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A debit card (EFPTOS) sale is essentially recorded by the seller:
a. as a bill receivable.
b. as a cash sale.
c. as a credit sale.

d. as a bill payable.
The correct answer is: as a cash sale.
Question
2
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The allowance for doubtful debts account had a balance of $4500 before bad debts of $1000 were written off and
the allowance was adjusted to 10% of the accounts receivable balance of $22 000. The new amount of allowance for
doubtful debts that is deducted from accounts receivable in the statement of financial position is:
a. $1000.
b. $1400.
c. $2200.
d. $1200.

The correct answer is: $2200.
Question
3
Incorrect
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John Jones calculates that this year's estimated bad debts expense will be $13 800. When John makes the adjusting
entry, the effect will be:
a. Bad debt expense: Increase; Allowance for doubtful debts: Increase; Gross accounts receivable: No effect.
b. Bad debt expense: No effect; Allowance for doubtful debts: Decrease; Gross accounts receivable: No

effect.
c. Bad debt expense: Increase; Allowance for doubtful debts: No effect; Gross accounts receivable: Decrease.
d. Bad debt expense: No effect; Allowance for doubtful debts: Increase; Gross accounts receivable: Decrease.
The correct answer is: Bad debt expense: Increase; Allowance for doubtful debts: Increase; Gross accounts receivable:
No effect.
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4
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Black Beauty Co has the following balances in its general ledger:
If a debt for $500, previously provided for as doubtful, is written off as bad, what is the estimated net realisable
value of accounts receivable after the write off?
a. $43 500
b. $46 500
c. $44 500
d. $44 000

The correct answer is: $44 000
Question
5
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Accounts receivable are usually valued in the statement of financial position at:
a. Gross amount less allowance for expected bad debts
b. Market value
c. The lower of cost and net realisable value

d. Historical cost
The correct answer is: Gross amount less allowance for expected bad debts
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6
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The allowance for doubtful debts account has a balance at the start of the year of $2000. At the end of the year
debts of $880, including $80 GST, are to be written off and the allowance for doubtful debts is to be adjusted to
10% of the closing accounts receivable balance of $33 000 (including $3000 GST). The amount for bad and doubtful
debts appearing in the statement of financial performance for the year will be:
a. $3000.
b. $3300.

c. $1800.
d. $1200.
The correct answer is: $1800.
Question
7
Incorrect
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Which of the following does not fit the IAS 37/AASB 137 definition of a provision as a liability of uncertain timing or
amount?
a. Provision for depreciation
b. Provision for warranties
c. Provision for long-service leave
d. Provision for environmental damage

The correct answer is: Provision for depreciation
Question
8
Incorrect
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Which of the following is not an essential characteristic of a liability under the Conceptual Framework?
a. A legal debt.

b. A past transaction or event.
c. An outflow of resources embodying economic benefits.
d. A present obligation.
The correct answer is: A past transaction or event.
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Question
9
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A contingent liability is reported:
a. in the statement of financial position.
b. in the statement of financial performance.
c. in the notes to the financial statements.

d. in the statement of changes in equity.
The correct answer is: in the notes to the financial statements.
Question
10
Correct
Mark 1.00 out of 1.00
What type of accounts are: I. Warranty expense; and II. Provision for warranties
a. I. Expense; II. Equity
b. I. Expense; II Asset
c. I. Liability; II. Expense
d. I. Expense; II. Liability

The correct answer is: I. Expense; II. Liability
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Courtney uses the allowance method of accounting for bad and doubtful debts. When she received notice that a
debtor, who owed her $5 000, was in liquidation she decided to write off the debt as bad. What is the general
journal entry to record the write off?
a. DR Allowance for doubtful debts $5 000; CR Bad debts expense $5 000
b. DR Bad debts expense $5 000; CR Allowance for doubtful debts $5 000
c. DR Bad debts expense $5 000; CR Accounts receivable $5 000

d. DR Allowance for doubtful debts $5 000; CR Accounts receivable $5 000
The correct answer is: DR Allowance for doubtful debts $5 000; CR Accounts receivable $5 000
Question
2
Correct
Mark 1.00 out of 1.00
Under the statement of financial performance method of estimating likely bad debts:
a. an estimate of bad debts is made by the accountant.
b. accounts receivable are 'aged' to establish likely bad debts.
c. a percentage, based on past experience, is applied to credit sales.

d. a percentage, based on past experience, is applied to profit.
The correct answer is: a percentage, based on past experience, is applied to credit sales.
Question
3
Correct
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Which of the following indicates an improvement in the management of accounts receivable?
a. A change in the average collection period from 34 days to 39 days.
b. An extension of the time taken to collect debts to beyond the allowed credit period.
c. A change in the number of times debtors are turned over per year from 8.32 times to 10.85 times.

d. An increase in the average collection time for accounts receivable.
The correct answer is: A change in the number of times debtors are turned over per year from 8.32 times to 10.85
times.
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4
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Maxine's Flower Shop had bank issued credit card sales of $1650 including GST. The correct entry to record the
sales is:
a. DR Cash 1650; CR GST Payables 150; CR Sales Revenue 1500
b. DR Cash 1500; CR Sales Revenue 1500
c. DR Account Receivable 1650; CR Sales Revenue 1650
d. DR Account Receivable 1500; CR GST Payable 150; CR Sales Revenue 1350

The correct answer is: DR Cash 1650; CR GST Payables 150; CR Sales Revenue 1500
Question
5
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Watson Company calculated that this year's estimated bad debts expense will be $5800. The unadjusted balance of
the allowance for doubtful debts account is $4200. What effect will the necessary adjusting entry have on the
following accounts? Gross accounts receivable: bad debts expense: allowance for doubtful debts.
a. No effect: increase: increase.
b. Increase: increase: no effect.

c. No effect: increase: decrease.
d. Increase: increase: increase
The correct answer is: No effect: increase: increase.
Question
6
Correct
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In managing accounts receivable, the term 'factoring' relates to:
a. the proportion of debts expected to become bad.
b. selling the accounts receivable to a business that will then collect the debts.

c. calculating the amount of bad debts expense.
d. ageing the receivables.
The correct answer is: selling the accounts receivable to a business that will then collect the debts.
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7
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Which of the following would not typically be classified as a non-current liability?
a. Mortgage payable
b. Unsecured notes payable
c. Accounts payable

d. Provision for long service leave
The correct answer is: Accounts payable
Question
8
Incorrect
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Under IAS 37/AASB 137, which of the following provisions is not regarded as a liability?
a. Provision for warranties
b. Provision for onerous contracts

c. Provision for long-service leave
d. Provision for doubtful debts
The correct answer is: Provision for doubtful debts
Question
9
Incorrect
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What types of accounts are: I. GST payable; and II. GST receivable.
a. I. Negative liability; II. Liability
b. I. Asset; II. Liability
c. I. Liability; II. Negative liability
d. I. Liability; II. Asset

The correct answer is: I. Liability; II. Negative liability
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10
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Where are contingent liabilities required to be disclosed in the financial reports?
a. in the liability section of the statement of financial position
b. in the notes to the financial reports

c. in the financial expense section of the statement of financial performance.
d. as deductions from the asset accounts they relate to.
The correct answer is: in the notes to the financial reports
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Baxter Ltd recorded sales of $480 000 during the year with $350 000 being on credit. Bad debts in the past have
averaged 2% of credit sales. Using the percentage of net credit sales method, the amount to provide for estimated
bad debt expense for the year is:
a. $9 600
b. nil.
c. $2 600
d. $7 000

The correct answer is: $7 000
Question
2
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On 31 December 2023, Miner Resources decided to finally write off as a bad debt a receivable of $6600 (including
$600 GST) from Underground Pty Ltd (in liquidation). If Miner Resources uses the allowance method, the correct
entry to write off the debt is:
a. DR Bad debts expense $6600; CR Accounts receivable $6600
b. DR Bad debts expense $6600; CR GST payable $600; CR Accounts receivable $6000

c. DR Allowance for doubtful debts $6000; CR Bad debts expense $6000
d. DR Allowance for doubtful debts $6000, DR GST payable $600; CR Accounts receivable $6600
The correct answer is: DR Allowance for doubtful debts $6000, DR GST payable $600; CR Accounts receivable $6600
Question
3
Correct
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When a credit sale involving GST is recorded, the sales account:
a. is input taxed.
b. excludes the GST.

c. has the GST added.
d. includes the GST.
The correct answer is: excludes the GST.
05/07/2021, 9:20 pm
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4
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Which of the following is not one of the ways in which the asset 'other receivables' could be recognised?
a. Loan to executive director

b. Prepaid insurance
c. Rent receivable
d. Sale of machinery on credit
The correct answer is: Prepaid insurance
Question
5
Incorrect
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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 Accounts receivable; CR Bad debts expense
c. DR Allowance for doubtful debts; CR Bad debts expense

d. DR Bad debts expense; CR Accounts receivable
The correct answer is: DR Bad debts expense; CR Allowance for doubtful debts
Question
6
Incorrect
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What is the effect on the financial statements if no adjustment is made for doubtful debts?
a. Assets are understated and profit is understated.

b. Assets are overstated and profit is understated
c. Assets are understated and profit is overstated.
d. Assets are overstated and profit is overstated.
The correct answer is: Assets are overstated and profit is overstated.
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Question
7
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The key difference between provisions and liabilities is:
a. the party that the obligation is owed to.
b. the uncertainty regarding the amount or timing of the future sacrifice of economic resources.

c. whether the obligation is current or non-current.
d. whether there is an obligation.
The correct answer is: the uncertainty regarding the amount or timing of the future sacrifice of economic resources.
Question
8
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The key characteristic of contingent liabilities is:
a. the liability will be confirmed only by the occurrence or non-occurrence of a future event not completely

within the control of an entity.
b. a legal dispute must exist at balance date.
c. the liability does not exist beyond a reasonable doubt.
d. the timing of the future sacrifice of economic benefits is uncertain.
The correct answer is: the liability will be confirmed only by the occurrence or non-occurrence of a future event not
completely within the control of an entity.
Question
9
Correct
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Which of the following would not be defined as a liability under the Conceptual Framework?
a. An arrangement to pay a quarterly bonus commission to salespersons for achieving sales over a certain
level.

b. A loan from a financial institution.
c. Salaries owing to managers.
d. Money owing to a supplier for goods purchased.
The correct answer is: An arrangement to pay a quarterly bonus commission to salespersons for achieving sales over a
certain level.
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Question
10
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True Blue Retailers provides a one year labour and parts warranty with every appliance sold. At the beginning of
2023, the provision to cover warranty claims had a balance of $9 000. On 30 April 2023, $1300 was paid out for
repairs on appliances under warranty. The correct accounting entry to record the payment of the claims is:
a. DR Provision for warranties $1300; CR Warranty expense $1300
b. DR Provision for warranties $1300; CR Bank $1300
c. DR Warranty expense $1300; CR Provision for warranties $1300

d. DR Warranty expense $1300; CR Bank $1300
The correct answer is: DR Provision for warranties $1300; CR Bank $1300
05/07/2021, 9:20 pm
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Under the periodic inventory system, what is the correct entry to record the cost of the sale of a dining suite sold to
a customer for $1650 including 10% GST? (The dining suite was originally purchased on credit for $990 including
GST of $90).
a. The cost of each sale is not recorded under the periodic inventory system

b. DR Purchases $900; CR Inventory $900
c. DR Purchases $1650; CR Sales $1650
d. DR Cost of sales $900; CR Inventory $900
The correct answer is: The cost of each sale is not recorded under the periodic inventory system
Question
2
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Goods held for sale by a retailer in the normal course of business are known as:
a. stock, inventory work-in-process.
b. merchandise, inventory.

c. inventory, stock, raw materials.
d. stock, inventory, stock-in-trade.
The correct answer is: stock, inventory, stock-in-trade.
Question
3
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Cash (settlement) discounts are primarily issued to:
a. encourage customers to pay for purchases in cash.
b. encourage customers to purchase goods on CR.
c. provide discounts to customers who purchase goods in bulk quantities.

d. encourage customers to pay their account early.
The correct answer is: encourage customers to pay their account early.
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4
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Using the periodic approach to accounting for inventory, beginning inventory plus purchases minus ending inventory
as determined by a physical stocktake, is assumed to equal:
a. cost of sales.
b. gross profit.
c. inventory turnover.

d. selling expenses.
The correct answer is: cost of sales.
Question
5
Incorrect
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Which of the following is not true of the periodic inventory system?
a. Cost of sales can be calculated only after a physical stocktake.

b. It uses a purchases account.
c. It identifies inventory variances.
d. It is the simplest system.
The correct answer is: It identifies inventory variances.
Question
6
Incorrect
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When goods are returned by a customer or the price is adjusted, Australia's GST legislation requires the retailer to
issue the customer with _________________for all amounts totalling more than $50.
a. an adjustment note
b. an invoice
c. a refund note

d. a negative tax invoice
The correct answer is: an adjustment note
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Question
7
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Fabulous Furniture uses a periodic inventory system. Many purchases and sales of goods occur during the financial
year. For Fabulous Furniture, the balance in the general ledger inventory account:
a. will usually be zero except at a balance date.
b. represents the goods on hand at any given point in time.
c. reports the goods purchased since the beginning of the accounting period.
d. does not change until a stocktake is carried out.

The correct answer is: does not change until a stocktake is carried out.
Question
8
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The specific identification method of costing inventory would be unsuitable for which of the following?
a. Works of art
b. Motor vehicles
c. Gold jewellery

d. Petrol at a service station
The correct answer is: Petrol at a service station
Question
9
Incorrect
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Which statement relating to the moving average method of costing inventories, used with the perpetual inventory
system, is incorrect?
a. A new average cost is calculated after each purchase return.
b. A new average cost is calculated after each sale
c. The formula for average cost is cost of goods available for sale divided by units for sale.
d. In periods of rising prices the profit result is between that of the FIFO and LIFO methods.

The correct answer is: A new average cost is calculated after each sale
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Question
10
Correct
Mark 1.00 out of 1.00
In the event of rising inventory prices, the method of inventory valuation that gives the highest profit and the
highest ending inventory is the:
a. Perpetual method.
b. LIFO method.
c. FIFO method.

d. Weighted average.
The correct answer is: FIFO method.
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With regards to the statement of financial performance for a retailer, which of the following statements is correct?
a. Expenses are classified into the groupings selling expenses, distribution expenses, and administrative and 
finance expenses.
b. Interest revenue is added to sales revenue to calculate gross profit.
c. Under the periodic system freight inwards is added to the cost of purchases.
d. The cost of sales section is the same no matter whether the periodic or perpetual inventory system is used.
The correct answer is: Under the periodic system freight inwards is added to the cost of purchases.
Question
2
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Under the perpetual inventory method, which of the following entries would be a closing entry at the end of the
accounting period?
a. DR Profit or loss summary; CR Purchases

b. DR Inventory; CR Profit or loss summary
c. DR Profit or loss summary; CR Inventory
d. DR Profit or loss summary; CR Cost of sales
The correct answer is: DR Profit or loss summary; CR Cost of sales
Question
3
Incorrect
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In the statement of financial performance expenses are classified into four categories, cost of sales, selling and
distribution, administrative, and financial. Expenses incurred for storage costs and advertising are classified as:
a. Administrative

b. Financial
c. Selling and distribution
d. Cost of sales
The correct answer is: Selling and distribution
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Question
4
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Under the periodic inventory system inventory purchased is debited to which account?
a. Purchases

b. Cost of sales
c. Prepaid expenses
d. Inventory
The correct answer is: Purchases
Question
5
Incorrect
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Under the perpetual inventory system, three office desks were originally purchased on CR at $300 each plus 10%
GST. If all three desks were sold to a customer at $550 each (including GST) what is the correct entry to record the
cost of the sale?
a. DR Cost of sales $900; DR GST receivable $90; CR Inventory $990
b. DR Cost of sales $1650; CR Sales $1650

c. DR Cost of sales $900; CR Inventory $900
d. DR Cost of sales $900; CR Sales $900
The correct answer is: DR Cost of sales $900; CR Inventory $900
Question
6
Correct
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Inventory is reported on the statement of financial position as:
a. property, plant and equipment.
b. a non-current asset.
c. a liability.
d. a current asset.

The correct answer is: a current asset.
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7
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Marlin Co. uses a periodic inventory system with the specific identification method of cost assignment. Inventory
purchases for the month of August were:
On 24 August 1200 units from beginning inventory and 1000 units from the 16 August purchase were sold. What
was the value of ending inventory at 31 August?
a. $58 300

b. $21 600
c. $36 700
d. $39 600
The correct answer is: $36 700
Question
8
Correct
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Blueberry Ltd uses the FIFO assumption with the periodic inventory method.Sales during year were 18 units. The
value of closing stock at the end of the period is:
a. $336
b. $415

(5 × $14) + (23 ×
$15)
c. $236
d. $651
The correct answer is: $415
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Question
9
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Novice Co purchased goods for $2500. While on display, the goods were damaged and it is estimated that they can
now only be sold for $1800. Additional marketing and distribution costs are $200. The net realisable value of the
goods is:
a. $500.
b. $1600.

c. $700.
d. $2300.
The correct answer is: $1600.
Question
10
Incorrect
Mark 0.00 out of 1.00
Which statement relating to the moving average method of costing inventories, used with the perpetual inventory
system, is correct?
a. A new average cost is calculated after each purchase
b. A new average cost is calculated after each sale and each purchase.
c. A new average cost is calculated at the end of each month.

d. A new average cost is calculated after each sale.
The correct answer is: A new average cost is calculated after each purchase
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Bailey Ltd sold goods to Andrews Ltd for $1000. Andrews Ltd paid the account 28 days later. Ignoring GST, the
correct entry in Bailey Ltd's books to record the payment by Andrews Ltd is:
a. DR Accounts receivable $1000; CR Sales $1000
b. DR Cash at bank $1000; CR Sales $1000
c. DR Cash at bank $1000; CR Accounts receivable $1000

d. DR Accounts receivable $1000; CR Equity $1000
The correct answer is: DR Cash at bank $1000; CR Accounts receivable $1000
Question
2
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Jane sold goods to Johnno for $4400 including GST. Johnno paid his account within the discount period and received
a settlement discount of 5%. Using the gross method, which of the following is the correct entry in Jane's books to
record Johnno's payment?
a. DR Cash $4180; DR Discount allowed $200; DR GST payable $20; CR Accounts receivable $4400
b. DR Cash $4200; DR Discount allowed $200; CR Accounts receivable $4400

c. DR Cash $4180; DR Discount allowed $220; DR GST payable $20; CR Accounts receivable $4420
d. DR Cash $4180; DR Discount allowed $220; CR Accounts receivable $4400
The correct answer is: DR Cash $4180; DR Discount allowed $200; DR GST payable $20; CR Accounts receivable $4400
Question
3
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The main difference between a service and a retail business is that service businesses:
a. buy and sell goods in bulk.
b. sell directly to consumers.
c. convert raw materials into finished goods.
d. sell services rather than goods.

The correct answer is: sell services rather than goods.
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4
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The opening balance in the inventory account under a periodic inventory system represents:
a. opening inventory plus purchases less ending inventory.
b. inventory on hand at the end of the current period before allowing for any inventory variances.

c. inventory on hand at the end of the previous period as determined by a physical stocktake.
d. inventory on hand at the end of the current period as determined by a physical stocktake.
The correct answer is: inventory on hand at the end of the previous period as determined by a physical stocktake.
Question
5
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Assuming that the net price method of recording purchases is used and that the business uses the perpetual method
of inventory recording, the correct entry to record the purchase of goods for $5000 on credit, with terms of 2/10,
n/30 is (ignore GST).
a. DR Inventory $4900; CR Accounts payable $4900
b. DR Inventory $5000; CR Accounts payable $5000
c. DR Inventory $4900; DR Discount allowed $100: CR Accounts payable $5000
d. DR Purchases $5000; CR Accounts payable $4900; CR Discount allowed $100

The correct answer is: DR Inventory $4900; CR Accounts payable $4900
Question
6
Incorrect
Mark 0.00 out of 1.00
If beginning inventory was $20 000, total purchases for the period were $80 000, freight-in was $4 000 and ending
inventory was $45 000, the cost of sales for the period would be:
a. $59 000
b. $84 000
c. $76 000

d. $51 000
The correct answer is: $59 000
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Question
7
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With the perpetual method of accounting for inventory, the costing assumption, such as first-in first-out, is applied
to:
a. the current asset inventory in the statement of financial position.
b. each sale via stock cards or computer records.
c. cost of sales at the end of the accounting year.
d. inventory at the end of the month.

The correct answer is: each sale via stock cards or computer records.
Question
8
Incorrect
Mark 0.00 out of 1.00
If Michelle knows that the ending inventory at retail for her corner store is $22 000 and her cost to retail percentage
is 45%, her ending inventory at cost can be estimated as:
a. $40 000.
b. $31 900.
c. $12 100.

d. $9 900.
The correct answer is: $9 900.
Question
9
Incorrect
Mark 0.00 out of 1.00
Which item should not be included in the statement of financial performance's cost of inventory?
a. The purchase price of the goods.
b. Cost for normal storage of the goods.
c. Costs associated with receiving and inspecting the goods

d. Costs incurred in preparing the goods for sale
The correct answer is: Cost for normal storage of the goods.
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Question
10
Correct
Mark 1.00 out of 1.00
Tully Sales uses a periodic inventory system with the weighted average method of cost assignment. The following
data are available.
The cost of sales for January is: (calculate your answer to the nearest whole dollar).
a. $7 000
b. $15 400
c. $9 800

($400 x $5.50 + 800 x $6.50 +1000 x $8) /
2200 units = $7.00. Cost of sales = 1400 x
$7
d. $8 000
The correct answer is: $9 800
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The asset most commonly subject to misappropriation is:
a. plant and equipment.
b. cash.

c. land and buildings.
d. investments.
The correct answer is: cash.
Question
2
Incorrect
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Flynn and Associates had an unadjusted bank account ledger balance at 30 November of $3552 Dr. The bank
statement at the same date showed a balance of $3460 Cr. Bank service charges for the month were $22 and
outstanding cheques totalled $630. The bank statement revealed that the bank had collected dividends for the firm
of $450 and a deposit of $1150 is not yet recorded on the statement. What is the corrected bank account ledger
balance at 30 November?
a. $4 130
b. $3 530

c. $3 460
d. $3 980
The correct answer is: $3 980
Question
3
Correct
Mark 1.00 out of 1.00
__________refers to the ability of a firm to pay its debts as they fall due.
a. the acid test.
b. being in surplus.
c. cash management.
d. solvency.

The correct answer is: solvency.
05/07/2021, 9:17 pm
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Question
4
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Viva Vacuums makes all sales on credit, with 80% of the payments received in the month of sale, 15% in the month
following the sale and 5% never collected. Budgeted sales are:
October $120 000
November $140 000
What is the estimated amount received from debtors in November?
a. $140 000
b. $136 000
c. $ nil

d. $130 000
The correct answer is: $130 000
Question
5
Incorrect
Mark 0.00 out of 1.00
Which of the following is not a good internal control practice?
a. Handwriting cheques
b. The pre-numbering of source documents
c. Use of a safe to store unused blank cheques
d. The use of passwords for computer access

The correct answer is: Handwriting cheques
Question
6
Correct
Mark 1.00 out of 1.00
Which of the following is not a characteristic of good internal control?
a. Insurance of assets
b. Regular bank reconciliations
c. Rotation of employees over a range of tasks
d. Joint responsibility for assets

The correct answer is: Joint responsibility for assets
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Question
7
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The main purpose of a bank reconciliation is:
a. to prove the accuracy of the general ledger.
b. to prove the accuracy of the bookkeeper.
c. to prove the accuracy of the bank

d. to prove the accuracy of the ledger bank account.
The correct answer is: to prove the accuracy of the ledger bank account.
Question
8
Incorrect
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The 30 April bank reconciliation of Perth Co was prepared using the information below.Ledger bank balance $14 805
Dr (adjusted);Outstanding deposit $2 680; Unpresented cheques $6 575; What was the bank statement balance at
30 April?
a. $18 700
b. $24 060

c. $17 485
d. $10 910
The correct answer is: $18 700
Question
9
Incorrect
Mark 0.00 out of 1.00
Which of the following does not represent proper internal control of cash receipts?
a. Daily banking of receipts.
b. Balancing the cash register after each employees' shift.
c. Two people opening the mail.

d. Paying accounts directly out of the cash register.
The correct answer is: Paying accounts directly out of the cash register.
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Question
10
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The bank statement of Mellon Company shows an overdraft of $10 000 at 28 February. In reconciling the account at
that date indicate how the company will treat cheque no. 4500 for $80 that was drawn on 25 February but had not
yet been presented for payment.
a. Record in the cash receipts journal.
b. Record in the cash payments journal.
c. Subtract from the bank statement balance in the bank reconciliation.

d. Add to the bank statement balance in the bank reconciliation.
The correct answer is: Add to the bank statement balance in the bank reconciliation.
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Assuming the account is not in overdraft, when reconciling the ledger with the bank statement a deposit in transit
should be:
a. subtracted from the bank statement balance in the reconciliation.
b. added to the bank statement balance in the reconciliation.

c. added to the general ledger bank balance.
d. subtracted from the general ledger bank balance.
The correct answer is: added to the bank statement balance in the reconciliation.
Question
2
Correct
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The preparation of a cash budget ensures that:
a. an entity can meet its commitments as they fall due.
b. cash funds are not left lying idle.
c. all of the other options.

d. wasteful cash outlays are minimised.
The correct answer is: all of the other options.
Question
3
Incorrect
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The cash budget is a projection of:
a. the expected future cash receipts and cash payments.
b. the cash receipts and cash payments received during the financial period.

c. the expected bank statement balance.
d. the present value of the future cash receipts and cash payments.
The correct answer is: the expected future cash receipts and cash payments.
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4
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While preparing the bank reconciliation Terry discovered that the bank had incorrectly paid cheque number 100389
for $900 more than the amount written on the cheque by the company. The bank account has a positive balance.
The proper procedure to correct this bank error is to:
a. deduct the error from the bank balance in the general ledger and notify the bank.
b. add the error to the bank balance in the general ledger.
c. add the error to the bank statement balance in the reconciliation and notify the bank.
d. deduct the error from the bank statement balance in the reconciliation.

The correct answer is: add the error to the bank statement balance in the reconciliation and notify the bank.
Question
5
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Which of the following would appear as a credit on the bank statement of Central Motors?
a. A dishonoured cheque.
b. A cheque paid by Central Motors to a supplier.

c. Employees' salaries paid by electronic funds transfer.
d. A cheque received by Central Motors from a customer
The correct answer is: A cheque received by Central Motors from a customer
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Question
6
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Sugar Industries makes all sales on credit with 60% of the payment received in the month of sale, 20% in the
month following the sale, 15% in the 2nd month following sale, and the remaining 5% remains uncollected.
Budgeted sales are:
July $100 000
August $140 000
September $120 000
October $150 000
The budgeted receipts from debtors for September are:
a. $100 000
b. $120 000
c. $115 000

d. $135 000
The correct answer is: $115 000
Question
7
Correct
Mark 1.00 out of 1.00
When preparing a bank reconciliation what would cause the bank statement balance to be less than the adjusted
cash balance in the general ledger? (Assume the bank is not in overdraft.)
a. Bank fees
b. Outstanding deposits

c. Dishonoured cheques
d. Outstanding cheques
The correct answer is: Outstanding deposits
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8
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The essential element of the internal control of cash is:
a. a strong safe.

b. a petty cash system.
c. the double entry accounting system.
d. the bank reconciliation.
The correct answer is: the bank reconciliation.
Question
9
Correct
Mark 1.00 out of 1.00
Which of the following statements relating to a bank statement is true?
a. It constitutes a source document for the entity for direct debits and credits such as bank charges.

b. The bank's customer is viewed as a debtor.
c. A direct deposit is listed in the debit column.
d. A positive balance in the bank account will be shown as a debit balance.
The correct answer is: It constitutes a source document for the entity for direct debits and credits such as bank
charges.
Question
10
Correct
Mark 1.00 out of 1.00
The petty cash account is what type of account?
a. Current Asset

b. Expense
c. Equity
d. Current Liability
The correct answer is: Current Asset
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If an adjustment for accrued rent is omitted from the financial reports the effect is:
a. assets are overstated; profit is understated.
b. liabilities are understated; profit is overstated.

c. liabilities are overstated; profit is understated.
d. assets are understated; profit is overstated.
The correct answer is: liabilities are understated; profit is overstated.
Question
2
Correct
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Accrued salaries is a/an:
a. contra asset account.
b. equity account.
c. asset account.
d. liability account.

The correct answer is: liability account.
Question
3
Incorrect
Mark 0.00 out of 1.00
Which of the following statements relating to balance day adjustments is correct?
a. They always affect the cash/bank account.
b. They only affect the statement of financial performance.
c. They have at least one effect on the statement of financial performance and one effect on the statement of
financial position.
d. They affect either the statement of financial performance or the statement of financial position.

The correct answer is: They have at least one effect on the statement of financial performance and one effect on the
statement of financial position.
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4
Not answered
Marked out of 1.00
The Prepaid Insurance account of Stephen's Spas shows a balance of $3000, representing a two-year insurance
premium paid on 1 February 2022. After recording the adjustment on 30 June 2022, the end of the accounting
period:
a. Insurance expense in the statement of financial performance is $3000 and Prepaid Insurance in the
statement of financial position is $0.
b. Insurance expense in the statement of financial performance is $750 and Prepaid Insurance in the statement
of financial position is $2250.
c. Insurance expense in the statement of financial performance is $625 and Prepaid Insurance in the statement
of financial position is $2375.
d. Insurance expense in the statement of financial performance is $2375 and Prepaid Insurance in the
statement of financial position is $625.
The correct answer is: Insurance expense in the statement of financial performance is $625 and Prepaid Insurance in
the statement of financial position is $2375.
Question
5
Correct
Mark 1.00 out of 1.00
What type of account is Prepaid Rent?
a. Asset

b. Expense
c. Income
d. Liability
The correct answer is: Asset
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Question
6
Not answered
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The correct closing entry for sales income of $60 000 is:
a. DR Profit or loss summary account $60 000; CR Sales income $60 000
b. DR Capital $60 000; CR Sales income $60 000
c. DR Sales income $60 000; CR Profit or loss summary account $60 000
d. DR Sales income $60 000; CR Capital $60 000
The correct answer is: DR Sales income $60 000; CR Profit or loss summary account $60 000
Question
7
Correct
Mark 1.00 out of 1.00
The post-closing trial balance contains only:
a. asset and equity accounts.
b. temporary accounts
c. statement of financial performance accounts.
d. statement of financial position accounts.

The correct answer is: statement of financial position accounts.
Question
8
Not answered
Marked out of 1.00
Which of the following statements relating to reversing entries is incorrect?
a. They reverse the effect of certain adjusting entries.
b. They reverse the effects of closing entries.
c. They are recorded on the first day of the new accounting year.
d. They are made to simplify the recording of regular transactions in the next period.
The correct answer is: They reverse the effects of closing entries.
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Question
9
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The correct closing entry for the bank account is:
a. No closing entry is required
b. DR Owner's capital account; CR Bank

c. DR Profit or loss summary account; CR Bank
d. DR Bank; CR Owner's capital account
The correct answer is: No closing entry is required
Question
10
Correct
Mark 1.00 out of 1.00
Closing entries refer to:
a. establishing zero balances in the statement of financial performance accounts.
b. transferring income and expense account balances to the profit or loss summary account, which is then

closed to the equity account.
c. establishing zero balances in all ledger accounts.
d. establishing a zero balance in the cash at bank account.
The correct answer is: transferring income and expense account balances to the profit or loss summary account, which
is then closed to the equity account.
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If a company has earned income which has not been received in cash at the end of the accounting period an
adjustment should be made which will:
a. DR an income account and CR an asset account.
b. DR cash and CR a liability account.
c. DR an asset account and CR an income account.

d. DR an expense account and CR cash.
The correct answer is: DR an asset account and CR an income account.
Question
2
Incorrect
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On 1 March 2022, Indiana Ltd rented out part of its manufacturing premises and collected $6000 in advance for a
one year period. The receipt was credited to a liability account. At 31 December 2022, Indiana Ltd's end of financial
year, the following adjusting journal should be recorded:
a. DR Rent receivable $5000; CR Rent income $5000

b. DR Rent income $3000; CR Unearned rent income $3000
c. DR Unearned rent income $4500; CR Rent income $4500
d. DR Unearned rent income $5000; CR Rent income $5000
The correct answer is: DR Unearned rent income $5000; CR Rent income $5000
Question
3
Correct
Mark 1.00 out of 1.00
The office supplies stock account is a/an:
a. expense.
b. liability
c. income.
d. asset.

The correct answer is: asset.
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4
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The supplies inventory account of Forever Flowers shows a balance of $1800 on 30 June 2022, the end of the
financial year. Supplies of $1550 were used during the month of June 2022. Which of the following is correct after
recording the adjustment on 30 June 2022?
a. Supplies expense in the statement of financial performance is $250 and Supplies inventory in the statement
of financial position is $1550.
b. Supplies expense in the statement of financial performance is $0 and Supplies inventory in the statement of
financial position is $1800.
c. Supplies expense in the statement of financial performance is $1800 and Supplies inventory in the

statement of financial position is $0.
d. Supplies expense in the statement of financial performance is $1550 and Supplies inventory in the statement
of financial position is $250.
The correct answer is: Supplies expense in the statement of financial performance is $1550 and Supplies inventory in
the statement of financial position is $250.
Question
5
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The prepaid insurance account of Downton Ltd shows a balance of $3600 (net of GST) representing a payment on 1
July 2022 of a three-year insurance premium. The correct adjusting entry on 31 December 2022, the close of the
annual accounting period is:
a. Dr Insurance expense $600; Cr Prepaid insurance $600
b. Dr Insurance expense $1200; Cr Prepaid insurance $1200
c. Dr Prepaid insurance $1200; Cr Insurance expense $1200

d. Dr Prepaid insurance $1800; Cr Insurance expense $1800
The correct answer is: Dr Insurance expense $600; Cr Prepaid insurance $600
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6
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Which statement relating to the profit or loss summary account is incorrect?
a. The profit or loss summary account is a permanent account.

b. The balance in each income and expense account is transferred to the profit or loss summary account.
c. The balance in the profit or loss summary account is transferred to the owner's capital account.
d. The profit or loss summary account is established to summarise the balances in the income and expense
accounts.
The correct answer is: The profit or loss summary account is a permanent account.
Question
7
Correct
Mark 1.00 out of 1.00
Entries made at the beginning of the next accounting period to reverse the effect of various adjustments, are called:
a. reversing entries.

b. negative entries.
c. simplified entries.
d. re-adjusting entries.
The correct answer is: reversing entries.
Question
8
Correct
Mark 1.00 out of 1.00
Income and expense accounts can be referred to as:
a. permanent accounts
b. normal accounts.
c. temporary accounts.

d. profit accounts
The correct answer is: temporary accounts.
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Question
9
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The salaries expense account on the worksheet shows an opening balance of $15 000. The worksheet includes a
reversing entry for $1800 for salaries prepaid in the previous year and $1400 for salaries accrued in the current
year. The balance of the salaries expense account that will be transferred to the statement of financial performance
column is:
a. $11 800.
b. $15 400.
c. $18 200.
d. $14 600.

The correct answer is: $18 200.
Question
10
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Assume that no reversing entries are made by the entity. How would the entity record the transaction for payment
of wages if $5200 was accrued for wages at the end of the year and the first payment of wages in the following year
was $63 900?
a. DR Salaries expense $63 900; CR Cash $63 900
b. DR Salaries payable $5200; DR Salaries expense $58 700; CR Cash $63 900
c. DR Salaries expense $63 900; CR Salaries payable $5200; CR Cash $58 700

d. DR Salaries expense $69 100; CR Salaries payable $5200; CR Cash $63 900
The correct answer is: DR Salaries payable $5200; DR Salaries expense $58 700; CR Cash $63 900
05/07/2021, 9:15 pm