EXAM BANK
MODULE : FUNDAMENTALS OF ACCOUNTING
COURSE : CERTIFICATE IN BUSINESS MANAGEMENT
SECTION A (MULTIPLE CHOICE QUESTIONS)
1 A balance sheet or a statement of financial position lists:
A Only the information about what happened to equity during a time period.
B The inflows and outflows of cash during the period.
C The types and amounts of assets, liabilities, and equity of a business as of a specific date.
D The types and amounts of the revenues and expenses of a business.
2 Accounting activities are affected by
A the number of staff it employs
B the physical location of the business
C the nature of the business
D the numbers of years the business has been operating
3 Accounting is an information and measurement system that does all of the following except
A Communicates business activities.
B Helps promote the company's product and services.
C Identifies business activities.
D Records business activities.
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4
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Assets are:
A
B
C
D
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debts due to others.
debts due to the owner of the business.
items owned and controlled by the business. losses incurred by the business.
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5 An increase in expenses will:
A decreases profits, which decreases owner's equity.
B increases cash, which increases assets.
C increases loan, which increases liability.
D increases profits, which increases owner's equity.
6 Coco Cafe bought coffee beans from the supplier on credit. The journal entry is recorded as:
A debit Accounts Payable and credit Purchase.
B debit Cash and credit Purchase.
C debit Purchase and credit Accounts Payable.
D debit Purchase and credit Cash.
7 An example of an intangible asset is:
A patents.
B land.
C accounts receivable.
D building.
8 Compensating errors cannot be detected by the trial balance. Compensating errors are:
A where the errors are of the same amounts and the amounts cancel each other.
B transactions that are not recorded at all.
C errors where total debits do not equal to total credits.
D a result of debit entries that are recorded as credit entries and viceversa.
9 Best Consultancy made a total of $20,000 in credit sales. The journal entry is recorded as:
A debit Sales and credit Bank.
B debit Sales and credit Accounts Receivable.
C debit Bank and credit Sales.
D debit Accounts Receivable and credit Sales.
10 If a company has total assets of $100,000 and total liabilities of $40,000, total owner's equity is:
A $100,000 B $140,000 C $40,000 D $60,000
11 Connor invests $50,000 worth of kitchen equipment to setup a restaurant. The journal entry is recorded as:
A debit Capital and credit Kitchen Equipment. B debit Cash and credit Kitchen Equipment.
C debit Kitchen Equipment and credit Capital. D debit Kitchen Equipment and credit Cash.
12 Journal entries:
A record transactions according to the different types
B only records debit balances.
C only records credit balances.
D are business transactions recorded according to date sequence.
13 Liabilities are:
A debts due to others.
B debts due to the owner of the business.
C profits earned by the business.
D items owned and controlled by the business.
14 Peter invested $50,000 cash and started his new business. Which two accounts are involved in the transaction?
A Bank and Bank Loan B Bank and Capital
C Cash and Bank D Cash and Capital
15 Monetary assumption states that:
A profits must be understated.
B only items that can be quantified in dollars and cents are recorded in the accounts.
C only cash items can be recorded in accounts.
D expenses must be overstated.
16 Which type of business ownership is required under the law to submit yearly audited accounts?
A Sole Proprietorships.
B Partnerships.
C Limited Liability Companies.
D All businesses are required to submit yearly audited accounts.
17 SMART Tuition Centre paid $15,000 rent by cheque. The journal entry is recorded as:
A debit Rent Expense and credit Cash.
B debit Rent Expense and credit Bank.
C debit Cash and credit Rent Expense.
D debit Bank and credit Rent Expense.
18 The owner withdraws cash from his business for his personal use. The journal entry is recorded as:
A debit Loan and credit Drawings.
B debit Drawings and credit Loan.
C debit Drawings and credit Cash.
D debit Cash and credit Drawings.
19 The accounting process begins with
A Summarizing the recorded effect of business transactions
B Analysis of business transactions and source documents
C Presentation of financial information to decision-makers
D Preparing financial statements and other reports
20 The trial balance is:
A a listing of all accounts with theirrespective balances on a specific date.
B a record of all debit entries only.
C a summary of the accounting equation.
D usually prepared after the financial reports.
21 General Ledgers accounts are classified into:
A Assets
B Liabilities and Owners'Equity
C Revenue and Expenses
D All of the above
22 Tippy Cafe paid their staff's salaries of $8,000 by cheques. Which of the following effect on the accounting equation is correct?
A Cash +$8,000, Retained Profits +$8,000
B Cash -$8,000, Retained Profits +$8,000
C Bank -$8,000, Retained Profits -$8,000
D Bank +$8,000, Retained Profits +$8,000
23 The General Ledger:
A only records credit balances.
B only records debit balances.
C records business transactions according to date sequence.
D records transactions by classification of all common items into specific accounts.
24 Which of the following is a liability account?
A Net Loss
B Furniture and Fixtures
C Capital
D Bank Overdraft
25 Which of the following account will normally have Debit balance?
A Accounts Payable
B Motor Vehicle
C Capital
D Net Profit
26 Which of the following is an asset account?
A Accounts Payable
B Bank Loan
C Drawings
D Goodwill
27 When investors and shareholders invest money in a business venture, the money invested in
the business is known as:
A capital.
B drawings.
C loan.
D retained profits.
28 Which of the following is an example of an internal user of accounting information?
A Management
B Debtor.
C Customer.
D Bank.
29 Which of the following account will normally have Credit balance?
A Sales
B Rent expense
C Salaries
D Building
30 Which of the following statement describes the accounting entity assumption?
A The owners are separate from the business and all transactions affecting the business are to be recorded.
B The business must adopt consistent methods when preparing accounts.
C The business is assumed to continue to survive for an indefinite period.
D A conservative approach is adopted when preparing accounts.
31 Which of the following will result in a debit entry?
A Decreases in an expense account
B Increase in a liability account
C Increase in a revenue account
D Increase in an asset account
32 Which of the following will result in a credit entry?
A Decrease in an owner's equity account
B Increase in a revenue account
C Increase in an asset account
D Increase in an expense account
33 Which of the following is not an owner's equity account?
A Building
B Capital
C Drawings
D Net Profit
34 An increase in expenses will:
A Increase cash
B Decrease profits
C Increase profits
D Increase loan
35 Which of the following is an asset account?
A Prepaid expense
B Rental expense
C Accrued expense
D None of the above
36 The fundamental accounting equation is:
A Owners'equity = Assets - Liabilities
B Owners'equity = Assets + Liabilities
C Assets = Liabilities - Owners'equity
D Assets = Owners'equity - Liabilities
37 Which of the following is a current liability account?
A Bank accounts
B Bank charges
C Bank overdraft
D Bank mortgage loan
38 Mr Wong started an engineering service and invested the followings: Cash $ 30,000
Computers $ 20,000 Bank Loan $ 10,000 Calculate the Capital.
A $ 60,000 B $ 40,000 C $ 20,000 D $ 10,000
39 The principle of prudence states that the business should adopt the following accounting practice:
A Liabilities and expenses to be reported at the lowest possible value.
B Assets to be reported at the highest possible value.
C All anticipated losses to be reported even before they occurred
D Profit to be reported at the highest value.
40 The sales journal is used to:
A Record all sales transactions
B Record all cash sales transactions
C Record all credit sales transactions
D Record all business transactions
41 Balance the Cash Account and find the value of X:
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Dr
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CASH ACCOUNT
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Cr
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Date
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Detail $
Jan 01 Balance b/d
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Date 11,000
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Detail $
Jan 15 Rental 2,000
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Jan 15
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Sales 9,000
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Jan 18 Jan 31
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Salary 2,000
Balance c/d X
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Feb 01 Balance b/d X
A $ 4,000
B $16,000
C $20,000
D $24,000
42 Going concern assumption assumes that:
A Company will continue to survive for a limited period.
B Company will continue to survive for an indefinite period
C Company adopts a consistent method of preparing its accounts
D Company adopts a conservative approach in preparing its accounts
43 A sole proprietorship is:
A A business owned by one person
B A business owned by two or more persons
C A company legally created by law
D A multi-national corporation
44 When goods are sold on credit, what will be the journal entry?
A Dr Sales and Cr Accounts receivable
B Dr Sales and Cr Accounts payable
C Dr Accounts payable and Cr Sales
D Dr Accounts receivable and Cr Sales
45 If total equity are $200,000 and total liabilities are $150,000, then total assets will equal to?
A $ 50,000
B $ 150,000.
C $ 200,000.
D $ 350,000.
46 The process of transferring data from the journal to the ledger is:
A Posting.
B Journalising.
C Balancing the account.
D Double-entry accounting.
47 The left side of the cash book are the debit entries for recording:
A Credit sales invoices
B Credit purchases invoices
C Cash and cheques receipts
D Cash and cheque payments