Financial Accounting Quiz 1) Which is not one of the three main forms of business organization?

a) Soles proprietorship b) Creditorship c) Partnership d) Company Which is not one of the three main business activities? a) Financing b) Operating c) Advertising d) Investing Profit will result when: a) Assets exceed liabilities b) Liabilities exceed revenue c) Expenses exceeds revenue d) Revenue exceeds expenses Which financial statement reports assets, liabilities and equity? a) Statement of changes in equity b) Income statement c) Balance sheet d) Cash flow statement

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Valuing assets at their market value rather than at their cost is inconsistent with the: a) Accounting period concept b) Accounting entity concept c) Cost principle d) All of the above Which is not an indicator of profitability? a) Current ratio b) Profit margin ratio c) Return on shareholders funds d) Return on assets ratio A general ledger: a) Contains only asset and liability accounts b) Should show accounts in alphabetical order c) Is a collection of the entire group of accounts maintained by an entity d) Provides a chronological record of transactions

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Debits: a) Increase both assets and liabilities b) Decrease both assets and liabilities c) Increase assets and decrease liabilities d) Decrease assets and increase liabilities Using accrual accounting, expenses are recorded and reported only: a) If they are paid before they are incurred b) When they are incurred and paid at the same time c) When they are incurred, whether or not cash is paid d) If they are paid after they are incurred

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10) What is the accounting period concept? a) A business will operate for a long period of time b) The economic life of a business can be divided into artificial time periods c) The financial year should correspond with the calendar year d) None of the above 11) If net sales revenue is RM420,000, cost of goods sol d is RM320,000, and operating expenses are RM60,000, what is the gross profit? a) RM340,000 b) RM100,000 c) RM40,000 d) RM420,000 12) Which of the following will affect the gross profit ratio? a) An increase in sales returns b) An increase in the depreciation expense c) A decrease in the electricity expense d) An increase in interest revenue 13) If beginning inventory is RM60,000, cost of goods purchased is RM380,000, and ending inventory is RM50,000, what is cost of goods sold? a) RM390,000 b) RM370,000 c) RM330,000 d) RM420,000 14) Which of these would cause the inventory turnover ratio to increase the most? a) Increasing the amount of inventory on hand b) Keeping the amount of inventory on hand constant but increasing sales c) Keeping the amount of inventory on hand constant but decreasing sales d) Decreasing the amount of inventory on hand and increasing sales

15) The principles of internal control do not include: a) Establishment of responsibility b) Documentation procedures c) External auditors d) Independent internal verification 16) Depreciation is a process of: a) Valuation b) Cost allocation c) Cash accumulation d) Appraisal 17) To be classified as a current liability, a debt must be expected to be paid: a) Within 1 year b) Within the operating cycle c) Within 2 years d) Within 5 years 18) Amounts deducted from employees wages but not yet p aid to Inland Revenue are recognized as: a) An asset b) An expense c) A liability d) None of the above; they are not recognized 19) Which of the following is not a measure of liquidity? a) Debt to total assets ratio b) Working capital c) Current ratio d) Quick ratio 20) Which of the following is not an equity account? a) Share capital b) Reserves c) Retained earnings d) Dividends payable 21) A low return on shareholders equity ratio indicates: a) Shareholder confidence b) Low profitability on shareholders funds c) Low return on assets d) High leverage

22) The cash flow statement classifies cash receipts and cash payments by these activities: a) Operating and non-operating b) Investing, financing, and operating c) Financing, operating, and non -operating d) Investing, financing, and non -operating 23) Which of the following are the basic tools used in financial statement analysis? a) Horizontal analysis b) Vertical analysis c) Ratio analysis d) All of the above 24) Which measure is useful in evaluating the efficiency in managing inventories? a) Inventory turnover b) Average days in inventory c) Both a) and b) d) None of the above 25) Which of the following is generally not considered to be a limitation of financial statement analysis? a) Use of ratios b) Use of estimates c) Use of cost d) Use of alternative accounting methods

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