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Mid term exam POA – HK1 2023-24
75 Min – Closed book exam - 02
I. MCQs (5 points)

Q1 2 3 4 5 6 7 8 9 10

11 12 13 14 15 16 17 18 19 20

1. Which item is not a liability?

A. Account payable
B. Amount owed to customer
C. Expense payable
D. Amount owed to us by customer
2. If you buy a computer with cash, the form of settlement is:
A. Cash
B. Computer
C. Debt
D. Both B and C
3. A sole trader purchases goods on credit. Which element(s) of the accounting equation will
change due to this transaction?
A. Assets and liabilities
B. Assets and capital
C. Capital and liabilities
D. Assets only
4. If total liabilities decreased by $4,000, then
a. stockholders’ equity must have decreased by $4,000.
b. assets must have decreased by $4,000, or capital must have increased by $4,000.
c. assets and capital each increased by $2,000.
d. assets must have increased by $4,000.
5. If an individual asset is increased, then
a. there could be an equal decrease in a specific liability.
b. there could be an equal decrease in capital
c. there could be an equal decrease in another asset.
d. none of these is possible.
6. If services are rendered for cash, then
a. assets will increase.
b. liabilities will increase.
 c. stockholders’ equity will decrease.
d. liabilities will decrease.
7. In double-entry bookkeeping, which of the following statements is true?
A. Credit entries decrease liabilities and increase income.
B. Credit entries decrease expenses and increase assets.
C. Debit entries increase expenses and increase assets.
D. Debit entries increase income and increase assets.
8. Which statement about an account is true?
a. In its simplest form, an account consists of two parts.
b. An account is an individual accounting record of increases and decreases in specific
asset, liability, and stockholders’ equity items.
c. There are separate account for specific assets and liabilities but only one account for
stockholders’ equity items.
d. The left side of an account is the credit or decrease side.
9. The normal balance of any account is the
a. left side.
b. right side.
c. side which increases that account.
d. side which decreases that account.
10. Which account would normally appear on the debit side of the initial trial balance?
A. Liability
B. Sales
C. Expense
D. Capital
11. An accountant has debited an asset account for $800 and credited a liability account for $600.
Which of the following would be an incorrect way to complete the recording of the
transaction?
a. Credit an asset account for $200.
b. Credit another liability account for $200.
c. Credit a stockholders’ equity account for $200.
d. Debit a stockholders’ equity account for $200.
12. Purchases account is used to record:
A. Purchase of non-current assets
B. Purchase of goods for resale
C. Goods returned from customers
D. Both A and C
13 Which of the following is correct?
I. Bought office furniture for cash: Dr Office furniture, Cr Cash
II. A debtor Tom pay us by cheque: Dr Bank, Cr Tom
III. Introduce capital by cheque: Dr Capital, Cr Bank
IV. Paid Creditor Lee by cash: Dr Lee, Cr Cash
 A. (I), (II) and (III)
B. (II), (III) and (IV)
C. (I), (II) and (IV)
D. (I) and (IV)
14. Determining the expenses used up to obtain the revenue is referred to the concept of:
A. Going concern
B. Matching
C. Historical cost
D. Money measurement
15. At October 1, 2012, Metz Industries had an Accounts Payable balance of $80,000. During the
month, the company made purchases by cash of $40,000 and made payments by bank
trasffered of $70,000. At October 31, 2012, the Accounts Payable balance is
a. $50,000 credit
b. $130,000 debit
c. $10,000 credit
d. $70,000 debit
16. On 1-Jan the assets and liabilities of a business are: Fixture 10,000, Inventory 8,000, Cash at
bank 4,000, Account payable 3,000. During Jan, the whole inventory is sold for 12,000 cash.
What is the amount of capital at the end of Jan?
A. 23,000
B. 31,000
C. 29,000
D. 21,000
17. A list of accounts and their balances at a given time is called a(n)
a. journal.
b. posting.
c. trial balance.
d. income statement
18. On July 7, 2012, Shireman Enterprises received cash $1,400 for services rendered. The entry
to record this transaction will include:
a. a debit to Service Revenue of $1,400.
b. a credit to Accounts Receivable of $1,400.
c. a debit to Cash of $1,400
d. a credit to Accounts Payable of $1,400.
19. Which of the following errors, each considered individually, would cause the trial balance to
be out of balance?
a. A payment of $148 to a creditor was posted as a debit to Accounts Payable and a
debit of $148 to Cash.
b. Cash of $530 received from a customer on account was posted as a debit of $350 to
Cash and as a credit of $350 to Accounts Payable.
 c. A payment of $59 for supplies was posted as a debit of $95 to Supplies and a credit of
$95 to Cash.
d. A transaction was not posted.
20. Which of the following is incorrect?
I. Goods sold for cash: Dr Cash, Cr Sales
II. Good bought on time from Tom: Dr Purchases, Cr Tom
III. Goods returned by us to Carter: Dr Carter, Cr Returns outwards
IV. Van bought for cash: Dr Purchases, Cr Cash

A. (I) and (III) only

B. (III) only
C. (II) and (IV) only
D. (IV) only

II. Short question (1 point)

A sole trader had account receivables of £2,700 at 1 May and during May made cash sales of
£7,000, credit sales of £15,000 and received £15,300 cash from his credit customers. Purchased
goods totaling £6,000 from suppliers on credit and made cash purchases of £400
Required:
Open and Balance off Account Receivable T account
III. Long question (4 points)
As at 1.3.20X7, a business has the following balances
Account Balance
$
Bank loan 12,000
Cash 11,700
Capital 13,000
Rent 1,880
Acc. Payables 11,200
Purchases 12,400
Sales 34,600
Wage payable 1,620
Acc. Receivables 12,000
Business Rates 1,400
Other expenses 11,020
Equipment 22,020

During the month, the business made the following transactions:

1. Sold equipment of $5,000 for cash
2. Paid suppliers the remaining balance by cash
3. Customer returned faulty goods of $3,000
Required:
a) Journalise the transactions. (1,5 point)
b) Prepare trial balance as at 31/3/20X7. (2,5 point)