AFA100 NOV 1 2025 Midterm Practice Questions and
answers Introductory Financial Accounting Toronto
Metropolitan University
AFA100 Midterm Practice Questions
These questions are for learning and review purposes only. These are NOT the only concepts and
topics you need to know for the midterm.
Solutions are at the end.
1. What is the main purpose of the statement of financial position?
A) Provide useful information on a company’s cash flows.
B) Report revenues earned by providing goods and services and recourses used to generate
revenues during a period of time.
C) Report the financial position (assets, liabilities, equity) at a specific point in time.
D) Measure profit or loss of a business for a specific time period.
E) None of the above
2. Which of the following is NOT an internal user of financial data of a corporation?
A) A creditor
B) The assistant controller
C) A commission-based sales person
D) Senior level management
E) The human resource manager
3. If liabilities increased by $25,000 and shareholders’ equity increased by $5,000 then total assets
must change by what amount in order to keep the accounting equation in balance?
A) $20,000 decrease
B) $20,000 increase
C) $25,000 increase
D) $30,000 increase
E) None of the above
4. Which of the following is true about assets (current and non-current):
, A) They have a future economic benefit
B) They are large in value
C) They have a short-medium useful life
D) They have a very long useful life
E) They are earned by providing goods and services to customers
5. A company purchased inventory for $10,000. There was an error and the inventory account was
debited for only $1,000 while accounts payables was credited for $10,000. At what point of the
accounting cycle would this error be discovered? Assume a manual accounting system.
A) Analysis of each transaction
B) Recording the transaction in the accounting records
C) Preparation of the trial balance
D) Preparation of the financial statements
E) The error would not be discovered
1
answers Introductory Financial Accounting Toronto
Metropolitan University
AFA100 Midterm Practice Questions
These questions are for learning and review purposes only. These are NOT the only concepts and
topics you need to know for the midterm.
Solutions are at the end.
1. What is the main purpose of the statement of financial position?
A) Provide useful information on a company’s cash flows.
B) Report revenues earned by providing goods and services and recourses used to generate
revenues during a period of time.
C) Report the financial position (assets, liabilities, equity) at a specific point in time.
D) Measure profit or loss of a business for a specific time period.
E) None of the above
2. Which of the following is NOT an internal user of financial data of a corporation?
A) A creditor
B) The assistant controller
C) A commission-based sales person
D) Senior level management
E) The human resource manager
3. If liabilities increased by $25,000 and shareholders’ equity increased by $5,000 then total assets
must change by what amount in order to keep the accounting equation in balance?
A) $20,000 decrease
B) $20,000 increase
C) $25,000 increase
D) $30,000 increase
E) None of the above
4. Which of the following is true about assets (current and non-current):
, A) They have a future economic benefit
B) They are large in value
C) They have a short-medium useful life
D) They have a very long useful life
E) They are earned by providing goods and services to customers
5. A company purchased inventory for $10,000. There was an error and the inventory account was
debited for only $1,000 while accounts payables was credited for $10,000. At what point of the
accounting cycle would this error be discovered? Assume a manual accounting system.
A) Analysis of each transaction
B) Recording the transaction in the accounting records
C) Preparation of the trial balance
D) Preparation of the financial statements
E) The error would not be discovered
1
