Account Specimen questions

Question 1

What is the MOST important element of
an internal control system?
(A) Publishing 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 in place

Answer 1

D

Question 2

Gablewoods Apartments Inc. received six
months’ rent in advance on 1 December 2022.
Under the accrual basis of accounting, the
income should be recognized?
(A) on 31 December 2022
(B) on 1 December 2022
(C) proportionately each month
(D) at the end of the six-month period

Answer 2

C

Question 3

Which of the following activities is NOT
an application of accrual accounting?
(A) Recording expenses when paid
(B) Recognizing revenues when earned
(C) Recognizing expenses when
incurred
(D) Adjusting the accounts at the end
of a period

Answer 3

D

Question 4

Financial accounting focuses on the specific
needs of decision-makers external to the
organization. Which of the following is
NOT an external user?
(A) Bank
(B) Stockholder
(C) Internal Revenue Service
(D) Vice president of marketing

Answer 4

C

Question 5

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

Answer 5

D

Question 6

The principle that underlies an accountant’s decision to make a provision for doubtful debts is
(A) double entry
(B) conservation
(C) revenue recognition
(D) money measurement

Answer 6

C

Question 7

Richardson Inc. sold 2 000 ordinary shares which were held as a temporary investment. The shares
were acquired six months before at a cost of $45 per share. Richardson Inc. sold the shares at $40
per share. The entry to record the sale is
$ $
(A) Temporary stock investment 80 000
Loss on sale of temporary investment 10 000
Cash 90 000
(B) Cash 90 000
Gain on sale of temporary investment 10 000
Temporary stock investment 90 000
(C) Cash 80 000
Temporary stock investment 80 000
(D) Cash 80 000
Loss on sale of temporary investment 10 000
Temporary stock investment 90 000

Answer 7

D

Question 8

Joylyn Inc. paid $9 000 for 1 500 common shares with a par value of $5.00 each from Jackie Ltd.
The journal entry to record this transaction in the books of Jackie Ltd is
$ $
(A) Investment in Jackie 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

Answer 8

B

Question 9

RXM Ltd invested $600 000 in marketable
securities in 2021. During 2022, the market
value of these securities fluctuated between
$300 000 and $600 000. The market value
at the end of 2022 was $650 000. RXM Ltd
should record its marketable securities at 31
December 2022 as
(A) $ 50 000
(B) $ 300 000
(C) $ 600 000
(D) $ 650 000

Answer 9

D

Question 10

ABC Corporation issued 1 000 shares of
$10 par value at $12 per share. Which of
the following credits were made in order
to record this transaction?
(A) Share capital $10 000 and share
premium $2 000
(B) Share capital $12 000 and cash
$2 000
(C) Share capital $10 000 and profit
and loss $2 000
(D) Share capital $10 000 and retained
earnings $2 000

Answer 10

A

Question 11

11. Which of the following tasks is a function
    of International Financial Reporting
    Standards?
    (A) Providing rules for conducting
    business activities
    (B) Providing guidelines indicating how
    to report economic events
    (C) Regulating the payment of income
    tax in Caribbean territories
    (D) Devising principles for conducting
    accounting research and practice

Answer 11

B

Question 12

12. 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

Answer 12

A

Question 13

13. A company received a $300 dividend
    payment on a short-term investment. Which
    of the following is true?
    (A) Dividend revenue is credited for
    $300.
    (B) Dividend revenue is debited for
    $300.
    (C) Short-term investment is debited
    for $300.
    (D) Short-term investment is credited
    for $300.

Answer 13

A

Question 14

14. On 1 January 2022, RosMarie Inc. has
    machinery on the books that originally
    cost $100 000. During 2022, the following
    expenditures were made:
    $
    Minor repairs 5 000
    Improvements 20 000
    Additions 9 000
    How much would be recorded in the
    maachinery account on 31 December 2022?
    (A) $105 000
    (B) $109 000
    (C) $120 000
    (D) $129 000

Answer 14

D