FA2 Final Test – 1
1.
David runs his own business. He already has $8,000 of capital invested. He decides on 23
March to invest a further $2,000.
How should the transaction on 23 March be recorded?
A Debit Bank $2,000, Credit Capital $2,000
B Debit Capital $2,000, Credit Bank $2,000
C Debit Bank $10,000, Credit Capital $10,000
D Debit Capital $10,000, Credit Bank $10,000
2.
Valerie runs a business that is registered for sales tax. On 28 September, the business
purchases goods on credit for $9,400, inclusive of tax at 20%.
How would this purchase be recorded in the accounts?
A Debit Purchases $7,520, Debit Sales Tax $1,880, Credit Payables $9,400
B Debit Purchases $7,520, Debit Sales Tax $1,880, Credit Cash $9,400
C Debit Purchases $7,833, Debit Sales Tax $1,567, Credit Cash $9,400
D Debit Purchases $7,833, Debit Sales Tax $1,567, Credit Payables $9,400
3.
Your business sells goods to a customer. There are two alternative terms on offer, EITHER pay
$2,000 on 60 days’ credit OR pay in full in cash on delivery and receive a discount of 5%. The
customer is expected to take up the discount offer, and subsequently pays the correct
amount immediately.
How should the sale be recorded in the accounts?
A Debit Receivables $1,900, Credit Sales $1,900
B Debit Bank $1,900, Debit discounts allowed $100, Credit Sales $2,000
C Debit Bank $1,900, Credit Sales $1,900
D Debit Bank $2,000, Credit Discounts allowed $100, Credit Sales $1,900
4.
On 1 May, your business sold goods to a customer for $1,000 on one month’s credit, with
the offer of a discount of 2% for payment within 7 days of the invoice date. The customer
was expected to take up the discount offered. On 28 May, the customer sent payment by
cheque for the appropriate amount.
How should the payment from the customer be recorded in the accounting records?
A Debit Bank $1,000, Credit sales $20, Credit Receivables $980
B Debit Bank $980, Credit Receivables $980
C Debit Receivables $980, Debit Discounts allowed $20, Credit Sales $1,000
D Debit Bank $1,000, Credit Discounts allowed $20, Credit Receivables $980
5.
Norma receives a cheque through the post for $8,000, payable to her business, but there is
no covering letter or document to explain what the money is for. She thinks it might be a
payment from a customer whose debt was written off two years ago as uncollectable. She
banks the money immediately.
How should she account for the transaction?
A Debit Bank $8,000, Credit Receivables $8,000
B Debit Bank $8,000, Credit Suspense account $8,000
C Debit Bad debts $8,000, Credit Receivables $8,000
D Debit Suspense account $8,000, Credit Bank $8,000
6.
Rhona prepared a trial balance, and found that the total of debit entries was $600,000 and
the total of credit entries was $590,000. A suspense account was opened to record the
difference. On investigation, she found that when she had paid $10,000 additional capital
into the business earlier in the year, the transaction had been entered in the cash book, but
had not been entered in any other account.
What journal entry is required to eliminate the balance on suspense account?
A Debit Suspense $10,000, Credit Capital $10,000
B Debit Suspense $10,000, Credit Drawings $10,000
C Debit Capital $10,000, Credit Suspense $10,000
D Debit Drawings $10,000, Credit Suspense $10,000
7.
The profit made by a business in 20X7 was $35,400. The proprietor injected new capital of
$10,200 during the year and withdrew a monthly salary of $500. If net assets at the end of
20X7 were $95,100,
What was the proprietor's capital at the beginning of the year?
A $43,500
B $55,500
C $63,900
D $126,300
8.
A business borrowed $1,700 from its bank, and used the cash to buy a new computer.
How was the accounting equation affected by these transactions?
Assets
Liabilities
A
Unchanged
Decreased
B
Unchanged
Increased
C
Increased
Increased
D
Increased
Decreased
9.
At the start of the year, the balance on David's capital account was $85,872. During the year
David made drawings of $19,500 and the net loss for the year was $1,700. He introduced
capital of $5,300
What is the closing balance on David's capital account at the year end?
A $73,372
B $69,972
C $98,372
D $62,772
10.
The profit made by a sole trader in 20X7 was $35,400. The owner injected new capital of
$10,200 during the year and withdrew a monthly salary of $500. If net assets at the end of
20X7 were $95,100,
What was the capital at the beginning of the year?
A $50,000
B $55,500
C $63,900
D $134,700
11.
Esther is recording the invoice for the purchase of a new non-current asset. As well as the
basic cost of the asset, the invoice shows the following items:
Delivery
Installation
Maintenance
Which of the costs should be treated as revenue expenditure?
A Delivery only
B Installation only
C Maintenance only
D All of the costs
12.
In the year to 31 October 20X6, Nadine recorded some revenue expenditure as capital
expenditure.
What is the effect on her profit for the year to 31 October 20X6 and her net assets at that
date?
Profit
Net assets
A Overstated
Overstated
B Overstated
Understated
C Understated Overstated
D Understated Understated
13.
Items should be included in the financial statements if their omission would mislead the
users of the financial statements.
Which one of the following accounting principles governs this?
A Consistency
B Accruals
C Materiality
D Money measurement
14.
A business owns a non-current asset which cost $4,000 and is recorded at its net book value
in the financial statements.
Which of the following accounting principles has been applied?
A Going concern
B Business entity
C Consistency
D Money measurement
15.
According to The Conceptual Framework, which of the following are fundamental
characteristics of financial information?
(i) Relevance
(ii) Faithful representation
A (i) and (ii)
B (i) only
C Neither (i) nor (ii)
D (ii) only
16.
What accounting principle states that 'For accounting purposes, a business is separate
from its owners’?
A Going concern
B Materiality
C Business entity
D Comparability
17.
A number of users would broadly agree that faithful representation has been achieved.
Which qualitative characteristic of financial information is described by this statement?
A Comparability
B Understandability
C Verifiability
D Relevance
18.
A business applies the same depreciation policy to all of its computers.
Which accounting principle does this treatment follow?
A Accruals
B Comparability
C Money measurement
D Business entity
19.
Transactions are stated at the value at which they occurred and are not adjusted at the end
of the year.
Which accounting principle is described by this statement?
A Business entity
B Historical cost
C Materiality
D Going concern
20.
Which qualitative characteristic of financial information can be achieved through a
combination of consistency and disclosure?
A Comparability
B Understandability
C Verifiability
D Relevance