Index No: ____________________

Seat No: ______

Sri Lanka Institute of Information Technology

B.B.A. (Special) Honours Degree

Mid-Term Examination
Year 1, Semester I (2018)

BM0010 - Accounting

Duration: 1 Hour

March 2018

Instructions to Candidates:
 This paper contains TWO PARTS (PART ‘A’ and PART ‘B’) in SEVEN (07) pages
excluding the cover page.
 PART ‘A’ consists of 20 Multiple Choice Questions; PART ‘B’ consists of written questions.
 Total Marks 40 and contribution for the final grade is 40%.
 Students are allowed to use calculators.
 Please write your answers on the space given.
Part ‘A’- Multiple Choice Questions 1 to 20 (20 Marks -1 Mark Each)
Underline the most preferred answer.
1. Accounting provides information on____________________.
(a) Cost and income for managers
(b) Company’s tax liability for a particular year
(c) Financial situation of an institution
(d) All of the above

2. The long term assets that have no physical existence but are rights that have value is known
as_______________.
(a) Current assets
(b) Fixed assets
(c) Intangible assets
(d) Investments

3. The debts, which are to be repaid within a short period (year or less) are known
as_______________________.
(a) Current liabilities
(b) Fixed liabilities
(c) Contingent liabilities
(d) All of the above

4. Any written evidence in support of a business transaction is called____________________.

(a) Journal
(b) Ledger
(c) Ledger posting
(d) Source Document

5. The accounting process involves in recording:

(a) quantifiable economic events
(b) non quantifiable economic events
(c) both quantifiable and non-quantifiable events
(d) none of them

6. In accounting, an Economic Event is referred to as,

(a) cash
(b) a bank statement
(c) a transaction
(d) an exchange of money

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7. That part of the accounting process which is identified as “Bookkeeping” is ;
(a) Analyzing
(b) Preparing financial statements
(c) Recording financial information
(d) Auditing the books of accounts

8. Management accounting provides financial information primarily to________________.

(a) government agencies
(b) general Public
(c) creditors
(d) managers

9. Keeping the log of financial information in books of original entries is

called____________________.
(a) recording
(b) summarizing
(c) grouping
(d) processing

10. If the total liabilities of a business decrease by Rs.15,000/- what will be the effect on total
asset? (assuming the amount of capital remain same)
(a) Remain constant
(b) Decrease by Rs.15,000/-
(c) Increase by Rs.5000/-
(d) Increase by Rs.10,000/-

11. The statement that does not explain a characteristic of a “Private Limited Company” is;
(a) Liability is limited for amount of capital invested.
(b) Having a separate legal Personality.
(c) Minimum numbers of directors are two.
(d) Not allowed to raise funds by issuing debentures.

12. The basic qualitative characteristics of financial statements are;

(a) understandability, comparability, realistic and reliability.
(b) understandability, completeness, consistency and reliability.
(c) understandability, comparability, relevance and reliability.
(d) understandability, comparability, assurance and reliability.

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13. Which accounting principle/concept states that all information and explanation necessary for
interpretation reports and statements should be conveyed to users?
(a) Consistency Principle.
(b) Historical Cost Principle.
(c) Prudence Concept.
(d) Full Disclosure Principle.

14. Which accounting principle/concept deals with keeping the records of the business separate
from the personal records of the owner of the business?
(a) Matching Principle.
(b) Business Entity Principle.
(c) Historical Cost Principle.
(d) None of the above.

15. Which of the following accounts is NOT a liability account?

(a) Trade Creditors.
(b) Accounts Receivable.
(c) Rent in Arrears.
(d) Accrued Salaries.

16. The matching concept matches which of the following?

(a) Asset with liabilities
(b) Capital with income
(c) Revenues with expenses
(d) Expenses with capital

17. Purchase of machinery for cash;

(a) Increases total assets
(b) Decreases total assets
(c) Keeps total assets unchanged
(d) Increases assets and liabilities

18. Balance Sheet is a statement of;

(a) Assets
(b) Liabilities
(c) Capital
(d) All of these

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19. Gihan owns a business and he purchased goods on cash from his personal funds on behalf of
the business. What is the effect?
(a) Reduce bank, Reduce creditors
(b) Increase cash, No effect on liabilities
(c) Increase stocks, Increase capital
(d) None of the above

20. Expenses paid by a business decrease;

(a) Cash
(b) Capital
(c) Cash and Capital
(d) Capital and accounts payable

Part ‘B’ (20 Marks)

1. State the ‘Form of Business’ that best matches each of the features of the business entity given.

(a) The goals of the organization are always to change or improve a social
issue…………………………………………………………………………………………

(b) This business is treated as a person in the eyes of the law. It can be sued and can sue
people………………………………….................................................................................

(c) The owners are jointly liable for the debts of the business………………………………...

(d) The growth of the business is limited to the owner’s personal wealth and capacity to raise
funds…………………………………………………………………………………
(4 Marks)

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2. Consider the following transaction and show the effect of them on the accounting equation.
Tally the equation after entering all the transactions.

I. Started business with Rs.300,000/- cash

II. Bought stock on credit for Rs.50, 000/- from Lahiru and Rs.20, 000/- from Malki.

III. Returned goods to Malki worth Rs.10, 000/-.

IV. Bought motor vehicle for Rs.700, 000/- paying by cheque.

V. Paid the following expenses by cash: Wages Rs.8, 000/- and Advertising Rs.2, 000/-.

VI. Sold stock on credit to Ravi for Rs.70,000/-

VII. Sent cheque to Lahiru for Rs. 30,000/-.

VIII. Received Rs.40, 000/- cash from Ravi.

IX. Took office equipment worth 5,000/- for personal use.

Please use the table given in the next page for the accounting equation.

(10 Marks)

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 Please use the table given in the next page for the accounting equation.

I.

II.

III.

IV.

V.

VI.

VII.

VIII.

IX.

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(b) Complete the following table.

Account to be Account to be
debited credited
I. Bought equipment on credit from Janith.

II. Malith, a debtor, pays us by cash.

III. Owner’s motor car brought into business use.

IV. Paid to a creditor Sadun.

V. Sold goods to Vikum on credit basis.

VI. Borrowed cash from Perera.

(6 Marks)

End of the Question Paper