Answer all 20 questions, then see your score at the end.
1. What does the matching concept aim to achieve?
A. Record only transactions paid in cash
B. Make assets equal expenses
C. Recognize expenses in the periods in which related revenues are recognized, where applicable
D. Match every cash receipt with a bank statement
2. What is an error of principle?
A. Recording a transaction in the wrong class of account
B. Entering the wrong amount on both sides
C. Reversing two digits in an amount
D. Omitting a transaction entirely
3. Who is primarily responsible for preparing financial statements?
A. Bank
B. External auditor
C. Tax authority
D. Management
4. If total assets are $120,000 and total liabilities are $45,000, what is equity?
A. $165,000
B. $120,000
C. $45,000
D. $75,000
5. Why obtain supplier statements during accounts payable reconciliation?
A. To prepare the sales budget
B. To calculate depreciation
C. To verify employee attendance
D. To compare supplier records with the entity's payable ledger and identify differences
6. What is revenue under IFRS 15 generally recognized when?
A. When a budget is approved
B. Only when a customer places an order
C. Only when cash is deposited, regardless of performance
D. When or as a performance obligation is satisfied by transferring control of promised goods or services
7. When is a provision generally recognized?
A. Whenever future profits are expected
B. Whenever management wants to reduce profit
C. When there is a present obligation, a probable outflow, and a reliable estimate
D. Only after cash is paid
8. What is accrued revenue?
A. Cash received before earning revenue
B. Revenue earned but not yet received or recorded
C. A reduction in sales
D. An expense incurred but unpaid
9. What does a purchases ledger usually contain?
A. Individual customer accounts
B. Individual supplier accounts
C. Only equity accounts
D. Only cash transactions
10. What is auditor independence?
A. Freedom from relationships or influences that compromise objective judgment
B. Being employed by the client as its bookkeeper
C. Being responsible for the client's financial statements
D. Having authority to set client prices
11. What is a prepaid expense?
A. An amount paid in advance for a future benefit
B. A liability due immediately
C. An expense incurred but not paid
D. Revenue received but not earned
12. In double-entry bookkeeping, what must be true for every complete journal entry?
A. Total debits equal total credits
B. Total expenses equal total liabilities
C. Every account must have a debit balance
D. Total assets equal total revenue
13. What is the internal rate of return (IRR)?
A. The rate of inventory turnover
B. The interest rate charged on every trade payable
C. The annual income tax rate
D. The discount rate at which a project's NPV equals zero
14. What is net realizable value of inventory?
A. Original cost plus profit margin
B. Cash paid to suppliers
C. Estimated selling price less estimated completion costs and costs necessary to make the sale
D. Replacement cost plus depreciation
15. Net profit is $18,000 and sales are $150,000. What is the net profit margin?
A. 12%
B. 8.3%
C. 20%
D. 18%
16. What is the entry to record rent paid in cash for the current period?
A. Debit Rent Expense; Credit Cash
B. Debit Inventory; Credit Cash
C. Debit Cash; Credit Rent Expense
D. Debit Rent Payable; Credit Revenue
17. What is a fraud risk indicator?
A. A normal ledger balance
B. A condition or behavior that may signal increased risk of fraud
C. A tax payment deadline
D. Conclusive proof of fraud in every case
18. What is absorption costing?
A. A method used only for tax returns
B. A method that excludes all production overhead
C. A method that records only cash costs
D. A method that includes fixed and variable production costs in product cost
19. Which item is normally excluded from quick assets?
A. Cash
B. Trade receivables
C. Inventory
D. Short-term marketable securities
20. What is a favorable material price variance generally caused by?
A. Actual material price being higher than standard price
B. Sales being below budget
C. Actual material price being lower than standard price for actual quantity purchased or used, as defined by the variance method
D. Actual usage exceeding standard usage