1.

A profit-making business operating as a separate legal entity and in which ownership is divided
into shares of stock is known as a
A. Proprietorship
B. Partnership
C. Service business
D. Corporation
2. The resources owned by a business are called
A. Assets
B. The accounting equation
C. Liabilities
D. Owner’s equity
3. A listing of a business entity’s assets, liabilities, and owner’s equity as of a specific date is a
A. Income statement
B. Balance sheet
C. Statement of owner’s equity
D. Statement of cash flows
4. If total assets increased birr20,000 during a period and total liabilities increased birr12,000
during the same period, the amount and direction (increase or decrease) of the change in
owner’s equity for that period is
A. Birr 32,000 increases
B. Birr 8,000 increases
C. Birr 32,000 decreases
D. Birr 8,000 decreases
5. If revenue was birr45,000, expenses were birr37,500, and the owner’s withdrawals were
birr10,000, the amount of net income or net loss would be
A. Birr 45,000 net incomes
B. Birr 37,500 net losses
C. Birr 7,500 net incomes
D. Birr 2,500 net losses
6. One of the following provides objective evidence for the occurrence of a transaction
A. Source document
B. Account
C. Journal
D. Worksheet
7. A debit may signify
A. Decrease in an asset account
B. Increase in the owner’s capital account
C. Increase in a liability account
D. Increase in an asset account
8. The type of account with a normal credit balance is
A. An asset
B. Revenue
C. Drawing
D. An expense
9. A debit balance in which of the following accounts would indicate a likely error?
A. Accounts Receivable
B. Cash
C. Fees Earned
D. Miscellaneous Expense
10. The receipt of cash from customers in payment of their accounts would be recorded by
A. A debit to Cash and a credit to Accounts Receivable
B. A debit to Accounts Receivable and a credit to Cash
C. A debit to Cash and a credit to Accounts Payable
D. A debit to Accounts Payable and a credit to Cash
11. The form listing the titles and balances of the accounts in the ledger on a given date is the
A. Income statement
B. Balance sheet
C. Statement of owner’s equity
D. Trial balance Openers
12. Which one of the following is not direct tax
A. VAT
B. Business profit tax
C. Employment income tax
D. Dividend income tax
13. The process of transferring debit and credit entries to the ledger accounts
A. Adjusting
B. Correcting
C. Posting
D. Journalizing
14. What types of accounts will appear in the post closing trial balance?
A. Permanent Accounts
B. Temporary Accounts
C. Accounts shown in the income statement columns of a worksheet
D. Nominal accounts
15. Which of the following items are liabilities?
A. Cash
B. Accounts receivable
C. Accounts payable
D. Owner’s drawings
16. Net income will result during a time period when
A. Assets exceed liabilities
B. Assets exceed revenues
C. Expenses exceed revenues
D. Revenues exceed expenses
17. Which of the following events is not recorded in the accounting records
A. Equipment is purchased on account
B. An employee is terminated
C. A cash investment is made into the business
D. The owner withdraws cash for personal use
18. Which of the following statements about users of accounting information is incorrect?
A. Management is an internal user
B. Taxing authorities are external users
C. Present creditors are external users
D. Regulatory authorities are internal users
19. If a Bank uses a compound interest rate in order to calculate interest on loans, then the bank
calculates interest on
A. Only on principal amount
B. Only on interest amount due
C. On both Principal and interest due
D. Neither on both Principal and interest due
20. What is the gross profit if sales revenues are Birr 400,000, cost of good sold is Birr 310,000 and
operating expenses are Birr 60,000?
A. Birr 400,000
B. Birr 340,000
C. Birr 90,000
D. Birr 30,000
21. Which one of the following is true about ATM ?
A. Helps to withdraw money
B. Helps to transfer money
C. Helps to make payments
D. All of the above