Question 1

Use the following information to answer Questions :Toshyo purchases an inventory of spare parts on credit from its suppliers for $15 000. During the month Toshyo pays its suppliers $10 000 and sells spare parts (which cost the business $8 000) to its customers on credit for $20 000. Customers pay Toshyo $12 000 during the month.
-Inventory increases by:

Accepted Answer

A)   $2 000
B)   $5 000
C)   $7 000
D)   $8 000
E)   $12 000 C

Question 2

During the month MaxiCo purchases inventory on credit for €22 000 and sells inventory on credit (which cost MaxiCo €14 000) for €24 000. Also during the month MaxiCo pays its suppliers €15 000 and receives €16 000 from its customers. MaxiCo's cost of sales is:

Accepted Answer

A)   €7 000
B)   €8 000
C)   €10 000
D)   €14 000 D

Question 3

A business has cash sales of £25 000. Inventory purchases on credit are £10,000. Payments to suppliers for inventory purchased on credit are £6 000. Cost of sales are £7 000. Wages paid are £2 000
-The profit effect of these transactions is:

Accepted Answer

A)   £6 000
B)   £10 000
C)   £13 000
D)   £16 000 D

Question 4

The Income Statement comprises the following groups of accounts:

Accepted Answer

A)   Income, Expenses and Equity
B)   Assets, Liabilities and Equity
C)   Income and Expenses
D)   Assets and Liabilities

Question 5

Use the following information to answer Questions :Toshyo purchases an inventory of spare parts on credit from its suppliers for $15 000. During the month Toshyo pays its suppliers $10 000 and sells spare parts (which cost the business $8 000) to its customers on credit for $20 000. Customers pay Toshyo $12 000 during the month.
-Profit increases by:

Accepted Answer

A)   $2 000
B)   $5 000
C)   $7 000
D)   $8 000
E)   $12 000

Question 6

Taken together, receivables, payables, inventory and bank are often referred to as:

Accepted Answer

A)   Equity
B)   Cash Flow
C)   Statement of Financial Position
D)   Working Capital

Question 7

Use the following information to answer Questions :Toshyo purchases an inventory of spare parts on credit from its suppliers for $15 000. During the month Toshyo pays its suppliers $10 000 and sells spare parts (which cost the business $8 000) to its customers on credit for $20 000. Customers pay Toshyo $12 000 during the month.
-Bank increases by:

Accepted Answer

A)   $2 000
B)   $5 000
C)   $7 000
D)   $8 000
E)   $12 000

Question 8

The purchase of goods on credit for later resale would affect the following accounts:

Accepted Answer

A)   Bank, Cost of sales
B)   Inventory, Bank
C)   Payables, Inventory
D)   Cost of sales, Payables

Question 9

Goods bought on credit from suppliers are referred to as:

Accepted Answer

A)   Payables or creditors
B)   Receivables or creditors
C)   Payables or debtors
D)   Receivables or debtors

Question 10

A business has cash sales of £25 000. Inventory purchases on credit are £10,000. Payments to suppliers for inventory purchased on credit are £6 000. Cost of sales are £7 000. Wages paid are £2 000
-The effect of these transactions on the Bank account is an increase of:

Accepted Answer

A)   £17 000
B)   £16 000
C)   £9 000
D)   £7 000

Question 11

Goods sold on credit to customers are referred to as:

Accepted Answer

A)   Payables or creditors
B)   Receivables or creditors
C)   Payables or debtors
D)   Receivables or debtors

Question 12

Accounting transactions are recorded from:

Accepted Answer

A)   Business events
B)   Transactions
C)   Source documents
D)   Ledgers

Question 13

The need to calculate cost of sales is driven by which of the following accounting principles?

Accepted Answer

A)   Accounting entity
B)   Accounting period
C)   Matching
D)   Historic cost

Question 14

A business has cash sales of £25 000. Inventory purchases on credit are £10,000. Payments to suppliers for inventory purchased on credit are £6 000. Cost of sales are £7 000. Wages paid are £2 000
-The effect of these transactions on the Inventory account is a:

Accepted Answer

A)   Decrease of £3 000
B)   Increase of £3 000
C)   Increase of £4 000
D)   Decrease of £4 000

Question 15

Paying cash for a computer system for business use would affect the following types of account:

Accepted Answer

A)   Assets only
B)   Both assets and liabilities
C)   Liabilities only
D)   Both assets and expenses

Question 16

Use the following information to answer Questions :Toshyo purchases an inventory of spare parts on credit from its suppliers for $15 000. During the month Toshyo pays its suppliers $10 000 and sells spare parts (which cost the business $8 000) to its customers on credit for $20 000. Customers pay Toshyo $12 000 during the month.
-Payables increases by:

Accepted Answer

A)   $2 000
B)   $5 000
C)   $7 000
D)   $8 000
E)   $12 000

Question 17

The principle that financial statements are prepared on the basis that the business will continue in operation is:

Accepted Answer

A)   Historic cost
B)   Going concern
C)   Conservatism
D)   Consistency

Question 18

Use the following information to answer Questions :Toshyo purchases an inventory of spare parts on credit from its suppliers for $15 000. During the month Toshyo pays its suppliers $10 000 and sells spare parts (which cost the business $8 000) to its customers on credit for $20 000. Customers pay Toshyo $12 000 during the month.
-Receivables increases by:

Accepted Answer

A)   $2 000
B)   $5 000
C)   $7 000
D)   $8 000
E)   $12 000

Question 19

In recording business transactions using the double entry method (as described in Chapter 3), which of the following statements is true

Accepted Answer

A)   Both entries must increase accounts
B)   One account must increase and the other account must decrease
C)   Either or both the accounts may increase or decrease
D)   Both entries must decrease accounts

Question 20

The Statement of Financial Position comprises the following groups of accounts:

Accepted Answer

A)   Income, Expenses and Equity
B)   Assets, Liabilities and Equity
C)   Income and Expenses
D)   Assets and Liabilities

Exam 3: Recording Financial Transactions and the Principles of Accounting

During the month MaxiCo purchases inventory on credit for €22 000 and sells inventory on credit (which cost MaxiCo €14 000) for €24 000. Also during the month MaxiCo pays its suppliers €15 000 and receives €16 000 from its customers. MaxiCo's cost of sales is:

A business has cash sales of £25 000. Inventory purchases on credit are £10,000. Payments to suppliers for inventory purchased on credit are £6 000. Cost of sales are £7 000. Wages paid are £2 000 -The profit effect of these transactions is:

The Income Statement comprises the following groups of accounts:

Taken together, receivables, payables, inventory and bank are often referred to as:

The purchase of goods on credit for later resale would affect the following accounts:

Goods bought on credit from suppliers are referred to as:

A business has cash sales of £25 000. Inventory purchases on credit are £10,000. Payments to suppliers for inventory purchased on credit are £6 000. Cost of sales are £7 000. Wages paid are £2 000 -The effect of these transactions on the Bank account is an increase of:

Goods sold on credit to customers are referred to as:

Accounting transactions are recorded from:

The need to calculate cost of sales is driven by which of the following accounting principles?

A business has cash sales of £25 000. Inventory purchases on credit are £10,000. Payments to suppliers for inventory purchased on credit are £6 000. Cost of sales are £7 000. Wages paid are £2 000 -The effect of these transactions on the Inventory account is a:

Paying cash for a computer system for business use would affect the following types of account:

The principle that financial statements are prepared on the basis that the business will continue in operation is:

In recording business transactions using the double entry method (as described in Chapter 3) , which of the following statements is true

The Statement of Financial Position comprises the following groups of accounts: