QUESTION 1

The income statement

1. presents the income and expenses of an entity for a specific period of time.
2. reports the changes in assets, liabilities and equity over a period of time.
3. reports the assets, liabilities and equity at a specific point in time.
4. summarises the change in retained earnings over a specific period of time.
5. None of the above

1 points

QUESTION 2

If a legitimate expense is not accrued at the end of the accounting period, the result will be an

1. understatement in liabilities and an overstatement in profit.
2. overstatement in liabilities and an understatement in profit.
3. overstatement in assets and profit.
4. understatement in assets and profit.
5. None of the above

1 points

QUESTION 3

Which of these isnotan example of an accounting estimate?

1. Useful life of a depreciable asset
2. Allowance for doubtful debts
3. Long service leave provided
4. Residual value of an asset used in depreciation calculations
5. None of the above, i.e. all are examples of accounting estimates

1 points

QUESTION 4

For a retailing or manufacturing entity, gross profit is equal to sales less

1. taxation expense.
2. cost of sales.
3. all expenses.
4. all expenses other than cost of sales.
5. None of the above

1 points

QUESTION 5

A machine is purchased for $130000. It is estimated that it has a useful life of 8 years and will then be sold for $10000. Using the straight-line method calculate the amount of depreciation to be charged for each year of useful life.

1. $1625
2. $10000
3. $16250
4. $15000
5. $0

1 points

QUESTION 6

If income earned is not accrued at the end of the accounting period, the result will be an

1. Understatement in liabilities and an overstatement in profit
2. Overstatement in liabilities and an understatement in profit
3. Overstatement in assets and profit
4. Understatement in assets and profit
5. None of the above

1 points

QUESTION 7

A transaction recording income earned

1. leaves total assets unchanged.
2. increases assets and decreases equity.
3. increases assets and equity.
4. increase assets and liabilities.
5. None of the above

1 points

QUESTION 8

At year-end it was forgotten to adjust the asset prepaid rent for the $5,000 rent expense used-up during the year.This will result in an:

1. understatement of assets, profit, and equity.
2. overstatement of assets, profit, and equity.
3. overstatement of liabilities and an understatement of profit and equity.
4. understatement of assets and an overstatement of profit and equity.

1 points

QUESTION 9

A forklift had a purchase price of $10,000, delivery costs of $2,000, a physical life of 6 years and a useful life of 4 years. Estimated residual value is zero. The annual depreciation charge using the straight-line method is:

1. $2,500
2. $1,667
3. $3,000
4. $2,000

1 points

QUESTION 10

Accrual accounting:

1. recognises expenses when the cash has been paid.
2. recognises expenses when they are earned.
3. recognises expenses when they have been incurred (economic benefits used up)regardless of whether the cash has or hasn't been paid.
4. recognises expenses when they are possible.

1 points

QUESTION 11

If equity at the beginning of the period is $100,000 and at the end of the period is $90,000 and additional capital of $20,000 is paid into the business by the owner during the period, profit or loss is:

1. profit $30,000
2. loss $30,000
3. loss $10,000
4. profit $10,000

1 points

QUESTION 12

The expense in the income statement which represents the purchase price of the goods that have been sold is called:

1. sales.
2. merchandise.
3. cost of sales.
4. payments for stock.

1 points

QUESTION 13

The major purpose of charging depreciation is:

1. to spread the cost of the asset over its useful life so that the cost of using it up is matched against income earned.
2. to provide for the replacement of the asset.
3. to adjust the asset to its expected market value.
4. none of the above.

1 points

QUESTION 14

On 31 December 2009 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 $25,000. The amount of depreciation expense charged for the six months ended 30th June 2010, using the straight-line method is:

1. Nil.
2. $4,000
3. $2,000
4. $25,000

1 points

QUESTION 15

Which accounting principlerequires the same depreciation method to be used over consecutive accounting periods?

1. consistency
2. conservatism
3. reliability
4. historical cost

1 points

QUESTION 16

If a business decided to classify its expenses under the headings 'Selling and Distribution', 'General and Administrative' and 'Financial' into which groupings would 1. depreciation of sales staff's motor vehicles and 2. bad debts written off, fall?

1. 1. selling and distribution2. general and administrative.
2. 1. selling and distribution 2. financial.
3. 1. general and administrative 2. financial.
4. 1. financial2. selling and distribution.

1 points

QUESTION 17

Choose the statement that best describes the way the reducing-balance method charges depreciation.

1. Yearly depreciation is greater at the beginning of the asset's life.
2. Yearly depreciation is the same in each year of the asset's life.
3. Yearly depreciation is lower at the beginning of the asset's life.
4. Yearly depreciation expense is greater at the end of the asset's life.

1 points

QUESTION 18

Which of these is not an area where judgement must normally be applied in order to calculate depreciation expense?

1. determining the cost of the asset
2. determining the expected useful life of the asset
3. choosing a depreciation method
4. determining the residual or disposal value of the asset

1 points

QUESTION 19

Gross profit is sales less the cost of sales.

1. True
2. False

1 points

QUESTION 20

For a non-reporting entity such as a sole trader there are no rules requiring the business to prepare financial statements in accordance with accounting standards.

1. True
2. False