01. Which of the following are differences between sole traders and limited liability companies?

1) A sole traders financial statements are private ; a companys financial statements are sent to shareholders and are publicly filed

2) Only companies have capital invested into the business

3) A sole trader is fully and personally liable for any losses that the company might make.

A. 2 and 3 only

B. 1,2 and 3

C. 1 and 3 only

D. 1 and 2 only

02. What is the effect on working capital of an increase in inventories of $500, a decrease in the bank balance of $600 and an increase in payables of $1,400?

A. $1500 decrease

B. $1300 decrease

C. $1300 increase

D. $1500 increase

03. Which items below could appear as separate items in statement of changes in equity required by IAS 1? 1)Transfer to retained earnings; 2)Loss on sale of investments; 3)Proceeds of an issue of equity shares; 4)Dividends proposed after the year-end

A. 1& 3

B. 1& 4

C. 2& 3

D. 2&4

04. Andrea started her business by transferring her car with $5000 into the business. What are the accounting entries required to record this?

A. Capital Account Dr

Car A/c Cr

B. Car A/c Dr

Capital A/c Cr

C. Drawings A/c Dr

Car A/C Cr

D. Car A/C Dr

Drawings A/c Cr

05. The purpose of a statement of financial position is to show

A- The assets of the business and the claims against those assets

B- A clear and definite estimate of what a business is really worth

C- The amount the business could be sold for in liquidation

D- The amount the business could be sold for as a going concern

06. Which of the following statements are TRUE of limited liability companies?

(1) The companys exposure to debts and liability is limited

(2) Financial statements must be produced

(3) A company continues to exist regardless of the identity of its owners

A 1 and 2 only

B 1 and 3 only

C 2 and 3 only

D 1, 2 and 3

07 . The financial statement that reports the revenues and expenses for a period of time such as a year or a month is the

A. Balance Sheet

B. Income Statement

C. Statement Of Cash Flows

08. Under the accrual basis of accounting, revenues are reported in the accounting period when the

A. Cash Is Received

B. Service Or Goods Have Been Delivered

09. Which of the following items would not fall under the definition of an asset?*

A. Land

B. Machinery

C. Cash

D. Owners equity

E. Debtors

10. Which of the following statements are false?*

A. A liability is a debt for your business.

B. Debtors are a debt for your business.

C. The accounting equation shows how much of your assets belong to the owner, and how much belong to people outside the business.

D. If you cannot work out a value for an item that will bring you future benefits, then you cannot keep this as an asset in your records.

E. None of the above.