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Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 21)

1
If a business pays a supplier in cash, where would this be recorded in the cash book?
Answer
(B)
Credit side of the cash column.
2
How is a bank loan recorded in the accounting records?
Answer
(B)
Debit Cash, Credit Loan.
3
What effect does a business purchasing inventory on credit have on the accounting equation?
Answer
(C)
Increases assets and increases liabilities.
4
If a business pays rent in cash, which accounts are affected and how?
Answer
(B)
Debit Rent Expense, Credit Cash.
5
What is the process that follows the recording of transactions in the general journal?
Answer
(B)
Posting entries to the ledger accounts.
6
What is the impact of NSF checks on the bank reconciliation?
Answer
(D)
Subtracted from the book balance
7
What accounts are affected when a business receives cash from a customer for a credit sale?
Answer
A
C
8
If a company purchases goods on credit, which of the following is correct?
Answer
(C)
Debit Purchases, Credit Accounts Payable
9
What accounting principle does the allowance for doubtful accounts help uphold?
Answer
(B)
Matching
10
Which of the following is a credit transaction?
Answer
(D)
A customer agrees to pay for a product later.
11
What are the advantages of using an imprest system?
Answer
A
B
12
What is the main purpose of closing entries?
Answer
(B)
To transfer the balances of temporary accounts to retained earnings.
13
What does a 'debit' entry do to the owner's capital account?
Answer
(B)
Decreases the balance
14
What is the purpose of a chart of accounts?
Answer
(B)
To provide a list and organizational structure of all accounts.
15
What is the primary reason for balancing off accounts?
Answer
(C)
To provide a summary of account balances at the end of the accounting period.
16
If a company purchases inventory on credit, which of the following will be correct?
Answer
(B)
Debit Inventory, Credit Accounts Payable
17
What is the main purpose of an invoice?
Answer
(B)
To request payment for goods or services
18
Which of the following accounts would typically have a debit balance?
Answer
(C)
Cost of Goods Sold
19
Which of the following transactions decreases owner's equity?
Answer
B
C
20
What is a 'cash book' considered to be?
Answer
(A)
A book of prime entry and a ledger account
21
When a customer pays cash for a credit sale, what is the debit entry?
Answer
(C)
Cash/Bank
22
What accounting entry would record cash sales?
Answer
(A)
Debit Cash, Credit Sales
23
What happens to the income statement when a company provides services to a customer, but the customer has not yet paid?
Answer
(A)
Service revenue will be recognized.
24
Which items are *always* included in each line entry in the sales returns journal?
Answer
A
B
C
25
Which type of account normally has a debit balance?
Answer
(C)
Expense accounts
26
What is the impact on the trial balance if an incorrect entry has been made on both sides?
Answer
(B)
The trial balance will still balance.
27
Which side of the accounting equation is affected by a credit sale?
Answer
(C)
Assets and equity
28
What is the effect of an increase in inventory on the accounting equation?
Answer
(C)
Increases assets, increases assets.
29
What happens to a business's equity if a business has a net loss during an accounting period?
Answer
(B)
Equity decreases
30
When a company receives interest earned on its checking account, how does this affect the bank reconciliation?
Answer
(A)
It increases the book balance.
31
What does "carried down" represent in a ledger account?
Answer
(A)
The balance brought forward to the next period.
32
Which of the following will increase a company's liabilities?
Answer
B
C
33
What type of items are recorded in the cash book, but may not yet appear on the bank statement?
Answer
(A)
Outstanding checks
34
What information is typically included on an invoice?
Answer
A
B
C
D
35
In the context of drawing cash, what is the effect on the owner's equity?
Answer
(B)
Decreases owner's equity.
36
What is the journal entry when a business buys inventory on credit?
Answer
(C)
Debit Inventory, Credit Accounts Payable
37
What is the correct journal entry for bank charges?
Answer
(A)
Debit Bank Charges, Credit Bank
38
What does the seller typically include on an invoice?
Answer
A
B
C
39
Which account is credited when an expense has been accrued?
Answer
(C)
Accounts Payable.
40
Which of the following are examples of business documents used in recording financial transactions?
Answer
A
B
C
41
What is the effect on the accounting equation when a business provides services to a customer on credit?
Answer
(C)
Assets increase, equity increases.
42
Which of the following statements are true about the role of a journal?
Answer
A
B
D
43
In which book of prime entry would you record the purchase of office stationery on credit?
Answer
(B)
Purchases Journal
44
What does 'cash in hand' represent within a cash book?
Answer
(B)
Physical currency held by the business.
45
Which of the following is true of unearned revenue?
Answer
(A)
Represents a liability.
46
If the company uses the accrual accounting, when do we record sales income?
Answer
(C)
When the sale is made.
47
A trial balance can detect which of the following types of errors?
Answer
B
C
D
48
If the total debits and credits do not match in a trial balance, what does this indicate?
Answer
(B)
There is a high probability of errors.
49
What is the correct accounting entry for an electricity bill paid via direct debit?
Answer
(B)
Debit Utilities Expense, Credit Bank
50
What type of accounts have a debit balance?
Answer
(A)
Assets, expenses, and dividends