1. A transaction recording accrued income will:

A. have no effect on total assets.

B. increase cash and decrease sales income.

C. increase accounts receivable and sales income.

D. increase accounts receivable and accounts payable.

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2. Which of the following will be classified as income?

A. Interest received.

B. Fees charged for services provided.

C. Gain on sale of equipment.

D. All of the options listed

- 3. An entity pays wages on a fortnightly basis and the next payroll date is 8 September. If wages expense is not accrued at 31 August the effect on the financial statements for August will be:

A. an overstatement of assets and profit.

B. an understatement of assets and profit.

C. an understatement of liabilities and an overstatement of profit.

D. an overstatement of liabilities and an understatement of profit.

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4. Which of the following would not be classified as an administrative expense?

A. Salaries and wages of sales staff.

B. Stationery.

C. Depreciation of office equipment.

D. Rates.

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5. Equity is decreased by:

A. liabilities

B. expenses

C. income

D. assets

- 6. Which of the following profit measures represents the raw operating earnings of an entity?

A. Profit after taxation.

B. Earnings before interest and taxation (EBIT).

C. Gross profit.

D. Earnings before interest, taxation, depreciation and amortisation (EBITDA).

- 7. Under the current accounting standards, which of the following items is not included in the measurement of profit in the statement of profit or loss?

A. Loss on the disposal of non-current assets

B. Gain on asset revaluation

C. Cost of sales

D. Dividends received

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8. Preparing financial statements on the basis of recognising transactions when they occur is referred to as:

A. accrual accounting

B. management accounting

C. cash accounting

D. financial accounting

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9. For the financial year ending 30 June, Sunset Ltd had a beginning balance for equity of $180 000 and an ending balance of $175 000. During the year the owner withdrew $120 000 for private use. How much profit did Sunset Ltd earn during the year?

A. $5 000

B. $115 000

C. $125 000

D. $60 000

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10. Expenses classified by function would be categorised as:

A. marketing expenses

B. borrowing expenses

C. selling and distribution expenses

D. all of the options listed