Answer all 20 questions, then see your score at the end.
1. 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
2. A business buys equipment on credit for $9,000. What is the immediate accounting effect?
A. Equipment decreases and cash decreases
B. Expense increases and capital decreases
C. Equipment increases and accounts payable increases
D. Cash increases and revenue increases
3. What is a performance obligation under IFRS 15?
A. A requirement to prepare a trial balance
B. A bank's obligation to reconcile accounts
C. A promise to pay corporate income tax
D. A promise to transfer a distinct good or service to a customer
4. What is the normal balance of an equity account?
A. Debit
B. It depends only on depreciation
C. Always zero
D. Credit
5. 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
6. What is a related party transaction?
A. Any cash sale to an unrelated customer
B. A transaction that must always be illegal
C. A bank reconciliation item
D. A transfer of resources, services, or obligations between related parties, whether or not a price is charged
7. 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
8. Which is an investing cash flow?
A. Cash paid to purchase equipment
B. Cash received from customers
C. Cash paid to employees
D. Cash paid to suppliers for inventory
9. What is transfer pricing?
A. Calculating depreciation
B. Setting the statutory VAT rate
C. Pricing transactions between related entities or divisions
D. Pricing goods sold only to unrelated retail customers
10. Why are adjusting entries necessary?
A. To avoid preparing financial statements
B. To make all ledger balances equal to zero
C. To recognize revenues and expenses in the correct accounting period
D. To eliminate all liabilities
11. 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
12. If output is 4,000 units and direct material cost is $3 per unit, what is total direct material cost?
A. $1,333
B. $4,000
C. $12,000
D. $7,000
13. Which assumption presumes the business will continue operating for the foreseeable future?
A. Realization concept
B. Dual aspect concept
C. Historical cost concept
D. Going concern assumption
14. What is a bank overdraft?
A. A cash sale made on credit
B. A deposit that has not cleared
C. A bank account balance where withdrawals exceed available funds under an overdraft arrangement
D. A long-term investment in shares
15. What is a capital expenditure appraisal used for?
A. Calculating employee deductions
B. Recording petty cash
C. Reconciling supplier statements only
D. Evaluating the financial attractiveness of long-term investment proposals
16. What is residual value?
A. Original purchase price
B. Annual maintenance cost
C. Estimated amount recoverable from an asset at the end of its useful life, less disposal costs
D. Accumulated depreciation
17. What is the arm's-length principle?
A. Related-party terms should be consistent with those that independent parties would agree in comparable circumstances
B. Related parties must always charge zero
C. Tax authorities must approve every purchase
D. All companies must use the same selling price
18. What is under-absorbed overhead?
A. Direct material exceeds direct labor
B. Overhead absorbed exceeds actual overhead incurred
C. Overhead absorbed is less than actual overhead incurred
D. Actual overhead is zero
19. What is the rights and obligations assertion?
A. All sales were collected in cash
B. The entity holds or controls rights to assets and has obligations for liabilities recorded
C. All transactions are mathematically accurate only
D. All assets are current assets
20. What does confidentiality require of an accountant?
A. Sharing all client data publicly
B. Respecting and protecting information acquired through professional relationships, subject to lawful duties
C. Refusing every lawful disclosure
D. Destroying records whenever asked