AFM QUIZ 3

A fire insurance premium covering the business premises is paid annually in advance.
What kind of an expense would this be?
Accrued Expense
Simple Expense
Prepaid Expense
Long term expense
Prepaid expense

Under which depreciation method does the depreciation remain same during the whole
life of the asset?
Straight line method
Reducing balance method
Machine hours method
Number of units produced method
Straight line method
 
Which term is used for the depreciation of natural resources?
Depreciation
Amortization
Depletion
Reduction
depletion
Depreciation is added back to profit when arriving at the cash flow from operating
activities because?
(a) Depreciation is only an estimated amount

(b) Depreciation does not affect profit

(c) Depreciation only affects the balance sheet, not the profit and loss account

(d) None of Above

Cash flow example from an investing activity is

Issue of Debenture
Repayment of Long-term Loan
Purchase of Raw Materials for Cash
Sale of Investment by Non-Financial Enterprise
 AFM QUIZ 3

B D correct
wrong

If £500 was shown added to Purchases instead of being added to a fixed asset
Net profit only would be understated
Net profit only would be overstated
It would not affect net profit
Both gross and net profits would be understated.
A D correct
wrong

What is depreciation?
Cost of a fixed asset
Cost of a fixed assets repair
The residual value of a fixed asset
Part of a fixed assets cost consumed during its time
D
correct

“When the final accounts are prepared, the Bad Debts Account is closed by a transfer to the”
Balance Sheet
Profit and Loss Account
Trading Account
Provision for Doubtful Debts Account.
D B correct
wrong

In the long run, a business must generate positive net cash flow from which of the following
activities, if it is to survive?”
Investing activities
Financing activities
Operating activities
Non cash activities
A C correct
wrong

A company purchased a machine for $5000 and the residual value is $1000 and the life will be 5
years. What will the depreciation be?
1000
 AFM QUIZ 3

800
1200
2000
B
correct

“XYZ purchased a new machine costing $300,000. They decided to do a test run on the machine
which costs $5000 to make sure that the machine works fine. However the sale receipts from the
test run came out to be $2000. What was the cost of the machine?”
300000
305000
302000
303000
A B correct
wrong

A machine costing $5000 has an accumulated depreciation of $3000 and the rate of depreciation
is 20%. What will be the current depreciation using reducing balance method?
600
3000
200
400
D
correct

A firm imports a machine from another country. Which of the following will NOT be the cost of
the machine?
Purchase price
Taxes
Import duties
Refundable tax
Dcorrec
t
"We originally sold 25 items at £12 each, less 33.33 per cent trade discount. Our
customer now returns 4 of them to us. What is the amount of credit note to be issued?"
A 48
B 36
C 30
D 32
 AFM QUIZ 3

D correct

 Question 1
0 out of 0.5 points
A Provision for Doubtful Debts is created
Ans: to write off bad debts (wrong)
C to provide for possible bad debts

 Question 2
0 out of 0.5 points
Cash flow example from an operating activity is
Ans: interest paid on term-deposits by bank (wrong)

 Question 3
0.5 out of 0.5 points
A company purchased a machine for $5000 and the residual value is $1000 and the life will
be 5 years. What will the depreciation be?
Ans: 800

 Question 4
0 out of 0.5 points
The estimated useful life of a fixed asset:
Ans: depend on asset (wrong)

 Question 5
0 out of 0.5 points
A credit balance brought down on a Rent Account means
Ans : we have paid too little in rent (wrong)
We owe that rent at that date

 Question 6
0 out of 0.5 points
Which of these errors would be disclosed by the trial balance?
Ans: cheques 95 from smith….(wrong)

 Question 7
0.5 out of 0.5 points
"Which of the following do not affect trial balance agreement? (i) Sales £105 to A Henry
entered in P Henry s account (ii) Cheque payment of £134 for Motor expenses entered only in
Cash Book (iii) Purchases £440 from C Browne entered in both accounts as £404 (iv) Wages
 AFM QUIZ 3

account added up incorrectly, being totalled £10 too much."

Ans: (i) and (iii)

 Question 8
0.5 out of 0.5 points
The basic financial statements include
Ans: all of above

 Question 9
0.5 out of 0.5 points
Which of the following is/are a kind of depreciation expense?
Ans: both of them

 Question 10
0.5 out of 0.5 points
Revenues are the same as profit.
Ans : false

 Question 11
0.5 out of 0.5 points
The term used for the right hand side of the account is called
Ans: credit

 Question 12
0.5 out of 0.5 points
What are Stock dividends considered to be?
Ans: owners’ equity

 Question 13
0 out of 0.5 points
"We originally sold 25 items at £12 each, less 33.33 per cent trade discount. Our customer
now returns 4 of them to us. What is the amount of credit note to be issued?"
Ans: 48 (wrong)
32

 Question 14
0.5 out of 0.5 points
"When an asset increases, it is said to be?"
Ans: debited

 Question 15
0.5 out of 0.5 points
 AFM QUIZ 3

"In accounting terminology, the economic resources of a business are called?"

Ans: assets

 Question 16
0.5 out of 0.5 points
"Given a purchases showing 5 items of £80 each, less trade discount of 25 per cent and cash
discount of 5 per cent, if paid within the credit period, your cheque would be made out for"
Ans: 280

 Question 17
0 out of 0.5 points
"Given opening capital of £16,500, closing capital as £11,350 and drawings were £3,300,
then"
Ans: loss for year was 8450 (wrong)
Profit for the year 1850

 Question 18
0.5 out of 0.5 points
"Asset= 25,000 Capital= 18,000 Liability= x"
Ans: 7000

 Question 19
0.5 out of 0.5 points
"Liabilities= 20,000 Capital= 10,000 Assets= X"
Ans: 30000

 Question 20
0.5 out of 0.5 points
What is the alternative term for accumulated depreciation?
Ans: provision for depreciation