Question 1

The statement that explains the changes in equity and serves as a link between the balance sheet and the income statement is which of the following?

Accepted Answer

A)  Statement of cash flows 
B)  Statement of changes in equity 
C)  Operating statement 
D)  Statement of financial position 
A)  Statement of cash flows 
B)  Statement of changes in equity 
C)  Operating statement 
D)  Statement of financial position

Question 2

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 3

Which of the following statements is incorrect?:

Accepted Answer

A)  The liability of shareholders to contribute to the debts of an insolvent company is limited. 
B)  A sole proprietorship is an accounting entity. 
C)  Individual partners are personally liable for partnership debts. 
D)  Partnerships are regarded as separate legal entities. 
A)  The liability of shareholders to contribute to the debts of an insolvent company is limited. 
B)  A sole proprietorship is an accounting entity. 
C)  Individual partners are personally liable for partnership debts. 
D)  Partnerships are regarded as separate legal entities.

Question 4

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 5

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 6

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

Accepted Answer

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

Question 7

On 1 March Speedy Window Cleaning pays $1200 in cash for the March rent of its business premises. Which of the following is the effect on the accounting equation?

Accepted Answer

A)  Decrease in cash at bank $1200; decrease in liability accounts payable $1200. 
B)  Decrease in cash at bank $1200; increase in liability accounts payable $1200. 
C)  Decrease in cash at bank $1200; decrease in equity $1200. 
D)  Decrease in cash at bank $1200; increase in equity $1200. 
A)  Decrease in cash at bank $1200; decrease in liability accounts payable $1200. 
B)  Decrease in cash at bank $1200; increase in liability accounts payable $1200. 
C)  Decrease in cash at bank $1200; decrease in equity $1200. 
D)  Decrease in cash at bank $1200; increase in equity $1200.

Question 8

The assumption which assumes that the entity will not be liquidated in the near future is the:

Accepted Answer

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

Question 9

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 10

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 11

Julio's opening capital at 1 July 2011 was $50 000, his profit for the year was
$18 000 and his drawings were $15 000. What is the final balance of his capital at the end of the year?

Accepted Answer

A)  $68 000 
B)  $50 000 
C)  $83 000 
D)  $53 000 
A)  $68 000 
B)  $50 000 
C)  $83 000 
D)  $53 000

Question 12

The accounting assumption that the business will continue indefinitely into the future is the ________________________ assumption.

Accepted Answer

A)  accounting period 
B)  faithful representation 
C)  understandability 
D)  going concern 
A)  accounting period 
B)  faithful representation 
C)  understandability 
D)  going concern

Question 13

In order to prepare financial information for interested parties Hobart Company divides the economic activity of the firm into three-month segments and prepares financial statements at the end of each segment. Which accounting assumption is Chambers applying?

Accepted Answer

A)  Accounting period 
B)  Materiality 
C)  Accounting entity 
D)  Going concern 
A)  Accounting period 
B)  Materiality 
C)  Accounting entity 
D)  Going concern

Question 14

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 15

Which of these is not a liability?

Accepted Answer

A)  GST payable 
B)  Bank overdraft 
C)  Wages paid 
D)  Creditor 
A)  GST payable 
B)  Bank overdraft 
C)  Wages paid 
D)  Creditor

Question 16

__________ is/are resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

Accepted Answer

A)  Liabilities 
B)  Assets 
C)  Equity 
D)  Income 
A)  Liabilities 
B)  Assets 
C)  Equity 
D)  Income

Question 17

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.

Question 18

Accepted Answer

A)  $17 000. 
B)  $14 000. 
C)  $16 000. 
D)  $12 000. 
A)  $17 000. 
B)  $14 000. 
C)  $16 000. 
D)  $12 000.

Question 19

On 2 January 2014 Fife Corp buys goods from O'Brien and agrees to pay for them within 60 days. On the balance sheet for Fife Corp at 2 January 2014 the amount owing to O'Brien would be reported as:

Accepted Answer

A)  an advance payment by a customer. 
B)  accounts receivable. 
C)  accounts payable. 
D)  an expense. 
A)  an advance payment by a customer. 
B)  accounts receivable. 
C)  accounts payable. 
D)  an expense.

Question 20

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.

Exam 2: Financial Statements for Decision Making

The statement that explains the changes in equity and serves as a link between the balance sheet and the income statement is which of the following?

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

Which of the following statements is incorrect?:

Which of these is not income?

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?

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

On 1 March Speedy Window Cleaning pays $1200 in cash for the March rent of its business premises. Which of the following is the effect on the accounting equation?

The assumption which assumes that the entity will not be liquidated in the near future is the:

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

Julio's opening capital at 1 July 2011 was $50 000, his profit for the year was $18 000 and his drawings were $15 000. What is the final balance of his capital at the end of the year?

The accounting assumption that the business will continue indefinitely into the future is the ________________________ assumption.

In order to prepare financial information for interested parties Hobart Company divides the economic activity of the firm into three-month segments and prepares financial statements at the end of each segment. Which accounting assumption is Chambers applying?

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

Which of these is not a liability?

__________ is/are resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

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?

On 2 January 2014 Fife Corp buys goods from O'Brien and agrees to pay for them within 60 days. On the balance sheet for Fife Corp at 2 January 2014 the amount owing to O'Brien would be reported as:

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

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

Accounting for Manufacturing

Cost Accounting Systems

Cash Management and Control

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis, Profitability Analysis and Capital Budgeting

Partnerships: Formation, Operation and Reporting

Companies: Formation and Operations

Regulation and the Conceptual Framework

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

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