Question 1

Historical cost is widely used for asset valuation as it is regarded as providing more ____________ information than estimated market value.

Accepted Answer

A) subjective 
B) relevant 
C) reliable 
D) accounting entity 
A) subjective 
B) relevant 
C) reliable 
D) accounting entity

Question 2

The accounting assumption that the business will continue indefinitely into the future is the ________________________ assumption.

Accepted Answer

A) accounting period 
B) faithful representation 
C) understandability 
D) going concern 
A) accounting period 
B) faithful representation 
C) understandability 
D) going concern

Question 3

The system where every transaction affects at least two components of theaccounting equation is known as:

Accepted Answer

A) historical cost accounting. 
B) the going concern system. 
C) the accounting entity system. 
D) double-entry accounting. 
A) historical cost accounting. 
B) the going concern system. 
C) the accounting entity system. 
D) double-entry accounting.

Question 4

Which of the following is the correct expression of the accounting equation?

Accepted Answer

A) Assets + liabilities = equity. 
B) Assets = liabilities - equity. 
C) Assets + equity = liabilities. 
D) Assets = liabilities + equity. 
A) Assets + liabilities = equity. 
B) Assets = liabilities - equity. 
C) Assets + equity = liabilities. 
D) Assets = liabilities + equity.

Question 5

Users of accounting information want to know about an entity's ______________________,that is,its control over economic resources,financial structure,capacity for adaptation and solvency.

Accepted Answer

A) financial position 
B) accounting equation 
C) liabilities 
D) performance 
A) financial position 
B) accounting equation 
C) liabilities 
D) performance

Question 6

Which assumption is the basis upon which the personal assets of the owner are excluded from the business's balance sheet?

Accepted Answer

A) Going concern 
B) Accrual basis 
C) Materiality 
D) Accounting entity 
A) Going concern 
B) Accrual basis 
C) Materiality 
D) Accounting entity

Question 7

Drop Zone Parachuting has decided to prepare its financial statements every three months.Which accounting assumption is it implementing?

Accepted Answer

A) Cost assumption 
B) Accounting entity 
C) Accounting period 
D) Going concern assumption 
A) Cost assumption 
B) Accounting entity 
C) Accounting period 
D) Going concern assumption

Question 8

The assets of Frank's business increased by $40 000 and the liabilities increased by $10 000 during the current year.If the profit for this period was $25 000,what additional contribution or withdrawal was made by the owner? (Assume only a withdrawal or a contribution was made.)

Accepted Answer

A) Drawings $10 000 
B) Contribution $10 000 
C) Contribution $5000 
D) Drawings $5000 
A) Drawings $10 000 
B) Contribution $10 000 
C) Contribution $5000 
D) Drawings $5000

Question 9

Which statement is not correct?

Accepted Answer

A) Information in the cash flow statement is useful in assessing the ability of an entity to pay its debts as they fall due. 
B) A comparison of the cash flow statement and the income statement can indicate to what extent the profit is represented by cash inflows. 
C) The cash flow statement classifies cash flows into operating investing and financing groupings. 
D) Operating activities are concerned with activities involving the sales and purchases of fixed assets. 
A) Information in the cash flow statement is useful in assessing the ability of an entity to pay its debts as they fall due. 
B) A comparison of the cash flow statement and the income statement can indicate to what extent the profit is represented by cash inflows. 
C) The cash flow statement classifies cash flows into operating investing and financing groupings. 
D) Operating activities are concerned with activities involving the sales and purchases of fixed assets.

Question 10

The assumption which requires transactions to be recognised in the accounting reports when they occur and not when the cash is received or paid is:

Accepted Answer

A) accrual basis. 
B) accounting entity. 
C) faithful representation. 
D) accounting period. 
A) accrual basis. 
B) accounting entity. 
C) faithful representation. 
D) accounting period.

Question 11

Sydney & Associates had the following assets and liabilities.Equity is:
$
Cash in hand 4 000
Bank overdraft 11 000
Sundry creditors 3 000
Inventory 2 700
Sundry debtors 8 100
Office furniture 4 500
Loan from Perth Ltd 12 000
Motor vehicles 12 000

Accepted Answer

A) $8300. 
B) $27 300. 
C) $5300. 
D) $13 300. 
A) $8300. 
B) $27 300. 
C) $5300. 
D) $13 300.

Question 12

Which of these is the most important consideration in ensuring that information is relevant for decision making?

Accepted Answer

A) A high degree of accuracy 
B) Historical record 
C) Monetary assumption 
D) Timeliness 
A) A high degree of accuracy 
B) Historical record 
C) Monetary assumption 
D) Timeliness

Question 13

The statement of changes in equity:

Accepted Answer

A) indicates the ability of the entity to generate cash flow. 
B) shows the selling price of the entity's assets. 
C) shows how profit was determined. 
D) serves as a connecting link between the income statement and the balance sheet. 
A) indicates the ability of the entity to generate cash flow. 
B) shows the selling price of the entity's assets. 
C) shows how profit was determined. 
D) serves as a connecting link between the income statement and the balance sheet.

Question 14

Which of the following statements is incorrect?

Accepted Answer

A) The liability of shareholders to contribute to the debts of an insolvent company is limited. 
B) A sole proprietorship is an accounting entity. 
C) Individual partners are personally liable for partnership debts. 
D) Partnerships are regarded as separate legal entities. 
A) The liability of shareholders to contribute to the debts of an insolvent company is limited. 
B) A sole proprietorship is an accounting entity. 
C) Individual partners are personally liable for partnership debts. 
D) Partnerships are regarded as separate legal entities.

Question 15

Which of these effects of a single transaction on the accounting equation is not possible?

Accepted Answer

A) Increase in assets at the same time as an equal increase in equity. 
B) Decrease in assets at the same time as an equal decrease in liabilities. 
C) Increase in liabilities at the same time as an equal decrease in liabilities. 
D) Decrease in liabilities and at the same time an equal decrease in equity. 
A) Increase in assets at the same time as an equal increase in equity. 
B) Decrease in assets at the same time as an equal decrease in liabilities. 
C) Increase in liabilities at the same time as an equal decrease in liabilities. 
D) Decrease in liabilities and at the same time an equal decrease in equity.

Question 16

From the point of view of a business entity,a person or business to whom a debt is owed is known as a:

Accepted Answer

A) debtor. 
B) creditor. 
C) debitor. 
D) bank. 
A) debtor. 
B) creditor. 
C) debitor. 
D) bank.

Question 17

Delta Company reports the following balance sheet information for 2014.
1 January 2014 31 December 2014
Assets $60 000 $70 000
Liabilities $12 000 $14 000
Assuming the capital contribution made by the owners during 2011 was $3000 and withdrawals were $12 000,profit for 2014 must have been:

Accepted Answer

A) $17 000. 
B) $14 000. 
C) $16 000. 
D) $12 000. 
A) $17 000. 
B) $14 000. 
C) $16 000. 
D) $12 000.

Question 18

The extent to which items in accounting reports can be combined or presented separately is covered by the concept of:

Accepted Answer

A) comparability. 
B) faithful representation. 
C) economic substance. 
D) materiality. 
A) comparability. 
B) faithful representation. 
C) economic substance. 
D) materiality.

Question 19

Junction Plants had the following transactions during August.Which transaction represents an expense for August under the accrual basis of accounting?

Accepted Answer

A) Used $90 worth of office telephone calls.The account will be paid during September. 
B) Paid $3300 in settlement of a loan obtained three months earlier. 
C) Paid a plumber $500 for repair work performed in July. 
D) Purchased a computer for $3000 cash. 
A) Used $90 worth of office telephone calls.The account will be paid during September. 
B) Paid $3300 in settlement of a loan obtained three months earlier. 
C) Paid a plumber $500 for repair work performed in July. 
D) Purchased a computer for $3000 cash.

Question 20

Which of these is not an alternative term for equity?

Accepted Answer

A) Proprietorship 
B) Owners' equity 
C) Bank account balance 
D) Capital 
A) Proprietorship 
B) Owners' equity 
C) Bank account balance 
D) Capital

Historical cost is widely used for asset valuation as it is regarded as providing more ____________ information than estimated market value.

The accounting assumption that the business will continue indefinitely into the future is the ________________________ assumption.

The system where every transaction affects at least two components of theaccounting equation is known as:

Which of the following is the correct expression of the accounting equation?

Users of accounting information want to know about an entity's ______________________,that is,its control over economic resources,financial structure,capacity for adaptation and solvency.

Which assumption is the basis upon which the personal assets of the owner are excluded from the business's balance sheet?

Drop Zone Parachuting has decided to prepare its financial statements every three months.Which accounting assumption is it implementing?

The assets of Frank's business increased by $40 000 and the liabilities increased by $10 000 during the current year.If the profit for this period was $25 000,what additional contribution or withdrawal was made by the owner? (Assume only a withdrawal or a contribution was made.)

Which statement is not correct?

The assumption which requires transactions to be recognised in the accounting reports when they occur and not when the cash is received or paid is:

Sydney & Associates had the following assets and liabilities.Equity is: $ Cash in hand 4 000 Bank overdraft 11 000 Sundry creditors 3 000 Inventory 2 700 Sundry debtors 8 100 Office furniture 4 500 Loan from Perth Ltd 12 000 Motor vehicles 12 000

Which of these is the most important consideration in ensuring that information is relevant for decision making?

The statement of changes in equity:

Which of the following statements is incorrect?

Which of these effects of a single transaction on the accounting equation is not possible?

From the point of view of a business entity,a person or business to whom a debt is owed is known as a:

Delta Company reports the following balance sheet information for 2014. 1 January 2014 31 December 2014 Assets $60 000 $70 000 Liabilities $12 000 $14 000 Assuming the capital contribution made by the owners during 2011 was $3000 and withdrawals were $12 000,profit for 2014 must have been:

The extent to which items in accounting reports can be combined or presented separately is covered by the concept of:

Junction Plants had the following transactions during August.Which transaction represents an expense for August under the accrual basis of accounting?

Which of these is not an alternative term for equity?

Decision Making and the Role of Accounting

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Retailing

Accounting for Systems

Partnerships: Formation,operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Cash Management and Control

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation,disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

Filters

Exam 2: Financial Statements for Decision Making

Historical cost is widely used for asset valuation as it is regarded as providing more ____________ information than estimated market value.

The accounting assumption that the business will continue indefinitely into the future is the ________________________ assumption.

The system where every transaction affects at least two components of theaccounting equation is known as:

Which of the following is the correct expression of the accounting equation?

Users of accounting information want to know about an entity's ______________________,that is,its control over economic resources,financial structure,capacity for adaptation and solvency.

Which assumption is the basis upon which the personal assets of the owner are excluded from the business's balance sheet?

Drop Zone Parachuting has decided to prepare its financial statements every three months.Which accounting assumption is it implementing?

The assets of Frank's business increased by $40 000 and the liabilities increased by $10 000 during the current year.If the profit for this period was $25 000,what additional contribution or withdrawal was made by the owner? (Assume only a withdrawal or a contribution was made.)

Which statement is not correct?

The assumption which requires transactions to be recognised in the accounting reports when they occur and not when the cash is received or paid is:

Sydney & Associates had the following assets and liabilities.Equity is: $ Cash in hand 4 000 Bank overdraft 11 000 Sundry creditors 3 000 Inventory 2 700 Sundry debtors 8 100 Office furniture 4 500 Loan from Perth Ltd 12 000 Motor vehicles 12 000

Which of these is the most important consideration in ensuring that information is relevant for decision making?

The statement of changes in equity:

Which of the following statements is incorrect?

Which of these effects of a single transaction on the accounting equation is not possible?

From the point of view of a business entity,a person or business to whom a debt is owed is known as a:

Delta Company reports the following balance sheet information for 2014. 1 January 2014 31 December 2014 Assets $60 000 $70 000 Liabilities $12 000 $14 000 Assuming the capital contribution made by the owners during 2011 was $3000 and withdrawals were $12 000,profit for 2014 must have been:

The extent to which items in accounting reports can be combined or presented separately is covered by the concept of:

Junction Plants had the following transactions during August.Which transaction represents an expense for August under the accrual basis of accounting?

Which of these is not an alternative term for equity?

Decision Making and the Role of Accounting

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Completing the Accounting Cycle Closing and Reversing Entries

Accounting for Retailing

Accounting for Systems

Partnerships: Formation,operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Cash Management and Control

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation,disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Statement of Cash Flows

Analysis and Interpretation of Financial Statements

Filters