Download accounting principles and more Cheat Sheet Economics in PDF only on Docsity!
CHAPTER 1: OVERVIEW OF ACCOUNTING
MULTIPLE-CHOICE QUESTIONS
Question 1.1 Accounting in an entity is classified into: a. Financial accounting b. Internal control c. Management accounting d. All are correct e. A and C are correct Question 1.2 The primary objective of financial accounting is: a. To serve the decision-making needs of internal users. b. To provide financial statements to help external users analyze an organization's activities. c. To monitor and control company activities. d. To provide information on both the costs and benefits of looking after products and services. e. To know what, when, and how much to produce. Question 1.3 Internal users of accounting information include: a. Shareholders. b. Managers. c. Lenders. d. Suppliers. e. Customers. Question 1.4 External users of accounting information include: a. Shareholders. b. Customers. c. Creditors. d. Government regulators. e. All of the above. Question 1.5 Career opportunities in accounting include:
a. Auditing. b. Management consulting. c. Tax accounting. d. Cost accounting. e. All of the above. Question 1.6 Toward a business, Social responsibility: a. Is a concern for the impact of our actions on society as a whole. b. Is a code that helps in dealing with confidential information. c. Is required by the government. d. Requires that all businesses conduct social audits. e. All of the above. Question 1.7 The accounting guideline that requires financial statement information to be supported by independent, unbiased evidence other than someone's belief or opinion is the: a. Business entity assumption. b. Monetary unit assumption. c. Going-concern assumption. d. Cost principle. e. Objectivity requirement. Question 1.8 Businesses can take the following form(s): a. Sole proprietorship. b. Common stock. c. Partnership. d. A and C only. e. All of the above. Question 1.9 The accounting principle/assumption/requirement that requires every business to be accounted for separately and distinctly from its owner or owners is known as the: a. Objectivity requirement.
b. Means that information can be based on what the preparer thinks is true. c. Means that financial statements should contain information that is optimistic. d. Means that a business may not reorganize revenue until cash is received. e. All of the above. Question 1.14 The Hai Au Experience Company acquired a building for 500, million VND. Hai Au Experience had an appraisal done, and found that the building was easily worth 575,000 million VND. The seller had paid 300,000 million VND for the building 6 years ago. Which accounting principle/assumption/requirement would require Hai Au Experience to record the building on its records at 500,000 million VND? a. Monetary unit assumption. b. Going-concern assumption. c. Cost principle. d. Business entity assumption. e. Matching principle. Question 1.15 Mai Nguyen is the owner of Nguyen Accounting Services. Which accounting principle/assumption/requirement requires Mai to keep her personal financial information separate from the financial information of Nguyen Accounting Services? a. Monetary unit assumption b. Going-concern assumption c. Cost principle d. Business entity assumption e. None of these. Since Mai is a sole proprietor, she is not required to separate her personal financial information from the financial information of Nguyen Accounting Services. Question 1.16 If equity is 300,000 and liabilities are 192,000, then assets equal (currency unit: million VND): a. 108,000. b. 192,000.
c. 300,000. d. 492,000. e. 792,000. EXERCISES E1. The following are users of financial statements. Customers. Financial regulators. Tax authorities. Store manager. Labor unions.
Suppliers. Marketing manager. Vice president of finance. Production supervisor.
a. Identify the users as being either external users or internal users. b. The following questions could be asked by an internal user or an external user.
- Can we afford to give our employees a pay raise?
- Did the company earn a satisfactory income?
- Do we need to borrow in the near future?
- How does the company’s profitability compare to other companies?
- What does it cost us to manufacture each unit produced?
- Which product should we emphasize?
- Will the company be able to pay its short-term debts?
- Identify each of the questions as being more likely asked by an internal user or an external user.
E1.2 Select the events that are recorded in the accounting books:
- Company X purchases raw materials on account.
- Company X sells goods on credit.
- CEOs at Company X is late for work.
- Company X estimates income tax expenses.
- Expenses incurr at Company X.
Requirement: Classify Assets, Liabilities, and Equity and calculate the total for each
Items Amounts Items Amounts
- Raw materials 20.000 12. Construction in progress 40.
- Merchandise goods 200.000 13. Other receivables 10.
- Supplies 10.000 14. Trade payables 60.
- Investment and development fund 20.000 15. Cash in banks 40.
- Capital expenditure fund 60.000 16. Trading securities 20.
- Advances 8.000 17. Borrowings and finance lease liabilities
- Trade receivables 32.000 18. Finished goods 180.
- Tangible assets 600.000 19. Payables to employees 10.
- Retained earnings 30.000 20. Work in progress 100.
- Owners’ capital 940.000 21. Taxes payables 20.
- Cash on hand 60.000 22. Mortgage, collaterals and deposits
Requirement:
- Classify the Company's Assets, Liabilities and Equity.
- Determine the total assets of the Company.
E1. Chieu Tim Company Limited has the following Assets, Liabilities and Equity as of 31/12/N (amounts in thousands) NO. Items Amounts 1 Cash on hand 600. 2 Trade payables 220. 3 Investment and development fund 460. 4 Retained earnings 1.270. 5 Cash in banks 1.950. 6 Trading securities 465.
CHAPTER 2 FINANCIAL STATEMENTS
MULTIPLE-CHOICE QUESTIONS
Question 2.1 The Statement of financial position provides which of the following information about a business: a. Assets, liabilities and equity c. Business strategy b. Revenues, expenses d. All a, b, c are correct Question 2.2 The Statement of profit and loss provides which of the following information about a business? a. Assets, liabilities and equity c. Business strategy b. Revenues, expenses d. All a, b, c are correct Question 2.3 Business sells finished goods for cash. The product has a cost of goods sold 100 and a selling price of 90 (not considering the impact of VAT). How does this transaction affect accounts on the Statement of financial position? a. 1 asset increases, 1 asset decreases b. 1 asset increases; 1 asset decreases; 1 equity increases c. 1 asset increases; 1 asset decreases; 1 equity decreases d. 1 asset decreases; 1 equity increases; 1 equity decreases Question 2.4 Business sells finished goods for cash. The product has a cost of goods sold 100 and a selling price of 90 (not considering the impact of VAT). How does this transaction affect accounts on the Statement of profit and loss? a. Revenue increases, expense increases b. Revenue increases, expense decreases c. Revenue increases, expense increases, profit decreases d. Revenue increases, expense increases, profit increases Question 2.5 Financial statements provide which of the following information? a. Assets, liabilities and equity c. Cash inflows and cash outflows b. Revenues, expenses d. All are correct
Question 2.6 Information about profit arising during the period is provided by which of the following financial statements: a. Statement of financial position c. Statement of profit and loss b. Statement of cash flows d. a and c are correct Question 2.7 Information about retained earnings at the end of the period is provided by which of the following financial statements: a. Statement of financial position c. Statement of profit and loss b. Statement of cash flows d. a and c Question 2.8 The accounting equation represents the balance of the Statement of profit and loss : a. Profit = Revenues – Expenses c. Neither a nor b b. Assets = Liabilities + Equity d. Both a and b Question 2.9 Which measures is used when preparing the Statement of financial position: a. Monetary measure c. Physical measure b. Time measure d. Both a, b and c Question 2.10 When presenting the item "Accumulated depreciation" on the Statement of financial position, which of the following statement is incorrect: a. Presented in the assets section c. Presented in the L&E section b. Presented in negative numbers d. Both a and b Question 2.11 The item"Retained earnings" on the Statement of profit and loss is always equal to the item "Retained earnings" on the Statement of financial position: a. True b. False Question 2.12 The enterprise purchases raw materials, paid to the supplier in half. This transaction affects the Statement of financial position as follows: a. Assets increase, assets decrease b. Assets increase, liabilities increase c. Assets increase, assets decrease, and liabilities increase
8 Owner's capital X? 9 Finished goods 50. 10 Trade Receivables (date of debt arising: 15/3/N1, paymentterm: 18 months) 75. 11 Inventory 80. 12 Trade Payables (date of debt arising: 30/5/N1, paymentterm: 18 months) 30. 13 Capital expenditure fund 250. 14 Bonus fund 35. 15 Supplies 25. 16 Retained earnings 80. 17 Taxes payable 15. 18 Other payables (paid within 6 months from 31/12/N1) 25. 19 Raw materials 110. 20 Trade payables (date of debt arising: 30/5/N1, paymentterm: 24 months) 50. 21 Prepaid expenses (36-month allocation period) 130. 22 3-year term bank borrowings (borrowings date: 1/1/N1,principal payment periodically at the end of each year) 1.000.
23 Trade Receivables (date of debt arising: 10/11/N1, payment term: 15 months)
Requirements :
- Classify these accounts into assets, liabilities and equity.
- Calculate owner's capital.
- Prepare the Statement of financial position of the company at the above time.
E2.
On 1/3/N, Mr. Nam plans to establish a commercial enterprise with the following data: (Unit: 1.000 VND).
- Purchase goods 500.000 from supplier X, Nam must pay 50% immediately, the remaining balance is owed to the supplier within 12 months.
- To ensure a long-term supply of goods, Nam must make a long-term deposit of 200,000 at the request of the supplier.
- Purchase land use rights and a house for office headquarters from B Real Estate Company with a purchase price of 6.000.000 (of which land use rights are worth 4,000,000). Nam pays 50% immediately, the rest is paid over 5 years, the payment deadline is the end of each year.
- Purchase machinery and office equipment on credit with the purchase price of 240.000, payment-term in 24 months, payment due at the end of each quarter.
- The amount of cash needed to spend on the remaining initial activities of the business is 900,000. Requirements :
- Calculate the initial equity that Nam needs to set up the Company with the above information.
- Prepare the Company's Statement of financial position as of 1/3/N.
E2. An initial business is established with the following data: (Unit: 1.000 VND).
- The parent company provided the subsidiary company (the entity) with cash capital of 5.000.000. There is 4/5 of this amount transferred to the entity 's bank account, the remaining amount was put into the cash fund of the entity.
- The parent company provides the entity with an amount of inventory 800. and an amount of tangible assets 2.000.000. Requirements:
- List down all assets, liabilities and equity of the entity.
5 Trade payables 10. 6 Tangible assets 60. 7 Accummulated depreciation X 8 Short-term borrowings 15. 9 Merchandise goods 25. 10 Owner’s capital 175. 11 Trade receivables (short-term) 15. 12 Advances 5. 13 Deposits received (long-term) 12. 14 Supplies 30. 15 Taxes payable 23.
Requirements:
- Calculate X, prepare the Statement of financial position as of 01/12/N.
- Prepare the Statement of financial position as of 31/12/N after these business transactions arise: a. Purchase goods on credit (payment term is 3 months): 20.000. b. The owners invest a tangible asset 30.000 into the business. c. Pay balance due to supplier by bank transfer: 20.000. d. Pay taxes to the State by bank deposit: 15.000. e. Distribute profit to supplement owner’s capital: 5.000. f. Receive payment from customer by bank deposit: 10.000. g. Pay cash for advances for employees on business trips 2.000. h. Pay short-term loans by bank deposits: 10.000. i. Deposit cash to bank: 15.000.
E2.
The information of revenues and expenses occurred in year 20xx at XYZ company as follows (Unit: 1.000 VND):
- Sales: 400.000.
- Sales allowances: 5.000.
- Sales Returns: 4.000.
- Cost of goods sold: 150.000.
- Selling expenses: 25.000, General & administrative expenses: 22.000.
- Financial revenues: 8.000, other income: 2.000.
- Financial expenses: 12.000, other expenses: 3.000.
- Corporate income tax rate: 20%. Requirements : Prepare the Statement of profit and loss of XYZ company in year 20xx (follow the below table). XYZ company STATEMENT OF PROFIT AND LOSS Year …… Account Code Amount
- Sales 01 2. Sales deductions 02
- Net sales (10 = 01 – 02 ) 10
- Cost of goods sold 11
- Gross profit (20 = 10 – 11 ) 20
- Financial revenues 21
- Financial expenses Include: Interest expense
22 23
- Selling expenses 24
- General & administrative expenses 25
- Net profit from operating activities [30 = 20 + (21 - 22) – (24+25) ]
30
CHAPTER 3: ACCOUNTS AND DOUBLE ENTRIES
MULTIPLE CHOICES QUESTIONS
Question 3.1 An account used to record the owner's investments in the business is called a(n): a. Asset account. b. Equity account. c. Expense account d. Liability account. Question 3.2 A record of the increases and decreases in a specific asset, liability, equity, revenue, or expense is a(n): a. Journal. b. Posting. c. Trial balance. d. Account. Question 3.3 Which of the following statements is correct? a. When a future expense is paid in advance, the payment is normally recorded in a liability account called Prepaid Expense. b. Promises of future payment are called accounts receivable. c. Increases and decreases in cash are always recorded in the equity account. d. An account called Tangible asset is commonly used to record increases and decreases in both the Tangible and Intangible asset owned by a business. Question 3.4 A ledger is: a. A record containing increases and decreases in a specific asset, liability, equity, revenue, or expense item. b. A collection of documents that describe transactions and events entering the accounting process. c. A list of all accounts with their debit balances at a point in time. d. A record containing all accounts and their balances used by a company. Question 3.5 A debit is: a. An increase in an account. b. The right-hand side of a T-account. c. A decrease in an account. d. The left-hand side of a T-account. Question 3.6 The right side of a T-account is a(n):
a. Debit. b. Increase. c. Credit. d. Decrease. Question 3.7 Which of the following statements is incorrect****? a. The normal balance of asset is a debit. b. The normal balance of equity is a credit. c. The normal balance of revenue is a credit. d. The normal balance of an expense account is a credit. Question 3.8 A simple account form widely used in accounting to illustrate how debits and credits work is called a: a. Withdrawals account. b. Capital account. c. Drawing account. d. T-account. Question 3.9 Which of the following statements is correct? a. The left side of a T-account is the credit side. b. Debits decrease asset and expense accounts, and increase liability, equity, and revenue accounts. c. The left side of a T-account is the debit side. d. Credits increase asset and expense accounts, and decrease liability, equity, and revenue accounts. Question 3.10 An account balance is: a. The total of the credit side of the account. b. The total of the debit side of the account. c. The difference between the total debits and total credits for an account including the opening balance. d. Assets = liabilities + equity. Question 3.11 A debit is used to record: a. A decrease in an asset account. b. A decrease in an expense account. c. An increase in a revenue account. d. An increase in an asset account. Question 3.12 A credit is: a. Used to increase asset and expense accounts, and decrease liability, equity, and
