Question 1

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

Accepted Answer

A party to whom the entity owes money for goods or services provided is called a creditor. A debtor, on the other hand, is a party who owes money to others. Debit and credit are accounting terms used to record financial transactions.

Question 2

If a transaction causes an equity account to decrease,which of these related effects may also occur?

Accepted Answer

If an equity account decreases, it means that the company has experienced a loss. This loss will result in a decrease of an equal amount in an asset account, as the asset has lost value or been used up in some way. Therefore, choice C is the best option. Choice A is not correct because a decrease in equity does not necessarily mean there is a corresponding decrease in a liability account. Choice B is also not correct because an increase in an asset account would not be related to a decrease in equity. Choice D is not correct because it is possible for a decrease in equity to have no effect on another equity account.

Question 3

A chart of accounts is:

Accepted Answer

A chart of accounts is a plan of the ledger listing account titles and their related numbers, providing a systematic way to organize and aggregate financial information. It helps to record the financial transactions of a business and categorize them into specific accounts for ease of recording and reporting purposes.

Question 4

The double-entry system requires how many of the following to be true?
i.At least one account should be debited and one account credited
ii.Total debits should equal total credits
iii.The accounting equation should stay in balance

Accepted Answer

The double-entry system requires all three statements to be true: at least one account should be debited and one credited, total debits should equal total credits, and the accounting equation should remain balanced.

Question 5

Select the account types for these items:
$\bullet$ Prepaid insurance
$\bullet$ Mortgage
$\bullet$ GST Collected
$\bullet$ Light and power

Accepted Answer

- Prepaid insurance is an asset, as it represents a future economic benefit that the company has already paid for.
- Mortgage is a liability, as it represents an obligation to pay back borrowed funds.
- GST Collected is a liability, as it represents money owed to the government for collected taxes.
- Light and power is an expense, as it represents the cost of using electricity to run the business.

Question 6

The source document for a cash sale could be a:

Accepted Answer

A credit card slip is the most appropriate source document for a cash sale, as it indicates that the customer has paid for the goods or services at the point of sale with a credit card. The other options (purchase order, cheque butt, credit note) are not relevant to a cash sale, as they relate to different types of transactions or payment methods.

Question 7

Which of these events would not be recorded by accountants?

Accepted Answer

Receiving an order from a customer does not involve any financial transaction or change in the financial position of the company at the moment the order is received, hence it is not recorded by accountants.

Question 8

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

Accepted Answer

The best choice is C) Unearned income since the deposit received in advance is not yet earned by Maharaj Co. Therefore, it is initially recorded as a liability in the form of unearned income until the services are provided, at which point the liability will decrease as the revenue is recognized. The other choices - A) Sales, B) Mortgage, and D) Expenses payable - are not appropriate in this scenario.

Question 9

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

Accepted Answer

Accounting periods are the time intervals used by businesses to divide their financial activities for accounting and reporting purposes. These periods can be monthly, quarterly, semi-annually, or annually, and allow for the timely provision of financial information to decision makers.

Question 10

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

Accepted Answer

A chronological record of all the transactions of an entity is provided in the Journal. The Journal is a book of original entry where all transactions are recorded in the order in which they occur. Later, the information from the journal is summarized and transferred to the ledger accounts. The balance sheet and trial balance are financial statements that are prepared after the transactions have been recorded in the journal and posted to the ledger.

Question 11

Which is the correct statement concerning a chart of accounts?

Accepted Answer

A chart of accounts is typically drawn up at the commencement of a business and serves as a framework for organizing the company's financial transactions. It is a list of all the accounts used by the company to record its financial transactions, including assets, liabilities, equity, revenues, and expenses. It is not typically organized alphabetically, and it does not include current balances. While there are some similarities in the structure of charts of accounts across different businesses, they can vary significantly depending on the nature of the company's operations and the industry in which it operates.

Question 12

A credit entry is made to:

Accepted Answer

A credit entry is used to decrease an expense, increase income, and increase equity. This is because credits increase revenue accounts and equity accounts, while they decrease expense accounts.

Question 13

The accounting entry to record the payment of a liability is

Accepted Answer

When a liability is paid, the accounting entry will involve reducing the liability (credit) and decrease in a corresponding asset account (debit), which would be used to pay off the liability. Therefore, the correct option is to debit a liability account and credit an asset account.

Question 14

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:

Accepted Answer

According to the Framework for the Preparation and Presentation of Financial Statements, the term used for income which arises in the course of the ordinary activities of an entity is revenue. Gain refers to an increase in equity resulting from transactions or events outside of the entity's ordinary activities. Fees are a specific type of revenue, typically associated with professional services. Profit is the total amount of revenue minus expenses, and is not specifically used to describe income within the ordinary activities of an entity.

Question 15

The true statement concerning the accounting period is:

Accepted Answer

The length of the accounting period can vary depending on the needs of users, such as monthly, quarterly, or annually, to provide timely financial information.

Question 16

The event that may be recorded in a firm's sustainability report but not in their financial report is:

Accepted Answer

Planned expenditure on waste disposal is an environmental and social impact that is important to stakeholders and may be included in a firm's sustainability report but not in their financial report.

Answer: D 
 Depreciation charged on Environmental Officer's motor vehicle is an expense that may relate to sustainability initiatives and may be included in a firm's sustainability report but not in their financial report.

Question 17

The true statement is:

Accepted Answer

In the income statement, income and expenses are recorded net of GST because GST is a tax collected on behalf of the government and not considered as income or expense for the business.

Question 18

Select the account types for these items:
$\bullet$ Repairs and maintenance
$\bullet$ Repairs and maintenance payable
$\bullet$ Accounts receivable
$\bullet$ Drawings

Accepted Answer

- Repairs and maintenance: Expense 
- Repairs and maintenance payable: Liability 
- Accounts receivable: Asset 
- Drawings: Equity

Question 19

The transactions below are from the records of Templestowe Picture Framers,the internal transaction is:

Accepted Answer

Recording depreciation is an internal transaction as it involves adjusting the value of assets within the company's records without any external exchange of goods or services.

Question 20

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:

Accepted Answer

The answer of GST paid by a business on the...

Quiz 3: Recording Transactions