Question 1

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 2

Cost of sales is a major expense for a retailer. Cost of sales is:

Accepted Answer

A) the cost of the goods purchased during the period. 
B) the cost of the goods available for sale during the period. 
C) the cost of the goods sold during the period. 
D) None of the above 
A) the cost of the goods purchased during the period. 
B) the cost of the goods available for sale during the period. 
C) the cost of the goods sold during the period. 
D) None of the above

Question 3

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 4

Which depreciation method best matches the pattern by which 1. a building and 2. a motor vehicle, contribute to income?

Accepted Answer

A) 1. reducing-balance; 2. straight-line 
B) 1. reducing-balance; 2. reducing-balance 
C) 1. straight-line; 2. reducing-balance 
D) 1. straight-line; 2. straight-line 
A) 1. reducing-balance; 2. straight-line 
B) 1. reducing-balance; 2. reducing-balance 
C) 1. straight-line; 2. reducing-balance 
D) 1. straight-line; 2. straight-line

Question 5

The amount of interest paid in cash for the period May to August is $1 000. However, the financial reports show interest expense for the period as $750. The difference is recorded in the statement of financial position as:

Accepted Answer

A) prepaid interest (liability). 
B) accrued interest (liability). 
C) accrued interest (asset). 
D) prepaid interest (asset). 
A) prepaid interest (liability). 
B) accrued interest (liability). 
C) accrued interest (asset). 
D) prepaid interest (asset).

Question 6

On 1 July 2017, LMZ Traders paid $12 000 in insurance premiums for coverage for the next three years. The insurance expense that will appear in the income statement and the amount of prepaid insurance in the statement of financial position for the year ended 30 June 2018, respectively, are:

Accepted Answer

A) $6 000 and $3 000 
B) $9 000 and $0 
C) $3 000 and $6 000 
D) $4 000 and $8 000 
A) $6 000 and $3 000 
B) $9 000 and $0 
C) $3 000 and $6 000 
D) $4 000 and $8 000

Question 7

If equity at the beginning of the period is $180 000, profit for the period is $90 000 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) $245 000 
C) $289 000 
D) cannot be calculated from the information provided. 
A) $115 000 
B) $245 000 
C) $289 000 
D) cannot be calculated from the information provided.

Question 8

In calculating depreciation, the life of an asset refers to its:

Accepted Answer

A) physical life. 
B) legal life. 
C) useful life. 
D) technological life. 
A) physical life. 
B) legal life. 
C) useful life. 
D) technological life.

Question 9

Accrued expenses are classified in the statement of financial position as a:

Accepted Answer

A) current liability. 
B) non-current asset. 
C) non-current liability. 
D) current asset. 
A) current liability. 
B) non-current asset. 
C) non-current liability. 
D) current asset.

Question 10

Which of the following would be a suitable format for the statement of financial performance for a medium size furniture store operation as a partnership?

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 11

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 12

To allow for debts that might prove bad in the future, a business will recognise as an expense in the income statement:

Accepted Answer

A) bad debts. 
B) doubtful debts. 
C) allowance for doubtful debts. 
D) allowance for depreciation. 
A) bad debts. 
B) doubtful debts. 
C) allowance for doubtful debts. 
D) allowance for depreciation.

Question 13

The accounting principle that requires the same depreciation method or inventory valuation method to be used over consecutive accounting periods is:

Accepted Answer

A) conservatism. 
B) consistency. 
C) reliability. 
D) historical cost. 
A) conservatism. 
B) consistency. 
C) reliability. 
D) historical cost.

Question 14

The cost associated with the purchase of a new machine that will be included in the cost of the machine is:

Accepted Answer

A) invoice price. 
B) installation costs. 
C) delivery charges. 
D) All of the above 
A) invoice price. 
B) installation costs. 
C) delivery charges. 
D) All of the above

Question 15

Employees have worked for the full year and have received total wages of $305 000 in cash. However, they must wait until the next payday to be paid for the last three days of the year they have worked. The amount owing is $6 500. Wages expense in the statement of financial performance and accrued wages in the statement of financial position are respectively:

Accepted Answer

A) $311 500 and $6 500 
B) $306 000 and $5 500 
C) $306 000 and $0 
D) $311 500 and $0 
A) $311 500 and $6 500 
B) $306 000 and $5 500 
C) $306 000 and $0 
D) $311 500 and $0

Question 16

At year-end, it was forgotten to adjust the asset prepaid rent for the $7 000 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) understatement of assets, profit, and equity. 
C) overstatement of liabilities and an understatement of profit and equity. 
D) overstatement of assets, profit, and equity. 
A) understatement of assets and an overstatement of profit and equity. 
B) understatement of assets, profit, and equity. 
C) overstatement of liabilities and an understatement of profit and equity. 
D) overstatement of assets, profit, and equity.

Question 17

Which accounting statement is specifically designed to measure and report on how much profit an entity has made?

Accepted Answer

A) The statement of cash flows 
B) The statement of financial position 
C) The statement of financial performance 
D) All of the above 
A) The statement of cash flows 
B) The statement of financial position 
C) The statement of financial performance 
D) All of the above

Question 18

Which statement best describes the way the reducing balance method charges depreciation?

Accepted Answer

A) Yearly depreciation is lower at the beginning of the asset's life. 
B) Yearly depreciation is greater at the beginning of the asset's life. 
C) Yearly depreciation is the same in each year of the asset's life. 
D) Yearly depreciation expense is greater at the end of the asset's life. 
A) Yearly depreciation is lower at the beginning of the asset's life. 
B) Yearly depreciation is greater at the beginning of the asset's life. 
C) Yearly depreciation is the same in each year of the asset's life. 
D) Yearly depreciation expense is greater at the end of the asset's life.

Question 19

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 20

The effect on the accounting reports of the current year of not taking into account a bad debt would be:

Accepted Answer

A) to overstate the asset accounts receivable. 
B) to overstate profit. 
C) Both A and B 
D) Neither A nor B 
A) to overstate the asset accounts receivable. 
B) to overstate profit. 
C) Both A and B 
D) Neither A nor B

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

Cost of sales is a major expense for a retailer. Cost of sales is:

The statement of financial performance provides information on:

Which depreciation method best matches the pattern by which 1. a building and 2. a motor vehicle, contribute to income?

The amount of interest paid in cash for the period May to August is $1 000. However, the financial reports show interest expense for the period as $750. The difference is recorded in the statement of financial position as:

On 1 July 2017, LMZ Traders paid $12 000 in insurance premiums for coverage for the next three years. The insurance expense that will appear in the income statement and the amount of prepaid insurance in the statement of financial position for the year ended 30 June 2018, respectively, are:

If equity at the beginning of the period is $180 000, profit for the period is $90 000 and $25 000 is withdrawn by the owner during the period, equity at the end of the period is:

In calculating depreciation, the life of an asset refers to its:

Accrued expenses are classified in the statement of financial position as a:

Which of the following would be a suitable format for the statement of financial performance for a medium size furniture store operation as a partnership?

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

To allow for debts that might prove bad in the future, a business will recognise as an expense in the income statement:

The accounting principle that requires the same depreciation method or inventory valuation method to be used over consecutive accounting periods is:

The cost associated with the purchase of a new machine that will be included in the cost of the machine is:

At year-end, it was forgotten to adjust the asset prepaid rent for the $7 000 rent expense used-up during the year. This will result in an:

Which accounting statement is specifically designed to measure and report on how much profit an entity has made?

Which statement best describes the way the reducing balance method charges depreciation?

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

The effect on the accounting reports of the current year of not taking into account a bad debt would be:

Introduction to Accounting

Measuring and Reporting Financial Position

Recording Transactionsthe Journal and Ledger Accounts

Accounting Systems and Internal Control

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

Planning and Budgeting

Capital Investment Decisions

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Exam 3: Measuring and Reporting Financial Performance

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

Cost of sales is a major expense for a retailer. Cost of sales is:

The statement of financial performance provides information on:

Which depreciation method best matches the pattern by which 1. a building and 2. a motor vehicle, contribute to income?

The amount of interest paid in cash for the period May to August is $1 000. However, the financial reports show interest expense for the period as $750. The difference is recorded in the statement of financial position as:

On 1 July 2017, LMZ Traders paid $12 000 in insurance premiums for coverage for the next three years. The insurance expense that will appear in the income statement and the amount of prepaid insurance in the statement of financial position for the year ended 30 June 2018, respectively, are:

If equity at the beginning of the period is $180 000, profit for the period is $90 000 and $25 000 is withdrawn by the owner during the period, equity at the end of the period is:

In calculating depreciation, the life of an asset refers to its:

Accrued expenses are classified in the statement of financial position as a:

Which of the following would be a suitable format for the statement of financial performance for a medium size furniture store operation as a partnership?

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

To allow for debts that might prove bad in the future, a business will recognise as an expense in the income statement:

The accounting principle that requires the same depreciation method or inventory valuation method to be used over consecutive accounting periods is:

The cost associated with the purchase of a new machine that will be included in the cost of the machine is:

At year-end, it was forgotten to adjust the asset prepaid rent for the $7 000 rent expense used-up during the year. This will result in an:

Which accounting statement is specifically designed to measure and report on how much profit an entity has made?

Which statement best describes the way the reducing balance method charges depreciation?

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

The effect on the accounting reports of the current year of not taking into account a bad debt would be:

Introduction to Accounting

Measuring and Reporting Financial Position

Recording Transactionsthe Journal and Ledger Accounts

Accounting Systems and Internal Control

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

Planning and Budgeting

Capital Investment Decisions

Filters