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asset? Correct Mark 1.00 out of 1.00 Flag question Select one: a. it must be
firstly meet the definition of an "asset". This is a three pronged test: 1 -Control
benefits are expected to flow. Thus, B & C are both true statements. A,
however, is untrue. The definition of an asset does not require legal control.
For example, if a lessee leases equipment, the legal title of the equipment still
resides with the lessor. Nevertheless, the lessee has control over the asset as
it can direct where the asset is located and the use to which the asset is put.
You can control an asset without owning it. b. the entity must have control
over the asset c. the transaction giving the entity control over the asset must
have occurred d. none of the above; all are essential characteristics The
correct answer is: it must be legally owned by the entity Question 2 Correct
Mark 1.00 out of 1.00 Remove flag If a machine is acquired in exchange for
$9,000 cash and a $21,000 loan, then: Select one: a. Total assets increase
Recall the accounting equation: Assets equals liabilities plus equity. In this
Expenses increase The correct answer is: Total assets increase Question 3
Correct Mark 1.00 out of 1.00 Flag question A stapling machine costing $25
which are mentioned above. A - Materiality: This principle states that the
Concept: Not only must an accounting entity's accounting records include only
and recorded in stable currency, such as the Australian dollar. This allows
evaluate performance for that period. Dividing the life of an organisation into
equal periods to determine profit or loss for that period is known as the
separate and distinguishable from its owners. What this means is that
business records must not include the personal assets or liabilities of the
(owners); similarly, the accounting entity of a sole trader is separate from the
affairs of the owner. The economic benefit(s) received from using a stapling
machine is as trivial as the transaction which led to its purchase. Thus, sound
accounting judgement would suggest that it's more appropriate to treat the
with the materiality assumption. By knowing the assumptions well, you would
accounting entity The correct answer is: materiality Question 4 Correct The
purpose of dividing assets and liabilities into current and non-current classes
is to help the reader of the balance sheet to determine: Mark 1.00 out of 1.00
Select one: Flag question a. the short-term financial position of the firm b. the
performance of the firm d. both A and B The terms current and short-term are
incorrect because focusing solely on the division between current and non-
The correct answer is: both A and B Question 5 Incorrect Mark 0.00 out of 1.00
Remove flag The most common way of accommodating the need for detailed
separate accounts in the general ledger, is to use the technique of: Select
entries are required when accrual basis accounting is used. D - cash flow
statements. The correct answer is: subsidiary ledgers and control accounts
Question 6 Which of the following statements is true? Correct Mark 1.00 out of
1.00 Flag question Select one: a. if the liabilities owed by a business total
$450 000, then the assets also total $450 000 b. if the assets owned by a
business total $500 000, then shareholders' equity also totals $500 000 c. if
the assets owned by a business total $90 000 and liabilities total $50 000,
then shareholders' equity totals $40 000 The accounting identity states Assets
borrowings). C is the only answer where the accounting identity holds true,
i.e., 90,000 = 50,000 + 40,000. A&B are possible answers but are not the best
answers because they each fail to consider the right hand-side of the equation
in its totality. There are two possible sources of finance. d. if the assets owned
by a business total $90 000 and liabilities total $50 000, then shareholders'
equity totals $140 000 The correct answer is: if the assets owned by a
business total $90 000 and liabilities total $50 000, then shareholders' equity
totals $40 000 Question 7 Incorrect Which of the following statements about
subsidiary ledgers and control accounts is NOT true? Mark 0.00 out of 1.00
Select one: Remove flag a. Every entry made to an account in the subsidiary
subsidiary ledgers When the total of the subsidiary ledger accounts does not
agree with the balance of the control account, it signals errors in one or both
accounts. The correct answer is D. b. All credit entries will be the same in
aggregate between the subsidiary ledger and the control account. c. The total
equal the balance appearing in the control account. d. If the total of the
subsidiary ledger accounts fails to agree with the balance of the control
account, the subsidiary ledger must be in error. The correct answer is: If the
total of the subsidiary ledger accounts fails to agree with the balance of the
following accounts were taken from the trial balance: Correct Mark 1.00 out of
1.00 Flag question Net profit for the period is: Select one: a. $12 000 b. $10
000 c. $12 500 d. $11 000 Net Profit = Revenue - Cost of Goods Sold -
The correct answer is: $11 000 Question 9 Which of the following accounts is
not closed off at year end? Correct Mark 1.00 out of 1.00 Flag question Select
(income statement accounts) are closed off at the end of year. The reason
behind this is twofold: (1) to reset income and expense accounts for next year
to avoid double counting, and (2) to transfer net profit or loss for the period to
and are not closed off, for it would not make sense to close off a balance
have in the New Year. For example, if you ended with $500 worth of inventory
in 2011, then you open with $500 worth of inventory in 2012. Your inventory
account would not start off with a zero balance in the New Year. A-C are
income statement accounts and would all be closed off at the end of the year.
The only item that wouldn't be closed off is D, because it's a permanent
account and appears on the balance sheet. The correct answer is: Accounts
Receivable Question 10 Correct Mark 1.00 out of 1.00 Flag question At the end
of the financial year, the usual adjusting entry for accrued salaries owed to
one: a. Salary expense for the year was overstated. b. The total of the
liabilities at the end of the year was overstated. c. Net profit for the year was
adjustment The adjusting entry for accrued salaries is: DR salary expense $xx
CR salary payable $xx If this adjusting entry was omitted, salary expense was
also overstated. The correct answer is D. The correct answer is: Shareholders'
equity at the end of the year was overstated. Question 11 Correct Mark 1.00
out of 1.00 Flag question The Framework states that an asset should be
recognised when and only when: i. The asset possesses a cost or other value
that can be measured reliably ii. It is legally owned by the entity iii. It is
probable that the future economic benefits embodied in the asset will
eventuate Select one: Skip Quiz navigation a. i and ii only b. i and iii only For
result of past event; and 3 - Future economic benefits are expected to flow.
Even though the item may meet the definition of an asset, we may not
necessarily recognise it on the balance sheet (ie present it on the face of the
balance sheet). We will only recognise an item on as an asset on the balance
sheet if it has 1) met the definition of an asset and 2) met the recognition
criteria, ie: 1 - Probable that future economic benefits will flow. 2 - Item has a
cost or value that can be measured reliably. c. ii and iii only d. i, ii and iii The
correct answer is: i and iii only Question 12 Which of the following are debits?
Correct Mark 1.00 out of 1.00 Flag question Select one: a. contributions of
owners' equity A, B, and C are all increases in sources of finance, the right-
Equity + Liabilities. Accounts that fall under the right-hand side of the
side (credit balance) and are increased by credit entries and decreased by
account with a credit balance you must debit it -d. The correct answer is:
Remove flag The supplies account has a balance of $975 at the beginning of
the year and was debited during the year for $2800, representing the total of
supplies purchased during the year. If $750 of supplies is on hand at the end
of the year, the supplies expense to be reported on the profit and loss
statement for the year is: Select one: a. $750 b. $975 c. $2800 d. $3025.
adjustment For the supplies account, during the period, Closing balance (i.e.
($2800) - supplies used Supplies expenses incurred during the year = $975+
transaction? Incorrect Mark 0.00 out of 1.00 Flag question Select one: a. The
an order has been made. In B, an asset has been received. In C, money has
probable that the company will have to pay damages, and even if it were
legal proceedings against the company The correct answer is: The
underlies this procedure? Mark 1.00 out of 1.00 Select one: Flag question a.
but these same transactions must also be measured and recorded in stable
currency, such as the Australian dollar. This allows comparisons across periods
profit or loss for that period is known as the accounting period assumption. D -
its owners. What this means is that business records must not include the
separate entity from its shareholders (owners); similarly, the accounting entity
of a sole trader is separate from the affairs of the owner. By knowing the
entity The correct answer is: accounting period Question 16 Correct Mark 1.00
concept There are some basic assumptions that underlie current accounting
distinguishable from its owners. What this means is that business records
must not include the personal assets or liabilities of the owners. For example,
accounting entity of a sole trader is separate from the affairs of the owner. B -
include only quantifiable transactions, but these same transactions must also
Historical Cost: According to the historical cost principle, assets are initially
recorded at cost, which equals the value exchanged at the time of their
are prepared under the assumption that the company will remain in business
except B. c. historical cost d. going concern The correct answer is: monetary
concept Question 17 Given the information below: Correct Mark 1.00 out of
1.00 Flag question What is the cash profit of the business for 2011? Select
one: a. $9 000 b. $14 000 c. $24 000 Accrual accounting captures the
occurs, regardless of when cash changes hands. In other words, revenues are
recorded when they occur-when they're earned, and expenses are recorded
when they're incurred. Under cash accounting, revenues are recognised only
when the company receives cash or its equivalent, and expenses are
recognised only when the company pays with cash or its equivalent. For
customer with the promise to deliver the tickets in 7 days. Any money
basis, specifically Unearned revenue.' This is because, while the business has
to deliver the tickets. Once the tickets have been delivered, the business is
said to have earned its revenue. On the other hand, under cash accounting,
words. The question asks us to determine the cash profit for 2011; therefore,
accrual based entries and accounts. A - Cash Sales: Part of cash basis
payment terms, which generally appear on the sale invoice. Thus, we would
not include this figure. C - Cash received from accounts receivables: Part of
cash basis accounting. Cash is being received. D - Wages Paid: Part of cash
end of the year: A business may have wages owing at the end of the year, and
will be expected to pay it sometime in the future, but until that date-a cash
accounting system remains unaffected. Once the wages that are owed are
22,000 - 8,000 = 24,000 d. none of the above The correct answer is: $24 000
out of 1.00 Flag question Select one: a. sales journal b. purchase journal c.
companies use special journals to record repetitive transactions that affect the
journal record the firm's purchases on credit. It has not affect on accounts
cash receipts journal. Credit columns for accounts receivable and Sales are
customer that repays you for goods and services purchased on credit at an
is: cash receipts journal Question 19 Correct In posting the total of the cash
column in a cash receipts journal, the entry that would be made is: Mark 1.00
out of 1.00 Select one: Flag question a. Dr Cash To speed up the process of
end of the accounting period. Transactions that increase cash appear in the
multi-column cash receipts journal. The Cash column in the cash receipts
journal is a debit column. Thus, when the cash column is posted to the Cash
account in the general ledger at the end of the accounting period, the entry is
simply Dr Cash. You wouldn't debit each of the specific accounts that comprise
the total of the cash column because the corresponding accounts have their
own totals in the cash receipts journal, which also get posted at the end of the
Cash c. Dr each of the specific accounts that comprise the total d. none of the
above The correct answer is: Dr Cash Question 20 Which of the following is
NOT a purpose served by special journals? Correct Mark 1.00 out of 1.00 Flag
Understand the Subsidiary ledgers and control accounts Special journals are
errors. The correct answer is: elimination of the general journal Question 21
product will not be delivered until next year. This transaction will: Mark 1.00
out of 1.00 Select one: Flag question a. increase net profit, total assets and
cash b. increase net profit and cash but not total assets c. increase total
assets and cash but not net profit Generally, a company records its revenue
only when delivery of the product occurs. It is at the point of delivery that the
the deposit Cr Unearned Revenue 500,000 - the product hasn't been delivered
yet; therefore, the revenue has not be earned. Unearned revenue is a liability
account because it reflects the fact that the company still has a present
total assets increase because cash increases but net profit remains
unchanged - c. d. increase cash but not increase net profit or total assets The
correct answer is: increase total assets and cash but not net profit Question
22 Correct Given the information below: Mark 1.00 out of 1.00 Flag question
Assume no dividends were declared during the year. What is the balance of
total assets at 30 June 2011? Select one: a. 200 000 b. $210 000 Assets =
assets. Share Capital (SE) + Retained Profits (SE) + Accounts Payable (L) =
the above The correct answer is: $210 000 Question 23 Which of the following
may be a liability of a business enterprise? Correct Mark 1.00 out of 1.00 Flag
question Select one: a. share capital b. wages payable Share Capital is part of
Shareholders' equity; Wages Payable are wages owed to employees for work
that has been performed; retained profits can be defined as a running account
Only possible answer is B. c. retained profits d. none of the above The correct
answer is: wages payable Question 24 Correct Mark 1.00 out of 1.00 In 2011,
Zealous Ltd paid $1900 for 2010 expenses, $32 000 for 2011 expenses and
$4000 advance payment for 2012 expenses. In 2012, it paid $8000 for 2011
expenses. Furniture depreciation for 2011 was $5000. What was the accrual
accounting expense for 2011? Remove flag Select one: a. $37 000 b. $40 000
c. $50 900 d. $45 000 Commentary - Prerequisites: understand and apply the
should recognize revenue and expense when revenue has been earned and
expense has incurred. Accrual accounting expense for 2011=$32 000 (which
incurred and paid in 2011) + $8000 (which incurred in 2011 but paid in 2012)
answer is D. The correct answer is: $45 000 Question 25 Which of the
overdraft c. Hiring a new staff member d. None of the above In order to qualify
other items of economic value; B - Past: The exchange must have happened,
between the entity being accounted for and someone else. Two
currency unit relevant in the country where the transaction happens. Answer
entity begins drawing down its bank overdraft that a transaction occurs. C -
the new staff member and a promise to remunerate the staff member on the
part of the entity. Also, the event is not measurable in dollars, failing the
profit: Correct Mark 1.00 out of 1.00 Flag question Select one: a. $30,000 b.
$60,000 In accounting, Gross Profit is the difference between revenue and the
Mark 1.00 out of 1.00 Flag question bill from the power company? Select one:
view, electricity has been consumed during the period but not paid for. Thus,
the consumer must recognise the electricity expense and the associated
liability because he/she has used up electricity and has a present obligation to
pay the power company in the future. Hence the answer is A. b. Dr Electricity
a subsidiary ledger? Incorrect Mark 0.00 out of 1.00 Flag question Select one:
sold. The correct answer is: cost of goods sold. Question 29 Correct Mark 1.00
out of 1.00 Flag question At 1 July 2010, Epsilon Pty Ltd had 100 items of
inventory which had cost $50 each. During the year ended 30 June 2011, it
purchased 1500 items at a cost of $50 each. Of these, 200 were returned to
the supplier as they were damaged. During the year, 1200 items were sold for
$80 each, but 50 were returned by customers. Overhead expenses during the
year amounted to $15 000. What was Epsilon Pty Ltd's cost of goods sold for
the year? Select one: a. $47 500 b. $57 500 The cost of goods sold (COGS) is
the cost of making or buying a product that is then sold. During the year
Epsilon Pty Ltd sold 1200 items, 50 of which were returned. Thus, COGS is
= (1200 - 50) x 50 = $57,500. c. $60 000 d. $62 500 The correct answer is:
$57 500 Question 30 Correct The general ledger account representing the
1.00 Select one: Flag question a. Inclusion of both control accounts and
against the aggregate data and the balance contained in it A subsidiary ledger
account for each customer who makes a credit purchase. The combined
don't improve control. They work concurrently, feeding off each other, which
enables the financial and accounting team to cross-check the accuracy of the
accounts. c. Both of the above are correct d. None of the above are correct
The correct answer is: The accuracy of the detailed accounts in the subsidiary
ledger can be checked against the aggregate data and the balance contained
in