Question 1.

Which one of the following is true?

Fixed assets are bought with the intention of resale

The term fixed asset cannot be applied to items which can be moved
Fixed assets are normally used in the business on a long-term basis
Fixed assets tend to change constantly in amount and composition

End of Question 1

Question 2.
A piece of machinery held for continued use in the business would usually be stated
in the balance sheet at:

its net book value (historical cost less depreciation)

its current value to the business
a realistic second-hand or scrap value
its current replacement cost

End of Question 2

Question 3.
Drawings by a sole trader are:

A liability
Items of office decoration
An appropriation of profit
An expense

End of Question 3

Question 4.
A business has net assets at the beginning of 2010 of 101,700. The profit earned
by the business during 2010 was 72,500. The owner withdrew goods for his own
private use which had cost 2,500. What were the net assets at the end of 2010?

174,200
171,700
176,700
99,200

End of Question 4

Question 5.
For accounting purposes an asset is essentially a resource held by the business
which has certain characteristics. Which of the following is not a required
characteristic of an asset?

A probable future benefit exists

The benefit must arise from some past transaction or event
It must have physical substance and be capable of being touched
The business has an exclusive right to control the benefit

End of Question 5

Question 6.
On 1 January 2011 the books of Travelite show accrued rent payable of 250. During
the year it pays rent bills amounting to 1,275 including a bill for 375 in
respect of the quarter ending 31 January 2012. What is the charge in the profit and
loss for rent payable for the year ending 31 December 2011?

900
1,150
1,400
1,650

End of Question 6

Question 7.
A business changes from depreciating its vehicles at 25% on a straight line basis
to 10%. What will be the effect of this change on profit?

Not able to quantify

Decrease profits
No effect
Increase profits

End of Question 7

Question 8.
A business buys 1,000 of stock on credit. What is the dual effect of this
transaction?

Increase debtors and increase stocks

Decrease creditors and increase stocks
Increase creditors and increase stocks
Decrease cash and increase stocks

End of Question 8
 Question 9.
An electrical retail company is due to report lower pre-tax profits than the
previous year. Management fear shareholder dissatisfaction. Which of the following
measures before the year end could improve the draft profit figure?

Postponement of an investment in new equipment

A reduction in the proposed dividend for the year
A reduction in the provision for doubtful debts
Delaying payment to creditors

End of Question 9

Question 10.
A firm bought a new vehicle for 10,000. It is expected to be used for 5 years and
then sold for 2,000. What is the annual amount of deprecation if the straight line
method is used?

2,000
1,600
2,400
2,334

End of Question 10

Question 11.
Which one of the following would be a fixed asset for a car dealership?

Office equipment
Motor vehicles for sale on the forecourt
Debtors
Cash

End of Question 11

Question 12.
An electricity accrual of 400 was ignored completely when preparing a trader's
profit and loss account. As a result:

Profit was overstated by 400 and current assets overstated by 400

Profit was understated by 400
Profit was overstated by 400 and current liabilities understated by 400
Profit was overstated by 400 and current liabilities overstated by 400

End of Question 12
 Question 13.
Which one of the following types of business face a particularly difficult problem
when determining the point of revenue recognition and will often recognise revenue
before all of the work necessary to generate the revenue is complete?

A food retailer selling goods for cash

A computer hardware store offering interest free credit
A hotel operator that requires payment on departure
A construction company engaged in contracts lasting more than one year

End of Question 13

Answer choices in this exercise appear in a different order each time the page is
loaded.

Pearson Education Copyright 1995-2010 Pearson Education. All rights

reserved.
Legal and Privacy Notice

Return to the Top of this Page