1. Which of these is not a limitation of accounting information?

A. The delay in providing reports to external users after the end of the financial period

B. The lack of accounting rules

C. The subjective nature of financial reports

D. The historical nature of the information

E. All of the above

2. A business which is a separate accounting entity can be a:

A. Sole trader.

B. Partnership.

C. Company.

D. Partnership and Company

E. All of the above are separate accounting entities.

3. If a transaction causes a liability account to increase, which of the following effects of equal amount may also occur?

A. An increase in profit

B. An increase in capital

C. An increase in an asset account

D. A decrease in an asset account

E. None of the above

4. A bookkeeper recorded wages for the month as a decrease to the Income account rather than as an increase to Wages Expense. This error will result in:

A. Overstated net profit for the period

B. Understated equity at the end of the period

C. Understated assets at the end of the period

D. Overstated assets at the end of the period

E. No effect on net profit of the period

5. When the entity's customer eventually pays for items that have been purchased on credit previously, the transaction will affect:

A. An asset and a liability.

B. An asset and an expense.

C. Two assets.

D. An asset and income.

E. None of the above.

6. If sales are $45 000, and the beginning and closing accounts receivable balances are $33 000 and $42 000 respectively, what are the cash receipts from customers?

A. $30 000

B. $54 000

C. $36 000

D. $53 000

E. $120 000

7. An entity's financial year ends on 31 December 2020. On 1 March 2020 it pays a 12-month insurance premium of $12 000. Under the accrual system of accounting how much of the premium will be recognised as an expense for the year ended 31 December 2020 and how much will be treated as an asset (prepaid insurance)?

A. $9000 expense and $3000 prepaid insurance

B. $4000 expense and $8000 prepaid insurance

C. $10000 expense and $2000 prepaid insurance

D. $12000 expense and $0 prepaid insurance

E. $0 expense and $12 000 prepaid insurance

8. A machine is purchased for $130 000. It is estimated that it has a useful life of 8 years and will then be sold for $10 000. Using the straight-line method calculate the amount of depreciation to be charged for each year of useful life.

A. $1 625

B. $10 000

C. $16 250

D. $15 000

E. $0

9. The entity started the year with total assets of $90 000 and total liabilities of $40 000. During the year the business earned $45 000 in profit and paid $4000 dividends. However, there was a $5000 income received in advance incorrectly recorded as income earned. After correcting the mistake, what is the Equity at the end of the period:

A. $46 000.

B. $86 000.

C. $91 000.

D. $96 000.

E. None of the above.

10. A high times debtors turnover indicates:

A. the entity's sales have increased.

B. a large percentage of the entity's sales are on credit.

C. customers are clearing debts more quickly.

D. customers are clearing debts more slowly.

E. sales have decreased.

njeruj350

an hour ago

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