Accounting for IGCSE & O level - Accounting Procedures (Section 18)
1
Which type of error is least likely to be detected by preparing a trial balance?
Answer
(B)
Error of Principle
2
A company receives a debit note from a supplier. How would this be recorded?
Answer
(B)
Credit the Purchases Ledger Control Account.
3
What is the significance of the balance on the sales ledger control account?
Answer
(C)
It should always equal the sum of the balances on the individual trade receivable accounts in the sales ledger.
4
What is the role of the purchases journal in the accounting system?
Answer
(B)
To record credit purchases of goods or services.
5
Which of these actions is a correcting entry designed to perform?
Answer
(C)
To change a previous entry.
6
What impact does interest charged on a customer's overdue account have on the trade receivable balance?
Answer
(A)
Increases the trade receivable balance
7
What is the impact on the financial statements if a revenue expenditure is incorrectly capitalized?
Answer
(A)
Expenses are understated, and profit is overstated in the current period.
8
What action is most likely to reduce the number of accounting errors?
Answer
(C)
Implement robust internal controls.
9
Which of the following is an example of capital expenditure?
Answer
(C)
Acquiring a delivery vehicle
10
What is a common purpose of capital receipts for a business?
Answer
(B)
To fund the purchase of non-current assets
11
The sales commission was posted for £400 and the actual amount was £160, which of the following will be the result of the correction?
Answer
(D)
Decrease the expense account by £240
12
Which of the following actions decrease the balance of the Purchases Ledger Control Account?
Answer
A
B
C
13
If the owner invests in the business, the value of the non-current assets will:
Answer
(C)
Remain the same.
14
Which of the following statements is correct about the journal entry for the accumulated depreciation upon disposal of a non-current asset?
Answer
(A)
Debit Accumulated Depreciation, Credit the Asset account
15
What is the impact on profit of failing to record cash received from customers?
Answer
(C)
No effect
16
What is the correct accounting treatment for a cash discount received from a supplier?
Answer
(B)
Credit the discount received account; debit the supplier's account
17
In the journal entry to record the sale of an asset, which accounts are most likely to be credited?
Answer
B
C
D
18
If the trial balance is imbalanced, which of the following is a likely cause?
Answer
(B)
The amounts are incorrect in the ledger.
19
What is the correct accounting treatment for a discount received from a supplier?
Answer
(B)
Debit Supplier Account, Credit Discount Received
20
What is the impact of an error of principle on the trial balance?
Answer
(A)
The trial balance remains balanced.
21
Which of the following is NOT an advantage of correct classification of expenditures?
Answer
(D)
Reduced tax liability.
22
What is the impact on profit if a revenue expenditure is incorrectly recorded as a capital expenditure?
Answer
(A)
Profit is overstated.
23
If drawings of £6,000 were omitted from the books, which statement is true?
Answer
(D)
Drawings and capital are understated
24
Which of the following events would *increase* the balance on a customer's account within the sales ledger?
Answer
(B)
A credit sale to the customer
25
Bradley's trial balance did not balance, so a suspense account was opened. After investigation, Bradley made an entry to correct an earlier error. The error was originally an undercast by $100. What should be done to the suspense account?
Answer
(B)
Credit the suspense account by $100.
26
What type of entry should you make when a customer returns goods to the business?
Answer
(B)
Credit the Sales Ledger Control Account.
27
Which type of error is most difficult to discover?
Answer
(D)
Compensating error
28
What will be the impact on the statement of financial position when an asset is disposed of?
Answer
A
C
29
If a customer pays their account, how is it recorded in the Sales Ledger Control Account?
Answer
(B)
Credit
30
What should be debited to record a sale on credit?
Answer
(B)
The Sales Ledger Control Account
31
If a company records a revenue expenditure as a capital expenditure, what is the impact on the company's financial position in the current year?
Answer
(A)
Non-current assets will be overstated.
32
What is the impact on the financial statements when a capital receipt is incorrectly recorded as a revenue receipt?
Answer
(B)
Revenue and profit are understated, owner's equity is overstated.
33
What impact does misclassifying a revenue expenditure as a capital expenditure have on the income statement?
Answer
(B)
Expenses are understated, and profit is overstated.
34
The trial balance has the following errors, payment to an employee of £500 was debited to wages and credited to the bank account, and a purchase of £45 has been omitted. Which is the impact on the financial position?
Answer
A
C
D
35
When an asset is disposed of, the net book value should be compared to which of the following to determine if a gain or loss has occurred?
Answer
(C)
The selling price or proceeds from the disposal.
36
What is the effect on the purchases ledger control account of a purchase return?
Answer
(B)
Decreases the balance.
37
A company’s Purchases Ledger Control Account has a credit balance of $50,000. The company returns defective goods to a supplier worth $5,000. What is the new balance?
Answer
(B)
$45,000 (credit)
38
Which financial statement would be used to find depreciation expense?
Answer
(B)
Income statement
39
When correcting the error in the journal due to the sales commission amount of £160 which was misposted for £400, which is the correct entry?
Answer
(A)
Debit sales account £160 and credit the trade payable amount and add £240 from the draft profit.
40
A business owner discovered that a piece of equipment costing $5,000 was not recorded in the accounts. What is the immediate effect on the accounting equation?
Answer
(A)
Assets and Owner's Equity are both understated.
41
What will happen after a correcting entry is made?
Answer
(B)
The suspense account is zeroed out.
42
An error where the debit side of a transaction is recorded as a credit and vice versa is known as what?
Answer
(C)
Error of reversal
43
If the purchases were understated by £200. What is the implication of this error to the financial statement?
Answer
(D)
The profit is overstated by £200.
44
What type of error is it when the debit and credit entries for electricity expenses were reversed? For example, debiting the bank account and crediting the electricity expense account.
Answer
(D)
Error of complete reversal
45
If a company *overstates* its revenue, what effect does this have on its financial statements?
Answer
(B)
Owner's equity will be overstated.
46
What effect would a change in depreciation method have on the financial statements?
Answer
(C)
Affect both the income statement and balance sheet
47
If a customer receives a refund for returned goods, how is this recorded in the sales ledger?
Answer
(B)
Credit customer account, debit cash.
48
When calculating the gain or loss on disposal, which amount represents the 'carrying amount'?
Answer
(C)
The asset's book value at the time of sale.
49
What is the effect on capital if drawings are not recorded?
Answer
(B)
Capital is understated
50
Which statement accurately describes the impact of an error where a building cost was incorrectly debited to the Repairs account?
