Question 1

Which of the following statements is correct with regards to the statement of cash flows?

Accepted Answer

A)  Financing activities include net cash from the sale and purchase of the entity's assets. 
B)  Investing activities include investments made by the owners of the entity. 
C)  Financing activities include amounts borrowed from financial institutions. 
D)  Investing activities include the cash received from customers. 
A)  Financing activities include net cash from the sale and purchase of the entity's assets. 
B)  Investing activities include investments made by the owners of the entity. 
C)  Financing activities include amounts borrowed from financial institutions. 
D)  Investing activities include the cash received from customers. C

Question 2

Jane is a painting contractor operating as a sole proprietor. On 15 May she completes a job for a client who pays her $1500 in cash. The effect of this transaction on the accounting equation is?

Accepted Answer

A)  Cash at bank increases by $1500; Accounts payable decreases by $1500. 
B)  Cash at bank increases by $1500; Equity increases by $1500. 
C)  Cash at bank increases by $1500; Accounts receivable decreases by $1500. 
D)  Cash at bank increases by $1500; Accounts payable increases by $1500. 
A)  Cash at bank increases by $1500; Accounts payable decreases by $1500. 
B)  Cash at bank increases by $1500; Equity increases by $1500. 
C)  Cash at bank increases by $1500; Accounts receivable decreases by $1500. 
D)  Cash at bank increases by $1500; Accounts payable increases by $1500. B

Question 3

Kate's Mechanics purchased a delivery van for $8000 cash. The effect of this transaction on the accounting equation is:

Accepted Answer

A)  Asset Cash at bank decreases by $8000; Equity decreases (via Motor Vehicles Expenses) by $8000. 
B)  Asset Cash at bank decreases by $8000; Equity increases (via Motor Vehicles Expenses) by $8000. 
C)  Asset Cash at bank decreases by of $8000; Asset Vehicles increases by $8000. 
D)  Asset Cash at bank increases by $8000; Asset Vehicles decreases by $8000. 
A)  Asset Cash at bank decreases by $8000; Equity decreases (via Motor Vehicles Expenses) by $8000. 
B)  Asset Cash at bank decreases by $8000; Equity increases (via Motor Vehicles Expenses) by $8000. 
C)  Asset Cash at bank decreases by of $8000; Asset Vehicles increases by $8000. 
D)  Asset Cash at bank increases by $8000; Asset Vehicles decreases by $8000. C

Question 4

The assurance that the accounting information presented to users is complete, without bias or undue error, and neutral is knows as:

Accepted Answer

A)  consistency. 
B)  verifiability. 
C)  faithful representation. 
D)  relevance. 
A)  consistency. 
B)  verifiability. 
C)  faithful representation. 
D)  relevance.

Question 5

__________________ is enhanced when information is classified, characterised, and presented clearly and concisely.

Accepted Answer

A)  Understandability 
B)  Consistency 
C)  Verifiability 
D)  Reliability 
A)  Understandability 
B)  Consistency 
C)  Verifiability 
D)  Reliability

Question 6

A balance sheet would normally balance at:

Accepted Answer

A)  net assets and total equity. 
B)  total liabilities and total equity. 
C)  the bank balance. 
D)  total assets and total equity. 
A)  net assets and total equity. 
B)  total liabilities and total equity. 
C)  the bank balance. 
D)  total assets and total equity.

Question 7

On 1 September 2018 Streak-Free Window Cleaning pays $1800 in cash for supplies purchased on 22 July 2018. Assuming the business prepares monthly financial reports using the accrual basis, what effect does this payment have on the accounting equation?

Accepted Answer

A)  Decrease in cash at bank $1800; decrease in liability accounts payable $1800. 
B)  Decrease in cash at bank $1800; increase in liability accounts payable $1800. 
C)  Decrease in cash at bank $1800; decrease in equity $1800. 
D)  Decrease in cash at bank $1800; increase in equity $1800. 
A)  Decrease in cash at bank $1800; decrease in liability accounts payable $1800. 
B)  Decrease in cash at bank $1800; increase in liability accounts payable $1800. 
C)  Decrease in cash at bank $1800; decrease in equity $1800. 
D)  Decrease in cash at bank $1800; increase in equity $1800.

Question 8

Genny is a small business owner. On 20 January she completes some work for a client on credit and sends the client an invoice for $250. On 10 February the client pays the account and Genny deposits the $250 into the business bank account. Assuming Genny prepares her financial statements each month, the receipt of cash on 10 February effects the accounting equation for Genny's business in the following way:

Accepted Answer

A)  Cash at bank increases by $250; Equity increases by $250. 
B)  Cash at bank increases by $250; Accounts receivable decreases by $250. 
C)  Cash at bank increases by$250; Accounts receivable increases by $250. 
D)  Cash at bank increases by$250; Equity decreases by $250. 
A)  Cash at bank increases by $250; Equity increases by $250. 
B)  Cash at bank increases by $250; Accounts receivable decreases by $250. 
C)  Cash at bank increases by$250; Accounts receivable increases by $250. 
D)  Cash at bank increases by$250; Equity decreases by $250.

Question 9

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

Accepted Answer

A)  Paying for medical supplies. 
B)  Borrowing $20 000 from a financial institution. 
C)  Billing a patient for a consultation. 
D)  Adding an extension to allow for 2 additional consultation rooms. 
A)  Paying for medical supplies. 
B)  Borrowing $20 000 from a financial institution. 
C)  Billing a patient for a consultation. 
D)  Adding an extension to allow for 2 additional consultation rooms.

Question 10

Which accounting assumption requires an accountant to be able to clearly identify the transactions to be recorded, classified and summarised into an entity's financial statements?

Accepted Answer

A)  accrual basis assumption. 
B)  going concern assumption. 
C)  accounting equation assumption. 
D)  accounting entity assumption. 
A)  accrual basis assumption. 
B)  going concern assumption. 
C)  accounting equation assumption. 
D)  accounting entity assumption.

Question 11

Information that is ____________ has a predictive role and a confirmatory or feedback role.

Accepted Answer

A)  subjective 
B)  relevant 
C)  reliable 
D)  material 
A)  subjective 
B)  relevant 
C)  reliable 
D)  material

Question 12

Maintaining a satisfactory relationship between an entity's resource inputs and its outputs of products or services is referred to as:

Accepted Answer

A)  directing. 
B)  efficiency. 
C)  controlling. 
D)  effectiveness. 
A)  directing. 
B)  efficiency. 
C)  controlling. 
D)  effectiveness.

Question 13

The statement that measures an entity's financial position is the:

Accepted Answer

A)  statement of changes in equity. 
B)  statement of cash flows. 
C)  balance sheet. 
D)  income statement. 
A)  statement of changes in equity. 
B)  statement of cash flows. 
C)  balance sheet. 
D)  income statement.

Question 14

Which of these is not an alternative term for equity?

Accepted Answer

A)  Accumulated funds 
B)  Owners' equity 
C)  Capital 
D)  Overdraft 
A)  Accumulated funds 
B)  Owners' equity 
C)  Capital 
D)  Overdraft

Question 15

The concept of 'management by exception' is part of which management function?

Accepted Answer

A)  planning. 
B)  directing. 
C)  controlling. 
D)  organising. 
A)  planning. 
B)  directing. 
C)  controlling. 
D)  organising.

Question 16

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

Accepted Answer

A)  A high degree of accuracy 
B)  Timeliness 
C)  Accrual basis 
D)  Materiality 
A)  A high degree of accuracy 
B)  Timeliness 
C)  Accrual basis 
D)  Materiality

Question 17

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

Accepted Answer

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

Question 18

Which of the following statements concerning the costs and benefits of financial reporting information is correct?

Accepted Answer

A)  The benefits include better investment, credit and similar economic decisions. 
B)  The benefits result in more efficient markets and greater benefits for the economy as a whole. 
C)  The major constraint on reporting the absolute best information is the cost of generating that information and assuring that it is faithfully represented. 
D)  All of these options are correct. 
A)  The benefits include better investment, credit and similar economic decisions. 
B)  The benefits result in more efficient markets and greater benefits for the economy as a whole. 
C)  The major constraint on reporting the absolute best information is the cost of generating that information and assuring that it is faithfully represented. 
D)  All of these options are correct.

Question 19

Jensen Paints had the following transactions during October. Which transaction represents an expense?

Accepted Answer

A)  Purchased office furniture for $1800 on account. 
B)  Paid $500 in settlement of a loan obtained six months earlier. 
C)  Received $200 cash for services provided to a client. 
D)  Purchased stationery for $120 cash. 
A)  Purchased office furniture for $1800 on account. 
B)  Paid $500 in settlement of a loan obtained six months earlier. 
C)  Received $200 cash for services provided to a client. 
D)  Purchased stationery for $120 cash.

Question 20

Which accounting concept relates to the extent to which information can be omitted, misstated or grouped with other information without misleading the users of that information in their decision-making?

Accepted Answer

A)  Verifiability 
B)  Relevance 
C)  Materiality 
D)  Economic substance 
A)  Verifiability 
B)  Relevance 
C)  Materiality 
D)  Economic substance

Exam 2: Financial Statements for Decision Making

Which of the following statements is correct with regards to the statement of cash flows?

Jane is a painting contractor operating as a sole proprietor. On 15 May she completes a job for a client who pays her $1500 in cash. The effect of this transaction on the accounting equation is?

Kate's Mechanics purchased a delivery van for $8000 cash. The effect of this transaction on the accounting equation is:

The assurance that the accounting information presented to users is complete, without bias or undue error, and neutral is knows as:

__________________ is enhanced when information is classified, characterised, and presented clearly and concisely.

A balance sheet would normally balance at:

On 1 September 2018 Streak-Free Window Cleaning pays $1800 in cash for supplies purchased on 22 July 2018. Assuming the business prepares monthly financial reports using the accrual basis, what effect does this payment have on the accounting equation?

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

Which accounting assumption requires an accountant to be able to clearly identify the transactions to be recorded, classified and summarised into an entity's financial statements?

Information that is ____________ has a predictive role and a confirmatory or feedback role.

Maintaining a satisfactory relationship between an entity's resource inputs and its outputs of products or services is referred to as:

The statement that measures an entity's financial position is the:

Which of these is not an alternative term for equity?

The concept of 'management by exception' is part of which management function?

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

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

Which of the following statements concerning the costs and benefits of financial reporting information is correct?

Jensen Paints had the following transactions during October. Which transaction represents an expense?

Which accounting concept relates to the extent to which information can be omitted, misstated or grouped with other information without misleading the users of that information in their decision-making?

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

Accounting for Manufacturing

Cost Accounting Systems

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis, Profitability Analysis and Capital Budgeting

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