1 The balances remaining on the books of a business after the preparation of the income statement

included the following.

loan from XY Finance 10 000

wages due 620
rent prepaid 240
trade receivables 3 300
trade payables 4 650
motor vehicles 8 000
provision for depreciation of motor vehicles 2 000

What was the total of the liabilities?

A $13 920 B $14 890 C $15 270 D $17 270

2 A company’s financial year ended on 31 December 2019. On 1 December 2019 it paid rent,
$8000, for the four months ending 31 March 2020.

What was the opening balance on the rent account on 1 January 2020?

A $2000 credit B
$2000 debit C
$6000 credit D
$6000 debit
3 Alice’s financial year ends on 31 December.

The balances on her books on 1 January 2020 included the following.

commission receivable 250 debit

rent receivable 500 credit

What do these balances represent?

commission receivable rent receivable

A income outstanding income outstanding

B income outstanding income prepaid
C income prepaid income outstanding
D income prepaid income prepaid

4 Which items are deducted from the gross profit when calculating the profit for the year?

1 balance on the provision for doubtful debts account

2 carriage paid on goods supplied to customers
3 drawings made by the owner during the year
4 wages paid to employees during the year

A 1, 2 and 3 B 1 and 4 C 2 and 3 only D 2 and 4

5 Alice’s financial year ends on 31 December.

The balances on her books on 1 January 2020 included the following.

commission receivable 250 debit

rent receivable 500 credit

What do these balances represent?

commission receivable rent receivable

A income outstanding income outstanding

B income outstanding income prepaid
C income prepaid income outstanding
D income prepaid income prepaid

6 Annual rental income due from Kumar, a tenant, is $3600. At the start of the year Kumar had
prepaid rent of $900. At the end of the year he owed two months’ rent.

How much rent was received from Kumar during the year?

A $2100 B $3300 C $3900 D $5100

7 A flat above a trader’s shop was rented out at $90 a month from 1 July 2018. At 30 June 2019 the rent
receivable account showed entries for rent received from the tenant totalling $900.

What was the balance of the rent receivable account on 1 July 2019?

A credit $90 B
credit $180 C
debit $90 D
debit $180
8 After preparing her income statement Emma found that:

1 a bad debt, $1500, should have been written off

2 no adjustment had been made for rent prepaid by her of $2800.

The draft profit for the year was $35 000.

What was the profit for the year after these adjustments?

A $30 700 B $33 700 C $36 300 D $39 300

9 Hans sublets part of his premises to Elmer. On 31 December 2015 Elmer had paid two months’ rent
in advance.

Where would this appear in Hans’ statement of financial position on 31 December 2015?

A other payables
B other receivables
C trade payables
D trade receivables
10 Ali’s financial year ends on 31 March. During the year ended 31 March 2019, Ali paid wages of
$42 500. On 31 March 2019, $1400 wages were accrued.

Which journal entry records the transfer from the wages account to the income statement on 31
March 2019?

debit credit
$ $
A income statement 42 500
wages 42 500

B income statement 43 900

wages 43 900

C wages 42 500
42 500
income statement
D wages 43 900
43 900
income statement

11 Gary rents his business premises. His financial year ends on 30 September. On 1 October 2016 rent
prepaid amounted to $3000. During the year ended 30 September 2017 a total of $7000 rent was
paid. On 30 September 2017 rent outstanding amounted to $2000.

Which journal entry shows the transfer of the rent to the income statement on 30
September 2017?

debit credit
$ $
A income statement 8 000
rent 8 000
B income statement 12 000
rent 12 000
C
rent
8 000
income statement 8 000
D
rent
12 000
income statement 12 000

12 The owner of a business paid $5000 into the business bank account.

A loan for $10 000 repayable in 2020 was also obtained and the money used to purchase a motor
vehicle.

Which changes would take place in the statement of financial position as a result of these
transactions?

non-current owner’s non-current

assets equity liabilities

$ $ $

A +5 000 +10 000 +5 000

B +10 000 –5 000 +10 000
C +10 000 +5 000 +10 000
D +15 000 +15 000 –10 000
13 Tareq started a business on 1 October 2016. He provided the following information.

On 28 November 2016 he paid an insurance premium, $1800, for the year starting 1
December 2016.

On 31 December 2017 he paid advertising costs for 1 July to 31 December 2017 totalling $2400.

What was shown in the statement of financial position at 30 September 2017?

other other
receivables payables
$ $
A advertising 400 insurance 300
B advertising 1200 insurance 300
C insurance 300 advertising 400
D insurance 300 advertising 1200

14 At the end of Carl’s financial year he made an adjustment for $40 rent owed by his tenant.

How did this adjustment affect Carl’s financial statements?

decrease profit increase profit increase current increase current

for the year for the year assets liabilities

A ✓ ✓
B ✓ ✓

C ✓ ✓

D ✓ ✓

15 Gurpreet is a broker and receives a commission from an insurance company when a client purchases
a car insurance policy.

The following information is available for the year ended 31 March 2017.

commission received from insurance 15 000

company
commission on policies arranged in 1 200
March 2017 not yet received
office rent 2 500
depreciation of non-current assets 900
heating and lighting 520

What was the profit for the year?

A $10 780 B $11 080 C $11 980 D $12 280