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Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 39)

1
What is the primary characteristic of the direct write-off method for bad debts?
Answer
(C)
Recognizes bad debt expense only when an account is determined to be uncollectible.
2
Identify the accounts that are typically found on the debit side of the cash book.
Answer
A
B
3
In which section of a cash book would you record a customer paying via a debit card?
Answer
(B)
Bank column.
4
If goods are returned by a customer, and the original sale was on credit, which account would be debited?
Answer
(D)
Sales Returns
5
Which of the following is an example of a transaction that *decreases* owner's equity?
Answer
(C)
The owner withdraws cash for personal use.
6
Under accrual accounting, when should an expense be recorded?
Answer
(C)
When the expense is incurred.
7
Which accounts are usually involved in the entry of sales returns?
Answer
B
C
D
8
What is the purpose of the 'description' column in a general journal?
Answer
(B)
To briefly explain the transaction.
9
When are sales returns posted on the ledger?
Answer
(B)
At the end of each month.
10
If a business offers a discount for early payment, what is the effect on the customer?
Answer
(B)
The customer will pay less.
11
Which of the following statements are true about a 'chart of accounts'?
Answer
A
B
D
12
When should a business use a credit note?
Answer
A
C
13
In a ledger account, which side is the balance carried down?
Answer
(D)
The side with the larger total
14
When is the balance in the trade receivables account adjusted when writing off a bad debt?
Answer
(C)
When the debt is deemed irrecoverable.
15
Which type of accounts increase with a debit?
Answer
(A)
Assets and expenses
16
When a bank loan has been taken out, what ledger account is debited when the funds are received?
Answer
(A)
The bank account
17
What effect does the payment of salaries have on a business's accounting equation?
Answer
(B)
Decreases assets and decreases owner's equity
18
Which item is debited when using the allowance method to write off a bad debt?
Answer
(B)
Allowance for Doubtful Accounts
19
What is the primary purpose of a petty cash voucher?
Answer
(A)
To record the details of small expenditures paid for from petty cash.
20
What happens to the bank account when paying for interest charges?
Answer
(B)
Credit the bank account, expenses are increased.
21
What is the accounting treatment when a business receives interest from its bank account?
Answer
(B)
Debit Bank, Credit Interest Revenue.
22
What is the purpose of the general ledger?
Answer
(B)
To provide a summary of all financial transactions, organized by account.
23
If a business accrues interest expense, which of the following accounts are affected?
Answer
(C)
Interest Expense and Interest Payable
24
Which of the following is an example of a financing activity on the statement of cash flows?
Answer
(C)
Issuance of bonds payable
25
If a business offers a trade discount, which amount is used as the basis for revenue recognition?
Answer
(B)
Net Price
26
Which accounts will have a credit balance?
Answer
(C)
Liabilities
27
Which of the following will result in a credit entry?
Answer
A
B
D
28
What is the basic accounting equation?
Answer
(A)
Assets = Liabilities + Equity
29
Which accounting principle requires a business to provide enough information to a user so that they can make informed decisions?
Answer
(B)
The Disclosure Principle
30
Which of the following is considered an expense?
Answer
(B)
Interest Expense
31
A discount received by a business is treated as:
Answer
(C)
Income
32
If a business purchases inventory for cash, what is the effect on the asset section of the balance sheet?
Answer
(C)
Assets stay the same.
33
What happens to the accounting equation when a business pays its employees' wages in cash?
Answer
(B)
Assets decrease and equity decreases.
34
Which transactions will cause an increase in the bank balance?
Answer
A
B
35
Which of the following best describes accrued revenue?
Answer
(B)
Revenue earned but for which cash has not yet been received.
36
If a company's liabilities are $90,000 and its owner's equity is $110,000, what is the value of the company's assets?
Answer
(A)
$200,000
37
If a check is returned by the bank due to insufficient funds, how should this be reflected in the accounting records?
Answer
(C)
Credit the bank account.
38
What is the accounting entry when a business receives a payment from a customer for a previously recorded sale on credit?
Answer
(A)
Debit Cash, Credit Accounts Receivable.
39
Which of the following are elements of the accounting equation?
Answer
A
B
D
40
What happens to the balance of the bank account when cash is deposited?
Answer
(B)
It increases
41
What are some typical expenses a business must pay?
Answer
A
B
C
D
42
If a company buys goods on credit, which of the following will increase?
Answer
(C)
Inventory
43
Which type of balance does an expense usually have?
Answer
(B)
Debit
44
What is the effect of an error where a company records a check for $100 when it should have been $1,000?
Answer
(B)
Subtract $900 from the book balance.
45
How does a trade discount affect the calculation of gross profit?
Answer
(B)
It decreases the gross profit.
46
What does it mean to 'balance' an account?
Answer
(D)
All of the above.
47
What is the purpose of a 'source document'?
Answer
(C)
To provide evidence that a transaction has occurred.
48
If a company receives cash from a customer in advance for goods that will be delivered in the future, what account is credited?
Answer
(C)
Unearned Revenue
49
What is an example of a long-term asset?
Answer
(D)
Equipment
50
Which account increases with a debit?
Answer
(C)
Salaries Expense