Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 15)
1
Which of the following is a cash outflow?
Answer
(C)
Payment of rent.
2
What is the primary purpose of accounting?
Answer
(B)
To measure the profit or loss and value of a business.
3
Which of the following are considered assets?
Answer
A
B
D
4
A company performs services for a customer in December, but the customer pays in January. When should the company recognize the revenue under accrual accounting?
Answer
(B)
When the services were performed in December.
5
Which of the following are true regarding the components of the accounting equation?
Answer
A
B
C
6
When a company makes a cash sale, which part of the cash book is affected?
Answer
(A)
Cash column (debit)
7
What type of adjusting entry involves recognizing an expense for which cash has already been paid?
Answer
(B)
Deferral
8
Which of the following statements is true about a 'credit' in the accounting system?
Answer
(A)
A credit always decreases the balance of an asset account.
9
What is the impact on the profit from the adjustments?
Answer
(A)
Profit is understated.
10
When a business receives cash, which side of the cash book's cash column is it recorded?
Answer
(A)
Debit side.
11
What effect does a cash payment to a supplier have on the accounting equation?
Answer
(B)
Assets and liabilities decrease.
12
If a company underestimates the allowance for doubtful accounts, what effect does this have on the financial statements?
Answer
(B)
Assets will be overstated, and net income will be overstated.
13
What is the purpose of an income statement?
Answer
(B)
To report the financial performance of a business over a period of time.
14
How is a business's cash position determined?
Answer
(B)
By the balance in the bank account.
15
What is the journal entry when a customer pays cash for a service provided?
Answer
(B)
Debit Cash, Credit Service Revenue
16
What type of errors can the general journal be used to correct?
Answer
(B)
Errors in posting to ledger accounts.
17
In the context of accounting, what is accrued expense?
Answer
(C)
An expense that has been incurred but not yet paid.
18
When using the allowance method, the entry to write off a specific uncollectible account includes a:
Answer
(C)
Debit to Allowance for Doubtful Accounts and a credit to Accounts Receivable.
19
What is the term for an error where the debit and credit entries are made for the same amount but are posted to the wrong accounts?
Answer
(A)
Error of principle.
20
What is the impact on the accounting equation if a business owner invests cash into the business?
Answer
(B)
Assets increase; equity increases.
21
What is the primary purpose of the aging of receivables method?
Answer
(B)
To estimate the allowance for doubtful accounts.
22
If goods are returned because they are damaged, what type of document is issued by the supplier?
Answer
(C)
Debit Note
23
Which of the following best describes accrued expenses?
Answer
(B)
Expenses recorded but not yet paid.
24
Which financial statement shows the financial position of a business?
Answer
(C)
Balance sheet.
25
What is the key feature used to prepare a trial balance?
Answer
(C)
The account balances.
26
Which of the following is the best definition of an irrecoverable debt?
Answer
(C)
A debt that a company does not expect to be able to collect.
27
Which financial statement would be most affected by sales returns?
Answer
(B)
The income statement
28
Which account balances are usually used to calculate profit?
Answer
(B)
Revenue and expenses
29
What is the impact of a cash payment from a customer on the bank account balance, after a cash sale?
Answer
(A)
The bank account balance increases.
30
What is the effect of a debit entry on an asset account?
Answer
(A)
It increases the asset.
31
Which of the following statements best describes the information recorded in the sales journal?
Answer
A
B
D
32
If a company receives a bill for electricity, what is the correct journal entry?
Answer
(C)
Debit Utilities Expense, Credit Accounts Payable
33
When is a business required to keep a record of transactions in the books of prime entry?
Answer
(C)
Every time a transaction occurs.
34
If a company makes a sale on credit, what accounts are impacted?
Answer
(C)
Debit accounts receivable, credit sales.
35
Which of the following is a book of original entry?
Answer
(C)
Cash Book
36
A company paid $100 for employee changes, but recorded it as $1,000 in the accounts. What type of error occurred?
Answer
(C)
Error of original entry.
37
An increase in the provision for doubtful debts will have which of the following effects on the financial statements of the business?
Answer
(A)
Increase the value of trade receivables and reduce profit
38
Which of the following statements correctly describe the role of the income statement?
Answer
B
C
39
What is the purpose of a 'chart of accounts'?
Answer
(B)
To provide a systematic listing of all accounts used by a business.
40
What does it mean to 'accrue' an expense?
Answer
(B)
To estimate and record an expense in the period it is incurred, even if not yet paid.
41
What does the term 'credit' mean in accounting?
Answer
(B)
The right side of an account.
42
Which transactions involve double entries that would be recorded in the general ledger?
Answer
A
B
C
D
43
What is the usual nature of the debit balance?
Answer
(C)
Expense accounts
44
Which journal would be used to record cash payments made by the business?
Answer
(C)
Cash Payments Journal
45
Which of the following is a result of using a direct debit?
Answer
(C)
The bank balance decreases.
46
What is the effect of an increase in accounts payable on the accounting equation?
Answer
(A)
Assets increase, Liabilities increase
47
What is the effect on the balance sheet when adjusting for accrued expenses?
Answer
(B)
Decrease assets, increase liabilities.
48
Which of the following accounts are directly impacted when recording an accrual of salaries earned but not yet paid?
Answer
(A)
Salaries Expense and Salaries Payable
49
Which of the following is the best description of depreciation?
Answer
(B)
The process of expensing the cost of an asset over its useful life.
50
Which of the following is a main purpose of a sales journal?
