TUNKU PUTERI INTAN SAFINAZ SCHOOL OF ACCOUNTANCY

SEMESTER A192
BKAN1013 BASIC ACCOUNTING
EXERCISE 2

1. The accounting profession can be divided into three major categories; specifically, the
practice of public accounting, private accounting, and governmental accounting. A
somewhat unique and important service of public accountants is:
A. Financial accounting.
B. Auditing. 
C. Managerial accounting.
D. Cost accounting.

2. Which of the following transactions would have no impact on stockholders’ equity?

A. Dividends to stockholders.
B. Purchase of land from the proceeds of a bank loan. 
C. Net loss.
D. Investments of cash by stockholders.

3. Accounting concepts must be defined clearly and well understood by both who prepare
financial statements and use the information therein for decision making because of the
following reasons:
i. The information in financial statements then become more meaningful
ii. It would assist accountants to account for unusual transactions
iii. It would assist Standard Makers to be consistent in their pronouncements
iv. It would improve comparability of financial statements

Which of the above statements are CORRECT?

A. i & ii
B. i, ii & iii
C. ii, iii, & iv
D. All four

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4. In times of rising prices accounting on the basis of the historical cost concept would tend
to:
A. Inflate profit and inflate assets
B. Understate profit and inflate assets
C. Inflate profits and understate assets
D. Understate profit and understate assets

5. In the financial statements issued by large companies like Imperial Chemical Industries
(ICI) the amounts stated are rounded off to the nearest million pounds. The reason for
this is:
A. To keep details secret from rival companies
B. To show how big their company is
C. The materiality concept
D. Because this is currently fashionable

6. The expenses relating to the proprietor and his household should be treated as drawings
rather than as business expenses on the basis of which of the following accounting
concepts:
A. Conservatism concept
B. Separate entity concept
C. Going-concern concept
D. Matching concept

7. Which of the following statements is INCORRECT in relation to financial statements:

A. It should convey information in a consistent and understandable way
B. The information included in it should be relevant and reliable
C. An amount/item may not be reported separately unless it is material for decision
making
D. When identifying information for inclusion in it subjectivity is not permitted

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8. Which of these is NOT included as a separate item in the basic accounting equation?
A. Assets
B. Revenues
C. Liabilities
D. Owner’s equity

9. The accrual basis of accounting records revenues when they are:

A. Collected
B. Earned
C. Contracted
D. Readily available for use

10. What is the main purpose of financial accounting?

A. Organise financial information
B. Provide useful, financial information to outsiders
C. Keep track of company expenses
D. Minimise company taxes

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PART B: ACCOUNTING EQUATION

With referring to the basic accounting equation: Assets = Liabilities + Owner’s Equity,
determine the effect of the following transactions to the equation.

April 1 The following assets were transferred to be used for the business, by the owner:
Cash RM250,000
Furniture RM 70,000
Equipment RM 40,000
7 Purchased supplies for a month, RM200, cash.
8 Recorded cash collected from services revenue during April amounted,
RM12,500.
10 Purchased office equipment on account, RM2,400.
13 Provided services to a customer RM2,000, on account.
19 Received cash from customers on account, RM1,200.
25 Paid creditor for equipment purchased on April 10, RM1,100.
29 Withdrew cash for personal use, RM600.
30 Rented a shop and paid rent for April RM500.

END OF QUESTIONS