1. The balance sheet shows the financial position of the entity:

Awhen it is making profits.

B.at the beginning of the year.

C.at a point in time.

D.over a period of time.

2. Clark, Inc. a retailer, reports the following information:

Accounts Payable$700Accounts Receivable$4 900Cash8 000Loan Payable4 500

Retained Profits7 700Inventory10 000

Buildings17 000Office Stationery2 100

What is the most likely amount for the firm's current assets?

A. $22 900B. $25 000C $42 000D. $13 800

3. Which of the following is not a valid expression of the balance sheet equation?

A.Assets = Liabilities + Owners' Equity

B.Liabilities + Assets = Owners Equity

C.Assets - Owners Equity= Liabilities

D.Assets - Liabilities = Owners Equity

4. ABC Ltd sold a machine for $90 000 which it had recorded in its accounts at $70 000. The effect on ABC Ltd's accounts is

AssetsLiabilitiesEquity

A.Increaseno changeincrease

B.Decreasedecreaseincrease

C.Increaseno changeno change

D.No changedecreaseno change

5. Paul was trying to determine the amount of total equity in his programming business. An exclusive list of accounts is listed below:

Computers$11 000

Cash$3 000

Office equipment$5 000

Bank overdraft$2 000

Profit for the period$4 000

Based on ths information the total owner's equity in Paul's business was:

A$4 000B.$14 000 C.$19 000 D. $17 000

6. The income statement shows financial information:

A. at the beginning of a reporting period (e.g. financial year).

B. at the end of a reporting period.

C. at a point in time.

D, over a period of time.

7. MNY Ltd provides business services and bills customers. In the first month this amount was $5,400. By the end of the first month, $2 600 had been collected. The other $2 800 would be collected during the following month. On MNY's income statement for the first month, what amount of revenue should be reported?

A. $0B. $5 400C. $2 600D. $2 800

8. Which of the following pairs of items would normally be classified as expense?

A. Ordinary dividends and salaries paid

B. Salaries paid and interest paid on loans

C. Discount received and interest paid on loans

D. Amortization of goodwill and loan payable

9. Merchandise inventory costing $10 000 was sold to customers on credit for $15 000. What

amount of revenue and cash flow and profit resulted from the sale of the inventory?

Revenue Cash FlowProfit

A.$15 000$0$5 000

B.$5 000$15 000$5 000

C.$10 000$15 000-$5 000

D.$15 000$15 000$5 000

10. Determine the profit earned by a business owner for the month ending 31 December who

recorded the following transactions during December:

1. Sold $10 000 of merchandise that had cost the company $7 000.

2. Paid $400 cash each month in the months of November and December.

3. Incurred $200 of expenses during December.

A.$10 000B. $2 800C. $3 000D. $2 200

11.If a company receives $12,000 from the owner to establish a proprietorship, the effect on the accounting equation would be:

A. Liabilities increase $12,000 and equity decreases $12,000.

B. Assets increase $12,000 and liabilities increase $12,000.

C. Assets decrease $12,000 and equity decreases $12,000.

D. Assets increase $12,000 and equity increases $12,000.

12.Net Income:

A. Decreases equity.

B. Represents owners' claims against assets.

C. Equals assets minus liabilities.

D. Is the excess of revenues over expenses.

13. Revenue is properly recognized:

A. When cash from a sale is received.

B. At the end of the accounting period.

C. When the customer makes an order.

D. Upon completion of the sale or when services have been performed and the business obtains the right to collect the sales price.

14. The accounting concept that requires every business to be accounted for separately from other business entities, including its owner or owners is known as the:

A. Time-periodassumption.

B. Going-concernassumption.

C. Measurement (Cost) principle.

D. Business entity assumption.

15. The accounting principle that requires accounting information to be based on actual cost and requires assets and services to be recorded initially at the cash or cash-equivalent amount given in exchange, is the:

A. Going-concernassumption.

B. Measurement (Cost) principle.

C. Business entity assumption.

D. Accountingequation.

16. Prepaid accounts (also called prepaid expenses) are generally:

A. Decreases in equity.

B. Payments made for products and services that never expire.

C. Assets that represent prepayments of future expenses.

D. Classified as liabilities on the balance sheet.

17. A company's formal promise to pay (in the form of a promissory note) a future amount is a(n):

A. Account receivable.

B. Unearned revenue.

C. Note payable.

D. Prepaid expense.

18. The record of all accounts and their balances used by a business is called a:

A)Balance column journal.

B)Ledger (or General Ledger).

C)General Journal.

D)Book of original entry.

19. Which of the following is NOT an asset account:

A)Cash

B)Land

C)Services Revenue

D)Equipment

20. A debit is used to record which of the following:

A)A decrease in an expense account.

B)An increase in the owner's capital account.

C)An increase in a revenue account.

D)An increase in the owner's withdrawals account.