1. The Framework states that an asset should be recognised when and only when:

(i) the asset possesses a cost or other value that can be measured reliably

(ii) it is legally owned by the entity

(iii) it is probable that the future economic benefits embodied in the asset will eventuate.

A. (i) and (ii) only

B. (i) and (iii) only

C. (ii) and (iii) only

D. (i), (ii) and (iii)

E. (ii) only

2. In which of the following transactions or events are the debit entries NOT equal to the credit entries?

A. Wages owing are recorded as increasing an expense and decreasing a liability

B. Credit purchase of supplies is recorded as increasing an asset and increasing a liability

C. Cash sales are recorded as increasing revenue and increasing an asset

D. Receipt from a customer for the amount previously owed is recorded as increasing an asset and decreasing another asset

E. Credit sales are recorded as increasing revenue and increasing an asset

3. Given only the following information, what is the balance of shareholders equity?

$

Cash 10,000

Inventory 30,000

Equipment 200,000

Accounts payable 50,000

Taxes payable 40,000

Loans to the company 100,000

A. $40,000

B. $50,000

C. $100,000

D. $140,000

E. None of the above

4. Accounts that have normal debit balances include:

1. Debtors, drawings, wages, accumulated depreciation
2. Debtors, drawings, equipment, depreciation expense
3. Creditors, capital, revenues, depreciation expense
4. Equipment, drawings, accumulated depreciation, inventory
5. Equipment, drawings, advertising, inventory gain

5. The owner of a business completed an electronic funds transfer of $5,000 from her personal bank account to Valley Motors as deposit on a new vehicle for the business costing $28,999. The balance owing is due in 60 days and will be paid for by the business. Identify the overall effect on the businesses accounting equation:

1. Assets decrease, liabilities increase and owners equity decreases
2. Assets increase, liabilities increase and owners equity decreases
3. Assets increase, liabilities increase and no effect on owners equity
4. Assets increase, liabilities increase and owners equity increases
5. None of the above

6. Suzie Yang runs a catering business. She received a phone booking for a function on 1 January. Susie catered for the birthday function on 28^th January, and received payment on 16^th February. Which of the following statements is correct?

1. If Susie were using cash-basis accounting, the revenue would be recorded in January;
2. If Susie were using cash-basis accounting, the revenue would be recorded in February;
3. If Susie were using accrual-basis accounting, the revenue would be recorded when received in February;
4. If Susie were using accrual-basis accounting, the revenue would be recorded when the booking was made;
5. None of the above.

7. Zia Company reports the following balance sheet information for 2020:

1 July 2019 30 June 2020

Assets $60,000 $70,000

Liabilities $12,000 $14,000

Assume that capital contributions during 2020 were $3,000 and that dividends were $12,000. Net profit for the year ended 30 June 2020 must have been:

1. $8,000
2. $11,000
3. $23,000
4. $17,000
5. $9,000

8. Failure to prepare an adjusting entry at the end of a reporting period to record an accrued expense would cause:

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