Introduction to Accounting
Mock Exam
Course Introduction
Introduction to Accounting provides students with a comprehensive overview of fundamental accounting principles and practices. Covering topics such as the accounting cycle, financial statement preparation, and the analysis of business transactions, this course equips learners with essential skills to understand and interpret financial information. Emphasis is placed on the role of accounting in decision-making processes and ethical considerations in financial reporting, making it an ideal foundation for further study in accounting and business disciplines.
Recommended Textbook
Accounting for Non Specialists 7th Australian Edition by Atrill McLaney
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Chapter 1: Introduction to Accounting
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Sample Questions
Q1) The three most common types of structures used by businesses in Australia are:
A)partnership, limited company, association.
B)sole proprietor, partnership, limited company.
C)partnership, private company, trust.
D)sole proprietor, limited company, co-operative.
Answer: B
Q2) Which accounting report is prepared at a particular point of time rather than over a period of time?
A)Statement of comprehensive income.
B)Statement of change in owners' equity.
C)Statement of financial position.
D)Both B and C.
Answer: C
Q3) The business most likely to operate as a sole proprietorship is:
A)private hospital.
B)medical specialist.
C)bank.
D)airline.
Answer: B
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Page 3
Chapter 2: Measuring and Reporting Financial Position
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Sample Questions
Q1) Identify the current asset.
A)Fixtures and fittings.
B)Inventory.
C)Delivery vehicle.
D)Loan to L Hardie repayable in 2 years.
Answer: B
Q2) The accounting convention that means only those transactions that are capable of being expressed in monetary terms are recorded, is the:
A)money measurement convention.
B)historical cost convention.
C)conservatism convention.
D)reliability convention.
Answer: A
Q3) What is the effect on the statement of financial position when the business pays a creditor?
A)decrease asset creditor; decrease liability bank.
B)decrease asset bank; decrease liability creditor.
C)decrease asset bank; decrease equity.
D)none of the above.
Answer: B
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Chapter 3: Measuring and Reporting Financial Performance
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Sample Questions
Q1) Which asset is not depreciated?
A)motor vehicles.
B)buildings.
C)premises.
D)land.
Answer: D
Q2) On 31 December 2017, a new motor vehicle with a useful life of five years and an estimated residual value of $5,000 was purchased by a business at a cost of $35,000. The amount of depreciation expense charged for the six months ended 30 June 2018, using the straight-line method, is:
A)nil.
B)$3,000.
C)$25,000.
D)$4,000.
Answer: B
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Page 5
Chapter 4: Introduction to Limited Companies
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Sample Questions
Q1) Which statement concerning a rights issue is true?
A)The issue is often made to ensure that new shareholders are brought into the company.
B)The shares are generally offered at above the current market price of the existing shares.
C)The cost of the issue tends to be less than making a share issue to the general public.
D)Both A and C.
Q2) Sovereign Ltd has an issued capital of 300,000,000 shares sold at $2 each. Aman holds 9,000 shares. If Sovereign Ltd makes a 1 for 3 bonus issue, how many bonus shares will Aman acquire?
A)3,000 shares.
B)1,800 shares.
C)2,000 shares.
D)9,000 shares.
Q3) What are bonus shares?
A)shares issued to employees.
B)shares issued at no cost to shareholders.
C)shares issued to the board of directors.
D)shares issued to valued customers.
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Page 6
Chapter 5: Regulatory Framework for Companies
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Sample Questions
Q1) Organised stock exchanges provide which of the following benefits?
A)Facility for companies to raise new capital.
B)Allows shareholders to easily sell their shares.
C)Increases the amount of regulation for the listed company.
D)Both A and B.
Q2) A company partly owned and controlled by another is known as a:
A)parent company.
B)subsidiary company.
C)a limited company.
D)a private company.
Q3) DBC Ltd recently paid $4,000,000 for 60% of JKL Ltd's equity. JKL Ltd had total assets of $6,500,000 and liabilities of $1,300,000. What amount of goodwill on consolidation will DBC Ltd record?
A)$2,700,000
B)$880,000
C)$1,200,000.
D)$100,000.
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Chapter 6: Measuring and Reporting Cash Flows
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Q1) Under accrual accounting, the receipt of cash from a trade debtor will:
A)have no impact on profit and increase cash.
B)increase profit and increase cash.
C)decrease profit and decrease cash.
D)none of the above.
Q2) GG Pty Ltd's accounting records show: \[\begin{array} { l c c } & \text { Beginning Balance } & \text { Ending Balance } \\ & \text { '000 } & \text { '000 } \\ & \$ & \$ \\
\text { Accounts payable } & 12 & 8 \\
\text { Inventory } & 25 & 21 \\
\text { Cost of sales } & - & 50
\end{array}\] Determine the amount of cash paid for inventory for the period.
A)$42,000.
B)$48,000.
C)$58,000.
D)$50,000.
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Chapter 7: Corporate Social Responsibility and Sustainability Accounting
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Sample Questions
Q1) 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.
Q2) What has been found in recent world studies on voluntary social responsibility reporting?
A)reporting was done principally by the largest companies.
B)disclosure was greatest in Australia.
C)reporting was mainly of a quantitative nature.
D)companies tended to provide 'bad news' as well as 'good news.'
Q3) Which of the following statements in relation to triple bottom line (TBL)reporting is correct? TBL reporting:
A)can only be used by companies.
B)can and is being used by at least one Australian council.
C)is not supported by the Australian government.
D)All of the above statements are correct.
Q4) Briefly outline the essence of the balance scorecard approach.
Page 9
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Chapter 8: Analysis and Interpretation of Financial Statements
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Q1) Which statement concerning the average settlement period for accounts payable is correct?
A)It is always best for the business to make creditors wait for their money for as long as possible.
B)It is best to pay accounts payable as quickly as possible.
C)Accounts payable provide a free source of finance for a business.
D)A change in the accounts payable turnover period of 56 days to 65 days means that accounts payable are being paid faster.
Q2) Which ratio is considered to be the primary measure of overall profitability as it assesses how effectively the business has used its funds?
A)return on ordinary shareholders' funds.
B)gross profit margin.
C)return on capital employed.
D)operating profit margin.
Q3) If the earnings yield is 6.67%, the price-earnings ratio is:
A)12:1.
B)15:1.
C)6:1.
D)6.7:1.
Page 10
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Chapter 9: Cost-Volume-Profit Analysis and Relevant
Costing
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Q1) Sand Art has increased its selling price to $35. All other costs remain constant (variable costs $25 per pot and fixed costs $50,000). The number of pots that have to be sold to break even is:
A)7,000 pots.
B)4,000 pots.
C)5,000 pots.
D)6,000 pots.
Q2) Xon Company needs 1,000 components for one of its products. It can subcontract production of the components to the Eon Company for $40 each. The business can produce the components internally for a total variable cost of $30 per component. Xon Company has spare capacity. What will be the impact on Xon's profit if Eon's offer is accepted?
A)$10,000 decrease.
B)$10,000 increase.
C)$1,000 increase.
D)$1,000 decrease.
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Chapter 10: Full Costing
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Sample Questions
Q1) All of the statements regarding activity-based costing are correct except:
A)it provides better information for decision-making.
B)it provides more accurate product costs.
C)it is used by the majority of businesses in Australia.
D)it is costlier than alternative systems.
Q2) If the overhead applied to a job is $800 and the overhead recovery rate is $20 per direct labour hour, how many direct labour hours were used for the job?
A)900 hours.
B)25 hours.
C)30 hours.
D)40 hours.
Q3) The focus in activity-based costing is on:
A)products.
B)direct costs.
C)services.
D)activities.
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Page 12
Chapter 11: Budgeting
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Sample Questions
Q1) A budget system that always provides plans for a full 12 months into the future is known as:
A)advance budget.
B)yearly budget.
C)future budget.
D)rolling budget.
Q2) If a firm had credit sales of $1,550,000 for March and collected its sales 30% in the month of sale and 70% in the month following the sale, how much of March sales would be collected in cash in March?
A)$1,250,000.
B)$375,000.
C)$875,000.
D)$465,000.
Q3) Refer to the table above. Calculate the total cash sales for the three months, January, February and March.
A)$256,000.
B)$960,000.
C)$2,848,000.
D)$732,000.
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Page 13
Chapter 12: Capital Investment Decisions
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Sample Questions
Q1) TG Industries is considering investing in a fleet of six delivery vehicles. The annual running costs are expected to total $90,000 per vehicle, including the driver's salary. The vehicles are expected to operate for a total of five years. At present TG industries uses a commercial carrier for its deliveries. The commercial carrier is expected to charge a total of $680,000 for each of the next five years to make the deliveries. What is the estimated net annual cash cost saving on delivery vehicle running cost if TG industries invests in the fleet of six vehicles?
A)$90,000.
B)$400,000.
C)$310,000.
D)$140,000.
Q2) The decision rule for the accounting rate of return method of assessing investment projects is to accept all projects with:
A)a positive return.
B)the highest return.
C)the highest return subject to a minimum required return.
D)none of the above.
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Chapter 13: The Management of Working Capital
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Q1) What is the formula for the average inventory turnover period in days?
A)(Average inventory held/Cost of sales)× 365.
B)Average inventory held/Sales.
C)Cost of sales/Average inventory.
D)None of the above.
Q2) Extending the credit period granted, with all other components of the credit policy remaining unchanged, will most likely cause:
A)a decrease in sales.
B)a decrease in bad debts.
C)a decrease in accounts receivable.
D)none of the above.
Q3) If inventory is turned over 8 times a year, what is the inventory turnover period in days?
A)7 days.
B)46 days.
C)19 days.
D)70 days.
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15
Chapter 14: Financing the Business
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Sample Questions
Q1) A mortgage is a form of loan that is secured by a charge over:
A)freehold property.
B)inventories.
C)accounts receivable.
D)none of the above.
Q2) For an investor investing in ordinary shares, it is normally considered riskier than investing in:
A)debentures.
B)unsecured notes.
C)preference shares.
D)all of the above.
Q3) The most important difference between a bonus share issue and a rights issue, from the issuing company's point of view, is that they:
A)require different accounting practices.
B)benefit different groups.
C)have different effects on cash flow.
D)none of the above.
Q4) Discuss the advantages and disadvantages of a company issuing long-term debt, e.g., debentures, compared to raising funds through an issue of shares.
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