1) On 1 May 20X0, Luis took out a bank loan for $80,000.

As required by the terms of the loan,

capital repayment $2,000 have been made on the 15th of each month, with the first repayment
being made on 15 Aug 20X0
How should the loan be reported in Luis' statement of financial position at 30 April 20X2?

a. Current liability: $24,000 Non-current liability: $18,000

b. Current liability: $18,000 Non-current liability: Nil
c. Current liability: Nil Non-current liability $18,000
d. Current liability: Nil Non-current liability: $42,000

2) If a transaction leads to an increase in assets, what could the other e ect be?

(1) A decrease in liabilities

(2) An increase in capital

(3) A decrease in assets

(4) An increase in drawings

a. 1 and 4
b. 2, 3 and 4
c. 2 and 3 only
d. 1 and 2

3) Charlotte made the following post trial balance adjustments as at 31 December 20X0

$
Accruals 5,000
Prepayments 3,000
Depreciation 10,000
Reduced allowance for receivables by 4,000
Reduced Warranty provision by 2,000

By what amount was Charlotte's profit reduced as a result of these adjustments?

4) James sold a non-current asset for $13,000 The assel had cost $25,000 and $15,000
deprecation had been charged at the date of sale.
What adjusting entries are required in the extended trial balance for each of the following?

Debit Credit
Non-current assets at cost $25,000 O O
Accumulated depreciation $15,000 O O

5) Which TWO of the following would be included in the cost of inventory?

 Future costs to complete
 Delivery and handing costs
 Settlement discounts
 The purchase price

6) How are financial statements a ected by the creation of a provision?

a. Statement of financial position. Dr Provision Statement of profit or loss Cr Expense

b. Statement of profit or loss. Dr Expense Statement of profit or loss Cr Provision
c. Statement of profit or loss. Dr Expense Statement of financial position Cr Provision
d. Statement of financial position: Dr Expense Statement of financial position C Provision

7) The following is a selection of accounts from a trial balance before the preparation of the year
end financial statements:

(1) Bank overdraft

(2) Carriage outwards
(3) Irrecoverable debt expense
(4) Accumulated depreciation
(5) Interest on the bank overdraft

Which of the above items will appear in the opening trial balance at the start of the next
accounting period?
a. 1 and 5
b. 2 and 5
c. 1 and 4
d. 2 and 3
8) Which of the following errors would be detected by a trial balance?

(1) The purchase of a second-hand van had been incorectly classified as motor expenses
(2) A sales invoice of $1,000 had been omitted from the accounting records

a. Neither 1 nor 2
b. 1 only
c. 2 only
d. Both 1 and 2

9) Safi is preparing her final accounts for the year ending 31 August 20X9 On 3 October 20X9 an
interest charge for $900 appeared on her bank statement for the period 1 July 20X9 to 30
September 20X9
How would this have been reflected in her statement of financial position as at 31 August 20X9?
a. $600 Prepayment
b. $600 Accrual
c. $300 Accrual
d. $300 Prepayment

10) Are the following statements about asset expenditure true or false?

If asset expenditure of $10,000 to buy land is incorrectly treated as expense, profit will be
understated by $10,000

Repairs to a building will always be treated as asset expenditure

11) You have been provided with the following information for an accounting period

$
Opening trade receivables balance 95,350
Sales invoices 690,716
Sales credit notes 20,320
Cash received from credit customers 648717
Irrecoverable debts written off 5,090
Cash refund given to credit customer 150
Contra with trade payables account 1,600

What is the balance on the trade receivables control account at the period end?
12) Following the year-end review of the accruals and prepayments of an entity, it was discovered
that the accruals for electricity had been understated.
What is the impact of the correction of the electricity accrual?

a. Profit reduces and liabilities increase.

b. Profit increases and assets reduce
c. Profit increases and assets increase
d. Profit reduces and liabilities reduce

13) At 1 October 20X1 the opening balance on Olaf's sales tax account was $1250 (credit). During
the quarter ended 31 December 20X1 input tax was $23,180 and a payment was made to the
tax authority of $12,000. On 31 December 20X1 the closing balance on the sales tax account
was $13,800 (credit)

Sales tax is levied at 20%.

What was the sales figure (excluding sales tax) for the quarter ended 31 December 201?
a. $183,150
b. $219,780
c. $123,150
d. $251,075

14) Dev, a sole trader, bought a new motor car for $15,000 Den look od a business of and the
balance from her personal bank account
What journal entries should Devi use to account for this transaction?

a. Dr Loan $9,600 Dr Capital $5,400 Cr Motor vehicles $15,000

b. Dr Motor vehicles $15,000 Cr Loan $9,600 Cr Capital $5,400
c. Dr Loan $9,600 Dr Cash at bank $5,400 Cr Motor vehicles $15,000
d. Dr Motor vehicles $15,000 Cr Loan $9,600 Cr Cash at bark $540

15) Gertrude has the following balances in her trial balance at 31 December 20X1

Dr Cr
$ $
Receivables 10,000
Allowance for receivables 3,000

After the trial balance was prepared, a customer su ering from financial di iculties indicated
that he will not be able pay their debt of $1,000
 What balances should be included in the extended trial balance for receivables and receivables
allowance after accounting for the non-payment of the debt?

a. Receivables $9,000 Allowance $4,000

b. Receivables $9,000 Allowance $3,000
c. Receivables $10,000 Allowance $4,000
d. Receivables $10,000 Allowance $3,000

16) What is the correct accounting treatment for interest charged on partners drawings?
a. Show as an expense in the statement of profit or loss
b. Add to profit shown in the statement of profit or loss when apportioning profit among
partners
c. Deduct from profit shown in the statement of profit or loss when apportioning profit
partners
d. Show as income in the statement of profit or loss

17) A set of accounts will be prepared on the assumption that the business will continue trading for
the foreseeable future and has no intention of going into liquidation. Assets will not be valued at
their break-up values.
Which accounting principle is described by the above statement?
a. Consistency
b. Materiality
c. Historical cost
d. Going concern

18) Which of the following would be recorded in a partner's current account?

(1) Interest on capital
(2) Interest on drawings
(3) Share of residual profit
(4) New capital introduced

a. 1,2 and 3 only

b. 1,2,3 and 4
c. 1 and 2 only
d. 3 and 4 only
19) Which TWO of the following are reasons for extracting a trial balance?
a. To ensure all transactions are in the cored ledger account
b. To ensure all transactions have been recorded in the books of prime entry
c. To summarise the ledger account balances
d. To ensure double entry has been maintained\

20) You are completing an extended trial balance. All account balances have been correctly
entered. All accruals and prepayments have been totalled and entered in the statement of
financial position columns appropriately. The debit column of the statement of profit or loss
section adds up to $112,000. The credit column adds up to $111,100
What does this mean?
a. There is a cash balance of $900
b. The di erence of $900 should be investigated, the two columns should always agree
c. A profit of $900 has been made
d. A loss of $900 has been made

21) Connor owned a van. It cost him $20,000. Accumulated deprecation of $7,000 had been
charged. When he sold the van, he received as consideration $15,000 in cash and inventory
worth $2,000
What gain or loss did Connor make on the sale of the van?
a. Gain of $2,000
b. Loss of $5,000
c. Gain of $4,000
d. Loss of $3,000

22) Aisha is preparing her extended trial balance

Which column in the extended trial balance would the following be extended to?

Statement of profit or Statement of financial

loss position
Bank overdraft O O
Opening inventory O O
Insurance expense O O
Prepayments O O
23) Which TWO of the following would be recorded in the journal?
a. Discount allowed
b. Cash received
c. Correction of errors
d. Depreciation charge

24) At the beginning of the month Rob had a debit balance on his cash account of $1,250 Durinng
the month he received cash of $300 from credit customers and made cash sales of $550. He
spent $475 in cash on
What figure should Rob include in his trial balance at the end of the month for his cash
account?

25) Sarah has decided to increase her receivables allowance

What entries should Sarah make in her general ledger?
a. Dr Receivables allowance Cr Receivables expense
b. Dr Receivables allowance Dr Receivables control
c. Cr Receivables control Cr Receivables allowance
d. Cr Receivables allowance Dr Receivables expense

26) At the end of the year, Tank has not received his telephone bill relating to the last quarter
Will each of the following be debited or credited to record this outstanding telephone bill?

Debit Credit
Telephone O O
Accruals O O

27) Are the following statements about inventory true or false?

TRUE FALSE
Closing inventory is a debit to cost of sales O O
Inventory appears in the statement of financial position as a current liability O O
28) Which TWO of the account balances listed below would appear on the credit side of a trial
balance?
 Purchases
 Prepayments
 Capital
 Carriage inwards
 Carriage outwards
 Bank overdraft

29) Which of the following are TRUE in relation to sales tax?

(1) An entity that is registered for sales tax collects the sales tax on behalf of the tax authority
(2) Sales tax is borne by the final consumer
(3) An entity registered for sales tax cannot reclaim the sales tax on its purchases and expenses
(4) All entities must charge sales tax on their output
a. 1 and 2 only
b. 1,2 and 3 only
c. 1,2,3 and 4
d. 2 and 4 only

30) Gower has just received a bank statement which shows that he had a balance at the back of
$12,000 at the close of business yesterday, after the bank had applied charges of $270. He is
about to send cheques with a total value of $4,800 to his suppliers. These cheques were written
yesterday. He is also holding a cheque from a customer for $5,100. This was received and
recorded in his cash account yesterday.
What is the correct balance of cash at bank to be recorded in Gower's financial statements?

31) A non-current asset with an original cost of $24,000 and accumulated depreciation of $18,500
was gone in part exchange for a new asset costing $28,000. The agreed trade-in value was
$7,000.
What gain or loss on disposal should be reported in the statement of profit or loss?
a. $4,000 Gain
b. $1,500 Loss
c. $4,000 Loss
d. $1,500 Gain
32) Bilal has the following in his trial balance for the year ended 31 December 20X1

Dr Cr
$ $
Wages 50,000
A bonus for the year ended 31 December 20X1 of $5,000 has been agreed but remains unpaid
at the end of the year. Bilal does not maintain a separate bonus account.
What balances should be included in the extended trial balance after accounting for the bonus?
a. Wages $50,000 Accrual $5,000
b. Wages $55,000 Accrual $5,000
c. Wages $50,000 Prepayment $5,000
d. Wages $55,000 Prepayment $5,000

33) Marcus has recorded a cash purchase as a credit purchase

What journal entry will correct this error?
a. Dr Cash Cr Trade payables
b. Dr Purchases Cr Cash
c. Dr Trade payables Cr Cash
d. Dr Purchases Cr Trade payables

34) Jasdeep acquired a machine for $15,000 on 1 April 20X5 The machine had a
useful economic life of four years and a residual value of $2,000. Jasdeep charges depreciation
on the straight-line basis pro-rated from the date of acquisition
What is Jasdeep's depreciation charge for the year end 31 December 20X5?
a. $2,812.50
b. $2,437.50
c. $3,750.00
d. $3,250.00

35) Which TWO of the following statements about bank reconciliations are correct?
 Bank charges that appear on the bank statement must be debited in the cash book
 An overdraft balance will be shown as a debit on the bank statement
 Outstanding lodgements must be separately debited in the cash book
 A cheque from a customer paid into the bank but dishonoured must be connected by
making a credit the cash book
36) The closing inventory of ABC Stores consists of the following three lines of inventory

(1) 250 items that cost $2 each, these were all sold for $3 after the year end
(2) 600 items that cost $5 each, these were all sold after the year end for $4 per item after
selling expenses of $150 in total
(3) 1,000 items that cost $10 each, these were all sold after the year end for $15 after incurring
total selling cost $2,000

What is the value of closing inventory?

a. $16,000
b. $12,750
c. $13,500
d. $15,750

37) Martha sells o ice furniture. All of her sales are on credit, Martha is registered for sales tax
What would be the postings to the sales returns general ledger?
a. Dr Receivables Cr Sales Cr Sales tax
b. Dr Receivables Dr Sales tax Cr Sales
c. Dr Sales returns Dr Sales tax Cr Receivables
d. Dr Sales returns Cr Receivables Cr Sales tax

38) Which of the following statements is/are TRUE?

(1) For information to be relevant it must be capable of making a di erence in decisions because of
the predictive value, confirmatory value or both

(2) An item is said to be material if its omission or misstatement in the financial statement would
influence the economic decisions of users

a. Neither 1 nor 2
b. Both 1 and 2
c. 2 only
d. 1 only

39) Which of the following is the correct journal entry to record goodwill when a new partner is
admitted to a partnership?
a. Debit bank account
Credit old partners' capital account on new profit share basis
b. Debit goodwill account
Credit old partners' capital account on new profit share basis
c. Debit goodwill account
Credit old partners' capital account on old profit share basis
 d. Debit bank account
Credit old partners' capital account on old profit share basis

40) IAS 2 Inventories requires that inventory should be stated at the lower of cost and net realizable
value.
Are each of the following statements correct?

TRUE FALSE
The cost of inventories can be calculated using FIFO or weighted average cost O O
The costs of purchase for inventories comprise the purchase price and directly
O O
attributable import duties

41) How is interest on partners' capital recorded in the following ledger accounts?

Debit Credit No entry

Bank account O O O
Partners' capital accounts O O O
Profit or loss appropriation account O O O
Partners' current accounts O O O

42) A business is building an o ice block and has incurred the following costs?

(1) $10,000 legal fee to acquire land

(2) $35,000 building materials
(3) $5,000 to clean the site prior to commencing the building

How much of these costs should the business capitalize?