Question 1

Which is the best description of the relationship between the statement of financial performance and the statement of financial position?

Accepted Answer

A)  There is no direct relationship between the statement of comprehensive income and the statement of financial position. 
B)  The opening statement of financial position plus the profit equals the closing statement of financial position. 
C)  The statement of financial position is the link between two statement of comprehensive incomes. 
D)  The statement of financial performance explains the change in equity that arises from operating activities. 
A)  There is no direct relationship between the statement of comprehensive income and the statement of financial position. 
B)  The opening statement of financial position plus the profit equals the closing statement of financial position. 
C)  The statement of financial position is the link between two statement of comprehensive incomes. 
D)  The statement of financial performance explains the change in equity that arises from operating activities. D

Question 2

The method of inventory valuation that assumes the earliest inventory acquired is the first to be sold is the:

Accepted Answer

A)  lower of cost and net realisable value method. 
B)  average cost method 
C)  FIFO method. 
D)  LIFO method. 
A)  lower of cost and net realisable value method. 
B)  average cost method 
C)  FIFO method. 
D)  LIFO method. C

Question 3

Which of these are not alternative names for the same thing?

Accepted Answer

A)  Gross profit; profit. 
B)  Cost of sales; cost of goods sold. 
C)  Statement of comprehensive income; profit and loss statement: statement of financial performance. 
D)  None of the above, i.e., all are alternative names for the same thing. 
A)  Gross profit; profit. 
B)  Cost of sales; cost of goods sold. 
C)  Statement of comprehensive income; profit and loss statement: statement of financial performance. 
D)  None of the above, i.e., all are alternative names for the same thing. A

Question 4

A suitable format for the statement of financial performance for a medium size furniture store operating as a partnership would be:

Accepted Answer

A)  income - expenses = profit 
B)  sales - cost of sales = gross profit - expenses = profit 
C)  income + expenses = profit 
D)  sales - cost of sales = gross profit 
A)  income - expenses = profit 
B)  sales - cost of sales = gross profit - expenses = profit 
C)  income + expenses = profit 
D)  sales - cost of sales = gross profit

Question 5

Identify the outgoing that could not appear in the statement of financial performance.

Accepted Answer

A)  Interest paid. 
B)  Wages and salaries. 
C)  Purchase of flowers for the waiting room. 
D)  Repayment of loan. 
A)  Interest paid. 
B)  Wages and salaries. 
C)  Purchase of flowers for the waiting room. 
D)  Repayment of loan.

Question 6

Where the amount of cash paid for office expenses during the year is less than the amount of office expenses recognised in the statement of financial performance under the accrual accounting approach,the difference is recorded in the statement of financial position as:

Accepted Answer

A)  prepaid office expenses (asset). 
B)  accrued office expenses (asset). 
C)  prepaid office expenses (liability). 
D)  accrued office expenses (liability). 
A)  prepaid office expenses (asset). 
B)  accrued office expenses (asset). 
C)  prepaid office expenses (liability). 
D)  accrued office expenses (liability).

Question 7

Bad debts:

Accepted Answer

A)  are sales where the customer returns the goods. 
B)  occur when debtors do not pay their accounts. 
C)  is just another term for doubtful debts. 
D)  are all of the above. 
A)  are sales where the customer returns the goods. 
B)  occur when debtors do not pay their accounts. 
C)  is just another term for doubtful debts. 
D)  are all of the above.

Question 8

All of the statements concerning bad and doubtful debts are correct,except which of the following?

Accepted Answer

A)  The account, doubtful debts expense, is a contra asset account deducted from accounts receivable in the statement of financial position. 
B)  Bad debts written off is an expense that relates to situations where there is a high degree of certainty that the amount owed will never be paid, e.g., the bankruptcy of the debtor. 
C)  Doubtful debts relate to amounts unlikely to be received from accounts receivable but where the business is still trying to collect the sum owed. 
D)  Doubtful debts can be estimated by applying a given percentage to credit sales. 
A)  The account, doubtful debts expense, is a contra asset account deducted from accounts receivable in the statement of financial position. 
B)  Bad debts written off is an expense that relates to situations where there is a high degree of certainty that the amount owed will never be paid, e.g., the bankruptcy of the debtor. 
C)  Doubtful debts relate to amounts unlikely to be received from accounts receivable but where the business is still trying to collect the sum owed. 
D)  Doubtful debts can be estimated by applying a given percentage to credit sales.

Question 9

The accounting principle underpinning the inventory valuation rule 'the lower of cost and net realisable value' is:

Accepted Answer

A)  prudence (conservatism). 
B)  historical cost. 
C)  matching costs with revenue. 
D)  going concern. 
A)  prudence (conservatism). 
B)  historical cost. 
C)  matching costs with revenue. 
D)  going concern.

Question 10

The writing off of a debtor's account as a bad debt when no allowance for doubtful debts has been made will see:

Accepted Answer

A)  a decrease in the asset accounts receivable, decrease in equity. 
B)  no effect. 
C)  a decrease in the asset accounts receivable, increase in the liability provision for doubtful debts. 
D)  a decrease in the asset bank, decrease in the asset accounts receivable. 
A)  a decrease in the asset accounts receivable, decrease in equity. 
B)  no effect. 
C)  a decrease in the asset accounts receivable, increase in the liability provision for doubtful debts. 
D)  a decrease in the asset bank, decrease in the asset accounts receivable.

Question 11

Choose the statement which best describes the straight-line method of depreciation.

Accepted Answer

A)  Depreciation is a fixed percentage of the carrying value of the asset. 
B)  Depreciation is allocated equally over each year of the asset's life. 
C)  Depreciation expense is greater at the beginning of the asset's life. 
D)  Both A and C. 
A)  Depreciation is a fixed percentage of the carrying value of the asset. 
B)  Depreciation is allocated equally over each year of the asset's life. 
C)  Depreciation expense is greater at the beginning of the asset's life. 
D)  Both A and C.

Question 12

Which of these occurrences could account for a difference between the total value of inventory in the accounting records and the total value of inventory as per the stocktake?

Accepted Answer

A)  Cost of sales transactions not recorded in the accounting records. 
B)  Inventory stolen from the storeroom. 
C)  Some inventory items not counted in the stocktake. 
D)  All of the above. 
A)  Cost of sales transactions not recorded in the accounting records. 
B)  Inventory stolen from the storeroom. 
C)  Some inventory items not counted in the stocktake. 
D)  All of the above.

Question 13

If equity at the beginning of the period is $177,000,profit for the period is $87,000 and $25,000 is withdrawn by the owner during the period,equity at the end of the period is:

Accepted Answer

A)  $115,000. 
B)  $239,000. 
C)  $289,000. 
D)  cannot be calculated from the information provided. 
A)  $115,000. 
B)  $239,000. 
C)  $289,000. 
D)  cannot be calculated from the information provided.

Question 14

The statement of financial performance provides information on:

Accepted Answer

A)  the financial structure of the business. 
B)  the financial position of the business. 
C)  how successful the business was in generating wealth. 
D)  cash inflows and outflows for the accounting period. 
A)  the financial structure of the business. 
B)  the financial position of the business. 
C)  how successful the business was in generating wealth. 
D)  cash inflows and outflows for the accounting period.

Question 15

The accounting principle underpinning the practice of providing for bad and doubtful debts is the:

Accepted Answer

A)  matching convention. 
B)  dual aspect convention. 
C)  historical cost convention. 
D)  going concern convention. 
A)  matching convention. 
B)  dual aspect convention. 
C)  historical cost convention. 
D)  going concern convention.

Question 16

At year-end,it was forgotten to adjust the asset prepaid rent for the $5,000 rent expense used-up during the year.This will result in an:

Accepted Answer

A)  understatement of assets and an overstatement of profit and equity. 
B)  overstatement of assets, profit, and equity. 
C)  overstatement of liabilities and an understatement of profit and equity. 
D)  understatement of assets, profit, and equity. 
A)  understatement of assets and an overstatement of profit and equity. 
B)  overstatement of assets, profit, and equity. 
C)  overstatement of liabilities and an understatement of profit and equity. 
D)  understatement of assets, profit, and equity.

Question 17

Calculate cost of sales if stock at start is $2,450,purchases are $19,000 and stock at end is $1,000.

Accepted Answer

A)  $21,450. 
B)  $20,450. 
C)  $22,550. 
D)  $22,450. 
A)  $21,450. 
B)  $20,450. 
C)  $22,550. 
D)  $22,450.

Question 18

A driver started a business on 1st of January 2014,hiring out his limousine for special occasions.Current regulations require the business to purchase a license that will expire after two years.The cost of the license is $12,000.Calculate the amount of license expense to be included in the income statement for the 6 months ended 30 June 2014.

Accepted Answer

A)  $6,000. 
B)  $4,000. 
C)  $3,000. 
D)  $12,000. 
A)  $6,000. 
B)  $4,000. 
C)  $3,000. 
D)  $12,000.

Question 19

Income is considered to have been earned when:

Accepted Answer

A)  it is probable that any income owing will be received and any outstanding expenses, such as warranty claims, can be identified. 
B)  the activities necessary to generate the income are substantially complete. 
C)  the amount of income generated can be reliably measured. 
D)  all of the above. 
A)  it is probable that any income owing will be received and any outstanding expenses, such as warranty claims, can be identified. 
B)  the activities necessary to generate the income are substantially complete. 
C)  the amount of income generated can be reliably measured. 
D)  all of the above.

Question 20

Which statement about net profit is not true?

Accepted Answer

A)  Net profit normally represents the amount of cash generated from operations for the period. 
B)  Net profit is a measure of achievement or productive effort. 
C)  Net profit increases equity. 
D)  None of the statements, i.e., all are true. 
A)  Net profit normally represents the amount of cash generated from operations for the period. 
B)  Net profit is a measure of achievement or productive effort. 
C)  Net profit increases equity. 
D)  None of the statements, i.e., all are true.

Which is the best description of the relationship between the statement of financial performance and the statement of financial position?

The method of inventory valuation that assumes the earliest inventory acquired is the first to be sold is the:

Which of these are not alternative names for the same thing?

A suitable format for the statement of financial performance for a medium size furniture store operating as a partnership would be:

Identify the outgoing that could not appear in the statement of financial performance.

Where the amount of cash paid for office expenses during the year is less than the amount of office expenses recognised in the statement of financial performance under the accrual accounting approach,the difference is recorded in the statement of financial position as:

Bad debts:

All of the statements concerning bad and doubtful debts are correct,except which of the following?

The accounting principle underpinning the inventory valuation rule 'the lower of cost and net realisable value' is:

The writing off of a debtor's account as a bad debt when no allowance for doubtful debts has been made will see:

Choose the statement which best describes the straight-line method of depreciation.

Which of these occurrences could account for a difference between the total value of inventory in the accounting records and the total value of inventory as per the stocktake?

If equity at the beginning of the period is $177,000,profit for the period is $87,000 and $25,000 is withdrawn by the owner during the period,equity at the end of the period is:

The statement of financial performance provides information on:

The accounting principle underpinning the practice of providing for bad and doubtful debts is the:

At year-end,it was forgotten to adjust the asset prepaid rent for the $5,000 rent expense used-up during the year.This will result in an:

Calculate cost of sales if stock at start is $2,450,purchases are $19,000 and stock at end is $1,000.

Income is considered to have been earned when:

Which statement about net profit is not true?

Introduction to Accounting

Measuring and Reporting Financial Position

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

Costvolumeprofit Analysis and Relevant Costing

Full Costing

Budgeting

Capital Investment Decisions

The Management of Working Capital

Financing the Business

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Exam 3: Measuring and Reporting Financial Performance

Which is the best description of the relationship between the statement of financial performance and the statement of financial position?

The method of inventory valuation that assumes the earliest inventory acquired is the first to be sold is the:

Which of these are not alternative names for the same thing?

A suitable format for the statement of financial performance for a medium size furniture store operating as a partnership would be:

Identify the outgoing that could not appear in the statement of financial performance.

Where the amount of cash paid for office expenses during the year is less than the amount of office expenses recognised in the statement of financial performance under the accrual accounting approach,the difference is recorded in the statement of financial position as:

Bad debts:

All of the statements concerning bad and doubtful debts are correct,except which of the following?

The accounting principle underpinning the inventory valuation rule 'the lower of cost and net realisable value' is:

The writing off of a debtor's account as a bad debt when no allowance for doubtful debts has been made will see:

Choose the statement which best describes the straight-line method of depreciation.

Which of these occurrences could account for a difference between the total value of inventory in the accounting records and the total value of inventory as per the stocktake?

If equity at the beginning of the period is $177,000,profit for the period is $87,000 and $25,000 is withdrawn by the owner during the period,equity at the end of the period is:

The statement of financial performance provides information on:

The accounting principle underpinning the practice of providing for bad and doubtful debts is the:

At year-end,it was forgotten to adjust the asset prepaid rent for the $5,000 rent expense used-up during the year.This will result in an:

Calculate cost of sales if stock at start is $2,450,purchases are $19,000 and stock at end is $1,000.

Income is considered to have been earned when:

Which statement about net profit is not true?

Introduction to Accounting

Measuring and Reporting Financial Position

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

Costvolumeprofit Analysis and Relevant Costing

Full Costing

Budgeting

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters