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1 XYX Cos non-current assets had a written down values of $368,400 and

$485,000 at the beginning and end of the year respectively. Depreciation for
the year was $48,600. Assets originally costing $35,000, with a carrying value
of $18,100 were sold in the year for $15,000.
What where the additions to non-current assets in the year?
Answer: ___________

2 Why is depreciation charged in the accounts?


A
B
C
D

to charge the cost of non current assets against profits


to make a provision for repairs
to make cash available to replace non current assets when necessary
to show current market values of non current assets

3 At 31 May 2010 the following items have not yet been included in a
companys financial statements:
(1) In June 2010 the company recorded a receipt of $3,000 rent from a tenant
for the three months to 31 May 2010.
(2) The company recorded a payment for $6,000 buildings insurance on 1
December 2009 for the year to 30 November 2010.
(3) The accounts show the company made a loan of $10,000 to an employee,
repayable on 1 June 2010.On the due date, the employee repaid the loan and
paid interest due of $500 on the loan to that date.
What amounts should be recognized in respect of these items in the
companys statement of financial position at 31 May 2010 ?

A
B
C
D

Current Assets
$
13,500
6,500
3,500
16,500

Current Liabilities
$
3,000
nil
3,000
nil

4 After Juliana prepared her draft accounts she discovered that she had
incorrectly classified an item of revenue expenditure as capital expenditure.
When the error is corrected, how will her net profit and capital be
affected?

A
B

Net profit

Capital

increased
reduced

reduced
increased
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C
D

increased
reduced

increased
reduced

5 A business can make a profit and yet have a decreased bank balance.
Which of the following might cause this to happen?
A
B
C
D

The sale of non current assets at a loss


The charging of depreciation in the income statement
The lengthening of the period of credit given to customers
The lengthening of the period of credit taken from suppliers

6 Which of the following best explains why employees are interested in


the financial statement of their employer?
A To compare the business with its competitors in order to decide whether to
seek employment with one of those competitors
B To assess the effect of the business on the local economy, community and
environment
C To assess whether the business will continue into the foreseeable future
D To assess the profitability of the business in order to decide whether to
invest in it
7 Andrews trial balance at 31 October 2010 includes the following balances:
$
Machinery
85,800
Accumulated depreciation on machinery
21,750
Trade receivables
42,650
Receivables allowance
1,570
Bank overdraft
6,470
Inventory at 1 November 2009
21,650
His inventory at 31 October 2010 is valued at $22,300
What value should be reported for current assets in Andrews SOFP at 31
October 2010?
Answer: $__________
8 Kent bought a new printing machine. The cost of the machine was $80,000.
The installation costs were $5,000 and the employees received specific training
on how to use this particular machine, at a cost of $2,000. Before using the
machine to print customers' orders, a test was undertaken which used up paper
and ink costing $1,000.
What should be the cost of the machine in the company's statement of
financial position?
Answer: $_____________

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9 On 1 October 2008 a company purchased machinery for $26 000. It was


decided to depreciate the asset using the reducing balance method at a rate of
20% per annum.
On 30 September 2010 the asset was sold for $12 000. The accounting year
ends on 30 September 2010. Depreciation is provided in the year of disposal.
What is the profit or loss on disposal?
A
B
C
D

$3600 loss
$3600 profit
$4640 loss
$4640 profit

10 At the end of its financial year, Tanner has the following non-current
assets:
Land and buildings at cost
$10,400
Land and buildings: accumulated depreciation $120
The company has decided to revalue its land and buildings at the year
end to $15,000.
What will be the amount of the adjustment on revaluation?
Answer: $_____________

11 Which of the following characteristics contribute to relevance,


according to the IASBs Framework for the Preparation and Presentation
of Financial Statements?
A
B
C
D

Neutrality
Prudence
Completeness
Materiality

12 When he closed his ledger accounts at 30 April 2010 Ryans wages


expense account had a debit balance of $87,963. Ryan also had to make an
accrual of $1,268 for outstanding wages.
What is Ryans opening balance for wages at 1 May 2010?
A
B
C
D

$1,268 debit
$1,268 credit
$87,963 debit
$87,963 credit

13 Which of the following statements is true?


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A The directors of a company are liable for any losses of the company
B A sole trader business is owned by shareholders and operated by the
proprietor
C Partners are liable for losses in a partnership in proportion to their profit
share ratio
D A company is run by directors on behalf of its members
14 At the end of a financial period, a business has the following balances :
$
total receivable balances
10 620
irrecoverable debts not yet written off
260
allowance for receivable brought forward
460
What should the business do if it wishes to maintain the receivables
allowance of 5% of accounts receivable?
A
B
C
D
15
A
B
C
D

decrease the existing allowance by $58


increase the existing allowance by $58
decrease the existing allowance by $71
Increase the existing allowance by $71
What does the going concern principle mean?
a business is profitable
a business will continue to operate for the foreseeable future
the assets of a business exceed its liabilities
the assets of business should be valued at disposal value

16 When a business introduces capital into his business, the transaction is


debited in the Cash Book and credited to his capital account.
Of which accounting principle is this an example?
A
B
C
D

entity
going concern
matching
prudence

17 At 31 December 2009, Tony had accrued $240 in respect of light and heat
for the quarter ending 31 December 2009. In January 2010, he discovered that
he had under-accrued by $10.

The bills for the next four quarters were as follows ( q.e. = quarter ending):
Amount
$260

Relating
q.e.31 March 2010
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Date paid
15 April 2010

$220
$210
$230

q.e.30 June 2010


q.e.30 September 2010
q.e.31 December 2010

17 July 2010
14 October 2010
19 January 2011

Tony always accrues for expenses based on the last bill.


What is the charge to the income statement in respect of light and heat
for the 15-month period ended 31 March 2011?
A
B
C
D

$1,160
$1,150
$930
$920

18 On 1 January 20X8, Wootton has a building in its books at cost


$380,000, net book value $260,000.
On 1 July 20X8, the asset is revalued at $450,000 and Wootton wishes to
include that valuation in its books. Wootton's accounting policy is to
depreciate buildings at 3% straight line.
The depreciation charge to the income statement for the year ended 31
Dec is: $______________

19 You are given the following information on 31 December 2010 by X, a sole


trader.
$
95 000

total purchases for the year


returns inwards

3 000

returns outwards

2 000

inventory withdrawn by X for personal use

5 000

Unsold inventory on 31 December 2010 was valued at $1000 more than on 1


January 2010.
What is the cost of sales?
Answer: __________

20 At 31 May 2011 Lady Gagas trial balance included the following items:

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Inventory at 1 June 2010


Trade receivables
Trade payables
Bank overdraft
Loan due for repayment in 2013

$
23,856
55,742
32,165
5,855
15,000

What is the value of Lady Gagas current liabilities at 31 May 2011?


Answer: __________

21 A property company received cash for rent totaling $838,600 in the year
ended 31 December 2010.
Figures for rent in advance and in arrears at the beginning and end of the year
were:
Rent received in advance
Rent in arrears (all subsequently received)

31 December 2009
$
102,600
42,300

31 December 2010
$
88,700
48,400

What amount should appear in the income statement for the year ended
31 December 2010 for rental income?
Answer: __________

22 Ahmad bought a new car for $12,750. He paid for the new car by taking out
a loan of $8,000 and trading in his old car. The old car originally cost $8,500
and had been depreciated by $4,148 at the time of the trade in.
What is the gain on disposal of the old car?
Answer: __________

23 Which of the following statements regarding non- current asset is


correct?
A
All non non-current assets should be revalued each year.
B
Non current assets may be revalued at the discretion of management.
Once revaluation has occurred it must be repeated regularly for all non-current
assets in a class.
C
Management can choose which non-current assets in a class of noncurrent assets should be revalued.
D
Non-current assets should be revalued to reflect rising prices.

The following information relates to question 24 and 25:

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The total amount owed to Robert by his customers at 30 November 2011 was
$78,600. Robert has decided that a balance of $600 should be written off as it
is irrecoverable, and that, based on past experience, an allowance equal to
1 % of the remaining receivables balance should be made. His receivables
allowance at 1 December 2010 was $1,200.
24 Robert has made the entry in the receivables expense account to write off
the irrecoverable balance.
What other entry does he need to make?
A a debit entry in the sales account
B a credit entry in the sales account
C a debit entry in the receivables account
D a credit entry in the receivables account
25 How should the movement in the receivables allowance be reflected in
the income statement?
A a credit of $21
B a charge of $21
C a credit of $30
D a charge of $30
26 Erin is registered for sales tax. During May, she sells goods with a tax
exclusive price of $600 to Kyle on credit. As Kyle is buying a large quantity of
goods, Erin reduces the price by 5%. She also offers a discount of another 3% if
Kyle pays within 10 days. Kyle does not pay within the 10 days.
If sales tax is charged at 17.5%, what amount should Erin charge on this
transaction?
A

$96.76

$101.85

$99.75

$105.00

27 At 31 May 2010 Daves capital balance was $96,578. During the year to 31
May 2011, his drawings were $25,764. At 31 May 2011 his capital balance was
$104,864.
What was Daves profit for the year to 31 May 2011?
Answer: __________

28 On 23 May 2011, Julie used cash to pay rent on her business premises for
the three months to 31 August 2011 in advance.

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On 23 May, how is Julies accounting equation affected by this


transaction?
Assets
unchanged
unchanged
reduced
reduced

A
B
C
D

Liabilities
unchanged
reduced
unchanged
unchanged

Capital
unchanged
reduced
unchanged
reduced

29 Which of the following assumptions underlie the Framework for the


presentation and preparation of financial statements?
A

Accruals and consistency

Prudence and going concern

Accruals and going concern

Consistency and prudence

30 Which of the following are advantages of historical cost accounting?


1 It maintains financial and physical capital.
2 The statement of financial position shows the value of the business.
3 Reported amounts are objectively verifiable.
4 The profit concept is well understood.
A
B
C
D

3 and 4
1 and 2
1 and 3
2 and 4

31 The plant and equipment account in the records of a company for the year
ended 31 December 2010 is shown below:
2010
1 Jan Balance
1 July Cash

Plant and machinery - cost


$
2010
960,000
30 Sept Transfer disposal account
31 Dec Balance
48,000
1,008,000

$
84,000
924,000
1,008,000

The companys policy is to charge depreciation at 20% per year, with


proportionate depreciation in years of purchase and sale.
What should be the depreciation charge for the year ended 31 December
2010?
Answer: __________

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32 Which of the following characteristics of financial


information contribute to reliability, according to the IASBs
Framework for the Preparation and Presentation of Financial
Statements?
1 Neutrality
2 Prudence
3 Completeness
4 Timeliness
A
B
C
D

1,2 and 3 only


1,2 and 4 only
1,3 and 4 only
2,3 and 4 only

33 The following bank reconciliation statement has been prepared


by an inexperienced book keeper at 31 December 2010.
Bank reconciliation statement
Balance as per bank statement (overdrawn)
Add: Lodgements not credited
Less: unpresented cheques
Balance as per cash book

$
38,640
19,270
57,910
14,260
43,650

What should be the final cash balance be when all the above
items have been properly dealt with?
A $43,650 overdrawn
B $33,630 overdrawn
C $5,110 overdrawn
D $72,170 overdrawn
34 Which of the following statements does NOT explain the distinction
between financial accounts and management accounts?
A Financial accounts are primarily for external users and management
accounts are primarily for internal users
B Financial accounts are normally produced annually and management
accounts are normally produced monthly
C Financial accounts are more accurate than management accounts
D Financial accounts are audited by an external auditor and management
accounts do not normally have an external audit

35 The following items of expenditure take place during the first month of a
transport business.
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Rent
Insurance of building
Insurance of vehicle
Road tax
Purchase of vehicle
Number plate for vehicle
Painting of vehicles in company colours
Wages for lorry driver
Wages for painting vehicle

$
1 000
1 300
350
500
15 000
150
750
100
150

What is the total capital expenditure?


Answer: __________

36 A summary of the transactions of Ramsgate, who is registered for sales tax


at 17.5% shows the following for the month of June 2011.
Sales
Purchases

$60,000 (exclusive of tax)


$40,286 (inclusive of tax)

At the beginning of the period, Ramsgate owed $3,400 to the tax authorities,
and during the period he has paid $2,600 to them.
At the end of the period the amount owing to the tax authorities is:
Answer: __________

37 The following information relates to Minnies hairdressing business in the


year ended 30 June 2011:

Expenses
Opening inventory
Closing inventory
Purchases
Gross profit
Inventory drawings of shampoo

$
7,100
1,500
900
12,950
12,125
75

What is the sales figure for the business?


Answer: __________

38 Which of the following statements is true?


A the income statement illustrates a business financial position.
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B the income statement includes dividends paid


C the income statement illustrates the business financial performance
D the income statement has to show the results of one year.
39 Which one of the following statements is correct?
A The prudence concept requires assets to be understated and liabilities to
be overstated
B To comply with the law, the legal form of a transaction must always be
reflected in financial statements
C If a non-current asset initially recognised at cost is revalued, the surplus
must be credited in the statement of cash flows
D In times of rising prices, the use of historical cost accounting tends to
understate assets and overstate profits

40 Which of the following is correct?


A A debit entry will increase non-current assets.
A debit entry will increase drawings.
A debit entry will increase profit.
B A credit entry will increase a bank overdraft.
A debit entry will increase payables.
A credit entry will increase receivables
C A debit entry will increase profit.
A debit entry will increase receivables
A debit entry will decrease payables.
D A debit entry will increase receivables.
A credit entry will decrease non-current assets
A credit entry will increase profit.
41 The IFRS Advisory Council are responsible for:
(i) issuing guidance in relation to emerging issues
(ii) advising the IASB on major standard-setting projects.
A
B
C
D

1 and 2
1 only
2 only
Neither 1 nor 2

42 A credit balance of $800 brought down on X account in the books of Y


means that
A
B

X owes Y $800
Y owes X $800
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C
D

Y has paid X $800


Y has overpaid X by $800

43 Consider the following statements:


i] Double entry bookkeeping means that two sets of records are maintained.
ii] In double entry bookkeeping we have a basic check on the accuracy of the
entries, as the total value of the debit entries and the total value of the credit
entries should be equal.
Are the statements true or false?
Statement [i]
A
B
C
D

True
True
False
False

Statement [ii]
True
False
True
False

44 Mountain sells goods on credit to Hill. Hill receives a 10% trade discount
from Mountain and a further 5% settlement discount if goods are paid for within
14 days. Hill bought goods with a list price of $200,000 from Mountain. Sales
tax is 17.5%
What amount should be included in Mountains receivables ledger for this
transactions?
Answer: __________

45. Joel occupies part of Natashas business premises. Which entries in


Natashas books record the rent Joel pays her.

A
B
C
D

Debit account
Bank
Bank
Rent Payable
Rent Receivable

Credit account
Rent payable
Rent Receivable
Bank
Bank

46. On 31 December 2009, Quatta, a limited liability company, owned a


building that cost $800,000 on 1 January 2000. It was being depreciated at two
percent per year.
On 1 January 2010 , the building was revalued at $1,000,000. On this date, the
building had a remaining useful life of 40 years.
What is the depreciation charge for the year ended 31 December 2010,
and the revaluation reserve balance at on 1 January 2011?

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A
B
C
D

Depreciation charge
For the year ended 31 December 2010
$
25,000
25,000
20,000
20,000

Revaluation reserve
as at 1 January 2011
$
200,000
360,000
200,000
360,000

47 The following information is available for a sole trader who keeps no


accounting records:
$
Net business assets at 1 July 2010
Net business assets at 30 June 2011

186,000
274,000

During the year ended 30 June 2011:


Cash drawings by proprietor
68,000
Additional cash introduced by proprietor
50,000
Business cash used to buy a car for the proprietors
Wife, who takes no part in the business
20,000
Using this information, what is the traders profit for the year ended 30
June 2011?
Answer: __________

48

Which of the following are incorrect?


Account debited
Account credited
(i)Sold van for cash
Cash
Disposal
(ii)Returned some of
office equipment to Suppliers Ltd
Office equipment
Suppliers Ltd
(iii)Repaid part of loan from
C Charles by cheque
Loan from C Charles
Bank
(iv) Bought machinery on credit
from Betterways Ltd
Betterways Ltd
Machinery
A (ii) and (iv) only
B (iii) and (iv) only
C (ii) and (iii) only
D (i) and (iii) only
49 What is the balance on the following account on 30th April 2011 ?

2011
April 1 Sales
April 14 Sales
April 30 Sales

Liverton
$
2011
205
April 17
360
April 28
180
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Cash
Returns

$
300
50

A
B
C
D

A credit balance of $395


A debit balance of $380
A debit balance of $395
There is a nil balance on the account

50 A company with an accounting date of 31 October carried out a physical check of


inventory on 4 November 2003, leading to an inventory value at cost at this date of
$453,500.
Between 1 November 2003 and 4 November 2003 the following transactions took
place:
1 Goods costing $28,400 were received from suppliers.
2 Goods that had cost $14,580 were sold for $22,000.
3 A customer returned, in good condition, some goods which had been sold to him in
October for $800 and which had cost $500.
4 The company returned goods that had cost $1,480 in October to the supplier, and
received a credit note for them.
The figure that should appear in the company's financial statements at 31
October 2003 for closing inventory, based on this information was
$__________________.

End of questions

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