Business Accounting
Mock Exam
Course Introduction
Business Accounting introduces students to the fundamental principles and practices of accounting within a business context. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, the role of accounting in decision-making, and the application of generally accepted accounting principles (GAAP). Students will explore core concepts including assets, liabilities, equity, revenues, and expenses, as well as gain practical experience in recording financial transactions, managing accounts, and interpreting business performance. This foundational knowledge provides the basis for advanced study in accounting and equips students with the skills necessary for financial literacy and success in various business environments.
Recommended Textbook
Atrills Accounting for Business Students 1st Australian Edition by Atrill McLaney
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Page 2
Chapter 1: Introduction to Accounting
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Sample Questions
Q1) Which of the following are differences between management and financial accounting?
A)Nature of reports produced
B)Frequency of reports
C)Level of detail in reports
D)All of the above
Answer: D
Q2) The accounting report that is specifically designed to answer the question, 'What cash movements took place over a particular period?' is:
A)the statement of financial position.
B)the statement of cash flows.
C)the statement of comprehensive income.
D)all of the above.
Answer: B
Q3) What are the four key qualities of accounting information?
A)Relevance, reliability, comparability and understandability
B)Identification, analysis, reliability and timeliness
C)Planning, control, comparability and analysis
D)Understandability, identification, analysis and relevance
Answer: A
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Chapter 2: Measuring and Reporting Financial Position
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Q1) An example of where the prudence assumption leads to a reduction in the valuation of an asset is:
A)development expenditure capitalised as an asset rather than written off as an expense.
B)taking an upward revaluation of an asset to a reserve rather than including it in the profit calculation.
C)valuing inventory at the lower of cost and net realisable value.
D)All are examples.
Answer: C
Q2) Without the business entity convention, which item in the statement of financial position would not exist?
A)Assets
B)Equity
C)Liabilities
D)Cash at bank
Answer: B
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Chapter 3: Measuring and Reporting Financial Performance
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Sample Questions
Q1) Under accrual accounting, profit is measured as:
A)income minus expenses.
B)assets minus liabilities.
C)sales minus cost of sales.
D)cash sales minus payments for expenses.
Answer: A
Q2) The statement of financial performance provides information on:
A)the financial structure of the business.
B)the financial position of the business.
C)how successful the business was in generating wealth.
D)cash inflows and outflows for the accounting period.
Answer: C
Q3) The accounting principle underpinning the inventory valuation rule 'the lower of cost and net realisable value' is:
A)prudence (conservatism).
B)historical cost.
C)matching costs with revenue.
D)going concern.
Answer: A
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Page 5
Chapter 4: Recording Transactionsthe Journal and Ledger Accounts
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Q1) On a worksheet, the Accumulated Depreciation account has a balance of $50 000 on the trial balance. An adjustment is made to increase Depreciation Expense by $5 000. The balance of Accumulated Depreciation in the adjusted trial balance is:
A)a credit balance of $55 000.
B)a debit balance of $45 000.
C)a credit balance of $45 000.
D)a debit balance of $55 000.
Q2) After closing off the accounts, which of the following accounts will have a zero balance?
A)Cash
B)Creditors
C)Vehicle Expense
D)Inventory
Q3) In adjusting for a prepayment, the expense account needs to be ________ and an asset account needs to be ________.
A)set up; credited
B)set up; reduced
C)credited; debited
D)debited; credited
Page 6
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Chapter 5: Accounting Systems and Internal Control
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Q1) The control account for receivables has a balance of $150 000. The receivables ledger account has a debit balance of $150 000. This agreement shows that the account is error free.
A)True
B)False
Q2) Like the trial balance, internal control procedures can identify or prevent all errors before they are carried forward to the financial statements.
A)True
B)False
Q3) Which of the following is true of a computerised accounting system?
A)Card files are used for employees, creditors and debtors.
B)A coding system is used which does not require linkage to the chart of accounts.
C)A computerised accounting system eliminates the need for internal controls.
D)Because a computerised accounting system updates automatically, the files do not need to be backed up.
Q4) Subsidiary records are not part of the double-entry accounting system.
A)True
B)False
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Chapter 6: Introduction to Limited Companies
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Sample Questions
Q1) Which of these is a disadvantage of a country adopting international accounting standards compared to the country developing its own standards?
A)Standards by their nature must be general and involve compromises.
B)It will increase accounting and reporting costs for multinational companies.
C)It will reduce the comparability of different countries' financial reports.
D)All are disadvantages
Q2) Which statement is untrue for private (Pty Ltd)companies?
A)They tend to be associated with smaller businesses
B)There are fewer private companies in Australia than public companies
C)They are less regulated than public companies
D)The shareholders are often family members
Q3) Which of these is not an advantage of a private company compared to a partnership?
A)Perpetual life
B)Easier transfer of ownership
C)Limited liability
D)Mutual agency
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Chapter 7: Regulatory Framework for Companies
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Q1) Which of the following is not true about segmented financial reports?
A)Under-performing segments will be revealed.
B)Risks and profitability of individual segments are identified.
C)Segments that have been sold will be identified and can be evaluated.
D)Investors can evaluate the company as a whole.
Q2) Incorrect capitalisation of expenses is a means of creative accounting that:
A)overstates revenues.
B)understates revenues.
C)understates net income.
D)overstates net income.
Q3) Pressuring distributors to accept more goods than they can sell is:
A)a method of manipulating liabilities.
B)channel stuffing.
C)engaging in artificial trading.
D)a method of manipulating expenses.
Q4) Three key groups associated with companies are directors, shareholders and auditors. a. Explain the relationship between these three groups.
B. Define a reporting entity and a disclosing entity.
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Chapter 9: Corporate Social Responsibility and Sustainability Accounting
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Q1) Triple bottom line reporting refers to reporting in the three areas of:
A)pollution, climate, recycling.
B)economic prosperity, environmental quality, social justice.
C)physical resources, energy, human resources.
D)None of the above
Q2) On what does sustainability reporting tend to report?
A)Social sustainability
B)Issues impacting on the environment
C)Both A and B
D)Neither A nor B
Q3) Which of these is an example of an environmental disclosure in an annual report?
A)Implementation of tree planting schemes
B)Introduction of environmental audits
C)Sponsoring environmental achievement awards
D)All are examples
Q4) Once there is a complete move to sustainability reporting, TBL:
A)will still be required.
B)may have to be extended.
C)will be absorbed by sustainability reporting.
D)may have to be modified.
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Chapter 10: Analysis and Interpretation of Financial Statements
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Q1) The type of analysis being carried out when a company's gross profit ratio for three years is graphed and compared with the average industry gross profit ratio calculated over the same time period is:
A)parallel analysis.
B)vertical analysis.
C)trend analysis.
D)gearing analysis.
Q2) The formula for gross profit margin is gross profit divided by:
A)sales.
B)total assets.
C)total equity.
D)share capital + long-term loans.
Q3) Which ratios are specifically concerned with assessing the efficiency with which assets have been used by the business?
A)Liquidity ratios
B)Efficiency ratios
C)Gearing ratios
D)Investment ratios
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Chapter 11: Costvolumeprofit Analysis and Relevant Costing
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Q1) Refer to the table above. At the current level of sales, which of the following results are achieved?
A)Without the turning machine profit of $45 000; With the turning machine profit of $52 500
B)Without the turning machine profit of $30 000; With the turning machine profit of $22 500
C)Without the turning machine profit of $37 500; With the turning machine profit of $45 000
D)None of the above
Q2) Variable costs are represented graphically as:
A)starting at zero and increasing as a straight line as activity increases.
B)starting at a given point and increasing as a straight line as activity increases.
C)a horizontal line, staying the same irrespective of the level of activity.
D)the intersection of total costs and total revenue lines.
Q3) The contribution margin is so called because it contributes to:
A)variable costs.
B)fixed and variable costs.
C)fixed costs and profit.
D)fixed costs.
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Page 13
Chapter 12: Full Costing
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Q1) What does the break-even price represent?
A)Variable costs + mark-up
B)Direct costs + mark-up
C)Direct costs
D)Full costs
Q2) Refer to the table above. The management accountant at Oswald Ltd, wants to revise his estimates and use machine hours as the allocation base to determine the overhead recovery rate. The revised overhead recovery rate (rounded)per machine hour will be:
A)$4.88 per MH.
B)$9.00 per MH.
C)$7.38 per MH.
D)$8.75 per MH.
Q3) Refer to the table above. The direct unit cost per racquet for April is:
A)$17.00
B)$9.60
C)$16.70
D)$11.60
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14
Chapter 13: Planning and Budgeting
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Q1) The original budget was set at 15 000 units and estimated variable overheads at $345 000 ($23 per unit). If actual output is 16 000 units, calculate the variable overhead total and unit cost that would be shown in a budget flexed to actual output.
A)$345 000; $23
B)$361 000; $23.50
C)$345 000; $22.50
D)$368 000; $23
Q2) Which statement about the uses of budgets is not true?
A)They can assist in identifying short-term problems.
B)They can provide a system of authorisation for managers to spend up to a particular limit.
C)They are mainly used to set prices.
D)None of the above, i.e., all are true statements
Q3) What is the group which oversees the budgeting process within an organisation?
A)Estimates committee
B)Board of directors
C)Budget committee
D)Variance committee
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Chapter 14: Capital Investment Decisions
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Q1) When a new investment requires an increase in working capital (e.g., accounts receivable, inventory)the analysis should incorporate this by:
A)recording a cash outflow in Year 0 and a cash inflow at the end of the project.
B)recording a cash inflow at the end of the project.
C)evenly dividing the amount of working capital as a cash outflow for each year of the investment.
D)doing nothing as there is a nil impact on cash flows.
Q2) Bev is considering purchasing a new buttonholer for her business. She estimates the machine will cost $90 000 and will be paid for in cash. Her cash savings from the first 4 years of operation of the machine will be $20 000 in year 1, $30 000 in year 2, $35 000 in year 3 and $35 000 in year 4. The payback period for the machine is:
A)4 years.
B)3.86 years.
C)3.14 years.
D)2.66 years.
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