[TAN410] [Accounting] Quiz 2.

Review Chapter 2 + Chapter 3 - copy

First and last name

Question 1/69
The statement of changes in equity:

A. indicates the ability of the entity to generate cash flow.

B. shows the selling price of the entity’s assets.

C. shows how profit was determined.

D. serves as a connecting link between the income statement and the balance sheet.

Question 2/69
A balance sheet:

A. is classified into operating, investing and financing activities.

B. measures the entities financial performance.

C. lists assets, liabilities and equity at a specific point in time.

D. shows how profit was determined.

Question 3/69
Assume you are examining a financial statement headed ‘As at the 31 December 2014’.
The heading indicates the statement is the:

A. trial balance.

B. income statement.

C. statement of changes in equity.

D. balance sheet.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 4/69
Which of the following statements concerning the income statement is not true?

A. The heading must indicate the length of time the report covers.

B. It shows the change in the entity’s cash balance for the period.

C. If expenses exceed income than a loss has been incurred for the period.

D. An alternative name is the statement of financial performance.

Question 5/69
Which of the following statements concerning equity is true?

A. It is the owner’s claim to the assets of the entity after deducting liabilities.

B. It is fixed at the amount initially contributed when the business was established.

C. It is decreased by profit.

D. Assets + liabilities = equity.

Question 6/69

180000 300000

A. $160 000.

B. $120 000.

C. $300 000.

D. $220 000.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 7/69
The assets of Frank’s business increased by $40 000 and the liabilities increased by $10 000 during the current
year. If the profit for this period was $25 000, what additional contribution or withdrawal was made by the
owner? (Assume only a withdrawal or a contribution was made.)

A. Drawings $10 000

B. Contribution $10 000

C. Contribution $5000

D. Drawings $5000

Question 8/69

48000 56000

A. $17 000.

B. $14 000.

C. $16 000.

D. $12 000.

Question 9/69
Which statement is not correct?

A. Information in the cash flow statement is useful in assessing the ability of an entity to pay its debts as
they fall due.

B. A comparison of the cash flow statement and the income statement can indicate to what extent the profit
is represented by cash inflows.

C. The cash flow statement classifies cash flows into operating investing and financing groupings.

D. Operating activities are concerned with activities involving the sales and purchases of fixed assets.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 10/69
On 2 January 2014 Fife Corp buys goods from O’Brien and agrees to pay for them within 60 days. On the
balance sheet for Fife Corp at 2 January 2014 the amount owing to O’Brien would be reported as:

A. an advance payment by a customer.

B. accounts receivable.

C. accounts payable.

D. an expense.

Question 11/69
If an entity has assets of $168 900 and liabilities of $70 000 its equity is:
A. $238 900.
B. $28 900.
C. $98 900.

D. unable to be calculated.

Question 12/69
If income is $180 000, rent expense is $120 000 and advertising expense is $10 500, profit or loss is which of the
following?

A. $300 500 profit

B. $49 500 profit

C. $49 500 loss

D. $300 500 loss

Question 13/69
__________ is/are resources controlled by the entity as a result of past events and from which future economic
benefits are expected to flow to the entity.

A. Liabilities

B. Assets

C. Equity

D. Income

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 14/69
Which of these is not income?

A. Receipts from the sale of goods.

B. Receipts from the provision of services.

C. Interest received.

D. Additional capital contributed by the owner.

Question 15/69
If the loss for the period is $15 000 and total income is $115 000, total expenses for the period are:

A. $100 000.

B. $130 000.

C. $115 000.

D. $145 000.

Question 16/69
Which of the following statements is true?

A. The profit of an entity is always represented by an increase in cash.

B. A withdrawal of cash for private use by the owner is shown in the income statement as an expense.

C. Equity can be thought of as the owner’s claim to the assets of the entity after deducting all liabilities.

D. Profit can be calculated as net assets at the end of the year less net assets at the beginning of the year less
drawings.

Question 17/69
The income statement reports the financial:

A. position of an entity at a specific period of time.

B. performance of an entity over a specified period of time.

C. position of an entity over a specified period of time.

D. performance of an entity at a specific period of time.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 18/69
Which of these does not fit the accounting definition of an asset?

A. Accounts receivable

B. Staff skill and experience

C. Goodwill

D. Cash at bank

Question 19/69
Julio’s opening capital at 1 July 2011 was $50 000, his profit for the year was $18 000 and his drawings were
$15 000. What is the final balance of his capital at the end of the year?
A. $68 000

B. $50 000

C. $83 000
D. $53 000

Question 20/69
In order to assess an entity’s cash performance it is common to classify its activities into operating, investing and
financing. For a medical practice, which of the following would be an operating activity?

A. Billing a patient for a consultation.

B. Purchasing new equipment for the surgery.

C. Repaying a portion of a loan.

Question 21/69
In order to assess an entity’s cash performance it is common to classify its activities into operating, investing and
financing. For the local cricket club which of the following would be a financing activity?

A. Paying for lawn mowing.

B. Renovating the clubhouse.

C. Paying the annual subscription to the cricket association.

D. Borrowing $40 000 from a bank.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 22/69
On 31 July 2014 Comfy Heaters sells goods to Barker who agrees to pay for them within 45 days. On the
balance sheet of Comfy Heaters at 31 July 2014 the amount owing by Barker would be reported as the asset:

A. cash at bank.

B. accounts payable.

C. accounts receivable.

D. creditor.

Question 23/69
Which assumption is the basis upon which the personal assets of the owner are excluded from the business’s
balance sheet?

A. Going concern

B. Accrual basis

C. Materiality

D. Accounting entity

Question 24/69
The assumption which requires transactions to be recognised in the accounting reports when they occur and not
when the cash is received or paid is:

A. accrual basis.

B. accounting entity
C. faithful representation.

D. accounting period.

Question 25/69
The assumption which assumes that the entity will not be liquidated in the near future is the:

A. accounting entity.

B. reliability.

C. accrual basis.

D. going concern.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 26/69
In order to prepare financial information for interested parties Hobart Company divides the economic activity of
the firm into three-month segments and prepares financial statements at the end of each segment. Which
accounting assumption is Chambers applying?

A. Accounting period

B. Materiality

C. Accounting entity

D. Going concern

Question 27/69
The concept which permits information to be grouped together with other information aslong as this does not
mislead statement users in their decision making is called:

A. faithful presentation.

B. materiality.

C. understandability.

D. consistency.

Question 28/69
The system where every transaction affects at least two components of theaccounting equation is known as:

A. historical cost accounting.

B. the going concern system.

C. the accounting entity system.

D. double-entry accounting.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 29/69
Drop Zone Parachuting has decided to prepare its financial statements every three months. Which accounting
assumption is it implementing?

A. Cost assumption

B. Accounting entity

C. Accounting period

D. Going concern assumption

Question 30/69
The extent to which items in accounting reports can be combined or presented separately is covered by the
concept of:

A. comparability.

B. faithful representation.

C. economic substance.

D. materiality.

Question 31/69
On 1 March Speedy Window Cleaning pays $1200 in cash for the March rent of its business premises. Which of
the following is the effect on the accounting equation?

A. Decrease in cash at bank $1200; decrease in liability accounts payable $1200.

B. Decrease in cash at bank $1200; increase in liability accounts payable $1200.

C. Decrease in cash at bank $1200; decrease in equity $1200.

D. Decrease in cash at bank $1200; increase in equity $1200.

Question 32/69
Which of these effects of a single transaction on the accounting equation is not possible?

A. Increase in assets at the same time as an equal increase in equity.

B. Decrease in assets at the same time as an equal decrease in liabilities.

C. Increase in liabilities at the same time as an equal decrease in liabilities.

D. Decrease in liabilities and at the same time an equal decrease in equity.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 33/69
Liz, after qualifying at university and having several years’ experience decides to set up her own dental practice.
On 1 March she deposits $25 000 into a bank account she has opened for the practice. Which of the following
represents the effect of this transaction on the accounting equation?

A. Increase in assets of $25 000; increase in equity of $25 000.

B. Increase in assets of $25 000; decrease in equity of $25 000.

C. Increase in assets of $25 000; increase in liabilities of $25 000.

D. Decrease in assets of $25 000; increase in equity of $25 000.

Question 34/69
Jane is an accountant operating as a sole proprietor. On 1 February she does some work for a client who pays her
$320 in cash. Which of the following represents the effect of this transaction on the accounting equation?

A. Increase in cash at bank $320; decrease in liability accounts payable $320.

B. Increase in cash at bank $320; increase in equity $320.

C. Increase in cash at bank $320; increase in asset accounts receivable $320.

D. Increase in cash at bank $320; increase in liability accounts payable $320.

Question 35/69
Jane is an accountant operating as a sole proprietor. On 1 February she does some work for a client on credit
who she invoices for $120. Which of the following represents the effect of this transaction on the accounting
equation?

A. Increase in cash at bank $120; decrease in liability accounts payable $120.

B. Increase in equity $120; increase in liability accounts payable $120.

C. Increase in asset accounts receivable $120; increase in equity $120.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 36/69
Jane is an accountant operating as a sole proprietor. On 1 February she does some work for a client on credit
who she invoices for $120. On 10th of February the client pays his account and Jane banks the $120. Which of
the following represents the effect of the receipt of cash transaction on the accounting equation for Jane’s
practice?

A. Increase in cash at bank $120; increase in equity $120.

B. Increase in cash at bank $120; decrease in asset accounts receivable $120.

C. Increase in cash at bank $120; increase in asset accounts receivable $120.

D. Increase in cash at bank $120; decrease in equity $120.

Question 37/69
Laura J set up a part-time business ‘Speedy Window Cleaning’ by depositing $6000 into a business bank
account. Which of the following represents the effect of this transaction on the accounting equation?

A. Increase in assets of $6000; increase in equity of $6000.

B. Increase in assets of $6000; decrease in equity of $6000.

C. Increase in assets of $6000; increase in liabilities of $6000.

D. Decrease in assets of $6000; increase in equity of $6000.

Question 38/69
Speedy Window Cleaning received $600 for window cleaning services provided. Which of the following
represents the effect on the accounting equation?

A. Increase in assets of $600; increase in equity of $600.

B. Increase in assets of $600; decrease in assets of $600.

C. Increase in assets of $600; increase in liabilities of $600.

D. Decrease in assets of $600; decrease in equity of $600.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 39/69
Speedy Window Cleaning purchased 12 months worth of cleaning supplies on credit from Southern Cleaning
Supplies for $1500. Which of the following represents the effect on the accounting equation?

A. Increase in assets of $1500; increase in equity of $1500.

B. Increase in assets of $1500; decrease in assets of $1500.

C. Increase in assets of $1500; increase in liabilities of $1500.

D. Decrease in assets of $1500; decrease in equity of $1500.

Question 40/69
Speedy Window Cleaning paid Southern Cleaning Supplies $1500 which was owed for cleaning supplies
previously purchased. Which of the following represents the effect on the accounting equation?

A. Decrease in assets of $1500; decrease in equity of $1500.

B. Increase in assets of $1500; decrease in assets of $1500.

C. Increase in assets of $1500; increase in liabilities of $1500.

D. Decrease in liabilities of $1500; decrease in assets of $1500.

Question 41/69
Jane is an accountant operating as a sole proprietor. In January she purchases for $540 some new furniture for
her office. The purchase is made on credit. Which of the following represents the effect of this transaction on the
accounting equation?

A. Increase in the asset furniture $540; increase in the liability accounts payable $540.

B. Increase in the asset furniture $540; decrease in the asset accounts receivable $540.

C. Increase in the asset furniture $540; increase in equity $540.

D. Increase in the asset furniture $540; increase in the asset accounts receivable $540.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 42/69
Jane is an accountant operating as a sole proprietor. On 14 February she pays $600 wages in cash to her
receptionist for work done during the first half of the month. Which of the following represents the effect of this
transaction on the accounting equation?

A. Decrease in cash at bank $600; decrease in liability accounts payable $600.

B. Decrease in cash at bank $600; increase in liability accounts payable $600.

C. Decrease in cash at bank $600; increase in equity $600.

D. Decrease in cash at bank $600; decrease in equity $600.

Question 43/69
The transactions below are from the records of Templestowe Picture Framers, the internal transaction is:

A. cash sale.

B. paid monthly rent on premises.

C. credit sale.

D. recorded depreciation on shop fixtures and fittings.

Question 44/69
Which of these events would not be recorded by accountants?

A. Received an order from a customer.

B. The owner paid his daughter’s school fees from the business bank account.

C. Credit sale.

D. Depreciation on motor vehicles calculated at the end of the firm’s financial year.

Question 45/69
Which of these events would be recorded by accountants?

A. An employee receives a promotion.

B. An employee hurts themselves at work in the course of their duties.

C. An employee is paid by being given a computer instead of their normal wages.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 46/69
Why is the receipt of an order from a customer not regarded as a transaction?

A. Because an exchange between the entity and the customer has not yet occurred.

B. Because the computer cannot record it.

C. Because the customer might cancel the order.

D. The receipt of an order is regarded as a transaction.

Question 47/69
A two year insurance policy paid for on l January can initially be recorded in an asset account called:

A. prepaid insurance.

B. insurance payable.

C. unearned insurance.

D. debtors.

Question 48/69
A collection of all the individual accounts for a particular business is referred to as:

A. the general ledger.

B. the trial balance.

C. the general journal.

D. the chart of accounts.

Question 49/69
A deposit received in advance by Adelaide Co for services not yet supplied can be initially recorded by Adelaide
in a liability account called:

A. sales.

B. accounts payable.

C. unearned revenue.

D. expenses payable.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 50/69
A chronological record of all the transactions of an entity is provided in the:

A. ledger.

B. journal.

C. balance sheet.

D. trial balance.

Question 51/69
The accounting entry to record the payment of a liability is which of the following?

A. Debit an asset account and credit a liability account

B. Debit a liability account and credit an asset account

C. Debit an equity account and credit a liability account

D. Debit a liability account and credit an equity account

Question 52/69
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. Credits should always be entered into the journal before debits
iii. The accounting equation should stay in balance

A. 0

B. 1

C. 2

D. 3

Question 53/69
A credit entry is made to:

A. decrease an asset, increase a liability, and decrease equity.

B. decrease an expense, increase income, and increase equity.

C. increase an asset, decrease a liability, and decrease equity.

D. decrease an asset, decrease a liability, and increase equity.

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 54/69
If a transaction causes an equity account to increase, which of these related effects may also occur?

A. An increase of an equal amount in a liability 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 equity account.

Question 55/69
Which of these is incorrect?

A. The normal balance for an asset is a debit.

B. The normal balance for a liability is a credit.

C. The normal balance for equity is a debit.

D. The normal balance for income is a credit.

Question 56/69
What is the correct order in which the steps for analysing transactions are carried out?
i Decide what accounts are affected.
ii Decide if the account type is increasing or decreasing.
iii Apply the rules of debit and credit.
iv Decide on the account type.

A. i, ii, iii, iv

B. iv, ii, i, iii

C. i, iv, ii, iii

D. i, ii, iv, iii

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 57/69
The accounting entry when income is earned on credit is which of the following?

A. Debit cash, credit income

B. Debit accounts receivable, credit income

C. Debit income, credit accounts payable

D. Debit accounts payable, credit income

Question 58/69
If a sole proprietor who owns an electrical store takes home a DVD player for his own personal use it would be
considered to be:

A. an expense because an asset has been given away.

B. an increase in equity and a decrease in assets because the proprietor now owns the DVD player.

C. a decrease in assets and a decrease in equity because by taking the DVD player the owner has made a
drawing from the business.

D. an increase in assets and an increase in equity.

Question 59/69
A firm pays $4000 of an existing bank loan. The transaction is recorded as which of the following entries?

A. DR Loan payable $4000; CR Owner’s capital $4000

B. DR Cash at bank $4000; CR Accounts receivable $4000

C. DR Cash at bank $4000; CR Bank loan $4000

D. DR Loan payable $4000; CR Cash at bank $4000

Question 60/69
Happy Harry requires his customers to pay for their orders six weeks before shipping the goods. How should the
cash receipts be recorded by Harry?

A. Debit cash at bank, credit an asset account

B. Debit cash at bank, credit an expense account

C. Debit cash at bank, credit an liability account

D. Debit cash at bank, credit an income account

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 61/69
J. Wood performed carpentry services for $7500. He received cash of $5000 with the balance to be received
within 28 days. Ignoring GST, the transaction is recorded as which of the following?

A. DR Cash $5000; DR Accounts receivable $2500; CR Income earned $7500

B. DR Income earned $7500; CR Cash $5000; CR Accounts payable $2500

C. DR Cash $7500; CR Equity $7500

D. DR Cash $5000; DR Equity $2500; CR Income earned $7500

Question 62/69
Select the entry that correctly records the receipt by Speedy Window Cleaning of $900 in cash for window
cleaning services provided. Ignore GST.

A. DR cash at bank $900; CR income earned $900

B. DR income earned $900; CR cash at bank $900

C. DR cash at bank $900; CR debtors $900

D. DR equity $900; CR income earned $900

Question 63/69
Speedy Window Cleaning paid $120 of advertising for the month with Cheque No. 000221. Ignore GST. Which
of the following reflects the effect on the accounting equation?

A. Decrease in equity of $120; increase in assets of $120.

B. Decrease in equity of $120; decrease in assets of $120.

C. Increase in assets of $120; increase in liabilities of $120.

D. Decrease in assets of $120; increase in equity of $120.

Question 64/69
Select the entry that correctly records the purchase by Speedy Window Cleaning of 15 months worth of cleaning
supplies from Southern Cleaning. The purchase is for cash and the invoiced amount is $1500. Ignore GST.
A. Debit cleaning supplies expense $1500; credit equity $1500
B. Debit cash at bank $1500; credit cleaning supplies asset $1500
C. Debit prepaid expense $1500; credit cash at bank $1500
D. Debit cash at bank $1500; credit cleaning supplies expense $1500

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 [TAN410] [Accounting] Quiz 2. Review Chapter 2 + Chapter 3 - copy

Question 65/69
How many types of financial statements of a business are affected by this following transaction: Pay wages to
employees
A. 1
B. 2
C. 3
D. 4

Question 66/69
The double entry for a credit sales transaction for $500 is:
A. Dr Cash $500, Cr Sales $500
B. Dr Sales $500, Cr Cash $500
C. Dr Account Receivables $500, Cr Sales $500
D. Dr Sales $500, Cr Account Receivables $500

Question 67/69
Which of the following would result in a debit entry in an expense account?
A. Payment in cash for postage stamps
B. Payment to a supplier for a credit purchase of goods
C. Purchase return of goods to a supplier
D. Receipt of a loan from a bank

Question 68/69
The owner of a business invests a further $80000 in the business.
Which elements of the accounting equation will be affected by this transaction?
A. Assets and liabilities only
B. Assets only
C. Capital and assets only
D. Capital only

Question 69/69

A. $38 300
B. $51 700
C. $73 300
D. $86 700

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