Deck 3: Recording Transactions

Question 1

The source document for a credit sale is a:

A) credit note
B) receipt
C) cheque
D) tax invoice

Answer 1

D

Question 2

The transactions below are from the records of Cornerstone Framing. The internal transaction is:

A) cash sale.
B) recorded depreciation on shop fixtures and fittings.
C) credit sale.
D) paid monthly rent on premises.

Answer 2

B

Question 3

A party to whom the entity owes money for the provision of goods or services is called a:

A) creditor.
B) client.
C) debtor.
D) customer.

Answer 3

A

Question 4

Which of the following events would not be recorded by an accountant?

A) The owner paid his son's car registration from the business bank account.
B) Credit purchase.
C) Placed an order with a supplier.
D) Depreciation on equipment calculated at the end of the firm's financial year.

Question 5

A regular withdrawal of cash by the owner from the business is treated as a reduction in equity and is recorded in an account called:

A) petty cash.
B) drawings.
C) debtors.
D) borrowings.

Question 6

Why is the placing of an order with a supplier not regarded as a transaction?

A) Because the computer software cannot record it.
B) Because the entity may cancel the order.
C) Because an exchange between the entity and the supplier has not yet occurred.
D) The placing of an order is regarded as a transaction.

Question 7

In the expanded version of the accounting equation, income and expenses are sub-groupings of:

A) assets.
B) liabilities.
C) drawings.
D) equity.

Question 8

There are three basic types of balance sheet accounts. They are:

A) income, expense and drawings.
B) asset, expense and equity
C) asset, liability and equity.
D) bank, debtors and creditors.

Question 9

A separate ledger account is maintained for each:

A) item that appears in the financial reports.
B) journal entry.
C) business transaction.
D) day of business.

Question 10

A two-year insurance policy paid for on l July would initially be recorded in an asset account called:

A) debtors.
B) prepaid insurance.
C) insurance payable.
D) unearned insurance.

Question 11

What are the two basic types of income statement accounts?

A) Asset and profit
B) Equity and expense
C) Income and equity
D) Income and expense

Question 12

Which of the following transactions relating to the West Cricket Club is regarded as an internal transaction?

A) Sale of food and drinks from the canteen.
B) Depreciation charged on the club's mower.
C) Collection of players' fees.
D) Payment of wages for admin staff.

Question 13

In accounting, ABN stands for:

A) Annual Business Number.
B) Australian Business Number.
C) Automated Business Number.
D) Australian Bank Number.

Question 14

In Accounting, GST stands for:

A) General Service Tax.
B) Government Systems Tax.
C) Goods and Services Tax.
D) General and Sales Transactions.

Question 15

Financial reports prepared during the financial reporting period are called:

A) automated reports.
B) interim reports.
C) consolidated reports.
D) trial balances.

Question 16

Which of these events would be recorded by an accountant?

A) An employee resigns.
B) An employee receives a promotion.
C) An employee injures themselves at work in the course of their duties.
D) An employee is paid by being given a computer instead of their normal wages.

Question 17

A machine purchased by a business for use in generating income can be recorded in an asset account called:

A) prepayments.
B) plant and equipment.
C) debtors.
D) production.

Question 18

The source document for a cash sale could be a:

A) credit note.
B) cheque butt.
C) credit card slip.
D) purchase order.

Question 19

GST collected by a business on the sale of its goods and services is stored in a liability account called:

A) GST outlays.
B) GST payable.
C) GST purchases.
D) GST receivable.

Question 20

Which of the following statements is correct?

A) Income and expenses are recorded net of GST.
B) Journal entries to record GST are regarded as internal transactions.
C) The account, GST Payable, represents the amount of GST payable to the entity's suppliers.
D) If the GST inclusive price of inventory is $120 the GST component is $12.

Question 21

Which of the following statements concerning the accounting period is correct?

A) The accounting period originates from the accounting equation.
B) The accounting period must be at least 3 months long.
C) The length of the accounting period varies with the needs of users.
D) The length of the accounting period depends on which country the business is located in.

Question 22

The correct accounting entry to record the payment of a liability is:

A) DR asset account; CR liability account
B) DR equity account; CR liability account
C) DR liability account; CR equity account
D) DR liability account; CR asset account

Question 23

The term used in the Framework for the Preparation and Presentation of Financial Statements for income which arises in the course of the ordinary activities of an entity is:

A) gains.
B) fees.
C) revenue.
D) profit.

Question 24

A collection of all the individual accounts for a particular business is referred to as:

A) the master ledger.
B) the computerised accounts.
C) the chart of accounts.
D) the general ledger.

Question 25

If a transaction causes a liability account to increase, which of these related effects may also occur?

A) An increase of an equal amount in an equity account.
B) An increase of an equal amount in an asset account.
C) A decrease of an equal amount in an asset account.
D) An increase of an equal amount in another liability account.

Question 26

Select the account types for these items:
$\bullet$ Rent received in advance
$\bullet$ Mortgage
$\bullet$ Prepaid expenses
$\bullet$ Rates

A) Expense, liability, liability, equity
B) Asset, equity, asset, expense
C) Liability, liability, asset, expense
D) Expense, liability, asset, liability

Question 27

A chronological record of all the transactions of an entity is provided in the:

A) general ledger.
B) chart of accounts.
C) journal.
D) trial balance.

Question 28

A listing of the complete ledger account titles and their related account numbers is known as the:

A) general ledger.
B) computerised accounts.
C) chart of accounts.
D) index.

Question 29

What is the correct order in which the steps for analysing transactions are carried out?
I Determine which accounts are affected.
Ii Determine if the account type is increasing or decreasing.
Iii Apply the rules of debit and credit.
Iv Determine the account type.

A) i, iv, ii, iii
B) i, ii, iii, iv
C) iv, ii, i, iii
D) i, ii, iv, iii

Question 30

A party to whom the entity owes money for goods or services provided to the entity is called a:

A) borrower.
B) lender.
C) debtor.
D) creditor.

Question 31

How many of the following statements about the double-entry system are true?
I) The accounting equation should stay in balance
Ii) At least one account should be debited and one account credited
Iii) Credits should always be entered into the journal before debits

A) 3
B) 2
C) 1
D) 0

Question 32

Which of the following statements relating to a chart of accounts is correct?

A) The accounts are listed in alphabetical order.
B) It is a list of accounts and their current balances.
C) It is created at the commencement of a business.
D) It is the same for most businesses.

Question 33

A chart of accounts is a:

A) formal plan developed by management to estimate information flows through the computerised system.
B) listing of the ledger account titles and their account numbers.
C) list of accounts receivable and payable.
D) chart showing the organisational structure of the entity.

Question 34

Which of the following statements is correct?

A) The normal balance for an asset is a credit.
B) The normal balance for equity is a credit.
C) The normal balance for income is a debit.
D) The normal balance for a liability is a debit.

Question 35

The system of accounting where each transaction affects two or more accounts and the sum of the debit entries equals the sum of the credit entries is called:

A) single transaction accounting.
B) two-entry accounting.
C) double-entry accounting.
D) debit and credit accounting.

Question 36

A deposit received in advance by Broncos Ltd for services not yet supplied can be initially recorded by Broncos Ltd in a liability account called:

A) sales provision.
B) unearned revenue.
C) accounts payable.
D) accrued expenses.

Question 37

In order to provide timely information for decision-making the life of the business is divided into arbitrary time periods of equal length called:

A) accounting cycles.
B) operating periods.
C) business cycles.
D) accounting periods.

Question 38

Select the account types for these items:
$\bullet$ Fixtures and fittings
$\bullet$ Accounts payable
$\bullet$ Drawings
$\bullet$ Sales

A) Asset, liability, equity, income
B) Asset, liability, equity, expenses
C) Expense, asset, equity, income
D) Expense, liability, asset, expense

Question 39

GST paid by a business on the purchase of its goods and services, and for which a reduction of GST collected will be claimed from the tax department, is stored in an account called:

A) GST holdings.
B) GST collected.
C) GST expense.
D) GST receivable.

Question 40

A credit entry will:

A) decrease an asset, increase a liability, and decrease equity.
B) increase an asset, decrease a liability, and decrease equity.
C) decrease an expense, increase income, and increase equity.
D) decrease an asset, decrease a liability, and increase equity.

Question 41

Kleen Windows received $770 (including GST) from its customer John Jones for services previously supplied to him on credit. Which of the following entries correctly records this receipt?

A) DR Debtors $770; CR Bank $770
B) DR Bank $770; CR Debtors $770
C) DR Bank $770; CR Services revenue $700; CR GST payable $70
D) DR Debtors $770; CR Services revenue $700; CR GST payable $70

Question 42

An entity repays $2000 of an existing bank loan. The transaction is recorded as:

A) DR Bank loan $2000; CR Owner's capital $2000
B) DR Cash $2000; CR Accounts payable $2000
C) DR Cash $2000; CR Bank loan $2000
D) DR Bank loan $2000; CR Cash $2000

Question 43

A __________________ provides a complete record, in one place, of each transaction in date order.

A) general journal
B) ledger
C) trial balance
D) chart of accounts

Question 44

A sole proprietor who owns a newsagency takes home stationery and exercise books for
His children to use at school. This would be considered to be:

A) an expense because an asset has been used for personal use.
B) an increase in equity and a decrease in assets because the sole proprietor purchased the inventory.
C) a decrease in assets and a decrease in equity because by taking the stationery items the owner has made a drawing from the business.
D) an increase in assets and an increase in equity.

Question 45

Which of the following represents the accounting entry when expenses are incurred on
Credit?

A) DR Cash, CR Income
B) DR Accounts receivable, CR Income
C) DR Expense, CR Accounts payable
D) DR Accounts payable, CR Income

Question 46

Which statement relating to the general journal is incorrect?

A) The debit and credit effects of each transaction are recorded together.
B) It provides a record of transactions in chronological order.
C) It is compiled using the information taken from the entity's general ledger.
D) It is referred to as a book of original entry.

Question 47

A trial balance will disclose which of the following errors?

A) Failing to record a transaction.
B) Recording an amount on the correct side of the wrong account.
C) Recording the same transaction twice.
D) Recording a credit as a debit.

Question 48

A list of ledger accounts and their balances is called a:

A) chart of accounts.
B) balance sheet.
C) general journal.
D) trial balance.

Question 49

The GST is a tax that is levied at the rate of ______ on the sale of most goods and services. It was introduced in Australia on July 1 2000.

A) 5%
B) 10%
C) 15%
D) 20%

Question 50

Jones Cleaning Services purchased 12 months' worth of cleaning supplies from Focus on Cleaning. The purchase is for cash and the invoiced amount is $1200. Ignoring GST, the entry that correctly records this transaction is:

A) DR Cleaning Supplies expense $1200; CR Equity $1200
B) DR Bank $1200; CR Cleaning Supplies asset $1200
C) DR Cleaning Supplies asset $1200; CR Bank $1200
D) DR Bank $1200; CR Cleaning Supplies expense $1200

Question 51

James Wright performed handyman services for $2500. He received cash of $1500 with
The balance to be received within 28 days. Ignoring GST, the transaction is recorded as:

A) DR Cash $1500; DR Accounts receivable $1000; CR Services revenue $2500
B) DR Services revenue $2500; CR Cash $1500; CR Accounts payable $1000
C) DR Cash $2500; CR Equity $2500
D) DR Cash $1500; DR Equity $1000; CR Services revenue $2500

Question 52

Which of the following errors would be detected by a trial balance?

A) Staff wages were recorded as office expenses.
B) The cashier pocketed the cash from a cash sale and did not record it on the register.
C) A cash sale was recorded in the sales account as $548 instead of $584 but was correctly recorded in the bank account.
D) Supplies purchased on credit were recorded as a debit to the plant and equipment account and a credit to the accounts payable account.

Question 53

The payroll officer recorded wages for the month as a debit to the Sales account rather
Than as a debit to wages expense. This error will result in:

A) understated liabilities at the end of the period.
B) overstated expenses at the end of the period.
C) overstated profit for the period.
D) no effect on profit of the period.

Question 54

Ignoring GST, which of the following entries correctly records the receipt by Swift Garden Maintenance of $500 in cash for gardening services?

A) DR Bank $500; CR Services $500
B) DR Services $500; CR Bank $500
C) DR Bank $500; CR Debtors $500
D) DR Equity $500; CR Services $500

Question 55

Which statement relating to a trial balance is incorrect?

A) A trial balance may be prepared at any time to test the equality of debits and credits in the ledger.
B) The fact that the total of the debit column equals the total of the credit column does not guarantee that the ledger if free from errors.
C) A trial balance reports the financial performance of an entity.
D) A trial balance is a list of all the accounts in the ledger with their current balances.

Question 56

Charming Pete requires his customers to pay for their orders two weeks before shipping the goods. Pete will record the cash receipts as:

A) DR Bank, CR asset account
B) DR Bank, CR expense account
C) DR Bank, CR liability account
D) DR Bank, CR income account

Question 57

Johanna's Hair Studio paid $300 for advertising during the month using Cheque No. 100558. Ignore GST. Which of the following reflects the effect on the accounting equation?

A) Decrease in equity of $300; increase in assets of $300.
B) Increase in assets of $300; increase in liabilities of $300.
C) Decrease in assets of $300; increase in equity of $300.
D) Decrease in equity of $300; decrease in assets of $300.

Question 58

A trial balance is prepared to:

A) act as a link between the journal and the ledger.
B) determine profit or loss.
C) act as an index to the journal.
D) verify the equality of debit and credit postings in the ledger.

Question 59

O'Brien paid $880, including GST, for advertising. The entry to record this transaction is:

A) DR Advertising $880; CR Cash $880
B) DR Advertising $880, DR GST receivable $88; CR Cash $792
C) DR Advertising $880; CR GST receivable $80, CR Cash $800
D) DR Advertising $800, DR GST receivable $80; CR Cash $880

Question 60

Ignoring GST, which of the following entries correctly records the purchase of land for $300 000 financed by a $100 000 cash deposit with the balance payable via a 20-year, 6% loan?

A) DR Land $100 000; CR Bank $100 000
B) DR Land $300 000; CR Bank $300 000
C) DR Land $300 000; CR Bank $100 000; CR Loan $200 000
D) DR Land $300 000; CR Loan $300 000