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Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 18)

1
What happens when a company provides services but has not yet billed the customer?
Answer
(A)
Accounts receivable increases and revenue increases.
2
Which of the following statements correctly describes the relationship between the adjusting entry for depreciation and the financial statements?
Answer
A
D
3
What is the journal entry to record a debt recovered which was previously written off, assuming the allowance method?
Answer
(C)
Debit Accounts Receivable, Credit Allowance for Doubtful Accounts; and Debit Cash, Credit Accounts Receivable.
4
Which of the following are permanent accounts?
Answer
A
D
5
If a business receives a check from a customer, where is the increase initially recorded?
Answer
(B)
In the bank column of the cash book.
6
What is the normal balance for an asset account?
Answer
(A)
Debit
7
In accounting terms, what does 'credit' generally represent?
Answer
(A)
A decrease in an asset or an increase in a liability or equity.
8
Which journal is used to record all the daily transactions of the business?
Answer
(C)
General Journal
9
Which of the following statements best describes a direct debit?
Answer
(B)
A variable payment agreed by the payer.
10
When balancing off an account, the difference between the debit and credit sides represents the:
Answer
(C)
Account balance
11
What is the purpose of a 'trial balance'?
Answer
(B)
To ensure that the accounting equation is balanced.
12
Which financial statement reports a company's financial performance over a period of time?
Answer
(B)
Income Statement
13
What is the normal balance of the Capital account?
Answer
(B)
Credit
14
What does a trial balance help to ensure?
Answer
(B)
The accuracy of the accounting equation.
15
Which of the following increase a company's assets?
Answer
(A)
Receipt of cash from customers
16
What is the difference between 'revenue' and 'profit'?
Answer
(B)
Profit is the amount left after deducting expenses from revenue.
17
Which of the following is an example of a current asset?
Answer
(C)
Accounts Receivable
18
What is the relationship between the matching principle and adjusting entries?
Answer
(C)
Adjusting entries are used to apply the matching principle.
19
When is the prepaid insurance expense recognized?
Answer
(B)
During the life of the policy.
20
Which of the following entries affect the Income Statement directly?
Answer
A
B
21
What is the purpose of a 'Statement of Cash Flows'?
Answer
(C)
To present the changes in a company's cash balance over a period.
22
What is the effect of recording an accrual of salaries expense at the end of the accounting period?
Answer
(C)
Expenses increase, and liabilities increase.
23
If the business had a sale on credit, which of the following would be affected?
Answer
B
C
D
24
What is the nature of 'accounts receivable' on a company's balance sheet?
Answer
(B)
Asset
25
What type of payment is considered when a customer uses a payment card?
Answer
(C)
A bank debit.
26
When a company receives cash from a customer for services to be performed next month, what should be done?
Answer
(C)
Debit Cash; Credit Unearned Revenue.
27
What is the primary purpose of a 'ledger'?
Answer
(B)
To classify and summarize transactions by account.
28
Which of the following are used to record errors?
Answer
A
B
29
Which of the following statements is correct regarding a trial balance?
Answer
(D)
The trial balance is used to ensure the debit and credit totals are equal.
30
Which of the following is a characteristic of a 'current asset'?
Answer
(A)
It is expected to be converted into cash within one year or the operating cycle, whichever is longer.
31
What happens to the cash flow of the business when a supplier provides a cash discount?
Answer
(B)
Cash outflow decreases.
32
How are returns of goods usually handled in the general ledger?
Answer
(C)
Debited to Sales Returns and Allowances.
33
A company receives payment for services in advance. What type of account is created?
Answer
(B)
Unearned Revenue.
34
Which of the following source documents would be used for recording cash sales?
Answer
(C)
Receipt
35
In the context of accounting, what is the primary purpose of adjusting entries?
Answer
(C)
To record the impact of transactions that have occurred but haven't been recorded yet.
36
When making adjusting entries for accrued expenses, which accounts are usually affected?
Answer
A
B
37
When is it appropriate to record an adjusting entry?
Answer
(A)
At the end of an accounting period.
38
What action does a business need to perform when using a bank current account to pay suppliers?
Answer
B
C
39
What will a petty cash voucher typically include?
Answer
A
B
C
40
When a company pays its suppliers with cash, what is the normal journal entry?
Answer
(A)
Debit Accounts Payable, Credit Cash.
41
The imprest system is a(n) _____ way of controlling cash in a small organization.
Answer
(B)
Effective
42
When should revenue be recognized under the accrual accounting?
Answer
B
C
43
What is the effect of a credit entry on a liability account?
Answer
(A)
It increases the liability.
44
When a company receives cash from a customer in advance for services to be performed in the future, what is the correct journal entry?
Answer
(B)
Debit Cash, Credit Unearned Revenue
45
What is the effect of recording a prepaid expense on the income statement?
Answer
(B)
It decreases net income.
46
Which of the following are typically found in the General Ledger?
Answer
A
B
C
D
47
What is the primary goal of financial accounting?
Answer
(B)
To provide information to external users for decision-making.
48
What is the effect on profit if an expense is recognized in the wrong period?
Answer
(B)
Profit is misstated.
49
What is a 'Trade Payable'?
Answer
(B)
Amount owed to suppliers.
50
Which of the following statements are true about adjusting for prepaid expenses?
Answer
A
B
D