Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 28)
1
What effect does the accrual of salaries expense have on a company’s liabilities?
Answer
(A)
Increase liabilities.
2
Which of the following is the correct journal entry to correct an error where a sale of goods for $800 was incorrectly recorded as a sale of $80?
Answer
(B)
Debit Cash $720; Credit Sales $720
3
What is the normal balance of an expense account?
Answer
(A)
Debit
4
What is the impact on the accounting equation when a customer returns goods purchased on credit, and receives a cash refund?
Answer
A
C
5
What happens to the retained earnings when there is a net loss?
Answer
(B)
Retained earnings decrease.
6
Which of the following will result in an increase in both assets and liabilities?
Answer
(C)
Receiving cash for services to be performed in the future.
7
Which of the following is correct regarding 'Unearned Revenue'?
Answer
A
C
D
8
What does a credit balance represent in a ledger?
Answer
(C)
An increase in liabilities or equity.
9
What document would a business use to reconcile with their supplier?
Answer
(C)
Statement of Account
10
Which of the following will likely be found in the General Ledger?
Answer
(D)
All of the above
11
If the bank statement shows an NSF check, which adjustment is required in a bank reconciliation?
Answer
(D)
Deduct it from the book balance.
12
How does the direct write-off method impact a company's financial statements?
Answer
A
B
13
How does a cash purchase of inventory affect the accounting equation?
Answer
(C)
Assets increase, assets decrease.
14
How are closing entries related to the temporary accounts?
Answer
(A)
Closing entries change their balances to zero.
15
What is the impact on the bank balance when a customer pays using a standing order?
Answer
(B)
Decreases the bank balance
16
A business makes a cash sale of goods. In which book of prime entry would this be recorded?
Answer
(B)
Cash Book
17
Which of the following accounts is affected when recognizing prepaid insurance expense?
Answer
(A)
Insurance Expense and Prepaid Insurance
18
What is the impact on the bank account when a business receives a bank loan?
Answer
(D)
The bank account is credited and liability is increased.
19
Which of the following is an example of a 'current liability'?
Answer
(D)
Accounts payable
20
Which of the following actions typically result in a debit entry?
Answer
A
B
D
21
What is the journal entry for unearned revenue?
Answer
(C)
Debit Cash, Credit Unearned Revenue
22
What is the impact of the bank transfer to settle an amount due to a supplier on Sept 6 on the accounting equation?
Answer
(C)
Decreases assets and decreases liabilities.
23
When a business pays a supplier by cheque, which aspects of the cash book are affected?
Answer
(A)
Bank column (credit).
24
In the case of prepaid expenses, what account is credited at the time of payment?
Answer
(C)
Cash.
25
Which of the following is an example of an asset account?
Answer
(C)
Cash
26
What is a credit note used for?
Answer
(D)
To reduce the amount a customer owes the business.
27
If a company fails to accrue interest income earned but not yet received at year-end, what is the impact on the financial statements?
Answer
(C)
Assets and liabilities are understated.
28
What does the 'matching principle' dictate in accounting?
Answer
A
C
29
Which of the following is an example of a cash outflow?
Answer
(C)
Paying salaries to employees.
30
Which of the following would cause an increase in the cash book's cash column balance?
Answer
(B)
Cash sales.
31
Which of the following will *decrease* assets?
Answer
(A)
Paying salaries
32
Which financial statement is directly impacted when a debt is written off using the allowance method?
Answer
(B)
Balance Sheet only
33
What is the purpose of preparing a provision for doubtful debts?
Answer
(C)
To recognize the estimated loss from uncollectible trade receivables in the current period.
34
What is the journal entry for the correction of an error where $100 cash was debited to the wrong account when it should have been debited to Utilities Expense account?
