ACC117

Homework – Topic 1: Introduction to Accounting

PART A - True and False Questions

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

1. Individuals who manage the business are known as internal users such as owner,
manager, employees and public accountants. F
2. The number of owners in a general partnership can range from 2 to 20. T 3. Unlimited
liability of a business is when its members have a joint obligation to meet any insufficiency in
the assets of the business to enable settlement of any outstanding liability. T
4. The similarities between Klinik F&E and Qisya Bookstore are that both businesses raise
capital by issuing shares.
5. Copyright is classified as a tangible asset.
6. The purpose of accounting is to analyse and interpret the business transactions to help
users in making decision.
7. Among of the characteristics of Kasih Sdn. Bhd., it has limited liability and no legal
obligation to audit the accounts. F
8. Potential investors are considered as internal users of accounting information. F 9. 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. T
10. The steps in the accounting process are classification, identification, interpretation and
communication. F
11. The primary objective of preparing financial statements is to meet the need of managers
who run the business on a day-to-day basis only. F
12. The external users of accounting information include tax authority and potential
investors. T
13. The owner of sole proprietorship is not responsible for the liabilities of the business when
the business goes bankrupt. F
14. Employees of the business is considered to be external users of financial accounting. F
15. In accounting process, it is correct to record the transactions into the ledgers first before
transferring the amount to book of prime entry F
16. For professional partnership, the number of partners allowed is between 2 partners to 20
partners. F
17. Bank overdraft is an example of current liability. T
18. Profits in companies are shared between the owners using pre-agreed profit distribution
ratio. F
19. Bookkeeping possesses a higher scope than accounting. F
20. Creditors are interested to know the business’ financial soundness before granting credit.
T
21. The maximum number of owners in a professional partnership is 50 persons.T
22. Sole proprietorship is the simplest and least costly to establish as compared to a
partnership and company. T
23. Accounting process includes the process of analysing and interpreting the information
recorded in the books of accounts.
24. The accounting process involves recording non-quantifiable economic events.
25. Accounting primarily protects the interest of outsiders dealing with organization in
various capacities.
26. A business organisation as a separate legal entity is a sole proprietorship. 27. There are
two types of limited companies, namely the public limited company and the private limited
company.
28. Internal users are those who work in organisations, such as owners, managers, and
employees.
29. The accounting process starts with the recording of business transactions, the details of
which are taken from source documents.
30. There are two types of current assets, which are non-current assets and investments.

PART B - Multiple Choices Questions.

Choose the most suitable answer.

1. All the followings are characteristics of a Partnership, EXCEPT ______. A.

capital contributed by partners.
B. managed and controlled by partners.
C. has legal obligation to keep and prepare accounts.
D. owned by 2 – 20 partners.

2. The following are the purpose of accounting information EXCEPT for ______. A.
decision making of the users.
B. to evaluate the performance of the business.
C. to avoid misleading financial statement.
D. None of the above.

3. Which of the following is the external user of accounting information for Fashion Star Sdn
Bhd?
A. Clerk of Fashion Star Sdn Bhd
B. Mr. Stanley, one of the potential investors of Fashion Star Sdn. Bhd.
C. Operation Manager of women product line in Fashion Star Sdn Bhd.
D. Puan Mariam, one of Fashion Star Sdn Bhd's shareholders.

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

5. Which of the following users require financial statement as guideline to evaluate the
organization ability to pay wages and other benefits?
A. Owners
B. Creditors
C. Government
D. Employees
6. Sole proprietorship business owners have ____________.
A. Unlimited liability
B. No liability
C. Limited liability
D. Restricted liability

7. The main purpose of preparing financial statements is __________. A.

to show the values of shares in the business
B. to help management determining the salary of workers
 C. as a motivation to increase motivation
D. to assess the financial position and performance of the business

8. Which of the following defines classifying?

A. transferring accounting data from ledger to trial balance.
B. sorting accounting data into orderly and correct accounting categories.
C. Analyzing results of financial statements.
D. Communicate the summary of business financial information to interested users

9. Which of the following users of accounting information are external users? i.

Shareholders and board of directors
ii. Owner of business, employees and manager
iii. Employees, creditors and product consumers
iv. Creditors, investors and product consumers

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

10. Which of the following business entities have NO limited liability?

i. Surya Enterprise
ii. Alisha & Humaira Associates
iii. Aqwan Sdn Bhd
iv. Bina Teguh Bhd

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

11. Which of the following describes the term ‘asset’?

A. Amount owed by a business to external parties
B. Property of a business that only bought for resale.
C. Funds supplied by the owner to the business for the acquisition of property for the
business.
D. Economic resources owned and controlled by a business, including non-current and
current

12. Following are the internal users of the accounting information EXCEPT ________.
A. Director
B. Government
C. Employee
D. Manager
13. A term accounting can best be defined as __________.
A. a document that reports on an organization's financial position
B. a system that measures business activities, processes financial information into
reports and communicates the findings
C. a business plans
D. a method of recording business transactions

14. Following are the characteristics of sole proprietorship EXCEPT __________.

A. No legal obligation to prepare financial statements
B. Owned by one person
C. Profit is enjoyed by the owner
 D. The liability is limited to only business propert

15. Which user is to be considered as an internal user?

A. Inland revenue board
B. Potential investor
C. Kenanga Investment Bank
D. Chief financial officer

16. The purpose of a Statement of Profit or Loss is to _________________________.

A. ascertain on total sales
B. ascertain on total net assets
C. avoid misleading on presentation information
D. determine the profit or loss for the given accounting period

17. __________ needs the accounting information to evaluate the risks of granting credit or
lending money to businesses.
A. Creditor
B. Employee
C. Government
D. Potential investor

18. All of the following business entities enjoy limited liabilities, except?
A. Private company
B. Public listed company
C. Partnership
D. Limited liability partnership

19. The accounting cycle starts with the _______.

A. preparation of ledger accounts
B. preparation of trial balance
C. analysis of business transaction
D. preparations of adjusting entries

20. All the followings are characteristics of a sole proprietorship, EXCEPT ______.
A. owner has unlimited legal liability
B. owner has control of the business
C. owner and the business are separate legal entity
D. None of the above

21. In accounting and bookkeeping, the term POSTING refers to ______.

A. the transfer of information from ledger to trial balance
B. the transfer of entries from journal to ledger
C. the preparation of financial statement from trial balance
D. None of the above
22. The following would be considered an internal user of accounting information for Siakap
Jelita Sdn. Bhd. EXCEPT ________
A. president of the company
B. production Manager
C. merchandise inventory Clerk
D. president of the employees’ labour union

23. Which of the following is the purpose of accounting?

A. To know the financial status of the organisation
B. For easier reference
C. To avoid the presentation of misleading financial statements
 D. All of the above

24. What is the last step of the accounting cycle?

A. Journalise business transactions
B. Posting to ledger
C. Preparation of trial balance
D. Preparation of financial statements

25. Which internal user of financial information is interested in the ability of the business to
progress and expand?
A. Payables
B. Employees
C. Government
D. Consumer

26. Which of the following statements concerning a private limited company is not true?
A. Greater potential for expansion
B. The company’s shares cannot be transacted through the share market
C. Shareholders are legally protected by the law
D. The life span of the business depends on the life span of the members

27. ___ 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