Question

PART ONE

Question 1 :

The goal of accounting is to provide useful information for decisions.Therefore, financial accounting is governed by concepts and rules known as generally accepted accounting principles (GAAP).

1. Explain that sentence showing the qualitative characterstics of usefull information. [10 marks].
2. b) Discuss the main roles of International Accounting Standards Board (IASB) including its efforts with Financial Accounting Standard Board (FASB) to achieve a single set of accounting standards for global use. [15 marks].

Question 2

A Choose the correct answer for the following items. (20 marks= 2 mark each)

1) Which of the following financial statements lists the entity's assets, liabilities, and stockholders' equity as of a specific date?

A) Statement of cash flows

B) Statement of retained earnings

C) Income statement

D) Balance sheet

2) Which of the following sequences is the normal sequence of flow of accounting data?

A) Ledger → Journal → Source document

B) Journal → Source document → Ledger

C) Source document → Journal → Ledger

D) Source document → Ledger → Journal

3) The field of accounting that focuses on providing information for external decision makers is ________.

A) managerial accounting

B) financial accounting

C) cost accounting

D) nonmonetary accounting

4) Which of the following is the record holding all the accounts, the changes in those accounts, and their balances?

A) Ledger

B) Journal

C) Source document

D) Trial balance

5) Luna Rashed decided to start her own CPA practice as a professional corporation, Rashid CPA PC. Her corporation purchased an office building for $35,000 that her real estate agent said was worth $50,000 in the current market. The corporation recorded the building as a $50,000 asset because Luna believes that is the real value of the building. Which of the following concepts or principles of accounting is being violated?

A) cost principle

B) economic entity assumption

C) monetary unit assumption

D) going concern assumption

6) Which of the following statements is true of a trial balance?

A) A trial balance is the first step in the accounting cycle.

B) A trial balance is also known as a balance sheet.

C) A trial balance is a list of all accounts with their balances.

D) A trial balance is also known as the chart of accounts.

7) Sunlight Company has assets and equity that amount to $200,000 and $90,000, respectively. Liabilities total ________.

A) $90,000

B) $110,000

C) $200,000

D) $290,000

8) GCC Co. reported assets of $1,000 and equity of $450. What is its debt ratio?

A) 60%

B) 45%

C) 100%

D) 55%

9) Future, Inc. paid $12,000 on accounts payable. How does this transaction affect the accounting equation of Future, Inc.?

A) assets decrease by $12,000 and equity increases by $12,000

B) assets decrease by $12,000 and liabilities decrease by $12,000

C) assets increase by $12,000 and equity decreases by $12,000

D) assets increase by $12,000 and liabilities increase by $12,000

10) The Accounts Payable account of Nadeen, Inc. has the following postings:

Calculate the ending balance of the account.

A) $18,000 credit

B) $5,000 debit

C) $12,000 credit

D) $18,000 debit

B- Identify whether the following items would be reported on the income statement (IS) or statement of financial position (FP).

1.   Service Revenue

2.   Cash

3.   Interest Expense

4.   Notes Payable

5.   Salaries Expense

Answer 1

A Choose the correct answer for the following items. (20 marks= 2 mark each)

1) Which of the following financial statements lists the entity's assets, liabilities, and stockholders' equity as of a specific date?

D) Balance sheet

Explanation. All the other statement reports income and expenses over a period of time. Balance sheet reports the balances as on a specific date.

2) Which of the following sequences is the normal sequence of flow of accounting data?

C) Source document → Journal → Ledger

Explanation: The souce document is the document that contains all the transaction of the business. Journal Entry can be prepared only if we know the transactions and ledger can be prepared only when we know the accounts involved in the transactions.

3) The field of accounting that focuses on providing information for external decision makers is ________.

B) financial accounting

Explanation: Financial accounting gives information for external decision makers while managerial accounting provides information for internal decision makers.

4) Which of the following is the record holding all the accounts, the changes in those accounts, and their balances?

A) Ledger

Explanation: The opening Balance, the changes and the closing balance of each account is reflected in ledger accounts.

5) Luna Rashed decided to start her own CPA practice as a professional corporation, Rashid CPA PC. Her corporation purchased an office building for $35,000 that her real estate agent said was worth $50,000 in the current market. The corporation recorded the building as a $50,000 asset because Luna believes that is the real value of the building. Which of the following concepts or principles of accounting is being violated?

A) cost principle

Explanation: All assets purchased should first be reported at cost price.

6) Which of the following statements is true of a trial balance?

.

C) A trial balance is a list of all accounts with their balances.

Explanation: A trial balance is holds the ending balances of all accounts from the ledger.

.

7) Sunlight Company has assets and equity that amount to $200,000 and $90,000, respectively. Liabilities total ________.

B) $110,000

Liabilities = Assets- Equity = $200,000-$90,000

8) GCC Co. reported assets of $1,000 and equity of $450. What is its debt ratio?

D) 55%

Debt Ratio = Liabilities / Assets = $550/$1000 = 55%

9) Future, Inc. paid $12,000 on accounts payable. How does this transaction affect the accounting equation of Future, Inc.?

B) assets decrease by $12,000 and liabilities decrease by $12,000

Explanation: Cash goes out, so decrease in assets. Liability is paid off, hence decrease in liabilities.

10) The Accounts Payable account of Nadeen, Inc. has the following postings:

Calculate the ending balance of the account.

A) $18,000 credit

B) $5,000 debit

C) $12,000 credit

D) $18,000 debit

Not enough information to calculate. Input missing.

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