Deck 3: Recording Financial Transactions and the Principles of Accounting

Question 1

Accounting transactions are recorded from:

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

Answer 1

Source documents

Question 2

The Income Statement comprises the following groups of accounts:

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

Answer 2

Income and Expenses

Question 3

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

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

Answer 3

Assets, Liabilities and Equity

Question 4

Goods sold on credit to customers are referred to as:

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

Question 5

Goods bought on credit from suppliers are referred to as:

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

Question 6

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

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 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.

-Inventory increases by:

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

Question 8

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:

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

Question 9

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:

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

Question 10

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:

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

Question 11

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:

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

Question 12

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

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

Question 13

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

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

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 profit effect of these transactions is:

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

Question 15

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:

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

Question 16

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:

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

Question 17

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

Question 18

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

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

Question 19

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

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

Question 20

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

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