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Accounting for IGCSE & O level - Accounting Procedures (Section 17)

1
In a situation of a contra entry, which ledgers are involved?
Answer
(C)
Both sales and purchases ledgers.
2
What is the primary purpose of a control account?
Answer
(B)
To verify the arithmetical accuracy of the subsidiary ledgers.
3
When a business replaces a roof, what would be the correct accounting treatment?
Answer
(B)
Capitalize the cost as a capital expenditure.
4
What will be the correct entry when a drawing of £6,000 was not recorded?
Answer
(A)
Debit Drawings, Credit Capital
5
Which of the following errors can be revealed by the trial balance?
Answer
A
B
D
6
What is the purpose of a sales journal?
Answer
(C)
To record all credit sales transactions.
7
Which of the following is NOT a type of revenue receipt?
Answer
(C)
Sale of spare land.
8
If a business recorded a $1000 payment for rent as a debit to the utilities expense account, this is an example of:
Answer
(B)
An error of commission
9
Which of the following statements is correct regarding the Purchases Ledger Control Account?
Answer
(B)
It controls and summarizes all transactions with suppliers.
10
What is the primary role of the balance sheet?
Answer
(B)
To show a company's assets, liabilities, and equity at a specific point in time.
11
If a customer pays their outstanding balance in full, how will this impact the Sales Ledger Control Account?
Answer
(B)
It is credited.
12
How does the disposal of a non-current asset affect the statement of financial position?
Answer
A
B
13
What is the primary function of the purchases ledger control account?
Answer
(B)
To provide a summary of purchases on credit.
14
A company had opening balance of $10,000 in the Sales Ledger Control Account. During the month, it made credit sales worth $50,000, received cash from customers worth $40,000, and issued credit notes for $2,000. What is the closing balance of the Sales Ledger Control Account?
Answer
(A)
$18,000 (Debit)
15
Which of the following errors can occur despite the trial balance balancing?
Answer
A
C
16
A company has a debit balance in its Sales Ledger Control Account. What does this signify?
Answer
(C)
Customers owe money to the company.
17
Identify the corrections required in the journal before correcting an error where the purchase journal was understated by £200.
Answer
(A)
Debit £200 from purchases account and credit suspense account.
18
What effect will an understated purchase have on profit?
Answer
(C)
Overstated profit
19
What is the effect of a credit sale on the Sales Ledger Control Account?
Answer
(A)
Debit the account.
20
What should be done if the sales ledger control account does not agree with the total of the individual customer balances?
Answer
(C)
Investigate to find and correct the errors.
21
Which of the following best describes the purpose of the units-of-production method?
Answer
(B)
To depreciate an asset based on its usage or output
22
What will be the impact of the overstatement of expenses in the income statement?
Answer
(A)
Profit will be understated.
23
Which of the following entries would *increase* the balance of a trade receivable account?
Answer
A
C
24
Which book of prime entry is used to record credit purchases?
Answer
(B)
Purchases journal
25
In the sales ledger, which accounting entry is made when a customer pays their account balance?
Answer
(B)
Credit the customer’s account and debit cash.
26
A company purchases equipment for $100,000. The equipment has an estimated useful life of 10 years with a salvage value of $10,000. Using the straight-line method, what is the annual depreciation expense?
Answer
(A)
$9,000
27
What is meant by the term 'book value' of an asset?
Answer
(C)
The cost of the asset less accumulated depreciation.
28
What is the effect on profit if a revenue expenditure is incorrectly treated as a capital expenditure?
Answer
(B)
Profit is overstated.
29
In the purchases ledger, what accounting entry is recorded when a business receives a credit note from a supplier for returned goods?
Answer
(C)
Debit the purchase returns account and credit the supplier account.
30
A payment of £500 was credited to the wages account and debited to the bank account. Which financial statement is most directly impacted?
Answer
(B)
Balance Sheet
31
An item was originally recorded in the correct account, but with the incorrect amount. Which of the following errors has occurred?
Answer
(C)
Error of Original Entry
32
If a company incorrectly records a cash payment for rent as a capital expenditure, what will be the immediate impact on the financial statements?
Answer
(A)
Assets will be overstated and expenses will be understated.
33
What should happen to the accumulated depreciation account when a non-current asset is disposed of?
Answer
(B)
The account balance should be decreased to zero.
34
A sales invoice for $500 was entered in the sales journal, but the corresponding entry to the customer's account in the sales ledger was only $50. How will this error affect the sales ledger control account?
Answer
(A)
The sales ledger control account will be understated.
35
A drawing of £6,000 was not recorded, what effect will it have on the financial position?
Answer
(C)
Cash in bank understated by £6,000, capital understated by £6,000.
36
What is the impact on the profit if an expense is overstated?
Answer
(B)
Profit will be understated.
37
What type of error occurs if a purchase of goods on credit is recorded as a cash purchase?
Answer
(A)
Error of Principle
38
What is the primary goal when correcting errors in accounting records?
Answer
(B)
To make the financial statements reflect the true and fair view of the business.
39
What is the purpose of distinguishing between capital and revenue receipts in accounting?
Answer
(B)
To accurately assess the financial position of the business.
40
Which of the following transactions *increases* the balance of the Purchases Ledger Control Account?
Answer
(D)
Purchasing goods on credit.
41
What is the appropriate journal entry to record a return of goods to a supplier?
Answer
(A)
Debit Purchases Returns, Credit Supplier Account
42
Which actions would decrease the balance in the Sales Ledger Control Account?
Answer
A
B
D
43
What is the impact on the company's assets if an asset is scrapped and has no salvage value?
Answer
(A)
Assets decrease.
44
What effect does recording depreciation have on the net profit of a company?
Answer
(A)
Decreases net profit
45
What is the impact on the financial statements if drawings of £6,000 were not recorded?
Answer
A
C
46
Which of the following would be classified as a capital expenditure?
Answer
(B)
Installation charges for a new machine
47
What type of account is the purchases ledger?
Answer
(C)
Personal account.
48
What is the formula for calculating the annual depreciation expense using the straight-line method?
Answer
(A)
(Cost - Salvage Value) / Useful Life
49
What is the effect of a compensating error?
Answer
(C)
It creates an error that offsets another error
50
What is the main objective of calculating depreciation expense?
Answer
(B)
To match the cost of an asset to the revenue it generates.