Deck 4: Business Transactions

Question 1

An investment by shareholders in a company will increase:

A)assets and shareholders' equity.
B)assets and liabilities.
C)liabilities and shareholders' equity.
D)assets only.

Answer 1

A

Question 2

Liabilities + equity should always be:

A)less than assets
B)equal to assets
C)greater than assets
D)greater than or equal to assets

Answer 2

B

Question 3

The sale on credit of a computer by Computers R Us is:

A)A business transaction
B)A personal transaction
C)A business event
D)Not a business transaction

Answer 3

A

Question 4

The effect on the accounting equation of the business purchasing a new motor vehicle on credit for $35 500 is:

A)an increase in the asset Motor Vehicles of $35 500 and a decrease in the asset cash of $35 500.
B)an increase in the asset Motor Vehicles of $35 500 and a decrease in the liability accounts payable of $35 500
C)a decrease in the asset Motor Vehicles of $35 500 and an increase in the liability accounts payable $35 500
D)an increase in the asset Motor Vehicle of $35 500 and an increase in the liability accounts payable $35 500

Question 5

Which of these is correct?

A)Assets + liabilities = equity
B)Liabilities = assets + equity
C)Assets = liabilities + equity
D)Assets = equity - liabilities

Question 6

The payment of a liability:

A)decreases assets and liabilities.
B)decreases assets and equity.
C)increases assets and decreases liabilities.
D)decreases assets and increases liabilities.

Question 7

For the cash account to decrease and the profit to decrease the transaction occurring could have been:

A)purchase of a new printer for the owner's home computer.
B)repayment of a loan.
C)payment of an electricity bill.
D)agreement with a supplier on the value of the next delivery.

Question 8

On 14 May,Green Pty Ltd sells goods to Gold Pty Ltd with payment to follow within 60 days.On Green's balance sheet the amount owed by Gold should be recorded as:

A)a customer advance payment.
B)an account payable.
C)an account receivable.
D)inventory.

Question 9

Which of these would be classed as a transaction on credit?

A)Payment of salaries
B)Depreciation of office equipment
C)Withdrawal of capital
D)Sale of goods on account

Question 10

For the accounting equation to balance each transaction must:

A)always affect two accounts.
B)affect the same number of asset and liability accounts.
C)affect two or more accounts.
D)affect two or less accounts

Question 11

The effect on the accounting equation of the business paying $275 cash for mobile phone charges is:

A)a decrease in the asset cash of $275 and a decrease in the liability accounts payable of $275
B)a decrease in the asset cash of $275 and a decrease in profit and loss of $275 to record the phone expense.
C)an increase in the asset cash of $275 and a decrease in profit and loss of $275 to record the phone expense.
D)a decrease in the asset cash of $275 and an increase in profit and loss of $275 to record the phone expense.

Question 12

Evidence that would not be of help in recording a transaction would be:

A)a cheque
B)an advertising brochure
C)an invoice
D)a cash register record

Question 13

Which of the following is not a business transaction?

A)providing services on credit
B)purchasing inventory on credit
C)signing a contract to hire a new employee
D)withdrawal of cash by the owner from the business bank account

Question 14

The accounts land,accounts receivable,sales revenue and accounts payable should be classified as follows:

A)land - asset,accounts receivable - liability,sales revenue - income,accounts payable - asset
B)land - asset,accounts receivable - asset,sales revenue - liability,accounts payable - liability
C)land - asset,accounts receivable - liability,sales revenue - liability,accounts payable - liability
D)land - asset,accounts receivable - asset,sales revenue - income,accounts payable - liability

Question 15

The liability created by a business purchasing stationary on credit is an:

A)account payable.
B)account receivable.
C)income.
D)expense.

Question 16

Some of ABC's transactions for the month of October are as follows.Which transaction,if any,is an expense for the month of October?

A)Purchased $50 worth of petrol on credit,to be paid for in November
B)Paid $1000 off a loan obtained during July
C)Paid a mechanic $250 for repair work carried out in September
D)Purchased a photocopier for $15 000

Question 17

The business hires an office manager at $700 a week.The immediate effect on the accounting equation is to:

A)increase equity by $700 and decrease the asset cash by $700
B)decrease the asset cash by $700 and decrease equity by $700
C)no effect as this is not a business transaction
D)increase wages by $700 and decrease equity by $700

Question 18

A present obligation of the entity arising from past events,the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits is the definition of:

A)Income
B)An expense
C)A liability
D)Equity

Question 19

If a transaction causes an asset account to increase,which of the following effects of equal amount may also occur?

A)A decrease in a liability account
B)An increase in another asset account
C)A decrease in an equity account
D)An increase in a liability account

Question 20

The duality concept requires that each transaction must be recorded:

A)in at least two different accounts.
B)in a journal and a ledger.
C)in two sets of books.
D)first as income than as an expense.

Question 21

A business paid $725 for employees' wages at the end of the week.The debit and credit entries are:

A)Debit Cash $725;credit Equity $725
B)Debit Cash $725;credit Wages expense $725
C)Debit Equity $725;credit Wages expense $725
D)Debit Wages expense $725;credit Cash $725

Question 22

Which of these is not part of a general journal entry?

A)Date
B)Names of the accounts affected
C)A debit and a credit column
D)Type of account (e.g.asset,liability,income,etc. )

Question 23

If: $\begin{array}{l}\text { assets } &=\$20000\\\text { liabilities } &=\$11500\\\text { income }&=\$36900 \\\text { equity at start }&=\$7400\\\end{array}$

The amount of expense for the period was:

A)$35 800
B)$26 200
C)$16 600
D)$24 300

Question 24

Omitting a transaction for a cash sale for $6000 from a worksheet will cause:

A)the liabilities & equity side of the worksheet to be $6000 more than the assets side
B)the liabilities & equity side of the worksheet to be $12 000 more than the assets side
C)the assets side of the worksheet to be $6000 more than the liabilities & equity side
D)the assets and liabilities & equity sides of the worksheet will balance,i.e.they will have equal totals

Question 25

If assets are $100 000,opening equity is $50 000,liabilities are $20 000 and income is $85 000,expenses must be:

A)$30 000
B)$45 000
C)$50 000
D)$55 000

Question 26

Accounts for Printers Pty Ltd are as follows:
$\begin{array}{llcc} \text { Cash } & \$2000 \\ \text {Creditors } &10000\\ \text { Accounts Receivable } &11700\\ \text { Office equipment } &4500\\ \text { Loan payable } &14000\\ \text { Motor vehicle} &32000\\\end{array}$

Equity is:

A)$54 200
B)$2000
C)$50 200
D)$26 200

Question 27

An accountant sent an invoice to a customer,John Brown for $500 for preparing his tax return.The debit and credit entries are:

A)Debit Debtor J.Brown $500;credit Fees income $500
B)Debit Fees income $500;credit Equity $500
C)Debit Cash $500;credit Fees income $500
D)Debit Cash $500;credit Debtor J Brown $500

Question 28

The effect on the accounting equation of the business buying a computer worth $900 paying $450 cash and owing $450 to be paid in 30 days' time is:.

A)increase the asset computers,increase the asset cash,decrease the liability accounts payable
B)decrease the asset computers,increase the asset cash,decrease the liability accounts payable
C)increase the asset computers,decrease the asset cash,increase the liability accounts payable
D)increase the asset computers,increase the asset cash,decrease the liability accounts payable

Question 29

The effect on the accounting equation of the business invoicing J.Bird for $1700 for computing services supplied to her on credit:

A)is an increase in the asset accounts receivable and an increase in profit and loss by $1700 to record the income earned.
B)is an increase in the asset cash and an increase in profit and loss by $1700 to record the income earned.
C)is a decrease in the asset cash and an increase in the asset accounts receivable of $1700 to record the amount paid.
D)is a decrease in the asset accounts receivable and an increase in profit and loss by $1700 to record the income earned.

Question 30

The effect on the accounting equation of the business banking $1000 of cash received from a debtor paying his account for an amount owing is:

A)increase the asset cash;increase profit and loss to record income
B)increase the asset cash;decrease the liability debtors
C)increase the asset cash;decrease the asset debtors
D)decrease the asset cash;decrease the profit and loss

Question 31

The error that would be detected by a trial balance is:

A)office salaries recorded as office expenses.
B)a sales person pocketed cash from a cash sale that they did not ring up on the register.
C)a purchase of inventory on credit was recorded as a cash transaction.
D)a cash sale of $273 was recorded as $237 in the sales account and recorded correctly in the cash account.

Question 32

The statement concerning journal and ledger accounts that is true is:

A)Ledger accounts are seldom used nowadays since most recording is done on computer packages
B)In a manual accounting system the ledger is written up before the journal
C)The left hand side of a ledger account is the debit side
D)With a manual accounting system a business will normally show all transactions in one journal,the general journal

Question 33

Accounts for XYZ are as follows:
$$\begin{array} { l r } \text { Cash } & \$ 4000 \\\text { Overdraft } & 11000 \\\text { Creditors } & 3000 \\\text { Invertory } & 2700 \\\text { Accounts Receivable } & 8100 \\\text { Furniture } & 4500 \\\text { Loan payable } & 15000 \\\text { Car } & 12000\end{array}$$
Equity is:

A)$13 300
B)$ - 400
C)$5300
D)$2300

Question 34

If only one side of a $100 transaction is recorded,the imbalance in the worksheet will be:

A)$0.
B)$50.
C)$100.
D)$200.

Question 35

In a manual accounting system for a business that offers credit to its customers,the journal(s)most like to be used is/are:

A)the general journal only
B)the cash receipts journal only
C)the cash receipts and cash payments journal
D)special journals;i.e.cash receipts,cash payments,credit purchases,credit sales and the general journal

Question 36

If assets are $560 000 and equity is $270 000 liabilities must be:

A)$830 000
B)$290 000
C)$560 000
D)$190 000

Question 37

When a customer eventually pays for items that have been purchased on credit,the transaction will affect:

A)an asset and a liability
B)an asset and an expense
C)two assets
D)an asset and income

Question 38

The rule that is incorrect is:

A)Increases in assets are debits
B)Increases in income are debits
C)Increases in equity are credits
D)Increases in liabilities are credits

Question 39

In recording wages for the month a bookkeeper records a debit entry to the account Sales instead of a debit to Wages Expense.This error will result in:

A)an overstatement of sales for the period.
B)no effect on profit for the period.
C)an understatement of assets at the end of the period.
D)an understatement of equity at the end of the period.

Question 40

A business purchased a delivery vehicle for $42 000 cash.The debit and credit entries are:

A)Debit Cash $42 000;credit Delivery Vehicle $42 000.
B)Debit Delivery Vehicle $42 000;credit Cash $42 000.
C)Debit Delivery Vehicle $42 000;credit Equity $42 000.
D)Debit Delivery Vehicle $42 000;credit Creditors $42 000.

Question 41

The statement that is incorrect is:

A)A debit entry is used to increase assets
B)A credit entry is used to increase liabilities
C)A credit entry is used to increase expenses
D)A debit entry is used to decrease equity

Question 42

The statement about a trial balance that is not true is:

A)It is a list of ledger account balances
B)It is prepared at the end of the accounting period
C)It is used to assist in the preparation of the worksheet
D)It has a debit and a credit column

Question 43

The accounting principle that requires separation of business transactions from any personal transactions of the owners is known as the _____________________ concept.

Question 44

When parties deal from equal bargaining positions where neither party is subject to the other's control or significant influence,and the transaction is treated with fairness,integrity and legality the transactions are

Question 45

Cheque butts,invoices,purchase orders,credit card slips and cash register tapes are examples of _____________ _____________ which provide written evidence to verify a business transaction.

Question 46

A manual spreadsheet,used by accountants to organise information and assist in the preparation of financial statements,is known as a __________ sheet.

Question 47

If the total of the credits is $72 dollars greater than the total of the debits in the trial balance,the error is most likely to be:

A)an incorrect entry where $72 has been credited to the wrong account
B)an incorrect entry where $72 has been credited twice
C)a single error where only one part of a transaction is entered
D)a transposition entry

Question 48

If the value of Assets is equal to the value of Equity then Liabilities must be equal to ________________.

Question 49

Income - Expenses = ___________________

Question 50

Occurrences that have the potential to affect the entity in some way,but that will not be recorded as business transactions until an exchange of goods or services takes place between the entity and an outside party are known as ______________ ______________.

Question 51

Which of the numbers below,representing the difference in totals of debits and credits in a trial balance is most likely to be caused by a transposition error?

A)35
B)100
C)162
D)33

Question 52

A customer purchased goods from DEF Pty Ltd paying cash of $300 and receiving 30 days credit for the balance of $400.The debit and credit entries for DEF Pty Ltd are:

A)Debit sales $700;Credit accounts receivable $400;Credit cash $300
B)Debit cash $300,Debit accounts receivable $400;Credit sales $700
C)Debit cash $300,Debit accounts payable $400;Credit sales $700
D)Debit cash $700,Debit accounts receivable $400;Credit sales $300

Question 53

A business purchased office furniture for $1500 paying $1000 cash and owing $500 to be paid the following month.The debit and credit entries are:

A)Debit office furniture $1500;credit cash $1000,credit accounts payable $500
B)Debit cash $1000,debit accounts payable $500;credit office furniture $1,500
C)Debit office furniture $1000;credit cash $1000,credit accounts payable $500
D)Debit office furniture $500;credit cash $1000,credit accounts payable $1500

Question 54

The double entry accounting method requires each transaction to have at least ___________ effects on the accounting equation.

Question 55

A supplier sold inventory to XYZ Pty Ltd valued at $8500.XYZ Pty Ltd paid cash of $2000 and received 30 days credit for the balance owing.The debit and credit entries for XYZ Pty Ltd are:

A)Debit cash $2000;Credit accounts receivable $6500;Credit sales $8500
B)Debit cash $2000,Debit accounts receivable $6500;Credit inventory $8500
C)Debit accounts payable $6500,Debit cash $2000;Credit inventory $8500
D)Debit inventory $8500;Credit accounts payable $6500,Credit cash $2000

Question 56

The basic accounting equation is Assets = _______________ + Equity.

Question 57

Profit is added to opening equity to calculate ending _________.

Question 58

A business borrowed $20 000 from AXY Finance.The debit and credit entries for this transaction are:

A)Debit accounts payable $20 000;Credit loan from AXY finance $20 000
B)Debit loan from AXY finance $20 000;Credit accounts payable $20 000
C)Debit cash $20 000;Credit loan from AXY finance $20 000
D)Credit loan from AXY finance $20 000;Debit cash $20 000

Question 59

Which of the following accounts could not have a credit balance?

A)accounts payable
B)fee income
C)office furniture
D)capital

Question 60

Income has a (positive/negative)____________________ effect on Equity.

Question 61

A _____________ is a record in which each business transaction appears in date order.

Question 62

A transposition of figures is easy to find as the error on the worksheet will be divisible by ____________________.

Question 63

Payment of an electricity account for cash results in a (debit/credit)_________ entry in the electricity expense account.

Question 64

The abbreviation for credit is _________.

Question 65

A _____________ account is used to summarise transactions that affect a particular item in the accounting reports, e.g.sales.