Reference no: EM132365128

1. A trial balance will not reveal the following error:

1. A cash sale of £100 posted to sales account only

2. A credit sale of £100 made to Ashley, posted as debit sale account £100 and credit Ashley account £100

3. A cash sale of £100 posted as credit sale of £100, debit cash £10

4. A credit sale of £100 to Ashley debited to Ashley account only

2. In a statement of cash flows, the acquisition of land by issuing capital stock:

1. Is not shown at all, since no cash was received or disbursed.

2. Is shown as an investing activity.

3. Is shown as a financing activity.

4. Is shown in a supplementary schedule as a noncash investing and financing transaction.

3. All of the following are characteristics of managerial accounting, except:

1. Reports are used primarily by insiders rather than by persons outside of the business entity.

2. Its purpose is to assist managers in planning and controlling business operations.

3. Information must be developed in conformity with generally accepted accounting principles or with income tax regulations.

4. Information may be tailored to assist in specific managerial decisions.

4. The method that does not necessarily produce a declining pattern of depreciation over an asset's service life is: A) The double-declining-balance method. B) The sum-of-the-years'-digits method. C) The units-of-production method. D) All of the above produce a declining pattern.

1. Only c

2. a and b

3. a and c

4. Only b

5. The purpose of the balance sheet, sometimes called the statement of financial position, is to report a company's financial position on a particular date.

1. true

2. false

6. Depreciation is the cost of current asset wearing away

1. true

2. false

7. Which of the following statements relating to working capital financing is not correct?

1. Long-term debt is less risky that short-term debt.

2. A conservative policy uses long-term debt to finance fixed assets.

3. An aggressive policy uses long-term debt to finance fluctuating current assets.

4. Short-term debt is cheaper than long-term debt.

5. The matching principle indicates that fluctuating current assets should be financed by short-term debt.

8. Which one of the following is not considered to be a key qualitative characteristic of accounting?

1. Timeliness

2. Comparability

3. Understandability

4. Reliability

9. The total amount reported for stockholders' equity is the approximate fair value or net worth of the corporation as of the balance sheet date.

1. true

2. false

10. For purposes of preparing a cash flow statement, which of the following is not considered a "cash equivalent"?

1. A money market fund.

2. An investment in IBM bonds.

3. Treasury bills.

4. Commercial paper.

11. Why accounting is called as SCIENCE

1. Because it deals with human beings

2. Because it deal with the transaction

3. Because the transactions are recorded in the systematic manner

4. Accrual

12. Maximum sulphur percentage in low sulphur heavy stock (LSHS) furnace oil is about

1. 0.1

2. 1

3. 2.5

4. 3.5

13. The amount of current assets required to meet a firm's long-term minimum needs is referred to as which working capital.

1. Permanent

2. Temporary

3. Net

4. Gross

14. The level of real income of a firm can be distorted by the reporting of depreciation and interest expense. During periods of high inflation, the level of reported depreciation tends to __________ income, and the level of interest expense reported tends to __________ income.

1. understate, overstate

2. understate, understate

3. overstate, understate

4. overstate, overstate

5. There is no discernable pattern

15. Flash point of atmospheric distillation residue is determined by which apparates.

1. Pensky-Martens (closed cup type).

2. Abel.

3. Cleveland (open cup type)

4. None of the above

16. Economic value added (EVA) is also known as

1. excess capacity.

2. excess income.

3. value of assets.

4. accounting value added.

5. residual income

17. Various techniques are used in the analysis of financial data to emphasize the comparative and relative importance of the data presented and to evaluate the position of the firm. Which of the following is not one of the techniques used in analysis?

1. ratio analysis

2. common-size analysis

3. theory consistency

4. examination of relative size among firms

5. review of descriptive material

18. What does Profit and lose shows?

1. Profit or loss during period indicates the financial operational results of the business, so it is necessary to put all financial records of the expenses, revenues or incomes relating to a particular period, so that matching between revenues and expenses can be facilitated.

2. Profit or loss during period indicates the marketing operational results of the business, so it is necessary to put all financial records of the expenses, revenues or incomes relating to a particular period, so that matching between revenues and expenses can be facilitated.

3. Profit or loss during thisperiod indicates the HR operational results of the business, so it is necessary to put all financial records of the expenses, revenues or incomes relating to a particular period, so that matching between revenues and expenses can be facilitated.

4. All of the above

19. what is cash and bank in terms of asset and liability

1. Cash is an asset and Bank is a liability

2. Cash is an liability and Bank is a assets

3. Both are true

4. None of the above

20. If a firm sold stock on credit then which of the following would be the result?

1. Current ratio decreases

2. Acid test ratio decreases

3. Current ratio increases

4. Acid test ratio increases

21. According to the Financial Accounting Standards Board, What does the financial reporting includes?

1. According to the Financial Accounting Standards Board, financial reporting includes not only financial statements but also other means of communicating financial information about an enterprise to its external users

2. According to the Financial Accounting Standards Board, financial reporting does not includesincludes not only financial statements but also other means of communicating financial information about an enterprise to its external users

3. According to the Financial Accounting Standards Board, financial reporting includes not only financial statements but also other means of communicating financial information about an government to its external users

4. All of the above

22. Which of the following is not a contributory factor towards faithful representation?

1. Completeness

2. Freedom from error

3. Neutrality

4. Predictive value

23. If the current cost measurement basis is used, assets are measured at:

1. Replacement cost

2. The amount paid to acquire them

3. The amount which could be obtained by selling them

4. Present value

24. If you wanted to know what accounting rules a company follows related to its inventory, where would you look?

1. the balance sheet

2. the income statement

3. the notes to the financial statements

4. the headings to the financial statements

25. Which of the following does not explain why debtors are more liquid than stock?

1. Legal right to money owed by debtors

2. Most firms give long credit periods

3. Availability of debt factors

4. Most debtors do pay what they owe

26. Depreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return.

1. true

2. false

27. In the income statement of a manufacturing company whose expenses are analysed by function, the depreciation charge of plant and machinery would be classified as:

1. Cost of sales

2. Distribution costs

3. Administration costs

4. Finance costs

28. What is the normal balance for stockholders' equity and owner's equity accounts?

1. Debit

2. Credit

3. Both

4. None of the above

29. Which of the following is an asset account?

1. Accounts Payable

2. Prepaid Insurance

3. unpaid insurance

4. Unearned Revenue

30. International Accounting Standards (IAS) have been developed by:

1. A trade-off between profitability and risk

2. The International Organisation of Securities Commission (IOSCO)

3. The European Commission

4. The Financial Reporting Council

5. None of the above

31. As shown below is an extract of the year-end trial balance. At which of the following points of the accounting process has the trial balance been extracted? Debit Credit Machinery account £580,000 Provision for depreciation £312,600 Depreciation account £84,200?

1. On the last day of the accounting period prior to writing off depreciation for the year

2. At the beginning of the accounting period

3. On the last day of the accounting period after writing off depreciation for the year

4. On the last day of the accounting period prior to making any year end adjustments

32. Prepaid expenses require an adjustment to be made to the double entry accounts as follows:

1. Debit relevant expense account with prepayment before balancing off account; credit profit and loss account

2. Credit relevant expense account with prepayment before balancing off account; debit profit and loss account

3. Credit relevant expense account with prepayment before balancing off account; debit prepayment to same account after balancing off

4. Debit relevant expense account with prepayment before balancing off account; credit prepayment to same account after balancing off

33. ABC Co. performed services for Client PQR in December and billed PQR $4,000 with terms of net 30 days. ABC follows the accrual basis of accounting. In January ABC received the $4,000 from Kay. In January ABC will debit Cash, since cash was received. What account should ABC credit in the January entry?

1. Accounts Receivable

2. Service Revenue

3. Owner's Equity

4. None of the above

34. Equity and liabilities are divided into?

1. Shareholders' funds

2. Share application money pending allotment

3. Non-current liabilities

4. Current liabilities

5. All of the above

35. A firm has a higher quick (or acid test) ratio than the industry average, which implies.

1. the firm has a higher P/E ratio than other firms in the industry.

2. the firm is more likely to avoid insolvency in short run than other firms in the industry.

3. the firm may be less profitable than other firms in the industry.

4. A and B.

5. B and C.

36. This question may have more than one answer:
Which two of the following accounts is a non-current asset?

1. Reserves

2. Shareholders' equity

3. Trademarks

4. Machinery

5. Retained earnings

37. An example of a liquidity ratio is :

1. fixed asset turnover

2. current ratio

3. acid test or quick ratio

4. A and C

5. B and C

38. A statement of cash flows would be least useful in answering which of the following questions?

1. What was the average balance in the Cash account during the period?

2. Did operating activities result in a positive or negative net cash flow?

3. How much cash was provided or used by financing activities during the period?

4. Were cash dividends paid by the company more or less than the net cash flow from operations?

39. The basic capital budgeting principles involved in determining relevant after-tax incremental operating cash flows require us to :

1. Include effects of inflation, but ignore project-driven changes in working capital net of spontaneous changes in current liabilities

2. Include effects of inflation, and include project-driven changes in working capital net of spontaneous changes in current liabilities

3. Ignore both the effects of inflation and project-driven changes in working capital net of spontaneous changes in current liabilities

4. Ignore the effects of inflation, but include project-driven changes in working capital net of spontaneous changes in current liabilities

40. Which of the following factors does not suggest overtrading is taking place?

1. Increases in sales volume

2. Lower profit margins

3. Build up of cash in bank

4. Reliance on short term finance

41. The primary users of general purpose financial reports are:

1. Investors and employees

2. Investors and lenders

3. Investors and customers

4. Employees and lenders

42. All of the following influence capital budgeting cash flows except:

1. Choice of depreciation method for tax purposes

2. Economic length of the project

3. Projected sales (revenues) for the project

4. Sunk costs of the project

43. Which of the following would be considered a use of funds?

1. a decrease in accounts receivable.

2. a decrease in cash.

3. an increase in account payable.

4. an increase in cash.

44. A note payable is a borrowing instrument that generally does not involve the payment of interest.

1. true

2. false

45. What do you mean by Comprehensive income?

1. Comprehensive income is the change in equity (net assets) of an entity during a period from transactions and other events and circumstances from no owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

2. Comprehensive income is the equity (net assets) of an entity during a period from transactions and other events and circumstances from no owner sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

3. Comprehensive income is the change in equity (net assets) of an entity during a period from transactions and other events and circumstances from no owner sources. It does not includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

4. None of the above

46. Which of the following is a contra account?

1. Accumulated Depreciation

2. Mary Smith, Capital

3. Both

4. None of the above

47. The amount reported on the balance sheet for Property, Plant and Equipment is the company's estimate of the fair market value as of the balance sheet date.

1. true

2. false

48. Depreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return.

1. true

2. false

49. The proportion of sales that is accounted for by total costs can be ascertained by which ratio?

1. Return on capital employed

2. Gross profit percentage

3. Stock turnover

4. Net profit percentage

50. "An entity which adopts international financial reporting standards must always adhere to the requirements of every standard, no matter what the circumstances".

1. true

2. false

51. Of the following account types, which would be increased by a debit?

1. Liabilities and expenses.

2. Assets and equity.

3. Assets and expenses.

4. Equity and revenues.

52. In proper capital budgeting analysis we evaluate incremental which cash flows.

1. Accounting

2. Operating

3. Before-tax

4. Financing

53. What would be the result where two to twenty (normally) people carry on a business, with a view to profit.

1. consortium

2. partnership

3. company

4. cooperative

54. What do you mean by the Management Accounting?

1. Management Accounting: This type of accounting is a tool in the hands of management for various functions; (i) to control costs (ii) to take important future decisions (forecasting).

2. Management Accounting: This type of accounting is a tool in the hands of management for various functions; (i) to recuit workforce (ii) to take important Selection decisions (forecasting).

3. Management Accounting: This type of accounting is a tool in the hands of management for various functions like pantry management, transportation of employee

4. None of the above

55. Accounting information can only be considered to be useful if it could be capable of affecting people's:

1. welfare

2. behaviour

3. thoughts

4. business

56. In financial statement analysis, an increasing capital stock account tends to be a sign of which of the following?

1. Weak financial health

2. Insolvency

3. Economic health

4. High liquidity

57. The elements of financial statements which relate to financial position are:

1. Income and expenses

2. Income, expenses and equity

3. Assets, liabilities and equity

4. Assets, liabilities, income and expenses

58. Deferred credits will appear on the balance sheet with the?

1. Assets

2. Liabilities

3. Owner's/Stockholders' Equity

4. None of the above

59. Which of the following statements is correct for a conservative financing policy for a firm relative to a former aggressive policy?

1. The firm uses long-term financing to finance all fixed and current assets.

2. The firm will see an increase in its expected profits.

3. The firm will see an increase in its risk profile.

4. The firm will increase its dividends per share (DPS) this period.

60. Current purchasing power accounting is concerned with:

1. Changes in replacement cost

2. Changes in net realisable value

3. Specific price changes

4. General price changes

61. All of the following are true regarding the cash flow statement except?

1. cash outflows are shown in parentheses to indicate that payments must be subtracted

2. this statement explains the causes of the change in the cash balance

3. this statement classifies cash transactions as operating, investing, or financing

4. this statement reports information as of a certain date and therefore, is dated like the balance sheet

62. This question may have more than one answer:
Which two of the following accounts is a current liability?

1. Minority interests

2. Trade receivables

3. Trade payables

4. Taxes payable

5. Reserves

63. When attempting to identify accounting errors the trial balance can be relied on to detect which of the following errors:

1. amounts posted to the correct side of a wrong account

2. all accounting errors

3. posting to the wrong side of any account

4. transactions not accounted for

64. Which of the following statements is not true?

1. Returns inwards and returns outwards are both debit balances

2. Carriage inwards and carriage outwards do not both appear in the trading account

3. Both types of returns appear in the trading account

4. Carriage inwards and carriage outwards are both debit balances

65. Which of the following statement is correct?

1. We can find out from the books of account how much is due to creditors (liabilities)

2. How much the firm owns (assets).

3. One can know about the profit earned or loss suffered

4. 1 and 3

5. All of the above

66. During periods of inflation, the use of FIFO (rather than LIFO) as the method of accounting for inventories causes:

1. higher inventory turnover

2. higher incomes taxes

3. lower ending inventory

4. higher reported sales

5. None of the above

67. A delivery van that cost $40,000 has an expected service life of eight years and a residual value of $4,000. Depreciation for the second year of the asset's life using the sum-of-the-years'-digits method is:

1. 4500

2. 7000

3. 8000

4. None of the above

68. Stock is not included in the current assets when calculating the acid test ratio because:

1. Only debtors can be included, as they will be converted into cash shortly

2. It makes comparison easier as only two current liabilities are included in the acid test ratio

3. Banks only recognise cash and debtors as liquid assets

4. Stock is not a liquid asset

69. XYZ Company has a ratio of (total debt/total assets) that is above the industry average, and a ratio of (long term debt/equity) that is below the industry average. These ratios suggest that the firm:

1. utilizes assets effectively

2. has too much equity in the capital structure

3. has relatively high current liabilities

4. has a relatively low dividend payout ratio

5. None of the above

70. The balances of opening and closing accounts receivable are Rs. 40,000 and 15,000 respectively what would be the value of cash received from customer if the net sales are 45,000.?

1. Rs. 85,000

2. Rs. 60,000

3. Rs. 70,000

4. Rs. 100,000

71. Given the following information, what is the cash conversion cycle in days of PP plc? £000 Total sales: 276 Cost of goods sold: 200 Purchases: 120 Stocks: 37 Debtors: 43 Creditors: 15?

1. 125.6 days.

2. 78.8 days.

3. 60.2 days.

4. 170.0 days.

5. 35.0 days

72. The following are extracts from an income statement for the year ended 31 December 2009 £000 Sales revenue 10,000 Cost of sales (8,500) Distribution costs (300) Administrative expenses (200) Net interest paid (150) Taxation (500) Dividends (100) The profit after tax is:

1. £750,000

2. £250,000

3. £900,000

4. £250,000

73. In 2007, the controller of the XYZ Company discovered that 2006 depreciation expense was overstated by $50,000, a material amount. Assuming an income tax rate of 40 percent, the prior period adjustment to 2007 beginnings retained would be:

1. 0

2. $30,000 debit.

3. $30,000 credit.

4. None of the above