Reference no: EM132365109

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 of the following is NOT a cash outflow for the firm?

1. dividends.

2. interest payments.

3. taxes.

4. depreciation.

9. The prime entry for the acquisition of a cash book, ledgers and a journal for £240 from XYZ, on credit would be in the:

1. Journal

2. Purchases Day Book

3. Cash Book

4. None of the above

10. Which one of the following describes the correct sequence of stages of an accounting information system (where IA = information analysis, II = information identification, IRec = information recording and IRep = information reporting)?

1. IRec II IRep IA

2. II IRec IA Irep

3. II IRec IRep IA

4. IRec II IA Irep

11. Having defined working capital as current assets, it can be further classified according to:

1. Financing method and time

2. Rate of return and financing method

3. Time and rate of return

4. Components and time

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

1. Timeliness

2. Comparability

3. Understandability

4. Reliability

13. What is concerned with the financing and investing activities of the business.

1. Financial systems

2. Financial wealth

3. Financial management

4. Financial accounting

14. 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

15. 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.

16. The profit of a business during an accounting period is equal to

1. total cash receipts less total cash payments

2. total revenues less total expenses

3. total cash receipts less total expenses

4. total revenues less total cash payments

17. 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

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

1. 0.1

2. 1

3. 2.5

4. 3.5

19. In general, revenue is recognized when the earnings process is virtually complete and:

1. Collection of the sales price is reasonably assured

2. A purchase order is received.

3. Cash is collected.

4. Production is completed.

20. 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

21. 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

22. 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

23. What is the normal balance for liability accounts?

1. Debit

2. Credit

3. Both

4. None of the above

24. Depreciation Expense is sometimes referred to as a noncash expense.

1. true

2. false

25. 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

26. Both Land and Land Improvements will generally be depreciated.

1. true

2. false

27. 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

28. What type of accounts are accounts receivable and accounts payable?

1. Operating accounts.

2. Cash accounts

3. Financing accounts.

4. Investing accounts.

29. If a firm has a positive tax rate, a positive ROA, and the interest rate on debt is the same as ROA, then ROA will be:

1. greater than the ROE

2. equal to the ROE

3. less than the ROE

4. greater than zero but it is impossible to determine how ROA will compare to ROE

5. negative in all cases

30. 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

31. 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

32. 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

33. 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

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

1. Completeness

2. Freedom from error

3. Neutrality

4. Predictive value

35. 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

36. 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

37. What is the main objective of conservatism convention?

1. The main objective of conservatism convention is to show minimum profit

2. The main objective of conservatism convention is to show Maximun profit

3. The main objective of conservatism convention is to show minimum loses

4. The main objective of conservatism convention is to show minimum number of employees

38. 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

39. 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

40. 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

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

1. Debit

2. Credit

3. Both

4. None of the above

42. Which of the following is an asset account?

1. Accounts Payable

2. Prepaid Insurance

3. unpaid insurance

4. Unearned Revenue

43. 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

44. Which of the following statements is most correct?

1. For small companies, long-term debt is the principal source of external financing.

2. Current assets of the typical manufacturing firm account for over half of its total assets.

3. Strict adherence to the maturity matching approach to financing would call for all current assets to be financed solely with current liabilities.

4. Similar to the capital structure management, working capital management requires the financial manager to make a decision and not address the issue again for several months.

45. 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

46. Which of the following statements are correct?

1. If any amount of revenue is received but either goods are to be supplied in future or services are rendered in future, the amount is not recognized as revenue in the current year, the result is to be shown as liability in the balance sheet but if any loss is there for which no revenue is earned it is to be charged from the current profit and loss account

2. When an item of revenue is recorded in the profit and loss account, all the expenses incurred whether paid for cash on not should be recorded as the expenses

3. When an item of expense is spent against revenue it will be entered in the following period, result would be to show it in the Balance sheet and in the following period, to be treated as an expense

4. Only 1 and 3

5. 1,2,3

47. 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

48. If the only accounting error is each of those stated below, identify the amount of the trial balance difference which will be placed in a Suspense Account:£218,400 paid to a supplier has been posted to the supplier's account as £214,800.?

1. Dr 3,600

2. Dr 218,400

3. Cr 3,600

4. Both 1 and 2

49. 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

50. What impact does depreciation have on the cash account?

1. Depreciation only impacts the cash account if inflation has occurred.

2. Depreciation results in an increase to cash.

3. Depreciation results in an decrease to cash.

4. Depreciation has no impact on the cash account.

51. What are the elements of Financial statement as per FASB.

1. According to FASB, the elements of financial statements are the building blocks with which financial statements are constructed

2. An entity's cash receipts and cash payments relating to its financing activities during a particular period.

3. The Financial Accounting Standards Board (FASB) has defined the following elements of financial statements of business enterprises: assets, liabilities, equity, revenues, expenses, gains, losses, investment by owners, distribution to owners and comprehensive income.

4. 1 and 3

5. 1 and 2

52. 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

53. Failure to record the receipt of a utility bill for services already received will result in:

1. An overstatement of assets.

2. An overstatement of liabilities.

3. An overstatement of equity.

4. An understatement of assets.

54. As per the Convention of conservatism?

1. Profit is overstated

2. Profit is not overstated

3. Profit is deleted from the book of account

4. Profit is added to the books of accounts

5. 1 and 4 both

55. 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.

56. The following items would be classified as financing activities on the statement of cash flows:

1. Sales of goods, repayment of debt, loans to others.

2. Proceeds from borrowing, payment of dividends, repayment of debt.

3. Payments for inventory, payments to lenders, payments for taxes.

4. Loans to others, returns from loans to others, acquisition of land.

57. Which two of the following accounts is a non-current asset?

1. Reserves

2. Shareholders' equity

3. Trademarks

4. Machinery

5. Retained earnings

58. Which of the following is not a category of ratios?

1. Efficiency

2. Solvency

3. Management

4. Profitability

59. 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

60. 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?

61. The purpose of providing for depreciation in the profit and loss account is to:

1. Reflect the duality concept

2. Ensure funds are available to purchase new assets to replace those disposed of

3. Reflect the net realisable value of the asset in the balance sheet

4. Ensure a charge is made against revenue for the amount of a fixed asset used up in achieving that revenue

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

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

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

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

4. A and B

5. B and C.

63. 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