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Accounting - Test 3


1. Which of the following is listed in the balance sheet as an asset?
A. bank balance overdrawn
B. rates paid in advance
C. rent received in advance
D. wages due but unpaid


2. A food store's net profit for a year was calculated at $5k. Later it was found that closing inventory of $100 had been overlooked, and rent receivable of $150 was owing. What is the correct net profit?
A. $4,750
B. $4,950
C. $5,050
D. $5,250


3. On which basis should inventory be valued?
A. cost price
B. higher of cost or net realisable value
C. lower of cost or net realisable value
D. net realisable value


4. What does current assets less current liabilities equal?
A. capital employed
B. liquid assets
C. net assets
D. working capital


5. A business decides to record inventories of stationery as an asset only if they are over $100. Which accounting concept is being applied?
A. conservatism
B. dual aspect
C. materiality
D. money measurement


6. A bookkeeper mistakenly treats a revenue expenditure item as capital expenditure. What is the effect of this error?
A. gross profit is overstated
B. net profit is understated
C. total assets are overstated
D. total assets are understated


7. A business depreciates its non-current assets using the straight-line method. Assuming there is no scrap value, on which amount is the annual depreciation charge calculated?
A. book value
B. cost
C. market value
D. replacement cost


8. A trader buys goods for $20k and then sells three-quarters of them for $32k. What is the gross profit?
A. $12k
B. $15k
C. $17k
D. $20k


9. What does a credit balance on a partner's current account represent to a business?
A. current asset
B. current liability
C. non-current liability
D. part of the capital


10. What is a limited company's issued capital?
A. its loan capital
B. its paid-up share capital
C. the capital that the company is allowed to raise
D. the number of shares issued







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