Business Accounting
Question Bank
Course Introduction
Business Accounting introduces students to fundamental concepts and practices essential for understanding the financial workings of organizations. The course covers the recording, summarizing, and interpretation of business transactions, focusing on the preparation and analysis of financial statements such as balance sheets, income statements, and cash flow statements. Core topics include accounting principles, the accounting cycle, asset and liability management, and ethical considerations in financial reporting. Through hands-on exercises and case studies, students gain practical skills in bookkeeping, budgeting, and financial analysis, enabling them to make informed business decisions and effectively communicate financial information within various organizational contexts.
Recommended Textbook
Financial Accounting 5th Canadian Edition by Walter T. Harrison
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Page 2
Chapter 1: The Financial Statements
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Sample Questions
Q1) Current assets are assets expected to be converted to cash, sold, or consumed:
A) within the next 12 months or within the business's normal operating cycle if less than a year
B) within the next 12 months or within the business's normal operating cycle if longer than a year
C) within the next 6 months
D) within the next 24 months
Answer: B
Q2) Which of the following financial statements would a potential investor most likely use to evaluate a company's financial performance for the current period?
A) balance sheet
B) income statement
C) cash flow statement
D) retained earnings statement
Answer: B
Q3) The payment of interest is a financing activity.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Recording Business Transactions
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Sample Questions
Q1) The accounting transaction to record payment of the telephone bill would include a:
A) credit to Cash
B) credit to Accounts Payable
C) credit to Utilities Expense
D) debit to Accounts Receivable
Answer: A
Q2) Purchasing a three-year insurance policy for cash would include a:
A) debit to Cash and a credit to Accounts Receivable
B) debit to Insurance Expense and a credit to Dividends
C) debit to Prepaid Insurance and a credit to Accounts Payable
D) debit to Prepaid Insurance and a credit to Cash
Answer: D
Q3) The purchase of office equipment for cash would include a:
A) debit to Cash
B) debit to Office Equipment
C) credit to Accounts Payable
D) credit to Office Equipment
Answer: B
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4
Chapter 3: Accrual Accounting and the Financial Statements
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Sample Questions
Q1) The debt ratio is computed by:
A) dividing total liabilities by total assets
B) dividing total assets by total liabilities
C) dividing current liabilities by total assets
D) dividing total assets by current liabilities
Answer: A
Q2) On a cash flow statement, closing entries will:
A) be shown in the operating activities
B) be shown in the investing activities
C) be shown in the financing activities
D) not appear on the statement
Answer: D
Q3) The statement of retained earnings is the first financial statement to be prepared, followed by the balance sheet, and then the income statement.
A)True
B)False
Answer: False
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Page 5
Chapter 4: Internal Control and Cash
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Sample Questions
Q1) If the expected ending cash balance is $5,000, estimated cash receipts are $125,000, and estimated cash payments are $131,000, then:
A) the beginning cash balance is $11,000
B) the beginning cash balance is $6,000
C) the beginning cash balance is $5,000
D) the beginning cash balance is $1,000
Q2) Differentiate between the role of an external and internal auditor.
Q3) Managers must control the operations of their business. A plan of internal control is designed to help management maintain control of a business and its operations. What are the key elements of a plan of internal control?
Q4) In a bank reconciliation, bank service charges are:
A) added to the bank balance on the bank statement
B) deducted from the bank balance on the bank statement
C) added to the bank balance in the general ledger
D) deducted from the bank balance in the general ledger
Q5) Purchasing agents should always receive goods and approve payments for those goods.
A)True
B)False
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Chapter 5: Short-Term Investments and Receivables
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Sample Questions
Q1) What category of account is the Allowance for Uncollectible Accounts account?
A) contra-asset account
B) contra-revenue account
C) contra-expense account
D) expense account
Q2) A written promise to pay a specified amount of money at a particular future date is called a(n):
A) account receivable
B) promissory note
C) maturity note
D) unearned revenue
Q3) Which of the following ratios is considered to be a more stringent measure of a company's ability to pay its current liabilities than the current ratio?
A) acid-test ratio
B) equity ratio
C) debt ratio
D) days' sales in receivables
Q4) What are 'held-for-trading investments'?
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Chapter 6: Inventory and Cost of Goods Sold
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Sample Questions
Q1) FIFO income typically is less realistic compared to the net income under weighted-average cost.
A)True
B)False
Q2) A perpetual inventory system offers all the following advantages except:
A) inventory balances are always current
B) it enhances internal control
C) it is less expensive than a periodic system
D) it helps salespeople determine whether there is a sufficient supply of inventory on hand to fill customer orders
Q3) FIFO tends to decrease cost of goods sold when:
A) costs are constant
B) costs are decreasing
C) costs are increasing
D) FIFO will always yield the lowest possible taxes
Q4) In a time of increasing inventory costs, FIFO gives us a higher COGS number compared to the weighted average method.
A)True
B)False
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Chapter 7: Property, Plant, and Equipment, and Intangible Assets
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Sample Questions
Q1) When using the double-declining-balance depreciation method, the asset's residual value is used in computing the first year of depreciation.
A)True
B)False
Q2) Big Rock Times Corporation (BRT) acquired equipment on January 1, 2012, for $300,000. The equipment had an estimated useful life of 10 years and an estimated salvage value of $25,000. On January 1, 2015, BRT Corporation revised the total useful life of the equipment to 6 years and the estimated salvage value to be $10,000. Compute the book value of the equipment as of December 31, 2015, if BRT Corporation uses straight-line depreciation.
A) $148,333
B) $151,667
C) $155,000
D) $190,000
Q3) If an organization selects the revaluation model, it should revise its depreciation amount with each new carrying amount.
A)True
B)False
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Chapter 8: Long-Term Investments and the Time Value of Money
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Sample Questions
Q1) The parent and subsidiary relationship that is established in consolidation accounting is an example of the entity concept.
A)True
B)False
Q2) How does a company such as ATCO Ltd. report the results of its diverse worldwide lines of business?
Q3) When a premium on a bond investment is amortized by the company holding the investment:
A) the amount of cash received as an interest payment will be increased
B) the amount of cash received as an interest payment will be reduced
C) Interest Revenue will be debited
D) companies normally credit a separate account called Premium on Investments
Q4) The journal entry to record the receipt of a cash dividend will include a credit to Retained Earnings.
A)True
B)False
Q5) Why is understanding the extent to which ATCO Ltd. influences another company important for accounting purposes? What impact does the degree of influence ATCO Ltd. has over another company have on accounting?
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Chapter 9: Liabilities
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Sample Questions
Q1) New Growth greenhouse purchases 500 watering cans for $1500 plus 13% HST for a total of $1,695.
In the spring New Growth sells these watering cans for $3000 plus HST for a total of $3,390.
Prepare the following journal entries for:
a the purchase of the watering cans by New Growth
b the sale of the watering cans
c the remittance of the HST
Q2) Amortizing the discount on a bond payable:
A) increases the face value of the bonds
B) decreases the face value of the bonds
C) increases the carrying amount of the bonds
D) decreases the carrying amount of the bonds
Q3) An example of a post retirement benefit provided by a company is medical insurance for retired workers.
A)True
B)False
Q4) Another name for the effective interest rate is the market interest rate.
A)True
B)False
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Chapter 10: Shareholders Equity
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Sample Questions
Q1) Once a share is sold, it is consider issued.
A)True
B)False
Q2) The board of directors elects the chairperson of a corporation.
A)True
B)False
Q3) If a corporation issues only one class of shares, it must be:
A) par value
B) preferred
C) common
D) common or preferred
Q4) A stock dividend will:
A) reduce total assets
B) have no effect on total assets
C) have no effect on total assets or total owners' equity
D) increase total owners' equity
Q5) Explain the fundamental difference between retained earnings and share capital.
Q6) What type of shares would an investor purchase if he or she were primarily interested in a safe investment?
Q7) Describe the rights typically enjoyed by common shareholders.
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Income, and the Statement of Shareholders Equity
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Sample Questions
Q1) A company that switches from straight-line amortization to double-declining-balance amortization during an accounting period must report this change on the financial statements as:
A) an extraordinary item
B) income from continuing operations
C) a prior-period adjustment
D) a cumulative effect of a change in accounting principle
Q2) Repurchased share transactions are reported on the:
A) statement of shareholders' equity
B) statement of retained earnings
C) income statement as an extraordinary item
D) income statement as a part of continuing operations
Q3) Prior-period adjustments are:
A) added to beginning balance of retained earnings
B) added to or deducted from the beginning balance of retained earnings
C) deducted from ending balance of retained earnings
D) added to or deducted from net income
Q4) For 2014 Zip has accounting income (pre-tax) of $880,000. Their taxable income for 2014 has been calculated at $950,000. Prepare the journal entry under IFRS to record Zip's taxes for 2014 given a tax rate of 38%. Page 13
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Page 14
Chapter 12: The Statement of Cash Flows
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Sample Questions
Q1) Minden Company purchased a piece of land in 2008 for $120,000. At the end of 2013 the land was appraised and valued at $200,000. In 2014, due to water quality issues Minden Company sold the land for $55,000. On its 2014 income statement and statement of cash flows how should the company record this sale transaction.
Q2) The indirect method of preparing the statement of cash flows: A) is more commonly used in practice than the direct method B) is preferred by the Accounting Standards Board over the direct method C) produces a different amount for cash flows from operating activities than the direct method
D) produces a different amount for cash flows from investing activities than the direct method
Q3) Cost of Goods Sold and Inventory are the only two accounts needed to analyze the cash payments for inventory.
A)True
B)False
Q4) Non cash activities such as an exchange of shares for a piece of equipment do not need to be disclosed.
A)True
B)False
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Chapter 13: Financial Statement Analysis
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Sample Questions
Q1) When performing vertical analysis, each financial statement item is shown as a percentage of the base amount.
A)True
B)False
Q2) Which of the following is a measure of a company's ability to meet short-term obligations?
A) working capital
B) book value per share of common shares
C) accounts receivable turnover
D) debt ratio
Q3) Assume you are using total assets as the base in vertical analysis. Current assets in 2013 are 42%, and are 36% in 2014. This would always indicate that:
A) the current ratio has decreased
B) the dollar amount of current assets has decreased
C) total non-current assets have increased as a percentage of total assets
D) the dollar amount of non-current assets has increased
Q4) Identify three cash flow signs of a healthy company.
Q5) Based upon recent accounting scandals, identify potential red flags that may be discovered in financial analysis.
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