Business Accounting
Textbook Exam Questions
Course Introduction
Business Accounting introduces students to the fundamental principles and practices of financial record-keeping and reporting for business organizations. The course covers essential topics such as the accounting cycle, preparation and analysis of financial statements, management of assets and liabilities, and the role of accounting in decision-making. Students will develop practical skills in recording business transactions, understanding regulatory requirements, and interpreting accounting information to support effective business management. This course lays a solid foundation for further study in accounting and finance, while also equipping students with valuable skills applicable across diverse business environments.
Recommended Textbook
Horngren's Accounting 8th Australia Edition by Tracie Nobles
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Page 2
Chapter 1: The Role of Accounting in Decision Making
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Sample Questions
Q1) Which of the following financial statements lists the entity's assets,liabilities and owners' equity as at a specific date?
A) Cash flow statement
B) Balance sheet
C) Income statement
D) Statement of changes in equity
Answer: B
Q2) Which of the following statements BEST describes management accounting?
A) Management accounting provides information for taxing authorities.
B) Management accounting focuses on information for internal decision making.
C) Management accounting provides information for the public.
D) Management accounting focuses on outside investors and lenders.
Answer: B
Q3) Liabilities represent creditors' claims on the business's assets.
A)True
B)False
Answer: True
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Chapter 2: Recording Business Transactions
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Sample Questions
Q1) For Capital,the category of account and its normal balance are:
A) Assets and a debit balance.
B) Assets and a credit balance.
C) Liabilities and a credit balance.
D) Owners' equity and a credit balance.
Answer: D
Q2) In a trial balance,total debits are always equal to total credits.
A)True
B)False
Answer: True
Q3) When recording a transaction in a journal,the credit side is entered first,followed by the debit side.
A)True
B)False
Answer: False
Q4) When a business records an expense incurred,the expense account is always credited.
A)True
B)False
Answer: False
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Chapter 3: The Adjusting Process
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Sample Questions
Q1) On 1 January 2017,the Accounts receivable of Linda Company had a debit balance of $170,000.During January,the company provided services for $400,000 on account.The company collected $240,000 from its customers on account in January.What was the ending balance in the Accounts receivable account at the end of January?
A) $570,000
B) $400,000
C) $330,000
D) $160,000
Answer: C
Q2) Which of the following lists a company's assets,liabilities and equity to report its financial position?
A) Balance sheet
B) Statement of changes in equity
C) Adjusted trial balance
D) Income statement
Answer: A
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Chapter 4: Completing the Accounting Cycle
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Sample Questions
Q1) A list of the accounts and their balances at the end of the period after journalising and posting the closing entries which includes only permanent accounts is called:
A) post-closing trial balance.
B) pre-closing balance sheet.
C) chart of accounts.
D) adjusted trial balance.
Q2) Buildings,land and equipment would be classified as:
A) non-current liabilities.
B) non-current assets.
C) current assets.
D) current liabilities.
Q3) The worksheet is NOT a journal,a ledger or a financial statement.
A)True
B)False
Q4) Which of the following accounts does NOT close at the end of the period?
A) Depreciation expense
B) Drawings
C) Accumulated depreciation
D) Sales revenues
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Chapter 5: Retailing Operations
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Q1) HiLo Running Store is not registered for GST.Which of the following statements is INCORRECT?
A) The firm will charge a flat rate of GST on all goods sold.
B) The firm will not be able to claim a refund from the ATO on GST paid to suppliers.
C) Journal entries for sales and purchases will not include a GST Clearing account.
D) Purchases of inventory will be recorded at the 'gross' amount, that is, the amount including GST.
Q2) A firm receives an invoice that indicates that title to the inventory will pass to the firm when they receive the goods.This situation is described as FOB destination.
A)True B)False
Q3) Net sales revenue is equal to Sales revenue less Cost of sales.
A)True B)False
Q4) The ATO will refund any GST a registered firm pays to a supplier.
A)True B)False
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Chapter 6: Retail Inventory
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Sample Questions
Q1) When using periodic inventory,the closing process begins with closing out the Beginning inventory to Cost of sales.The second step is to set up the Ending inventory by debiting Cost of sales and crediting Inventory.
A)True
B)False
Q2) Which of the following inventory costing methods yields the highest Gross profit when costs are rising during the accounting period?
A) First-in, first-out
B) Average cost
C) Last-in, first-out
D) Specific unit cost
Q3) The various costing methods are necessary because the cost per unit of acquiring new inventory fluctuates frequently.
A)True
B)False
Q4) Ending inventory equals the number of units on hand multiplied by the unit cost.
A)True
B)False
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Chapter 7: Accounting Information Systems
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Sample Questions
Q1) The journal in which all transactions that do not fit into the special journals are recorded is the:
A) cash receipts journal.
B) purchases journal.
C) general journal.
D) sales journal.
Q2) The accounts payable subsidiary ledger has postings from which set of journals?
A) Purchases, cash receipts and sales
B) Sales, cash payments and general
C) Purchases, general and cash receipts
D) Purchases, general and cash payments
Q3) All of the following are common examples of special journals,except:
A) cash receipts journal.
B) sales journal.
C) purchases journal.
D) accounts payable journal.
Q4) Computerised accounting packages are organised by modules.Changes to one module will automatically update information in other modules.
A)True
B)False
Page 9
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Chapter 8: Internal Control and Cash
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Sample Questions
Q1) The bank statement reveals an EFT payment made to one of the company's suppliers that has not yet been recorded in the ledger.How would this information be included on the bank reconciliation?
A) An addition on the book side
B) A deduction on the bank side
C) An addition on the bank side
D) A deduction on the book side
Q2) In a bank reconciliation,a dishonoured cheque will be shown on the bank side of the reconciliation.
A)True
B)False
Q3) External auditors monitor company controls to safeguard assets and ensure that employees are following company policies.
A)True
B)False
Q4) In a bank reconciliation,a book error will be shown on the bank side of the reconciliation.
A)True B)False
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Chapter 9: Receivables
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Sample Questions
Q1) A company has net credit sales of $92,000,beginning net accounts receivable of $20,000 and ending net accounts receivable of $16,000.Calculate the days' sales in receivables.Use a 365-day year.(Round to the nearest day.)
A) 41 days
B) 71 days
C) 73 days
D) 61 days
Q2) The ageing of accounts receivable method calculates bad debts expense as a percentage of net credit sales.
A)True
B)False
Q3) Accounts receivable amounts are generally shown on the balance sheet net of the allowance.
A)True
B)False
Q4) The allowance method is a method of recording collection losses by estimating uncollectable amounts.
A)True B)False
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Chapter 10: Non-Current Assets: Property, plant and Equipment, and Intangibles
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Sample Questions
Q1) Expenditures that extend the life of an asset or increase its productive capacity should be expensed.
A)True
B)False
Q2) Which of the following assets is NOT an intangible asset?
A) Goodwill
B) Patent
C) Building
D) Trademark
Q3) Plant and equipment are more likely to decrease in value than increase.
A)True
B)False
Q4) Albatross Services scrapped a van.The van originally cost $40 000,had an estimated residual value of zero and an estimated life of 10 years.At the time it was scrapped,it had accumulated depreciation of $40 000.What was the effect of scrapping the van?
A) loss of $1 000
B) loss of $2 000
C) gain of $2 000
D) no gain or loss
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Chapter 11: Current Liabilities and Payroll
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Sample Questions
Q1) Which of the following is included in the entry to record the employer's payroll taxes?
A) A debit to Payroll tax payable
B) A credit to Payroll tax payable
C) A credit to Income tax payable
D) A credit to Payroll tax expense
Q2) Amounts owed for products or services purchased on account are non-current liabilities.
A)True
B)False
Q3) General Stores borrowed $50 000 at 6% interest on a long-term loan payable on 31 August.At 31 December,interest plus $10 000 of the principal are payable within one year.What is the account name and amount of a current liability that will be reported on the balance sheet as at 31 December?
A) Interest payable $600
B) Interest payable $1 000
C) Interest payable $3 000
D) Interest payable $2 000
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Chapter 12: Non-Current Liabilities,debentures Payable and
Classification of Liabilities on the Balance
Sheet
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Sample Questions
Q1) Premium on debentures payable is spread over the term of the debentures and reduces total interest expense.
A)True
B)False
Q2) Trek Company signed a 11%,10-year note for $158,000.The company paid $2700 as the instalment for the first month.What portion of the first monthly payment is interest expense? (Round to the nearest dollar.)
A) $1448
B) $1252
C) $15,867
D) $30,547
Q3) On 1 January 2017,Bratios Company purchased equipment and signed a 6-year mortgage payable for $160,000 at 15%.The mortgage will be paid in equal annual instalments of $42,278,beginning 1 January 2018.The journal entry to record the first instalment payment on 1 January 2018 will include a:
A) credit to Mortgage payable for $160,000.
B) debit to Interest expense for $24,000.
C) debit to Mortgage payable for $42,278.
D) credit to Cash for $18,278.
Page 14
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Chapter 13: Partnerships
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Sample Questions
Q1) Floyd and Merriam start a partnership business on 12 June 2019.Their capital account balances as of 31 December 2020 stood as follows: \[\begin{array} { | l | l | }
\hline \text { Floyd } & \$ 47,000 \\
\hline \text { Merriam } & 17,000 \\ \hline \end{array}\]
They agreed to admit Ramelow into the business for a one-third interest in the new partnership.He had to bring in a cash contribution of $24,000 for the same.Which of the following is the correct capital account balance of Ramelow after he enters the business?
A) $24,000
B) $26,666
C) $47,000
D) $29,333
Q2) A new partner may be admitted to a partnership without dissolving the partnership.
A)True
B)False
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15
Chapter 14: Companies: Formation and Shareholders
Equity
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Sample Questions
Q1) Which of the following occurs when a previously declared dividend is paid?
A) Liabilities increase
B) Liabilities decrease
C) Assets increase
D) Equity increases
Q2) A company declares a dividend of $0.75 per share on 11,000 ordinary shares.Which of the following would be included in the entry to record the declaration?
A) Dividends payable, ordinary would be debited for $8250
B) Ordinary share capital would be credited for $8250
C) Retained earnings would be credited for $8250
D) Retained earnings would be debited for $8250
Q3) If a company's share prices go up from the original issue price,the company will record net profit for the amount of the gain.
A)True
B)False
Q4) All companies must issue both ordinary and preference shares.
A)True
B)False
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Chapter 15: Companies: Capital Management and the Income Statement
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Q1) Which of the following will decrease the balance in Retained earnings?
A) Share issue
B) Purchase of non-current assets
C) Share split
D) Cash dividend
Q2) A 3-for-1 share split will:
A) cut the market price by one-third and triple the number of issued shares.
B) triple the market price and drop the number of issued shares by one-third.
C) have no effect on the market price but will affect the number of issued shares.
D) have no effect on the number of issued shares but will affect market price.
Q3) Which of the following does NOT require a formal journal entry?
A) Share dividend
B) Share split
C) Issue of new shares
D) Cash dividend
Q4) A share buy-back requires a credit to the Ordinary share capital account.
A)True
B)False
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Chapter 16: The Cash Flow Statement
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Sample Questions
Q1) A payment of interest on a loan would be considered a:
A) non-cash activity.
B) cash outflow from investing activities.
C) cash outflow from financing activities.
D) cash outflow from operating activities.
Q2) Avatar Company uses the direct method to prepare its cash flow statement.Refer to the following information reported for the year 2016:
1) Sales revenue, $519,000
2) Accounts receivable, beginning balance, $96,000
3) Accounts receivable, ending balance, $57,000
In the operating activities section of the cash flow statement, what amount will be shown for collections from customers?
A) $558,000
B) $462,000
C) $366,000
D) $153,000
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18
Chapter 17: The Framework of Accounting
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Q1) The objective of financial reporting is to provide useful information to investors,creditors and others to aid in making and evaluating decisions about the allocation of scarce resources.
A)True
B)False
Q2) The basic accounting concepts and principles:
A) explain the difference between managerial and financial accounting.
B) provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity.
C) are an important way in which management discharges its accountability to investors and other outside users.
D) provide a structure for helping us to judge whether specific rules and methods for calculating and reporting accounting information are consistent with each other.
Q3) Accounting principles initially drew their authority from acceptance by the business community.
A)True
B)False
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Chapter 18: Financial Statement Analysis
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Sample Questions
Q1) The dividend yield will tell a shareholder how much of his investment will be returned in dividends.
A)True
B)False
Q2) Olivera Ltd provides the following data for the year 2016: \[\begin{array} { | l | l | }
\hline \text { Sales revenue } & \$ 629,000 \\
\hline \text { Sales returns and allowances } & 20,000 \\
\hline \text { Sales discounts } & 6000 \\
\hline \text { Net sales revenue } & \$ 603,000 \\
\hline \text { Cost of sales } & \$ 390,000 \\
\hline
\end{array}\]
On a vertical analysis report,the gross profit as a percentage of net sales will be:
A) 35.32%
B) 33.86%
C) 36.32%
D) 64.68%
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20
Chapter 19: Introduction to Managerial Accounting and the Master Budget
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Sample Questions
Q1) Which of the following statements is INCORRECT?
A) Managerial accounting is used to plan and control business operations.
B) Managerial accounting is used to report the company's financial position and results of operations to creditors and investors.
C) Managerial accounting is used to prepare budgets.
D) Managerial accounting is used to determine the cost of products and services.
Q2) When the different business units at a company use differently structured reporting formats for their business unit budgets,it is more difficult for the company to consolidate the business unit data into a company-wide budget.
A)True
B)False
Q3) Some of the costs of a service company are called period costs and others are non-service costs.
A)True
B)False
Q4) The wages and benefits of the factory manager are inventoriable product costs.
A)True
B)False
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Chapter 20: Job Costing
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Sample Questions
Q1) When jobs are completed,the total cost of the job is recorded as a debit to Finished goods and a credit to Work in process.
A)True
B)False
Q2) Bilkins Financial Advisors provides accounting and finance assistance to customers in the retail business.Bilkins has 6 professionals on staff,plus an office with 8 clerical staff.Total compensation,including benefits,for the professional staff runs about $911,250 per year and they normally have about 9000 billable hours per year.Professional staff keep detailed time sheets organised by the client number.Office and administrative costs total $684,000 a year.
Bilkins allocates professional time and office and administrative costs to clients monthly,using allocation rates based on billable hours.During July,Bilkins's professionals spent 38 hours on their client,Soupy Sales.What is the total amount of cost that Bilkins will record for the client for the month? (Round your intermediate calculations to two decimal places)
A) $2888
B) $5624
C) $6736
D) $3848
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Chapter 21: Cost-Volume-Profit Analysis
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Q1) Porterhouse Company has both fixed and variable production costs.If volume goes up by 20%,how would that affect the total of all costs? (Assume all volumes are within the relevant range.)
A) Would go down
B) Would go up 20%
C) Would remain the same
D) Would go up by some amount less than 20%
Q2) The mixed cost per unit is constant throughout the relevant range of activity.
A)True
B)False
Q3) Anthony Company's highest point of total cost was $75,000 in June.Their point of lowest cost was $50,000 in December.The company makes a single product.Production volume in June and December were 13,000 and 8000 units,respectively.What is the fixed cost per month?
A) $34,375
B) $35,000
C) $10,000
D) $50,000
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Chapter 22: Short-Term Business Decisions
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Q1) Hilltop Golf Course is planning for the coming season.Investors would like to earn a 15% return on the company's $60,000,000 of assets.The company primarily incurs fixed costs to groom the greens and fairways.Fixed costs are projected to be $30,000,000 for the golfing season.About 500,000 rounds of golf are expected to be played each year.Variable costs are about $17 per round of golf.Hilltop Golf Course has a favourable reputation in the area and therefore,has some control over the price of a round of golf.Using a cost-plus pricing approach,what price should Hilltop charge for a round of golf to achieve the desired profit?
A) $77
B) $43
C) $60
D) $95
Q2) If a product line has a negative contribution margin,the product line should probably be dropped,assuming no other significant considerations.
A)True
B)False
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24
Chapter 23: Capital Investment Decisions and the Time Value of Money
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Q1) The accounting rate of return calculations ignores the time value of money,but the payback period does include consideration of the time value of money.
A)True
B)False
Q2) Which two methods are typically used for initial screening of investments,rather than for detailed in-depth analysis?
A) Accounting rate of return and net present value
B) Internal rate of return and net present value
C) Payback and accounting rate of return
D) Net present value and payback
Q3) Software Hub is deciding whether to purchase new accounting software.The cost of the software package is $56,000 and its expected life is 10 years.The payback for this investment is four years.Assuming equal yearly cash flows,what are the expected annual net cash savings from the new software? (Assume the investment has zero salvage value.)
A) $14,000
B) $38,483
C) $5600
D) $224,000
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