Unit 1: Topic 1

Which of the following would NOT be included in a Statement of Profit or Loss?

• Mortgage

• Interest

• The value of supplies used up

• Service Fees

Gino, a mechanic, opened a business on 1 July 2022. The business was funded with a bank loan of $50,000, and Gino's parents also gave him $50,000 personal loan to invest in the business.

Gino also contributed $11,000 of Tools as well as $25,00 worth of Equipment.

Gino has personal shares of $5,000, a house valued at $600,000 and a personal mortgage of $400,000.

On 2 Jul, $20,000 of additional equipment was purchased for the business with cash.

According to the accounting entity assumption, the value of assets to be recorded in the books of the business would be:

• $86,000

• $136,000

• $156,000

• $56,000

The purpose of source documents is to:

• Remind the accountant what happened in the business during the month

• Record information in a computerized accounting system

• Gather information that is generally used for end of month reporting

• Provide evidence that a transaction has taken place

Which of the following transactions would have NO impact on Owner's Equity?

• Furniture and Equipment contributed to the business by the Owner

• Purchase of land and buildings with proceeds from a bank loan

• Cash is withdrawn from the business' bank account for owner's personal expenses

• Personal borrowings contributed to the business

Three items which should NOT appear in the business's records are:

• Petty cash, Personal investments, Family Holiday House

• Family holiday house, Loan from Eastpac, Personal Investments

• Personal Investments, Family holiday house, Mortgage on Holiday house

• Petty cash, personal investments, mortgage on holiday house

Unlimited liability for a sole trader means:

• The business is responsible for its liabilities

• The owner liability for the debts of the business is restricted

• The owner is fully responsible for all debts

• The owner is liable for the debts up to the value of the business assets

Which of the following is considered an expense?

• Payment to accounts payable

• Repayment of a bank loan

• Cash drawings by an owner

• Payment of Interest on a bank loan

Which of the following would be revealed by a trial balance that does not balance?

• The recording of an incorrect transaction amount on the debit and credit side of the correct accounts

• The omission of a transaction from the general journal

• The recording of a debit and credit to the correct sides of one correct account and one incorrect account

• The recording of transaction amount on the credit side of two accounts affected.

Which of the following is a correct expression of the accounting equation?

• Owner's Equity = Liabilities + Assets

• Owner's Equity = Liabilities - Assets

• Liabilities = Assets + Owner's Equity

• Liabilities = Assets - Owner's Equity

The end of period financial statement based on the accounting equation is the...

• Trial Balance

• Statement of Cash Flows

• Statement of Profit or Loss

• Statement of Financial Position