Chapter 4 Source Document & GST

What is the primary purpose of a source document in accounting?

• To provide an estimate of a firm's total revenue

• To ensure transactions are verifiable and supported by evidence

• To predict future financial trends

• To record employee salaries

Which of the following characteristics ensure that accounting reports provide a Faithful Representation of a firm’s transactions?

• Relevant, consistent, free from legal obligations

• Complete, neutral, free from material error

• Objective, reliable, future-focused

• Auditable, estimable, forward-looking

The Goods and Services Tax (GST) in Australia is levied at what rate?

• 5%

• 10%

• 15%

• 20%

Which of the following items is excluded from the GST in Australia?

• Clothing

• Electronics

• Fresh food

• Furniture

What is the correct formula to calculate the GST amount from a price exclusive of GST?

• Multiply by 1.1

• Divide by 11

• Multiply by 0.1

• Subtract 10% of the total

If a business has collected more GST on sales than it has paid on purchases, it will:

• Have a GST asset and receive a refund

• Have a GST liability and need to settle with the ATO

• Have no GST obligation

• Receive a tax deduction

Which of the following is NOT a required component of a tax invoice?

• Name of the seller

• Description of goods/services provided

• Business number of the buyer

• Date of the transaction

What is the primary function of the GST Clearing account?

• To record all GST collections and payments before settlement

• To act as a savings account for GST funds

• To store financial reports for tax audits

• To predict future GST liabilities

If a price inclusive of GST is given, how can the GST amount be calculated?

• Divide by 1.1

• Multiply by 0.1

• Divide by 11

• Subtract 10% from the total

Which of the following statements about the General Journal is true?

• It records transactions after they are posted to the General Ledger

• It does not require source documents for verification

• It includes a narration that describes each transaction

• It is used only for recording GST transactions