TUTORIAL: CLASS EXERCISE – 20102022

PART A

State whether each of the following statements is True or False.

1. The purpose of accounting is to analyse and interpret the business transactions to help
users in making decision.
2. Among of the characteristics of Kasih Sdn. Bhd, it has limited liability and no legal
obligation to audit the accounts.
3. Potential investors are considered as internal users of accounting information.
4. Pre-adjusted trial balance is prepared at the end of the financial year after adjustments
is made to determine the financial performance of a business.
5. Financial information is defined as relevance when it is capable of making a difference
in the decisions made by users.
6. Neutrality is one of the enhancing characteristics of accounting information.
7. Financial information is verifiable when it gives assurance that the information faithfully
represents the economic phenomena being represented.
8. In a partnership, each partner is responsible for another partner’s wrongdoing or
carelessness.
9. External users of accounting information can be defined as those who use the
information to run the business on a day-to-day basis and for making business
decisions.
10. The accruals concept states that expenses must be recorded when it is paid and
revenue when it is received.
11. Going concern concept states that a business will not continue to operate in the
foreseeable future if it suffers from losses.

PART B

Choose the most suitable answer.

1. _______ process explains sorting out the mass of accounting data into orderly and
meaningful categories
A. Summarizing
B. Interpreting
C. Classifying
D. Recording

2. Which of the following users require financial statement as guideline to evaluate the
organisation’s ability to pay wages and other benefits?
A. Owners
B. Creditors
C. Government
D. Employees

3. ___________ users require financial statement as guideline to evaluate the organization

financial position whether it is a good investment or not.
A. Public
B. Investors
C. Managers
D. Owners
4. Sole proprietorship business owners have _______
A. Unlimited liability
B. No liability
C. Limited liability
D. Restricted liability

5. The underlying theme of the conceptual framework is ________

A. Decision usefulness
B. Understandability
C. Reliability
D. Comparability

6. Information provided by financial statements need to be capable of being

understandable by users. Having a reasonable knowledge of business and economic
activities and accounting and a willingness to study with reasonable diligence the
information provided. Which qualitative characteristic is appropriate based on the above
information?
A. Comparability
B. Verifiability
C. Timeliness
D. Understandability

7. Ertugrul owns a Café selling Turkish Coffee in Malaysia. He recorded his business
transactions in Ringgit Malaysia (RM) and he also includes all the information which
might affect decision making in his accounting records. Which accounting concept
applied to the above scenario?
A. Money measurement concept
B. Accrual concept
C. Going concern concept
D. Comparability concept

8. Irham runs a business selling computer hardware and software as a sloe proprietorship
business. In the current year, he has withdrawn RM3,000 from the business bank
account to pay for his own personal travelling expenses. The amount was charged
against the business profit. Which accounting concept that Irham has violated?
A. Going concern concept
B. Historical cost concept
C. Economic entity concept
D. Money measurement concept

9. The term “Accounting” can be best defined as:

A. a business plan.
B. a method of recording business transactions.
C. a document that reports on an organisation’s financial position.
D. a system that measures business activities, processes financial information into
reports and communicates the findings.

10. A starting point in the accounting process requires a business entity to:
A. identify the economic events relevant to its business.
B. identify the monetary value.
C. identify the amount of net profit.
D. identify the financial results.
11. Which of the following is NOT the purpose of accounting?
A. To provide financial information to the users.
B. To be used as a tool for performance evaluation.
C. To increase the wealth of the users.
D. To assist management in controlling the business

12. The following statements about a sole proprietorship is true EXCEPT

A. The business is registered under the Business Registration Act 1957.
B. The owners are between 1 to 20 persons.
C. The financial records are not required to be published.
D. The owner is personally liable for business debts.

13. The following statements are not true EXCEPT

A. Financial statements are solely to be used by the owner of the business.
B. Sole proprietorship has the advantage of limited liability.
C. For public companies, financial statements are important to attract potential investors.
D. Partnership is governed by the Partnership Act 1965.

14. The following statements about users of accounting information are correct EXCEPT
________________.
A. tax authorities are considered as external users
B. present creditors are considered as external users
C. the management is considered as an internal user
D. regulatory authorities are considered as internal users

15. Accounting identifies, records and communicates the economic events of an

organization to interested users of the information such as:
A. managers and employees
B. investors and the general public
C. suppliers and financial institutions
D. all of the above

16. The following statements are true with regard to the characteristics of business entities
EXCEPT for:
A. Sole proprietorship is governed by the Companies Act 2016.
B. Profits or losses will be shared based on a profit sharing ratio under a partnership.
C. A company will issue shares in order to obtain additional capital.
D. A company will distribute its profits in the form of dividends

17. Based on the going concern concept, accountants ____________________.

A. assume that the business will be profitable for the foreseeable future
B. assume that the company is planning to sell its assets as part of going out of business
C. are required to have dealings only with companies that are not currently in danger of
bankruptcy
D. assume that the business will continue operating for the foreseeable future

18. The followings are transactions that follow monetary unit assumption EXCEPT
_________________.
A. businessman purchase a machine costing RM8,000 to be used in his business
B. a customer returned goods costing RM280 previously sold to him
C. a business received a monthly bank statement from Bank Teguh
D. a business owner withdraws RM500 from the business bank account to pay for his
private expenses
19. The following statements are false EXCEPT for:
A. Fair value principle states that assets and liabilities should be recorded at their costs.
B. Neutrality states that information reported must completely reflect the true picture of
an entity.
C. Going concern assumes that an entity will continue to generate profit for the
foreseeable future.
D. Business entity concept states that the business and the owner of the business are
the same entity.

20. Accounting policy or method once adopted should be followed in the subsequent periods
to allow comparison to be made, is based on the __________ concept.
A. Materiality
B. Consistency
C. Accrual accounting
D. Business entity

21. "For accounting purpose, the proprietor of enterprise is always considered to be

separated and distinct from the business which he or she controls or owns". From the
following accounting concepts, which concept refers to the above statement?
A. Going Concern concept
B. Money Measurement concept
C. Historical Cost concept
D. Business entity concept

22. Which accounting concept suits the statement below?

“The equipment bought by the business three (3) years ago will still reflect the same
value in the business book of accounts”.
A. Fair value concept
B. Neutrality concept
C. Historical cost concept
D. Consistency concept

23. K&M Trading recognized sales in the accounting records when the goods are transferred
to the customer. This is in line with ___________________concept.
A. Periodicity
B. Materiality
C. Accrual
D. Consistency

24. The periodicity or time period assumption implies that:

A. the purchasing power of the unit of measurement used in accounting is Ringgit
Malaysia
B. the economic activities of an enterprise can be divided into artificial time periods.
C. the ability to compare an entity’s financial statements with another entity’s financial
statements.
D. the expenses incurred will be matched against income earned during the same
accounting period.

25. Which one of the following is a characteristic of partnership?

A. Limited liability
B. Limited life
C. Single owner
D. Capital from public
26. One of the following statements about users of accounting information is INCORRECT:
A. Government is considered as internal user
B. Income Tax Department is considered as external user
C. Management is considered as internal user
D. Accounts payable are considered as external user

27. The process of accounting can be described as:

A. Classifying, recording, summarizing and interpreting
B. Classifying, interpreting, recording and summarizing
C. Recording, summarizing, interpreting and classifying
D. Recording, classifying, summarizing and interpreting

28. Bookkeeping differs from accounting. Bookkeeping primarily involves which part of the
accounting process?
A. Measurement
B. Identification
C. Communication
D. Recording

29. The following steps in the accounting cycle have not been listed in the correct order.
Rearrange the following steps to show the correct sequence in the accounting cycle.
i. Trial balance
ii. Journalizing
iii. Business transaction
iv. Source document
v. Posting
vi. Financial statements

A. vi, i, v, ii, iii and iv

B. iii, iv, ii, v, i and vi
C. iv, iii, ii, i, v and vi
D. ii, iv, v, iii, i and vi

30. The sale journal is:

A. Used only to record credit sales
B. Used only to record cash sales
C. Used to record all sales
D. Used to record credit purchases

31. Which of the following is NOT an internal user of accounting information?

A. Owners
B. Managers
C. Accounts payable
D. Employees

32. Business organizations could be classified into sole proprietorship, partnership and
limited company. Which of the following business organization has the word “Berhad” at
the end of its name?
A. Partnership
B. Sole proprietorship
C. Public limited company
D. Private limited company
33. Which part of the accounting process involves with “bookkeeping”?
A. Concluding
B. Interpreting
C. Benchmarking
D. Recording

34. All the following characteristics are suitable for limited companies EXCEPT:
A. Managed and controlled by one owner
B. Registered with the Commissioner of Companies under the Companies Act 1965
C. Shareholders contribute capital to the business
D. A maximum of fifty (50) persons could own a private company

35. Which of the following is an example of a source document?

A. Cash book
B. An invoice
C. Journals
D. Ledgers

36. Klinik Abu and Rakan-rakan has the following characteristics EXCEPT:
A. The members are between 2 to 50 persons
B. Registered under the Partnership Act 1961
C. The capitals are in the form of ordinary shares
D. The financial reports are not required to be published

37. Which of the following is INCORRECT in explaining the users of accounting information:
A. Accounts payable need accounting information to evaluate the business ability to pay
debts on time
B. Investors use the accounting information for planning, controlling and organizing the
business
C. Government needs accounting statements and reports for tax purposes
D. Employees are interested to know the business progress to ensure steady
employment and career enhancement

38. Which of the following accounting cycle is correct?

A. Source document – ledger – journal - financial statements - trial balance
B. Journal – source document – trial balance – ledger – financial statements
C. Ledger – trial balance – journal – source document – financial statements
D. Source document – journal – ledger – trial balance – financial statements

39. All of the followings are considered as business transactions and will be recorded in the
business’s account EXCEPT:
A. Sold goods to Maslan and received cash RM500
B. Purchased of motor vehicle on credit worth RM4,000 for business purposes
C. Withdrew RM700 cheque from business’s account for personal use
D. Paid owner’s housing loan of RM900 monthly from owner’s personal credit card

40. The internal users of financial statement seek the following information EXCEPT:
A. Employees – career enhancement and promotions
B. Management teams – planning and budgeting purposes
C. Owner – business growth and profit performance
D. Government – economic planning and taxation purposes
41. The statement below explained one of the accounting concepts used in preparing the
financial statements:
- Only transactions and events that are capable of being measured in monetary
terms are recognized in the financial statements
- All transactions and events recorded in the financial statements must be reduced
to a unit of monetary currency. Where it is not possible to assign a reliable
monetary value to a transaction or event, it shall not be recorded in the financial
statements

Which accounting concept below is the most suitable to be applied for the above
statements:
A. Money measurement concept
B. Currency measurement concept
C. Kuala Lumpur Stock Exchange concept
D. Business entity concept

42. Below are two different business entity owned by different owners:
Abu Mini Mart
Klinik Abu and Bakar

What is the similarity possess by the business above:

A. Unlimited liabilities
B. Separate legal entity
C. Audited financial statement
D. Published financial statement

43. Which of the following refers to a sole proprietorship business?

A. Limited liability
B. Capital contributed solely by owner
C. Income from business is not subject to tax
D. Profit or loss is divided among owners and members

44. What is the main objective of accounting?

A. To show the value of the shares in the company
B. To provide information on business activities to interested users
C. To help management to plan its business’s activities
D. To show managers the results of their departments

45. The concept that concerns the significance of information and amount contained in an
accounting record:
A. Going concern
B. Materiality
C. Consistency
D. Business entity

46. The statements below refer to the characteristics of a type of business

- Limited liability
- Number of members from 2-5- peoples
- Shares not listed on Bursa Malaysia

Which business meets the above characteristics?

A. Mamat Berhad
B. Mamat Trading
C. Mamat Sdn Bhd
D. Mamat and Co Trading
47. Which of the following refers to a partnership business?
A. Limited liability
B. Capital contributed by way of ordinary shares
C. Income from business is not subject to tax
D. Profit or loss is divided among owners and members

48. The concept that concerns with the significance of currency used when dealing with
economics events and agreeable by both parties is:
A. Going concern concept
B. Monetary concept
C. Consistency concept
D. Entity concept

49. The statements below refer to the characteristics of a type of business.

- Wide scattered in Malaysia
- Solely owned business
- Profit gained or loss suffered by own self

Which business meets the above characteristics?

A. Public limited company
B. Sole proprietorship
C. Private limited company
D. Partnership

50. Which of the following is not an internal user of accounting information?

A. Employee
B. Owner
C. Supplier
D. Manager

51. The following represents the definition of bookkeeping except .

A. classifying
B. interpreting
C. recording
D. summarising

52. Which of the following is not true about the characteristics of a partnership business?
A. Profit or loss is to be shared between the partners.
B. General partners are involved in operating the business.
C. Minimum number of partners is 2.
D. General partnership has limited liability.

53. Which of the following is a public limited company?

A. Mona Lisa Associates
B. Teriak Catering Enterprise
C. Bomca Malaysia Sdn Bhd
D. None of the above
54. Which of following statements is not true about the purposes of recording and analysing
accounting information?
A. To measure the level of employee engagement.
B. For easier reference in retrieving data and information.
C. To avoid misleading of financial statements.
D. To know the financial status of the business.

55. A conceptual framework for financial reporting is .

A. a set of regulations which govern financial reporting
B. a set of principles which underpin financial reporting
C. a set of items which make up an entity’s financial statements
D. a set of financial reporting standard

56. Which of the following is the fundamental qualitative characteristics of the conceptual
framework for financial reporting ?
A. Relevance
B. Verifiability
C. Timeliness
D. Understandability

57. The financial statements should not be prepared with the intention to influence certain
decisions. This is in accordance with the concept.
A. comparability
B. neutrality
C. consistency
D. materiality

58. Which of the following qualitative characteristics relates to the fact that an information is
complete, neutral and free from error?
A. Verifiability
B. Faithful representation
C. Consistency
D. Relevance

59. Which of the following are not the external users of financial information?
A. Managers of a business.
B. Creditors of a business.
C. Potential investors.
D. Government agencies such as Inland revenue board.

60. The accounting process includes all of the following except .

A. identification of business transactions.
B. preparation of trial balance.
C. preparation of financial statements.
D. observation of business transactions.

61. Which of the following types of business organisations have unlimited liability?
A. Private limited company and sole proprietorship.
B. Partnership and sole proprietorship.
C. Private limited company and partnership.
D. Private and public limited company.
62. Accounting is best described as .
A. recording all financial transactions systematically.
B. recording all production costs and profitability of a business.
C. classifying, recording, summarising and intrepreting all financial transactions of a
business.
D. recording all assets and liabilities of a business.

63. What is the range number of owners in private limited company?

A. 1 - 50
B. 2 - 20
C. 2 - 50
D. 1 - No limit

64. Which type of business organisation has the following characteristics:

- Owned by 2 to 20 persons
- Unlimited liability
- No legal obligation to prepare the financial statements

A. Sole proprietorship
B. Partnership
C. Private limited company
D. Public limited company

65. The going concern assumption assumes that .

A. the business will be liquidated in the near future.
B. the business’s sole concern is to ensure the accuracy of the financial records.
C. the business will presents useful information in yearly basis.
D. the business will continue on long period of time to carry out its existing objective and
commitments.

66. The accounting concept that states the recorded business activities should be kept
separated from the recorded activities of its owner is the concept.
A. comparability
B. economic entity
C. monetary measurement
D. neutrality

67. “The transaction in bookkeeping is concerned only with those facts which can be
measured in monetary terms”. This is in line with the concept.
A. going concern
B. comparability
C. consistency
D. money measurement

68. The financial statements should not be prepared with the intention to influence certain
decisions. This is in accordance with the concept.
A. consistency
B. comparability
C. going concern
D. neutrality
69. The consistency concept states that .
A. a business should only record business transactions that can be stated in terms of a
currency.
B. a business should change its auditor from year to year.
C. the same accounting methods should be used from year to year.
D. a business should not change the owners of a business.

70. Which of the following is true concerning comparability concept?

A. Business should record all relevant financial information whether it is favorable or not
favorable for users decision making.
B. Users can carry out trend analysis and analyse whether the business’s performance
and position has improved across time.
C. Each business transaction has two aspects known as debit and credit.
D. Incomes and expenses incurred should be charged to the statement profit or loss in
the same accounting period

71. The accounting process involves all the following EXCEPT:

A. Analysing and interpreting financial reports
B. Recording non-quantifiable economics events
C. Identifying economics transactions that are relevant to the business
D. Communicating financial information to the users by preparing financial report

72. From the legal point of view, the type of business organization that has a separate legal
entity from its owners and where the owners are not personally liable for the debts of
business is:
A. Limited company
B. Sole proprietorship
C. Partnership
D. None of the above