Accounting for IGCSE & O level - Accounting Procedures (Section 19)
1
What would increase accumulated depreciation?
Answer
(D)
Annual Depreciation Expense
2
What is the impact on the draft financial statement in the case where the electricity expenses were understated and reversed?
Answer
A
C
3
Which of the following best describes the concept of 'depreciation' in accounting?
Answer
(B)
The allocation of an asset's cost over its useful life.
4
What is a key characteristic of capital receipts?
Answer
(D)
They increase the owner's equity.
5
What is the impact on the statement of financial position for not including annual depreciation?
Answer
(D)
Increase draft profit by $1,000
6
Which method is best suited for vehicles, equipment, and similar assets that lose value quickly?
Answer
(B)
Reducing balance method
7
What is the effect on the income statement when a capital expenditure is incorrectly recorded as a revenue expenditure?
Answer
(B)
Expenses are overstated, and profit is understated.
8
How does the matching principle relate to depreciation?
Answer
(B)
It requires depreciation expense to be matched with the revenues the asset helps generate.
9
What is the formula for calculating depreciation using the straight-line method?
Answer
(A)
(Cost - Residual Value) / Useful Life
10
What type of error is illustrated by crediting the wages account and debiting the bank account after paying an employee.
Answer
(A)
Error of principle
11
Which book of prime entry records cash sales?
Answer
(C)
Cash Book
12
Which of the following is an example of a compensating error?
Answer
(C)
A debit of $100 is posted as a credit of $100 in a different account.
13
Which of the following is NOT a characteristic of an asset that is eligible for depreciation?
Answer
(D)
It is land.
14
What is the main objective when choosing a depreciation method?
Answer
(A)
To match the expense with the revenue
15
What does "net book value" represent?
Answer
(C)
The depreciated value of the asset.
16
What will reduce the debit balance of the Sales Ledger Control Account?
Answer
A
B
D
17
If the building expenses were understated by £300, and the sales are understated by £300, which is the impact on the financial statements?
Answer
A
D
18
Which of the following financial records will be affected if the drawings were completely omitted?
Answer
(C)
Only the Balance Sheet.
19
Which of the following statements is true regarding the disposal of an asset and its impact on the statement of cash flows?
Answer
(C)
The proceeds from the sale are classified as an investing activity.
20
What is the main purpose of the income statement?
Answer
(B)
To show the financial performance of a company.
21
What impact does the error of complete reversal have on profits?
Answer
(D)
Can't be determined.
22
Which errors will make the trial balance unbalanced?
Answer
A
C
23
Which of the following events would trigger a journal entry involving depreciation?
Answer
(D)
All of the above.
24
What is the correct treatment of a discount allowed in the sales ledger control account?
Answer
(B)
Credit the control account
25
What is the accounting treatment for discounts allowed in the sales ledger?
Answer
(B)
Credit customer's account, Debit the sales discount account
26
The depreciation of equipment would be classified as?
Answer
(B)
Revenue expenditure.
27
Which type of error would *not* be revealed by the trial balance?
Answer
(A)
An error of principle
28
Which of the following best describes the purpose of a general ledger?
Answer
(B)
To summarize financial transactions for a specific period.
29
Consider the scenario where an asset with a cost of $10,000, accumulated depreciation of $6,000, and a salvage value of $1,000 is sold for $3,000. What is the amount of the loss or gain on disposal?
Answer
(A)
Loss of $1,000
30
Which of the following are examples of capital expenditure?
Answer
A
C
31
In the context of accounting records, what is the primary purpose of the general journal?
Answer
(B)
To record transactions that do not fit into any other book of prime entry.
32
How does the choice of depreciation method affect the calculation of gain or loss on disposal?
Answer
(A)
It affects the depreciation expense and therefore the net book value.
33
What is the book value of an asset?
Answer
(C)
The original cost less accumulated depreciation
34
What is the purpose of a control account?
Answer
(B)
To summarize and control transactions in subsidiary ledgers.
35
Which entry would *not* typically be found in the Sales Ledger Control Account?
Answer
(D)
Purchases on credit.
36
What is the function of the purchases journal?
Answer
(B)
To record credit purchases from suppliers.
37
What is the correct entry for the Sales commission amount of £160, which was misposted to £400?
Answer
(D)
Debit the sales account by £240 and credit the sales commission account by £240.
38
What does the term 'book value' represent in the context of a non-current asset?
Answer
(C)
The asset's original cost less accumulated depreciation.
39
What is the formula for calculating the annual depreciation using the straight-line method?
Answer
(A)
(Cost - Salvage Value) / Useful Life
40
Which of the following is a characteristic of a liability?
Answer
(B)
It is an obligation of the entity arising from past events.
41
If a company records a capital expenditure as a revenue expenditure, what is the effect on the company's profitability in the current period?
Answer
(B)
Profit is understated.
42
What is the key concept when considering the accounting treatment for disposal of an asset?
Answer
(B)
To accurately match the asset's expense to its generated revenue.
43
In a sales ledger, what is the result of receiving cash from a customer?
Answer
(B)
Credit the customer's account
44
If a customer is granted a discount, how does this impact the Sales Ledger Control Account?
Answer
(B)
Credit the account.
45
When are contra entries used?
Answer
(A)
When a customer also supplies goods or services to the business.
46
What is the impact on the statement of financial position for introducing new capital?
Answer
(C)
Increase capital by $17,000
47
What is the effect on the statement of financial position if an item of inventory costing $1,000 was accidentally omitted from the year-end inventory count?
Answer
(B)
Assets and owner's equity are understated.
48
What is the accounting equation?
Answer
(C)
Assets = Liabilities + Owner's Equity
49
Which of the following entries would *increase* the balance on the Purchases Ledger Control Account?
Answer
(C)
Credit purchases
50
What is a common reason that errors are made in accounting records?
