Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 38)
1
How does a business record a trade discount within its accounting system?
Answer
(B)
The discount is deducted from the list price to calculate the net price, and the net price is recorded.
2
What journal is used to record credit sales?
Answer
(B)
Sales journal
3
Which of the following transactions will increase a company's cash balance?
Answer
A
D
4
What type of account is 'Unearned Revenue'?
Answer
(B)
A liability account
5
Which of the following would be recorded on the credit side of the bank column in a cash book?
Answer
B
C
6
What is the impact on the accounting equation when a business owner invests $10,000 of their own money into the business?
Answer
(B)
Assets increase, equity increases.
7
A company pays rent for the next 3 months in advance. How should the company record this transaction?
Answer
(B)
Debit Prepaid Rent; Credit Cash.
8
What is the purpose of a chart of accounts?
Answer
(B)
To provide a systematic listing of all accounts used by a company.
9
What accounting principle is supported by using separate journals?
Answer
(D)
Division of labor and specialization
10
When a business receives a cheque from a customer, where is the entry initially recorded in the cash book?
Answer
(B)
In the bank column, debit side.
11
What happens to an asset that has been used in the business?
Answer
(B)
It's converted to an expense.
12
If a business receives a utility bill, which account(s) are affected?
Answer
(B)
Debit Utilities Expense, Credit Accounts Payable
13
If a company sells goods on account, what is the journal entry?
Answer
(B)
Debit Accounts Receivable, Credit Sales Revenue
14
When a customer returns damaged goods, which document should the supplier issue?
Answer
(C)
Debit Note
15
What does the term 'accrued expenses' refer to?
Answer
(B)
Expenses that have been earned, but the company has not paid for.
16
If a company purchases supplies for cash, what is the effect on the accounting equation at the time of purchase?
Answer
(C)
Assets remain unchanged.
17
What is the impact on a company's net income when a customer returns goods?
Answer
(B)
Net income decreases.
18
If a company receives cash from a customer for services it will provide next year, what should be recorded initially?
Answer
(C)
Unearned Revenue.
19
What type of account is the 'Rent Received' account?
Answer
(C)
Revenue
20
Which of the following are examples of assets?
Answer
A
C
21
What does a debit balance in a bank statement represent?
Answer
(B)
The business owes the bank money.
22
How does a company calculate its 'profit for the year'?
Answer
(B)
Subtract total expenses from total revenue.
23
What is the correct journal entry for recording sales revenue?
Answer
(B)
Debit cash, credit sales.
24
What is the primary benefit of the allowance method over the direct write-off method for accounting for bad debts?
Answer
(B)
It better matches revenues and expenses in the same accounting period.
25
When a business pays for an insurance policy in advance, which account is debited?
Answer
(C)
Prepaid Insurance
26
In a statement of account, which side shows debit transactions and which side shows credit transactions?
Answer
(B)
Debit side - Purchases, Credit side - Sales
27
Which of the following is the effect of writing off an irrecoverable debt under the allowance method?
Answer
(A)
No effect on the total assets.
28
A business has trade receivables of $100,000. It estimates a provision for doubtful debts of 5%. How much should it increase the provision to at the end of the following accounting year to maintain this level?
Answer
(B)
$0
29
What is the purpose of the 'Revenue Recognition' principle?
Answer
(B)
To determine when to record revenue in the accounting system.
30
Which of the following is a fundamental accounting equation?
Answer
(B)
Assets = Liabilities + Equity
31
What is the purpose of the 'Journal entries' shown?
Answer
B
C
32
What is the formula for calculating net income (or net loss)?
Answer
(A)
Revenues - Expenses
33
Which events would increase a company's cash position?
Answer
A
C
34
What is the normal balance of the 'Accounts Payable' account?
Answer
(B)
Credit
35
What is the effect of receiving a cash discount on the supplier side?
Answer
(B)
Decrease in cash paid to the supplier.
36
In the context of adjusting entries, what does the term 'prepaid expense' represent?
Answer
(A)
An expense paid in advance that has not been used.
37
If a company receives cash in advance for services yet to be performed, what is the effect on the accounting equation?
Answer
(A)
Assets increase, Liabilities increase
38
When is the petty cash fund replenished in an Imprest System?
Answer
(C)
When the fund balance is low, and/or periodically.
39
Which of these are considered temporary accounts?
Answer
(B)
Sales Revenue and Rent Expense
40
Which of the following is an example of a long-term asset?
Answer
(D)
Equipment
41
Which source document provides the information for creating a sales return journal?
Answer
(B)
Credit Note
42
Which of the following accounts is most likely to be debited when recording the end-of-year adjustment for unearned revenue?
Answer
(A)
Unearned Revenue.
43
Which of these are examples of revenues?
Answer
A
C
44
What is the effect on the accounting equation if a business pays its suppliers with cash?
Answer
(D)
Decreases assets and decreases liabilities.
45
Which of the following events would increase the balance in a company's bank account?
Answer
A
C
46
Which of the following accounts typically has a credit balance?
Answer
(B)
Sales Revenue
47
What is the purpose of a sales return journal entry, regarding customer accounts?
Answer
(B)
To decrease customer account balances.
48
What is the main purpose of a sales ledger?
Answer
(B)
To track the amount owed to the business by customers.
49
How does a standing order impact the balance in the company's bank account?
Answer
(B)
Decreases the balance.
50
Which of the following are potential causes for a trial balance not to balance?
