Exam 2

In the bank reconciliation statement, when there is a credit bank balance as provided by the bank statement document, the item that will be added to this balance will be: Select one: a. Deposits not yet credited b. The total from the Cash Payments Journal c. Unpresented cheques d. The total from the Cash Receipts Journal

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The main purpose of reversing entries is to: Select one: a. correct errors made in the previous accounting period b. Remove the depreciation recorded on assets in the previous period c. conceal incorrect entries made in the previous accounting periods d. cancel the temporary asset and liability accounts created on the balance day of the previous accounting period

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Where would you show an automatic payment that was made by the bank on a business' behalf as part of the bank reconciliation process? Select one: a. Statement of Financial Position b. Bank Reconciliation Statement c. Cash Receipts Journal d. Cash Payments Journal

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A Balance Sheet is: a. A statement of assets, liabilities and equity as at a particular date b. A statement of assets, liabilities and equity at the beginning of the period c. A statement of assets, liabilities and equity at the end of the period d. A statement of assets, liabilities, equity, revenue and expenses

a

A _______ is often kept by an organisation for the purpose of making small miscellaneous payments. Select one: a. petty cash system b. cash on hand c. cheque account d. credit card account

a

Permitting only designated personnel to handle cash receipts is an application of the principle of: a. Establishment of responsibility b. Segregation of duties c. Independent checks d. Other controls

a

Receipts from customers will be classified as a/an ___________ in the Statement of Cash Flows. Select one: a. Operating activities b. General activities c. Financing activities d. Investing activities

a

Select the transaction that will have to be recorded in the General Journal if special journals are being used by a business. Select one: a. drawings of goods by the owner for personal use b. cash sales of goods c. credit sales of goods d. credit purchases of goods

a

The Prepaid Magazine Subscriptions Accounts shows a Dr balance of $1,500.00 (GST exclusive). During the accounting periods, prepaid magazine subscriptions of $1,100.00 have expired. The adjusting journal entry to record the expired prepaid magazine subscriptions is: a. Dr Magazine Subscriptions $1,100.00, Cr Prepaid Magazine Subscriptions $1,100.00 b. Dr Prepaid Magazine Subscriptions $1,100.00, Cr Magazine Subscriptions $1,100.00 c. Dr Magazine Subscriptions $1,500.00, Cr Prepaid Magazine Subscriptions, $1,500.00 d. Dr Prepaid Magazine Subscriptions $1,500.00, Cr Magazine Subscriptions $1,500.00

a

The most appropriate source document to record credit purchases is: a. Invoice (original) b. Invoice (copy) c. Cheque butt d. Credit note

a

There are two methods that may be used to calculate a business' cash flows from operations. The method that involves the reconstruction of the accounts to determine movements in cash from operating activities is called the: Select one: a. Direct method b. Reconstruction method c. Indirect method d. Reconciliation method

a

Which of the following is NOT a taxable period permitted by the IRD? a. 12 monthly b. 2 monthly c. Monthly d. 6 monthly

a

Which of the following transactions will be recorded in the General Journal if special journals are used by a business? a. Sale of a fixed asset b. Cash sales of goods c. Credit sales of goods d. None of the above

a

Which one of the following does not represent a category of the transactions that constitute as inputs into the accounting information system? Select one: a. aging b. internal c. time interval d. external

a

Which one of the following statements is most accurate about the use of worksheets in accounting? Select one: a. Worksheets are a useful tool for accountants which facilitate the preparation of financial statements. b. In practice, accountants make use of worksheets to compile information after the preparation of the financial statements. c. Worksheets have no use to accountants of this modern age. d. A worksheet does not allow the accountant to view all the account balances

a

_________ are payments made by a business in one accounting period for the benefits to accrue in the future accounting periods. Select one: a. prepaid expenses b. accrued expenses c. Unearned revenues d. accrued revenues

a

A trial balance is a list of all _______ accounts on a given date. Select one: a. purchases b. ledger c. journal d. sales

b

At the end of each month or appropriate period the totals in each of the columns in the Sales Journal are posted to the respective accounts in the: Select one: a. trial balance b. general ledger c. financial statements d. general journal

b

Financial statements that cover a period shorter than one fiscal year are called Select one: a. ledger accounts b. interim financial statements c. worksheets d. annual reports

b

For external reporting purposes, companies with certain exceptions are required to file audited financial statements with the _________________ on a/an ____________basis Select one: a. Registrar of Companies; quarterly b. Registrar of Companies; annual c. IRD; annual d. IRD; monthly

b

Identify the correct category for unearned revenue: a. Asset b. Liability c. Revenue d. Expense

b

In the Statement of Financial Performance for Xavier Xtra Accounting Services , which one of the following will not be a revenue earned by this business? Select one: a. Tax consulting Services b. Advertising Services c. Business Advisory Services d. Accounting Services

b

Internal control is used in a business to enhance the accuracy and reliability of its accounting records and to: a. Prevent fraud b. Safeguard its assets c. Produce correct financial statements d. Deter employee dishonesty

b

Select the item that is not a common error which will result in the inequality of debits/credits in the trial balance. Select one: a. Debit/credit interchange b. Omission c. Arithmetic mistakes d. Slide

b

Springboard Entrepreneurs Ltd was approved a bank loan of $25,000 (Repayable over a 5 year period) which was put into the business bank account. Where would the loan appear in the Statement of Financial Position? Select one: a. Non-Current Asset b. Non Current Liability c. Current Liabilities d. Equity

b

The ________ concept requires that profit be measured by matching revenue for the period with expenses incurred in earning that revenue. Select one: a. Period b. Matching c. Revenue Recognition d. Cash Basis

b

The benefits of recording transactions in special journals do not include: Select one: a. better control b. removal of errors c. easy information retrieval d. efficiencies in recording

b

The effect of the cash based accounting transactions is recognised in the accounting period in which Select one: a. all revenue have been recognised b. cash has been received or paid c. all expenses have been recognised d. credit transactions have been recognised

b

The source document associated with purchases returns of merchandise by a business to its supplier is the: Select one: a. sales invoice b. credit note c. receipt d. bank statement

b

What amount should be shown in the "Invoice Total" column in the Sales Journal if a credit sale of $540 (GST exclusive) to a customer was to be recorded? Select one: a. $81 b. $621 c. $469.57 d. $540

b

Which of the following is NOT an advantage of a computerised accounting system? a. Speed of processing b. Data entry errors are difficult to trace c. Easier storage of accounting information d. Improved accuracy and reduction of errors

b

Which of the following statements regarding a trial balance that equals is correct? a. All transactions have been recorded correctly b. There may still be compensating errors c. All transactions have been included d. All transactions have been posted to the correct accounts

b

Which one of the following is not a balance day adjustment? Select one: a. depreciation on asset at year end b. cash sales for the accounting period c. accrued revenue for the period d. income received in advance for next period

b

Which one of the following is not a type of cash account? Select one: a. Petty Cash Fund b. Petty Cash Expenses c. Cash at Bank d. Cash on Hand

b

With regards to the Statement of Financial Position, which one of the following statements is most accurate? Select one: a. If the Statement is prepared as at 31 December 2004, then the date written on the statement should be the next working day. b. Enables readers to assess the financial position of the business entity. c. The total of liabilities and owners equity should not equal the total of the assets. d. Only current liabilities are shown in the Statement of Financial Position.

b

You have been provided with the following information Capital at start $35,000.00 Capital at end $48,000.00 Profit for the year $22,000.00 Additional cash invested by the owner during the year $10,000.00 How much cash did the owner withdraw for personal use? a. $45,000.00 b. $19,000.00 c. $13,000.00 d. $20,000.00

b

A __________ is a tabular record in which the effects of the transactions are entered in chronological order and analysed in terms of debits and credits. Select one: a. general ledger b. source documents c. general journal d. trial balance

c

An asset shall be recognised in the statement of financial position when and only when it is _________ that the service potential or future economic benefits embodied in the asset will eventuate and the asset possesses a cost or other value that can be measured with __________. Select one: a. probable; confidence b. unlikely; reliability c. probable; reliability d. unlikely; confidence

c

An invoice from a supplier shows a total of $1500 owing. The GST component of this is: a. $225 b. $166.67 c. $195.65 d. $187.50

c

As at balance day, 31 March 2011, it has been estimated that the electricity consumed is $350.00. The invoice for electricity consumption will not be received until 6 April 2011. The journal entry required at balance day is: a. Dr Electricity Expense $350.00, Cr Bank $350.00 b. Dr Electricity Expense $304.35, Dr GST Clearing $45.65, Cr Accrued Expenses $350.00 c. Dr Electricity Expense $350.00, Cr Accrued Expenses $350.00 d. None of the above.

c

Cash drawings by the owner of a business should be classified as a/an ________ activity in the Statement of Cashflows Select one: a. Investing b. Not recorded in the Statement of Cashflows c. Financing d. Operating

c

For the year ended 31 December, a delivery truck has incurred depreciation for $5,650. Which of the following is the correct journal entry to record the balance day adjustment? Select one: a. Dr Delivery Truck; Cr Accumulated Depreciation-Delivery Truck b. Dr Depreciation Expense; Cr Bank c. Dr Depreciation Expense; Cr Accumulated Depreciation-Delivery Truck d. Dr Accumulated Depreciation-Delivery Truck ; Cr Delivery Truck

c

How many steps are there in the accounting cycle provided in Exhibit 5.1? Select one: a. 7 b. 8 c. 9 d. 6

c

On 1 September 2010 Blast Ltd took out a term loan for $100,000.00 with the following terms. Term of loan 10 years; interest rate 6% p.a.;principal repayable in equal instalments over the term of the loan on 1 September beginning 1 September 2011. How should Blast Ltd classify this loan in their Balance Sheet as at 31 March 2011? a. Current Liability b. Non Current Liability c. A portion as a current liability and a portion as a non current liability d. Expense

c

On 25 March 2XX1, Mitz Parts Ltd, an auto dismantling business received $175 from a customer for a second hand CV joint. Due to the shortage of such parts Mitz Parts Ltd promised to deliver the CV joint in 2 months time to the customer. The balance date for Mitz Parts Ltd is on 31 March every year. The type of balance day adjustment necessary for this transaction is: Select one: a. Accrued Revenue b. Depreciation c. Unearned revenue d. Prepayment

c

The _______ indicates the cash movements that took place in an organisation over a particular period of time. Select one: a. Statement of Financial Performance b. Cash Receipts Journal c. Statement of Cashflows d. Cash Payments Journal

c

What amount should be shown in the "Purchases" column in the Purchases Journal if a credit purchase of $920 (GST inclusive) from a supplier was to be recorded? Select one: a. $920 b. $138 c. $800 d. $120

c

Which of the following accounts is closed off at the end of the accounting period? a. Motor Vehicle b. Accumulated Depreciation - Motor Vehicle c. Motor Vehicle Expenses d. All of the above

c

Which of the following is NOT one of the financial disciplines of accounting: a. Management accounting b. Finance c. Economics d. Financial accounting

c

Which one of the following items will not appear in a cash budget? Select one: a. Forecasted payments for operating expenses b. Anticipated cash payments for purchases c. Provision for depreciation on an asset d. Anticipated cash sale receipts

c

With the advent of computing technology, most business use computerised accounting system to process the accounting information. Which one of the following is a disadvantage of accounting packages? Select one: a. Many control features are built in to enhance the integrity of the accounting information and data accuracy. b. Financial statements and other reports can be produced at the touch of a button. c. If there is no password control, accounting data can be manipulated. d. Getting an unequal trial balance is an exception rather than a norm.

c

________ are the future sacrifices of service potential or of future economic benefits that the entity is presently obliged to make to other entities as a result of past transactions or other past events. Select one: a. revenues b. assets c. liabilities d. expenses

c

_________ provides information relating to the resources of the business available to generate the income. Select one: a. Statement of Cashflows b. Statement of Financial Performance c. Statement of Financial Position d. Statement of Movements in Equity

c

A liability is: a. A probable future sacrifice of service potential or future economic benefits b. Able to be reliably measured c. Is the result of a past transaction d. All of the above

d

A process known as _______ is used when transferring information recorded in the journal to the ledger accounts. Select one: a. analysis of transactions b. adding c. adjustment d. posting

d

According to the NZ Framework which of the following is not an essential characteristic of liabilities: Select one: a. there must be a present obligation, which has not yet been satisfied b. there must be adverse financial consequences for the entity c. the event which gives rise to the obligation to sacrifice service potential must have occurred d. the transaction which gives rise to the obligation to sacrifice potential or future economic benefit should not have occurred

d

On 1 March 2011 a firm purchased a motor vehicle on credit for $24,500.00 (GST inclusive). The entry to record this transaction is: a. Dr Purchases $21,304.44, Dr GST clearing $3,195.56, Cr Sundry Creditor $24,500.00 b. Dr Purchases $24,500.00, Cr Sundry Creditors $24,500.00 c. Dr Motor Vehicles $24,500.00, Cr GST Clearing $3,195.56, Cr Sundry Creditors $21,304.44 d. Dr Motor Vehicles $21,304.44, Dr GST Clearing $3,195.56, Cr Sundry Creditors $24,500.00

d

Select the error that will be detected by the trial balance summary Select one: a. Compensating error b. Posting to the correct side of the account but to the wrong account c. Omission/Duplication d. Transposition of numbers

d

The Statement of Financial Performance and the Statement of Financial Position should be prepared on a GST-exclusive basis except for the figures for _________ and ________, which are GST ________. Select one: a. Sales Revenue; Accounts Receivable; Exclusive b. Purchases Expense; Accounts Payables ; Inclusive c. Accounts Receivables; Accounts Payables; Exclusive d. Accounts Receivables; Accounts Payables; Inclusive

d

The following balance day adjustment entry was recorded by Chilly Ltd at year end. Wages Dr 560.00 Accrued Wages 560.00 Chilly Ltd does prepare reversing entries. The entry required at the start of the new accounting period is: a. Dr Wages $560.00, Cr Bank $560.00 b. Dr Accrued Wages $560.00, Cr Bank $560.00 c. Dr Prepaid Wages $560.00, Cr Wages $560.00 d. Dr Accrued Wages $560.00, Cr Wages $560.00

d

The source document associated with payments by a business to other parties is the: Select one: a. sales invoice b. supplier invoice c. deposit slip d. cheque butt

d

There are three categories of activities in the preparation of the Statement of Cashflows. The category that is associated with any purchases or sales of assets and investments is: Select one: a. Selling activities b. Operating activities c. Financing activities d. Investing activities

d

What amount should be shown in the "Invoice Total" column in the Sales Journal if a credit sale of $540 (GST inclusive) to a customer was to be recorded? Select one: a. $469.57 b. $621 c. $70.43 d. $540

d

Which of the following statements is NOT true regarding a Chart of Accounts? a. There is no finite number of accounts b. The accounts listed in a Chart of Accounts have a numeric code c. It lists all asset, liability, equity, revenue and expense accounts d. It lists all asset, laibility and equity accounts

d