Ch03 tb hoggett a9e PDF

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Testbank to accompany

Accounting 9th Edition by John Hoggett, Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie & Jodie Maxfield Prepared by

Peter Hall

© John Wiley & Sons Australia, Ltd 2015

Testbank to accompany Accounting 9e

Chapter 3: Recording transactions Multiple-choice questions 1.

The transactions below are from the records of Templestowe Picture Framers, the internal transaction is: a. b. c. *d.

cash sale. paid monthly rent on premises. credit sale. recorded depreciation on shop fixtures and fittings.

Correct answer: d Learning objective 3.1 ~ identify the nature, purpose and evidence for transactions. 2.

Which of these events would not be recorded by accountants? *a. b. c. d.

Received an order from a customer. The owner paid his daughter’s school fees from the business bank account. Credit sale. Depreciation on motor vehicles calculated at the end of the firm’s financial year.

Correct answer: a Learning objective 3.1 ~ identify the nature, purpose and evidence for transactions. 3.

Which of these events would be recorded by accountants? a. b. c. *d.

An employee receives a promotion. An employee hurts themselves at work in the course of their duties. An employee resigns. An employee is paid by being given a computer instead of their normal wages.

Correct answer: d Learning objective 3.1 ~ identify the nature, purpose and evidence for transactions.

4.

Which of the following statements is true? a. b. c.

The entries to account for GST are regarded as internal transactions. GST collections is an asset account. If the GST inclusive price of a package of books is $1200 the GST component is $120.

© John Wiley and Sons Australia, Ltd 2015

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Chapter 3: Recording transactions

*d.

In the income statement income and expenses are recorded net of GST.

Correct answer: d Learning objective 3.1 ~ identify the nature, purpose and evidence for transactions.

5.

The source document for a cash sale could be a: a. *b. c. d.

purchase order. credit card slip. cheque butt. credit note.

Correct answer: b Learning objective 3.1 ~ identify the nature, purpose and evidence for transactions.

6.

The following transactions relate to the Melbourne Orchid Club, which of them is regarded as an internal transaction? a. b. *c. d.

Sale of plants. Payment of office wages. Depreciation charged on the club’s trailer. Collection of membership subscriptions.

Correct answer: c Feedback: Depreciation charged on the club’s trailer is an internal transaction as there is no exchange between the entity and an outside party. Learning objective 3.1 ~ identify the nature, purpose and evidence for transactions. 7.

Why is the receipt of an order from a customer not regarded as a transaction? *a. b. c. d.

Because an exchange between the entity and the customer has not yet occurred. Because the computer cannot record it. Because the customer might cancel the order. The receipt of an order is regarded as a transaction.

Correct answer: a Feedback: The receipt of an order from a customer is not regarded as a transaction because an exchange between the entity and the customer has not yet occurred. Learning objective 3.1 ~ identify the nature, purpose and evidence for transactions. 8.

In Accounting GST stands for: a. *b. c. d.

General Service Tax. Goods and Services Tax. Government Services Tax. General and Service Transactions.

© John Wiley and Sons Australia, Ltd 2015

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Testbank to accompany Accounting 9e

Correct answer: b Learning objective 3.1 ~ identify the nature, purpose and evidence for transactions.

9.

What is the source document for a credit sale? *a. b. c. d.

Tax invoice Credit note Receipt Cheque

Correct answer: a Learning objective 3.1 ~ identify the nature, purpose and evidence for transactions.

10.

In accounting ABN stands for: a. b. c. *d.

Annual Business Number. Account Balance Number. Australian Bank Number. Australian Business Number.

Correct answer: d Learning objective 3.1 ~ identify the nature, purpose and evidence for transactions. 11.

Financial reports prepared between the regular year-end reports are called: *a. b. c. d.

interim reports. audited reports. consolidated reports. trial balances.

Correct answer: a Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 12.

A regular withdrawal of cash by the owner from the business is treated as a reduction in equity and is recorded in an account called: a. b. *c. d.

creditors. debtors. drawings. mortgage.

Correct answer: c Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger.

© John Wiley and Sons Australia, Ltd 2015

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Chapter 3: Recording transactions

13.

A separate ledger account is maintained for each: a. b. *c. d.

business transaction. day of business. item that appears in the financial reports. journal entry.

Correct answer: c Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 14.

A two year insurance policy paid for on l January can initially be recorded in an asset account called: *a. b. c. d.

prepaid insurance. insurance payable. unearned insurance. debtors.

Correct answer: a Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 15.

In the expanded version of the accounting equation income and expenses are subgroupings of: a. *b. c. d.

assets. equity. liabilities. bank.

Correct answer: b Feedback: Income has the effect of increasing equity whereas expenses decrease equity. Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger.

16.

Balance sheet accounts are of three basic types, asset, liability and: a. *b. c. d.

income. equity. expense. bank.

Correct answer: b

© John Wiley and Sons Australia, Ltd 2015

3.5

Testbank to accompany Accounting 9e

Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 17.

What are the two basic types of income statement accounts? a. *b. c. d.

Asset and liability Income and expense Asset and expense Income and liability

Correct answer: b Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger.

18.

A party who has provided goods or services to the entity to whom the entity owes money is called a: a. b. *c. d.

debit. debtor. creditor. credit.

Correct answer: c Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 19.

A machine purchased by a business for use in producing income can be recorded in an asset account called: a. b. *c. d.

drawings. debtors. plant and equipment. buildings.

Correct answer: c Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 20.

GST collected by a business on the sale of its goods and services is stored in a liability account called: a. *b. c. d.

GST outlays. GST collections. creditable acquisitions. input credits.

© John Wiley and Sons Australia, Ltd 2015

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Chapter 3: Recording transactions

Correct answer: b Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger.

21.

A collection of all the individual accounts for a particular business is referred to as: *a. b. c. d.

the general ledger. the master file. MYOB. the chart of accounts.

Correct answer: a Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 22.

A listing of the complete ledger account titles and their related numbers is known as a/an: a. b. c. *d.

general ledger. master file. index. chart of accounts.

Correct answer: d Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 23.

The true statement concerning the accounting period is: *a. b. c. d.

the length of the accounting period varies with the needs of users. the accounting period originates from the accounting equation. must be at least 6 months long. depends on which country the business is located in.

Correct answer: a Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger.

24.

In order to provide timely information for decision-making the life of the business is divided into arbitrary time periods of equal length called: a. *b. c. d.

business cycles. accounting periods. time periods. operating cycles.

Correct answer: b

© John Wiley and Sons Australia, Ltd 2015

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Testbank to accompany Accounting 9e

Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 25.

A deposit received in advance by Adelaide Co for services not yet supplied can be initially recorded by Adelaide in a liability account called: a. b. *c. d.

sales. accounts payable. unearned income. expenses payable.

Correct answer: c Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 26.

The term used in the Framework for the Preparation and Presentation of Financial Statements for income which arises in the course of the ordinary activities of an entity is: *a. b. c. d.

revenue. gain. fees. profit.

Correct answer: a Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger.

27.

A party to whom the entity owes money for goods or services provided to the entity is called a: *a. b. c. d.

creditor. debtor. debit. credit.

Correct answer: a Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger.

28.

Select the account types for these items: Repairs and maintenance Accounts receivable Drawings Wages a.

Expense, asset, equity, equity © John Wiley and Sons Australia, Ltd 2015

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Chapter 3: Recording transactions

b. *c. d.

Asset, liability, equity, equity Expense, asset, equity, expense Expense, liability, asset, expense

Correct answer: c Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 29.

Select the account types for these items: Prepaid insurance Mortgage GST Collected Light and power a. b. *c. d.

Expense, liability, liability, equity Asset, equity, asset, expense Asset, liability, liability expense Expense, liability, asset, liability

Correct answer: c Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger.

30.

GST paid by a business on the purchase of its goods and services, and for which a reduction of GST collected will be claimed from the tax department, is stored in an account called: a. b. c. *d.

GST holdings. GST collections. creditable acquisitions. input credits GST outlays.

Correct answer: d Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 31.

A chronological record of all the transactions of an entity is provided in the: a. *b. c. d.

ledger. journal. balance sheet. trial balance.

Correct answer: b Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger.

© John Wiley and Sons Australia, Ltd 2015

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Testbank to accompany Accounting 9e

32.

A chart of accounts is a: a. b. c. *d.

planning device used by management to anticipate information flows through the accounting system. list of accounts receivable. chart showing the organisational structure of the firm. plan of the ledger listing account titles and their related numbers.

Correct answer: d Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger. 33.

Which is the correct statement concerning a chart of accounts? a. *b. c. d.

The accounts are listed in alphabetical order. It is drawn up at the commencement of a business. It is similar for most businesses. It is a list of accounts with their current balances.

Correct answer: b Learning objective 3.2 ~ describe the accounting cycle used to record, classify and summarise transactions, including the use of ledger accounts and the general ledger.

34.

The accounting entry to record the payment of a liability is which of the following? a. *b. c. d.

Debit an asset account and credit a liability account Debit a liability account and credit an asset account Debit an equity account and credit a liability account Debit a liability account and credit an equity account

Correct answer: b Learning objective 3.3 ~ outline the rules of debit and credit used in double-entry accounting and how to apply these rules in analysing transactions.

35.

What is the correct order of the steps in the accounting cycle? 1. Entries are made in the journal 2. A business transaction occurs 3. A trial balance is prepared 4. Entries are made in the ledger a. *b. c. d.

2, 4, 1, 3 2, 1, 4, 3 3, 2, 1, 4 2, 4, 3, 1

Correct answer: b

© John Wiley and Sons Australia, Ltd 2015

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Chapter 3: Recording transactions

Learning objective 3.3 ~ outline the rules of debit and credit used in double-entry accounting and how to apply these rules in analysing transactions. 36.

The double-entry system requires how many of the following to be true? i. At least one account should be debited and one account credited ii. Credits should always be entered into the journal before debits iii. The accounting equation should stay in balance a. b. *c. d.

0 1 2 3

Correct answer: c Learning objective 3.3 ~ outline the rules of debit and credit used in double-entry accounting and how to apply these rules in analysing transactions. 37.

A credit entry is made to: a. *b. c. d.

decrease an asset, increase a liability, and decrease equity. decrease an expense, increase income, and increase equity. increase an asset, decrease a liability, and decrease equity. decrease an asset, decrease a liability, and increase equity.

Correct answer: b Learning objective 3.3 ~ outline the rules of debit and credit used in double-entry accounting and how to apply these rules in analysing transactions.

38.

If a transaction causes an equity account to increase, which of these related effects may also occur? a. *b. c. d.

An increase of an equal amount in a liability account. An increase of an equal amount in an asset account. A decrease of an equal amount in an asset account. An increase of an equal amount in another equity account.

Correct answer: b Learning objective 3.3 ~ outline the rules of debit and credit used in double-entry accounting and how to apply these rules in analysing transactions. 39.

Which of these is incorrect? a. b. *c. d.

The normal balance for an asset is a debit. The normal balance for a liability is a credit. The normal balance for equity is a debit. The normal balance for income is a credit.

© John Wiley and Sons Australia, Ltd 2015

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Testbank to accompany Accounting 9e

Correct answer: c Learning objective 3.3 ~ outline the rules of debit and credit used in double-entry accounting and how to apply these rules in analysing transactions.

40.

The system of accounting where each transaction effects two or more accounts and the sum of the debit entries equals the sum of the credit entries is called: a. *b. c. d.

single entry accounting. double-entry accounting. twin accounting. debit and credit accounting.

Correct answer: b Learning objective 3.3 ~ outline the rules of debit and credit used in double-entry accounting and how to apply these rules in analysing transactions. 41.

What is the correct order in which the steps for analysing transactions are carried out? i Decide what accounts are affected. ii Decide if the account type is increasing or decreasing. iii Apply the rules of debit and credit. iv Decide on the account type. a. b. *c. d.

i, ii, iii, iv iv, ii, i, iii i, iv, ii, iii i, ii, iv, iii

Correct answer: c Learning objective 3.3 ~ outline the rules of debit and credit used in double-entry accounting and how to apply these rules in analysing transactions.

42.

The accounting entry when income is earned on credit is which of the following? a. *b. c. d.

Debit cash, credit income Debit accounts receivable, credit income Debit income, credit accounts payable Debit accounts payable, credit income

Correct answer: b Learning objective 3.4 ~ explain the purpose and format of the general journal, record transactions in the general journal and transfer the information to the general ledger. 43.

A __________________ provides a complete record, in one place, of each transaction in date order.

© John Wiley and Sons Australia, Ltd 2015

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Chapter 3: Recording transactions

a. b. c. *d.

ledger trial balance income statement...