Question 1

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

Accepted Answer

A) liabilities = assets + equity. 
B) equity = assets + liabilities. 
C) assets = equity + liabilities. 
D) none of the above. 
A) liabilities = assets + equity. 
B) equity = assets + liabilities. 
C) assets = equity + liabilities. 
D) none of the above. C

Question 2

Which of the following is not a potential conflict in the statement of financial position?

Accepted Answer

A) The statement of financial position is generally only determined annually. 
B) In reality, a country's money may not be 'a stable monetary unit'. 
C) Relevant information is not always entirely reliable. 
D) Australian dollars in 2005 may not have the same purchasing power in 2018. 
A) The statement of financial position is generally only determined annually. 
B) In reality, a country's money may not be 'a stable monetary unit'. 
C) Relevant information is not always entirely reliable. 
D) Australian dollars in 2005 may not have the same purchasing power in 2018. A

Question 3

Which of the following conventions dictates that a sole owner's personal transactions should not be included in the records of the business?

Accepted Answer

A) Accounting period. 
B) Business entity. 
C) Prudence. 
D) Historic cost. 
A) Accounting period. 
B) Business entity. 
C) Prudence. 
D) Historic cost. B

Question 4

Which statement concerning the reserves component of equity is not correct?

Accepted Answer

A) Reserves represent cash. 
B) Retained profits and reserves are often classified under the general heading of reserves. 
C) The higher the dividend paid by the company, the lower the reserves. 
D) Many reserves arise as transfers from retained profits. 
A) Reserves represent cash. 
B) Retained profits and reserves are often classified under the general heading of reserves. 
C) The higher the dividend paid by the company, the lower the reserves. 
D) Many reserves arise as transfers from retained profits.

Question 5

Assets are classified as either current or non-current. Current assets are:

Accepted Answer

A) goodwill. 
B) expected to be turned into cash within 12 months. 
C) the infrastructure assets. 
D) all of the above. 
A) goodwill. 
B) expected to be turned into cash within 12 months. 
C) the infrastructure assets. 
D) all of the above.

Question 6

The assumption that means accountants ignore inflation is:

Accepted Answer

A) the stable monetary unit assumption. 
B) the going concern assumption. 
C) the monetary assumption. 
D) the prudence assumption. 
A) the stable monetary unit assumption. 
B) the going concern assumption. 
C) the monetary assumption. 
D) the prudence assumption.

Question 7

Identify the asset.

Accepted Answer

A) Bank overdraft. 
B) Plant and equipment. 
C) Loan from ABC Ltd. 
D) Accrued expenses. 
A) Bank overdraft. 
B) Plant and equipment. 
C) Loan from ABC Ltd. 
D) Accrued expenses.

Question 8

Despite the uncertainty in relation to the exact amount to be paid and the actual timing of the payment, which of the following is still regarded as a liability?

Accepted Answer

A) Deposit on services received in advance. 
B) Provision for employee bonuses. 
C) Accounts payable. 
D) Money borrowed from an associate company. 
A) Deposit on services received in advance. 
B) Provision for employee bonuses. 
C) Accounts payable. 
D) Money borrowed from an associate company.

Question 9

Calculate the missing cash at bank account balance from these statement of financial position items. Equity $5,800; accounts receivable $890; accounts payable $450; inventory $360; loan to a business $1,400.

Accepted Answer

A) $4,900. 
B) $5,400. 
C) $3,600. 
D) $6,300. 
A) $4,900. 
B) $5,400. 
C) $3,600. 
D) $6,300.

Question 10

Calculate equity. Cash at bank $3,500; inventory $1,600; accounts receivable $3,500; accounts payable $1,700; loan from ABC bank $3,500.

Accepted Answer

A) $8,900. 
B) $3,400. 
C) $1,900. 
D) $12,300. 
A) $8,900. 
B) $3,400. 
C) $1,900. 
D) $12,300.

Question 11

Identify the intangible asset.

Accepted Answer

A) Brand name. 
B) Loan. 
C) Accounts payable. 
D) Inventory. 
A) Brand name. 
B) Loan. 
C) Accounts payable. 
D) Inventory.

Question 12

What is the overall effect on the statement of financial position when the business sells inventory for a profit of $5,000?

Accepted Answer

A) Increase total assets $3,000; decrease total equity $3,000. 
B) Increase total assets $5,000; increase total equity $5,000. 
C) No change in total assets; no change in total equity. 
D) None of the above. 
A) Increase total assets $3,000; decrease total equity $3,000. 
B) Increase total assets $5,000; increase total equity $5,000. 
C) No change in total assets; no change in total equity. 
D) None of the above.

Question 13

Complete the following table concerning the classification of items in the statement of financial position.
ACCOUNT ELEMENTS CLASSIFICATION
(Asset, Liability, Equity)(Current, Non-current)
 $\begin{array}{|l|l|l|l|}
\hline\text { e.g } & \text { Cash on hand } & \text { Asset } & \text { Current } \
\hline \text { e.g } & \text { Land and buildings } & \text { Asset } & \text { Non-current } \
\hline 1 & \text { Inventory } & & \
\hline 2 & \text { Accounts receivable } & & \
\hline 3 & \text { Bank overdraft } & & \
\hline 4 & \text { Prepaid insurance } & & \
\hline 5 & \text { Share capital } & & \
\hline 6 & \text { Retained profits } & & \
\hline 7 & \text { Accounts payable } & & \
\hline 8 & \text { Goodwill } & & \
\hline 9 & \text { Plant and equipment } & & \
\hline 10 & \text { Franchise } & & \
\hline 11 & \text { Loan from Eagle Finance (5 years) } & &\
\hline
\end{array}$

Accepted Answer

Question 14

What is the effect on the statement of financial position when the business buys inventory on credit?

Accepted Answer

A) Increase asset inventory; increase liability creditor. 
B) Increase asset inventory; increase equity. 
C) Decrease asset inventory; decrease liability creditor. 
D) Decrease asset inventory; increase liability creditor. 
A) Increase asset inventory; increase liability creditor. 
B) Increase asset inventory; increase equity. 
C) Decrease asset inventory; decrease liability creditor. 
D) Decrease asset inventory; increase liability creditor.

Question 15

If liabilities are $55,000 and assets are $123,600, equity is:

Accepted Answer

A) $178,400. 
B) $68,600. 
C) $178,600. 
D) $68,400. 
A) $178,400. 
B) $68,600. 
C) $178,600. 
D) $68,400.

Question 16

Which of these is not always a characteristic of an asset?

Accepted Answer

A) Ability of the benefit to be measured in money terms. 
B) Exclusive control of the economic benefits. 
C) Legal ownership by the entity. 
D) Probable expected future economic benefits. 
A) Ability of the benefit to be measured in money terms. 
B) Exclusive control of the economic benefits. 
C) Legal ownership by the entity. 
D) Probable expected future economic benefits.

Question 17

If reported profits are reduced by $6,000 in year one because of the operation of conservatism:

Accepted Answer

A) profits in later years will be unaffected. 
B) profits in later years must be $5,000 lower. 
C) profits in later years will be $6,000 higher. 
D) none of the above. 
A) profits in later years will be unaffected. 
B) profits in later years must be $5,000 lower. 
C) profits in later years will be $6,000 higher. 
D) none of the above.

Question 18

Which of the following is an example of an expenditure that could be recognized as either an immediate asset or an expense?

Accepted Answer

A) Purchase of a new plant (factory) 
B) Purchase of a 12 month insurance policy 
C) Payment of an account payable 
D) Payment of wages 
A) Purchase of a new plant (factory) 
B) Purchase of a 12 month insurance policy 
C) Payment of an account payable 
D) Payment of wages

Question 19

In the accounting equation, claims on the business are of two broad types:

Accepted Answer

A) bills payable and bills receivable. 
B) liabilities and equity. 
C) loans to and loans from outsiders. 
D) accounts receivable and accounts payable. 
A) bills payable and bills receivable. 
B) liabilities and equity. 
C) loans to and loans from outsiders. 
D) accounts receivable and accounts payable.

Question 20

Which of the following is a non-current asset?

Accepted Answer

A) 5-year loan to Ti Finance. 
B) Machinery. 
C) Long-term investment. 
D) All of the above. 
A) 5-year loan to Ti Finance. 
B) Machinery. 
C) Long-term investment. 
D) All of the above.

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

Which of the following is not a potential conflict in the statement of financial position?

Which of the following conventions dictates that a sole owner's personal transactions should not be included in the records of the business?

Which statement concerning the reserves component of equity is not correct?

Assets are classified as either current or non-current. Current assets are:

The assumption that means accountants ignore inflation is:

Identify the asset.

Despite the uncertainty in relation to the exact amount to be paid and the actual timing of the payment, which of the following is still regarded as a liability?

Calculate the missing cash at bank account balance from these statement of financial position items. Equity $5,800; accounts receivable $890; accounts payable $450; inventory $360; loan to a business $1,400.

Calculate equity. Cash at bank $3,500; inventory $1,600; accounts receivable $3,500; accounts payable $1,700; loan from ABC bank $3,500.

Identify the intangible asset.

What is the overall effect on the statement of financial position when the business sells inventory for a profit of $5,000?

What is the effect on the statement of financial position when the business buys inventory on credit?

If liabilities are $55,000 and assets are $123,600, equity is:

Which of these is not always a characteristic of an asset?

If reported profits are reduced by $6,000 in year one because of the operation of conservatism:

Which of the following is an example of an expenditure that could be recognized as either an immediate asset or an expense?

In the accounting equation, claims on the business are of two broad types:

Which of the following is a non-current asset?

Introduction to Accounting

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Cost-Volume-Profit Analysis and Relevant Costing

Full Costing

Budgeting

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters

Exam 2: Measuring and Reporting Financial Position

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

Which of the following is not a potential conflict in the statement of financial position?

Which of the following conventions dictates that a sole owner's personal transactions should not be included in the records of the business?

Which statement concerning the reserves component of equity is not correct?

Assets are classified as either current or non-current. Current assets are:

The assumption that means accountants ignore inflation is:

Identify the asset.

Despite the uncertainty in relation to the exact amount to be paid and the actual timing of the payment, which of the following is still regarded as a liability?

Calculate the missing cash at bank account balance from these statement of financial position items. Equity $5,800; accounts receivable $890; accounts payable $450; inventory $360; loan to a business $1,400.

Calculate equity. Cash at bank $3,500; inventory $1,600; accounts receivable $3,500; accounts payable $1,700; loan from ABC bank $3,500.

Identify the intangible asset.

What is the overall effect on the statement of financial position when the business sells inventory for a profit of $5,000?

What is the effect on the statement of financial position when the business buys inventory on credit?

If liabilities are $55,000 and assets are $123,600, equity is:

Which of these is not always a characteristic of an asset?

If reported profits are reduced by $6,000 in year one because of the operation of conservatism:

Which of the following is an example of an expenditure that could be recognized as either an immediate asset or an expense?

In the accounting equation, claims on the business are of two broad types:

Which of the following is a non-current asset?

Introduction to Accounting

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Cost-Volume-Profit Analysis and Relevant Costing

Full Costing

Budgeting

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters