Student’s Name……………………………………………………………………

‫بسم هللا الرحمن الرحيم‬

University of Khartoum- School of Management Studies
MBA- Program- Semester One
Mid-Term Exam, Academic year 2021
Subject; Fundamentals of Accounting Date: 01/07/2021 Time Allowed: Two hours

Attempt Answer ALL Questions

Question one: (6 marks)
Briefly, answer the following question;
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1. Identify and describe the steps in the accounting process. (12 marks)

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2. “Bookkeeping and accounting are the same.” Do you agree? Explain. (12 marks)

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3. What are the three basic forms of business organizations for profit-oriented enterprises? (12
marks)
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4. Define the terms assets, liabilities, and owner’s equity. (12 marks)

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Question Two: TRUE or FALSE (5 marks)

Indicate whether each of the ten statements presented below is true [T] or false [F].
1. The three steps in the accounting process are identification, recording, and examination. [ ]
2. The accounting process includes the bookkeeping function. [ ]
3. Managerial accounting provides reports to help investors and creditors evaluate a company. [ ]
4. The two most common types of external users are investors and creditors. [ ]
5. Internal users of accounting information include human resources managers. [ ]
6. US-Congress passed the Sarbanes-Oxley Act to ensure that investors invest only in companies that
will be profitable. [ ]
7. The standards of conduct by which actions are judged as loyal or disloyal are ethics. [ ]
8. The primary accounting standard-setting body in the United States is the Securities
and Exchange Commission (SEC). [ ]
9. The historical cost principle dictates that companies record assets at their cost and
continue to report them at their cost over the time the assets are held. [ ]
10. The monetary unit assumption requires that companies record only transactions that
can be measured in terms of money. [ ]

Question Three; (6 marks)

Circle the letter of the correct answer for the following questions;
1. Which of the following is not a step in the accounting process?
(a) Identification. (c) Recording.
(b) Economic entity. (d) Communication
2. 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.

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3. The historical cost principle states that:

(a) assets should be initially recorded at cost and adjusted when the fair value changes.
(b) activities of an entity are to be kept separate and distinct from its owner.
(c) assets should be recorded at their cost.
(d) only transaction data capable of being expressed in terms of money be included in the
accounting records.
4. During 2020, Bruske Company’s assets decreased $50,000 and its liabilities decreased $50,000.
Its owner’s equity therefore:
(a) increased $50,000. (c) decreased $100,000.
(b) decreased $50,000. (d) did not change.
5. 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.
6. As of December 31, 2020, Kent Company has assets of $3,500 and owner’s equity of $2,000.
What are the liabilities for Kent Company as of December 31, 2020?
(a) $1,500. (b) $1,000. (c) $2,500 (d) $2,000.
7. Which of the following statements about an account is true?
(a) The right side of an account is the debit or increase side.
(b) An account is an individual accounting record of increases and decreases in specific asset,
liability, and owner’s equity items.
(c) There are separate accounts for specific assets and liabilities but only one account for
owner’s equity items.
(d) The left side of an account is the credit or decrease side.
8. The expanded accounting equation is:
(a) Assets = Liabilities + Owner’s Capital + Owner’s Drawings + Revenues + Expenses.
(b) Assets = Liabilities + Owner’s Capital + Owner’s Drawings + Revenues - Expenses.
(c) Assets = Liabilities - Owner’s Capital - Owner’s Drawings - Revenues - Expenses.
(d) Assets = Liabilities + Owner’s Capital - Owner’s Drawings + Revenues - Expenses.
9. Which of the following statements about a journal is false?
(a) It is not a book of original entry.
(b) It provides a chronological record of transactions.

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(c) It helps to locate errors because the debit and credit amounts for each entry can be readily
compared.
(d) It discloses in one place the complete effect of a transaction.
10. The revenue recognition principle states that:
(a) revenue should be recognized in the accounting period in which a performance obligation is
satisfied.
(b) expenses should be matched with revenues.
(c) the economic life of a business can be divided into artificial time periods.
(d) the fiscal year should correspond with the calendar year.
11. The principle or assumption dictating that efforts (expenses) be matched with
accomplishments (revenues) is the:
(a) expense recognition principle. (b) cost assumption.
(c) time period assumption. (d) revenue recognition principle.
12. Adjusting entries are made to ensure;
(a) expenses are recognized in the period in which they are incurred.
(b) revenues are recorded in the period in which services are performed.
(c) balance sheet and income statement accounts have correct balances at the end of an
accounting period.
(d) All the responses above are correct.

Question Four: (13 marks)

1. Emily Valley is a licensed dentist. During the first month of the operation of her business on April
30,2021, the following events and transactions occurred.
April, 1 Invested $20,000 cash in her business.
1 Hired a secretary-receptionist at a salary of $700 per week payable monthly.
2 Paid office rent for the month $1,100.
3 Purchased dental supplies on account from Dazzle Company $4,000.
10 Performed dental services and billed insurance companies $5,100.
11 Received $1,000 cash advance from Leah Mataruka for an implant.
20 Received $2,100 cash for services performed from Michael Santos.
30 Paid secretary-receptionist for the month $2,800.
30 Paid $2,400 to Dazzle for accounts payable due.
Emily uses the following chart of accounts: No. 101 Cash, No. 112 Accounts Receivable,

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No. 126 Supplies, No. 201 Accounts Payable, No. 209 Unearned Service Revenue, No. 301
Owner’s Capital, No. 400 Service Revenue, No. 726 Salaries and Wages Expense, and
No. 729 Rent Expense.
Required
(a) Journalize the transactions. (4 marks)
(b) Post to the ledger accounts. (3 marks)
(c) Prepare a trial balance on April 30, 2021. (3 marks)
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2. Mac’s Motel opened for business on May 1, 2021. Its trial balance before adjustment on May
31 is as follows.
MAC’S MOTEL
Trial Balance, May 31, 2020
Account Title Debit Credit
Cash $ 3,500
Supplies 2,080
Prepaid Insurance 2,400
Land 12,000
Buildings 60,000
Equipment 15,000
Accounts Payable $ 4,800
Unearned Rent Revenue 3,300
Mortgage Payable 40,000
Owner’s Capital 41,380
Rent Revenue 10,300
Advertising Expenses 600
Salaries and Wages Expense 3,300
Utilities Expense 900
Total $99,780 $99,780

Additional information;
1. Prepaid insurance is a 1-year policy starting May 1, 2020.
2. A count of supplies shows $750 of unused supplies on May 31.
3. Annual depreciation is $3,000 on the buildings and $1,500 on equipment.
4. The mortgage interest rate is 12%. (The mortgage was taken out on May 1.)
5. Two-thirds of the unearned rent revenue has been earned.
6. Salaries of $750 are accrued and unpaid at May 31
Required;
Journalize the adjusting entries on May 31,2020. (3 marks)
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Good Luck

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