Question 1

Accountants divide the life of the business into arbitrary time periods of equal length:

Accepted Answer

A) in order to prepare a balance sheet. 
B) in order to calculate comparable profit results. 
C) in order to prepare an income statement. 
D) because of the accounting entity assumption. 
A) in order to prepare a balance sheet. 
B) in order to calculate comparable profit results. 
C) in order to prepare an income statement. 
D) because of the accounting entity assumption.

Question 2

In comparison to historical costs,estimated market values are usually considered by accountants to be____________________ for decision making.

Accepted Answer

A) more reliable but less relevant 
B) less reliable but more relevant 
C) more material but less comparable 
D) more comparable but less material 
A) more reliable but less relevant 
B) less reliable but more relevant 
C) more material but less comparable 
D) more comparable but less material

Question 3

A business transaction creating an inflow of net assets resulting from the sale of goods or services is a(n):

Accepted Answer

A) expense transaction. 
B) income transaction. 
C) cash disbursement. 
D) capital transaction. 
A) expense transaction. 
B) income transaction. 
C) cash disbursement. 
D) capital transaction.

Question 4

The cost assumption by accountants means that assets are valued at:

Accepted Answer

A) acquisition cost. 
B) market value. 
C) resale value. 
D) replacement cost. 
A) acquisition cost. 
B) market value. 
C) resale value. 
D) replacement cost.

Question 5

The income statement reports the financial:

Accepted Answer

A) position of an entity at a specific period of time. 
B) performance of an entity over a specified period of time. 
C) position of an entity over a specified period of time. 
D) performance of an entity at a specific period of time. 
A) position of an entity at a specific period of time. 
B) performance of an entity over a specified period of time. 
C) position of an entity over a specified period of time. 
D) performance of an entity at a specific period of time.

Question 6

If an entity has assets of $168 900 and liabilities of $70 000 its equity is:

Accepted Answer

A) $238 900. 
B) $28 900. 
C) $98 900. 
D) unable to be calculated. 
A) $238 900. 
B) $28 900. 
C) $98 900. 
D) unable to be calculated.

Question 7

Jane is an accountant operating as a sole proprietor.On 14 February she pays $600 wages in cash to her receptionist for work done during the first half of the month.Which of the following represents the effect of this transaction on the accounting equation?

Accepted Answer

A) Decrease in cash at bank $600; decrease in liability accounts payable $600. 
B) Decrease in cash at bank $600; increase in liability accounts payable $600. 
C) Decrease in cash at bank $600; increase in equity $600. 
D) Decrease in cash at bank $600; decrease in equity $600. 
A) Decrease in cash at bank $600; decrease in liability accounts payable $600. 
B) Decrease in cash at bank $600; increase in liability accounts payable $600. 
C) Decrease in cash at bank $600; increase in equity $600. 
D) Decrease in cash at bank $600; decrease in equity $600.

Question 8

If income is $180 000,rent expense is $120 000 and advertising expense is
$10 500,profit or loss is which of the following?

Accepted Answer

A) $300 500 profit 
B) $49 500 profit 
C) $49 500 loss 
D) $300 500 loss 
A) $300 500 profit 
B) $49 500 profit 
C) $49 500 loss 
D) $300 500 loss

Question 9

Which of the following statements concerning equity is true?

Accepted Answer

A) It is the owner's claim to the assets of the entity after deducting liabilities. 
B) It is fixed at the amount initially contributed when the business was established. 
C) It is decreased by profit. 
D) Assets + liabilities = equity. 
A) It is the owner's claim to the assets of the entity after deducting liabilities. 
B) It is fixed at the amount initially contributed when the business was established. 
C) It is decreased by profit. 
D) Assets + liabilities = equity.

Question 10

Jane is an accountant operating as a sole proprietor.On 1 February she does some work for a client on credit who she invoices for $120.On 10th of February the client pays his account and Jane banks the $120.Which of the following represents the effect of the receipt of cash transaction on the accounting equation for Jane's practice?

Accepted Answer

A) Increase in cash at bank $120; increase in equity $120. 
B) Increase in cash at bank $120; decrease in asset accounts receivable $120. 
C) Increase in cash at bank $120; increase in asset accounts receivable $120. 
D) Increase in cash at bank $120; decrease in equity $120. 
A) Increase in cash at bank $120; increase in equity $120. 
B) Increase in cash at bank $120; decrease in asset accounts receivable $120. 
C) Increase in cash at bank $120; increase in asset accounts receivable $120. 
D) Increase in cash at bank $120; decrease in equity $120.

Question 11

A balance sheet:

Accepted Answer

A) is classified into operating,investing and financing activities. 
B) measures the entities financial performance. 
C) lists assets,liabilities and equity at a specific point in time. 
D) shows how profit was determined. 
A) is classified into operating,investing and financing activities. 
B) measures the entities financial performance. 
C) lists assets,liabilities and equity at a specific point in time. 
D) shows how profit was determined.

Question 12

How well an entity attains its goals is referred to as:

Accepted Answer

A) efficiency. 
B) planning. 
C) organising. 
D) effectiveness. 
A) efficiency. 
B) planning. 
C) organising. 
D) effectiveness.

Question 13

Which of these is not income?

Accepted Answer

A) Receipts from the sale of goods. 
B) Receipts from the provision of services. 
C) Interest received. 
D) Additional capital contributed by the owner. 
A) Receipts from the sale of goods. 
B) Receipts from the provision of services. 
C) Interest received. 
D) Additional capital contributed by the owner.

Question 14

The concept which permits information to be grouped together with other information as long as this does not mislead statement users in their decision making is called:

Accepted Answer

A) grouping. 
B) materiality. 
C) clustering. 
D) accrual basis. 
A) grouping. 
B) materiality. 
C) clustering. 
D) accrual basis.

Question 15

In order to assess an entity's cash performance it is common to classify its activities into operating,investing and financing.For a medical practice,which of the following would be an operating activity?

Accepted Answer

A) Billing a patient for a consultation. 
B) Purchasing new equipment for the surgery. 
C) Repaying a portion of a loan. 
D) Selling an old computer. 
A) Billing a patient for a consultation. 
B) Purchasing new equipment for the surgery. 
C) Repaying a portion of a loan. 
D) Selling an old computer.

Question 16

Which of the following statements concerning the income statement is not true?

Accepted Answer

A) The heading must indicate the length of time the report covers. 
B) It shows the change in the entity's cash balance for the period. 
C) If expenses exceed income than a loss has been incurred for the period. 
D) An alternative name is the statement of financial performance. 
A) The heading must indicate the length of time the report covers. 
B) It shows the change in the entity's cash balance for the period. 
C) If expenses exceed income than a loss has been incurred for the period. 
D) An alternative name is the statement of financial performance.

Question 17

The accounting assumption that gives rise to the equity element in the accounting equation is:

Accepted Answer

A) the accrual basis assumption. 
B) the economic substance assumption. 
C) the entity assumption. 
D) the materiality assumption. 
A) the accrual basis assumption. 
B) the economic substance assumption. 
C) the entity assumption. 
D) the materiality assumption.

Question 18

The following balances were taken from the accounts of Adelaide Enterprises.
31 Dec.2013 31 Dec.2014
Assets $450 000 $610 000
Liabilities 270 000 310 000
Assuming there were no drawings or contributions of capital,profit for 2014 must have been:

Accepted Answer

A) $160 000. 
B) $120 000. 
C) $300 000. 
D) $220 000. 
A) $160 000. 
B) $120 000. 
C) $300 000. 
D) $220 000.

Question 19

In order to avoid later disputes it is desirable that a partnership agreement:

Accepted Answer

A) is in writing. 
B) should have the partners sharing profits and losses equally. 
C) should set up the partnership as a separate legal entity. 
D) should set out in detail how the how all likely transactions are to be recorded. 
A) is in writing. 
B) should have the partners sharing profits and losses equally. 
C) should set up the partnership as a separate legal entity. 
D) should set out in detail how the how all likely transactions are to be recorded.

Question 20

Laura J set up a part-time business 'Speedy Window Cleaning' by depositing
$6000 into a business bank account.Which of the following represents the effect of this transaction on the accounting equation?

Accepted Answer

A) Increase in assets of $6000; increase in equity of $6000. 
B) Increase in assets of $6000; decrease in equity of $6000. 
C) Increase in assets of $6000; increase in liabilities of $6000. 
D) Decrease in assets of $6000; increase in equity of $6000. 
A) Increase in assets of $6000; increase in equity of $6000. 
B) Increase in assets of $6000; decrease in equity of $6000. 
C) Increase in assets of $6000; increase in liabilities of $6000. 
D) Decrease in assets of $6000; increase in equity of $6000.

Accountants divide the life of the business into arbitrary time periods of equal length:

In comparison to historical costs,estimated market values are usually considered by accountants to be____________________ for decision making.

A business transaction creating an inflow of net assets resulting from the sale of goods or services is a(n):

The cost assumption by accountants means that assets are valued at:

The income statement reports the financial:

If an entity has assets of $168 900 and liabilities of $70 000 its equity is:

Jane is an accountant operating as a sole proprietor.On 14 February she pays $600 wages in cash to her receptionist for work done during the first half of the month.Which of the following represents the effect of this transaction on the accounting equation?

If income is $180 000,rent expense is $120 000 and advertising expense is $10 500,profit or loss is which of the following?

Which of the following statements concerning equity is true?

A balance sheet:

How well an entity attains its goals is referred to as:

Which of these is not income?

The concept which permits information to be grouped together with other information as long as this does not mislead statement users in their decision making is called:

In order to assess an entity's cash performance it is common to classify its activities into operating,investing and financing.For a medical practice,which of the following would be an operating activity?

Which of the following statements concerning the income statement is not true?

The accounting assumption that gives rise to the equity element in the accounting equation is:

The following balances were taken from the accounts of Adelaide Enterprises. 31 Dec.2013 31 Dec.2014 Assets $450 000 $610 000 Liabilities 270 000 310 000 Assuming there were no drawings or contributions of capital,profit for 2014 must have been:

In order to avoid later disputes it is desirable that a partnership agreement:

Laura J set up a part-time business 'Speedy Window Cleaning' by depositing $6000 into a business bank account.Which of the following represents the effect of this transaction on the accounting equation?

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

Accountants divide the life of the business into arbitrary time periods of equal length:

In comparison to historical costs,estimated market values are usually considered by accountants to be____________________ for decision making.

A business transaction creating an inflow of net assets resulting from the sale of goods or services is a(n):

The cost assumption by accountants means that assets are valued at:

The income statement reports the financial:

If an entity has assets of $168 900 and liabilities of $70 000 its equity is:

Jane is an accountant operating as a sole proprietor.On 14 February she pays $600 wages in cash to her receptionist for work done during the first half of the month.Which of the following represents the effect of this transaction on the accounting equation?

If income is $180 000,rent expense is $120 000 and advertising expense is $10 500,profit or loss is which of the following?

Which of the following statements concerning equity is true?

A balance sheet:

How well an entity attains its goals is referred to as:

Which of these is not income?

The concept which permits information to be grouped together with other information as long as this does not mislead statement users in their decision making is called:

In order to assess an entity's cash performance it is common to classify its activities into operating,investing and financing.For a medical practice,which of the following would be an operating activity?

Which of the following statements concerning the income statement is not true?

The accounting assumption that gives rise to the equity element in the accounting equation is:

The following balances were taken from the accounts of Adelaide Enterprises. 31 Dec.2013 31 Dec.2014 Assets $450 000 $610 000 Liabilities 270 000 310 000 Assuming there were no drawings or contributions of capital,profit for 2014 must have been:

In order to avoid later disputes it is desirable that a partnership agreement:

Laura J set up a part-time business 'Speedy Window Cleaning' by depositing $6000 into a business bank account.Which of the following represents the effect of this transaction on the accounting equation?

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