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Ac119 Tutorial Questions
Ac119 Tutorial Questions
DEPARTMENT OF ACCOUNTANCY
TUTORIAL QUESTIONS (AC119)
GROUP 1
1. Define and explain the term financial accounting.
2. Identify and explain attributes (characteristics) of useful financial information.
3. Identify and explain the objectives of financial reporting.
4. Identify the users of accounting information and explain their information needs.
5. Define, identify and explain accounting conventions/ principles/ concepts.
6. Define, give examples and explain the importance and limitations of accounting standards.
7. Define and explain the terms annual report and financial statements.
GROUP 2
GROUP 3
2. In 2003, Burghoff, Inc. (a hardware retail company) sold 10,000 units of its product at an
average price of $400 per unit. The company reported estimated Returns and allowances in
2003 of $200,000. Burghoff actually purchased 11,000 units of its product from its
manufacturer in 2003 at an average cost of $300 per unit. Burghoff began 2003 with 900
units of its product in inventory (carried at an average cost of $300 per unit). Operating
expenses (excluding depreciation) for Burghoff, Inc. in 2003 were $400,000 and depreciation
expense was $100,000. Burghoff had $2,000,000 in debt outstanding throughout all of 2003.
This debt carried an average interest rate of 10 percent. Finally, Burghoff’s tax rate was 40
percent. Burghoff’s fiscal year runs from January 1 through December 31. Given this
information, construct Burghoff’s 2003 income statement.
3. Prepare a multi-step income statement for the Appully Company (a clothing retailer) for
the year ending December 31, 2003 given the information below:
$
Advertising expenditures 68,000
Opening inventory 256,000
Depreciation 78,000
Closing inventory 248,000
Gross Sales 3,210,000
Interest expense 64,000
Lease payments 52,000
Management salaries 240,000
Materials purchases 2,425,000
R&D expenditures 35,000
Repairs and maintenance costs 22,000
Returns and allowances 48,000
Taxes 51,000
GROUP 4
1.As at 31 December 2016, your business has the following balances on its ledger accounts.
Accounts Balance
$
Capital 13,000
Local business taxes 1,880
Trade accounts payable 11,200
Purchases 12,400
Sales 14,600
Sundry payables 1,620
Trade accounts receivable 12,000
Bank loan interest 1,400
Other expenses 11,020
Vehicles 2,020
$
Accounts payable 39,000
Accrued expenses 8,000
Accumulated depreciation 51,000
Additional paid-in capital 86,000
Allowance for doubtful accounts 2,000
Cash 23,000
Common stock ($0.20 par) 45,000
Current portion of L.T. Debt 6,000
Gross accounts receivable 40,000
Gross fixed assets 486,000
Inventories 54,000
Long term debt 210,000
Net accounts receivable 38,000
Net fixed assets 435,000
Retained earnings 138,000
Short-term bank loan (notes payable) 18,000
GROUP 5
GROUP 6
1. Define the term working capital and show how it is calculated.
2. What are the consequences of insufficient working capital?
3. Define the term overtrading and identify its causes, consequences and remedies.
4. Define the term stock control; explain its importance as well as limitations to firms.
5. Explain what mearnt by debtors control account.
6.Answer the following true or false questions on accounting basics:
ACCOUNTING CONCEPTS & DOUBLE ENTRY SYSTEM
(a) Accounting Principle is a general law or rule followed in the preparation of financial
statements. (True/ false)
(b)Usefulness, objectivity and feasibility are the three basic norms generally found in
accounting principles. (True/false)
(c) The entity concept considers the business and the proprietor as distinct from each other.
(True/false)
(d) In accountancy, all business transactions are recorded as having dual aspect. (True/false)
(e) It is on the basis of going concern concept that the assets are always valued at market
value. (True/false)
(f) Since the life of the business is assumed to be indefinite, the financial statement of the
business should be prepared only when it goes into liquidation. (True/false)
(g) According to money measurement concept, the efficiency of the top management of the
business must be clearly recorded in the books of accounts. (True/false)
(h) According to periodic matching of cost and revenue concept, a business man is not only
to measure revenues in a particular accounting period but also has to calculate expenses
which can be assigned in earning such revenues. (True/false)
(i) Cash basis considers the revenue as realized when the goods are produced. (True/false)
(j.) The losses from sale of capital assets need not be deducted from revenue to ascertain the
net income. (True/false)
(k) The convention of disclosure implies that all material information should be disclosed in
the accounts. (True/false)
(l) In keeping with the principle of materiality, important items must be recorded instead of
being left out or merged with other items. True/false)
(m) The comparison of the results of one accounting period with that in the past is possible
when the convention of consistency is adhered to by the business. (True/false)
(n) The convention of conservation takes into account all prospective profits and all
prospective losses. (True/false)
SUBSIDIARY BOOKS
(a) The sale of an old car is recorded in the Sales Register. (True/false)
(b) Credit Note is the basis for making entry in the Purchase Returns Book. (True/false)
(c) The Sales Register is a part of the ledger. (True/false)
(d) Recording the transaction in the subsidiary books is the first step in the accounting cycle.
(True/false)
(e) The total of the Purchase Register is posted to the debit of the Purchases Account.
(True/false)
(f) Sales Book is also called as Daybook. (True/false)
(g) Total of the Sales Register is credited to Sales account. (True/false)
(h) Journal proper is used for recording only those transactions as cannot be recorded in any
of the other subsidiary books. (True/false)
(i) Journal proper is used to record purchase of furniture on credit. (True/false)
(j) Return Outward Books record goods returned by the customers. (True/false)
(k) Debit Note informs the supplier that his account has been credited. (True/False)
(l) The sale of a business asset on credit is recorded in a general journal. (True/False)
(m) The Cash book record only the cash payments. (True/false)
(n) The balance of cash book indicates net income. (True/false)
(o) If a cheque sent for collection is dishonoured, the debit is given to customer’s account.
(True/false)
(p) If a cheque is issued by us is dishonoured, the credit is given to supplier’s account.
(True/false)
(q) Discount allowed column appears in debit side of the cash book. (True/false)
(r) Discount received column appears in the credit side of the cash book. (True/false)
FINAL ACCOUNTS
(a) The income statement shows either net profit or net loss for a particular period.
(True/false)
(b) Gains from the sale or exchange of assets are not considered as the revenue of the
business. (True/false)
(c) The salary paid in advance is not an expense because it neither reduces assets or nor
increase liabilities. (True/false)
(d) A loss is an expenditure which does not bring any benefit to the concern. (True/false)
(e) All liabilities which become due for payment in one year are classified as long term
liabilities. (True/false)
(f) The term current asset is used to designate cash and other assets or resources which are
reasonably expected to be realized or sold or consumed within one year. (True/false)
(g) An asset gives rise to expenditure when it is acquired and to an expense when it is
consumed. (True/false)
(h) If the balance of an account on the debit side of the trial balance where the benefit has
already expired then it is treated as an expense. (True/false)
(i) Sales less cost of goods sold = gross profit. (True/false)
(j) If the debit side of the trading account exceeds its credit side then the balance is termed as
gross profit. (True/false)
(k) The provision for bad debts is debited to Sundry Debtors Account. (True/false)
(l).The provision for discount on creditors is often not provided in keeping with the principle
of conservatism. (True/false)
(m) Stock at the end does not appear in the Trial balance. In case it appears in the
Trial balance, the amount of purchases in the Trial balance is reduced. (True/ false)
(n) The debts written off as bad, if recovered subsequently are credited to Debtors Account.
(True/false)
(o) The adjustment entry in respect of income received in advance is debit Income received in
advance account and credit income account. (True/false)
(p) Premium paid on the life policy of a partner is debited to profit and loss account. (True/
false)
(q) Depreciation account appear in the trial balance is taken only to profit and loss account.
(True/false)
(r) Private purchases included in the purchases day book are added to the sales account in the
Trading account. (True/false)
(s) Medicines given to the office staff by a manufacturer of medicines will be debited to
salaries account. (True/false)
(t) The expression-depreciation at 5% and 5% per annum carry the same
Meaning.(True/false)
THE END