Lecture 5

Accounting Principles 1
Questions & Exercises
The following are the non-financial transactions that may
take place in the Ahmed's Stores:
1) The entity contracted to purchase machinery and
equipment from Germany Country.
2) A new branch was opened for the entity in Aswan
3) Five new workers were hired.
4) Some employees were transferred from the purchasing
department to the marketing department.
5) Goods were sold to Al-Mansour's stories.
6) A new branch was opened in Mansoura City.
 Indicate whether each of the following statements presented
below is true or false.
1. The sole purpose of accounting is to determine the profit or loss of the
project. (F)

2. One of the objectives of accounting is to determine the profit or loss of the

project (T)

3. The terms rights and resources are the assets of the enterprise. (T)
True-False 4. The terms Obligations and debts are the liabilities of the enterprise. (T)
Questions 5. Accounting is concerned with all transactions, financial or non-financial.
(F)

6. Accounting is concerned with non-financial transactions only. (F)

7. Profit or loss = expenses - revenues. (F)

8. Profit or loss = Revenues - Expenses. (T)

9. Profit or loss = expenses + revenues. (F)

10. Profit or loss = Revenues + Expenses. (F)

 1. Accounting is concerned with financial transactions only. (T)
2. The assets and liabilities of the entity are determined by the
income statement. (F)
3. The profit or loss of the enterprise is determined by the statement
of cash flows. (F)
4. Cash in and cash out of the entity are determined by the statement
of Owner's Equity. (F)
5. The rights of the owner of the entity are determined by the
True-False statement of financial position (F)

Questions 6. The historical cost principle dictates that companies record assets
at their cost. In later periods, however, the fair value of the asset
must be used if the fair value is higher than its cost. (F)
7. A business owner’s personal expenses must be separated from the
expenses of the business to comply with accounting’s economic
entity assumption. (T)
8. A business makes profits if total revenues are more than total
expenses. (T)
9. The company makes losses if total revenues are less than total
 1. Furniture is one of the assets. (T)
2. Accounts receivable are current assets. (T)
3. Accounts payable is one of the current liabilities. (T)
True-False 4. Assets - Liabilities = Net Assets (T)
Questions 5. Owners' Equity = Assets – Liabilities (T)
6. Liabilities = Assets - Owners' Equity (T)
7. Assets = Liabilities - Owners' Equity (F)
 1. A business organized as a separate legal entity under state law
having ownership divided into shares of stock is a

a.proprietorship.

b.partnership.

c.corporation.

Multiple d.sole proprietorship.

Choice Answer C

Questions 2. Which of the following correctly represents the basic accounting

equation?

a) Assets + liabilities = owner's equity.

b) Assets = owner's equity.

c) Cash = assets.

d) Assets – liabilities = owner's equity.

Answer D
 3. Which of these items is an expense?

a) Bank loan.

b) Owner’s equity.

c) Land.

d) Current period’s rent.

Multiple
Answer D
Choice 4. Which of the following would not be included on the balance sheet?
Questions a) Accounts receivable.

b) Accounts payable.

c) Sales Revenue.

d) Cash

Answer C
 Some of the assets, liabilities, and owner's equity are as follows:
Machines and equipment 10,000 pounds, land and buildings 80,000 pounds,
accounts receivable 30,000 pounds, inventory 40,000 pounds, long-term loans
20,000 pounds, accounts payable 25,000 pounds, expenses payable 10,000 pounds.
Considering the previous data, choose the correct answer for each of the following
questions:
1. Total Assets equal:

Multiple a)
b)
160,000 pounds.
140,000 pounds.
Choice c) 180000 pounds.

Questions d) None of the above

Answer A
2. Total liabilities equal:
A. 45,000 pounds.
B. 55,000 pounds.
C. 160,000 pounds.
D. None of the above.
Answer B
 3. Total fixed assets equal:
a. 80,000 pounds.
b. 70,000 pounds.
c. 90000 pounds.
d. None of the above.
Answer C
4. Total current assets are equal to:
Multiple A. 80,000 pounds.

Choice B.
C.
70,000 pounds.
90000 pounds.
Questions D. None of the above.
Answer B
5. Long-term liabilities are equal:
A. 40,000 pounds.
B. 20,000 pounds.
C. 30000 pounds.
D. None of the above.
Answer B
 6. Current liabilities are equal:

A. 50,000 pounds.

B. 40,000 pounds

C. 35000 pounds.

D. None of the above.

Answer C

7. net assets equal:

Multiple A. 15,000 pounds.

Choice B.

C.
30,000 pounds.

45000 pounds.

Questions D. None of the above.

Answer D

8. Owner's equity equals:

A. 10,000 pounds.

B. 20,000 pounds.

C. 40000 pounds.

D. None of the above.

Answer D
 1) One of the assets:
a. Machines
b. Accounts Payable
c. Loans
d. Income
Answer A
2) One of the liabilities:
Multiple a. Machines
b. Accounts Receivable
Choice c. Loans
d. Income
Questions Answer C
3) One of the owner’s equity:
a. Capital
b. Accounts Payable
c. Loans
d. Buildings
e. Answer A
 5) One of the revenues:
a. Machines
b. Accounts Payable
c. Loans
d. rent collected
Answer D
6) Equipment is one of the:
Multiple a. Assets
b. Liabilities
Choice c. owners equity
d. Expenses
Questions e. Revenues
Answer A
7) Long-term loans are:
a. Assets
b. Liabilities
c. owners equity
d. Expenses
e. Revenues
Answer B
 8) Salaries are:
a. Assets
b. Liabilities
c. owner's equity
d. Expenses
e. Revenues
Answer d
Multiple 9) Cash is:
a. An asset.
Choice b. A Liability.
c. An owners equity
Questions d. An Expense
e. A Revenue
Answer A
10) Financial accounting focuses on:
a. All transactions.
b. Financial transactions.
c. Non-financial transactions.
d. All the above.
Answer B
 11) Among the objectives of financial accounting are the following:
a. Determining the company's profit or loss.
b. Determining the assets and debts of the enterprise.
c. Determining the owner's equity of the entity.
d. All the above.
Answer D
12) The entities make profits if:
Multiple a. Revenues more than expenses.
b. Revenue equals expenses.
Choice c. Expenses more than revenues.
d. None of the above.
Questions Answer A
13) Accounting is:
a) Science and profession.
b) Science Only.
c) Profession only.
d) Function only.
Answer A
 14) Types of intangible assets:
A. Patent.
B. Goodwill (Reputation).
C. Trade Name.
D. Trademark (brand).
E. All the above.
Answer E
Multiple 15) The terms used in the accounting are:
a. Assets and Liabilities.
Choice b. Revenues and expenses.
Questions c. owner's equity.
d. all the above.
Answer D
16) Accounting provides useful information for:
a) Management of the entity only.
b) Employees of the entity.
c) Owners of the entity only.
d) All the above.
Answer D
 17) All of the following are assets of the enterprise except:
a) Lands.
b) Buildings.
c) Capital.
d) Accounts Receivable.
Answer C
18) All of the following are liabilities of the firm except:
Multiple a) Short term loans.
b) Notes payable.
Choice c) Machines and equipment.
d) Accounts payable.
Questions Answer C
19) Sales revenues of the Meram's entity during the month of
December 2022 are 100,000 pounds. Expenses represent 60% of
these sales. In light of this, the profit for this month equal:
a) 60,000 pounds.
b) 40,000 pounds.
c) 100,000 pounds.
d) None of the above.
Answer B
 20) Goody's stores' assets include fixed assets of 50,000 pounds, and current assets of
30,000 pounds. Goody's stores' liabilities include long-term liabilities of 30,000 pounds,
and short-term liabilities of 20,000 pounds. In light of this, the Owner's Equity equal:
a) 80,000 pounds.
b) 50,000 pounds.
c) 130,000 pounds.
d) 30,000 pounds.
Answer D
If you know that DR. Ashraf started his business at the beginning of 2022 with a capital

Multiple
of 50,000 pounds. At the end of the year, the project achieved a profit of 30,000 pounds.
If you know that the personal withdrawals amounted to 10,000 pounds.
Required:
Choice 21) What is the value of equity at the beginning of 2022:
a. 50,000 pounds.
Questions b. 30,000 pounds.
c. 10,000 pounds.
d. 90000 pounds.
e. 70,000 pounds.
Answer A
22) What is the value of equity at the end of 2021:
a) 50,000 pounds.
b) 30,000 pounds.
c) 10,000 pounds.
d) 90000 pounds.
e) 70,000 pounds
Answer A
 23) What is the value of equity at the end of 2022:
a) 50,000 pounds.
b) 30,000 pounds.
c) 10,000 pounds.
d) 90000 pounds.
e) 70,000 pounds.
Answer E
24) What is the value of equity at the beginning of 2023:
Multiple a. 50,000 pounds.
Choice b. 30,000 pounds.
c. 10,000 pounds.
Questions d. 90000 pounds.
e. 70,000 pounds.
Answer E
25) Short-term loans are:
a. Assets
b. liabilities
c. expenses
d. Revenues
Answer B
 26) wage is:
a. Asset.
b. Liability.
c. owner's equity.
d. Expense.
Answer D
27) Cost of goods sold is:
a. Liability.
b. owners' equity
c. Expense.
d. Revenue.

Multiple
Answer C
28) One of the assets:
a. Computers.

Choice b. Accounts Payable.

c. Loans.

Questions
d. Income.
Answer A
29) One of the liabilities:
a. Machines.
b. Accounts Receivable.
c. Accounts Payable.
d. Income.
Answer C
30) One of the owner’s equity:
a. Income.
b. Accounts Payable.
c. Loans.
d. Buildings.
Answer A
 The financial records of Rihan shop show the following items:
Accounts Payable 24,000
Accounts receivable 60.000
Land $360,000
Cash ?
Rihan's capital ?
Equipment 180,000
Buildings 250,000
Notes payable 280,000
Multiple 1. If Rihan’s capital is $600,000, cash is:
Choice a. $714,000
b. $304,000
Questions c. $54,000
d. $174,000
Answer C
2. If Rihan’s capital is $700,000, total asset of the shop are:
A) $1,004,000
B) $154,000
C) $1,334,000
D) $1,158
Answer A
 3. If cash is $104,000, Rihan capital is:
A) A negative number
B) $650,000
C) $1,258,000
D) $104,000.
Answer B
4. If cash is $34,000, the owner's equity is:
Multiple A) $884,000
Choice B) $1,646,000
c) $614,000
Questions D) $580,000
Answer D
5. If cash is $54,000, total assets are:
A) $600,000
B) $1,334,000
C)$904,000
D) $654,000
Answer C
 6. At the end of the first year of operations, Temraz company for imports
and exports has total assets of $270,000, and owner's equity of $180,000:
A) Temraz invested $180,000 at the beginning of activities.
B) This company is profitable.
C) Total liabilities are $450,000.
D) Total liabilities are $90,000
Answer D
7. Assets of Younis Company increased by $312,000, also its liabilities
Multiple increased by$270,000. Owner's equity:
Choice A) Decreased by $42,000
B) Decreased by $582,000
Questions C) Increased by $42,000
D) Increased by $582,000
Answer C
8. If a note is signed for $10,000 and cash of $32,000 is paid to purchase
some office equipment to be used in the company:
A) Total assets increased.
B) Total liabilities decreased.
C) Total assets decreased.
D) Owner's equity increased
Answer A
 9. At the end of last year Owner's equity was $348,000. During last year assets
increased by $140,000, and liabilities increased by $92,000. What was the owner's
equity at the beginning of last year:
A) $300,000
B) $396,000
C)$580,000
D) $116,000
Answer A

Multiple 10. If assets increased by $145,000. Liabilities decreased by $35,000. Owner's

equity at the end of the year was $395,000. What was owner's equity at the
Choice beginning of the year?
A) $285,000
Questions B) $215,000
C) $575,000
D) $505,000
Answer B
11. Net income can be described as:
A) Cash receipts - cash payments during the period.
B) Increase in owner's equity produced during the period from the business
activities.
C) Increases of total assets during the period.
D)Earned revenues during the period minus cash payments during the period.
Answer D
 12. If expenses exceed revenues during the period:
A) Assets increase than liabilities.
B) Owner's equity increases than assets.
C) Cash balance decreases.
D) The income statement shows net loss.
Answer D
13. Revenues can be described as:
A)Price of products and services provided to customers during the period.
Multiple B) Cash collected from the sale of goods during the period.
Choice C) Net increase in owner's equity during the period.
D) Last figure in the income statement.
Questions Answer A
14. Which of the following items can be considered revenues for the
period:
A) Providing legal services to a customer during the period for $4,000 but
not collected.
B) Collecting 2,400 from a customer in payment of his account.
C) Deposit $10,000 cash as additional capital.
D) Borrow $5,000 from the bank.
Answer A
 15. Which of the following statements is wrong?
A) All expenses reduce the owner’s equity.
B) All decreases in owner's equity are expenses.
C)Expenses are the cost of goods and services used to produce revenues.
D)All expenses increase assets.
Answer D
16. An entertainment firm holds a concert and all tickets are sold out. This
transaction:
Multiple A) Increases revenues, assets, and owner's equity.
Choice B) Increases cash and owner's equity.
C) Increases assets and reduces owner’s equity.
Questions D) Increases expenses and reduces owner's equity.
Answer A
17. The statement of owner’s equity shows:
A) Changes in cash during the period.
B) Revenues, expenses, and withdrawals by the owner during the period.
C) Assets purchased from profits of previous years.
D) Changes in owner's equity during the period.
Answer D
 Owner's Equity is calculated as follows:
➢ Owner's Equity = Assets – Liabilities
Or:
Owner's Equity = (Beginning capital + Increase in capital + profit) - (Reduction
(decrease) of capital + loss + withdrawals)
Compete for the missing information in each of the following:
1. Owner's equity beginning of the period $14,000
Net income of the period $6,500

Multiple Withdrawals $4,900

Owner's equity end of the period?
Choice 2. Owner's equity beginning of the period $22,000
Net income of the period?
Questions Withdrawals $8,500
Owner's equity end of the period $37,000
3. Owner's equity beginning of the period $12,000
Net income of the period $10,400
Withdrawals?
Owner's equity end of the period $19,800
4. Owner's equity beginning of the period $32,100
Net income of the period?
Withdrawals $11,000
Owner's equity end of the period $45,000
Additional investments by the owner during the period $20,000
Thank you