Accounting (4AC1)

Test 1
Time allowed: 1.15 hour
1. Multiple choice questions. [10 marks]
(a) Which statement is correct?
A Accounting involves measuring profit and losses
B Accounting is the recording of financial transaction
C Book-keeping involves communicating financial data
D Book-keeping requires the use of ratio analysis
(b) The balances remaining on the books of a business after the preparation of the income
statement included the following.
$

Loan from XY Finance 10000

Other payables 620

Other receivables 240

Trade receivables 3300

Motor vehicles 8000

Trade payables 4650

What was the total of the liabilities?

A $13920 B $14890 C $15270 D $17270

(c) Which entries did Sally makes to record the following transaction?
Rashid, a credit customer, returned damaged goods
(d) Which increases owner’s capital?
A Bank loan extended from five to ten years
B Purchase of inventory on credit
C Purchase of machinery by cheque
D Transfer of vehicle to business from private use
(e) Carl, a trader, took goods from the business for his own use. These goods had cost $100.
How would this be recorded in Carl’s accounts in the books of the business?
A debit Carl’s capital account $100
B credit Carl’s capital account $100
C debit Carl’s drawings account $100
D credit Carl’s drawings account $100
(f) William paid $500 in cash to Sonia for rent.
How did Sonia record this?

(g) What may appear on the credit side of a trial balance?

A Carriage outwards B Motor vehicles
C Purchase returns D Insurance
(h) Which of the following has a debit balance?
A Revenue B Commission received
C Drawings D Return outwards
(i) A business maintains a petty cash book with an imprest of $100 , which is restored on the
first day of each month.
On 31 January, there was $23.40 in the petty cash box and voucher totalling $76.60.
How much did the petty cashier receive from the chief cashier on 1 February?
A $23.40 B $76.60 C $100 D $53.20
(j) Identify when a customer would receive a trade discount.
A bulk purchases B payment made by cash
C payment made within agreed time D regular purchases
2. Record the debit and credit in the appropriate account for each of the following transactions.
[10 marks]
(First one is answered as example) Debit Credit
(a) Introduced capital into the business bank account. Bank Capital
(b) Purchased goods for resale by cheque.
(c) Purchased equipment on credit from Hammer Ltd.
(d) Paid for a one-year insurance in cash.
(e) Paid the monthly rent in cash.
(f) Sales of goods on credit to Zeema.
(g) Paid for the equipment purchased in transaction no (c).
(h) Zeema returned goods due to wrong color.
(i) Owner took goods for personal use.
(j) Paid wages to employees in cash.
(k) Received cash from Zeema for the amount of owing.

3. The following account balances are taken from the records of Fox Creek Service Limited at 31
October 2015 after its first year of operation:
Trade payable $9000 Insurance expenses $ 2500
Trade receivable 7500 Revenue 19000
Advertising expense 3200 Supplies expense 2800
Bank Loan 5000 Telephone expense 1250
Cash 4000 Truck car 11000
Capital 7000 Operation expense 2250
Commission expense 4500 Wages expense 2500
Bank overdraft 3500 Other receivables 2000
Required:
(a) Prepare a Trial balance at 31 October 2015. [10 marks]
4. Amara maintains a petty cash book using the imprest system. The imprest amount of $200 is
restored on the first day of each month. On 1 January 2020 Amara had a balance of $65 in her
petty cash.
On 1 January 2020, Amara owed $85 to Razvan, a credit supplier.
All payments of less than $100 are made from petty cash.
Amara provided the following information for January 2020.
January 1 The petty cash imprest was restored from the business bank account.
3 Purchased stationery for cash, $24
7 Paid travelling expenses, $49
14 Paid Razvan the amount outstanding on his account
22 Paid taxi fare, $18
29 Paid postage, $11
REQUIRED
Prepare Amara’s petty cash book with the analysis column: travel, postage and
sstationery, and ledger. Balance the petty cash book and bring down the balance on 1 February
2020. [10 marks]