Accounting for IGCSE & O level - Accounting Procedures (Section 27)
1
What is a compensating error?
Answer
(B)
When errors cancel each other out.
2
Which journal would be used to record a credit sale?
Answer
(B)
Sales journal
3
Which of the following are examples of non-current assets?
Answer
C
D
4
What would the corrections require, in the case where the sales commission of £160 was misposted as £400?
Answer
(D)
Debit the sales account for £400
5
If the purchase journal was overstated, what would happen?
Answer
(B)
Expenses would be overstated.
6
In the event of a loss on disposal, what is the final effect on the statement of financial position?
Answer
(B)
Total assets decrease.
7
Which of the following are errors that will NOT affect profit but will impact the financial position?
Answer
A
B
8
What type of accounting is depreciation?
Answer
(C)
Non-cash expense
9
In the sales ledger, what happens to the customer's account when they make a payment?
Answer
(B)
The account is credited.
10
Which events will give a more accurate view of profit?
Answer
A
B
C
11
If a trial balance is out of balance because total debits exceed total credits, where would the difference be initially recorded?
Answer
(B)
Credit side of the suspense account
12
Which type of error will *always* cause the trial balance to be unbalanced?
Answer
(B)
An error of omission
13
What is 'depreciable amount'?
Answer
(B)
Original Cost minus Salvage Value
14
What happens when a business takes out a 10-year commercial bank loan?
Answer
(B)
Bank account (debit) and bank loan account (credit).
15
What is the normal balance of the Sales Ledger Control Account?
Answer
(A)
Debit
16
If a business owner invests cash in the business, what type of transaction is this primarily?
Answer
(C)
Capital receipt.
17
Which journal would be used to record goods returned by a customer?
Answer
(C)
Sales Returns Journal
18
The purpose of a trial balance is primarily to:
Answer
(C)
Verify the equality of debits and credits.
19
Which of the following best describes the term 'useful life' in relation to a depreciable asset?
Answer
(B)
The period over which an asset is expected to be used by the business.
20
Which journal is used to record a credit sale?
Answer
(D)
Sales journal
21
Which of these is an example of a capital receipt?
Answer
(D)
Cash received from the sale of a company's vehicle.
22
Which of the following would increase the sales ledger control account balance?
Answer
(B)
Credit sales.
23
What type of account is 'Accumulated Depreciation' and how is it reported in the financial statements?
Answer
(B)
A contra-asset account, reported on the balance sheet.
24
What kind of entry would be made in the Purchases Ledger Control Account for a purchase return?
Answer
(B)
Credit
25
If a company incorrectly treats a capital expenditure as a revenue expenditure, how will it impact the financial statements?
Answer
(C)
Assets will be understated, and profit will be understated.
26
What is the impact of a cash discount received from a supplier on the purchases ledger control account?
Answer
(B)
Decreases the balance
27
In accounting for depreciation, what does the term "useful life" primarily refer to?
Answer
(B)
The period during which the asset is expected to be used by the business.
28
What is the primary purpose of distinguishing between capital and revenue expenditures?
Answer
(B)
To accurately reflect the financial performance and position of the business.
29
Which of the following items is most likely to be considered a revenue expenditure?
Answer
(C)
The cost of repairing a machine.
30
If a company sells goods on credit for $1,000, what is the impact on the accounting equation?
Answer
(A)
Assets and owner's equity increase by $1,000.
31
What is the effect on profit when a payment to an employee has been debited to wages and credited to the bank account?
Answer
(C)
No effect on profit
32
What impact does declaring and paying a cash dividend have on a company's financial statements?
Answer
(B)
Decreases assets and decreases owner's equity.
33
What is the purpose of the statement of cash flows?
Answer
(C)
To report a company's sources and uses of cash during a period.
34
What is the impact on the profit if an expense of $1,500 was not recorded in the books?
Answer
(A)
Profit would be overstated by $1,500.
35
Which event will increase the current assets of a business?
Answer
(C)
Cash sales of goods.
36
If a company purchases a machine for $15,000, with an estimated useful life of 3 years and a residual value of $3,000, what would the annual depreciation be using the straight-line method?
Answer
(A)
$4,000
37
A company buys a machine for $50,000. It has an estimated useful life of 5 years and a salvage value of $5,000. What is the annual depreciation expense using the straight-line method?
Answer
(A)
$9,000
38
What is the effect on the financial statements of an error of complete reversal?
Answer
(B)
Profit and financial position are both impacted.
39
What type of asset is usually depreciated?
Answer
(B)
Buildings
40
What is the effect of credit sales on the Sales Ledger Control Account?
Answer
(A)
The account is debited.
41
What is the appropriate accounting entry for a purchase of a non-current asset?
Answer
(A)
Debit the asset account, credit the bank account.
42
Which of the following are usually included in capital expenditure?
Answer
(C)
Installation charges for equipment, shelving and display units.
43
In the context of a Sales Ledger Control Account, what does a credit entry indicate?
Answer
(B)
A decrease in customer debts.
44
Which depreciation method tends to allocate a higher depreciation expense during the initial years of an asset's life?
Answer
(B)
Declining balance
45
What is the effect on the financial statements if a building cost of £240 was debited to the repairs account?
Answer
(A)
Profit is overstated, fixed assets are understated
46
How does depreciation affect the balance sheet?
Answer
(B)
Decreases assets and decreases owner's equity.
47
What is the impact on the accounting equation if depreciation expense of $2,000 was not recorded?
Answer
(A)
Assets are overstated by $2,000 and owner's equity is overstated by $2,000.
48
Which of the following is *not* a reason to depreciate an asset?
Answer
(C)
To ensure the asset is reflected at its current market value.
49
What is the goal when correcting an error?
Answer
(D)
To adjust the original entry to correct the balance.
50
Which of the following is a key characteristic of a compensating error?
