WorksheetsMidterm Test - Accounting - 2020
Total questions: 40
Worksheet time: 2hrs 30mins
Which groups of people are most likely to be interested in the financial statements of a sole trader?
1 Shareholders of the company
2 The business’s bank manager
3 The tax authorities
4 Financial analysts
1 and 2 only
2 and 3 only
2, 3 and 4 only
1, 2 and 3 only
Which accounting concept should be considered if the owner of a business takes goods from inventory for his own personal use?
The fair presentation concept
The accruals concept
The going concern concept
The business entity concept
According to the IASB's Conceptual Framework for Financial Reporting, which TWO of the following are part of faithful representation?
1 It is neutral
2 It is relevant
3 It is presented fairly
4 It is free from material error
1 and 2
2 and 3
1 and 4
3 and 4
Which of the following accounting concepts means that similar items should receive a similar accounting
treatment?
Going concern
Accruals
Matching
Consistency
Listed below are some comments on accounting concepts.
1 Financial statements always treat the business as a separate entity.
2 Materiality means that only items having a physical existence may be recognised as assets.
3 Provisions are estimates and therefore can be altered to make the financial results of a business more attractive to investors.
Which, if any, of these comments is correct, according to the IASB's Conceptual Framework for
Financial Reporting?
1 only
2 only
3 only
None of them
Which of the following statements about accounting concepts and the characteristics of financial information are correct?
1 The concept of accruals requires transactions to be reflected in the financial statements once the cash or its equivalent is received or paid.
2 Information is material if its omission or misstatement could influence the economic decisions of users taken on the basis of the financial statements.
3 Based on faithful representation, it may sometimes be necessary to exclude material information from financial statements due to difficulties establishing an accurate figure.
1 only
1 and 2 only
2 and 3 only
2 only
The profit earned by a business in 20X7 was $72,500. The proprietor injected new capital of $8,000 during the year and withdrew goods for his private use which had cost $2,200.
If net assets at the beginning of 20X7 were $101,700, what were the closing net assets?
$35,000
$39,400
$168,400
$180,000
Jones Co has the following transactions:
1 Payment of $400 to J Bloggs for a cash purchase
2 Payment of $250 to J Doe in respect of an invoice for goods purchased last month
What are the correct ledger entries to record these transactions?
Dr Cash $650/Cr Purchases $650
Dr Purchases $650/Cr Cash $650
Dr Purchases $400; Dr Trade Payables $250/Cr Cash $650
Dr Cash $650/ Cr Trade Payables $250; Cr Purchases $400
Which of the following documents should accompany a return of goods to a supplier?
Debit note
Remittance advice
Purchase invoice
Credit note
Which of the following are books of prime entry?
1 Sales day book
2 Cash book
3 Journal
4 Purchase ledger
1 and 2 only
1, 2 and 3 only
1 only
All of them
Which of the following statements is true?
A debit records an increase in liabilities
A debit records a decrease in assets.
A credit records an increase in liabilities.
A credit records an decrease in capital.
Are the following statements about debit entries true or false?
1 A debit entry in the cash book will increase an overdraft in the accounts.
2 A debit entry in the cash book will increase a bank balance in the accounts.
Both true
Both false
1 true and 2 false
1 false and 2 true
You are given the following information:
Receivables at 1 January 20X3 $10,000
Receivables at 31 December 20X3 $9,000
Total receipts during 20X3 (including cash sales of $5,000) $85,000
What are sales on credit during 20X3?
$81,000
$86,000
$79,000
$84,000
A business sells $100 worth of goods to a customer, the customer pays $50 in cash immediately and
will pay the remaining $50 in 30 days' time.
What is the double entry to record the purchase in the customer’s accounting records?
Debit cash $50, credit payables $50, credit purchases $50
Debit payables $50, debit cash $50, credit purchases $100
Debit purchases $100, credit payables $50, credit cash $50
Debit purchases $100, credit cash $100
The following totals appear in the day books for March 20X8.
$
Sales day book 40,000
Purchases day book 20,000
Returns inwards day book 2,000
Returns outward day book 4,000
Opening and closing inventories are both $3,000. What is the gross profit for March 20X8?
$22,000
$24,000
$20,000
$18,000
Bert has extracted the following list of balances from his general ledger at 31 October 20X5:
$
Sales 258,542
Opening inventory 9,649
Purchases 142,958
Expenses 34,835
Non-current assets (carrying amount) 63,960
Receivables 31,746
Payables 13,864
Cash at bank 1,783
Capital 12,525
What is the total of the debit balances in Bert's trial balance at 31 October 20X5?
$267,049
$275,282
$283,148
$284,931
The following information relates to Eva Co's sales tax for the month of March 20X3:
$
Sales (including sales tax) 109,250
Purchases (net of sales tax) 64,000
Sales tax is charged at a flat rate of 15%. Eva Co's sales tax account showed an opening credit balance of $4,540 at the beginning of the month and a closing debit balance of $2,720 at the end of the month.
What was the total sales tax paid to regulatory authorities during the month of March 20X3?
$6,470.00
$11,910.00
$14,047.50
$13,162.17
Alana is not registered for sales tax purposes. She has recently received an invoice for goods for resale which cost $500 before sales tax, which is levied at 15%. The total value was therefore $575.
What is the correct entry to be made in Alana’s general ledger in respect of the invoice?
Dr Purchases $500, Dr Sales tax $75, Cr Payables $575
Dr Purchases $575, Cr Sales tax $75, Cr Payables $500
Dr Purchases $500, Cr Payables $500
Dr Purchases $575, Cr Payables $575
A business commenced with capital in cash of $1,000. Inventory costing $800 plus sales tax is purchased on credit, and half is sold for $1,000 plus sales tax, the customer paying in cash at once.
The sales tax rate is 20%.
What would the accounting equation after these transactions show?
Assets $1,800 less Liabilities $200 equals Capital $1,600
Assets $2,200 less Liabilities $1,000 equals Capital $1,200
Assets $2,600 less Liabilities $800 equals Capital $1,800
Assets $2,600 less Liabilities $1,000 equals Capital $1,600
Trade receivables and payables in the final accounts of a sales tax registered trader will appear as
described by which of the following?
Inclusive of sales tax in the statement of financial position
Exclusive of sales tax in the statement of financial position
The sales tax is deducted and added to the sales tax account in the statement of financial
position
Sales tax does not appear in the statement of financial position because the business simply acts
as a collector on behalf of the tax authorities
The inventory value for the financial statements of Global Inc for the year ended 30 June 20X3 was based on a inventory count on 7 July 20X3, which gave a total inventory value of $950,000.
Between 30 June and 7 July 20X6, the following transactions took place.
$
Purchase of goods 11,750
Sale of goods (mark up on cost at 15%) 14,950
Goods returned by Global Inc to supplier 1,500
What figure should be included in the financial statements for inventories at 30 June 20X3?
$952,750
$949,750
$926,750
$958,950
Which of the following costs may be included when arriving at the cost of finished goods inventory for inclusion in the financial statements of a manufacturing company?
1 Carriage inwards
2 Carriage outwards
3 Depreciation of factory plant
4 Finished goods storage costs
5 Factory supervisors' wages
1 and 5 only
2, 4 and 5 only
1, 3 and 5 only
1, 2, 3 and 4 only
The closing inventory at cost of a company at 31 January 20X3 amounted to $284,700.
The following items were included at cost in the total:
1 400 coats, which had cost $80 each and normally sold for $150 each. Owing to a defect in manufacture, they were all sold after the reporting date at 50% of their normal price. Selling expenses amounted to 5% of the proceeds.
2 800 skirts, which had cost $20 each. These too were found to be defective. Remedial work in February 20X3 cost $5 per skirt, and selling expenses for the batch totalled $800. They were sold for $28 each.
What should the inventory value be according to IAS 2 Inventories after considering the above items?
$281,200
$282,800
$329,200
None of these
A company values its inventory using the first in, first out (FIFO) method. At 1 May 20X2 the company had 700 engines in inventory, valued at $190 each.
During the year ended 30 April 20X3 the following transactions took place:
20X2
1 July Purchased 500 engines at $220 each
1 November Sold 400 engines for $160,000
20X3
1 February Purchased 300 engines at $230 each
15 April Sold 250 engines for $125,000
What is the value of the company's closing inventory of engines at 30 April 20X3?
$188,500
$195,500
$166,000
None of these
Which of the following statements about the valuation of inventory are correct, according to IAS 2
Inventories?
1 Inventory items are normally to be valued at the higher of cost and net realisable value.
2 The cost of goods manufactured by an entity will include materials and labour only. Overhead
costs cannot be included.
3 LIFO (last in, first out) cannot be used to value inventory.
4 Selling price less estimated profit margin may be used to arrive at cost if this gives a reasonable
approximation to actual cost.
1, 3 and 4 only
1 and 2 only
3 and 4 only
None of the statements are correct
An inventory record card shows the following details.
February 1 50 units in stock at a cost of $40 per unit
7 100 units purchased at a cost of $45 per unit
14 80 units sold
21 50 units purchased at a cost of $50 per unit
28 60 units sold
What is the value of inventory at 28 February using the FIFO method?
$2,450
$2,700
$2,950
$3,000
The closing inventory of X amounted to $116,400 excluding the following two inventory lines:
1 400 items which had cost $4 each. All were sold after the reporting period for $3 each, with selling expenses of $200 for the batch.
2 200 different items which had cost $30 each. These items were found to be defective at the end of the reporting period. Rectification work after the statement of financial position amounted to $1,200, after which they were sold for $35 each, with selling expenses totalling $300.
Which of the following total figures should appear in the statement of financial position of X for inventory?
$122,300
$121,900
$122,900
$123,300
The inventory value for the financial statements of Q for the year ended 31 December 20X4 was based on an inventory count on 4 January 20X5, which gave a total inventory value of $836,200.
Between 31 December and 4 January 20X5, the following transactions took place:
$
Purchases of goods 8,600
Sales of goods (profit margin 30% on sales) 14,000
Goods returned by Q to supplier 700
What adjusted figure should be included in the financial statements for inventories at 31 December 20X4?
$838,100
$853,900
$818,500
$834,300
A firm has the following transactions with its product R.
1 January 20X1 Opening inventory: nil
1 February 20X1 Buys 10 units at $300 per unit
11 February 20X1 Buys 12 units at $250 per unit
1 April 20X1 Sells 8 units at $400 per unit
1 August 20X1 Buys 6 units at $200 per unit
1 December 20X1 Sells 12 units at $400 per unit
The firm uses periodic weighted average cost (AVCO) to value its inventory. What is the inventory value at the end of the year?
$nil
$2,057.12
$2,400.00
$2,007.20
Your cash book at 31 December 20X3 shows a bank balance of $565 overdrawn. On comparing this with your bank statement at the same date, you discover the following.
1 A cheque for $57 drawn by you on 29 December 20X3 has not yet been presented for payment.
2 A cheque for $92 from a customer, which was paid into the bank on 24 December 20X3, has been dishonoured on 31 December 20X3.
What is the correct bank balance to be shown in the statement of financial position at 31 December 20X3?
$714 overdrawn
$657 overdrawn
$473 overdrawn
$53 overdrawn
The following information relates to a bank reconciliation.
(i) The bank balance in the cashbook before taking the items below into account was $8,970 overdrawn.
(ii) Bank charges of $550 on the bank statement have not been entered in the cashbook.
(iii) The bank has credited the account in error with $425 which belongs to another customer.
(iv) Cheque payments totalling $3,275 have been entered in the cashbook but have not been presented for payment.
(v) Cheques totalling $5,380 have been correctly entered on the debit side of the cashbook but have not been paid in at the bank.
What was the balance as shown by the bank statement before taking the above items into account?
$9,520 overdrawn
$11,200 overdrawn
$9,520 in credit
$11,200 in credit
Listed below are some possible causes of difference between the cash book balance and the bank
statement balance when preparing a bank reconciliation:
1 Cheque paid in, subsequently dishonoured
2 Error by bank
3 Bank charges
4 Lodgements credited after date
5 Unpresented cheques not yet presented
Which of these items require an entry in the cash book?
1 and 3 only
1, 2, 3, 4 and 5
2, 4, and 5 only
4 and 5 only
In preparing a company's bank reconciliation statement at March 20X3, the following items are causing the difference between the cash book balance and the bank statement balance:
1 Bank charges $380
2 Error by bank $1,000 (cheque incorrectly debited to the account)
3 Lodgements not credited $4,580
4 Unpresented cheques $1,475
5 Direct debit $350
6 Cheque paid in by the company and dishonoured $400
Which of these items will require an entry in the cash book?
2, 4 and 6
1, 5 and 6
3 and 4
3 and 5
Which of the following statements about bank reconciliations are correct?
1 A difference between the cash book and the bank statement must be corrected by means of a journal entry.
2 In preparing a bank reconciliation, lodgements recorded before date in the cash book but credited by the bank after date should reduce an overdrawn balance in the bank statement.
3 Bank charges not yet entered in the cash book should be dealt with by an adjustment in the bank reconciliation statement.
4 If a cheque received from a customer is dishonoured after date, a credit entry in the cash book is required.
2 and 4
1 and 4
2 and 3
1 and 3
After checking a business cash book against the bank statement, which of the following items could
require an entry in the cash book?
1 Bank charges
2 A cheque from a customer which was dishonoured
3 Cheque not presented
4 Deposits not credited
5 Credit transfer entered in bank statement
6 Standing order entered in bank statement.
1, 2, 5 and 6
3 and 4
1, 3, 4 and 6
3, 4, 5 and 6
The debit side of a trial balance totals $800 more than the credit side.
Which one of the following errors would fully account for the difference?
$400 paid for plant maintenance has been correctly entered in the cash book and credited to the plant asset account
Discount received $400 has been debited to discount allowed account.
A receipt of $800 for commission receivable has been omitted from the records.
The petty cash balance of $800 has been omitted from the trial balance.
A company's trial balance failed to agree, the totals being:
Debit $815,602
Credit $808,420
Which one of the following errors could fully account for the difference?
The omission from the trial balance of the balance on the insurance expense account $7,182 debit
Discount allowed $3,591 debited in error to the discount received account
No entries made in the records for cash sales totalling $7,182
The returns outwards total of $3,591 was included in the trial balance as a debit balance
Which one of the following would be an error of principle?
Plant and machinery purchased was credited to a non-current assets account.
Plant and machinery purchased was debited to the purchases account.
Plant and machinery purchased was debited to the equipment account
Plant and machinery purchased was credited to the equipment account.
A business statement of profit or loss and other comprehensive income for the year ended 31 December 20X4 showed a net profit of $83,600. It was later found that $18,000 paid for the purchase of a motor van had been debited to motor expenses account. It is the company's policy to depreciate motor vans at 25 per cent per year, with a full year's charge in the year of acquisition.
What would the net profit be after adjusting for this error?
$106,100
$70,100
$97,100
$101,600
Net profit was calculated as being $10,200. It was later discovered that capital expenditure of $3,000 had been treated as revenue expenditure, and revenue receipts of $1,400 had been treated as capital receipts.
What is the net profit after correcting this error?
$5,800
$8,600
$11,800
$14,600
