Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 33)
1
What happens to the sales returns account balance if a customer returns goods purchased on credit?
Answer
(B)
It increases.
2
If a company does not accrue for an expense at the end of the accounting period, which of the following are true?
Answer
(D)
Liabilities are understated and expenses are understated.
3
What is a trial balance primarily used for?
Answer
(B)
To check the accuracy of ledger postings.
4
What type of entry does a business make when a bank deposit is made?
Answer
(C)
Debit to cash, debit to bank.
5
How would the payment of rent by cheque be recorded?
Answer
(A)
Debit rent expense, credit bank
6
What is the effect of a standing order on the cash book?
Answer
(D)
It decreases the bank balance.
7
In a trial balance, a balance is extracted from the ledger of a small business. The debit side is 5,000 while the credit side is 3,500. Which of the following errors have been made?
Answer
(A)
An error of original entry.
8
Which of the following is an example of accrued income?
Answer
(B)
Interest earned but not yet received.
9
What is the effect of a debit entry in the cash book?
Answer
(A)
Increases cash balance
10
What is the significance of a trial balance that does not balance?
Answer
(C)
It indicates a need for further investigation.
11
When goods are returned, what is the debit and credit made in accounting?
Answer
(C)
Debit Sales Returns and Allowances and Credit Accounts Receivable
12
What is an example of an accrued expense?
Answer
(C)
Salaries payable to employees at year-end.
13
When a company receives a bill for utilities, which account(s) are debited?
Answer
(A)
Utilities Expense
14
What kind of effect does the return of merchandise sold on credit have on the income statement?
Answer
(C)
Decreases net profit
15
What does the term "balancing the trial balance" mean?
Answer
(B)
That the total debit balances equal the total credit balances.
16
What is a typical purpose for a sales receipt?
Answer
(D)
To confirm purchase
17
What is the typical role of a credit note in a sales returns transaction?
Answer
(C)
To authorize the reduction of the customer's account balance.
18
If a company purchases inventory on credit, which accounts are affected?
Answer
(C)
Debit Inventory, Credit Accounts Payable
19
On Sept 5, a cheque was issued to pay for a new delivery van. Which accounts are affected, and how?
Answer
(A)
Cash decreases; Delivery van increases.
20
Which of the following is a key advantage of using separate journals for sales returns and sales?
Answer
(D)
It provides detailed information about sales and returns.
21
What is the main purpose of a trial balance?
Answer
(B)
To check the accuracy of the ledger accounts
22
Identify the transactions that impact the Drawings account.
Answer
A
B
23
If a business pays in advance for an expense that will be used in the following accounting year, how should the expense be treated in the current year?
Answer
(B)
It should be treated as a prepayment or prepaid expense.
24
Which of the following statements are true about the use of credit notes?
Answer
A
B
25
When a company sells goods on credit, what two accounts are directly impacted?
Answer
(C)
Accounts Receivable and Sales Revenue
26
When a business purchases inventory with cash, how does this affect the accounting equation?
Answer
(D)
The composition of assets changes; no net effect.
27
Which of the following transactions will increase assets?
Answer
A
D
28
Where do we find the account balances used to prepare a trial balance?
Answer
(C)
In the general ledger.
29
Which of the following is directly affected by the total of sales returns recorded during an accounting period?
Answer
(B)
Gross Profit
30
What type of account is 'Salaries Expense'?
Answer
(D)
Expense
31
What is the journal entry when a company pays an invoice from a supplier, where the original purchase was on credit?
Answer
(B)
Debit Accounts Payable, Credit Cash.
32
Which of the following is true about the cash book's function?
Answer
(D)
All of the above.
33
Why is the accounting year often different than the calendar year for a business?
Answer
(A)
To align with the company's fiscal cycle or industry practices.
34
What would be the debit side of the adjusting entry to record unearned revenue as it is earned?
Answer
(C)
Unearned Revenue
35
What is the impact on a company's equity when it records a sale?
Answer
(A)
Increases
36
A company has a building. Depreciation is an example of which type of entry?
Answer
(B)
Deferral
37
When writing off an irrecoverable debt, what is the correct journal entry?
Answer
(A)
Debit Irrecoverable Debts; Credit Receivables
38
What effect does recording a sales return have on a business's net income?
Answer
(B)
Decreases it.
39
What are the basic components of a balance sheet?
Answer
A
B
C
40
What is the normal balance of the Accounts Payable account?
Answer
(B)
Credit
41
Which of the following financial records are used to summarize credit sales transactions?
Answer
(A)
General Ledger.
42
Which of the following transactions will decrease the company's liabilities?
Answer
(C)
Paying cash to a supplier
43
What is the impact on the balance sheet when recording supplies expense?
Answer
(A)
Decrease assets.
44
When using the allowance method, what is the balance of the allowance for doubtful accounts *before* a specific uncollectible account is written off?
Answer
(C)
It is an estimate of uncollectible accounts.
45
Which of the following accounts is NOT affected by owner's drawings?
Answer
(D)
Inventory
46
What is the normal balance of a liability account?
Answer
(B)
Credit
47
What is the effect of an expense on owner's equity?
Answer
(B)
Decreases it
48
What is the impact on trade receivable accounts when goods are returned by a customer?
Answer
(B)
Decrease
49
What must the total of the debit balances equal to in a trial balance?
Answer
(C)
The total credit balances.
50
What is the immediate impact on the accounting equation when a company purchases inventory for cash?
