Deck 4: Business Transactions

Question 1

The sale on credit of printer cartridges by Everything Computers is:

A) a personal transaction.
B) a business transaction.
C) a business event.
D) not a business transaction.

Answer 1

B

Question 2

An example of a personal transaction would be:

A) lunch paid for by the business.
B) buying school supplies for the owner's children on a company credit card.
C) paying wages to the owner's personal assistant.
D) an owner buying lunch with their own money.

Answer 2

D

Question 3

The receipt of payment for an account receivable:

A) affects only the asset side of the accounting equation.
B) affects assets and equity.
C) affects assets and liabilities.
D) has no effect on the accounting equation.

Answer 3

A

Question 4

Some of MAC's transactions during the month of January are as follows.Which transaction,if any,is recognised as an expense for the month of January?

A) Paid $10 000 off a loan obtained during December.
B) Paid a supplier $200 for goods purchased on credit in November.
C) Purchased stationery to the value of $125 on credit, to be paid for in February.
D) Purchased a motor vehicle for $25 000 cash.

Question 5

Which of the following transactions could explain the reason for a decrease in the cash account and a decrease in profit?

A) Owner withdrawing cash from the business bank account.
B) Payment to a supplier for goods purchased on credit.
C) Payment of wages.
D) Loan repayment.

Question 6

The double-entry method of accounting

Question 7

Which of the following is not a business transaction?

A) Selling goods on credit.
B) Signing a contract to hire a new employee.
C) Purchasing office equipment for cash.
D) Owner withdrawing cash from the business bank account for personal use.

Question 8

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

A) a credit card receipt.
B) an invoice.
C) a purchase order.
D) a sales catalogue.

Question 9

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

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

Question 10

The duality concept requires that each transaction must be recorded:

A) on both sides of the accounting equation.
B) in both the income statement and balance sheet.
C) in at least two different accounts.
D) first as an expense then as equity.

Question 11

On 27 January,Rose Pty Ltd provides a service to Lily Pty Ltd with payment due within 30 days.On Rose's balance sheet the amount owed by Lily will be recorded as:

A) a prepayment.
B) an account receivable.
C) an account payable.
D) services income.

Question 12

An owner pays her private motor vehicle insurance from the business bank account.This is:

A) a business transaction.
B) a business event.
C) a personal transaction.
D) none of the above.

Question 13

A business purchasing inventory on credit creates a liability known as:

A) accounts receivable.
B) inventory.
C) supplies.
D) accounts payable.

Question 14

The business completes a purchase order for the purchase of more inventory at a cost of $1500.The immediate effect on the accounting equation is to:

A) increase asset inventory by $1500 and decrease the asset cash by $1500.
B) decrease the asset cash by $1500 and increase expenses by $1500.
C) increase liabilities by $1500 and increase asset inventory by $1500.
D) no effect as this is not recognised as a business transaction until the inventory is received.

Question 15

Which of the following would be recognised as a transaction on credit?

A) Payment of salaries.
B) Depreciation of motor vehicle.
C) Owner drawings.
D) Purchasing inventory on account.

Question 16

The following accounts: equipment,accounts payable,sales revenue and inventory are classified as:

A) equipment - asset; accounts payable - liability; sales revenue - income; inventory - asset.
B) equipment - expense; accounts payable - asset; sales revenue - asset; inventory - liability.
C) equipment - asset; accounts payable - asset; sales revenue - income; inventory - expense.
D) equipment - asset; accounts payable - liability; sales revenue - income, inventory - expense.

Question 17

Which of these is a business transaction?

A) Negotiating trading terms with a new supplier.
B) Buying a new printer.
C) Meeting with the bank manager to extend the bank overdraft.
D) Hiring a new contractor to perform work for your business next week.

Question 18

The effect of profit on the accounting equation is to:

A) increase assets.
B) decrease expenses.
C) increase equity.
D) decrease liabilities.

Question 19

For the accounting equation to balance each transaction must:

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

Question 20

Assets should always be:

A) equal to liabilities.
B) greater than equity.
C) less than liabilities + equity.
D) equal to liabilities + equity.

Question 21

A business invoices a customer $200 for maintenance services supplied on credit.The effect of this transaction on the accounting equation is:

A) an increase in the asset accounts receivable $200 and an increase in profit or loss by $200 to record the services income.
B) an increase in the asset cash $200 and an increase in profit or loss by $200 to record the services income.
C) an increase in the asset accounts receivable of $200 and a decrease in the asset cash $200 to record the amount paid.
D) a decrease in the asset accounts receivable $200 and an increase in profit or loss by $200 to record the services income.

Question 22

Which of the following rules is correct?

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

Question 23

A business paid $1255 for employees' wages at the end of the week.The debit and credit entries are:

A) debit cash $1255; credit equity $1255.
B) debit wages expense $1255; credit cash $1255.
C) debit wages expense $1255; credit wages payable $1255.
D) debit equity $1255; credit wages expense $1255.

Question 24

A customer purchased a holiday package worth $5000 from Oasis Holidays Ltd and paid a cash deposit of $1000.The balance is to be paid in two instalments of $2000 each over the next two months.The debit and credit entries for Oasis Holidays Ltd are:

A) debit sales $5000; credit accounts receivable $4000, credit cash $1000.
B) debit cash $1000, debit accounts receivable $4000; credit sales $5000.
C) debit cash $4000, debit accounts payable $1000; credit sales $5000.
D) debit cash $5000, debit accounts receivable $1000; credit sales $4000.

Question 25

Which of the following statements concerning journals and ledger accounts is true?

A) With a manual accounting system a business will normally show all transactions in one journal, the general journal.
B) They are no longer required due to the recording of transactions using electronic accounting packages.
C) In a manual accounting system the ledger is written up before the journal.
D) In a journal entry, the accounts to be debited are recorded before the accounts to be credited.

Question 26

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

A) Classification of account (e.g. income, expense, asset, etc.).
B) Debit and credit columns.
C) Date.
D) Account name.

Question 27

Once all entries have been recorded in the worksheet you should:

A) total all the columns.
B) check the total of the asset accounts equals the total of the liability and equity accounts.
C) use the column totals to prepare a balance sheet and income statement.
D) all of the above.

Question 28

A business owner withdraws $1000 from the business bank account for their own personal use.The effect of this transaction on the accounting equation is:

A) decrease the asset cash; decrease equity.
B) increase the asset cash; increase equity.
C) increase the asset cash; decrease equity.
D) decrease the asset cash; decrease the profit or loss.

Question 29

A business borrowed $200 000 from GT Finance.The debit and credit entries for this transaction are:

A) debit cash $200 000; credit loan from GT Finance $200 000.
B) debit loan from GT Finance $200 000; credit cash $200 000.
C) debit accounts payable $200 000; credit loan from GT Finance $200 000.
D) debit loan from GT Finance $200 000; credit accounts payable $200 000.

Question 30

A business purchased a motor vehicle worth $40 000,paying $15 000 cash and borrowing $25 000.The effect of this transaction on the accounting equation is:

A) increase the asset motor vehicles, decrease the asset cash, decrease the liability loan payable.
B) increase the asset motor vehicles, decrease the asset cash, increase the liability loan payable.
C) decrease the asset motor vehicles, increase the asset cash, decrease the liability loan payable.
D) increase the asset motor vehicles, increase the asset cash, decrease the liability loan payable.

Question 31

Which of the following statements is incorrect?

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

Question 32

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

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

Question 33

A business purchased inventory for $15 000,paying $8 000 cash and the balance of $7 000 due at the end of the following month.The debit and credit entries are:

A) debit cash $8 000, debit accounts payable $7 000; credit inventory $15 000.
B) debit inventory $8 0000; credit cash $8 000.
C) debit inventory $15 000; credit cash $8 000, credit accounts payable $7 000.
D) debit inventory $8 000; credit cash $15 000, credit accounts payable $7 000.

Question 34

A business paid $6000 cash for the purchase of office furniture.The debit and credit entries to record this transaction are:

A) debit cash $6000; credit office furniture $6000.
B) debit office furniture $6000; credit cash $6000.
C) debit office furniture $6000; credit accounts payable $6000.
D) debit office expenses $6000; credit cash $6000.

Question 35

Accounts for Saxophone Pty Ltd are as follows:
$\begin{array}{lr}\text { Bank overdraft } & \$ 12000 \\ \text { Accounts payable } & 8000 \\ \text { Accounts receivable } & 36300 \\ \text { Office equipment } & 14500 \\ \text { Loan payable } & 34000 \\ \text { Motor vehicle } & 27000\end{array}$
The amount for Equity is:

A) $23 800
B) $47 800
C) $54 000
D) $77 800

Question 36

A business pays $500 cash for their electricity bill.What effect does this transaction have on the accounting equation?

A) A decrease in the asset cash of $500 and a decrease in the liability accounts payable of $500.
B) An increase in the asset cash of $500 and a decrease in profit or loss of $500 to record the electricity expense.
C) A decrease in the asset cash of $500 and a decrease in profit or loss of $500 to record the electricity expense.
D) A decrease in the asset cash of $500 and an increase in profit or loss of $500 to record the electricity expense.

Question 37

Omitting a transaction for a credit sale of $4000 from a worksheet will cause the:

A) assets side of the worksheet to be $8000 more than the liabilities and equity side.
B) liabilities and equity side of the worksheet to be $8000 more than the assets side.
C) liabilities and equity side of the worksheet to be $4000 more than the assets side.
D) both sides of the worksheet will balance. i.e. assets will equal liabilities + equity.

Question 38

An accountant sent an invoice to a customer,Matt Bridges,for $300 for preparing his business activity statement.The debit and credit entries are:

A) debit cash $300; credit fees income $300.
B) debit cash $500; credit debtor M. Bridges $300.
C) debit debtor M. Bridges $300; credit fees income $300.
D) debit fees income $300; credit fees payable $300.

Question 39

A business borrows $10 000 from the bank.What effect does this transaction have on the accounting equation?

A) An increase in the asset cash of $10 000 and an increase in the liability bank loan of $10 000.
B) An increase in the asset cash of $10 000 and a decrease in the liability bank loan of $10 000.
C) A decrease in the asset cash of $10 000 and a decrease in the liability bank loan of $10 000.
D) A decrease in the asset cash of $10 000 and an increase in the liability bank loan of $10 000.

Question 40

Accounts for Minion Ltd are as follows:
$\begin{array}{lr}\text { Cash } & \$ 8000 \\ \text { Accounts payable } & 15000 \\ \text { Wages payable } & 2000 \\ \text { Inventory } & 8500 \\ \text { Accounts receivable } & 4200 \\ \text { Equipment } & 14500 \\ \text { Loan payable } & 15000 \\ \text { Motor vehicles } & 22000\end{array}$
The amount for Equity is:

A) $32 000
B) $25 200
C) $57 200
D) $27 000

Question 41

Which of the following statements about a trial balance is not true?

A) It has a debit and a credit column.
B) It is used to check the accuracy of the ledger or journal entries.
C) It is prepared at the end of the accounting period.
D) It will detect all errors in the ledger accounts.

Question 42

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

Question 43

A worksheet is a ___________ spreadsheet used by accountants to organise information and assist in the preparation of financial statements.

Question 44

Profit (or loss)= ___________________ less expenses

Question 45

A journal is a record in which each business transaction appears in ___________ order.

Question 46

If assets are $225 000,opening equity is $100 000,liabilities are $60 000 and income is $145 000,expenses must be:

A) $120 000
B) $40 000
C) $15 00
D) $80 000

Question 47

Expenses have a (positive/negative)____________________ effect on Equity.

Question 48

When recording a sale of inventory on credit,the office clerk records the debit entry to accounts payable instead of to accounts receivable.This error will result in:

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

Question 49

The trial balance at the end of the month shows the total debit balance is $1500 greater than the total credit balance.When recording the transaction for payment of wages of $1500 the following error would most likely have occurred:

A) a single-entry error where wages expense was debited for $1500 but the credit to cash for $1500 was not recorded.
B) an incorrect entry where both wages expense and cash were credited for $1500.
C) an incorrect entry where both wages expense and cash were debited for $1500.
D) a transposition error where both the debit to wages expense and the credit to cash were recorded as $5100.

Question 50

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

A) a cash sale was recorded as $463 in the sales account and recorded as $643 in the cash account.
B) electricity expense recorded as advertising expense.
C) a cashier pocketed $20 from a cash sale worth $40 and entered the sales total as $20 on the register.
D) services provided to a customer on credit were recorded as a cash transaction.

Question 51

_________ is added to opening equity to calculate ending equity.

Question 52

If a transaction worth $50 is not recorded,the trial balance will:

A) not be effected.
B) be out of balance by $50.
C) be out of balance by $100.
D) be out of balance by $200.

Question 53

If total claims equal $950 000 and equity is $460 000,assets must be:

A) $590 000
B) $490 000
C) $950 000
D) $460 000

Question 54

Blitz Pty Ltd has the following accounts and balances listed in its trial balance.Assuming all transactions have been entered correctly,the total debits and credits in the trial balance equal:
$\begin{array}{lr}\text { Capital } & \$ 15000 \\ \text { Cash } & 2000 \\ \text { Accounts payable } & 7000 \\ \text { Inventory } & 5500 \\ \text { Accounts receivable } & 9500 \\ \text { Property, plant and equipment } & 15000 \\ \text { Loan payable } & 24000 \\ \text { Motor vehicles } & 14000\end{array}$

A) $31 000
B) $61 000
C) $43 500
D) $46 000

Question 55

The numbers below represent the difference between the total debits and credits in a trial balance.Which of these numbers is most likely to be the result of a transposition error?

A) 185
B) 236
C) 173
D) 252

Question 56

A supplier sold inventory to Bikes & Autos Pty Ltd valued at $9000.Bikes & Autos Pty Ltd paid half in cash and received 30 days credit for the balance owing.The debit and credit entries for Bikes & Autos Pty Ltd are:

A) debit cash $9000; credit accounts receivable $4500, credit sales $4500.
B) debit inventory $9000; credit accounts payable $4500, credit cash $4500.
C) debit cash $4500, debit accounts receivable $4500; credit inventory $9000.
D) debit accounts payable $4500, debit cash $4500; credit inventory $9000.

Question 57

The ________________ ________________ is the accounting principle that requires separation of business transactions from any personal transactions of the owners.

Question 58

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 59

Invoices,purchase orders,and credit card slips are examples of _____________ _____________ which provide written evidence to verify a business transaction.

Question 60

If the value of Assets is $165 000 and the value of Equity is $100 000,then Liabilities must be equal to ________________.

Question 61

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

Question 62

A cash payment of a telephone account results in a (debit/credit)_________ entry in the telephone expense account.

Question 63

Borrowing $10 000 from the bank to purchase new machinery will result in a (debit/credit)_________ entry to the asset machinery account and a (debit/credit)_________ entry to the liability bank loan account.

Question 64

Receiving payment from a customer for inventory purchased on credit terms will result in a (debit/credit)_________ entry to the cash account and a (debit/credit)_________ entry to the accounts receivable account.

Question 65

A worksheet error that is relatively easy to find due to the difference being divisible by nine is known as a ____________________ error.

Question 66

An error that occurs when only one part of a transaction is recorded is known as a __________ - __________ error.

Question 67

A common error that occurs when a transaction is recorded with two increases (or decreases)to one side of the accounting equation is known as a(n)__________ error.

Question 68

A listing of ledger accounts,names,and amounts is called a __________ of ___________.