1/ Normal balance of accounts on balance sheet and icome statement will be on

_____side?
a. Debit
b. Credit
c. Increase
d. Decrease
2/ Nov. 8 2022, Sanchez company paid $1,700 for salaries due employees, of
which $700 is for October salaries. The correct journal entry recorded in the
general journal is:
3/ Which of the following is the general journal entry to provide for estimated bad
debts under the allowance method?
a. Dr Bad debts expense; Cr Allowance for doubtful debts
b. Dr Allowance for doubtful debts; Cr Bad debts expense
c. Dr Accounts receivable; Cr Bad debts expense
d. Dr Bad debts expense; Cr Accounts receivable
4/ Below is an extract from an Income statement of Linda Ltd for the year ended
31 Dec 2021 (assumed the company uses periodic inventory system):
• Beginning inventory: $25,000
• Net sales: $48,000
• Freight-in: $2,200
• Ending inventory: $22.300
• Purchases: $35,500
• The cost of sales for the year ended 31 Dec 2021:
a. $38,700
b. $34,700
c. $36,900
d. $40,400
5/ The correct entry to record the purchase of Office Supplies for $12,000 by
issuing 5-months note payable with the interest rate is 6% is (ignoring GST):
a. Dr Office Supplies $12,000; Cr Account Payable $12,000
b. Dr Office Supplies $12,000; Cr Interest Payable $12,000
c. Dr Office Supplies $12,000; Cr Note Payable $12,000
d. Dr Office Supplies $12,000; Cr Interest Expense $12,000
6/ Misha Co. bought a machine for $65,000, which it is expected to have a useful
life of four years and a residual value of $3,000 at the end of that time. If
depreciation is to be provided on the straight-line basis, the net book value after
two years will be (in term of USD):
a. $17,500
b $19,500
c. $21,500
d. $34,000
7/ Which of the following would not be included on an income statement?
a. Sales
b. Cost of goods sold
c. Rent expense
d. Unearned revenues
8/ Cynthia's Beauty Services performed beauty services for customers for the
amount of $4,500 and sent an invoice to them for $4,500. The journal entry is:
a. Dr. Account receivable $4,500/Cr. Services revenues $4,500.
b. Dr. Account payable $4,500/ Cr. Services revenues $4,500.
c. Dr. Cash $4,500/ Cr. Services revenues $4,500.
d. Dr. Unearned services revenues $4,500/ Cr. Services revenues $4,500
9/ Costs/expenses paid for before they are consumed, are the examples of which
adjusting entries?
a. Accrued revenues.
b. Accrued expenses.
c. Unearned revenues.
d. Prepaid expenses.
10/ Anika Wilson earned a salary of $800 for the last week of September 2020.
She will be paid on October 1st, 2020. The adjusting entry for Anika's employer
at September 30th 2020 is:
a. No entry is required.
b. Debit Salaries & wages expense 800; Credit Salaries & wages payable 800
c. Debit Salaries and wages expense 800; Credit Cash 800
d. Debit Salaries and wages payable 800; Credit Cash 800
11/ Which of the following is a temporary account?
a. Prepaid insurance.
b. Supplies expense.
c. Unearned fee revenue.
d. Interest payable
12/ The accounting principle that states companies and owners should be
account for separately is:
a. Business entity concept.
b. Going concern concept.
c. Money unit assumption.
d. Periodicity assumption.
13/ Under the perpetual inventory system, the inventory purchased is debited to
which the account?
a. Prepaid inventory
b. Cost of sales
c. Purchases
d. Inventory
14/ _____is the process of transferring a journal entry to a ledger.
a. Collecting
b. Journalizing
c. Posting
d. a and b are correct
15/ The statement that explains the changes in equity and serves as a link
between the balance sheet and the income statement is?
a. Statement of cash flows.
b. Statement of changes in equity.
c. Operating statement.
d. Statement of financial position.
16/ Lily Co. employees perform work to the value of $20,000. They are paid a
half immediately with the balance to be settled in the next accounting period.
Under the cash basis to profit measurement, the amount of wages expense that
will be recorded in the current period is:
a. $6,000
b. $4,000
c. $10,000
d. $20,000
17/ Unearned subscription revenue is normally classified in the balance sheet as
a/an:
a. liability.
b. asset.
c. expense.
d. revenue.
18/ Which of the following transactions would have no impact on owners' equity?
a. Dividends to stockholders
b. Investments of cash by stockholders
c. Purchase of a machinery from the proceeds of a bank loan
d. All above are correct
19/ The job of the modern accountant is a challenging one. The most critical
requirement is:
a. Neatness
b. Punctuality
c. Ability to add up
d. Ability to manage change
20/ Which transaction will make the decrease in equity?
a) Purchasing land and equipment by cash
b) Checking and counting the inventory
c) Paid for rent expense
d) All above are correct
21/ If an asset cost US$27,000 with its expected useful life 10 years and the
salvage value is $2,000. After 10 years, the asset can be sold at $5,800. The
annual depreciation charge calculated using the straight-line method is:
a. $2,700
b. $2,500
c. $3,080
d. Cannot calculate due to lack of information
22/ The trial balance of Jeong Company had accounts with the following normal
balances: Cash $5,000. Service revenue $85,000, Salaries and wages Payable
$4,000; Salaries and wages expense $40,000, Rent expense $10,000; Owner's
Capital $ 32,000, Owner's Drawings $15,000 and Equipment $51,000,
Accumulated depreciation $20,000, Depreciation expense $20,000. In Preparing
a trial balance, the total in the debit column is:
a. $140,000
b. $161,000
c. $126,000
d. All above are incorrect
23/ At the end of financial year Dec 31 2020, one month or $200 of the policy
has expired. The accountant does not make an adjustment. Therefore,
a. Understate expense at the end of the year.
b. Have no effect on expense for the year.
c. Overstate income for the year.
d. Understate income for the year.
24/ The book value or carrying amount of an asset is defined as:
a. Cost Minus Salvage Value
b. Cost Minus Accumulated Depreciation.
c. Cost Minus Salvage Value Minus Accumulated Depreciation.
d. Estimated Fair Market Value
25/ Gerald had beginning total stockholders' equity of $160,000. During the year,
total assets increased by $240,000 and total liabilities increased by $120,000.
Gerald's net income was $180,000. No additional investments were made;
however, dividends did occur during the year. How much were the dividends?
a. $20,000.
b. $60,000.
c. $140,000.
d. $220,000.
26/ Laura J set up a part-time business 'Speedy Window 'by depositing $6,000
into a business bank account. The effect of this transaction on the accounting
equation is:
a. Increase in assets of $6,000; increase in equity of $6,000.
b. Increase in assets of $6,000; decrease in equity of $6,000.
c. Increase in assets of $6,000; increase in liabilities of $6,000.
d. Decrease in assets of $6 000; increase in equity of $6.000.
27/ 'Debtors' are:
a. people or organisations whose account in business accounting books has a
greater value on the debit side.
b. They owe the company money.
c. They are included in the amount shown for accounts receivable in the
statement of financial position
d. All above are correct.
28/ Gross Profit is determined by:
a. Sales minus cost of sales.
b. Sales minus ending inventory.
c. Sales minus total operating expenses.
d. All above are correct
29/ A company borrowed $100,000 on December ) by signing a six month note
that specifies interest at an annual percentage rate of 12%. No interest or
principal payment is due until the note matures on May 31 The company
prepares financial statements at the end of each calendar month. What is the
adjusting entry for the above transaction on 31st December
a) Dr. Interest expense $1,000/ Cr. Interest payables $1,000
b) Dr. Interest expense $6,000/ Cr. Interest payables $6,000
c) Dr. Interest payables $1,000/ Cr. Interest expense $1,000
d) Dr. Interest payables $6,000/ Cr. Interest expense $6,000
30/ Misha Co. bought a machine for $39,000, which is expected to have a useful
life of four years and a residual value of $4,000 at the end of that time. If
depreciation is to be provided on the straight-line basis, the net book value after
two years will be (in term of USD):
a) 17,500
b) 19,500
c) 21,500
d) 30,250
31/ The dual concepts reflect:
a) Every transaction affect both assets and either liabilities or owner's equity
b) Every transaction affect either assets or liabilities
c) Every transaction affect both assets and owner's equity
d) Every transaction affects at least two accounts
32/ The assets and liabilities of Kafka Company at 1/1/2022 are $250,000 and
$90,000, respectively. During the year 2020, owner's drawings are $40,000,
revenues are $450,000; and expenses are $320,000 What is the amount of Kafka
Company's capital at 31/12/2022?
a) $250,000
b) $200,000
c) $150,000
d) $220,000
33/ The primary purpose of cash flow is to:
a) Provide information on operating, investing and financing activities.
b) Report income earned and expenses incurred.
c) To provide banking summary
d) None of the above.
34/ Which of the following is a cause of depreciation?
a) wear and tear due to use.
b) deterioration and decay due to time.
c) obsolescence.
d) all above are correct
35/ At 30 June 2022, $700 of the $1,700 unearned service amount has been
carned. Therefore, $700 must be transferred:

a) from unearned service revenue into service revenue.

b) from service revenue into unearned service revenue.
c) from cash into service revenue.
d) from unearned service revenue into cash.
36/ ABC received $990 (including GST) from its customer Long for services
previously supplied to her on credit. Which of the following entries correctly
records this receipt?
a. Dr Accounts receivable $990; Cr Cash at bank $990
b. Dr Cash at bank $99; Cr Accounts receivable $990
c. Dr Cash at bank $990; Cr Services revenue $900, Cr GST payable $90
d. Dr Accounts receivable $990; Cr Services revenue $900 Cr GST payable $90
37/ Users of accounting information want to know about an entity's that is, its
control over economic resources, financial structure, capacity for adaptation and
solvency (such as cash, inventory, supplies...).
a) Financial position
b) Accounting equation
c) Financial statements
d) Internal reports
38/ A contra asset account has what type of balance?
a) Debit
b) Credit
c) Contra
d) None of the above are correct
39/ During 2018, Talon Inc. had sales revenue $376,000; Cost of goods sold
$126,000; operating expenses $66,000; cash dividends $30,000, other expenses
and losses; $20,000. Its corporate tax rate is 30%. What was Talon's income tax
expense for the year?
a) $40,200.
b) $40,000.
c) $42,000.
d) $49,200.
40/ ABC Co. received $2,200 for future services on 2nd Oct 2020. But the
company performed the service $1,200 in the end of this month and the rest of
services will do in November. The adjusting entry for the company on 31 Oct
2020.
a) Debit Account receivable 1,200; Credit Service revenue 1,200
b) Debit Unearned service revenue 1,200; Credit Service revenue 1,200
c) Debit Unearned service revenue 2,200; Credit Service revenue 2,200
d) Debit Account receivable 2,200; Credit Service revenue 2,200
41/ The Supplies account has a preliminary balance of $1,000 However, a count
of the supplies actually on hand indicates that the true amount of supplies is
$700. This means that the preliminary balance is by
a) Lower: $700.
b) Lower: $300.
c) High: $300.
d) High: $700.
42/ Misha Co. bought a machine for $56,500, which is expected to have a useful
life of four years and a residual value of $4,000 at the end of that time. If
depreciation is to be provided on the straight-line basis, the net book value after
two years will be (in term of USD):
a) 17,500
b) 19,500
c) 21,500
d) 30,250
43/ The accrual basis accounting:
a) States that all transactions must be recorded into a minimum of 2 ledgers.
b) States that all expenses incurred during the year must be matched with
revenue earned within the financial year
c) States that assets minus liabilities to obtain owner's equity
d) States that revenue received must be matched with expense paid within the
same year
44/ Which of the following represents the ending balance in accounts payable?
a) Credit purchase - Beginning balance + Payments.
b) Beginning balance + Payments - Credit purchases.
c) Payments + Beginning balance + Credit purchases.
d) None of the above.

1. What are the differences between cash basis and accrual basis?
Cash Basis
+ Income is recorded when cash is received
+ Expenses are recorded when cash is paid
Accrual Basis
+ Income recognised when the anticipated inflow of economic benefit can
be reliably measured
+ Expenses recognised when the consumption of benefits can be reliably
measured
To measure the profit
2. What is permanent accounts and temporary accounts? Give the
examples?
Permanent (Real) Accounts
– Balance Sheet Accounts
– Ending balances carried forward to next accounting period
Ex: Cash at bank, Account receivable, Account payable, office supplies,
inventory, office equipment
Temporary (Nominal) Accounts
– Income Statement Accounts
– Reduced to zero balance at the end of each accounting period (closed)
– Reset the business “stopwatch”
Ex: Service income, service revenue, rent expense, electricity expense
3. What is the closing process?
4. What is the adjusting entry? Give the examples?
Adjusting entries are required every time a company prepares financial
statements. The company analyzes each account in the trial balance to
determine whether it is complete and up-to-date for financial statement
purposes.
Every adjusting entry will include one income statement account and one
balance sheet account. Adjusting entries are classified as either deferrals
or accruals
Deferrals:
1. Prepaid expenses: Expenses paid in cash before they are taed or
consumed
2. Unearned revenues: Cash received before services are performed.
Accruals:
1. Accrued revenues: Revenues for services performed but not yet
recetend inser recorded
2. Accrued expenses: Expenses incurred but not yet paid in cash or
recorded
5. What is the trial balance? Some limitations of trial balance?
A trial balance is a list of accounts and their balances at a given time.
Customarily, companies prepare a trial balance at the end of an
accounting period. They list accounts in the order in which they appear in
the ledger. Debit balances appear in the left column and credit balances in
the right column.
• The trial balance proves the mathematical equality of debits and credits
after posting.
• In addition, a trial balance is useful in the preparation of financial
statements.
Limitations of a Trial Balance
Trial balance may balance even when
1. A transaction is not journalized.
2. A correct joumal entry is not posted.
3. A journal entry is posted twice.
4. Incorrect accounts are used in journalizing or posting.
5. Offsetting errors are made in recording the amount of a transaction.
6. Show the linkage between income statement, balance sheet
and statement of change in equity?

7. What are the internal and external transactions? Give the

examples?
External Transactions
- Involve an outside party
- Exchange of economic resources and/or obligations
+ Sale of inventory
+ Purchase of supplies
Ex: Provide services to customers, Purchase goods, inventory, machinery,
office supplies from supplier
Internal Transactions
- Incur inside/within the company
- Transformation of economic resources
+ Use of office supplies
+ Use of raw materials
Ex: Pay salaries, wages to employees, Transfer raw material to WIP
inventory, Non-current assets depreciation
Non-Transactional Events
- Not usually recorded, but may be in the future
Receiving an order from a customer
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