MID-TERM BREAK HOMEWORK – CHAPTER 1, 2, 3 & 4 (REVISION FOR TEST)

MULTIPLE-CHOICE QUESTIONS – to discuss

1. The following are the internal users of an organization, except:

A. Owners and managers.

B. Securities Commission and potential customers.
C. Storekeeper and employee.
D. Internal auditor and accountant.

2. ____________ is the last step in the accounting cycle.

A. Preparation of financial statements.

B. Postings the transactions from journal to ledgers.
C. Recording the accounting adjustments.
D. Analysis of financial statements

3. An asset is recorded at its original price. This is to fulfil which qualitative characteristic of
financial information or accounting concept?

A. Completeness
B. Economic entity concept
C. Historical cost concept
D. confirmatory value

4. Which of the following is not true concerning a conceptual framework in accounting

concept?

A. It allows preparers to solve practical problem more quickly by reference to it.

B. To assist MASB in developing MFRS Standards
C. It should be a basis on fundamental truths that are derived from the laws of nature.
D. None of the above.

5. The fundamental qualitative characteristic of conceptual framework is _____________

A. economic entity
B. Going concern
C. Truthful representation
D. Free from error

6. The depreciation method was used for the last accounting year, and it should be used for
the current and future accounting period as to comply with __________

A. Consistency concept
B. Going concern concept
C. Money measurement concept
D. Completeness concept

7. Which of the following accounting equation is not true?

A. Assets - Liabilities + Revenues = Capital - Expenses

B. Assets + Expenses = Capital + Liabilities + Revenues
C. Assets + Expenses – Revenues = Liabilities + Capital
D. Assets - Liabilities = Capital + Revenues - Expenses
8. Which of the following is INCORRECT classification?

A. Office equipment – non-current asset

B. Inventory – current asset
C. Bank overdraft – current liability
D. Account receivable – current liability

9. Which of the following statement described the principles of double entry is true?

A. Cash purchases will be debited in the purchases account.

B. Cash contributed by the owner of the business will be debited in the capital account.
C. Withdrawal of cash by the owner of the business for his/her personal usage will be
debited in the capital account.
D. Sold of goods to existing customers on credit will be debited in the sales account.

10. In a double entry system, a credit is used to record __________.

A. increase in revenues and drawings

B. increase in expenses and assets
C. increase in owner’s equity and assets
D. increase in liabilities and owner equity

11. Which of the following is the external user of the accounting information?

A. Creditor
B. Employee
C. Manager
D. Business Owner

12. Which of the following accounting process is correct?

A. Source documents – 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 documents – journal – ledger – trial balance – financial statements

13. Choose the incorrect statement about the neutrality characteristic as discussed in the
conceptual framework for financial reporting.

A. It is an input to processes employed by users to predict future outcomes.

B. It is an exercise of caution when making judgements under conditions of
uncertainty.
C. The financial information is free from bias.
D. It does not allow misstatements.

14. The financial information provided must be capable of being tested such as falsified or
provable by observation. This is to fulfil which qualitative characteristic of financial
information?

A. Understandability
B. Verifiability
C. Neutrality
D. Timeliness
15. Three (3) characteristics of faithful representation are ______________.

A. relevance, materiality and reliability

B. uniformity, completeness and materiality
C. neutrality, relevance and confirmatory
D. completeness, neutrality and free from error

16. Jack the owner of a grocery shop paid his personal insurance policy and recorded this
expense as a business expense. This transaction violates the ______________.

A. consistency concept
B. going concern concept
C. money measurement concept
D. business entity concept

17. In a double entry system, a credit is used to record _____________ ,

A. Increase in liability and expenses , decrease in asset, revenue and capital.

B. Increase in asset and expenses, decrease in liability, revenue and capital
C. Decrease in liability, revenue and expenses, decrease in asset and capital.
D. Decrease in asset, expenses and increase in capital, liability and revenue.

18. The following statements represent the definition of asset in financial accounting.

i. Resources controlled by the business as a result of past event.

ii. Economic resources which are of value to the business.
iii. Residual interest in the entity’s assets after deducting all its liabilities.
iv. Provide either present or future benefits to the business.

A. i and ii
B. i, ii and iii
C. i, ii and iv
D. i, ii, iii and iv

19. The accounting equation forms the basis upon which the double entry system is
developed. Identify the correct expanded accounting equation below.

A. Asset + Capital = Liability

B. Asset + Expense – Capital = Revenue + Liability
C. Asset – Liability = Capital + Revenue + Expense
D. Asset + Liability + Revenue = Capital + Expense

20. The owner’s equity will increase when_____________.

i. a business incurred net loss

ii. the owner brought his personal laptop for business use
iii. a business obtained net profit
iv. the owner paid a supplier with his own cash

A. i and ii
B. ii and iv
C. ii,iii,and iv
D. i,ii and iii
21. 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.

22. 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.

23. 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.

24. 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.

25. 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.

26. 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

27. 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
28. 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.

29. 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

30. 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

31. 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.

32. 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

33. "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
34. 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

35. 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

36. 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.

37. Which of the following statements is defined Non-Current Asset?

A. Asset with no physical substance.

B. Asset that is either cash or those that can be converted into cash within one
year.
C. Fund supplied by the owner to the business for the acquisition of assets.
D. Asset acquired or bought not for resale but to be used in operations of the
business with useful lives of more than one year.

38. Calculate the LIABILITY for the accounting equation below:

Capital – RM85,000 Expenses – RM45,224

Revenue – RM75,500 Asset – RM166,000

A. RM50,724
B. RM51,224
C. RM111,276
D. RM371,724
39. Hazim buys inventories from Daniel for RM5,500. He returns half of the inventories on
15 August. Which of the following journal entry to record for the return of the inventories
in Daniels’ books?

A. Dr Account Payables: Daniel Cr Return Outwards

B. Dr Return Inward Cr Account Receivables: Hazim
C. Dr Account Payables: Aifaa Cr Return Outwards
D. Dr Return Inward Cr Account Receivables: Daniel

40. Amirul owes Izzat Enterprise RM1,000. When he went to settle his debt, he is only
required to pay RM950. In the book of Izzat Enterprise, what does the difference of RM50
represent?

A. A trade discount of RM50.

B. A discount received of RM50.
C. A discount allowed of RM50.
D. A discount receivable of RM50.
 QUESTION 1 – to submit

Ramadhani is the owner of Adha Enterprise located in Shah Alam, Selangor. Adha Enterprise,
a grocery shop started its operation in January 2023. The following transactions are selected
from the business for the month of January 2023.

Date Transactions
January 2023 The owner contributed RM90,000 cash and office equipment valued at
1 RM40,000 to start the business.
2 Deposit RM70,000 cash into the business bank account.
3 Purchased fax machine from Mala Trading costing RM4,700. The
payment will be paid in two equal installments starting next month.
4 Received a bank loan worth RM75,000 from LLH Bank.
5 Purchased goods on credit worth RM7,500 from Senang Enterprise.
8 Cash sales to Safuan amounting to RM4,500.
Purchased goods worth RM8,000 from Adam Runcit and paid via online
9
transfer.
A credit note of RM550 was received from Senang Enterprise for
11
damaged goods returned.
17 Sold goods amounting RM5,500 to Kamisah on credit.
20 Paid Senang Enterprise for full settlement by cheque.
25 Invested RM20,000 in fixed deposits by cheque.
A cheque for RM5,200 was received from Kamisah on which RM300 cash
26
discount was given to her.
Paid wages and salaries RM25,000 to all the workers through online
27
banking.
28 The owner took RM5,000 cash to settle her personal debts.

Required:
a. Identify the effects (increase or decrease) of assets, liabilities, owner's equity,
revenues or expenses for the transactions dated of all the above transactions.
b. Show the journal entry (debit and credit) of all the above transactions.

Date (a) Effects (b) Journal Entry

Increase Decrease Debit Credit

QUESTION 2 – to discuss

Rasa Sayang Enterprise, a grocery shop business was set up on 1 November 2022. Below
are the business transactions during the month of November 2022.

Date Transactions
November 2022 Owner brought in RM90,000 cash and furniture valued at RM22,000
2 into the business.
7 Purchased goods worth RM7,000 on credit from Pacific Store.
9 Sold goods worth RM5,500 on credit to Sally.
Purchased a display cabinet on credit from Ali Furniture worth
10 RM4,200.
The payment will be paid in four equal instalments starting next month.
12 Returned damaged goods to Pacific Store worth RM300.
A credit note of RM300 was issued to Sally for the return of damaged
14
goods.
15 Cash sales to Marina worth RM1,300.
Received full settlement from Sally for the amount due after deducting
18 a cash discount of RM50. The sum was received by electronic funds
transfer.
Owner withdrew goods worth RM500 from the business for personal
20
consumption.

Required:

Using the format below, answer the following questions:

Date a. Effects b. Double Entry
Increase Decrease Debit Credit

(a) Identify the effects (increase or decrease) on assets, liabilities, revenues, expenses or
capital for the above transactions.
(b) Show the accounts to be debited and credited for the above transactions.
QUESTION 3 – to submit

NESH Enterprise is a furniture distributor in Mersing, Johor. The following are the business
transactions during the month of March 2022.

Date
Transactions
March
The owner of NESH Enterprise brought cash in hand RM30,000 and a
1
computer valued at RM5,000 into the business
Received an invoice for credit purchased worth RM5,000 from Jual Perabot
5
Enterprise
8 Issued an invoice to Bahagia Trading worth RM2,300
9 Paid electricity amounted to RM400 by cash
11 Received a debit note of RM200 from Bahagia Trading due to goods returned
Bought a motor vehicle on credit from JMT Car Auto Sdn Bhd for RM40,000;
12 RM10,000 deposit was paid by cheque and the balance is to be paid by next
month
15 Received bank loan from RHD Bank RM100,000
17 Paid RM6,000 cash for inventories purchased from Mariamah Trading
Received a cheque from Bahagia Trading for the amount due after deducting
18
a cash discount of RM300
21 Paid rental expenses RM1,300 by cheque
22 Purchased inventories on credit worth RM12,000 from Rengit Enterprise
24 Cash sales RM2,500
26 Paid RM5,500 to Rengit Enterprise by cash and received RM500 cash discount
27 Withdrew RM2,000 cash from the bank and placed it in the cash box

Required:

Using the format below, answer the following questions:

Date c. Effects d. Double Entry
Increase Decrease Debit Credit

(a) Identify the effects (increase or decrease) on assets, liabilities, revenues, expenses or
capital for the above transactions.
(b) Show the accounts to be debited and credited for the above transactions.