11 Accounting Quiz 3

Which of the following statements is incorrect?

• The accounting equation is A = L + O

• The chart of accounts lists all assets, liabilities, owner's equity, revenue and expense accounts

• A general journal provides a record of transactions

• Trial balances do not include revenues and expenses

In relation to SOFP, which of the following statements is incorrect?

• Assets are listed on the debit side

• Revenues and expenses are not listed

• A SOFP is the relationship between total assets, total liabilities, and total owner's equity

• A SOFP lists all assets, liabilities and owner's equity at a particular point in time

Answer explanation

The SOFP has NO debit or credit side. It is simply a list of balances broken into A, L and O. The columns represent increased detail of a particular number. You read the columns from right to left.

Sometimes a SOFP is presented in T-format where the left side is the asset side and the right side is liabilities and owner's equity. These sides reflect their nature but are NOT a dr and cr column.

Increases to accounts are recorded on:

• the debit side

• the same side as the nature of the account

• the credit side

• the opposite side to the nature of the account

'Double entry' means:

• for every transaction, two accounts are affected

• for every transaction, one debit and one credit is recorded

• two entries are made in every account

• for every transaction, total debits equal total credits

The total of the trial balance at 30 September is

• $7 550

• $6 300

• $6 000

• $7 300

Answer explanation

Cash at Bank A Dr $1,000; Service Fees Revenue R Cr $1,000

Supplies A Dr $300; Cash at Bank A Cr $300

Wages E Dr $500; Cash at Bank A Cr $500

M Mahoney A Dr $5,000; Service Fees Rev R Cr $5,000

Wages E Dr $500; Cash at Bank A Cr $500

Cash at Bank A Dr $250; Comm Rev R Cr $250

Cash = 1,000-300-500-500+250 = 50 Cr

Supplies = 300 Dr

Wages = 500 + 500 = 1,000 Dr

M Mahoney = $5,000 Dr

Service Fees Rev = 1,000 + 5,000 = 6,000 Cr

Comm Rev = 250 Cr

Dr = 300 + 1,000 + 5,000 = $6,300

Cr = 50 + 6,000 + 250 = $6,300

What is the net profit for the month?

• $20 000

• $10 000

• $6 500

• $13 000

Answer explanation

Service Fees Revenue R Cr $10,000

Supplies Expense Dr $2 000

Advertising E Dr $500

Wages and Salaries E Dr $1,000

Cash at Bank A Dr $13,000

M Walker A Dr $3,500

Capital O Cr $10 000

Expenses = 2,000 + 500 + 1,000 = 3,500

Revenues = 10,000

Profit =10,000 - 3,500 = 6,500

What is the balance of the Cash at Bank account as at 31 May?

• $14 000 debit

• $10 000 credit

• $10 000 debit

• $14 000 credit

Answer explanation

Cash = 4,000-10,000+6,500-9,000+4,000-500-9,000 =-14,000

A negative number tells you that the account is decreasing, therefore it is Cr

The balance is 14,000 Cr

Which of the following transactions does not involve a revenue account?

• Performed services of $10 000 on credit for P Smith.

• Purchased $5000 worth of furniture for cash and $3000 of supplies for cash.

• Received commission of $7000 and interest of $550.

• Services performed $2000 for cash.

Answer explanation

Assume no GST

Furniture A Dr $5,000

Cash at Bank A Cr $5,000

Supplies A Dr $3,000

Cash at Bank A Cr $3,000

Performed services = Service Fees Revenue

Received commission = Commission Revenue

Services performed = Services Fees Revenue

What is the net amount owing to J Scanlan on 31 August?

• $13 000 credit

• $11 000 credit

• $33 000 credit

• $41 000 credit

Answer explanation

Supplies Dr $12,000

J Scanlan Cr $12,000

Cash at Bank Dr $2,000 *** was for cash not on credit

Service Fees Rev Cr $2,000

Motor Vehicle Dr $14,000

J Scanlan Cr $14,000

J Scanlan Dr $5,000

Cash at Bank Cr $5,000

J Scanlan Dr $8,000

Service Fees Rev Cr $8,000

J Scanlan Dr = 5,000 + 8,000 = 13,000

J Scanlan Cr = 12,000 + 14,000 = 26,000

More Cr than Dr

26,000 - 15,000 = 13,000 Cr