Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 27)
1
What type of account is 'Allowance for Doubtful Accounts'?
Answer
(D)
A contra-asset account
2
When recording a cheque payment for an air conditioning system, what is impacted?
Answer
(C)
Debit expense; credit bank
3
Which type of account is *never* included in the journal entries for transferring balances to an income statement?
Answer
(C)
Asset accounts
4
Which of the following are examples of transactions that would be recorded as credits in a business?
Answer
A
B
5
What type of account is a cash book, in terms of its function?
Answer
(A)
A subsidiary ledger.
6
Which accounting entries will affect cash flow directly?
Answer
B
C
7
On which date was inventory purchased on credit?
Answer
(C)
Sept 11
8
What is the primary reason for creating an allowance for doubtful accounts?
Answer
(B)
To estimate and report the amount of receivables that are unlikely to be collected.
9
Which of the following accounts is *not* closed at the end of the accounting period?
Answer
(C)
Retained Earnings
10
What is the impact of an unrecorded deposit on a bank reconciliation prepared using the bank statement method?
Answer
(A)
It increases the balance per the bank statement.
11
Which of the following is a key characteristic of accrual accounting?
Answer
(C)
Revenues and expenses are recognized when earned or incurred, regardless of cash flow.
12
What is the effect on the accounting equation when a company purchases equipment on credit?
Answer
(A)
Assets increase, Liabilities increase, Equity stays same
13
What is the effect of a deposit in transit on the balance per bank statement?
Answer
(A)
Increases the balance.
14
Which accounting method is being used if a company records bad debt expense only when a specific account is determined to be uncollectible?
Answer
(B)
Direct Write-off Method
15
What is the impact on the balance sheet when recognizing accrued revenue?
Answer
(B)
Assets increase, equity increases.
16
Which actions are signs of an overdrawn bank account?
Answer
(A)
Total debits exceed total credits.
17
What will result in an increase in owner's equity?
Answer
A
C
18
Which of the following statements best describes the double entry rule regarding the sales journal?
Answer
(C)
Each sales transaction requires a debit to the customer’s trade receivable account and a credit to the sales account.
19
What is the impact on the accounting equation when a business purchases inventory for cash?
Answer
(D)
Assets stay the same.
20
What are the fundamental purposes of adjusting entries?
Answer
B
C
21
What does an “error of original entry” involve?
Answer
(B)
An incorrect amount is entered in the books of original entry.
22
What type of account is 'Accumulated Depreciation'?
Answer
(C)
A contra-asset account.
23
Which of the following accounts are found on the balance sheet?
Answer
A
B
D
24
Which statement accurately describes the relationship between debits and credits?
Answer
(A)
Debits and credits are always equal in every transaction.
25
What is the relationship between the size of a customer's order and the trade discount they might receive?
Answer
(A)
Larger orders may lead to higher trade discounts.
26
When a company purchases office supplies on account, what is the effect on the accounting equation?
Answer
(A)
Assets increase, liabilities increase.
27
What types of payment are typically documented by a receipt?
Answer
A
B
C
28
Which of the following statements are true regarding the use of drawings?
Answer
A
C
29
What type of transactions are recorded in a purchases returns journal?
Answer
(B)
Returns of goods to suppliers.
30
Which of the following is true about the 'Matching Principle'?
Answer
B
C
D
31
What is the normal balance of the Sales Revenue account?
Answer
(B)
Credit
32
If a company purchases equipment on credit, which accounts are affected?
Answer
(B)
Debit Equipment, Credit Accounts Payable
33
What are the limitations of the trial balance?
Answer
A
C
34
What is the impact on the accounting equation when a company sells goods for cash?
Answer
(C)
Assets increase, equity increases.
35
What accounting document is primarily used to reconcile differences between a company's cash book and its bank statement?
Answer
(D)
Bank Reconciliation Statement.
36
What happens to a business's cash position when a customer pays by check?
Answer
(B)
Bank balance increases.
37
Which financial statement reports a company's assets, liabilities, and equity?
Answer
(C)
Balance Sheet
38
Which of the following is an example of a 'current liability'?
Answer
(B)
Accounts payable (money owed to suppliers).
39
Which accounts are increased by the end-of-year adjusting entries?
Answer
A
B
D
40
If a business receives a payment via BACS transfer, where would the entry be made in the cash book?
Answer
(B)
In the bank column.
41
Which of the following is an example of an operating activity on the statement of cash flows?
Answer
(C)
Collection of cash from customers
42
If a company fails to make an adjusting entry for accrued interest expense at the end of the year, what will be the impact on the financial statements?
Answer
(B)
Expenses and liabilities will be understated.
43
In accounting, what is the primary use of a journal?
Answer
A
D
44
What does it mean for an account to have a 'credit' balance?
Answer
(D)
The account's balance is on the right side of the T-account.
45
What is the correct accounting equation?
Answer
(D)
Assets = Liabilities + Equity
46
What are ledger accounts?
Answer
(B)
Records of financial transactions arranged by account.
47
Which document is used when recording a sale of goods on credit?
Answer
(A)
A sales invoice.
48
When a business receives a bank transfer from a customer, how is this recorded?
Answer
(B)
Debit bank, credit sales
49
Which of the following is an advantage of using the allowance method over the direct write-off method for accounting for bad debts?
Answer
(B)
It adheres more closely to the matching principle.
50
If a company has received cash in advance from a customer for services to be provided, which account will be credited when initially receiving the cash?
