Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 31)
1
What type of account is 'Sales Revenue'?
Answer
(D)
A revenue account.
2
Which of the following transactions would increase the owner's equity?
Answer
(D)
Additional investment by the owner.
3
Which of the following statements describes the relationship between the accounting equation and double-entry bookkeeping?
Answer
(C)
Double-entry bookkeeping ensures that the accounting equation remains balanced.
4
Which scenario represents a 'cash in hand' transaction in the cash book?
Answer
(B)
Withdrawing cash from the bank.
5
What impact does an increase in the provision for doubtful debts have on working capital?
Answer
(B)
Decreases
6
Which of the following accounts would be categorized as a current asset?
Answer
(B)
Inventory
7
What is the correct journal entry for paying rent expense?
Answer
(B)
Debit Rent Expense, Credit Cash
8
What is the effect on the balance sheet when the adjusting entry for prepaid insurance is made?
Answer
(A)
Decrease in assets.
9
What is the definition of double-entry bookkeeping?
Answer
(C)
Every transaction affects two or more accounts with equal debits and credits.
10
What is typically recorded in the general journal?
Answer
A
B
11
What are the purposes of closing entries at the end of an accounting period?
Answer
A
B
12
What type of account is the “Tanya fruit & vegetable supplier” account?
Answer
(B)
A liability account.
13
Which of these would cause a trial balance not to balance?
Answer
B
C
14
What is the definition of 'retained earnings'?
Answer
(C)
The accumulated profits of a company that have not been distributed to owners.
15
If a company's bank statement shows a balance different from the cash book balance, what is the common reason for this?
Answer
(B)
Errors in the cash book or bank statement.
16
A company uses the percentage of sales method to estimate bad debts. If sales are $1,000,000 and the estimated percentage is 2%, what is the amount of the bad debt expense?
Answer
(B)
$20,000
17
What is the primary purpose of the 'accrual basis of accounting'?
Answer
(A)
To match revenues with related expenses.
18
Which statement about the accounting equation is correct?
Answer
(C)
Assets = Liabilities + Owner's Equity
19
When recording the sale of goods on credit, what is the correct order of operations?
Answer
(C)
Debit Accounts Receivable, Credit Sales Revenue
20
What is the primary purpose of preparing a trial balance?
Answer
(D)
To check the arithmetical accuracy of the ledger accounts.
21
What type of account is 'Provision for Doubtful Debts'?
Answer
(C)
A contra-asset account.
22
When a customer pays a business via a standing order, how does this affect the business's cash book?
Answer
(D)
The bank balance decreases.
23
When should revenue from services be recognized?
Answer
(C)
When services are performed.
24
What is the effect on the financial statements when a customer prepays for a service?
Answer
(A)
An increase in assets and an increase in liabilities.
25
In double-entry bookkeeping, what is the fundamental principle that must always be followed?
Answer
(A)
Total debits must always equal total credits.
26
What is the normal balance of an expense account?
Answer
(A)
Debit
27
What is the purpose of preparing closing entries?
Answer
(B)
To bring all temporary accounts to zero balances.
28
What is the journal entry for a business paying cash to settle an account payable?
Answer
(A)
Debit Accounts Payable, Credit Cash
29
Which of the following is the correct journal entry to record the write-off of an irrecoverable debt when using the allowance method?
Answer
(C)
Debit Allowance for Doubtful Accounts, Credit Accounts Receivable.
30
What happens after entries from the purchases journal are posted to the ledger?
Answer
(A)
The Purchases Ledger and the General Ledger are updated.
31
What is the effect on the accounting equation when a company purchases equipment with cash?
Answer
(C)
Increases assets and decreases assets.
32
What is the impact on the accounting equation when a business purchases office furniture with cash?
Answer
(C)
Assets increase, assets decrease.
33
What is the purpose of a 'Sales Journal'?
Answer
(C)
To record credit sales.
34
What type of balance does an expense account normally have?
Answer
(B)
Debit
35
Which of the following correctly represents the journal entry for a customer returning goods purchased on credit?
Answer
(C)
Debit Sales Returns, Credit Accounts Receivable
36
How is the purchase of office equipment for cash recorded in the accounting records?
Answer
(B)
Debit equipment, credit cash
37
What is the effect on the accounting equation when a trade discount is given?
Answer
(B)
Assets decrease and owner's equity decreases.
38
In what order are the amounts in the general journal to be entered?
Answer
(A)
Debit first, then credit.
39
How is a discount received from a supplier recorded?
Answer
(D)
Debit accounts payable, credit cash.
40
What are the key benefits of using separate journals, like sales journals, in accounting?
Answer
A
B
41
What is the effect on the profit if an expense incurred is not recorded in the same period?
Answer
(A)
Profit is increased.
42
What is the purpose of the balance sheet?
Answer
(B)
To report a company's assets, liabilities, and equity at a specific point in time.
43
What are the two key components used in the income statement?
Answer
(D)
Revenue and Expenses.
44
What is the normal balance of the Sales Returns and Allowances account?
Answer
(A)
Debit
45
What is the impact on the financial statements when a company accrues interest expense?
Answer
(C)
Expenses increase, liabilities increase.
46
What are the essential components of an adjusting entry?
Answer
A
B
47
What is the journal entry for a business paying its employees' salaries?
Answer
(B)
Debit Salaries Expense, Credit Cash
48
Which of the following best summarizes the information captured within the sales journal?
Answer
A
B
C
49
Which of the following transactions will lead to a decrease in the bank balance?
Answer
B
C
50
What does the 'accrual basis of accounting' primarily aim to achieve?
Answer
(C)
To match expenses with revenues in the correct period.
