LEVEL FOUR: THEORY

CHOICE

1. Which of the following is not part of the accounting process?

a. Recording c. Financial decision making
b. Identifying d. Communicating

2. Internal users of accounting data include:

a. Economic planners c. Customers
b. Investors d. Company officers

3. The monetary unit assumption:

a. Provides that the unit of measure fluctuates over time
b. Is unimportant in applying the cost principles
c. Is only used for financial statements of banks
d. Requires that only transaction data capable of being expressed in terms of money be
included in the accounting records of the economic entity.

4. A proprietorship is a business:
a. Owned by one person
b. Owned by two or more persons
c. Organized as a separate legal entity under state corporation law
d. Owned by a governmental agency

5. A net loss will result during a time period when:

a. Assets exceed liabilities
b. Assets exceed owner’s equity
c. Expenses exceed revenues
d. Revenues exceed expenses

6. A company might carry on many activities that do not represent business transactions such as:
a. Borrowing money from the bank
b. Placing an order for merchandise with a supplier
c. Using office supplies
d. Paying wages

7. Transactions are one type of business events, which may or may not be an accounting entry is:
a. Payment of monthly rent
b. Sale of pizza and burgers to customers
c. Use of paper, pens, and other office supplies
d. Change of interest rate

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 8. Garden Beer Grill located around Bole receives a bill of Birr 400 from the Lion Advertising
Agency. The owner, Elias Maru, is postponing payment of the bill until a later date. The effect
on specific items in the basic accounting equation is:
a. A decrease in cash and an increase in accounts payable
b. A decrease in cash and an increase in Elias Maru, Capital
c. An increase in accounts payable and a decrease in Elias Maru, Capital
d. A decrease in accounts payable and an increase in Elias Maru, Capital

9. The Lion Advertising Company is owned by Olana Peter. Alemitu, the inventory clerk,
indicates that Birr 9,750 of supplies were used during the period. The effect on specific items
in the basic accounting equation is:
a. A decreases in supplies and a decreases in Olana Peter, Capital
b. A decrease in cash and an increase in supplies
c. An increase in accounts payable and a decreases in supplies
d. An increase in supplies payable and a decrease in Olana Peter, Capital

10. Almaz Birara, owner of the Habesh Bar and restaurant, withdraws Birr 5,000 in cash for
personal use. The effect on the specific items in the basic accounting equation is:
a. An increase in accounts receivable and a decrease in Almaz Birara, Capital
b. An increases in salary expense and a decrease in cash
c. An increase in Almaz Birara, Capital and a decrease in cash
d. A decrase in Almaz Birara, Capital and a decrease in cash

11. Abyssinia Coffee Plc purchases Birr 60,000 of coffee from Ethiopian Commodity Exchange
market after availing the required cash in its ECX payee out account. The effect on the
components of the basic accounting equation of Abyssinia Coffee Plc is:
a. An increase in assets and liabilities
b. A decrease in assets and liabilities
c. No change in total assets
d. An increase in assets and a decrease in liabilities

12. The Mohamed and Baubed Company have the following at September 17: Assets birr 13,000;
Liabilities Birr 8,000; and Owner;s Equity Birr 5,000. On September 18, Mohamed and
Baubed Company receive Birr 500 of cash revenue and earn Birr 200 of revenue on credit.
Michael Tekle, the only worker that day, works 8 hours and receives a wage rate of Birr 10 per
hour. Michael will not get paid unitl September 21. No other transactions occur during the day.
At the end of September 18 the new totals are:
Assets Liabilities Owner’s Equity
a. 13,500 7,880 5,620
b. 12,500 8,000 4,500
c. 13,500 8,120 5,380
d. 13,700 8,080 5,620

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 13. As of December 31, 1996, Mohhamed and Baubed Company has liabilities of Birr 5,000 and
owner’s equity of Birr 7,000. It received revenues of Birr 23,000 during the year ended
December 31,1996. What are the assets for Mohammed and Baubed Company as of
Decembwer 31, 1996?
a. Birr 2.000 c. Birr 25,000
b. Birr 12,000 d. Birr 35,000

14. The statement that reports revenues and expenses is the:

a. Statement of owner’s equity
b. Statement of financial position
c. Statement of financial performance
d. Statement of cash flows

15. Dashen bank buys a Birr 1,200,000 VAN on credit. The transaction will affect the:
a. Income statement only
b. Statement of financial position only
c. Income statement and owner’s equity statement only
d. Income statement , owner’s equity statement, and balance sheet

16. The financial statement that summarizes the financial position of a Dashen bank Plc is the :
a. Income statement
b. Balance sheet
c. Operating statement
d. Owner’s equity statement

17. Which of the following would not appear on the Mohammed and Baubed Company balance
sheet?
a. Accounts receivable
b. Mohamed and Baubed, capital
c. Utilities expense
d. Wages payable

18. Give two examples of adjustments made at the end of the accounting period
a. Depreciation expense and accounts payable
b. Provision for loan losses and accounts receivable
c. Current asset and non-current asset
d. Depreciation expense and provision for loan losses
19. What are the three elements which change equity:
a. Income, investments by owner(s) and distribution to owners(s)
b. Depreciation expense, accumulated depreciation and provision for loan losses
c. Investments by owner(s), long term liability and interest bearing deposits
d. Distribution to owner(s), interest income, current loans and cash

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 20. How should an accountant convert a previous sale on account to a note receivable?
a. Debit accounts receivable and credit owner’s equity
b. Debit accounts receivable and credit accounts payable
c. Debit notes receivable and credit accounts receivable
d. Debit notes receivable and credit notes payable

21. A company has decided to buy an expensive piece of equipment. The company can either pay
for it in full at the current time or with equal yearly payments over ten years. Which of the
following factors is most important to consider in making the decision about how to pay for the
equipment?
a. Standard cost and compounding rate
b. Amortization cost and annuity value
c. Leasing cost and assets valuation
d. Opportunity cost and interest rate

22. One of the following is an element that helps managers make decisions in a legal context.
a. Identifying compliance requirements
b. Financial auditing
c. Scheduling and planning
d. Technical requirements

23. The pervasive formula of accounting i.e. A=L+C is mainly shown in one of the following
financial statements
a. Cash flow statement
b. Capital statement
c. Income statement
d. Balance sheet

24. Even though a company is under taking a computerized accounting systems, the possible
accounting cycle which still needs the manual intervention of an accountant is
a. Classifying
b. Summarizing
c. Identifying and recording
d. Analyzing

25. DEK CO, a VAT registered company purchased construction materials and delivered services
for birr 500,000 and 600,000 respectively including VAT in the month of June 2005. The
amount of VAT and month of payment with no penalty is:
a. VAT payable 13,043.50, during July 2005
b. VAT receivable 13,043.50, during July 2005
c. VAT payable 15,000.50, during July 2005
d. VAT receivable 15,000.50, during June 2005

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 26. Wakjira Hagos has been paying monthly income tax birr 1,234.85 to the tax office. His
monthly pension contribution that has been deducted from his basic salary is 26.34% of his
monthly income tax. Using the current pension proclamation (i.e. 6 and 8), what is Wakjira’s
monthly Net Pay? (Assume no overtime and other taxable allowances).
a. 5,421.00 c. 3,860.89
b. 4,215.89 d. 1,897.35

27. The overstatement of ending inventory in the financial statements results in

a. Overstatement of net income, understatement of CGS, and understatement of profit tax.
b. Understatement of net income, overstatement of CGS, and understatement of profit tax.
c. Overstatement of net income, understatement of CGS, and overstatement of profit tax.
d. Overstatement of net income, overstatement of CGS, and understatement of profit tax.

28. Abay Merchandising received in advance cash of birr 700,000.00 from its customer and
recorded it as an income. At the end of the fiscal year, birr 95,000.00 is being earned. The
adjusting entry will be:
a. Debit income and credit unearned revenue by birr 95,000.00
b. Credit income and debit unearned revenue by birr 95,000.00
c. Credit income and debit unearned revenue by birr 605,000.00
d. Debit income and credit unearned revenue by birr 605,000.00

29. Jalud merchandising company has receipts of 2% tax withheld by different legitimate
companies at the time of business transaction which add upto birr 49,000.00 at the end of the
fiscal year 2005. At the same time, the company announces profit before tax of birr
220,000.00. Given 30% of business tax rate, what is the amount of profit tax expected to be
paid by the company?
a. 66,000.00 c. 49,000.00
b. 17,000.00 d. 115,000.00

30. Employees at same level pay equal amount of tax. It is principles of tax.
a. Horizontal equity
b. Vertical equity
c. Simplicity
d. Convenience

31. The banker accountant credited the customer account in error and in preparing bank
reconciliation the error could be adjusted by:
a. Adding to depositor balance
b. Deducting to depositor balance
c. Adding to bank balance
d. Deducting to bank balance

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 32. The process of implementing tasks for small/medium business operation is:
a. Identifying daily work requirements
b. Starting a new designed task
c. Developed effective work habits
d. Evaluate work performance

33. The use of accounting software’s is not:

a. Increase speed
b. Increase source documents
c. Increase accuracy
d. Decrease time of manual processing

34. The sales person of a drug store maintains petty cash of birr 14,000.00. Payment documents of
sales person found to be birr 11,000 utilities, birr 2,000 postage, birr 150 taxi, birr 550 loading
and unloading and birr 350 in currencies. Which one is correct to the sales person.
a. Petty cash can be replenished at birr 13,650.00
b. Petty cash can be replenished at birr 13,500.00
c. A cash overage of birr 150.00
d. A cash shortage of birr 50.00

35. Cash received but not earned is an example of

a. Cash accounting c. Accrued revenue
b. Accruals d. Deferrals

36. Financial institutions should be monitored by:

a. Commercial bank c. Ministry of finance
b. National bank d. Industry minister

37. Breakthrough improvement processes is

a. Review systems for compatibility only
b. Explore opportunities which happened in the past
c. Develop and refine systems for improvement in operations
d. Set parameters of past external improvement

38. Monitor planned work activities is

a. Planning steps that require the comparison of implemented activities with the planned
objectives
b. Plan and schedule activities
c. Setting objectives
d. Implement planned activities

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 39. Financial budget that helps to finance the project
a. Sales budget
b. Cash forecast budget
c. Production budget
d. Materials usage budget

40. Costs are traced or allocated to the product is

a. Cost accumulation
b. Cost allocation
c. Cost assignment
d. Cost allocation base

41. Inventory cost method used for estimating ending inventory at fire loss:
a. Weighted average method
b. Gross profit method
c. Retail method
d. FIFO

42. The accounting clerk of Zemen Bank record the withdrawal of birr 30,000.00 to by a customer
from saving account as a collection from the customer for settlement of Mortgage. The entry to
correct the recording should be:
a. Debit mortgage receivable and customer account by 30,000.00
b. Credit mortgage receivable and debit the balance of customer account by 60,000.00
c. Debit customers account and credit cash by 30,000.00
d. Debit customers account and credit cash by 60,000.00

43. Which one of the following items represents Deferral?

A. Prepaid insurance C. Wages Payable
B. Fees Earned D. Accumulated Deprecation

44. The Policies Procedures used by management to protect asset for accurate Business
Information and ensure compliance with laws are called
A. System Design C. System Analysis
B. Internals control D. System Implementation

45. A payment of cash for purchase of services should be recorded on:

A. Purchase journal C. Cash Receipt Journal
B. Revenue journal D. Cash Payments
46. When there are a large number of Individual accounts with a common to please them in
separate ledger called
A. Creditor ledger C. Subsidiary ledger
B. Account Payable ledger D. Account Receivable ledger

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 47. Is sold on account to a customer for Br 1,000 1/10, n/30 the amount of the discount for early
payment would be
A. Br 0 B. Br 10 C. Br 5 D. Br 100

48. Which of the following is a not characteristic of a partnership?

A. Double taxation C. Co-ownership of property
B. Mutual agency D. Limited life

49. the matching principal states that

A. Revenue should be reported when cash is collected
B. Revenue should be reported when service are provided
C. Expense should be reported in the period in which contributed
D. Expense should be reported when they paid in cash

50. A net loss will result during a time period when

A. Asset exceed liabilities
B. Asset exceed owners’ equity
C. Expense exceed revenue
D. Notes receivables & credit accounts receivables

51. Which one the following would not appear on company’s balance sheet
A. Accumulated depreciation C. Owners’ equity
B. Utilities expense D. A Large payable

52. An inventory system that record as all increases &decreases merchandise inventory account is
known as:
A. A perpetual inventory system C. A periodic inventory system
B. FIFO inventory system D. LIFO inventory system

53. Cost of equipment Br 150,000, use full life 5 years, salvage values 10,000. Compute the annual
depreciation using line method
A. 28,000 B. 14,000 C. 10,000 D. 13,000

54. An allowance given to an employee to company safe for inconvenient circumstance

A. Desert allowance C, Hardship allowance
B. Position allowance D, House allowance

55. A process costing system is used by an company that

A. produce heterogeneous product
B. produce items special request of customer
C. Accumulates cost by job
D. produce homogeneous product

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 56. Business income tax at 30% rate is not paid by
A. Share company/corporation C. Private limited company
B. public enterprise D. Category “C” tax payers

57. If the beginning inventory was Br 120,000 cost of merchandise purchase was Br 180,000 &
ending inventory was Br 140,000 How much will be the cost of goods sold?
A. 160,000 B, 150,000 C, 120,000 D, 180,000

58. Which of the following is not a base for categories o tax payers as categories C?
A. Annual turnover/ Sales C. Natural of operation
B. Legal Personality D. All are basis for categorization of taxpayers

59. the advantages of a partnership as compared to corporation do not include

A. Ease of formation C. Freedom from Gov’t Regulation
B. Unlimited liability D. Ease of decisions

60. in a job order cost system manufacturing overhand applied would be record to
A. Finished goods inventory C. Cost of goods sold
B. Work in process inventory D. Manufacturing over head

61. Which of the following is not an example of intangible asset?

a. Franchise
b. Goodwill
c. Patents
d. Land

62. Goods of 1,000 purchased from Mr. A were recorded in sale book. The rectification of this
error will:
a. Increase in the gross profit
b. Reduce the gross profit
c. Have no effect on gross profit
d. None of the given options

63. Which of the following item must be recorded in the unadjusted cash book of the depositor in
order to bring it in line with the adjusted cash balance?
a. Bank charge
b. An error on the bank statement
c. Uncredited deposit
d. Un presented cheque

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 64. It is supposed that on 31st December, 2007 the sundry debtors are amounted to birr 40,000 on
the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful.
Beginning balance of allowance for doubtful accounts was birr 1,600. What amount of new
provision for doubtful debts will be credited in the allowance account?
a. Birr 4,599
b. Birr 340
c. Birr 2,400
d. Birr 1,500

65. Which of the following is an example of operating expense?

a. Purchasing operation equipment
b. Purchasing a vehicle
c. Purchasing cleaning services
d. Buying a computer

66. The balance sheet reported a beginning balance of birr 20,000 in accounts receivable and an
ending balance of birr 15,000 credit sales of birr 20,000 were made during the year. Using this
information, compute cash collected from customers:
a. Birr 205,000
b. Birr 195,000
c. Birr 200,000
d. Birr 15,000

67. What is a business called that sells goods that it purchases for resale?
a. Service business
b. Manufacturing business
c. Partnership business
d. Merchandising business

68. What is the primary purpose of a sales journal?

a. Makes work for the account
b. Shows the company the purchase made last month
c. Shows the individual accounts of all customers
d. Saves time in posting and it

69. Which of the following entry will be recorded if cheque deposited is dishonored by bank
a. Bank account (Dr) and debtors account (Cr)
b. Debtors account (Dr) and bank account (Cr)
c. Creditors account (Dr) and bank account (Cr)
d. Creditors account (Dr) and bank account (Cr)

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 70. Which of the following is not a financial statement?
a. Audit report
b. Balance sheet
c. Income statement
d. Cash flow statement

71. Which of the following accounting will be credited in the books of XYZ Company if the
business purchased a vehicle through cheque?
a. Vehicle account
b. Business account
c. Debtors account
d. Bank account

72. Documentary evidence in a specific format used to record the data details of transaction is
known as:
a. Account
b. Voucher
c. Journal
d. Ledger

73. Which of the following account balance account will be shown on debit of trial balance (it is
assumed that all account balance are shown on normal balance?
a. Capital account
b. Sundry account
c. Accounts payable account
d. Cash account

74. The amount of salary pay to Mr Sahili should be debited to:

a. Mr Sahili account
b. Cash account
c. Expense account
d. Drawing account

75. Which of the following is correct about the flow of recording a transaction?
a. Accuracy of event  voucher  journal ledger  trial balance  profit and loss
statement  balance sheet.
b. Accuracy of event  journal  voucher ledger  trial balance  profit and loss
statement  balance sheet.
c. Accuracy of event  ledger  voucher  journal  trial balance  profit and loss
statement  balance sheet.
d. Accuracy of event  trial balance  voucher  journal  ledger  profit and loss
statement  balance sheet.

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 76. This account does not appear on the income statement
a. Accumulated depreciation
b. Depreciation expense
c. Sales expense
d. Marketing expense
e. Interest expense

77. Providing services on account for Birr 40,000 would?

a. Increase cash Birr 40,000 and decrease account receivable Birr 40,000
b. Decrease account receivable Birr 40,000 and decrease owner’s equity Birr 40,000
c. Increase account receivable Birr 40,000 and increase owner’s equity Birr 40,000
d. Increase account receivable Birr 40,000 and decrease owner’s equity Birr 40,000.

78. Which of the following transaction require a compound journal entry?

a. An owner invested personal cash on his or her business.
b. Purchase of Birr 100 of supplies same cash and the rest on account.
c. Purchase three kinds of supplies for cash
d. Received cash from customers as payment for service

79. One of the following loans is an expense of adjusting entry for deferred items?
a. Expense to asset
b. Revenue to liability
c. Asset to expense
d. Liability to expense

80. From income statement sales revenue is Birr 650,000 the gross margin is 20%, what is the cost
of goods sold?
a. Birr 650,000
b. Birr 260,000
c. Birr 130,000
d. Birr 520,000

81. Industry and legislative requirements may not cover:

a) Industry code of practice
b) Illegitimate disbursement
c) Accounting standards
d) Relevant financing laws
82. Directly shown in the income statement is:
a) direct cost
b) direct labor cost
c) selling expenses
d) factory over heed cost

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 83. Deducted from the balance according to the depositors balance:
a) deposit in transit
b) non-sufficient fund
c) outstanding checks
d) notes collected by the banks

84. How should an accountant convert a previous sale on account to a note receivable?
a) debit account receivable & credit account payable
b) debit notes receivable & credit notes payable
c) debit notes receivable &credit account receivable
d) debit account receivable & credit owners equity

85. The statement that reports revenues and expenses is the:

a) statement of owners equity
b) statement of cash flows
c) statement of financial performance
d) statement of financial position

86. ABC Inc. sold a piece of equipment for birr 50,000. The equipment originally cost birr 100,000
& the accumulated depreciation on the equipment amounted to birr 60,000. The
company should recognize:
a) Again of birr 50,000
b) Again of birr 10,000
c) Again of birr 60,000
d) No gain or loss

87. Internal users of accounting data including:

a) Investors
b) Customers
c) Economic planners
d) Company officers

88. Which of the following is not part of the accounting process?

a) financial decision making
b) identifying
c) recording
d) communicating
89. An account does not closed to income summary account at the end of period:
a) salary expense
b) supplies expense
c) liability
d) revenue

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 90. What are the three elements which change equity?
a) distribution to owner (s) interest income, current loans & cash
b) income, investments by owners (s) and distribution to owners (s)
c) investments by owners (s) long term liability and interest bearing deposits
d) depreciation expense, accumulated depreciation & provision for loan losses

91. Dashen bank buys a birr 1,200,000 Van on credit the transaction will affect the:
a) income statement only
b) statement of financial position only
c) income statement & owner’s equity statement only
d) income statement, owner’s equity statement & balance sheet

92. The receipt of cash from customers in payment of their accounts would be recorded by:
a) A debit to account payable and a credit to cash
b) A debit to cash & a credit to account payable
c) A debit to cash & a credit to account receivable
d) A debit to account receivable & a credit to cash

93. Almaz Birara owner of the Habesha Bar & Restaurant withdraws birr 5,000 on cash for
personal use. The effect on the specific items in the basic accounting equation is:
a) An increases in account receivable & a decrease in Almaz Birara capital
b) An increase in salary expense and a decrease in cash
c) A decrease in Almaz Birara capital and a decrease in cash
d) An increase in Almaz Birara capital & a decrease in cash

94. The Mohamed & Baunbed company has the following at September 17: Assets birr 13,000;
liabilities birr 8,000 and owner equity birr 5,000. On September 18, Mohamed & Baunbed
company receives birr 500 of cash revenue and earns birr 200 of revenue on credit. Michael
Tekle, the only workers that day works 8 hours & receives a wages rate of birr 10 per hour.
Micheal will not get paid until September 21. No other transaction occur during the
day.At the end of September 18, the new totals are:
a) Assets, liabilities, owners equity birr 13700 birr 8080 birr 5620
b) Assets, liabilities, owners equity birr 13500 birr 8120 birr 5380
c) Assets, liabilities, owners equity birr 12500 birr 8000 birr 4500
d) Assets, liabilities, owners equity birr 13500 birr 7880 birr 5620

95. The monetary unit assumption:

a) is only used for financial statement of banks
b) is unimportant in applying the cost principle
c) Provides that the unit of measure fluctuates over time
d) Require that only transaction data capable of being expressed in terms of money
be included in the accounting records of the economic entity

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 96. One of the following provides objective evidence for the occurrence of a transaction
a. Account
b. Journal
c. Source document
d. Work sheet

97. The process of transferring debit and credit entries to the ledger accounts
a. Adjusting
b. Correcting
c. Journalizing
d. Posting

98. An account that is nominal or temporary

a. Chala’s drawings
b. Paid in capital in excess of par value
c. Retained earning
d. Unearned rent income

99. The meaning of the credit term 2/10, n/30 for sale of merchandise inventory is:
a. An invoice to be paid within 10 days or at the end of 30 days
b. An invoice paid within 10 days the accountant considers a 2% discount
c. An invoice may be paid Net of 2 % discount by the end of month of sale
d. An invoice is subjected to discount regardless of date of payment

100. One of the following is a supporting statement for merchandising enterprise

a. Balance sheet
b. Income statement
c. Retained earnings statement
d. Schedule of accounts receivable and account payable

101. Generally accepted accounting principles call for recognition of expense when
a. Incurred and collected in cash
b. Incurred regardless of time of the related cash payment
c. Goods and services are purchased
d. Paid in cash regardless of the time expenses are incurred

102. Financial statements prepared in between the fiscal period is known as

a. Annual financial statements
b. Fiscal-year financial statements
c. Interim financial statements
d. Year-end financial statements

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 103. One of the following financial statements is prepared on a specific date of a business entity
a. Balance sheet
b. Capital statements
c. Retained earnings
d. Statement of profit and loss

104. An inventory system that continuously discloses the cost of inventory on hand and cost of
inventory sold is:
a. First-in first-out inventory costing system
b. Periodic inventory system
c. Perpetual inventory system
d. Physical inventory system

105. A depreciation method acceptable by the Ethiopian income tax law for business
organization
a. Double declining balance
b. Straight line
c. Sum-of-the-years’ digits
d. Unit of production

106. If original cost salvage value and accumulated depreciation balance of office equipment
after adjustment are birr 20,000 birr 4,000 and birr 12,000 respectively the book value of the
office equipment is :
a. Birr 10,000
b. Birr 8,000
c. Birr 7,000
d. Birr 5,000

The following information is taken from the accounting records of almaz company immediately before
accounts of the company are adjusted
Accounts receivable birr 40,000
Allowance for uncollectible accounts (credit) 200
Percentage of uncollectible 3%
107. Which of the following statement s is correct , if uncollectable is estimated based on year
end accounts receivable balance
A. Account receivable is birr 38,800 after adjustment
B. Allowance for uncollectible accounts is birr 1000 after adjustment
C. Net realizable value of account receivable is birr 38,800 after adjustment
D. Uncollectible accounts expense is birr 1,400

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 108. The balance of allowance for uncollectible accounts after adjustment is :
a. Br. 200
b. Br. 1,200
c. Br. 1,400
d. Br. 38,800

109. Temporary (or casual ) employees salary are NOT affected by

a. Income tax deductions
b. Overtime earnings
c. Pension contribution deduction
d. Voluntary deduction

110. One of the following is NOT a benefit of applying computer based accounting system
A. Enhance accuracy in recording transaction
B. Increase the need for source documents
C. Minimizes errors in recording and reporting transactions
D. Saves time for posting entries

111. Profit and loss of partnership business is allocated to partners

a. According to their respective capital balances
b. According to the time they spend in the business
c. At agreed rates states on the articles of partnerships
d. Equally

112. One of the following is NOT the rights of common stockholders

a. Share equally in any assets remaining at the end of liquidation
b. The basic owner of corporate assets
c. The right to share in company profit
d. Voting right on company affairs

113.What is the breakeven sales quantity if total fixed cost is birr 10,000 while the units selling
price and variable costs are birr 15 and birr 10 respectively?
a. 667 units
b. 1,000 units
c. 2,000 units
d. 10,000 units
114. According to the Ethiopian employment income tax rules and regulations the following
items are NOT exempted from income tax
a. Contribution to retirement fund plan not exceeding 15 % basic salary
b. Over time earnings
c. Reimbursement for medical costs incurred
d. Transaction allowance not exceeding birr 800

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 115. A type of proprietary fund use to account for the operation of a government unit in a
manner similar to business organization is.
a. Enterprise fund
b. Expenditure trust fund
c. International service fund
d. Non expenditure trust fund

116. If beginning inventory was birr 120,000, cost of merchandise was birr 180,000, and
ending inventory was birr 140,000, how much will be cost of goods sold?
a. 160,000 c. 120,000
b. 150,000 d. 180,000

117. Which of the following is not a base fro categorization of tax payers as category ‘C’?
a. Annual turnover/Sales
b. Legal personality
c. Nature of operations
d. All

118. The advantages of a partnership as compared to corporation do not include:

a. Ease of formation
b. Unlimited liability
c. Freedom from government regulation
d. Ease of decision making

119. In a job order cost system, manufacturing overhead applied would be record to:
a. Finished goods inventory
b. Work in process inventory
c. Cost of goods sold
d. Manufacturing overhead

120. Cost of equipment birr 150,000 uses full life 5 years salvage value 10,000 annual
depreciation using straight line method
a. 28,000 B. 14,000 C. 10,000 D. 13,000

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 Matching 1

A B

1. Quality A. Policies and procedures in place

2. Recorded as an asset or as an expense B. Used to upload data
3. Conversion costs C. Segregation of duties
4. Internal control D. Budget
5. Account payables and accounts receivable E. For External users and GAAP based
6. Work schedules F. Gap between existing and required skill
7. Accrued revenue G. Date of actual events for accounting
8. Spreadsheet H. More Risks and cost supposed by the supplier
9. Training need assessment I. Performance evaluation
10. Financial accounting J. Prime costs
11. FOB destination K. Increases with units produced
12. Real time transaction L. Activities assigned to workforce and
machines with its completion time
13. Financial plan M. Prior claim of creditors
14. Fixed cost per unit N. FOB shipping
15. Compliance audit O. Decreases with units produced
P. Meeting or exceeding customers’ needs
Q. Retirement payments
R. Prepayments
S. Balance sheet accounts used in accruals
T. Direct labor and overhead costs
U. Residual claim of share holders
V. Disclaimer audit opinion
W. Rent/interest receivables

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 Matching 2
Column A Column B
1. Excise Tax a. Appropriations
2. Unqualified audit opinion b. Bank service charge
3. Government Fund c. Capital project fund
4. Acquisition of goods and services by a d. Direct labor and overhead costs
governmental fund entity e. Financial statements presented fairly
5. Organization cost f. Group A tax payers
6. Submit income statement and balance sheet g. Group B tax payers
to tax authority h. Indirect tax
7. Cumulative preferred shareholders i. Intangible asset
8. Home office and branch office j. Internal control system
9. Bank debit memo k. Job order costing
10. Production of voluminous similar products l. NSF Fund
11. Segregation of duty m. Process costing
12. Source of finance for the state n. Product pricing decision
13. Management accounting o. Purchase order report
14. Quantity ordered, received, and remaining p. Reciprocal accounts
15. Conversion manufacturing costs q. Tax, loan, and donation
r. The right to take dividend in arrears

Matching 3
Column A
1. The gross increases in owner’s equity resulting from business activities
2. Requires that only transaction data capable of being expressed in terms of money be included in
the accounting records of the economic entity.
3. Summarizes the changes in owner’s equity for a specific period of time.
4. Reports the assets, liabilities, and owner’s equity of a business enterprise at a specific date.
5. States that economic event can be identified with a particular unit of accountability.
6. Statement of Financial Performance
7. States that economic event can be identified with a particular unit of accountability.
8. Resources owned by the business.
9. The process of identifying, recording, and communicating the economic information of an
organization to interested users.
10. Economic events of the enterprise recorded by accountants.
11. Costs of assets consumed or services used in the process of earning revenue.
12. Creditor ship claims on total assets
13. A common set of rules, procedures, and guidelines (standards) used by accountants in reporting
economic events.
14. Business events, which may or may not necessitate an accounting entry.
15. States those assets should be recorded at their cost.

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Column B
A. Transactions
B. Accounting
C. Revenues
D. Assets
E. Statement of financial positions
F. IFRS(International Financial reporting Standard)
G. Expenses
H. Liabilities
I. Owner’s equity
J. Owner’s equity statement
K. Monetary unit assumption
L. Economic entity assumption
M. Ownership claim on total assets
N. Cost principle
O. Presents the revenues and expenses and net income of company for specific period of time
P. Return on investment
Q. Financial statement
R. Balance

Matching 4

1. Increases in owner’s equity A. Partnership agreement

2. Decreases in owner’s equity B. Input VAT
3. Separating financial information in put periodic C. Economic entity assumptions
4. Indicated that personal and business record D. Budget officer
keeping should be separately maintained E. Periodicity assumption
5. External users of accounting information F. Partnership
6. Internal users of accounting information G. Unlimited liability
7. Original cost minus salvage value H. Suppliers
8. Original cost minus accumulation depreciation I. Sole proprietor ship
9. Disadvantage of partnership J. Sustaining
10. Articles of partnership K. Book value
11. Maintained & reviewing standards L. Expense
12. Business owned by two or more persons M. Revenue
13. Business owned by one person N. Deprecation Cost
14. VAT paid on purchase of goods & service O. Market Value
15. VAT collected from sales of goods & services P. Limited Liability
Q. Output VAT

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 Matching 5

1. Expense paid in advance for futures A. accrued expense

2. Profit distributed to owners of corporation B. Retained earnings
3. Summarize the changes in owners’ C. Dividend
equity for specific period of time D. Capital
4. Requires that only transaction data capable of being E. Expense
expressed interims of money be included in the account F. Accrued Revenue
records of the economic entities G. Economic Entity assumption
5. Cost of assets consumed or used in H. Statement Financial Position
the process of earning revenues I. Journalize
6. The process of recording transaction J. Posting
in the book of original entry K. Patent
7. Intangible asset L. Monetary Unit Assumptions
8. Direct tax M. Land
9. Prime cost N. Deferred Expenses
10. Revenue earned but not yet collected and recorded O. VAT
11. Depreciation P. Income tax
12. Interest Q. Deferred Revenue
13. Asset & liability of Z business should be recorded R. Direct Material & Direct Labor costs
separately from Z personal asset & liability of Z owners S. Direct labor &MOH costs
14. Entries required after end of the accounting period T. Fixed asset
to update the balance sum accounts U. Merchandise Inventory
15. Items held to be sold to customers V. Cost of capital
W. Adjusting
X. Closing

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 Matching 6

A B

1. Advantages of direct tax A. Cash flow statement

2. Equality of debit and credit B. Ledger
3. Each record in a journal C. Deposit in transit
4. Added bank balance D. Sales tax
5. Summary of cash receipt and payments E. Journal
6. Normal balance for asset account F. Debit
7. Book of secondary entry G. Equitable
8. List of account in the ledger H. Special Journal
9. For relatively small amount of expense I. Uncertainty
10. Book of original entry J. Property Tax
11. Indirect tax K. Trial balance
12. End of accounting process L. Chart of Accounts
13. Direct tax M. Entry
14. Disadvantages of indirect tax N. Post-closing trial balance
15. Record only one type of transaction O. Petty cash
P. Income statement
Q. Outstanding checks

Matching 7
B
A. Transaction
B. Accounting
C. Revenues
D. Assets
E. Statement of financial position
F. IFRS(International Financial Reporting Standards)
G. Expense
H. Liabilities
I. Owners equity
J. Owners equity statement
K. Monetary unit assumption
L. Economic entity assumption
M. Ownership claim on total asset
N. Cost principle
O. Presents revenues & expense and net income of a Company for specific period of time
P. Return on Investment
Q. Financial statement

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 R. Balance

A
1. Statement of Financial Performance.
2. Reports the assets, liabilities, and owner’s equity of a business enterprise at a specific date.
3. Business events, which may or may not necessitate an accounting entity.
4. The gross increases in owner’s equity resulting from business activities entered into for the
purpose of earning income.

Matching 8
B
A. Management accounting
B. Prime cost
C. Creation of inflation
D. Entry
E. Respect from hazards
F. Using active listening
G. Sales budget
H. Product costs
I. Variable costs
J. Excise tax
K. Questionnaires
L. Notes receivable
M. Financial accounting
N. Fixed costs
O. Expense
P. Indirect tax
Q. Balance sheet
R. Accuracy
S. Quality statistics
A
1. Safety procedures
2. Demerit of indirect tax
3. Provides financial and non-financial information

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