1.

The idea that a business will continue to operate for the indefinite future or until the
benefits of its non-current assets can be realized in the normal course of operations is
known as the
A. Objectivity principle
B. Business entity principle
C. Going concern principle
D. Revenue recognition principle

2. The MAIN duty of the external auditors, from, the point of view of the shareholders, is to
A. Express an opinion on the reliability of the financial statements
B. Plan and perform the audit using statistical techniques
C. Adhere to generally accepted auditing standards
D. Exercise accuracy in conducting the audit of financial statements

3. A corporation re-acquired 5 000 of its own shares at $4 per share. Which of the
following would be the journal entry to record this transaction?

A. Treasury stock Dr. $20 000

Cash Cr. $20 000
B. Share capital Dr. $20 000
Cash Cr. $20 000
C. Cash Dr. $20 000
Treasury stock Cr. $20 000
D. Treasury stock Dr. $20 000
Share capital Cr. $20 000

4. Generally accepted accounting principles are described as

A. Truths derived from the laws of nature
B. A set of rules recognized as a guide for financial reporting
C. The guidelines that professionals use to solve ethical dilemmas
D. Rules established by the department of overseas trade of a country

5. The historical cost principle states that

A. Assets should be recorded initially at cost and then adjusted as market value changes
B. The private activities of the owner of a business should not be incorporated into the
activities of the business
C. Transactions involving assets are recorded at acquisition cost
D. Only transactions that are capable of being expressed in monetary terms should be
included in the accounting records

6. Internal controls are used in a business to

A. Produce correct financial statements and deter employee dishonesty
B. Enhance the accuracy and reliability of its accounting records, and to prevent fraud
 C. Establish responsibility and conduct independent checks on employee performance
D. Safeguard the business’ assets and enhance the accuracy and reliability of accounting
records

7. One clerk is responsible for keeping inventory records and another for receiving and
issuing inventory items. This is an example of
A. Minimization of labour
B. Segregation of duties
C. Inventory valuation
D. Inventory allocation

8. ABC Corporation issued 3 000 ordinary shares of $20 par value at $24 per share. In
recording the transaction, credits are recorded as
A. Ordinary share capital $60 000 and net savings $12 000
B. Ordinary share capital $60 000 and retained earnings $12 000
C. Ordinary share capital $60 000 and share premium $12 000
D. Ordinary share capital $60 000 and profit and loss $12 000

9. A firm issued 35 000 no par ordinary shares in exchange for a building which had a fair
market value of $525 000. The entry to record this transaction is
A. Dr. Building $525 000
Cr. Ordinary share capital $525 000
B. Dr. Cash $525 000
Cr. Ordinary share capital $525 000
C. Dr. Ordinary share capital $525 000
Cr. Building $525 000
D. Dr. Ordinary share capital $525 000
Cr. Cash $525 000

10. Stephens Inc issues 3 000 ordinary shares of $10 par value for $45 000. How should this
be treated in the financial statements?
A. Cash should be debited for $15 000
B. Ordinary share capital should be credited for $45 000
C. Paid-in capital in excess of par (share premium) should be debited for $10 000
D. Paid-in capital in excess of par (share premium) should be credited for $10 000

11. The MAJOR effect of computerization in financial accounting is increased

A. Speed
B. Fraud
C. Security
D. Employment
12. Which of the following relationships CANNOT be derived from the fundamental
accounting equation?
A. Assets – Liabilities = Owners’ Equity
B. Owners’ Equity + Liabilities = Assets
C. Assets – Owners’ Equity = Liabilities
D. Liabilities + Assets = Owners’ Equity

13. What would be an advantage (benefit) of having all countries adopt and follow the same
accounting standards?
A. Comparability
B. Consistency
C. Absorbed preparation costs
D. Eliminating the need for external auditing

14. Having the same person responsible for the ordering, paying and receiving of goods has
the effect of
A. Improving organizational efficiency
B. Increasing the potential for errors and fraud
C. Providing a good example of segregation of duties
D. Providing a good example of how to safeguard the company’s assets

15. DBG Ltd acquired for cash the business of Singer Inc on 22 June 2018, at a price of
$14 500 000. The book value of the net assets at the time of the transaction was
$11 000 000. Independent appraisers valued Singer Inc’s net assets at a fair market value
of $13 000 000. What amount should DBG debit in the goodwill account?
A. $ 0
B. $ 200 000
C. $1 500 000
D. $3 500 000

16. A partner who assumes unlimited liability of the debts of the partnership business is
known as
A. A limited partner
B. A mutual partner
C. An active partner
D. A general partner

17. Which of the following reports is NOT a component of financial statements according to
IAS 1 (Sec. 3 of IFRS for SMEs)?
A. Financial ratios
B. Statement of financial position
C. Statement of changes in equity
D. Notes to the financial statements
18. The ability to raise funds from the Stock Exchange Market is a distinguishing feature of
which of the following type of business organization?
A. Statutory corporation
B. Public corporation
C. Private corporation
D. Partnership

19. Which of the following statements is NOT true regarding ordinary shares or preference
shares?
A. Ordinary shares are the most basic and common type of shares
B. All companies issue ordinary shares
C. With preference shares the amount of dividend is generally specified and increases
every year
D. With preference shares the holders have priority over ordinary shareholders in
dividend and assets distribution

20. Which of the following accounts would be entered in the liabilities section of the Balance
Sheet (Statement of Financial Position)?
A. Accounts Payable, Notes Payable and Loans Payable
B. Cash, Accounts Receivable and Inventory
C. Common Stock, Retained Earnings and Paid-in Capital
D. Retained Earnings, Common Stock and Long-Term Investment

21. Which of the following statements is TRUE regarding information that is provided by
financial reporting?
I. It increases the value of the company
II. It is useful for making investment and credit decisions
III. It identifies what is owned, what is owed and the ownership interest in the
company

A. I and II only
B. I and III only
C. II and III only
D. I, II and III

22. A single step income statement shows

A. Revenue and expenses
B. Revenue and cost of sales
C. Gross income and expenses
D. Revenue, cost of sales and expenses

23. The major disadvantage of traditional financial statements is their emphasis on

 A. Historical cost
B. Long-term growth
C. Short-term profitability
D. Relevance

24. Two-thirds of an insurance policy has expired. The policy was acquired at a cost of
$5 700. The adjusting entry to record the expired portion would involve a
A. Credit of $1 900 to prepaid insurance
B. Credit of $3 800 to prepaid insurance
C. Debit of $1 900 to insurance expense
D. Debit of $3 800 to insurance expense

25. A summary of the procedures (principles) for controlling accounts receivables includes
I. Segregation of duties
II. Establishment of responsibilities
III. Proper documentation

A. I and II only
B. I and III only
C. II and III only
D. I, II and III

26. The conceptual framework of accounting starts with a set of

A. Principles for guiding accountants
B. Assumptions about the accounting profession
C. Objectives of financial reporting
D. Conventions for recording financial information

27. An accounting firm provides $6 500 of accounting and tax services for a customer. The
customer pays $2 000 and agrees to pay the balance in two weeks. How should this
transaction be recorded?
Debit Credit
$ $
A. Cash 2 000
Service Revenue 2 000
B. Service Revenue 2 000
Cash 2 000
C. Cash 2 000
Service Revenue 4 500
Accounts Receivable 6 500
D. Cash 2 000
 Accounts Receivable 4 500
Service Revenue 6 500
28. Cash, accounts receivable and inventory are classified in the balance sheet as
A. Current assets
B. Intangible assets
C. Non-current assets
D. Owner’s equity

29. Regarding issued share capital in financial statements, a company is required to disclose
the
A. Par value
B. Market value
C. Names of the shareholders
D. Number of shares held by employees

30. In the preparation of financial statements, accountants in practice must ensure that
A. Only timely information on the reporting company is presented
B. The interest of management of the reporting company is preserved
C. True and fair information on the reporting firm is provided to decision makers
D. The interest of the shareholders of the reporting company is preserved

31. GI Apartments Inc received six months’ rent in advance on December 1, 2018. Under
the accrual basis of accounting the income should be recognized
A. On December 31, 2018
B. On December 1, 2018
C. Proportionately each month
D. At the end of the six-month period

32. Which is the MOST important element of an internal control system?

A. Publication of the internal controls
B. Motivating staff to increase output
C. Purchasing adequate insurance coverage
D. Performing a cost-benefit analysis before each internal control is put into place

33. Which of the following is NOT an application of accrual accounting?

A. Adjusting the accounts at the end of a period
B. Recognizing revenues when earned
C. Recognizing expenses when incurred
D. Recording expenses when paid

34. Financial accounting focuses on the specific needs of decision makers external to the
organization. Which of the following is NOT an external user?
A. Stockholder
 B. Internal Revenue Service
C. Vice President Marketing
D. Bank

35. Which of the following statements does NOT express a feature of a computerized
accounting system?
A. The recording of business transactions is more efficient
B. Principles different from those in manual accounting system are used
C. Accounting information and reports are accessed much faster
D. Arithmetic calculations are more accurate

36. The principle that underlies an accountant’s decision to make a provision for doubtful
debts is the principle of
A. Conservatism
B. Revenue recognition
C. Money measurement
D. Double entry

37. Joy Inc paid $9 000 for 1 500 common shares with a par value of $5.00 each from Haley
Ltd. The journal entry to record this transaction in the books of Haley Ltd is

Debit Credit
$ $
A. Investment in Haley Ltd 9 000
Cash 9 000
B. Cash 9 000
Share Capital 7 500
Share Premium 1 500
C. Share Capital 7 500
Share Premium 1 500
Cash 9 000
D. Share Capital 9 000
Cash 9 000
38. Which of the following tasks is a function of International Accounting Standards?
A. Regulating the payment of income tax in Caribbean territories
B. Providing guidelines indicating how to report economic events
C. Providing rules for conducting business activities
D. Devising principles for conducting accounting research and practice

39. Guyco issued 750 000 shares of $10 par value common stock in exchange for a building
valued at $800 000. The entry for this transaction includes a
A. Debit to the Building account for $800 000
B. Debit to the Building account for $750 000
 C. Credit to Common Stock for $800 000
D. Credit to the Building account for $50 000
40. On January 1, 2018, Rose Inc. has machinery on the books that originally cost $100 000.
During 2018, the following expenditures were made:
$
Minor repairs 5 000
Improvements 20 000
Additions 9 000

How much would be recorded in the machinery account on December 31, 2018?
A. $105 000
B. $109 000
C. $120 000
D. $129 000

41. The declaration of a 10% stock dividend on 100 000 outstanding shares with a par value
of $1 and a market value of $20 would include a debit to the Retained Earnings of
A. $ 0
B. $ 20 000
C. $200 000
D. $210 000

42. Which of the following is a feature of preferred shares?

I. Convertible
II. Participating
III. Callable

A. I only
B. I and II only
C. II and III only
D. I, II and III

43. The par value of a share is defined as

A. The minimum price for the stock when issued
B. The maximum amount for which a share of stock may be sold
C. An amount determined by the marketplace when shares of stock are sold
D. The exact amount for which an individual share of stock must be sold

44. Which of the following would NOT be considered an intangible asset?

A. Leasehold
B. Trademark
C. Franchise
D. Receivables
45. Which of the following is/are limitation(s) of the statement of financial position
I. Many items are omitted
II. Judgement may be used
III. Current values are not reflected

A. I only
B. III only
C. II and III only
D. I, II and III