1. Whic Which h of of the the foll follow owin ing g equ equat atio ions ns prop proper erly ly repr repres esen ents ts a derivation of the fundamental accounting equation?
a. b. c. d.
Assets + Lia Liabilities = Ow Owner’s r’s eq equity uity Assets = Owner ’s equity Cash = Assets Assets – Liabilities = Owner’s equity
2. Reta Retain ined ed ear earni ning ngs s wil willl cha chang nge e over over tim time e beca becaus use e of seve severa rall factors. Which of the following factors would explain an increase in retained earnings?
a. b. c. d.
Net loss Net Income Dividends Investment by stock holders
3.
Whic Which h of of the these se item items s wou would ld be acco accoun unte ted d for for as an expe expens nse? e? a. Repayment of a bank loan b. Dividends to to st stockholders c. Purchase of land d. paym paymen entt to the the curr curren entt peri period od’’s ren rent
4. Whic Which h of of the the fol follo lowi wing ng woul would d not not be inc inclu lude ded d on on a bal balan ance ce sheet? a. b. c. d. 5
Accounts receivable Accounts payable sales Cash
Whic Which h of of the the foll follow owin ing g sta state teme ment nts s is is tru true e con conce cern rnin ing g ass asset ets? s?
a. They are recorded at cost and adjusted for inflation. b. They are recorded at market value for financial reporting because historical cost is arbitrary. arbitrary. c. Accounting principles require that companies report assets on the income statement.
d. Assets are measured using the cost concept. 6. Whic Which h of of the the foll followi owing ng is a corr correc ectt exp expres ressi sion on of the acco account untin ing g equation? a. Assets - Liabilities + Owners’ Equity b. Assets = Liabilities - Owners’ Equity c. Assets Assets + Owners’ Owner s’ Equity = Liabilities d. Assets = Liabilities + Owners’ Equity 7. How How is is the the bala balanc nce e she sheet et link linked ed to the the oth other er fina financ ncia iall statements? a. The beginning retained earnings balance on the statement of retained earnings becomes the amount of retained earnings reported on the balance sheet. b. Retained earnings is added to total assets and reported on the balance sheet. c. Net income increases retained earnings on the statement of retained earnings, which ultimately increases retained earnings on the balance sheet. d. There is no link between the balance sheet and the other statements. 8.
Info Informa rmati tion on that that is mate materi rial al means means that that an an erro errorr or or alt altern ernat ativ ive e method of handling a transaction
a. would possibly affect the judgment of someone relying on the financial statements. b. would not affect the decisions of users. c. might cause a company to understate its earnings for the accounting period. d. could increase the profitability of a company.
9. The The proc proces ess s of reco record rdin ing g the the eco econo nomi mic c ef effect fects s of of busi busine ness ss transactions in a book of original entry: a. double entry system b. debit c. credit d. journalizing e. posting 10. If the sum of the debits and credits in a trial balance is not equal, then a. there is no concern because the two amounts are not meant to be equal. b. the chart of accounts also does not balance. c. it is safe to proceed with the preparation of financial statements. d. most likely an error was made in posting journal entries to the general ledger or in preparing the trial balance. 11. Treml Corp. had Rs. 1800 of goods on hand at January 1, 2006. During 2006, goods worth Rs.7,000 were purchased. At December 31, 2006, the actual goods on hand amounts to Rs.2,300. After the adjustments are recorded and posted at December 31, 2006, the balances in the Goods and cost of Goods Expense accounts will be: a. Goods,Rs.7,000; Cost of goods, Rs.2,300. b. Goods,Rs.1,800; Cost of goods Rs.7,000. c. Goods, Rs.2,300; Cost of goods Rs.6,500. d. Goods, Rs.2,300; Cost of goods Rs.3,900.
Use the information presented below to answer the questions that follow.
Solid Co. received a non-interest-bearing note from Bedrock Co. on October 1, 2006. The amount of the note due at the maturity date is Rs 6,200. The note was accepted by Solid for Goods sold to Bedrock with a selling price of Rs.6,000. The note is due in 3 months. 12. The difference of Rs.200 between the amount of the note (Rs6,200) and the sales price of the merchandise (Rs.6,000) a. is the interest explicitly included in the amount of the note. b. will be recorded in a contra account, Discount on Notes Receivable, by Solid Co. c. will be recorded as interest revenue on October 1, 2006. d. is an error made in preparing the note. 13. Which of the following combination of financial statements would provide the most in-depth information to help understand a company’s liquidity? a. income statement and statement of cash flows b. balance sheet and statement of cash flows c. balance sheet and income statement d. statement of retained earnings and statement of cash flows 14. Boston Bean Company sold equipment for Rs.4,000. This resulted in Rs.1,500 loss. What is the impact of this sale on the working capital? a. reduces working capital b. increases working capital c. has no affect on working capital at all d. the increase offsets the decrease 15. To determine whether a lottery winner would prefer to receive the money in a single lump sum immediately or receive an equal amount over a period of years, you would use which type of time value of money calculation? a. the future value of a single amount b. the present value of a single amount c. the future value of an annuity
d. the present value of an annuity 16. Quartermaine Corp. issued 10-year, 8%, Rs.100,000 bonds paying interest on an annual basis, at Rs 5,200 premium. Which one of the following statements is true? a. Quartermaine’s annual interest expense on the bonds will be greater than the amount of interest payments to bondholders each year. b. Quartermaine’s annual interest expense on the bonds will be less than the amount of interest payments to bondholders each year. c. Quartermaine will receive Rs.94,800 as the issue price. d. None of the above 17. The book value per share for a corporation is a. the market price of the stock. b. the cost of investments in stock of other corporations. c. based on the excess of total assets over total liabilities. d. the amount shareholders would receive if they sold their shares back to the corporation. 18. Which of the following is not an operating activity? a. cash collections from credit customers b. cash payments for operating expenses c. cash receipts for interest earned d. cash payments for dividends to shareholders 19. Comparability of information results when: a. the information would influence a decision. b. different companies use the same accounting principles. c. the amounts involved are material. d. a company uses the same accounting principles and methods from year to year.
20. Items such as a sales slip, a check, a bill, or a cash register tape are examples of: a. balance sheet accounts. b. income statement accounts. c. cost of goods sold. d. source documents. 21. Unearned revenues are: a. prepayments. b. liabilities. c. temporary accounts. d. both a and b above. 22. The revenue recognition principle requires that sales revenues be recognized: a. when cash is received. b. when the merchandise is ordered. c. when the goods are transferred from the seller to the buyer . d. None of the above. 23. All of the following are “other receivables” except: a. petty cash. b. interest receivable. c. income taxes refundable. d. advances to employees. 24. Depreciation is dependent on a number of estimates. When a change in an estimate is required, the change is made: a. in the current year. b. in the future year. c. to prior periods. d. both a and b above. 25. In order to pay a dividend:
a. the corporation must have adequate retained earnings. b. the board of directors must declare a dividend. c. the corporation must have adequate cash. d. all of the above. 26. Upon receiving a stock dividend: a. you own more shares. b. your ownership interest has increased. c. your ownership interest has not changed. d. both a and b above. 27. The The Cash Cash acc accoun ountt on the the bala balanc nce e sheet sheet shou should ld not not incl include ude which of the following items? a. Travel advances to employees b. Currency c. Money orders d. Deposits in transit 28. A credit memorandum accompanying a bank statement would occur for which of the following items? a. A previously deposited customer check which was returned NSF NSF.. b. Bank service charges for the month. c. The proceeds of a note collected by the bank are deposited to the account. d. Each of the above. 29. When reconciling the ending cash balance per the bank statement to the correct adjusted cash balance, how would deposits in transit be handled? a. Added to the balance per the bank statement. b. Subtracted from the balance per the bank statement. c. Added to the balance per company records. d. Ignored. 30. A bank reconciliation sometimes points to the need for adjusting entries. In general, the source of the adjustments is:
a. the reconciliation of the ending balance per the bank statement to the adjusted cash balance. b. the reconciliation of the cash balance per the company records to the adjusted cash balance. c. both a and b. d. none of the above. 31. Malory Company provides the following information about the month-end bank reconciliation: Ending cash per bank Rs.1,367 statement Ending cash per company records
7,383
Monthly bank service charge
25
Deposits in transit at month-end
8,345
Outstanding checks at 2,399 month-end Customer check returned NSF
45
The correct ending cash balance is: a.Rs.4,914 b.Rs. 7,268 c.Rs. 7,313 d.Rs. 7,383 32. Which Which of of the the follow following ing bank reconci reconciliat liation ion items items would would not result result in an adjusting entry in the books (general ledger)? a.Service charges b.Outstanding checks c.Interest earned d.Collection of a note by the bank
33. Notifi Notificat cation ion by the the bank bank that a depos deposite ited d custo customer mer check check was returned NSF requires that the company make the following adjusting entry: a. b. c. d. 34. a. b. c. d. 35. a. b. c. d.
Accounts Receivable Cash Cash Accounts Receivable Miscellaneous Ex Expense Accounts Receivable No adj adjus ustting en entry is ne necessary. ry.
which which of of the the follow following ing errors errors will will not affec affectt the the trial trial balanc balance? e? wrong balancing of an account wriiting wr ting an amou amount nt in the the wro wrong ng acco accoun untt but but on the the correct side wrong totaling of an amount none of the above whic which h of the the fol follow lowin ing g error errors s is an err error or of of omis omissi sion? on? sale sale of Rs. Rs. 500 500 was was wri writt tten en in the the pur purch chas ases es jour journa nall wage wages s pai paid d to to Moh Mohan an have have been been debi debite ted d to to his his acco accoun untt The The tot total al of the the sal sales es jour journa nall has has not not bee been n pos poste ted d to to the the sales account None of the above
36. Purchas Purchase e of offic office e furnit furniture ure for Rs.3400 Rs.3400 has been debited debited to General Expenses account, it is an error of a. b. c. d. 37. a.
commission omission principle none of the above Which Which of of the the flowi flowing ng errors errors will will affec affectt the the trial trial balance balance account account? ? repa repair ir to buil buildi ding ngs s have have been been debi debite ted d to to bui build ldin ings gs
b. c. d. 38. 38. a. b. c. d. 39. a. b. c. d. 40. a. b.
c. d. 41. a. b. c. d.
the the tot total al of purc purcha hase ses s jou journ rnal al is Rs. Rs. 1000 1000 shor shortt frei freigh ghtt pai paid d on on new new mach machin iner ery y has has been been debi debite ted d to to the the freight account none of the above Erro Errors rs of comm commis issi sion on do not not all allow ow:: correc rect tot tota aling of of the the bala alance sh sheet corr correc ectt total otalin ing g of the tria triall bala balanc nce e the trial balance to agree none of the above The The prep prepara arati tion on of a tri trial al balan balance ce helps helps in locat ocatiing er errors ors of of com comp plete om omission locating errors of principle locating er errors of of co commission none of the above whic which h of the the fol follow lowin ing g error errors s is an err error or of of prin princi cipl ple e Rs.5 Rs.500 00 rece receiv ived ed from from Ganp Ganpat at has has bee been n deb debit ited ed to his his account Purchase of Rs.1000 has been entered in the sales journal Repa Repair irs s to to buil buildi ding ngs s have have been been deb debit ited ed to to Bui Build ldin ings gs acc accou ount nt None of the above The The type type of acco account unt with with a norma normall cre credi ditt bala balanc nce e is An asset A drawing A revenue An expense
42. The form form listi listing ng the the balanc balances es and and the the titl title e of the the accou accounts nts in the the ledger on a given date is the a. b. c.
Income statement Balance Sheet Retained earnings statement
d.
Trial balance
