PILOT TEST
Unit: PRINCIPLES OF ACCOUNTING. Unit Code: BSA2001-E
I. Multiple Choice Question:
Students must write the answers in the following table:
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10
Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20
1. A building is offered for sale at $500,000 but is currently assessed at
$400,000. The purchaser of the building believes the building is worth
$475,000, but ultimately purchases the building for $450,000. The purchaser
records the building at:
a. $400,000.
b. $450,000.
c. $475,000.
d. $500,000.
2. On December 30 of the current year, KPMG signs a $150,000 contract to
provide accounting services to one of its clients in the next year. KPMG has a
December 31 year-end. Which accounting principle or assumption requires
KPMG to record the accounting services revenue from this client in the next
year and not in the current year?
a. Business entity assumption
b. Revenue recognition
c. Monetary unit assumption
d. Cost principle
Explaination:
The revenue recognition principle states that revenue should
be recognized in the accounting period in which it is earned,
regardless of when the cash is received. In this case, since the
accounting services will be provided in the next year, the revenue
should be recognized in the next year when the services are
actually performed, not in the current year when the contract is
signed. This ensures that the financial statements accurately reflect
the company's performance and financial position.
3. If the assets of a company increase by $100,000 during the year and its
liabilities increase by $35,000 during the same year, then the change in equity
of the company during the year must have been:
a. An increase of $135,000.
b. A decrease of $135,000.
c. A decrease of $65,000.
d. An increase of $65,000.
Explaination:
Assets = Liabilities + Equities => Equities = $100,000 -
$35,000 = $65,000
4. Brunswick borrows $50,000 cash from Third National Bank. How does this
transaction affect the accounting equation for Brunswick?
a. Assets increase by $50,000; liabilities increase by $50,000; no effect on
equity.
b. Assets increase by $50,000; no effect on liabilities; equity increases by
$50,000.
c. Assets increase by $50,000; liabilities decrease by $50,000; no effect on
equity.
d. No effect on assets; liabilities increase by $50,000; equity increases by
$50,000.
5. Geek Squad performs services for a customer and bills the customer for
$500. How would Geek Squad record this transaction?
a. Accounts receivable increase by $500; revenues increase by $500.
b. Cash increases by $500; revenues increase by $500.
c. Accounts receivable increase by $500; revenues decrease by $500.
d. Accounts payable increase by $500; revenues increase by $500.
Explaination:
When Geek Squad performs services and bills the customer, they
recognize the revenue earned from the services provided. Since
the customer has been billed but has not yet paid, the amount
is recorded as accounts receivable. This reflects the amount owed
by the customer to Geek Squad.
6. Net income will result during a time period when:
a. assets exceed liabilities.
b. assets exceed revenues.
c. expenses exceed revenues.
d. revenues exceed expenses.
Explaination:
Net income is calculated as the difference between total revenues
and total expenses. When revenues are greater than expenses, the
result is a net income. Conversely, if expenses exceed revenues, the
result would be a net loss.
7. Adjustments for unearned revenues:
a. decrease liabilities and increase revenues.
b. increase liabilities and increase revenues.
c. increase assets and increase revenues.
d. decrease revenues and decrease assets.
Explaination:
Unearned revenues are payments received by a company for
services or goods that have not yet been provided. When the
company earns the revenue by providing the services or goods, it
needs to adjust its accounts. This adjustment involves decreasing
the liability account (unearned revenue) and increasing the
revenue account to reflect the earned revenue.
8. According to IAS1, Presentation of Financial Statements, compliance with
IFRS Standards will normally ensure that:
a. The entity’s inventory is valued at net realizable value
b. The entity’s assets are valued at their break-up value
c. The entity’s financial statements are prepared on the assumption that it is a
going concern
d. The entity’s financial position, financial performance and cash flows are
presented fairly
9. Which of the following accounts is not shown on the Statement of Owner’s
Equity?
a. Owner’s Capital
b. Revenues
c. Expenses
d. Withdrawals
Explaination:
The Statement of Owner’s Equity typically includes accounts such
as Owner’s Capital, Withdrawals (or Drawings), and Net Income
(which is derived from Revenues and Expenses). However,
Revenues and Expenses themselves are not directly shown on the
Statement of Owner’s Equity; they are included in the calculation
of Net Income, which then affects the Owner’s Equity.
10. The withdrawal of cash by the owner will
a. decrease net income.
b. increase liabilities.
c. not affect total assets.
d. decrease owner’s equity.
11. When a service has been performed, but no cash has been received, which
of the following statements is true?
a. The entry would include a debit to Accounts Receivable.
b. The entry would include a debit to Accounts Payable.
c. The entry would include a credit to Unearned Revenue.
d. No entry is required until the cash is received.
12. An $800 debit item is accidentally posted as a credit. The trial balance
column totals will therefore differ by
a. $0
b. $400
c. $800
d. $1,600
13. Which of the following is a business event that is not considered a
recordable transaction?
a. A company receives a product previously ordered.
b. A company pays an employee for work performed.
c. A customer inquiry about the availability of a service.
d. A customer purchases a service.
14. Which of the following is not a Book of Prime Entry?
a. Sales Journal
b. Cashbook
c. Purchases Journal
d. Sales Ledger
15. A credit customer returned some damaged goods to the business. This
transaction will record in:
a. Sales Return Journal
b. Purchase Return Journal
c. Purchase Journal
d. Sales Journal
Explaination:
Books of Prime Entry, also known as Books of Original Entry, are
the initial records where transactions are first recorded before
being posted to the ledger accounts. These include the Sales
Journal, Cashbook, and Purchases Journal. The Sales Ledger, on
the other hand, is a subsidiary ledger that contains individual
accounts for each customer, summarizing the transactions
recorded in the Sales Journal.
16. A receipt is used as a source document for
a. Credit sales
b. Credit purchases
c. Payment of cash
d. Return of goods to supplier
Explaination:
A receipt is a source document that serves as proof of
payment. It is typically issued when cash is received or paid out.
For example, when a customer makes a cash payment for goods or
services, a receipt is issued to acknowledge the transaction.
Similarly, when a business makes a cash payment to a supplier, a
receipt is received as proof of the payment.
17. The controller for Tires and More, Inc. has recorded the following
transactions during the month: the purchase of equipment for $8,500 cash;
payment of $6,300 for 3 months rent; and, collection of $2,400 from a
customer for services performed. At the beginning of the month the owner
established the business by making an investment of $15,000 cash. What is the
balance in the Cash account at the end of the month, and is the balance a debit
or a credit?
a. $2,600 debit.
b. $2,600 credit.
c. $6,800 debit.
d. $15,200 debit.
Dr Purchases 8,500
Cr Cash 8,500
Dr Rent 2,100
Cr Cash 2,100
Dr Cash 2,400
Cr Sales 2,400
Dr Cash 15,000
Cr Investment 15,000
⇒ Cash = - 8,500 - 2,100 + 2,400 + 15,000 = +6,800 on dedit
18. A sole trader is £5,000 overdrawn at her bank and receives £1,000 from a
credit customer in respect of its account. Which element(s) of the accounting
equation will change due to this transaction?
a. Assets and liabilities
b. Liabilities only
c. Assets only
d. Assets, liabilities and capital
19. A sole trader had trade receivables of £2,700 at 1 May and during May
made cash sales of £7,200, credit sales of £16,500 and received £15,300 from
his credit customers. The balance on his trade receivables account at the end of
May was:
a. £1,500
b. £3,900
c. £8,700
d. £11,100
Dr Trade Receivables 2,700
Cr Cash 2,700
Dr Cash 7,200
Cr Sales 7,200
Dr Trade Receivables 16,500
Cr Cash 16,500
Dr Cash 15,300
Cr Trade Receivables 15,300
20. Information is relevant if it is capable of making a difference in the
decisions made by users. According to the IASB's Conceptual Framework,
financial information is capable of making a difference in decisions if it has
which of the following?
1 Predictive value
2 Comparative value
3 Historic value
4 Confirmatory value
a. 1 and 3 only
b. 2 and 4 only
c. 1 and 4 only
d. 2 and 3 only
II. Short question:
Given that Company ABC's fiscal year ends on December 31st, and the
utility bill for the month of December is expected to be received on January 5 th.
Assuming that the estimated utility expense for December is $2,000. Should
the company record the utility expense in its financial statements for the year
ending December 31st? Provide explanation.
Under accrual accounting, expenses are recognized in the period they
are incurred, regardless of when the payment is made.
In this case, even though the bill is received in January, the expense is
incurred for December usage.
Therefore, following accrual accounting, Company ABC should
record the estimated $2,000 utility expense in its financial statements for the
year ending December 31st.
Explain why investing (assets) and financing (liabilities and equity)
totals are always equal.
Investing (assets) and financing (liabilities and equity) totals are always equal
because of the fundamental accounting equation, which states that Assets =
Liabilities + Equity. When a company invests in assets, it must finance those
assets through either liabilities or equity. Therefore, the total amount invested
in assets must be equal to the total amount of financing provided by liabilities
and equity to maintain the balance in the accounting equation.
III. Exercises:
Demo Exercise 1:
Andrew Joel is a market trader. The company’s trial balance as at 31 December
20X8, appears below:
$ $
Sales 71,600
Purchases 29,050
Salaries 4,650
Rent and business rates 2,500
Prepay – Insurance 3,900
Motor expenses 21,860
Fixtures 35,000
Cash in hand 5,000
3,500
Cash at bank
Drawings 24,000
Capital 61,810
Account Receivable 23,450
Account Payable 19,500
152,910 152,910
During the month of January, the company completed the following
transactions:
Januar Transfers $700 of his savings into a business bank account
y
1 Borrows $3,000 from LLoydwest Bank, repayable in three years’
time
2 Buys goods for resale on time, $80 from [Link]
3 Buys goods for resale, paying cash $55
4 Goods returned by us to [Link], $20
5 Sale goods $650, customer paying by cheque $500
6 Sale goods on time, $120 to [Link]
7 Goods returned to us by [Link] $20
8 Pays staff wages for January, $400 cash
9 Purchases goods from [Link] $400, less 10% trade discount, pays
by cash
10 Insurance is still unexpired of $3,000
11 Inventory on 31 January 20X9 is 7,547
Required:
a. Record all the transactions.
Dr Cash in bank
1
Cr Cash in hand
Dr Cash 3,000
2
Cr Trade Payables 3,000
Dr Purchases 80
3
Cr Trade Payables 80
Dr Purchases 55
4
Cr Cash 55
Dr Sales Return 20
5
Cr Cash 20
Dr Trade Receivables 120
6
Cr Sales 120
Dr Cash 20
7
Cr Sales Return 20
Dr Wages 400
8
Cr Cash 400
Dr Purchases 400
9
Cr Cash 400
Dr Prepayment 3,000
10
Cr Insurance 3,000
11
b. Prepare a Trial Balance as at the end of the month.
TRIAL BALANCE
Cash =
c. Prepare Income Statement for the month.
d. Prepare a Balance Sheet at the end of the period.
Demo Exercise 2:
Andrew Joel is a market trader. On the December 1, 20X8, he opened a hotel
named Queen Hotel. The company’s trial balance as at 31 December 20X8,
appears below:
Rent revenue 64,100
Unearned Rent 29,050
Supplies 4,650
Prepay Insurances 2,400
Motor expenses 21,860
Fixtures 35,000
Cash in hand 34,050
Drawings 24,000
Capital 32,760
Account Receivable 23,450
Account Payable 19,500
145,410 145,410
During the month of January, the company completed the following
transactions:
1. Insurance expires at the rate of $450 per month.
2. A count of supplies on December 31 showed $3,000 on hand.
3. Received cash from credit customers, $10,000.
4. Purchased a car by cash, $1,000.
5. Rental of $1,600 were due from tenants at January 31.
6. Unearned Rent of $10,000 was earned prior to 31 January.
7. Made a payment to suppliers by cash, $500.
8. Paid wages and salaries for the period by cash, $700.
Required:
a. Record all the transactions.
Dr Insurance 450
1
Cr Cash 450
Dr Trade Receivables 10,000
3
Cr Cash 10,000
Dr Vehicle 1,000
4
Cr Cash 1,000
5
b. Prepare a Trial Balance as at the end of January.
c. Prepare Income Statement for the month ending 31st January.
d. Prepare Balance sheet at the end of January.
Note:
1. Sinh viên phải điền đáp án phần trắc nghiệm vào bảng (phần I).
2. Phần bài tập có 2 đề mẫu, sinh viên có thể sử dụng để ôn tập. Đề mẫu thường
khó hơn, và nhiều thông tin về nghiệp vụ phát sinh hơn đề thi chính thức. Đề
thi chính thức thì chỉ có 01 dạng bài tập và trong mỗi bài tập chỉ có thêm 05
nghiệp vụ phát sinh.
3. Cấu trúc đề thi gồm: 20 câu trắc nghiệm (4 điểm); 01 câu hỏi ngắn (1 điểm)
và 01 bài tập với 04 ý hỏi (5 điểm).