Bird Ltd made a sale of $800 to a customer on terms of '2.

5/10, n/30' on 1
July. The account was paid on 8 July. Bird Ltd would make which of the
following postings to the ledger on 8 July?
a. Cr Accounts Receivable, $780
b. Cr Discount Revenue, $20
c. Cr Sales Revenue, $800
d. Dr Accounts Receivable, $800
e. Dr Discount Expense, $20
During 2009, the first year of operations, a company makes credit sales of
$500,000, of which $375,000 is collected at year-end. It pays $200,000 in
expenses and owes $25,000 for electricity used during 2009. Accrual profit is:
a. $125,000
b. $150,000
c. $175,000
d. $275,000
e. $300,000
Accounts Receivable is a credit column in the:
a. Cash Payments Journal
b. Cash Receipts Journal
c. General Journal
d. Purchases Journal
e. Sales Journal
If a company pays a 12-month insurance premium for $1,200 on 1 May 2009,
then at 30 June 2009 the accounts, after recording the appropriate adjusting
entries,will show:
a. A prepayment of $200 in the balance sheet and an insurance expense of
$1,000 in the income statement.
b. A prepayment of $1,000 in the balance sheet and an insurance
expense of $200 in the income statement.
c. A prepayment of $1,200 in the balance sheet.
d. A prepayment of $1,200 in the balance sheet and an insurance expense of
$200 in the income statement.
e. An insurance expense of $1,200 in the income statement.
What is the journal entry to record depreciation expense for the year on motor
vehicles?
a. Dr Accumulated Depreciation; Cr Depreciation Expense
b. Dr Accumulated Depreciation; Cr Motor Vehicles
c. Dr Depreciation Expense; Cr Accumulated Depreciation
d. Dr Depreciation Expense; Cr Motor Vehicles
e. Dr Motor Vehicles; Cr Accumulated Depreciation
Closing entries:
a. Are required prior to preparation of financial statements.
b. Are the last step in the accounting cycle.
c. Bring the balances in the balance sheet accounts to zero.
d. Close off all ledger accounts.
e. Ensure that there is adequate cash for payment of bills.
Use the information given below to answer the following question.
Cash sales: $10,000
Credit sales: $30,000
Cash received from accounts receivable: $22,000

Wages paid: $8,000

Wages owing at year-end: $5,000
What is the net profit for 2009?
a. $22,000
b. $27,000
c. $32,000
d. $49,000
e. $54,000
Which of the following accounts is not closed as part of closing entries at the
end of the year?
a. Sales Revenue
b. Wages Expense
c. Accumulated Depreciation
d. Bad Debts Expense
e. Cost of Goods Sold
As at 30 June 2009 Smyth Ltd has a balance in Accounts Receivable of
$30,000 and an Allowance for Doubtful Debts of $1,000. It was decided that
the Allowance for Doubtful Debts should stand at 10% of Accounts Receivable.
What is the journal entry to bring the Allowance for Doubtful Debts to the
required level?
a. Dr Accounts Receivable $2,000; Cr Allowance for Doubtful Debts $2,000
b. Dr Accounts Receivable $3,000; Cr Allowance for Doubtful Debts $3,000
c. Dr Bad Debts Expense $1,000; Cr Allowance for Doubtful Debts $1,000
d. Dr Bad Debts Expense $2,000; Cr Allowance for Doubtful Debts
$2,000
e. Dr Bad Debts Expense $3,000; Cr Allowance for Doubtful Debts $3,000
Kramer Limited ships goods to Sykes Company on consignment. When the
goods are delivered to Sykes, Kramer should record:
a. Sale if Inventory: No; Revenue: Yes
b. Sale of Inventory: No; Revenue: No
c. Sale of Inventory: Yes; Revenue: No
d. Sale of Inventory: Yes; Revenue: Yes
e. None of the above
Which of the following statements about reversing entries is true?
a. They facilitate the preparation of closing entries.
b. They are an essential part of the accounting system.
c. They facilitate the accurate recording of cash payments for
accrued expenses in the following accounting period.
d. They are normally entered into the ledger after preparing adjusting entries
but prior to the preparation of closing entries.
e. They facilitate the accurate recording of expenses that have been prepaid.
Supplies purchased on account were incorrectly recorded as Office Equipment.
The correcting entry would be:
a. Dr Accounts Receivable; Cr Supplies
b. Dr Accounts Payable; Cr Supplies
c. Dr Office Equipment; Cr Supplies
d. Dr Supplies; Cr Accounts Payable
e. Dr Supplies; Cr Office Equipment
Jomes Limited has one motor vehicle that was purchased for $24,000 cash
three years ago. The opening balance of Accumulated Depreciation - Motor

Vehicles was $17,000 (credit) and the closing balance was $20,000 (credit).
The depreciation expense for the year was:
a. $3,000
b. $4,000
c. $7,000
d. $17,000
e. $20,000
Segregation of duties involves:
a. Ensuring only qualified accountants are employed in the accounting
department.
b. Maintaining effective records.
c. Physically protecting sensitive assets.
d. Providing each staff member with an individual password.
e. Separating record-keeping from handling of assets.
Which of the following is not a desirable internal control attribute?
a. Employees taking regular leave.
b. Adequate pay and motivation of employees.
c. Adequate insurance over assets.
d. Employees performing the same job for an extended period of
time.
e. Separation of record keeping from handling of assets.
Able Limited operates on a 5 day working week. Employees are paid on
Thursday for work completed to Wednesday. The weekly wages bill is $40,000.
If the year end fell on a Tuesday, what would be the adjusting journal entry?
a. Dr Wages Expense $8,000; Cr Wages Payable $8,000
b. Dr Wages Expense $32,000; Cr Wages Payable $32,000
c. Dr Wages Payable $8,000; Cr Wages Expense $8,000
d. Dr Wages Payable $32,000; Cr Wages Expense $32,000
e. Dr Wages Expense $40,000; Cr Wages Payable $40,000
Super Ltd has the following balance sheet information as at 28 February:
Accounts Receivable:
$500,000
Allowance for Doubtful Debts:
$29,100
Net Accounts Receivable:
$470,900
On 1 March, the company receives notification from Downer Corporation that
it is insolvent. The CFO of Super Ltd decides to write off Downer's account for
$5,300. Which of the following statements is true?
a. Neither net income nor net accounts receivable will decrease.
b. Net income and net accounts receivable will decrease.
c. Net income and accounts receivable will decrease.
d. Net income will decrease but no change will occur in net accounts
receivable.
e. No change will occur in net income but net accounts receivable will
decrease.
The monthly bank statement for DEF Ltd included bank service charges. What
entry is required in the company's accounts?
a. Dr Bank Charges, Cr Cash
b. Dr Cash, Cr Other Revenue
c. Dr Cash, Cr Accounts Payable
d. Dr Interest Revenue, Cr Cash
e. No entry is required.

At the end of the financial year, the usual adjusting entry for accrued salaries
owed to employees was omitted. Which of the following statements is true?
a. Net profit for the year was overstated.
b. Retained profits was understated.
c. Revenue for the year was understated.
d. Salary expense for the year was overstated.
e. The total of the liabilities at the end of the year was overstated.
The petty cash account was not reimbursed as at the end of the year. The
petty cash imprest is $100 and there is currently $62 cash available. As a
result of not reimbursing petty cash at the end of the year:
a. Petty cash in the balance sheet will be overstated.
b. Petty cash in the balance sheet will be understated.
c. Expenses in the income statement will be understated.
d. Expenses in the income statement will be overstated.
e. Cash in the balance sheet will be understated.
Consider the following transactions;
(i) Repayment of a loan in June 2008
(ii) Depreciation of equipment in June 2008
(iii) Payment of accounts payable in June 2008
(iv) Payment of an insurance bill in June 2008, which covers 1 July 2008 to 30
June 2009
Which of the above transactions increase 2008 expenses?
a. (ii) only
b. (i) and (ii) only
c. (i), (ii), and (iii) only
d. (i), (ii), and (iv) only
e. (ii), (iii), and (iv) only
ABC Ltd maintains subsidiary ledgers for debtors and creditors. At 1 July 2008,
debtors owed $10,000, $7,300 was owing to creditors, and the balance in the
Allowance for Doubtful Debts account was $250. Transactions for the year
ended 30 June 2009 were as follows:
Credit sales:
$120,000
Cash sales:
$300,000
Credit purchases:
$80,000
Cash purchases:
$200,000
Cash received from debtors:
$90,000
Cash paid to creditors:
$72,000
Discount received from creditors:
$1,200
Discount allowed to debtors:
$800
Bad debts written off:
$150
Increase in allowance for doubtful debts:
$300
What was the balance of the Debtors control account at 30 June 2009?
a. $29,050
b. $38,650
c. $39,050
d. $39,200
e. $39,850
Which of the following statements accurately describes posting of entries
entered in the cash payments journal?
a. Entries in the cash at bank column are totalled and posted to the
general ledger at the end of the month.
b. Entries in the cash at bank column are individually posted to the general

ledger daily.
c. Entries in the creditors column are totalled and posted to the subsidiary
ledger and general ledger at the end of the month.
d. Entries in the creditors column are individually posted to the general
ledger daily and to the subsidiary ledger at the end of the month.
e. Entries in the creditors column are individually posted to the subsidiary
ledger and general ledger daily.
On 30 June 2010, the petty cash fund of Charles Ltd was replenished when the
count of petty cash on hand totalled $60. Vouchers revealed that postage
expenses of $40 had been incurred. The journal entry to record the
replenishment was:
a. Dr Petty Cash $40; Cr Cash $40
b. Dr Petty Cash $60; Cr Cash $60
c. Dr Petty Cash Expense $40; Cr Petty Cash $40
d. Dr Postage Expense $40; Cr Cash $40
e. Dr Postage Expense $40; Cr Petty Cash $40
Pintar Limited sells groceries at four stores across Sydney and uses a general
journal, cash receipts journal, cash payments journal, sales journal, and
purchases journal. Which of the following transactions would be entered in the
general journal?
a. Identified bank charges when preparing a bank reconciliation statement.
b. Sold groceries on credit.
c. Borrowed money from the bank to be repaid in 2 years.
d. Paid a cash dividend to shareholders.
e. Purchased a delivery van on credit.
As at 30 June 2009 Dodgey Ltd had a balance in Accounts Receivable of
$40,000 and an Allowance for Doutful Debts of $2,000. It was decided to write
off as irrecoverable the debt of Tomony Ltd totalling $3,500. It was further
decided that the Allowance for Doubtful Debts should stand at 10% of
Accounts Receivable. What is the journal entry to write off the debt of Tomony
Ltd as irrecoverable?
a. Dr Accounts Receivable $1,500; Cr Allowance for Doubtful Debts $1,500
b. Dr Accounts Receivable $3,500; Cr Bad Debts Expense $3,500
c. Dr Allowance for Doubtful Debts $3,500; Cr Accounts Receivable
$3,500
d. Dr Bad Debts Expense $3,500; Cr Accounts Receivable $3,500
e. Dr Bad Debts EXpense $3,500; Cr Allowance for Doubtful Debts $3,500
The accountant of Marlon Limited did not post a credit sale entered in the
sales journal on June 28 to the subsidiary ledger. The entries to the general
ledger were posted correctly at the end of the month. As a result of not
posting the sale to the subsidiary ledger:
a. The trial balance as at the end of the month will not balance.
b. Accounts receivable in the balance sheet prepared at the end of the
month will be understated.
c. Accounts receivable in the balance sheet prepared at the end of the
month will be overstated.
d. The total of the accounts receivable subsidiary ledger will not
reconcile with the total of the accounts receivable control account.
e. Sales revenue in the income statement prepared for the month will be
understated.
Manery Limited uses the balance sheet approach for the calculation of

Allowance for Doubtful Debts. The opening balance of the Allowance for
Doubtful Debts was $19,000 (Credit) and the closing balance was $16,000
(credit). The Income Statement reveals that Bad Debts Expense for the year
was $21,000. The value of debts written off as uncolectable during the year
was:
a. $3,000
b. $16,000
c. $18,000
d. $21,000
e. $24,000
Which of the following statements about worksheets is true?
a. A worksheet is an essential part of the accounting system.
b. Closing entries must be entered into the worksheet.
c. The use of worksheets removes the need for a formal ledger.
d. Worksheets facilitate the preparation of interim financial
statements.
e. Worksheets are used to record commonly occurring transactions.
In preparing the monthly bank reconciliation, Jon Ltd ascertains that there is a
note collected by the bank for $500 and an interest on overdraft charge of
$760. Outstanding cheques total $9,400 and there is a deposit in transit for
$2,900. It will be necessary to make journal entries for:
a. Only the interest charge.
b. The outstanding cheques and the deposit in transit.
c. The note collected and the interest charge.
d. The note collected, the interest charge, and the outstanding cheques.
e. No entries are required.
When preparing the current month's bank reconciliation, the accountant
identifies that a cheque outstanding at the end of last month has not been
presented this month. When preparing this month's bank reconciliation, the
accountant will:
a. Record a journal entry recognising the cash payment in the amount of the
unpresented cheque and then ignore the unpresented cheque when preparing
the current month's reconciliation.
b. Record a journal entry recognising the cash payment in the amount of the
unpresented cheque and continue to include the unpresented cheque as a
reconciling item in the current month's reconciliation.
c. Record a journal entry reversing the cash payment in the amount of the
unpresented cheque and then ignore the unpresented cheque when preparing
the current month's reconciliation.
d. Not record a journal entry and ignore the unpresented cheque when
preparing the current month's reconciliation.
e. Not record a journal entry and continue to include the
unpresented cheque as a reconciling item in the current month's
reconciliation.
Which of the following statements relating to special journals and subsidiary
ledgers is false?
Correct Answer: b.
Subsidiary ledgers can only be used for accounts receivable and
accounts payable.

Harry employs a perpetual inventory system. When a customer returns

merchandise to Harry that was purchased on credit, which of the following
entries would Harry make?
Answer
Dr Accounts Receivable; Cr Sales Returns
Dr Cash, Cr Accounts Receivable
Dr Sales Returns; Cr Cash
Dr Sales Returns; Cr Accounts Receivable
Dr Sales Returns, Cr Inventory
At 30 June 2009, Simon had a balance in Accounts Receivable of $500,000
and an Allowance for Doubtful Debts of $40,000. It was decided to write off as
irrecoverable a debt of Sarah Ltd for $20,000. It was further decided that the
Allowance for Doubtful Debts should stand at 10% of Accounts Receivable.
What was the Dr side of the journal entry to bring the Allowance for Doubtful
Debts to the required level after writing off the debt of Sarah Ltd?
Answer
Dr Accounts Receivable, $30,000
Dr Allowance for Doubtful Debts, $26,000
Dr Bad Debts Expense, $26,000
Dr Bad Debts Expense, $28,000
Dr Bad Debts Expense, $30,000
The following lots of a particular commodity were available for sale during the
year:

Beginning
inventory
First purchase

10 units
$60
25 units
$63
Second purchase 30 units
$64
Third purchase
15 units
$70

at
at
at
at

The firm uses the periodic system and there are 20 units of the commodity on
hand at the end of the year. What is the amount of inventory at the end of the
year, according to the first-in, first-out method?
Answer
$1,200
$1,230
$1,286
$1,370
$1,400
In a period of rising purchase prices, which cost flow assumption provides the
highest net profit?
Answer
FIFO
LIFO
Moving weighted average
Specific identification

It depends on the rate of inflation

This

information

is

for

the

following

two

questions.

At year-end Murray Ltd had a balance of Accounts Receivable of $90,000 and

an Allowance for Doubtful Debts of $4,000. It was decided to write off the debt
of Jason totalling $2,500 as irrecoverable. It was further decided that the
Allowance for Doubtful Debts should stand at 5% of Accounts Receivable.
What was the journal entry needed to write off the debt of Jason as
irrecoverable?
Answer
Dr Accounts Receivable, $2,500; Cr Bad Debts Expense, $2,500
Dr Allowance for Doubtful Debts, $2,500; Cr Accounts Receivable, $2,500
Dr Bad Debts Expense, $2,500; Cr Allowance for Doubtful Debts, $2,500
Dr Bad Debts Expense, $2,500; Cr Accounts Receivable, $2,500
No entry is required.
What was the net balance sheet value of Accounts Receivable at 31 December
following the period-end adjustments?
Answer
$83,125
$83,500
$84, 625
$86,000
$87,500
Use the following information to answer the next 3 questions.
ABC Ltd maintains subsidiary ledgers for debtors and creditors. At 1 July 2008,
debtors owed $10 000, $7300 was owing to creditors, and the balance in
Allowance for Doubtful Debts was $250. Transactions for the year ended 30
June 2009 were as follows:
$
Credit sales
120 000
Cash sales
300 000
Credit purchases
80 000
Cash purchases
200 000
Cash received from debtors
90 000
Cash paid to creditors
72 000
Discount received from creditors
1200
Discount allowed to debtors
800
Bad debts written off
150
Increases in allowance for doubtful 300
debts
What was the Bad Debts Expense for the year ending 30 June 2009?
Answer
$150
$200
$250
$300
$400

What was the balance of the Debtors control account at 30 June 2009?
Answer
$29,050
$38,650
$39,050
$39,200
$39,850
What was the balance of the Creditors control account at 30 June 2009?
Answer
$6,800
$8,400
$14,100
$15,300
$16,500
The following information relates to the next three questions.
A company purchases and sells Soos. It began last year with 5 units of Soos
on hand at a cost of $10 each, and during the year its purchases and sales
were
as
follows:
Date
Sept 10
Dec 20
Mar 3
June 10

Units
purchased
5
4

Units sold
6

Purchase
price
$12
$15

What was the value of the cost of inventory sold on December 20 by Soos,
using moving weighted average and a perpetual inventory system?
Answer
$60.00
$62.00
$66.00
$72.00
$78.00
What was the value of cost of goods sold of Soos, using the annual weighted
average and a periodic inventory system?
Answer
$36.43
$131.00
$133.57
$137.00
$140.00