Accounting questions
1) Fundamental qualities of accounting info?
a. Verifiability and comparability
b. Relevance and faithful representation
c. Relevance and understandability
d. Faithful rep and verifiability
Purpose of accounting does not involve:
e. Providing useful accounting info
f. Providing info that will enable uses to make informed decisions
g. Identification recording and communication of bus activities
h. Predicting future share price
Internal users of accounting info:
i. Lenders
j. Suppliers
k. Customers
l. Managers
2) Assets of £7500 and liabilities of £4500. What is equity for acdc plc
a. £11500
b. £4500
c. £7500
d. £3000
Assets of 11500 liabilities of 7500 what is equity for acdc ?
e. 19000
f. 11500
g. 7500
h. 4000
3) Sales rev is £840000, operating inventory is £200000, ending inventory is £160000,
purchases are £600000 and operating expenses are £120000. What is cost of sales
a. 600000
b. 560000
c. 640000
d. 480000
Sales rev is 520000 opening inventory is 200000 ending inventory is 180000
purchases are 160000 and operating expenses are 60000. What is cost of sales
e. 160000
f. 180000
g. 140000
h. 200000
4) Sales rev is 840000, operating inventory is 160000, purchases 600000 and operating
expenses 120000. What is gross profit
a. 240000
b. 280000
c. 200000
d. 360000
Sales rev is 210000 opening inventory is 50000 ending inventory is 40000 purchases
are 150000 and operating expenses are 3000 what is gross profit
e. 60000
f. 70000
g. 50000
h. 90000
Sales rev is 840000 opening inventory is 200000 ending inventory is 160000
purchases are 600000 and operating expenses are 120000 what is gross profit
i. 240000
j. 280000
k. 200000
l. 360000
Sales rev is 520000 opening inventory is 200000 ending inventory is 180000
purchases are 160000 and operating expenses are 60000. What is gross profit
m. 360000
n. 340000
o. 380000
p. 320000??
5) Interest revenue 3600 has been earned but not received or recorded
Rent expense of £3400 has been accrued but not recorded
If no adjusting entries are made then effect on net profit will be
a. Understatement of net profit by 600
b. Overstatement of net profit by 1000
c. Overstatement of net profit by 200
d. Understatement of net profit by 200 ????
Rent expense of 7200 has been accrued but not recorded
Interest rev of 6800 earned but nor received or recorded
If no adjusting entries made then effect of net profit will be
e. Understatement of net profit by 400
f. Overstatement of net profit by 400
g. Overstatement of net profit by 200
h. Understatement of net profit by 200
Interest rev of 1800 earned but not received or recorded
Rent expense of 1700 has been accrued but not recorded
i. Understatement of net profit by 300
j. Overstatement of net profit by 500
k. Overstatement of net profit by 100
l. Understatement of net profit by 100
6) Which of following not an example of revenue?
a. Sales
b. Fees for service
c. Sale of non current assets ???
d. Interest received
Best describes revenue recognising principal.
e. Amount of rev must be able to be measured reliably
f. Probable that economic benefits will be received
g. Rev should be recognised in accounting period in which the performance
obligation is satisfied
h. Control of item has passed to buyer
Expanded accounting equation:
i. Assets = equity +profit +liabilities
j. Assets + profit = equity + liabilities
k. Assets – profit = equity +liabilities
l. Assets = equity – profit + liabilities
Using accrual based accounting, expenses are recorded and reported only:
m. If they are paid before they are incurred
n. When they are incurred and paid at the same time
o. When they are incurred whether or not cash is paid
p. If they are paid after they are incurred
7) Total invoice cost of 300000. Equip has estimated residual value of 60000 and
estimated useful life of 6 years. What is amount of depreciation expense at 31 dec
19 if straight line method of depreciation is used?
a. 40000
b. 50000
c. 45000
d. Cannot be determined
Total invoice of 400000 equip has estimated residual value of 20000 and an
estimated useful life of 5 years. What is the amount of depreciation expense at 31
dec 19 if straight line method of depreciation is used?
e. 76000
f. 80000
g. 84000
h. Cannot be determined
Total invoice cost of 300000. Equip has estimated residual value of 60000 and
estimated useful life of 4 years. What is amount of depreciation expense at 31 dec
19 if straight line method of depreciation is used?
i. 65000
j. 75000
k. 60000
l. Cannot be determine
Total invoice of 300000 equip has estimated residual value of 50000 and an
estimated useful life of 5 years. What is the amount of depreciation expense at 31
dec 19 if straight line method of depreciation is used?
a. 60000
b. 50000
c. 70000
d. Cannot be determined
8) Total invoice of £300000. Estimated residual value if £50000 and estimated useful
life of 5 years. What is the carrying amount of the equipment at 31 dec 19
a. 180000
b. 200000
c. 140000
d. 20000
Total invoice of 300000 equipment has estimated residual value of 60000 and
estimate useful life of 4 years what is carrying amount of equipment using straight
line method of depreciation?
e. 170000
f. 20000
g. 150000
h. 180000
Total invoice of 400000 equipment has estimated residual value of 20000 and
estimate useful life of 5 years what is carrying amount of equipment using straight
line method of depreciation?
i. 240000
j. 248000
k. 20000
l. 232000
Total invoice of 300000 equipment has estimated residual value of 60000 and
estimate useful life of 6 years what is carrying amount of equipment using straight
line method of depreciation?
a. 220000
b. 200000
c. 210000
d. 20000
9) An income statement provides info about
a. Financial performance of business at specific date
b. Financial position of business for specific period of time
c. Financial performance of business for specific period of time
d. Financial position of business at specific date
Income statement:
e. Presents revenues and expenses for specific period of time
f. Summarises changes in retained earnings for specific period of time
g. Reports changes in assets liabilities and equity for specific period of time
h. Reports assets liabilities and equity at specific date
Cash flow statement
i. Presents rev and expenses for specific period of time
j. Shows movement of cash in org for period of time
k. Report changes in assets liabilities and equity for specific period of time
l. Reports assets liabilities and equity at specific date
Statement of financial position
m. Presents revenues and expenses for specific period of time
n. Summarises changes in retained earnings for specific period of time
o. Reports changes in assets liabilities and equity for specific period of time
p. Reports assets liabilities and equity at specific date
10) Going concern concept is best described as
a. Org should match expenses and revenues to the period in which they
occurred
b. Org should be accounted for as if it will continue trading into the future
c. Org should be conservative when estimating rev and expenses
d. Only items substantial enough to influence decisions of users of accounts
should be recognised
Materiality concept in accounting is best described as
e. Org should match expenses and revenues to period in which they occurred
f. Org should be accounted for as if it will continue trading into the future
g. Org should be conservative when estimating revenue and expenses
h. Only items substantial enough to influence the decisions of users of the
accounts should be recognised
Prudence concept in accounting is best described as
a. Org should match expenses and revenues to period in which they occurred
b. Org should be accounted for as if it will continue trading into the future
c. Org should be conservative when estimating revenue
d. Only items substantial enough to influence the decisions of users of the
accounts should be recognised
Matching concept best described as:
a. Org should match expenses and revenues to period in which they
occurred
b. Org should be accounted for as if it will continue trading into the
future
c. Org should be conservative when estimating revenue and expenses
d. Only items substantial enough to influence the decisions of users of
the accounts should be recognised
11) What section of statement of cash flows indicates acquisition of land using share
issue during the past accounting period?
a. Investing section
b. Operating section
c. Financing section
d. Statement of cash flow does not give this info
What section of statement of cash flows indicates cash spend on new equipment
during the past accounting period?
e. Investing section
f. Operating section
g. Financing
h. Does not give this info
What section of statement of cash flows indicates cash used to pay dividends
during past accounting period?
i. Investing section
j. Operating section
k. Financing section
l. Statement of cash flow does not give this info
12) Statement of cash flows should not be used to evaluate an entity’s ability to
a. Pay dividends
b. Meet obligations
c. Earn future profits
d. Earn future profits
Statement of cash flows incorrect:
e. Statement shows cash provided for three categories exactly
f. Operating section is last section of the statement
g. Indirect method may be used to report cash provided by operations
h. Direct method may be used to report cash provided by operations
Statement of cash flows classifies cash receipts and payments by following
activities
i. Inventing, financing and non operating
j. Operating and non operating
k. Financing operating and non operating
l. Investing financing and operating
13) Profit is 112000, accounts payable increase 5000 during the year, inventory
decreases 6000 during the year, accounts receivable increased 2000 during the year.
Use indirect method, what is net cash provided by operations
a. 124000
b. 109000
c. 121000
d. 111000
Profit is 142000 accounts payable increases 20000 inventory decreased 8000 and
accounts receivable increased 15000 during the year using indirect method what
is net cash provided by operations?
e. 185000
f. 115000
g. 155000
h. 139000
Profit is 132000 accounts payable increased 10000 inventory decreased 6000 and
accounts receivable increased 12000 what is net cash provided by operations
i. 104000
j. 116000
k. 124000
l. 136000
Profit is 122000 accounts payable increased 9000 inventory decreased 8000 and
accounts receivable increased 10000 what is net cash provided by operations
a. 165000
b. 119000
c. 124000
d. 129000
14) Not classified as cash flow from financing activities
a. Repayment of borrowings
b. Dividends paid to shareholders
c. Issue of shares to raise capital
d. Sale of shares held as an investment
Example of cash flow from financing activity is
e. Receipt of cash from sale of equipment
f. Receipt of cash from customers
g. Payment of cash to suppliers for inventory
Investing activities include:
h. Collecting cash from loans made
i. Obtaining capital from owners
j. Obtaining cash from creditors
k. Repaying borrowed money
Example of cash flow from operating activity is
l. Payment of cash to lenders for interest
m. Payment of cash dividends to company shareholders
n. Receipt of cash from sale of capital shares
o. Purchasing office equipment
15) Reported profit of 24000, net sales 200000 and average assets 400000 what was
2019 operating profit margin
a. 6%
b. 12%
c. 20%
d. 60%
Reported profit 50000 net sales 600000 average assets 700000 what is operating
profit margin?
e. 8%
f. 7%
g. 20%
h. 12%
Reported profit 48000 net sales 400000 average assets 800000 what is operating
profit margin?
a. 6%
b. 12%
c. 40%
d. 200%
16) Silver ferm profit 6000, netsales 10000 total assets 150000 and current liabilities of
25000 for 2019. What is ROCE
a. 4.8%
b. 66.7%
c. 80%
d. 4%
Profit 12000, net sales 200000 total assets 300000 current liabilities 50000 what is ROCE?
e. 4%
f. 66.7%
g. 80%
h. 4.8%
Profit 24000 net sales 400000 total assets 600000 current liabilities 100000 what is ROCE
i. 4.8%
j. 66.7%
k. 80%
l. 4%
Profit 48000 net sales 800000 total assets 1600000 current liabilities of 200000 ROCE?
m. 6%
n. 12%
o. 40%
p. 200%
Profit 96000 net sales 800000 total assets 1200000 current liabilities of 200000 ROCE?
a. 66.7%
b. 4.8%
c. 80%
d. 4%
17) Thames manuf had current assets of 500000 and 180000 of current liabilities before
borrowing 120000 from bank within a 3 month note payable. What effect did
borrowing transaction have on thames current ratio/?
a. Change in current ratio cannot be determined
b. Ration remained unchanged
c. Ratio decreases
d. Ratio increased
Current assets of 250000 and 90000 of current liabilities before borrowing 60000
from bank with 3 month payable what effect did borrowing have on current ratio
e. Change in current ratio cannot be determined
f. Ration remained unchanged
g. Ratio decreases
h. Ratio increased
Current assets of 62500 and 22500 of current liabilities before borrowing 15000
from bank with 3 month payable what effect did borrowing have on current ratio
i. Change in current ratio cannot be determined
j. Ration remained unchanged
k. Ratio decreases
l. Ratio increased
18) Measures of profitability incluse
a. Acid test ratio
b. Dividend payout ratio
c. Return on ordinary shareholders funds
d. Gearing ratio
Liquidity ratios are used to assess
e. Short term ability of an entity to pay its debts
f. Ability of an entity to survive over long term
g. Long term solvency??
h. Short term sales levels
Common measure of long term solvency is:
i. Current ratio
j. Avg inventory turnover period
k. Gearing ratio
l. Earnings per share
19) accounting equation may be expressed as
a. assets + equity = liabilities
b. assets + liabilities = equity
c. assets = equity – liabilities
d. assets = liabilities + equity
objective of financial reports
e. value the reporting entity
f. determined by size of reporting entity
g. defines what businesses are reporting entities
h. to provide financial info that is useful to shareholders lenders and other
creditors in making decisions relating to provision of resources to an entity
for accounting info to be relevant it must:
i. not be reported to public
j. be used by lot of different firms
k. have very little cost
l. help predict future events or confirm prior expectation
20) neg impact they have on society – trying to contribute positiviely to social
development through
a. competitive pricing
b. marketing concepts
c. corporate SR programes
d. price fixing
NOT a benefit of an integrated report
e. it’s a signle report that is easy to access, clear and concise
f. costless to produce
g. links of non financial performance more directly to the business
h. allows better identification of risk and opportunities
21) characteristic of management accounting
a. MA is mainly for external users of the accounts
b. Follows set of internationally accepted principles and guidelines
c. Management accounting has more of a decision-making focus
d. Mainly concerned with accurate recording and representation of bus activity
Which would constitute an internal user of the accounts
e. Local govt representative ?????
f. Her majesty revenue and customs
g. Largest customer of the organisation
h. Head of the marketing dept?
NOT a characteristic of management accounting
i. MA accounts follow IFRS
j. Management accounting has more of a decision-making focus
k. MA mainly for use of internal users
l. MA has no prescribed format
22) Operating gearing increases as
a. Economic trading conditions improve
b. Economic trading conditions worsen
c. Proportion of fixed costs in cost structure increases
d. Proportion of variable costs in cost structure increases
Operating gearing provides measure of
e. Risk associated with cost structure of organisation
f. Proportion of debt to equity in business
g. Economic trading conditions a business currently faces
h. Estimated present values from a prospective investment project
Operating gearing attempts to measure:
i. Bankruptcy risk
j. Risk of operational failure
k. Risk associated with cost structure of org
l. What % of company is financed by long term debt
Operating gearing decreases as:
m. Proportion of fixed costs in cost structure decreases
n. Proportion of variable costs in cost structure decreases
o. As economic trading conditions become more favourable
p. As economic trading conditions become less favourable
23) Variable cost
a. Decreases as volume increases, when measured on a per unit basis
b. Increases as volume increases when measured on a per unit basis
c. Remains fixed, irrespective of volume
d. Increases in direct prop to volume, when measured in total
Fixed cost:
e. Remains fixed no matter how many units are produced
f. Remains fixed over relevant range of production volume
g. Increases in direct proportion to volume
h. Remains fixed when measured on per unit basis even as volume increases
24) what could justify discontinuation of production of particular product
a. Product generates positive contribution
b. Product generates positive contribution, but is not very profitable after
having fixed costs allocated to it on an overhead absorption basis
c. Product generates negative contribution???
d. Product sells at a loss, but drives sales of a very profitable complimentary
product eg toothbrush toothpaste
Assuming a product generates positive contribution per unit a business could
increase short term profit by
e. Reducing fixed costs associated with producing the product
f. Increasing production levels
g. Shutting down production of this product
h. Holding greater inventory levels
Assuming a product generates positive contribution per sale a business could
increase short term profit by
i. Incurring greater fixed costs
j. Selling greater volumes at same price per unit
k. Increasing variable cost per unit
l. Holding greater inventory levels
25) C in cvp stands for
a. Customer
b. Cost
c. Carrying
d. Current
CVP stands for
e. Cost variable production
f. Customer variances productivity
g. Cost volume profit
h. Cost volume price
26) Not characteristic of relevant cost
a. Future
b. Incremental
c. Sunk
d. Cash flow
Characteristic of relelvant cost:
e. Sunk
f. Avoidable
g. Depreciation
h. Variable
27) Problem with using hi lo method to estimate costs is
a. Costly to execute
b. Likely to be too simplistic to represent actual cost behaviour
c. Complex and difficult to understand for non accounting staff
d. Relatively new technique and employees may not be familiar with it
Hi lo technique could be appropriate for estimating costs when
e. Theres a single product with mostly linear cost structure
f. For large org with many product lines
g. When cost increase in an exponential curve
h. When cost decrease due to EOS
Hi lo method assumes:
i. Fixed cost do not increase
j. Eos can be achieved
k. Vc increase exponentially as volume increases
l. Vc decreases exponentially as volume increases
28) Primary financial criterion in the decision whether to accept a special order ot not
(Assuming ample spare capacity)
a. In fulfilling the order, positive net contribution is generated
b. In fulfilling the order, fixed cost do not rise
c. Fulfilling the order do not accept reduction on retail sales price
d. Fulling the order, do not sell to potential competitor
What could our org do to help retain customers and prevent cannibalisation
(assuming the special order product will directly compete with ours)
e. Make special order product slightly lower in quality
f. Make special order product exactly the same as ours
g. Negotiate a higher price for special order product
h. Make sure we r in same market as the company who submitted the special
order request
Which of following would be valid reason to accept a special order that
generates negative contribution per unit?
i. Decision in itself is financially sound and will increase profit
j. To use excess capacity
k. There may be an opp for future orders at higher price
l. If customer is in direct competition with our organisation
29) Cash flow forecast shows small deficit due to occur next month and to remain in
deficit for one month after that. Choose most appropriate solution as proposed by
four members of your team
a. Book meeting with bank to arrange overdraft facility
b. Book meeting with bank to arrange 10 yr bank loan
c. Withhold staff wages for next two months
d. Issue sale and lease back agreement immediately on most appropriate non
current asset
Disadvantage of cash budgets is
e. They are too long term in nature
f. They actively promote risk taking behaviour from managers
g. They are complex to understand especially for non account staff
h. Become more unreliable the further they forecast into the future
If cash budget shows small short term deficit in future, most appropriate solution
to this would be:
i. Issue shares immediately to raise finance
j. Take out long term bank loan to raise finance
k. Arrange overdraft facility with bank to reduce fees and interest incurred
l. Sell non current assets to raise quick finance
30) Britech ltd:
Units produced 9000
Variable labour cost per unit £14
Materials cost per unit £9.50
Other variable prod cost per unit £7
Total fixed costs estimated to be £120000 proposed sale price for unit is £70 each
What is their breakeven point
a. 3037 units??
b. 3338 units
c. 3038 units
d. 3083 units
Units produced: 6000
Variable labour cost per unit: 12
Materials cost: 7.50
Other var prod cost per unit : 3.25
Total fixed cost estimated to be 280000 proposed sales price for unit is 80
each
What is break even point
e. 4981
f. 4891
g. 4890
h. 4908
Units produced: 7000
Variable labour cost per unit: 24
Materials cost: 7.50
Other var prod cost per unit : 3.75
Total fixed cost estimated to be 180000 proposed sales price for unit is 80
each
What is break even point
i. 3711
j. 3712
k. 4022
l. 4023
31) Alpha has sales of 300000 variable cost of 180000 fixed cost 100000 what is
operating gearing for company
a. 4
b. 2
c. 6
d. 3
Sales of 100000 var cost 60000 fixed costs 20000 operating gearing ?
e. 2
f. 3
g. 4
h. 6
Sales of 200000 var cost 150000 fixed costs 25000 operating gearing ?
a. 4
b. 6
c. 2
d. 3
32)
37500 units?
29167
20834
20000 units
33)
21500
94500
117500
109500
34)
35)
661500? 708750?
1077300
708750
36
27200 5200 favourable
4000 26000 adverse
29500 20500 favourable
37)
15000
10600
38)
149.40
149.25??
51.5
39) and 40
39) 50%
40 -30000 to 48000
187000 476000
20%
50%
461000 790000
