MID-TERM BREAK HOMEWORK (Revision for Test)

State whether each of the following statements is True or False. – to discuss

1. Bookkeeping possesses a higher scope than accounting.

2. Creditors are interested to know the business’ financial soundness before granting credit.

3. The maximum number of owners in a professional partnership is 50 persons.

4. Sole Proprietorship is the simplest and least costly to establish as compared to a

partnership and company.

5. If financial information is to be useful, it must be relevant and faithfully represent what it

purports to represent.

6. Comparability enables the user of financial statements to compare the business financial
statements through different times and with another entity’s financial statement.

7. Information is material if omitting it or misstating it could influence decisions that users

make based on financial information about a specific reporting entity.

8. Financial statements should be prepared on a going concern basis unless management

either intends to liquidate the business or to cease its trading.

9. Accounts receivable will be recognised when there is a cash sale.

10. The Credit side of the account is used to record any decrease in revenue, owner’s equity
and liabilities.

11. The steps in the accounting process are classification, identification, interpretation and
communication.

12. The primary objective of preparing financial statements is to meet the need of managers
who run the business on a day-to-day basis only.

13. The external users of accounting information include tax authority and potential investors.

14. The owner of sole proprietorship is not responsible for the liabilities of the business when
the business goes bankrupt.

15. Accounting principles or concepts refer to rules that must be followed to ensure subjectivity
in the preparation of financial statements.

16. Relevance and faithful representation characteristics are the fundamental qualities of
accounting information.

17. “Once a particular accounting method has been adopted, it should follow consistently in
subsequent periods.” This statement is based on money measurement concept.

18. Accrual concept requires expenses and revenues to be recorded in the accounting period
based on the amount incurred and earned respectively, not on cash involved.

19. A business equity will increase when the business acquires net profit for the reporting year.
20. The accounting equation should remain balance since every transaction affects only one
account.

21. Employees of the business is considered to be external users of financial accounting.

22. The business records the sales when it receives cash and records the purchases when it
pays cash. This follows the accrual-based accounting concept.

23. In accounting process, it is correct to record the transactions into the ledgers first before
transferring the amount to book of prime entry.

24. When a customer returns faulty products after he has made cash purchase, the business
should record it as debit sales return and credit accounts receivable.

25. For professional partnership, the number of partners allowed is between 2 partners to 20
partners.

26. In order for the accounting information to be verifiable, the transactions recorded must be
supported with relevant documentations and presentation of evidence.

27. Bank overdraft is an example of current liability.

28. Profits in companies are shared between the owners using pre-agreed profit distribution
ratio.

29. Historical cost concept states that the assets should be valued with the original amount
transacted and not the current value of the assets.

30. If the users are able to use the accounting information to make decisions, then the
accounting information is said to be faithfully represented.
Multiple-choice questions. Choose the most suitable answer. – to discuss

1. Which user is to be considered as an internal user?

A. Inland revenue board

B. Potential investor
C. Kenanga Investment Bank
D. Chief financial officer

2. The purpose of a Statement of Profit or Loss is to _________________________.

A. ascertain on total sales

B. ascertain on total net assets
C. avoid misleading on presentation information
D. determine the profit or loss for the given accounting period

3. __________ needs the accounting information to evaluate the risks of granting credit or
lending money to businesses.

A. Creditor
B. Employee
C. Government
D. Potential investor

4. All of the following business entities enjoy limited liabilities, except?

A. Private company
B. Public listed company
C. Partnership
D. Limited liability partnership

5. Financial information may be affected if it is biased and wrongly influences decision

makers. This is related to ____________ concept.

A. neutrality
B. periodicity
C. monetary measurement
D. economic entity

6. _________________ refers to the information that can make a difference in the decision
making by users of that information.

A. Verifiability
B. Relevance
C. Timeliness
D. Faithful representation

7. Qualitative information in the annual report is presented in a graphical form. This is to

meet ____________ qualitative characteristics.

A. verifiability
B. comparability
C. timeliness
D. understandability
8. A business is treated as separate from its owner. This refers to _________ concept.

A. historical cost
B. business entity
C. going concern
D. accruals

9. Ahmad Enterprise purchased office equipment on credit from Labu Sayung Sdn Bhd.
Which of the following accounting effects is correct?

A. Increase in asset; increase in owner equity

B. Increase in owner equity; decrease in asset
C. Increase in asset; increase in liability
D. Increase in liability; decrease in owner equity

10. Mr. Ong purchased ten containers of eggs for his business on credit. What will be the
appropriate journal entry?

A. Dr. Cash, Cr. Bank

B. Dr. Inventory, Cr. Account receivable
C. Dr. Purchase, Cr. Account payable
D. Dr. Purchase, Cr. Account receivable

11. Which of the following defines classifying?

A. transferring accounting data from ledger to trial balance.

B. sorting accounting data into orderly and correct accounting categories.
C. Analyzing results of financial statements.
D. Communicate the summary of business financial information to interested users.

12. Which of the following users of accounting information are external users?

i. Shareholders and board of directors

ii. Owner of business, employees and manager
iii. Employees, creditors and product consumers
iv. Creditors, investors and product consumers

A. i and ii
B. i and iii
C. iii and iv
D. iv only

13. Which of the following business entities have NO limited liability?

i. Surya Enterprise
ii. Alisha & Humaira Associates
iii. Aqwan Sdn Bhd
iv. Bina Teguh Bhd

A. i and ii
B. i and iii
C. iii and iv
D. iv only
14. Which of the following describes the term ‘asset’?

A. Amount owed by a business to external parties

B. Property of a business that only bought for resale.
C. Funds supplied by the owner to the business for the acquisition of property for the
business.
D. Economic resources owned and controlled by a business, including non-current and
current.

15. Quality accounting information assists the users to make informed and timely decisions.
The enhancing qualitative characteristics include ________.

A. Relevance and faithful representation

B. Comparability and consistency
C. Comparability, verifiability, understandability and timeliness
D. Comparability, consistency, verifiability and understandability

16. Which of the following statements describe a going concern concept?

A. A business is assumed to operate for an indefinite life.

B. A business will ensure that only items that can be expressed in money terms are
recorded in the financial statements.
C. A business will refrain itself from changing the methods or techniques of valuation to
allow comparison of financial statements.
D. All the above

17. A business has decided to report its financial statement yearly. It just started its business
on 1st January 20x1 and will complete the twelve-month reporting period by 31 December
20x1. This is in accordance with the ________________ concept.

A. Neutrality
B. Periodicity
C. Materiality
D. Consistency

18. __________ concept require business transactions is recorded and reported separately
from the owner’s personal transaction.

A. Historical cost concept

B. Money measurement concept
C. Economic entity concept
D. Going concern concept

19. Which of the following is the double entry for goods purchased by cash from Ekhlas
Enterprise?

Debit Credit
A. Purchases Ekhlas Enterprise
B. Ekhlas Enterprise Purchase
C. Purchases Cash
D. Cash Purchases
20. In double entry system, a credit is used to record __________.

A. Decrease in asset and owner’s equity, and a decrease in liability and revenue.
B. Decrease in asset and an increase in owner’s equity, revenue and expenses.
C. Decrease in asset and revenue, and increase in liability, expenses and owner’s
equity.
D. Decrease in asset and expenses, and increase in liability, revenue and owner’s
equity.

21. The financial statement that reports the gross profit of the business is the ________.

A. Trial Balance
B. Statement of Profit or Loss
C. Statement of Financial Position
D. Cash Flow Statement

22. The correct ledger entry for 10% trade discount on credit purchases is _________.

A. Dr Purchases, Cr Creditor, Cr Discount Received

B. Dr Purchases, Cr Account Payable
C. Dr Purchases, Dr Discount allowed, Cr Creditor
D. None of the above

23. When the owner invest cash in business, _____________.

A. Asset increase and liabilities decrease

B. Liabilities increase and owner’s equity increase
C. Asset decrease and liabilities decrease
D. Asset increase and owner’s equity increase

24. Financial statements are prepared with the expectation that business will remain in
operation indefinitely. This is to comply to ___________ concept.

A. Historical cost
B. Timeliness
C. Going concern
D. Consistency

25. Following are the internal users of the accounting information EXCEPT ________.

A. Director
B. Government
C. Employee
D. Manager

26. The practice of recording the actual amount paid for items purchased even though the
market value of the item is different, follows ______.

A. Money measurement concept

B. Going concern concept
C. Historical cost concept
D. Business entity concept
27. A term accounting can best be defined as __________.

A. a document that reports on an organization's financial position

B. a system that measures business activities, processes financial information into
reports and communicates the findings
C. a business plans
D. a method of recording business transactions

28. Following are the characteristics of sole proprietorship EXCEPT __________.

A. No legal obligation to prepare financial statements

B. Owned by one person
C. Profit is enjoyed by the owner
D. The liability is limited to only business property

29. Mukriz, the owner of a restaurant, includes his family expenses on meal as part of the
business expenses. This violated _________.

A. Business Entity Concept

B. Ownership Concept
C. Accruals Concept
D. Materiality Concept

30. “Information must be received by the users at the right time before it loses its ability to
affect the decision”. This statement is related to which qualitative characteristics of
financial statement?

A. Comparability
B. Relevance
C. Understandability
D. Timeliness
QUESTION 1 – to submit

Amanda opened a shop selling frozen foods ranging from meats, seafoods, finger foods, ready
meals and Malaysian delicacies. The business is located in Bandar Seri Alam and started its
operation on 1 April 2023. Given below are the transactions of the business for the month of
April 2023.

April 2023 Transactions

1 Amanda contributed capital of RM25,000 cash and a motor vehicle valued at
RM50,000 into the business.
3 Purchased 7 units of freezers worth RM15,400 on credit from C&S Trading.
6 Bought frozen foods worth RM8,350 on credit from Laila Frozen Foods Supply
Sdn Bhd.
8 Borrow RM75,000 from FE Bank and the amount was credited to the business
bank account.
10 Returned damaged frozen foods to Laila Frozen Foods Supply Sdn Bhd costing
RM400.
14 Sold frozen foods on credit to Qisya Frozen Food Trading worth RM5,000.
16 Purchased frozen foods worth RM3,200 from O&O Foods Sdn Bhd and paid by
cheque.
19 Mr. Qayyid purchased frozen foods worth RM120 and paid in cash.
21 Qisya Frozen Food Trading returned RM350 worth of damaged goods.
23 Purchased a computer worth RM3,400 on cash.
25 Qisya Frozen Food Trading settled the amount due by cheque and was given
RM100 cash discount for early payment.
27 The owner took cash RM250 and 10 packs of frozen foods valued at RM150 for
her personal use.
30 Paid rental expenses and wages RM3,000 and RM4,500 respectively by cheque.

Required:

a. Illustrate the effects (increase or decrease) of asset, liability, owner's equity, drawing,
revenue and expense of the above transactions.

b. Show the journal entry (debit or credit) of the above transactions.

(Use the format given below to answer the above questions)

Date a. Effects b. Journal Entry
Increase Decrease Debit Credit
Question 2 – to submit

Puan Anis is a producer and distributor of dodol products under the business name of Mak
Lang Dodol Enterprise. The main ingredients used in its dodol production are glutinous rice
flour, palm sugar and coconut milk. The business was registered on 1 October 2022 in Ipoh,
Perak. During the month of October 2022, Mak Lang Dodol Enterprise performed the following
transactions:

October Transaction
Puan Anis transferred her personal cash of RM50,000 into the business’ bank
1
account.
Bought 10 cartons of glutinous rice flour and 20kg of palm sugar from Kedai
3 Kalsom, a grocery shop, amounting to RM1,200 on credit. Trade discount of10%
was obtained for this transaction.
Received cash in bank account amounting to RM50,000 for business loan taken
5
up from Bank Simpanan Nasional (BSN).
Returned 1 carton of glutinous rice flour which had expired, costing RM80, to
6
Kedai Kalsom.
8 Puan Anis brought her home’s freezer worth RM2,800 into the business.
9 Bought 20kg of coconut milk from Pak Mat Santan Frozen for RM240 in cash.
Sold 50 packs of dodol to Puan Maria in cash for RM1,000. Trade discount of5%
10
was then given to Puan Maria.
Sold 200 packs of dodol durian to Badan Kebajikan Al-Hasanah for RM5,000,
11
before trade discount of 10%, on credit.
Puan Maria dissatisfied with the quality of 10 packs of the sold dodol and
12
returned them to the business.
Received 5% cash discount upon settlement of amount due to Kedai Kalsom.
20
Payment was made by cheque.
23 Paid salaries to staffs through online banking RM12,000.
Puan Anis took 4kg of coconut milk for a family gathering with her relatives
25
amounting to RM50.
Purchased a second-hand delivery van worth RM20,000 from Lai Meng Auto
27
Sdn Bhd. Deposit paid was RM5,000 by cheque.
Received 50% payment from Badan Kebajikan Al-Hasanah which was directly
29
transferred into business’ bank account.

Required:

a. Illustrate the effects (increase/decrease) of asset, liability, owner's equity, revenue

and expense of the above transactions.

b. Show the journal entry (debit or credit) of the above transactions.

(Use the format given below to answer the above questions)

a. Effects b. Journal Entries

Date Increase Decrease Debit Credit
 Question 3 – to discuss

Hijazi Trading is a popular one-stop center selling merchandise for umrah and hajj pilgrims
who wants to get quality product at affordable prices in Senawang, Negeri Sembilan. The
owner, Haji Mustafar has started the business in 2012. The business accounting period ends
on every 31 December each year. Given below are the extract of business transactions for
the month of April 2022.

DATE TRANSACTIONS
3 Haji Mustafar brought cash amounted RM50,000 into the business.
4 Haji Mustafar deposited RM10,000 of the cash into bank account.
Bought two clothes cabinet to display the jubah apparels at RM6,000 by
5
cash.
Purchased hajj supplies on credit from Al-Quds Sdn Bhd worth RM10,000
7
and received a trade discount of 5%.
8 Made cash sales of ihram clothings worth RM3,500.
9 Paid RM1,000 for rental expenses by cheque.
16 Returned defect goods to Al-Quds Sdn Bhd amounted RM450.
Sold mini telekung, jubah dress and handsocks to Humaira boutique
17
RM12,000 by credit.
Paid Al-Quds Sdn Bhd by cheque for full settlement after receiving a cash
18
discount of 10%.
Receives commission amounted RM2,000 by cheque for being a dropship
21
of Elite Liew Kurta.
Received cheque from Humaira boutique for sales invoice on 17 April 2022.
22
A cash discount of 10% was given for the early settlement.
23 Haji Mustafar took 2 sets of ihram clothing for his personal gift to his sons.
25 Paid salary to worker RM1,500 by cheque.
26 Paid utility bills RM500 by cash.

Required:

a. Illustrate the effects (increase/decrease) of asset, liability, owner's equity, revenue

and expense of the above transactions.

b. Show the journal entry (debit or credit) of the above transactions.

(Use the format given below to answer the above questions)

a. Effects b. Journal Entries
Date Increase Decrease Debit Credit