Question

11) When a business prepays a maintenance contract, which of the following is true? a) Cash decreases, prepaid expenses increases, equity decreases b) Cash decreases, prepaid expenses increases on the income statement, equity decreases c) Cash decreases, prepaid expenses increases, no change to equity d) Cash decreases, prepaid expenses increases on the income statement, no change to equity e) None of the choices listed

12) Value of owners’ equity at the end of January is $30,000. Calculate the value of owners equity at the end of February, after the following transactions occurred: cash revenues $14,000, cash expenses $5,000, expenses on account payable in March $3,000, interest on loan $1,000, bought fixed assets for $20,000 cash and billed travel expenses of $2,000 to a credit card payable in March. a) $27,000 b) $20,000 c) $53,000 d) $33,000 e) None of the choices listed

13) If a business records a telephone expense in March but does not pay the bill until June, which of the following is true? a) In June, debt decreases, expenses increase and equity decreases b) In June debt decreases and in March equity and cash decrease c) In March, debt increases, expenses increase and equity does not change d) In March, debt increases, expenses increase and equity decreases e) None of the choices listed

14) Under IFRS, what is the balance sheet known as? a) Statement of Changes in Equity b) Statement of Comprehensive Income c) Balance Sheet d) Statement of Financial Position e) None of the choices listed

15) If the value of owner’s equity is initially $10,000, calculate the value of owner’s equity after the following transactions: cash revenues $9,000, prepay rent $3,000, pay bank loan principal $2,000, pay maintenance fees $4,000 and buy a computer on account for $1,000. a) $11,000 b) $15,000 c) $9,000 d) $13,000 e) None of the choices listed

16) Which of the following is an expected advantage of implementing IFRS? a) Increased jurisdictional control b) Increased costs in the short term c) Increased comparability d) Increased GAAP e) None of the choices listed

17) Recording and recognizing prepaid expenses is an example reflecting which of the following principles? a) Objectivity Principle b) Going Concern Principle c) Time Period Concept d) Matching Principle e) None of the choices listed

18) Which fundamental characteristic of GAAP requires that all information useful for decision making is present in the financial statements? a) Relevance b) Understandability c) Comparability d) Reliability e) None of the choices listed

19) The matching principle requires that expenses: a) be matched with revenues in the same period b) be less than revenue during each period c) be matched with liabilities d) be recorded only when cash is exchanged e) None of the choices listed

20) The owner of a manufacturing business also happens to be the company's corporate auditor. Which of the following do you believe is true? a) It is unethical b) It is ethical c) There is nothing wrong with this as long as their bank is aware of the fact d) It will be ethical if he agrees not to be paid to do the audit e) None of the choices listed

21) Which fundamental characteristic of GAAP requires that financial statements are prepared in a similar way year after year? a) Relevance b) Understandability c) Comparability d) Reliability e) None of the choices listed

22) Members shall adhere to acknowledged principles and standards of professional practice. The preceding statement is: a) an aspect of triple bottom line reporting b) a form of organization c) a statement typical of the codes of ethics for accountants d) a statement of GAAP e) None of the choices listed

23) Which fundamental characteristic of GAAP requires that information is reasonably understood by its users? a) Relevance b) Understandability c) Comparability d) Reliability e) None of the choices listed

24) The purpose of internal controls is to provide reasonable assurance regarding the achievement of the: a) reliability of financial reporting b) effectiveness and efficiency of operations c) compliance with applicable laws and regulators d) all of the choices e) None of the choices listed

25) One of the roles of a professional accountant would be: a) to use information prepared by the bookkeeper to provide appropriate accounting adjustments in accordance with GAAP b) to prepare income statements only on a month to month basis c) to do the bank reconciliations only d) to only prepare payroll each month for the bookkeeper e) None of the choices listed

Answer 1

11) When a business prepays a maintenance contract, which of the following is true? a) Cash decreases, prepaid expenses increases, equity decreases b) Cash decreases, prepaid expenses increases on the income statement, equity decreases c) Cash decreases, prepaid expenses increases, no change to equity d) Cash decreases, prepaid expenses increases on the income statement, no change to equity e) None of the choices listed

Ans: c) Cash decreases, prepaid expenses increases, no change to equity

12) Value of owners’ equity at the end of January is $30,000. Calculate the value of owners equity at the end of February, after the following transactions occurred: cash revenues $14,000, cash expenses $5,000, expenses on account payable in March $3,000, interest on loan $1,000, bought fixed assets for $20,000 cash and billed travel expenses of $2,000 to a credit card payable in March. a) $27,000 b) $20,000 c) $53,000 d) $33,000 e) None of the choices listed

Ans: d) $33,000

Note: (14000-5000-3000-1000-2000=3000) Add to owners’ equity of $30000.

13) If a business records a telephone expense in March but does not pay the bill until June, which of the following is true? a) In June, debt decreases, expenses increase and equity decreases b) In June debt decreases and in March equity and cash decrease c) In March, debt increases, expenses increase and equity does not change d) In March, debt increases, expenses increase and equity decreases e) None of the choices listed

Ans: d) In March, debt increases, expenses increase and equity decreases

Note: Debt increases due to liability created, expense is accounted in Income statement and hence impact of retained earnings on equity.

14) Under IFRS, what is the balance sheet known as? a) Statement of Changes in Equity b) Statement of Comprehensive Income c) Balance Sheet d) Statement of Financial Position e) None of the choices listed

Ans: d) Statement of Financial Position

15) If the value of owner’s equity is initially $10,000, calculate the value of owner’s equity after the following transactions: cash revenues $9,000, prepay rent $3,000, pay bank loan principal $2,000, pay maintenance fees $4,000 and buy a computer on account for $1,000. a) $11,000 b) $15,000 c) $9,000 d) $13,000 e) None of the choices listed

Ans: b) $15,000

Note: (9000-4000=5000) Add to owners’ equity of $10000.

16) Which of the following is an expected advantage of implementing IFRS? a) Increased jurisdictional control b) Increased costs in the short term c) Increased comparability d) Increased GAAP e) None of the choices listed

Ans: c) Increased comparability

17) Recording and recognizing prepaid expenses is an example reflecting which of the following principles? a) Objectivity Principle b) Going Concern Principle c) Time Period Concept d) Matching Principle e) None of the choices listed

Ans: d) Matching Principle

18) Which fundamental characteristic of GAAP requires that all information useful for decision making is present in the financial statements? a) Relevance b) Understandability c) Comparability d) Reliability e) None of the choices listed

Ans: a) Relevance

19) The matching principle requires that expenses: a) be matched with revenues in the same period b) be less than revenue during each period c) be matched with liabilities d) be recorded only when cash is exchanged e) None of the choices listed

Ans: a) be matched with revenues in the same period

20) The owner of a manufacturing business also happens to be the company's corporate auditor. Which of the following do you believe is true? a) It is unethical b) It is ethical c) There is nothing wrong with this as long as their bank is aware of the fact d) It will be ethical if he agrees not to be paid to do the audit e) None of the choices listed

Ans: a) It is unethical

21) Which fundamental characteristic of GAAP requires that financial statements are prepared in a similar way year after year? a) Relevance b) Understandability c) Comparability d) Reliability e) None of the choices listed

Ans: c) Comparability

22) Members shall adhere to acknowledged principles and standards of professional practice. The preceding statement is: a) an aspect of triple bottom line reporting b) a form of organization c) a statement typical of the codes of ethics for accountants d) a statement of GAAP e) None of the choices listed

Ans: c) a statement typical of the codes of ethics for accountants

23) Which fundamental characteristic of GAAP requires that information is reasonably understood by its users? a) Relevance b) Understandability c) Comparability d) Reliability e) None of the choices listed

Ans: b) Understandability

24) The purpose of internal controls is to provide reasonable assurance regarding the achievement of the: a) reliability of financial reporting b) effectiveness and efficiency of operations c) compliance with applicable laws and regulators d) all of the choices e) None of the choices listed

Ans: d) all of the choices

25) One of the roles of a professional accountant would be: a) to use information prepared by the bookkeeper to provide appropriate accounting adjustments in accordance with GAAP b) to prepare income statements only on a month to month basis c) to do the bank reconciliations only d) to only prepare payroll each month for the bookkeeper e) None of the choices listed

Ans: a) to use information prepared by the bookkeeper to provide appropriate accounting adjustments in accordance with GAAP