Financial statements for decision making
Recording Transactions
Adjusting the accounts and preparing financia
100
The expression for the accounting equation that is correct is:

(a) Assets + Liabilities = Equity

(b) Assets = Liabilities + Equity

(c) Assets + Equity = Liabilities

(d) Assets = Liabilities - Equity

(b) Assets = Liabilities + Equity
100
Balance sheet accounts are of three basic types, asset, liability and:

(a) Income

(b) Equity

(c) Expense

(d) Bank

(b) Equity
100
What type of account is prepaid insurance?

(a) Liability

(b) Income

(c) Expense

(d) Asset

(d) Asset
200
If the loss for the period is $15 000 and total income is $115 000 total expenses for the period are:

(a) $100 000

(b) $115 000

(c) $130 000

(d) $145 000

(c) $130 000
200
A party to whom the entity owes money for goods or services provided to the entity is called a:

(a) Creditor

(b) Debtor

(c) Debit

(d) Credit

(a) Creditor
200
PASS Ltd purchased three high-tech computers on 1 January 2009. Each of these computers cost $20 000 and have a useful life of 5 years with an expected residual value of $5 000.

The adjusting entry for depreciation on 30 June 2009, using the straight-line method is:

(a) $1 500

(b) $3 000

(c) $4 500

(d) $9 000

(c) $4 500
300
Laura J set up a part-time business 'Speedy Window Cleaning' by depositing $6 000 into a business bank account. The effect of this transaction on the accounting equation is:

(a) Increase in assets of $ 6 000; increase in equity of $ 6 000

(b) Increase in assets of $6 000; decrease in equity of $6 000

(c) Increase in assets of $6 000; increase in liabilities of $6 000.

(d) Decrease in assets of $6 000; increase in equity of $6 000.

(a) Increase in assets of $6 000; increase in equity of $6 000
300
Select the account types for these items:

♣ Repairs and maintenance

♣ Repairs and maintenance payable

♣ Accounts receivable

♣ Drawings

(a) Expense, liability, asset, equity

(b) Asset, liability, asset, equity

(c) Expense, asset, asset, expense

(d) Expense, liability, asset, liability

(a) Expense, liability, asset, equity
300
If an adjustment for depreciation is omitted from the financial reports the effect is:

(a) Assets are understated; profit is understated

(b) Assets are overstated; profit is understated

(c) Assets are understated; profit is overstated

(d) Assets are overstated; profit is overstated

(d) Assets are overstated; profit is overstated
400
UOW Ltd announced a profit for the 2008-09 FY of $150 000. At the end of the 2009-10 FY the following balances were taken from their accounts:

Assets: $570 000

Liabilities: $190 000

In the 2009/10 FY one director made a contribution of $10 000.

Assuming there was no contribution made in the 2008/09 FY and no withdrawals made during both financial years.

Determine the net profit made in the 2009/10 FY?

(a) $220 000

(b) $230 000

(c) $370 000

(d) $380 000

(a) $220 000
400
Which rule of debit and credit is incorrect?

(a) An increase in an asset results in a debit entry

(b) A decrease in a liability results in a credit entry

(c) An increase in an expense results in a debit entry

(d) An increase in income results in a credit entry

(b) A decrease in a liability results in a credit entry
400
The prepaid insurance account of Tan Traders shows a balance of $600, representing a payment on 1 July 2009 of a two-year insurance premium.

The correct adjusting entry on 31 December 2009, the close of the annual accounting period, is:

(a) Debit prepaid insurance $150; credit insurance expense $150

(b) Debit insurance expense $300; credit prepaid insurance $300

(c) Debit prepaid insurance $300; credit insurance expense $600

(d) Debit insurance expense $150; credit prepaid insurance $150

(d) Debit insurance expense $150; credit prepaid insurance $150
500
The assets for PASS Ltd have increased by $76 000 and the liabilities have decreased by $16 000 during the year. If the profit for this period was $50 000, and the owner of PASS Ltd made a withdrawal of $10 000, what was the additional contribution made by the owner?

(a) $20 000

(b) $42 000

(c) $52 000

(d) $62 000

(c) $52 000
500
PASS Ltd performed teaching services for $5 000. He receives at 30% deposit on cash, with the remaining amount given on credit.

How is this transaction recorded?

(a) Debit: Cash at Bank $5 000 ; Credit: Income $5 000

(b) Debit: Income $5 000; Credit: Cash at Bank $5 000

(c) Debit: Cash at Bank $1 500; Debit: Accounts Receivable $3 500; Credit: Income $5 000

(d) Debit: Cash at Bank $1 500; Credit: Accounts Payable $1 500

(c) Debit: Cash at Bank $1 500; Debit: Accounts Receivable $3 500; Credit: Income $5 000
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