Corporate Accounting
Study Guide Questions
Course Introduction
Corporate Accounting examines the principles and practices associated with the financial accounting and reporting processes of corporate entities. The course covers key topics such as the preparation and analysis of company financial statements, accounting for share capital and debentures, company amalgamations and reconstructions, valuation of goodwill and shares, and compliance with relevant accounting standards and regulations. Emphasis is placed on understanding both the theoretical underpinnings and practical applications of corporate accounting, enabling students to interpret financial data for effective decision-making within the corporate sector.
Recommended Textbook
Financial Accounting An Integrated Approach 6th Australia Edition by Trotman
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Page 2
Chapter 1: Introduction to Financial Accounting
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Sample Questions
Q1) Which of the following is NOT shown in the heading of the balance sheet?
A) The name of the enterprise
B) The title of the report
C) The period covered by the report
D) All of the answers are shown in the heading
Answer: C
Q2) The owner withdraws inventory for his own use from the business.To which financial statement assumption does this relate?
A) Materiality
B) Monetary
C) Accounting period
D) Accounting entity
Answer: D
Q3) Which of the following is NOT an example of a liability?
A) Provisions for long service leave
B) Share capital
C) Accounts payable
D) Loan payable
Answer: B
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Page 3
Chapter 2: Measuring and Evaluating Financial Position and
Financial Performance
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Sample Questions
Q1) 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
Q2) To which balance sheet grouping does the item 'wages payable' belong?
A) Current asset.
B) Noncurrent asset
C) Current liability
D) Noncurrent liability
Answer: C
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Chapter 3: The Double-Entry System
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Sample Questions
Q1) A new CEO was appointed to commence in 3 months' time on a salary of $400 000 per annum.
A) A liability increased and another liability decreased.
B) An asset decreased and a liability decreased.
C) An asset increased and revenue increased.
D) This had no effect on the accounting equation.
Answer: D
Q2) Identify the journal entry required to correctly record the following transaction. Depreciation expense on motor vehicles for the year incurred.
A) Dr Motor vehicles
Cr Accumulated depreciation
B) Dr Accumulated depreciation
Cr Depreciation expense
C) Dr Depreciation expense
Cr Motor vehicles
D) Dr Depreciation expense
Cr Accumulated depreciation
Answer: D
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Chapter 4: Record-Keeping
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Sample Questions
Q1) What is the closing balance of the bank account?
A) $100 000
B) $131 500
C) $170 000
D) $208 500
Q2) Which of the following is NOT an accounting transaction?
A) A payment is made by cheque to Telstra.
B) The company is awarded a contract to build a bridge,with construction to commence in 12 months' time.
C) A creditor charges interest for late payment.
D) The payroll department issues a cheque to pay an employee.
Q3) Which of the following statements about closing the accounts is NOT true?
A) Sales revenue account is debited.
B) Depreciation account is credited.
C) Share capital is debited.
D) A net loss is debited to the retained profits account.
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Chapter 5: Accrual Accounting Adjustments
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Q1) RST paid $120 000 in wages during the year.The opening balance of Accrued Wages was $7860 and the closing balance was $8870.What was the wages expense for the year?
A) $118 990
B) $120 000
C) $121 010
D) None of the answers provided
Q2) Which of the following is NOT an example of accrued revenue?
A) Unbilled revenue
B) Customer deposits
C) Interest receivable on loans
D) All answers are examples of accrued revenue.
Q3) What is the journal entry made by the consultant on 15 August 2016?
A) Dr Cash Cr Accounts receivable
B) Dr Cash Cr Service revenue
C) Dr Accounts receivable Cr Cash
D) None of the answers provided
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Page 7
Chapter 6: Financial Reporting Principles, accounting
Standards and Auditing
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Sample Questions
Q1) The practice by Woolworths Ltd of presenting their financial statements in millions of dollars is an application of the concept of:
A) relevance.
B) materiality.
C) understandability.
D) disclosure.
Q2) The external auditor renders an adverse opinion when he/she:
A) is unable to express an opinion either way because of a limitation in the work he or she was able to carry out.
B) considers that the financial statements are not presented fairly in accordance with GAAP.
C) is generally satisfied except for a specified departure from GAAP in the statements.
D) is unable to obtain sufficient reliable audit evidence.
Q3) 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.
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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 service charge appearing on the bank statement,$45,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) Which of the following is NOT correct? An effective internal control system for any organisation is one that:
A) discourages inefficient use of resources.
B) helps management safeguard assets.
C) assists management in controlling the enterprise.
D) prevents collusion between employees.
Q3) What was the bank balance in Simon Ltd's books at 31 October before the adjustments?
A) $15600 Dr
B) $15800 Cr
C) $17200 Cr
D) $18800 Dr
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Page 9
Chapter 8: Accounts Receivable and Further
Record-Keeping
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Sample Questions
Q1) 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.
Q2) K Ltd reported beginning and ending balances in the Allowance for doubtful debts account of $723 000 and $904 000 respectively.It also reported that write-offs of bad debts amounted to $648 000.Assuming that no previously written-off accounts had been collected,what amount did K Ltd record as bad debt expense for the period?
A) $467 000
B) $648 000
C) $829 000
D) $904 000
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Chapter 9: Inventory
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Sample Questions
Q1) 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.
Q2) The perpetual accounting control method has which of the following advantages over the periodic inventory method?
A) A physical count is not required.
B) Stock shortages are eliminated.
C) Cost of operation is lower.
D) Details of the number of items on hand is available.
Q3) During year ended 30 June 2016,Rugger Ltd had net sales of $256 000.Inventory at 1 July 2015 was $25 000,and at 30 June 2016 it was $18 000.Purchases were $115 000.What was the gross profit for year ended 30 June 2016?
A) $12 000
B) $134 000
C) $141 000
D) None of the answers provided
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Chapter 10: Noncurrent Assets
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Sample Questions
Q1) Equipment that cost $500 000 and had accumulated depreciation of $300 000 was sold for $180 000.This results in a:
A) $20 000 gain.
B) $20 000 loss.
C) $180 000 gain.
D) $320 000 loss.
Q2) 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.
Q3) Assuming Norman Ltd used the straight-line method of depreciation,the accumulated depreciation at 30 June 2017 was:
A) $0.
B) $11 250.
C) $22 500.
D) none of the answers provided.
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Chapter 11: Liabilities
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Sample Questions
Q1) Which of the following is a liability?
A) Revenue received in advance
B) Accrued revenue
C) Prepayments
D) None of the answers provided
Q2) Amounts owing to an advertising company as per an invoice received would appear on the balance sheet as:
A) accounts payable.
B) accruals.
C) provisions.
D) contingent liability.
Q3) The effect on the 30 June 2016 financial statements was:
A) an increase in liabilities and a decrease in profit.
B) an increase in liabilities but no effect on profit.
C) an increase in profit but no effect on liabilities.
D) no effect on either profit or liabilities.
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Chapter 12: Completing the Balance Sheet
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Q1) If Yu Ltd used the equity basis,what dividend revenue would it record for year ended 31 December 2016 in respect of its investment in Ping Ltd?
A) $120 000
B) $150 000
C) $350 000
D) None of the answers provided
Q2) Gargantua Ltd paid $1 000 000 for 75 per cent of the voting shares of Dwarf Ltd,and evaluated Dwarf's assets to be worth $1 500 000 and its liabilities $300 000.What was the goodwill on consolidation at the date of acquisition?
A) $100 000
B) $200 000
C) $300 000
D) None of the answers provided
Q3) The journal entry on 3 March 2016 would include:
A) Dr Interim dividend declared,$25 000.
B) Cr Cash,$25 000.
C) Cr Interim dividend payable,$25 000.
D) Cr Retained profits,$25 000.
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14
Chapter 13: Revenue and Expense Recognition: Additional Concepts
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Sample Questions
Q1) With respect to services provided,it is customary to recognise revenue when the:
A) customer requests the service.
B) supplier agrees to provide the service.
C) service is provided.
D) service is paid for.
Q2) Using the percentage of completion method,what profit would Romulus Ltd report in 2015?
A) $800 000
B) $2 000 000
C) $3 200 000
D) $1 300 000
Q3) Revenue from a credit sale should not be recognised until:
A) the goods have been paid for.
B) the warranty period has expired.
C) collection is reasonably assured.
D) it is certain that the goods will not be returned.
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Chapter 14: The Statement of Cash Flows
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Q1) Which of the following is NOT added back to net income to obtain cash flow from operations?
A) Depreciation
B) Gain on sale of investment
C) Decrease in accounts receivable
D) Increase in accounts payable
Q2) The net profit reported on the income statement for the current year was $50 000.Depreciation on property,plant and equipment was $31 000.What is the amount of cash flows from operating activities that would appear on the statement of cash flows prepared using the indirect method?
A) $19 000
B) $49 000
C) $81 000
D) $80 000
Q3) What effect does increasing depreciation expense have on cash flows?
A) It increases operating cash flows.
B) It decreases operating cash flows.
C) It decreases investing cash flows.
D) It has no effect.
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Page 16
Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) What was the number of days' sales in receivables?
A) 121.7 days
B) 143.1 days
C) 260.4 days
D) 301.4 days
Q2) Which of the following statements about the current ratio is NOT true?
A) The current ratio indicates whether the company has enough short-term assets to cover its short-term debts.
B) An extremely high ratio is always a favourable sign.
C) A ratio above 1 indicates that working capital is positive.
D) The current ratio is calculated as current assets divided by current liabilities.
Q3) Which of the ratios listed helps to indicate the efficiency with which the resources of the company are being utilised to generate profit?
A) Current ratio
B) Profit margin
C) Quick ratio
D) Return on assets
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Chapter 16: Accounting Policy Choices
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Q1) Which of the following is NOT an accounting method that would increase the current ratio (currently 1.5:1)?
A) Understating the allowance for doubtful debts
B) Recognising unearned revenue as revenue
C) Not recognising accrued wages
D) Changing the method of depreciation
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) Which of the following is NOT an area in which large companies typically make policy choices?
A) How to value receivables in the balance sheet
B) Over what period to amortise intangible assets
C) Cash versus accrual accounting
D) Which product development expenditures should be expenses
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18
Chapter 17: Sustainability Reporting
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Q1) The Global Reporting Initiative sets out:
A) guidelines of how to reduce carbon emissions.
B) principles to measure and report measures used to reduce carbon emissions.
C) principles to measure and report economic,environmental and social performance.
D) how organisations should behave ethically in regards to carbon emissions.
Q2) The stakeholder engagement process does NOT involve:
A) engaging stakeholders to identify and understand sustainability issues.
B) determining the relevance of sustainability issues.
C) stakeholders in identifying and evaluating sustainability issues.
D) reporting sustainability issues to shareholders.
Q3) Which of the following is an environment performance indicator?
A) Policy,practices and spending on locally based suppliers
B) Direct economic value generated
C) Energy consumption within the organisation
D) Development and impact of infrastructure investments and services supported
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