CONFIDENTIAL ACC407/TEST1 /MAR-AUG 22

UNIVERSITI TEKNOLOGI MARA

TEST 1

COURSE : FUNDAMENTAL FINANCIAL ACCOUNTING AND

REPORTING
COURSE CODE : ACC407
SEMESTER : MARCH -AUGUST 2022
TIME : 2 HOURS

INSTRUCTIONS TO CANDIDATES
1. This question paper consists of three (3) parts. i) PART A
ii) PART B
iii) PART C
2. Answer ALL questions.
3. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 6 printed pages

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PART A
This part consists of multiple-choice questions. Choose the most suitable answer(s).
1) Which of the following statements about the users of accounting information is
incorrect?
A. Management is an internal user.
B. Tax authorities are external users.
C. Creditors or suppliers on credit are external users.
D. Regulatory authorities are internal users.
(1 marks)

2) The 3 most common forms of business entities are ________________.

A. Sole proprietor, small businesses, and partnership.
B. Sole proprietor, partnership, and large businesses.
C. Sole proprietor, partnership, and corporation.
D. Financial, manufacturing, and service companies.
(1 marks)

3) Preparing the financial statements reflect which phase of accounting?

A. Recording
B. Interpreting
C. Summarising
D. Classifying
(1 marks)

4) Which of the following is the similarity between a sole proprietor and partners in a
partnership?
A. Unlimited liability
B. Limited liability
C. Not personally liable
D. A separate legal entity from the business
(1 marks)

5) Which of the following business entity is considered as a separate entity from the legal
perspective?
A. Iqbal & Associates
B. Amza Enterprise
C. Usaha Sdn. Bhd.
D. Afza, Nazifa & Iskandar
(1 marks)

6) This area of accounting keeps track of the business’s financial transactions.

A. Cost Accounting
B. Management Accounting
C. Financial Accounting
D. Forensic Accounting
(1 marks)

7) A structured representation of the financial performance and financial position of a

business and changes over a period of time is the_________.
A. Profit or loss account
B. Financial statement

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C. Financial position
D. Internal audit
(1 marks)

8) Which of the following users assesses the potential of an investment?

A. Tax authority
B. Financial analyst
C. Banker
D. Employee
(1 marks)

9) Which of the following is a primary characteristic of useful accounting information?

A. Comparability
B. Relevance
C. Consistency
D. Timeliness
(1 marks)

10) Which of the following can be considered as the benefit of the conceptual framework?
A. Increase the financial statement users’ understanding of and confidence in the
financial reports.
B. Enhance comparability among companies’ financial statements.
C. Allow new and emerging practical problems to be more quickly solved.
D. All are the benefits.
(1 marks)

11) Which of the following basic accounting assumptions is threatened by the existence of
severe inflation in the economy?
A. Monetary unit assumption
B. Periodicity assumption
C. Going-concern assumption
D. Economic entity assumption.

(1 marks)

12) What is meant by comparability when discussing financial accounting information?

A. Information has predictive or feedback value.
B. Information is reasonably free from error.
C. Information that is measured and reported in a similar fashion across companies.
D. Information is timely.
(1 marks)

13) Changing the method of inventory valuation should be reported in the financial
statements under what qualitative characteristic of accounting information?
A. Comparability
B. Consistency
C. Verifiability
D. Understandability
(1 marks)

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14) Asfa Bhd issued its annual financial reports within one month of the end of the year;
this is an example of which ingredient of primary quality of accounting information?
A. Neutrality
B. Timeliness
C. Predictive value
D. Representational faithfulness
(1 marks)

15) Which basic assumption may not be followed when a firm in bankruptcy reports
financial results?
A. Economic entity assumption
B. Going concern assumption
C. Periodicity assumption
D. Monetary unit assumption
(1 marks)

16) Information is neutral if it ________________.

A. provides benefits which are at least equal to the costs of its preparation
B. can be compared with similar information about an enterprise at other points in
time
C. would have no impact on a decision maker
D. is free from bias toward a predetermined result
(1 marks)

17) Which of the following items belong to the same class of accounts?
A. Loan, bank and capital.
B. Discount received, carriage inwards and duty on purchase.
C. Equipment, cash and capital.
D. Freight/Transportation-in, purchases and audit fees.
(1 marks)

18) On 1 January 2022, Marsha started her business with cash of RM150,000 and a motor
van worth RM90,000. She also obtained a RM50,000 7-year loan from KKV Bank with
4% annual interest. What is the total equity of her business?
A. RM290,000
B. RM190,000
C. RM240,000
D. RM200,000
(1 marks)

19) MakLang Trading needs to acquire additional funds to open a new retail outlet in another
state. The total anticipated amount is RM240,000. A quarter of the amount will be
contributed by Mak Lang, the owner and the balance by obtaining a bank loan. Based
on the above scenario, identify the journal entries?
A. Debit capital RM240,000, debit bank RM180,000, credit bank RM60,000
B. Debit bank RM60,000, credit capital RM60,000, credit bank loan RM180,000
C. Debit bank RM240,000, credit capital RM60,000, credit bank loan RM180,000
D. Debit bank RM60,000, debit loan RM180,000, credit capital RM240,000

(2 marks)
(Total: 20 marks)

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PART B

This part consists of true or false questions. State True or False for all statements.

1. Hiring 10 semi-skilled labour by A&M Co is an example of non-economic events.

2. In the accounting cycle, the closing entries are prepared after the adjusting entries.

3. Information has confirmatory value if in its preparation under conditions of uncertainty,

a degree of caution has been applied in exercising judgment and making the necessary
estimates.

4. Businesses should not include complex information in the financial statements because
it would not be understood by some users.

5. Accounts receivable is the funds a business owes its vendors or suppliers.

6. Discounts given by a business to a customer for early payment of an invoice are called
sales discounts.

7. A credit is an entry made to the right side of an account and always increases an account
balance.

8. Under the double entry rules, the number of debit accounts must be equal to the number
of credit accounts.
(Total: 8 marks)

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PART C

QUESTION
Amir’s mini market was set up in January 2022. The following are the transactions for the month
of April 2022.

Date Transaction
2 The business purchased goods worth RM3,000 on credit from Bala Enterprise.
4 Made a cash payment of RM150 for transport of goods purchased from Bala
Enterprise.
6 Sold goods on credit to Confucius Cooperative RM1,500.
8 Bala Enterprise has issued a credit memo in the amount of RM600 for goods
returned due to spoilage.
9 Amir, the owner withdrew RM200 cash for his personal use.
10 Purchased goods worth RM900 in cash from Daulat Trading.
12 The business paid off its debt to Bala Enterprise for full settlement by electronic funds
transfer and received a 5% discount.
14 A credit memo of RM300 was issued to Confucius Cooperative for the return of spoilt
goods.
16 Amir invested RM15,000 in a fixed deposit by cheque.
20 Sold goods worth RM3,500 for cash.
22 Paid cash for utilities RM270.
24 The business received full payment from Confucius Cooperative for the amount due
after deducting a cash discount of RM30. The sum was deposited into the business's
bank account.
25 Amir brought in additional cash of RM20,000 into the business.
26 A bank loan of RM30,000 was obtained to finance the business operations. The sum
was deposited into the company's bank account.
28 The business purchased some furniture amounted to RM4,000 by cheque.

Required:
a. Identify the effects (increase or decrease) on assets, liabilities, revenues, expenses or
owner's equity for the above transactions.
(16 marks)
b. Show the accounts to be debited and credited for the above transactions.
(16 marks)
Note: Use the following table format to answer the above question:

Effect Journal Entry

Date
Increase Decrease Account to be debited Account to be credited

(32 marks)
(Total:60 marks)
END OF QUESTIONS