Business Accounting
Textbook Exam Questions
Course Introduction
Business Accounting is an essential course that introduces students to the fundamental principles and practices of accounting within a business context. The course covers topics such as the accounting cycle, preparation and analysis of financial statements, and the interpretation of financial data for decision-making purposes. Students will learn how to record transactions, manage ledgers, and ensure regulatory compliance. Emphasis is placed on understanding the role of accounting in different types of business organizations and its impact on overall business strategy and operations. By the end of the course, students will have developed practical skills in budgeting, financial reporting, and using accounting information to support business objectives.
Recommended Textbook
Financial Accounting An Integrated Approach 6th Australia Edition by Trotman
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Chapter 1: Introduction to Financial Accounting
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Q1) Does measuring economic performance involve: (i)estimates; (ii)adjustments;and/or (iii)judgements?
A) (i)and (ii)only
B) (i)and (iii)only
C) (ii)and (iii)only
D) (i), (ii)and (iii)
Answer: D
Q2) The life of a business is divided into equal periods to determine profit or loss for that period.What assumption/concept underlies this procedure?
A) Materiality
B) Monetary
C) Accounting period
D) Accounting entity
Answer: C
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3
Chapter 2: Measuring and Evaluating Financial Position and
Financial Performance
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Sample Questions
Q1) The balance sheet of Hemp Ltd at 30 June 2016 showed: noncurrent assets $500 000;noncurrent liabilities $320 000;total liabilities $400 000;and shareholders' equity
$300 000.What was the working capital of Hemp Ltd at 30 June 2016?
A) $120 000
B) $180 000
C) $200 000
D) $300 000
Answer: A
Q2) During 2016,JLK Ltd earned revenue of $2000 and a net profit of $500.Dividends of $400 were declared.At 1 January 2016,the balance of retained profits was $890,assets were $3800 and liabilities were $1500.What was the balance of JLK Ltd's retained profits at 31 December 2016?
A) $790
B) $890
C) $990
D) $2490
Answer: C
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4
Chapter 3: The Double-Entry System
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Sample Questions
Q1) An account for advertising that had appeared in a local newspaper was received.There was no previous record of the charge.
A) An asset increased and another asset decreased.
B) An asset decreased and an expense increased.
C) An asset decreased and a liability decreased.
D) A liability increased and an expense increased.
Answer: D
Q2) What were Livermore's retained profits at 30 June 2016?
A) $3750
B) $7250
C) $8750
D) $5500
Answer: B
Q3) Inventory was purchased on credit.
A) An asset increased and another asset decreased.
B) An asset decreased and an expense increased.
C) An asset decreased and a liability decreased.
D) A liability increased and an asset increased.
Answer: D
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Page 5
Chapter 4: Record-Keeping
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Sample Questions
Q1) If the two totals of a trial balance are not equal,it could be due to:
A) failure to record a transaction.
B) recording the same erroneous amount for both the debit and the credit parts of a transaction.
C) an error in determining the account balances,such as an incorrectly computed balance.
D) recording the same transaction more than once.
Q2) A trial balance would detect which of the following errors?
A) Failure to record depreciation for the year.
B) A credit purchase recorded in accounts payable account as $927 instead of $972.
C) A cash purchase of inventory recorded as a debit to plant and a credit to accounts payable.
D) A salesman failing to record a cash sale,and retaining the proceeds.
Q3) What do transactions (6A)and (6B)represent?
A) Sale of goods on credit and later collection of cash
B) Sale of goods on credit and for cash
C) Receipt of cash and purchase of inventory
D) Sale of goods for cash
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6
Chapter 5: Accrual Accounting Adjustments
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Sample Questions
Q1) Which of the following entries is NOT an example of asset consumption,recognised over future time periods?
A) Dr Salaries expense Cr Cash
B) Dr Depreciation expense Cr Accumulated depreciation
C) Dr Insurance expense Cr Prepaid insurance
D) Dr Cost of goods sold Cr Inventory
Q2) Able Ltd operates on a five-day working week.Employees are paid on Thursday for work completed to Wednesday.The weekly wages bill is $40 000.If 30 June 2016 fell on a Tuesday,what was the accrued wages payable on 30 June 2016?
A) $8000
B) $16 000
C) $32 000
D) None of the answers provided
Q3) What is the journal entry made by TV Manufacture Ltd on 7 October 2016?
A) Dr Warranty expense Cr Warranty liability
B) Dr Warranty liability Cr Warranty expense
C) Dr Warranty liability Cr Cash
D) Dr Cash Cr Warranty liability
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Chapter 6: Financial Reporting Principles, accounting
Standards and Auditing
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Sample Questions
Q1) Which of the following statements about capital markets is true?
A) Systematic risk refers to the risk arising from a firm's financing decision.
B) Returns of high-beta stocks tend to vary less than overall market prices.
C) The efficient market hypothesis states that it is not possible to consistently 'beat the market' by using publicly available information.
D) If the efficient market hypothesis were true,it would be impossible to make money in the stock market.
Q2) The return you earn by owning a share is:
A) the cash from dividends.
B) the current price of the share on the Australian Securities Exchange.
C) the change in the market price of the share.
D) cash from dividends plus the change in the market price of the share.
Q3) In reporting on its liability for long service leave to employees,a company is obliged to trade off:
A) understandability and consistency.
B) relevance and faithful representation.
C) materiality and disclosure.
D) comparability and relevance.
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Chapter 7: Internal Control and Cash
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Sample Questions
Q1) In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for monthly bank service charges,$30,appearing on the bank statement is to:
A) add it to the balance as per bank statement.
B) deduct it from the balance as per bank statement.
C) add it to the balance per company records.
D) deduct it from the balance per company records.
Q2) In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for interest earned on account,$240,is to:
A) add it to the balance as per bank statement.
B) deduct it from the balance as per bank statement.
C) add it to the balance per company records.
D) deduct it from the balance per company records.
Q3) For which of the following adjustments would NO journal entry be required following completion of the bank reconciliation?
A) Error by the bank
B) Error by the company
C) Note collected by the bank
D) NSF cheque
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Page 9
Chapter 8: Accounts Receivable and Further
Record-Keeping
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Sample Questions
Q1) What was the balance of the creditors control account at 30 June 2016?
A) $11 500
B) $6500
C) $5500
D) $6000
Q2) The balance in the Allowance for doubtful debts account represents:
A) bad debts written off in the current accounting period.
B) liquid funds available to meet losses arising from customers becoming insolvent.
C) an amount that is deducted from the Accounts receivable account to reduce it to the estimated realisable value.
D) bad debts written off as Accounts receivable considered uncollectable.
Q3) The Allowance for doubtful debts account would appear in the balance sheet under:
A) current assets.
B) current liabilities.
C) shareholders' equity.
D) property,plant and equipment.
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Chapter 9: Inventory
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Sample Questions
Q1) The entry to record a credit sale when the perpetual inventory method is employed will include a debit to:
A) cost of goods sold.
B) sales.
C) purchases.
D) inventory.
Q2) The journal entries to record a credit sale under the perpetual inventory system will include a:
A) debit to purchases.
B) credit to inventory.
C) debit to sales.
D) debit to inventory.
Q3) Which of the following statements about the use of the LIFO assumption is true?
A) The LIFO assumption assigns older costs to the cost of goods sold expense account.
B) The LIFO assumption produces inventory asset values that are close to current costs.
C) The LIFO assumption produces a lower inventory asset value and the highest cost of goods sold.
D) None of the answers provided.
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11
Chapter 10: Noncurrent Assets
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Q1) Assuming Norman Ltd used the reducing balance method of depreciation and a rate of 40 per cent,the depreciation expense for the year ending 30 June 2017 is:
A) $9720.
B) $10 800.
C) $11 800.
D) none of the answers provided.
Q2) It was sold on 1 July 2016.If the machine was sold for $60 000,what was the gain or loss on disposal?
A) Loss of $20 000
B) Loss of $40 000
C) Gain of $60 000
D) Gain of $20 000
Q3) Assuming Norman Ltd used the reducing balance method of depreciation and a rate of 40 per cent,the balance of the accumulated depreciation account at 30 June 2017 was:
A) $28 800.
B) $18 000.
C) $10 800.
D) none of the answers provided.
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Page 12
Chapter 11: Liabilities
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Sample Questions
Q1) Which of the following is NOT a liability?
A) Unearned revenue
B) Provision for employee entitlements
C) Accrued revenue
D) Accrued expenses
Q2) RST has been sued by a competitor for a potential copyright infringement.Legal advice is divided over the likelihood of the success of the claim and the likely damages,if any.It would be shown as:
A) an accrual on the balance sheet.
B) a provision on the balance sheet.
C) a contingent liability on the balance sheet.
D) a contingent liability in the notes to the accounts.
Q3) When a business collects GST from customers,it records:
A) a contra asset.
B) a liability.
C) an expense.
D) an asset.
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13
Chapter 12: Completing the Balance Sheet
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Sample Questions
Q1) A debit balance in the retained profits account indicates that the company has:
A) made a loss in the current period.
B) made a loss in at least one period.
C) never made a profit.
D) paid a dividend.
Q2) What was the balance of share capital at 11 October?
A) $25 000
B) $125 000
C) $150 000
D) $110 000
Q3) When the cost method of accounting for long-term investment in shares is employed,the receipt of a dividend on those shares is recorded as a credit to:
A) the investment asset.
B) dividend revenue.
C) dividend declared.
D) retained profits.
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Chapter 13: Revenue and Expense Recognition: Additional Concepts
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Q1) At what point would you expect revenue from sales of building materials to be recognised?
A) During production
B) On completion of production
C) At point of sale or delivery
D) When cash is received
Q2) If revenue increased by 30 per cent,with no effect on expenses other than income tax,what would be the effect on net after tax profit?
A) It would increase by $6600.
B) It would decrease by $6600.
C) It would increase by $4620.
D) It would decrease by $4620.
Q3) How much profit was earned during 2015 if the percentage of completion method was used?
A) $5 600 000
B) $4 375 000
C) $3 500 000
D) $10 500 000
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Chapter 14: The Statement of Cash Flows
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Q1) The prepaid insurance account showed an opening balance of $22 000 and a closing balance of $25 000.Insurance expense was $67 000.What was the cash payment for insurance?
A) $64 000
B) $67 000
C) $70 000
D) $45 000
Q2) Which of the following is an operating cash flow?
A) Issue of shares
B) Purchase of equipment
C) Repayment of a loan
D) Receipt of cash from accounts receivable
Q3) Which of the following is NOT classified as a financing activity?
A) Issue of shares
B) Dividend payments
C) Sale of equipment
D) Borrowing from a finance company
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Chapter 15: Financial Statement Analysis
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Q1) Which of the following could NOT explain an increase in the return on equity ratio?
A) Share buyback
B) Declaring a final dividend
C) Increase in profits
D) Purchase of land on credit
Q2) What is the effect on the inventory turnover ratio?
A) It increases.
B) It decreases.
C) There is no effect.
D) It cannot be determined from the information provided.
Q3) What is the effect of the loan on the debt-to-equity ratio?
A) There is an increase.
B) There is a decrease.
C) There is no effect.
D) It cannot be determined from the information provided.
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Chapter 16: Accounting Policy Choices
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Q1) Select the income statement account(s)that would be affected by a policy choice at the same time as the inventory balance sheet account.
A) Bad debts expense
B) Cost of goods sold expense
C) Depreciation or amortisation expense
D) Various expense accounts
Q2) Which of the following would be decreased by the change?
A) Cash
B) Cost of goods sold
C) Net profit
D) No accounts would be decreased
Q3) what would be the effect on depreciation expense?
A) $122 400 reduction
B) $217 600 reduction
C) $340 000 reduction
D) $217 600 increase
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18
Chapter 17: Sustainability Reporting
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Q1) Integrated reporting:
A) includes a sustainability report regarding energy reduction and greenhouse emissions in an organisation's annual report.
B) is an additional report to be prepared by organisations as required by accounting standards.
C) reflects the commercial,social and environmental setting in which the organisation operates.
D) is additional information regarding energy emissions included in the direct report of an organisation's annual statement.
Q2) Which of the following is an economic performance indicator?
A) Direct energy consumption by a primary energy source
B) Percentage of products sold and their packaging materials that are reclaimed
C) Total direct and indirect gas emissions
D) Development and impact of infrastructure investments and services supported
Q3) Disclosure of information in sustainability reports is determined by:
A) the organisation who is reporting.
B) accounting standards.
C) Australian Securities Industry Commission.
D) company law reporting requirements.
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