Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 37)
1
When a company pays its employees salaries, which accounts are affected?
2
What are two examples of common prepaid expenses?
3
What happens to the financial statements when a company records depreciation expense?
Answer(B)
Assets decrease, and equity decreases.
4
What is the impact on the accounting equation when a business pays for inventory with cash?
Answer(B)
Assets increase, and assets decrease.
5
What is meant by a business's 'financial position'?
Answer(D)
The value of the business's total resources
6
Which of the following would be recorded on the credit side of a cash book?
7
What is the purpose of the bank column in a cash book?
Answer(B)
To record all bank transactions.
8
What is the journal entry to record the sale of goods for cash?
Answer(A)
Debit Cash, Credit Sales Revenue
9
What happens to the balance of a liability account if a business pays its supplier?
10
A company pays a supplier for inventory purchased on credit. Which accounts are affected?
Answer(A)
Debit Accounts Payable, Credit Cash.
11
What does a debit entry typically represent?
Answer(C)
An increase in assets or a decrease in liabilities or equity.
12
What impact does a standing order have on the bank account?
Answer(C)
It decreases the bank account
13
How do you record a bank service fee on the company's cash book?
Answer(B)
Debit bank service fees, credit cash
14
What is the normal balance of the Sales Revenue account?
15
Which journal would be used to record cash received from customers?
16
What is a "prepaid expense"?
Answer(A)
An expense that has been paid but not yet incurred.
17
What will increase owner's equity?
18
What is the order in which the financial statements are typically prepared?
Answer(B)
Income Statement, Statement of Retained Earnings, Balance Sheet, Statement of Cash Flows
19
Which of the following is the main characteristic of a 'real account'?
Answer(D)
Permanent accounts that carry balances forward.
20
What source document is primarily used for the entry in the sales returns journal?
Answer(C)
A credit note issued by the business
21
What does 'GAAP' stand for in accounting?
Answer(C)
Generally Accepted Accounting Principles
22
What is the role of a delivery note in the sales process?
Answer(B)
To inform the customer of goods delivered.
23
Which of the following are typically classified as liabilities?
24
What is the purpose of a 'purchase order'?
Answer(C)
To authorize a supplier to provide goods or services
25
What happens when a business pays its employees' salaries via bank transfer?
Answer(D)
The bank balance decreases.
26
What does 'a trial balance should balance' mean?
Answer(B)
The total debits equal the total credits.
27
How should a company record bank charges incurred during the month?
Answer(B)
Debit Bank Charges, Credit Bank
28
What is the impact of the bank charging the business for bank charges?
Answer(A)
Debit bank charges, credit bank.
29
Which accounts are affected when a company sells inventory on account (on credit)?
Answer(B)
Accounts Receivable and Sales Revenue
30
What is the rule regarding the debit and credit sides?
Answer(A)
The debits and credits must always be equal.
31
Which of the following is *not* typically found on a bank reconciliation prepared using the bank statement approach?
32
A business owner deposits the cash takings from the day's sales into the company's bank account. How is this transaction recorded in the cash book?
Answer(B)
Debit bank column, credit cash column.
33
The matching principle is best illustrated by:
Answer(C)
Matching expenses with the revenues they generate in the same accounting period.
34
What is the primary purpose of creating a provision for doubtful debts?
Answer(C)
To account for estimated uncollectible amounts from customers.
35
Which statement is accurate about the effect of an owner withdrawing cash from the business for personal use?
Answer(B)
Assets decrease and equity decreases.
36
Which of these accounts would appear on the Income Statement (Statement of Profit or Loss)?
37
Which of the following best describes the purpose of the bank column in a cash book?
Answer(B)
To record transactions related to a company's bank account.
38
Which of the following is a benefit of using specialized journals?
39
Which accounting principle is most closely related to the concept of conservatism?
Answer(D)
The Prudence (Conservatism) Principle
40
What is the primary purpose of a purchases journal?
Answer(B)
To record all purchases of goods on credit.
41
If a business purchased equipment for $5,000 on credit, which accounts would be affected?
Answer(C)
Debit Equipment, Credit Accounts Payable
42
Which of the following represents an expense?
43
What is the effect of a decrease in accounts receivable on the accounting equation?
Answer(D)
Assets increase, Assets decrease
44
Which of the following is the correct accounting equation?
Answer(D)
Assets = Liabilities + Equity
45
What is the relationship between the sales journal and the general ledger?
Answer(A)
The sales journal summarizes transactions, which are then posted to the general ledger.
46
When should a company write off an irrecoverable debt?
Answer(C)
When the debt is deemed uncollectible.
47
What is the purpose of adjusting entries?
Answer(C)
To ensure that revenues and expenses are recognized in the correct accounting period.
48
Which of the following entries will be on the credit side of the bank column?
49
What is the main purpose of an adjusting entry for prepaid expenses?
Answer(B)
To allocate the cost of the expense over the periods benefited.
50
Which financial statement provides a summary of a company's assets, liabilities, and equity?
