QUIZ 1

ACC101

Faculty of Management and Computing

Financial Accounting
ACC101
Quiz 1
Duration: 1 hour 30 minutes
Saturday, 3rd March 2012

Instructions to candidates:
1. Answer ALL the questions.
2. You may use non-programmable calculators.
3. Your answers must be presented in an appropriate format for the required accounts or
other necessary workings.
4. You are reminded of the necessity for good English and orderly presentation in your
answers.

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1. Which of the following is NOT an asset

(A) Machinery
(B) Cash in hand
(C) Bank overdraft
(D) Inventory
2. Which of the following statements is incorrect?
(A) Assets = Liabilities + Capital
(B) Capital = Assets Liabilities
(C) Assets Liabilities = Capital
(D) Capital Assets = Liabilities
3. What is credited in the cash book?
(A) Bank charges
(B) Cheques received
(C) Discount allowed
(D) Trade discount
4. Which of the following is a liability?
(A) Cash at bank
(B) Furniture & fittings
(C) Land and buildings
(D) Loan from P. Turner
5. Given the following, what is the amount of owners equity? Assets: Land and building
$50,000; Inventory $2,000; Cash $5,000. Liabilities: Bank overdraft: $3,000; Creditors
$4,000.
(A) $50,000
(B) $56,000
(C) $64,000
(D) $128,000

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6. Which of the following is NOT a book of prime entry?

(A) Petty cash book
(B) Sales day book
(C) Cheque book
(D) Purchases day book
7. An increase for which of the following accounts gives rise to a credit?
(A) Machinery
(B) Inventory
(C) Creditors
(D) Debtors
8. Which of the following is NOT a qualitative characteristic of accounting?
(A) Understandability
(B) Relevance
(C) Reliability
(D) Going concern
9. A trial balance is made up of a list of debit balances and credit balances. Which of the
following statements is correct?
(A) Every debit balance represents an expense
(B) Assets are represented by debit balances
(C) Liabilities are represented by debit balances
(D) Income is included in the list of debit balances

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10. According to IAS 2: Inventories, which of the following should NOT be included in
valuing the inventories of an entity?
(1) Labour costs
(2) Transport costs to deliver goods to customers
(3) Administrative overheads
(4) Depreciation on factory machine
(A) All four items
(B) 1 only
(C) 2 and 3 only
(D) 2, 3, and 4 only
11. Elizabeth is trying to value her inventory. She has the following information available:
Details

Selling price

34

Cost incurred to date

20

Cost of work to complete it

12

Selling costs per item

What is the net realisable value of Elizabeths inventory?

(A) $35
(B) $22
(C) $21
(D) $33
12. Who issues International Financial Reporting Standards?
(A) The IFRS Advisory Committee
(B) The stock exchange
(C) The International Accounting Standards Board
(D) The government
13. Which accounting concept should be considered if the owner of a business takes goods
from inventory for his own personal use?
(A) The prudence concept
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(B) The accruals concept

(C) The going concern concept
(D) The business entity concept
14. Adam started his business on 1 January 2011 with a capital of $50,000. During the year
2011, he made a total net profit of $12,500. He also introduced an additional capital of
$20,000. On 31 December 2011, he withdrew $10,500 from the business. What is the
closing capital of the business?
(A) $72,000
(B) $62,500
(C) $60,500
(D) $50,000
15. Which of the following statements is true?
(A) A debit records an increase in liabilities
(B) A debit records a decrease in assets
(C) A credit records an increase in liabilities
(D) A credit records a decrease in capital
16. According to IAS 2 Inventories, which TWO of the following costs should be included in
valuing the inventories of a manufacturing company?
1. Carriage inwards
2. Carriage outwards
3. Depreciation of factory plant
4. General Administrative overheads
(A) 1 and 3
(B) 1 and 4
(C) 2 and 3
(D) 2 and 4
17. An alternative name for a Sales Journal is:
(A) Sales Invoice
(B) Sales Day Book
(C) Daily Sales
(D) Sales Ledger
18. What is the closing balance on the following account as at 31 March 1999?

(A) $225 debit

(B) $300 debit
(C) $225 credit
(D) $300 credit
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19. If the total debits exceed the total credits in a T-account, does the account have a debit or
a credit balance?
(A) Debit balance
(B) Credit balance
20. Does a debit balance brought down in the Cash T-account represent an asset or a liability?
(A) An asset
(B) A liability
(20 x 2 = 40 marks)
21. The following transactions are from the books of Marco, for the month of December
2011.
Dec 1. Deposited 6,000 in a business bank account
Dec 3. Bought goods on credit from Brian, cost 2,100
Dec 5. Cash sales 19,000
Dec 7. Paid rent by a cheque 250
Dec 10. Sold goods on credit to Diana 250
Dec 14. Paid wages 5,000
Dec 17. Bought furniture for cash 1,000
Dec. 20. Obtained a loan from Prince 20,000
Dec 22. Paid an insurance premium of 1,650
Dec 30. Withdrew 550 for personal use
Required:
(1) State the books of original entries for the above transactions

(5 marks)

(2) Record the transactions in the ledger accounts

(10 marks)

(3) Balance the ledger accounts and hence, extract a trial balance

(10 marks)

22. (a) Distinguish between financial and management accounting.

(4 marks)
(b) Define any THREE qualitative characteristics of accounting.
(6 marks)
(c) List and explain any THREE accounting conventions.
(6 marks)
(d) Explain how inventory should be valued as per IAS 2 Inventories?
(4 marks)
(e) List the users of accounting information. Explain why one set of accounting
information is unlikely to satisfy the needs of all users.
(5 marks)
(f) List down 5 examples of source documents.
(5 marks)
(g) State the TWO names given for the books where accounting transactions are first
recorded. Give THREE examples of these books.

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(5 marks)