Commerce Accounting Financial Management

Commerce
Accounting
Financial management
1. "Shareholder wealth" in a firm is represented by:
the number of people employed in the firm.
the book value of the firm's assets less the book value of its liabilities.
the amount of salary paid to its employees.
the market price per share of the firm's common stock.
2. The long-run objective of financial management is to:
maximize earnings per share.
maximize the value of the firm's common stock.
maximize return on investment.
maximize market share.
3. What are the earnings per share (EPS) for a company that earned $100,000 last year in after-tax profits, has
200,000 common shares outstanding and $1.2 million in retained earning at the year end?
$100,000
$6.00
$0.50
$6.50
4. A(n) would be an example of a principal, while a(n) would be an example of an agent.
shareholder; manager
manager; owner
accountant; bondholder
shareholder; bondholder
5. The market price of a share of common stock is determined by:
the board of directors of the firm.
the stock exchange on which the stock is listed.
the president of the company.
individuals buying and selling the stock.
6. The focal point of financial management in a firm is:
the number and types of products or services provided by the firm.
the minimization of the amount of taxes paid by the firm.
the creation of value for shareholders.
the dollars profits earned by the firm.
7. The decision function of financial management can be broken down into the decisions.
financing and investment
investment, financing, and asset management
financing and dividend
capital budgeting, cash management, and credit management
8. The controller's responsibilities are primarily in nature, while the treasurer's responsibilities are primarily
related to .
operational; financial management
financial management; accounting
accounting; financial management
financial management; operations
9. In the US, the has been given the power to adopt auditing, quality control, ethics, and disclosure standards
for public companies and their auditors as well as investigate and discipline those involved.
American Institute of Certified Public Accountants (AICPA)

Financial Accounting Standards Board (FASB)
Public Company Accounting Oversight Board (PCAOB)
Securities and Exchange Commission (SEC)
10. A company's is (are) potentially the most effective instrument of good corporate governance.
common stock shareholders
board of directors
top executive officers
11. The Sarbanes-Oxley Act of 2002 (SOX) was largely a response to:
a series of corporate scandals involving Enron, WorldCom, Global Crossing, Tyco and numerous
others.
a dramatic rise in the US trade deficit.
charges of excessive compensation to top corporate executives.
rising complaints by investors and security analysts over the financial accounting for stock options.
The following item is NEW to the 13th edition.
12. ___________ refers to meeting the needs of the present without compromising the ability of future generations
to meet their own needs.
Corporate Social Responsibility (CSR)
Sustainability
Convergence
Green Economics

$100,000
$6.00
$0.50
$6.50
manager; owner

related to .
board of directors
others.
Sustainability
Convergence
Green Economics
$100,000
$6.00
$0.50
$6.50
manager; owner

related to .
board of directors
others.

Sustainability
Convergence
Green Economics
3) Bad debts written off during a period of accounting are entered in which side of
a control account?
D) Credit side of debtor control a/c
4) Which of the following accounts is used to record the cash sales

A) Sales account
5) An account receivable was charged with the interest of $500, but no entry was
made in the debtor control account. What would be the adjustment in the debtor
control account?
B) $500 will be debited in the debtor control a/c
6) A check for $200 was received from Mr. Z (a debtor) and was presented to bank
but the bank has dishonored it. Identity the correct treatment of check in a debtor
control account?
A) Debit control account with $200
7) Sales of $500 were recorded twice in the sales ledger control account. What is
the correct adjustment in a debtor control account?
A) $500 will be credited
8) Sales return was understated by $1000. Which of the following is correct?

B) $1000 will be credited in debtor control a/c
9) $500 debit was entered as $500 credit in sales ledger control account. What’s
its adjustment in the sales ledger control account?
C) $1000 should be debited
11) Which of the following statements is/are correct?

1. Creditor control account is also known account payable control account
2. Creditor control account is also referred to as purchase ledger control account
3. Creditor control account is also called purchase ledger account
C) 1 and 2 are correct
12) A contra entry of $1000 between sales ledger and purchase ledger was
omitted from creditor control account. Which of the following is the
correct adjustment in a creditor control account?
B) $1000 should be debited
13) A creditor control account is a kind of _______ since it can be used to proved
the arithmetic correction of accounting record
C) Trial balance
14) The total of purchases return is entered on the which side of a creditor control
account?
A) Debit side
15) Discount received is entered on the which side of a creditor control account?
A) Debit side
16) identify the correct double entry for “bill receivable dishonor”
A) Debit debtor and Credit bill dishonored
17) Generally, the total amount purchases is taken from which book of account
for the purpose of preparing Creditor control account?
C) Purchase day book
18) A creditor control account contains the following transaction:

» Bank = $100
» Purchases=$200
» Discount received = $100
» Balance c/d = $300
Work out the balance b/d
C) $300
19) Which of the following, generally, doesn’t appear in a debtor control account?
D) Provision for doubtful debts
20) Which of the following is the correct entry for bill payable acceptance?
B) Creditor Debit and bill payable Credit
1) What is depreciation?
D) Portion of a fixed asset’s cost consumed during the current accounting period
2) Under which depreciation method the amount of depreciation expenses
remains same throughout the useful life of a fixed asset
A) Straight line method
3) A company purchased a vehicle for $6000. I will be used for 5 years and its
residual value is expected to be $1000. What is the annual amount of deprecation
using straight line method of depreciation?
A) $1000
4) What is the accumulated deprecation?

A) Sum of all depreciation expenses of a fixed asset
5) Which of the following is the normal balance of an accumulated

depreciation account?
B) Credit balance
6) How trial balance shows the accumulated depreciation?

B) as a credit item
7) Which of the following is a double entry for depreciation expenses?

B) Depreciation expenses Debit and accumulated depreciation Credit
8) An alternative term used for accumulated depreciation expenses?

A) Provision for depreciation B) Cumulative depreciation
C) Targeted depreciation D) Depletion
9) Which of the following is/are a kind of depreciation expenses?
A) Amortization
B) Depletion
C) Both of them
10) A fixed asset was bought for $5000. Its accumulated depreciation is $3000 and
rate of depreciation is 20%. Calculate its depreciation expenses for the
current accounting period using reducing balance method?
D) $400
11) In depreciation calculation, the useful life of a fixed asset is:

B) an estimate
12) Depreciable amount + Residual value of a fixed asset =?

C) Cost of the fixed asset
13) Cost of a fixed asset – Accumulated depreciation expenses of the fixed

asset=?
A) Book value of a fixed asset
14) The estimate about useful life of a fixed asset:

B) Can be changed
15) Which of the following is the correct formula for calculating depreciation
using service hours method?
B) Depreciation=(Cost - Accumulated depreciation) / Total hours X Actual hours )
16) The purchase price of a software that will be used for more than 12 months
should be regarded as:
B) a capital expenditure
17) XYZ firm has imported a machine from abroad. Which of the following is NOT
the element of machine’s cost?
D) Refundable tax
18) make sure that machine works properly. There was expense of $5000 incurred
on test run, however the sale proceeds of test production were $2000. You are
required to find out the total cost of machine?
C) 503,000
19) Which of the following fixed assets is not depreciated in the ordinary
circumstances?
C) Land
20) In the calculation of depreciation, all of the following items are actually
estimates except:
C) Historical cost
21) Which of the following accounting concepts or principles require the

calculation of depreciation of the fixed assets?
D) Matching concept
22) A car was purchased for $5500. Its residual value was estimated to be $500
while its monthly depreciation expenses are $100 using straight line method.
Which of the following is the annual rate of depreciation?
B) 24%
23) Under which method of depreciation the amount of depreciation expenses

remains constant throughout the useful life of a fixed asset
C) Straight line method
24) An increase in the value of fixed asset is referred to as:

B) Appreciation
25) A fixed asset having book value of $2000 was sold for $1500. Which of the
following is the gain or loss on the sale of fixed asset?
C) $500 loss
26) Book value of a fixed asset equals to market value or sale proceeds of a fixed
asset if:
C) Gain or loss on sale=0
27) The term ______ is generally used for the depreciation of natural resources
B) Depletion
28) Which of the following is a biological asset?

D) Living plants and animals
29) Items of property, plant and equipment can be recognized as assets when
their cost can be measured reliably and it is likely that the future economic
benefits associated with the assets:
C) will flow to the entity
30) Under the revaluation model of fixed assets provided by the international
accounting standards, the revaluation of the fixed assets should be carried out:
B) on a regular basis
1) Which of the following is the effect on net income if a business decreases

provision for doubtful debts?
A) It will increase net income
2) A firm has not recorded the bad debts by mistake. Which of the following is the
effect of bad debts omission?
B) Net profit would increase
3) When it is certain that a debt won’t be recovered. Which of the following is
correct?
B) Account receivable is credited
4) A recovery of bad debt

A) increases net income
5) The opening balance of “provision for doubtful debts account” is $1000

whereas the closing balance of debtors account is 100,000. What amount of
provision for doubtful debts should be charged to income statement using a 5%
provision for doubtful debts for the current accounting period?
B) $4000
6) The opening and closing balances of provision for doubtful debts account are
$1000 and $2000 whereas bad debts are totaled $200
B) $2000 is to be subtracted from total debtors balance in the balance sheet
7) Which of the following double entries is used to transfer “bad debts recovered”
to income statement?
A) Bad debts recovered Debit and income statement Credit
8) What does aged debtors analysis signify?

A) shows how long debts have been outstanding
9) Which of the following is the most common cause of bad debt?

D) Debtor declared to be a bankrupt
10) According to a general rule of accounting, the older a debts is outstanding,

the more likelihood that the debt will turn out to be a C) bad debt
11) Total debtors=$5000, the closing balance of provision for doubtful debt a/c is
$500. Identify what amount should be shown in balance sheet regarding the
debtors?
A) $5000-$500=$4500
12) Which accounting concept dictates the inclusion of “provision for doubtful
debts” in the financial statements?
D) Prudence concept
13) Which of the following is an alternative term for “provision for doubtful debts”
?
C) Allowance for doubtful debts
15)A firm decided to provide for a 4% or $160 allowance for doubtful debts on all
outstanding debts. Which of the following is the value of total outstanding debts
of the firm at the time of creating the provision?
D) 4000$
16) Which of the following is a commonly used base to create the provision for
doubtful debts?
B) Total credit sales
17) Which of the following debtors have highest probability to default on trade
debts?
A) Over 90 days old debtors
18) Provision for doubtful debts account is a/an

B) Contra asset account
20) Provision for cash discount on debtors is a percentage of

C) Net debtors less provision for doubtful debt
1) The value of inventories or stock is figured out at the lower of cost and
D) net realizable value
2) An overstatement in the value of closing stock overstates all of the following

except
D) Cost of goods sold
3) Which of the following are generally the inventories of a service business

D) Work in process inventories
4) All of the following are the methods of inventory costing except

D) Stock take
5) Which one of the following methods of inventory costing yields highest taxable
income?
A) FIFO
6) Which one of the following methods of inventory costing produces ending

stock cost close to the market value of the inventories?
A) FIFO
7) Which of the following inventory costing systems is regarded as the most

complex one?
B) Perpetual inventory system
8) Which one of the following double entries is passed when goods are
purchased on credit under perpetual inventory system?
D) Inventory Debit and a/c payable Credit
9) Which of the following journal entries is passed when goods are purchased on
credit under the periodic inventory system?
C) Purchases Debit and a/c payable Credit
10) Which one of the following inventory systems ascertains the balance of stock
or amount
of stock at the end of an accounting period or at the time of physical inventory
count?
A) Periodic inventory system
11) Which one of the following inventory costing methods is supposed to issue
the most recently purchased goods?
C) LIFO method
12) Which of the following inventory systems is the most appropriate for a
business that deals in a precious metal such as gold?
B) Perpetual inventory system
13) Opening inventory + Net purchases = What?

D) Cost of goods available for sale
14) Cost of goods available for sale – closing inventory = What?
D) Cost of goods sold
15) Gross profit is 25% on total sales and cost of goods sold amounts to $750.
Which of the following is the amount of gross profit?
D) $250
16) At the end of XYZ firm’s accounting period, the closing stock was found to be
$10,000. However, it was realized that a fixed asset of cost $1000 was included
in the stock count. Which of the following is the correct amount of ending
inventory or stock?
C) $9000
17) NRV or net realizable value of inventory is the expected selling price or
market value less
B) expenses necessary to complete sale
18) Cost of an item in the closing inventory is $100 whereas the net realizable
value is $85. At which one of following amounts the item should be shown in
the financial statement?
C) $85
19) An item of inventory was purchased for $100. It can be sold for $125 and
company can replace the item with the new one at the cost of $105. Which of the
following is the historical cost of that item?
C) $100
20)Under which method of inventory costing a pre-determined cost is assigned to

all items of inventory? B) Standard cost method
1)Which of the following is generally considered as a non profit oriented
organization?
A) Charitable organization
2) The receipts and payments account of a non-profit organization is a

B) Real account
3) Non-profit organizations prepare all of the following accounts except the

D) Income statement
4) Expenditures greater than incomes of a non-profit organization give rise to a
D) Deficit
5) Rent expense of a non-profit organization paid in advance. Which of the

following is the correct classification of rent?
D) Asset
6) An advance receipt of subscription from a member of the non-profit

organization is considered as a/an
B) Liability
7) Income and expenditure account is based on

B) Accrual accounting
8) Which of the following is regarded as apt to show the purchase of a fixed

asset?
C) Balance sheet
9) Which of the following is to be recorded in an income and expenditure

account?
C) Profit on the sale of a fixed asset
10) Honorarium is a kind of remuneration paid to a person who is not the

employee of a non-profit organization. Which of the following statements is true
about the honorarium payment?
A) It’s a revenue expenditure
11) The capital of a non-profit organization is generally known as

B) Accumulated fund
12) When cash is received for life membership, which one of the following
double entries is passed?
D) Cash Debit and life membership fund Credit

Commerce Accounting Financial Management

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Commerce Accounting Financial Management

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Commerce

1. "Shareholder wealth" in a firm is represented by:

the number of people employed in the firm.

the amount of salary paid to its employees.

the market price per share of the firm's common stock.

2. The long-run objective of financial management is to:

maximize earnings per share.

maximize the value of the firm's common stock.

maximize return on investment.

maximize market share.

4. A(n) would be an example of a principal, while a(n) would be an example of an agent.

the board of directors of the firm.

the stock exchange on which the stock is listed.

the president of the company.

individuals buying and selling the stock.

6. The focal point of financial management in a firm is:

the number and types of products or services provided by the firm.

the minimization of the amount of taxes paid by the firm.

the creation of value for shareholders.

the dollars profits earned by the firm.

financing and investment

investment, financing, and asset management

financing and dividend

capital budgeting, cash management, and credit management

operational; financial management

financial management; accounting

accounting; financial management

financial management; operations

American Institute of Certified Public Accountants (AICPA)

Public Company Accounting Oversight Board (PCAOB)

Securities and Exchange Commission (SEC)

common stock shareholders

top executive officers

a dramatic rise in the US trade deficit.

charges of excessive compensation to top corporate executives.

The following item is NEW to the 13th edition.

Corporate Social Responsibility (CSR)

the number of people employed in the firm.

the amount of salary paid to its employees.

the market price per share of the firm's common stock.

maximize earnings per share.

maximize the value of the firm's common stock.

maximize return on investment.

maximize market share.

4. A(n) would be an example of a principal, while a(n) would be an example of an agent.

5. The market price of a share of common stock is determined by:

the board of directors of the firm.

the stock exchange on which the stock is listed.

the president of the company.

individuals buying and selling the stock.

6. The focal point of financial management in a firm is:

the number and types of products or services provided by the firm.

the minimization of the amount of taxes paid by the firm.

the dollars profits earned by the firm.

financing and investment

investment, financing, and asset management

financing and dividend

capital budgeting, cash management, and credit management

operational; financial management

financial management; accounting

accounting; financial management

financial management; operations