Accounting & Auditing Paper 2008 - 1

Accounting & Auditing Paper 2008 - 1

1. 2008 Identify the item that is likely to serve as source document?

a) Trial balance
b) Income statement
c) Balance sheet
d) Invoice from supplier Identify which of the normal balances

2. Identify which of the normal balances (in parentheses) assigned to the following accounts is incorrect?

a) Office supplies (Debit)
b) Cash (Debit)
c) Wages payable (Credit)
d) Free earned (Debit)

3. The formula (Cost less salvage value/Total capacity in units x units extracted) refers to which depreciation method?

a) Straight line
b) Units of production
c) Declining balance
d) Depletion

4. While passing adjusting entries for what type of transactions expenses are debited and assets are credited?

a) Accrued revenue
b) Accrued expenses
c) Unearned Revenue
d) Prepaid Revenue

5. Of the following statements, which one is untrue for the corporate form of organization?

a) It is a separate legal entity
b) It has a limited life
c) Income that is distributed to owners is usually taxed twice
d) Ownership rights can be easily transferred

6. For each transaction, double-entry accounting requires which of the following?

a) Debits to asset accounts must create credits to liability or equity accounts
b) A debit to a liability account must create a credit to an asset accounts. Total debits must equal total credited
c) None of these

7. When costs are rising, which method reports higher net income?

a) LIFO
b) FIFO

8. A transaction caused Rs. 20,000 decrease in both total assets and total liabilities. This transaction could have been?

a) Purchase of an asset for Rs. 20.000 cash
b) Asset costing Rs. 20,000 destroyed by fire
c) Repayment of Rs. 20,000 bank loan
d) Collection of Rs. 20,000account receivable

9. Identify the correct answer with regards to depreciation expense?

a) Is an application of the matching principle
b) Is a closing entry
c) Usually includes an offsetting credit either to cash or accounts payable.
d) Is not an adjusting entry

10. A and B are partners in the ratio of 2:1. They admit C for ¼ shares who contribute Rs. 3000 for his share of goodwill. Total value of the goodwill of the firm is?
a) Rs. 3000
b) Rs. 9000
c) Rs. 12000
d) 15000

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