Deck 1: Introduction to Financial Accounting

Question 1

Which type of information would be of most interest to trade creditors?

A) Dividends paid
B) Total revenues
C) Ability to pay debts
D) Continuity of orders for the firm's products

Answer 1

C

Question 2

ABC is a company that commenced business on 1 January 2019. Below are the balances in the 30 June 2019 financial statements. What is the balance of liabilities?

A) $7 000
B) $9 000
C) $15 000
D) None of the above

Answer 2

B

Question 3

During 2019, a company makes credit sales of $600 000, of which $475 000 is collected at year-end. It pays $175 000 in expenses and owes $50 000 for electricity used during 2019. What would the profit be if cash accounting rather than accrual accounting was used?

A) $150 000
B) $225 000
C) $300 000
D) $375 000

Answer 3

C

Question 4

During 2019, a company makes credit sales of $600 000, of which $475 000 is collected at year-end. It pays $175 000 in expenses and owes $50 000 for electricity used during 2019. Accrual profit is:

A) $250 000
B) $275 000
C) $375 000
D) None of the above

Question 5

Which of the following is NOT an asset?

A) Equipment
B) Accounts receivable
C) Accounts payable
D) Inventory

Question 6

Which of the following statements about external company auditors is NOT true?

A) There is substantial judgement in the audit process.
B) External company auditors cannot credibly audit statements they have prepared.
C) External company auditors must be independent.
D) External company auditors provide assurance that the financial statements audited by them contain no mistakes.

Question 7

Which of the following involve measuring economic performance? i. Estimates
Ii) Adjustments
Iii) Judgements

A) i and ii only
B) i and iii only
C) ii and iii only
D) i, ii and iii

Question 8

What is the net profit for 2019 given the following information?

A) $26 000
B) $32 000
C) $46 000
D) None of the above

Question 9

Which of the following is NOT shown in the heading of the balance sheet?

A) The period covered by the report
B) The title of the report
C) The name of the company
D) All of the answers are shown

Question 10

Which of the following statements about shareholders' equity is NOT true?

A) Shareholders' equity is the excess of assets over liabilities.
B) Shareholders' equity consists of two main elements: share capital and retained profits.
C) Shareholders' equity is a residual claim of the shareholders on the assets of the organisation.
D) Shareholders' equity is the amount shareholders will receive in dividends in the future.

Question 11

A company's assets are differentiated from the owners' assets. What assumption/concept underlies this procedure?

A) Accounting entity
B) Accounting period
C) Historical cost
D) Going concern

Question 12

Which of the following is NOT an example of a liability?

A) Provisions for employee entitlements
B) Share capital
C) Accounts payable
D) Loans

Question 13

ABC is a company that commenced business on 1 January 2019. Below are the balances in the 30 June 2019 financial statements. What is the balance of assets?

A) $8 000
B) $10 000
C) $16 000
D) None of the above

Question 14

Which type of information would be of most interest to shareholders?

A) Profitability
B) Long-term financial stability
C) Proposed expansion of the company
D) Continuity of orders for the firm's products

Question 15

Which of the following use accounting information? i. Shareholders
Ii) Banks
Iii) Employees

A) i and ii only
B) ii and iii only
C) i and iii only
D) i, ii and iii

Question 16

Use the information given below to answer the following question. What is the net profit for 2019?

A) $62 000
B) $70 000
C) $104 000
D) None of the above
)

Question 17

Which of the following statements about an income statement is TRUE?

A) An income statement provides information on an organisation's profitability at a certain point in time.
B) An income statement deducts liabilities from assets to determine shareholders' equity.
C) The revenues may include contributions from owners.
D) For revenue to be included, it is not necessary for cash to have been received.

Question 18

The life of a business is divided into equal periods to determine profit or loss for that period. What assumption/concept underlies this procedure?

A) Historical cost
B) Monetary
C) Accounting period
D) Accounting entity

Question 19

LPR is a company that commenced business on 1 January 2019. Below are the balances in the 30 June 2019 financial statements. What is the net profit for the period ending 30 June 2019?

A) $15 000
B) $25 000
C) $40 000
D) None of the above

Question 20

Which of the following statements is NOT true?

A) Judgements made by accountants affect profit.
B) Attempts are made to measure incomplete transactions.
C) The impact of transactions is recognised only when cash is received or paid.
D) Estimates are made of certain balance sheet items.

Question 21

Which accounting concept is involved in the requirement that financial statements contain information that is useful to those who are making decisions?

A) Consistency
B) Comparability
C) Faithful representation
D) Relevance

Question 22

A balance sheet:

A) lists the assets and liabilities at present replacement cost.
B) shows how the resources of an entity change during a period of time.
C) shows all facts affecting the financial position of the entity.
D) lists the assets, liabilities and shareholders' equity at a specific point in time.

Question 23

Use the information given below at 30 June 2019 to answer the following question. What is the balance of shareholder equity?

A) $300 000
B) $460 000
C) $760 000
D) None of the above.

Question 24

During 2018 a company makes cash sales of $900 000. It pays $300 000 in expenses and owes $90 000 for services it received in 2018 but are payable in 2019. It pays $170 000 in dividends. What is the profit for 2018?

A) $340 000
B) $510 000
C) $600 000
D) None of the above

Question 25

Mike's Mulching (MM) had the following assets and liabilities: What would shareholders' equity be?

A) $2 300
B) $13 300
C) $31 000
D) None of the above

Question 26

The preparation of financial statements in a similar form to those of other companies facilitates:

A) comparability.
B) materiality.
C) faithful representation.
D) understandability.

Question 27

Use the information given below at 30 June 2019 to answer the following question. What is the balance of total assets at 30 June 2019?

A) $400 000
B) $420 000
C) $580 000
D) None of the above.

Question 28

The practice by Woolworths Ltd of presenting their financial statements in millions of dollars is an application of the concept of:

A) relevance.
B) materiality.
C) understandability.
D) disclosure.

Question 29

Identify the accounting concept or principle that relates to the statement in the following statement: Information should have predictive value and/or feedback value.

A) Relevance
B) Faithful representation
C) Materiality
D) Comparability