Ch2 Accounting Information System

Question 1

Where are business transactions first recorded in?

Answer 1

Journals

Question 2

What is the accounting concept that states that we have to differentiate between business and personal activities?

Answer 2

Accounting Entity Concept

Question 3

Cash purchases are recorded in the ___________.

Answer 3

Cash Book

Question 4

Which of the following shows the correct accounting cycle?

Answer 4

Source documents → Journals → Ledgers → Trial Balance → Income Statement → Balance Sheet

Question 5

The accounting information system process begins with the _________.

Answer 5

Source Documents

Question 6

Which accounting concept is violated when a transaction recorded based on the accountant’s estimate and is not supported by a source document?

Answer 6

Objectivity Concept

Question 7

What is the last day of the accounting year if Xin Yi commenced business on 1 August 20X3?

Answer 7

31 July 20X4

Question 8

At which phase of the accounting cycle are financial reports prepared?

Answer 8

The reporting phase

Question 9

The monetary concept states that ____________.

Answer 9

Only activities that have monetary values are recorded

Question 10

An example of a personal transaction is ________.

Answer 10

Withdrawals of goods by owner

Question 11

The principle of prudence states that the business should _____________.

Answer 11

Report all anticipated losses even before they occur.

Question 12

Which accounting concept states that if the owner takes goods for his personal use, this must be recorded separately in the books of the business?

Answer 12

Accounting entity

Question 13

Which source document was not prepared by the seller?

Answer 13

Remittance Advice

Question 14

Non-current assets are valued at historical cost rather than at market price because of _____________.

Answer 14

Historical Cost Concept

Question 15

In an accounting information system, the process performed right after posting entries into the Ledgers is the ____________.

Answer 15

Trial Balance

Question 16

The accrual concept recognises ___________.

Answer 16

Income as soon as a sale is made and expenses as incurred

Question 17

When are the adjustments in the accounting cycle performed?

Answer 17

At the end of each financial period

Question 18

According to the accounting period concept, a business’ financial year end must occur on __________.

Answer 18

Any date is acceptable

Question 19

Which of the following assumptions facilitates the comparison of the business performance from one period to another?

Answer 19

Consistency

Question 20

The accountants have the tendency to understate profit and assets. The accounting concept which best describes this statement is __________.

Answer 20

Prudence

Question 21

On 1 January 20X5, Amy brought a computer that costs $1,500. On 31 December 20X5, the computer is now valued at $1,000. Based on historical cost concept, the value of the computer that Amy should record in her accounts is ________.

Answer 21

$1,500

Question 22

A tract of land purchased ten years ago for $20 000 was recorded at that price, even though it was subsequently valued at a higher price. Which accounting concept is being adhered to?

Answer 22

Historical Cost

Question 23

Mr Williams, a sole proprietor, paid his house rent from the business’ cash at bank account. This transaction was recorded in the Rent Expense Account. State the accounting principle that was violated.

Answer 23

Accounting entity

Question 24

Based on the going concern concept, what will occur if there is evidence indicating that the business may close down?

Answer 24

Assets are recorded at the value that they can be sold for