Introductory Accounting Exam Questions
Course Introduction
Introductory Accounting provides students with a foundational understanding of the principles and practices used in financial accounting. The course covers key topics such as the accounting cycle, preparation and analysis of basic financial statements, recording transactions, and understanding assets, liabilities, and equity. Students will learn how to apply generally accepted accounting principles (GAAP) to real-world business scenarios and develop skills in using accounting information for decision-making. Emphasis is placed on accuracy, ethics, and the relevance of accounting in modern business environments.
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) What is the balance of liabilities?
A) $7000
B) $9000
C) $15 000
D) None of the answers provided Answer: B
Q2) What is the net profit for the period ending 30 June 2016?
A) $2000
B) $4000
C) $5000
D) $7000
Answer: A
Q3) What is the balance of assets?
A) $8000
B) $10 000
C) $16 000
D) None of the answers provided
Answer: C
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Chapter 2: Measuring and Evaluating Financial Position and
Financial Performance
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Sample Questions
Q1) Gross profit is the difference between:
A) sales revenue and operating expenses.
B) sales revenue and cost of goods sold.
C) operating profit before tax and income tax expense.
D) sales and sales returns.
Answer: B
Q2) Which of the following is NOT an expense?
A) Dividends declared
B) Amount owed to electrician to be paid in the next period
C) Cost of goods sold
D) Wages
Answer: A
Q3) Which of the following statements about retained profits is true?
A) Retained profits is the sum of past net profits/losses minus dividends declared.
B) Retained profits indicates the total profits earned by a company since its inception.
C) If a company does not pay a dividend,it cannot decrease.
D) Retained profits is the current year's profit.
Answer: A
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Chapter 3: The Double-Entry System
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Sample Questions
Q1) A customer was invoiced for services rendered.
A) A liability increased and another liability decreased.
B) An asset decreased and a liability decreased.
C) An asset increased and revenue increased.
D) An asset increased and another asset decreased.
Answer: C
Q2) If a payment is received from accounts receivable:
A) shareholders' equity increases and an asset decreases.
B) an asset increases and a liability increases.
C) an asset decreases and a liability decreases.
D) one asset increases and another asset decreases.
Answer: D
Q3) At the end of the accounting period,3 months' interest is owing to the company from the bank on a term deposit with the bank.
A) A liability increases and another liability decreases.
B) An asset decreases and a liability decreases.
C) An asset increases and revenue increases.
D) An asset increases and another asset decreases.
Answer: C
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Page 5
Chapter 4: Record-Keeping
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Sample Questions
Q1) Which transaction represents a customer paying his/her account?
A) (5A)
B) (6A)
C) (7)
D) (8)
Q2) What does transaction (2)represent?
A) Sale of inventory on credit
B) Sale of inventory for cash
C) Purchase of inventory on credit
D) Purchase of inventory for cash
Q3) Which transaction represents the acquisition of a noncurrent asset?
A) (2)
B) (4)
C) (9)
D) (10)
Q4) What is the closing balance of inventory?
A) $120 000
B) $140 000
C) $200 000
D) $260 000
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Chapter 5: Accrual Accounting Adjustments
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Sample Questions
Q1) Brown Ltd has a $22 000 balance in its Unearned service revenue account.Where would this account appear in the financial statements?
A) As revenue in the income statement
B) As a current asset in the balance sheet
C) As a current liability in the balance sheet
D) None of the answers provided
Q2) At the end of the financial year,the usual adjusting entry for depreciation on equipment was omitted.Which of the following statements is true?
A) Total assets will be understated at the end of the current year.
B) The profit and loss statement will be misstated but the balance sheet will be correct for the current year.
C) Net profit will be overstated for the current year.
D) Total liabilities and total assets will be understated.
Q3) What was the depreciation expense for year ended 30 June 2016?
A) $15 000
B) $10 000
C) $7500
D) $5000
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Chapter 6: Financial Reporting Principles, accounting
Standards and Auditing
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Sample Questions
Q1) Which of the following is NOT included in the corporate governance statement required under stock exchange regulations?
A) Composition of the audit committee
B) Audit report
C) Remuneration policy for directors
D) Statement of ethical standards
Q2) Which of the following items would be recognised as a liability?
A) Advances from customers for goods and services to be provided next year
B) Accumulated depreciation
C) The estimated cost of maintenance of plant deferred from this year to next year
D) Interest earned but not yet received
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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Page 8
Chapter 7: Internal Control and Cash
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Q1) Which of the following items would require a journal entry following preparation of the bank reconciliation statement?
A) Error by the bank
B) Error by the company
C) Unpresented cheques at end of the month
D) Receipts not yet banked
Q2) In preparing a bank reconciliation statement for a business with a substantial bank balance,the appropriate treatment for $650 that a customer paid directly into the company's bank account 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) Which of the following statements about the bank statement is NOT true?
A) The bank statement shows the amount payable by the customer.
B) The bank statement summarises the activity in a cheque account.
C) If the customer of the bank has a substantial bank overdraft,the closing balance will normally be a debit.
D) It is the source document for bank charges.
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Page 9
Chapter 8: Accounts Receivable and Further
Record-Keeping
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Sample Questions
Q1) In posting the total of the cash column in a cash receipts journal,the entry that would be made is:
A) Dr Cash.
B) Cr Cash.
C) Dr each of the specific accounts that comprise the total.
D) Cr each of the specific accounts that comprise the total.
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
Q3) What was the balance of the creditors control account at 30 June 2016?
A) $11 500
B) $6500
C) $5500
D) $6000
Page 10
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Chapter 9: Inventory
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Sample Questions
Q1) What was the balance of Pinkerton Ltd's accounts payable at the end of the period?
A) $20 000
B) $40 000
C) $90 000
D) $100 000
Q2) Which of the following entries records a credit sale under the perpetual inventory system?
A) Dr Cost of goods sold
B) Dr Sales
C) Dr Inventory
D) Dr Accounts receivable
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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11
Chapter 10: Noncurrent Assets
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Sample Questions
Q1) X buys Y for $1 million.The fair value of the following items is: property,plant and equipment $800 000;accounts receivable $160 000;loan from the bank $60 000;and provision for employee entitlements $80 000.The value of goodwill is:
A) $40 000.
B) $10 000.
C) $180 000.
D) $820 000.
Q2) Equipment with a cost of $15 000 and accumulated depreciation of $12 500 was sold for $1700.The journal entry to record the disposal would include:
A) Cr Cash,$1700.
B) Cr Loss on sale,$800.
C) Dr Accumulated depreciation,$12 500.
D) Cr Equity,$15 000.
Q3) What was the balance of accumulated depreciation at 31 December 2018?
A) $84 000
B) $93 600
C) $97 440
D) $60 000
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Chapter 11: Liabilities
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Sample Questions
Q1) An employee earns $1000 a week and the following deductions are made: income tax $150,superannuation $90,union dues $20.The journal entry to record this transaction would include:
A) Dr Union dues due $20.
B) Dr Wages expense $740.
C) Cr Wages payable $1000.
D) Dr Wages expense $1000.
Q2) As a result of some major excavations this year for mining,PLM Ltd is obliged to carry out land restoration at the end of the excavations.This cost of the restoration will be shown in the balance sheet under:
A) accounts payable.
B) accruals.
C) provisions.
D) contingent liability.
Q3) What is the interest expense for the year ended 30 June 2015?
A) $0
B) $10 000
C) $120 000
D) None of the answers provided
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Page 13
Chapter 12: Completing the Balance Sheet
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Q1) XYZ Limited paid $2 million for 100 per cent of the voting shares of ABC Limited and determined the assets to be worth $3 million and the liabilities $800 000.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
Q2) The journal entry on 12 February 2016 would include:
A) Dr Interim dividend declared,$25 000.
B) Cr Cash,$25 000.
C) Cr Retained profits,$25 000.
D) none of the answers provided.
Q3) When bonus shares are issued:
A) total assets increase.
B) total liabilities increase.
C) retained profits increase.
D) shareholders may receive more dividends.
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Chapter 13: Revenue and Expense Recognition: Additional Concepts
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Q1) How much profit was earned during the third year if the percentage of completion method was used?
A) $450 000
B) $750 000
C) $1 500 000
D) $240 000
Q2) How much profit was earned during the third year if the completion of production method was used?
A) $360 000
B) $440 000
C) $800 000
D) $400 000
Q3) What difference would there be in profit for year 2 if the completion of production method were used?
A) Profit would be $200 000 higher.
B) Profit would be $200 000 lower.
C) Profit would be $220 000 higher.
D) Profit would be $420 000 higher.
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Chapter 14: The Statement of Cash Flows
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Sample Questions
Q1) What were the cash flows from operating activities?
A) $25 000
B) $23 000
C) ($17 000)
D) $20 000
Q2) 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
Q3) Which of the following is NOT a financing cash flow?
A) Dividends received
B) Issue of shares
C) Borrowing $10 000 from the bank
D) Share buybacks
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Chapter 15: Financial Statement Analysis
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Sample Questions
Q1) Which of the following could explain a substantial increase in the current ratio (presently 1:1)?
A) Purchase of inventory for cash
B) Sale of a major noncurrent asset near year-end
C) A large prepayment near year-end
D) Received a cash deposit for work to be done next year
Q2) The inventory of Dyer Ltd for year ended 31 December 2016 was $70 000.The number of days' inventory on hand was 91.25 days.What was the cost of goods sold for the year?
A) $140 000
B) $259 000
C) $280 000
D) None of the answers provided
Q3) A high debt-to-equity ratio does NOT indicate that the company:
A) is highly geared.
B) is heavily in debt relative to its equity.
C) may be vulnerable to interest rate increases.
D) has a high current ratio.
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17
Chapter 16: Accounting Policy Choices
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Q1) what would be the effect on net book value of assets?
A) $340 000 reduction
B) $340 000 increase
C) $217 600 reduction
D) $217 600 increase
Q2) Which of the following would be decreased by an accounting policy change involving writing off obsolete inventories?
A) Expense
B) Revenue
C) Liabilities
D) Net profit
Q3) Which of the following would be increased by an accounting policy change involving use of the reducing balance method of depreciation in place of the straight-line method,leading to an increase in depreciation expense?
A) Assets
B) Net profit
C) Retained profits
D) Expenses
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Chapter 17: Sustainability Reporting
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Q1) Which of the following is NOT a reason for having sustainability reports audited?
A) To provide improved reported process
B) To improve the quality of the information in sustainability reports
C) It is a requirement of Australian accounting standards
D) To increase the credibility of sustainability reports
Q2) Sustainability reporting refers to:
A) environmental,social and economic performance.
B) reporting on carbon emissions.
C) maximising the net returns to shareholders.
D) maximising the net profits of the organisation.
Q3) 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.
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