ACBG13 - Basic Financial Accounting - 2101, 1301 (4.

5 hp) - 20230216

 Instructions
Please read the instructions below carefully!

SWITCH OFF your mobile phone! Do not have it in vibration mode!

Dear Students,

This is the examination for Basic Financial Accounting (ACBG13). You have 4 hours to
complete this examination. It has three parts and consist of the following:

Section A : Multiple-choice Questions (24 questions) (12 points)

Each question is worth 0.5 point.

Section B : Short-answer Questions (8 questions) (8 points)

Each question is worth between 0.5 point to 2 points.

Section C : Comprehensive Calculation Question

The entire question is worth 40 points.

Each answer (box) in this question is worth between 0.5 to 2 points each.

Answer ALL questions. The maximum points you can receive for this examination is 60
points. You need 36 points to pass this examination.

We trust you are honest students with integrity and will not cheat on this examination. You
are NOT ALLOWED to discuss, collaborate or receive help from anyone, whether a student
(past or present), or non-student. You must answer this examination independently. You are
NOT ALLOWED to refer to lecture notes, personal notes, power points, textbooks, or any
internet sites.

If you are caught cheating, you will be reported to the Disciplinary Committee (DAN) of the
university and action may be taken against you. The punishment may be as severe as
suspension or expulsion from the university.

I am not able to visit you in the exam hall or take any calls during the exam. If there should
be a problem with the exam, we will look into it after the exam.

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There is an English-to-English dictionary in the hall. You should also be given blank sheets
and a calculator to use.

Good luck!
Caroline

1 Q1a
Two common areas of accounting that respectively provide information to internal and external
users are ________________________ (0.5 point)
Select one alternative:

forensic accounting and financial accounting

management accounting and financial accounting

financial accounting and tax accounting

management accounting and environmental accounting

Maximum marks: 0.5

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2 Q2a
What are assets? (0.5 point)
Select one alternative:

Money owed to others

Money borrowed from external parties that have to be paid back later

Shares sold to external parties

Resources owned by the business

Maximum marks: 0.5

3 Q3a
What is "Owner's Equity"? (0.5 point)
Select one alternative:

Money owed to creditors

The worth of a business or company

Money owed to the business or company

Revenue minus expenses

Maximum marks: 0.5

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4 Q4a
Which of the following is not a role of accounting in business? (0.5 point)
Select one alternative:

to provide information to external users to determine the economic performance and

condition of the business

to assess the various informational needs of users and design an accounting system to
meet those needs

to personally guarantee loans of the business

to provide reports to users about the economic activities and condition of a business

Maximum marks: 0.5

5 Q5a
Debts owed by a business to someone else are referred to as: (0.5 point)
Select one alternative:

liabilities

accounts receivable

owner's equity

expenses

Maximum marks: 0.5

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6 Q6a
When a business owner takes out cash from their business for personal use, it is called
______________. (0.5 point)
Select one alternative:

expenses

drawings

revenue

liabilities

Maximum marks: 0.5

7 Q7a
Assume you are starting a business for the first time. When a transaction occurs, what is the first
step in the accounting cycle? (0.5 point)
Select one alternative:

Prepare the balance sheet

Write the journal entry for the transaction

Write the t-accounts for the transaction

Prepare the income statment

Maximum marks: 0.5

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8 Q8a
If you wanted to know how cash was received or spent during an accounting year for a business,
you would look in the ___________________ (0.5 point)
Select one alternative:

cash flow statement

personal bank account of the business owner

income statement

balance sheet

Maximum marks: 0.5

9 Q9a
What do the terms "Debit" and "Credit" mean? (0.5 point)
Select one alternative:

Debit means increase and Credit means decrease

Debit means minus and credit means plus

Debit is the left side and Credit is the right side of a t-account

Debit means add to the income statement while Credit means minus from the income
statement

Maximum marks: 0.5

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10 Q10a
What is the purpose of a Trial Balance? (0.5 point)
Select one alternative:

To check for fraud

To ensure the total debits are equal to the total credits

To check the number of accounts in a business

To list all accounts of a business in alphabetical order

Maximum marks: 0.5

11 Q11a
Owner's equity will be decreased by all of the following except ______________ .(0.5 point)
Select one alternative:

revenues

expenses

drawings

All of the above

Maximum marks: 0.5

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12 Q12a
Which of the following groups of accounts have a normal debit balance? (0.5 point)
Select one alternative:

liabilities and capital

assets and expenses

revenues, liabilities and capital

capital and assets

Maximum marks: 0.5

13 Q13a
What is the structure of a balance sheet? (0.5 point)
Select one alternative:

Assets + Liabilities = Equity

Assets + Equity = Liabilities

Assets = Liabilities + Equity

Assets = Liabilities - Equity

Maximum marks: 0.5

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14 Q14a
Small businesses can usually prepare their Income Statements and Balance Sheet on a cash
basis. On what basis do large businesses prepare their Income Statements and Balance
Sheets? (0.5 points)
Select one alternative:

Share price basis

Accrual basis

Cash flow statement basis

Cash basis

Maximum marks: 0.5

15 Q15a
The following are reasons we need a Statement of Cash Flow except: (0.5 point)
Select one alternative:

The Statement of Cash Flow can detect fraud

There is less scope to manipulate the Statement of Cash Flow

The survival of a business depends on its ability to pay its debts

The statement of cash flow gives users important information about the business’ ability to
generate cash and its needs.

Maximum marks: 0.5

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16 Q16a
Which of the following is not a section in the Statement of Cash Flow? (0.5 point)
Select one alternative:

Expensing

Investing

Financing

Operating

Maximum marks: 0.5

17 Q17a
An owner withdraws cash from the business bank account and uses it for a personal holiday. In
which section of the Statement of Cash Flow will you see this cash amount reported? (0.5 point)
Select one alternative:

Operating

Expensing

Financing

Investing

Maximum marks: 0.5

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18 Q18a
How will a decrease in inventory be reported in the Statement of Cash Flow? (0.5 point)
Select one alternative:

The amount will be added (i.e. a positive number) to the Investing section of the Statement
of Cash Flow

The amount will be deducted (i.e. a negative or bracket number) in the Investing section of
the Statement of Cash Flow

The amount will be deducted (i.e. a negative or bracket number) in the Operating section of
the Statement of Cash Flow

The amount will be added (i.e. a positive number) to the Operating section of the Statement
of Cash Flow

Maximum marks: 0.5

19 Q19a
Which of the following is not true about companies or corporations (the words companies and
corporations mean the same in this question)? (0.5 point)

Select one alternative:

Shareholders of a company have limited liability

The most common form of a business is a sole proprietor

A company can be private or public

A company is owned by shareholders

Maximum marks: 0.5

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20 Q20a
What is "Issued share capital"? (0.5 point)
Select one alternative:

the total par value of shares that has actually been paid by the shareholders

the total par value of shares that has actually been sold to shareholders

the company has issued shares but has only asked for payments in instalments

the number of shares a company is authorised to sell

Maximum marks: 0.5

21 Q21a
What is a "dividend"? (0.5 point)
Select one alternative:

Extra shares that a company gives to its shareholders due to good performance

Extra shares that a company gives to its shareholders from dividing its current shares

A sum of cash paid by a company to its shareholders out of its profits

A sum of cash received by a company from its shareholders returning their shares to the
company

Maximum marks: 0.5

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22 Q22a
Which of the following is not true about Retained Earnings? (0.5 point)
Select one alternative:

Retained earnings is the same as Share Capital

Retained earnings is increased by net income

Retained earnings is decreased by net loss

Retained earnings is decreased by cash dividends paid to the company's shareholders

Maximum marks: 0.5

23 Q23a
Which of the following is correct about Ordinary Shares? (0.5 point)
Select one alternative:

Ordinary shares do not carry voting rights

The annual dividend for ordinary shares is fixed

Ordinary shares are also known as equity shares

Ordinary shareholders get paid before preference shareholders get paid

Maximum marks: 0.5

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24 Q24a
What is an "unearned revenue"? (0.5 point)
Select one alternative:

A revenue has been earned but has not yet been recorded

An expense has been incurred but has not yet been recorded

An expense which has been paid in advance, the benefits from which will be received in
the next period

A revenue received in advance which creates a liability

An expense which has been paid in advance, the benefits from which will be received in the next
period

Maximum marks: 0.5

25 Q1b

An example of a non-current asset is . (0.5 point)

Maximum marks: 0.5

26 Q2b
What is another term for "residual value"?

Fill in your answer in this box here. (0.5 point)

Maximum marks: 0.5

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27 Q3b
A restaurant, Delicious Pizza bought a new pizza oven on 1st January 2022. The new oven
costs £16 500 and has a residual value of £500. The oven has a useful life of 4 years.

What is the depreciation expense for this new oven in the second year of its usage, assuming
the restaurant uses a straight-line method? (2 points)

The depreciation expense in the second year is £ .

Maximum marks: 2

28 Q4b
"From Farm to Table" is a company that grows organic vegetables and herbs using a hydroponic
system. On 1st January 2022, the company purchased a new computer system to keep track
of the amount of fertilizer and water used for their crops.

The computer system costs £25 000 and has no residual value. It has a useful life of 5 years.
The company uses a reducing balance method for calculating depreciation for this computer
system at the rate of 40%.

What is the accumulated depreciation at the end of the first year of usage of this computer
system? (1 point)

The accumulated depreciation at the end of the first year is £ .

Maximum marks: 1

29 Q5b
Briefly state one reason why businesses need to have control over their inventory. (0.5 point)

Fill in your answer in this box:

Maximum marks: 0.5

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30 Q6b
What is one way to safeguard inventory in a business? (0.5 point)

Fill in your brief answer in this box here:

Maximum marks: 0.5

31 Q7b
The inventory data for a wooden chair for January 2023 are:

Jan 1st Beginning inventory 20 units at £19 each

Jan 4th Sales 10 units
January 10th Purchase 30 units at £20 each
January 17th Sales 20 units
January 30th Purchase 10 units at £21 each

Using a perpetual system, what is the cost of goods sold for January 2023 if the company uses
the Last-in-First-Out (LIFO) inventory system? (1 point)

Write your answer in the box below:

Cost of goods sold for January 2023 is £ .

Maximum marks: 1

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32 Q8b
The following data regarding purchases and sales of a medical scanner were taken from a
company. The company uses a perpetual system and the First-In-First-Out (FIFO) inventory
system.

June 1st Beginning inventory 25 units at £60 each

June 6th Sales 20 units
June 8th Purchase 20 units at £61 each
June 16th Sales 10 units
June 20th Purchase 20 units at £62 each
June 23rd Sales 25 units
June 30th Purchase 15 units at £63 each

What is the cost of the ending inventory at June 30th? (2 points)

(You need to determine the number of units of inventory before you can calculate cost of ending
inventory)

Write your answer in the box below:

The cost of ending inventory at June 30th is £ .

Maximum marks: 2

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 ACBG13 - Basic Financial Accounting - 2101, 1301 (4.5 hp) - 20230216

33 Comprehensive Calculation Question

Read the PDF attachment about the career counselling and consulting company, Upscale
Limited. Then answer the questions below.

Required:
(a) Prepare the journal entries for each of the adjustments (i) to (v) given in the question. Write
your journal entries in the boxes given below (10 points).
(b) Prepare an Income Statement for Upscale Limited for the year ended 30 June. (30 points)

For (a) and (b) above, fill in the boxes given below with words or numbers. DO NOT fill in
anything in the boxes at the end of this page.

Answers for Part (a):

(i)

(ii)

(iii)

(iv)

(v)

Answers for Part (b):

Upscale Limited
Income Statement
For the year ended 30th June

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Total expenses

DO NOT WRITE BELOW THIS LINE (For Caroline's use only)

Maximum marks: 40

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Question 33
Attached
 Basic Financial Accounting (ACBG13)
Examination on 16th February 2023
Comprehensive Calculation Question

The following is an unadjusted trial balance for Upscale Limited, a career counselling
and consulting company. The company provides advice and services for anyone who
wishes to improve their job prospects. The company offers services such as writing
CV’s, mock interviews, advise on dress code and communication skills improvement.
The company closes their accounts on 30th June every year.
£ (Debit) £ (Credit)
Cash 6 420
Accounts Receivable 14 500
Supplies on hand 1 000
Prepaid rent 4 800
Furniture and Fixtures 20 000
Accumulated 6 250
depreciation
Accounts Payable 5 200
Share capital 10,000
Retained earnings 19 330
Consulting revenue 12 540
Utilities expense 4 100
Wage and Salary 2 500
expense
Totals 53 320 53 320

During the month of June, the following transactions occurred and have not been
accounted for in the trial balance above.
(i) Wages and salaries earned by employees at the end of June but not yet paid is
£2 500.
(ii) Supplies on hand at the end of June is £800.
(iii) Depreciation on furniture and fixtures for June is £417.
(iv) Upscale Limited prepays rent for its office space on June 1 of each year. The
rent is £400 per month.
(v) Consulting services were given to a customer and billed (invoiced) for which cash
has not yet been received is £4 800.

Required:
(a) Prepare the journal entries for each of the adjustments above (i) to (v).
(b) Prepare the Income Statement for the company for the year ended 30 June.

Read the instructions for this question on your computer/Inspera screen.