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Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 41)

1
Which scenario would result in a decrease in the cash balance?
Answer
(C)
Paying a supplier with a cheque.
2
Which item represents a cost paid in advance?
Answer
(B)
Prepaid Insurance.
3
Which of the following statements describes the accounting cycle related to books of prime entry?
Answer
(A)
Books of prime entry -> Ledger accounts -> Trial Balance -> Financial Statements
4
How are trade discounts commonly expressed?
Answer
(A)
As a percentage of the list price
5
When a business withdraws cash from its bank account for use in the business, what is the double-entry in the cash book?
Answer
(A)
Debit Cash, Credit Bank
6
When recording payments received by cheque or bank transfer, where are they recorded?
Answer
(D)
Credit side of the bank column
7
If the total debits equal the total credits in the cash book, what does that imply?
Answer
(B)
The business's cash position is balanced.
8
What is the impact of a credit entry in an account?
Answer
(C)
Decreases assets or increases liabilities or equity.
9
What does the term 'credit' mean?
Answer
B
C
10
What kind of accounts are normally used to record business expenses?
Answer
(B)
Nominal accounts.
11
In the context of a cash book, what does the term 'double entry' mean?
Answer
(C)
Recording a transaction in the cash book and the general ledger.
12
What happens to a company's cash position when it pays for goods by direct debit?
Answer
(D)
Bank balance remains unaffected.
13
How does increasing the provision for doubtful debts affect the current ratio (current assets / current liabilities)?
Answer
(C)
No effect on the ratio.
14
What is the normal balance of a revenue account?
Answer
(B)
Credit.
15
When are expenses generally recognized under accrual accounting?
Answer
B
D
16
Which of the following is a liability?
Answer
(D)
Accounts Payable
17
If a company overestimates its liabilities at the end of an accounting period, what is the impact on net income?
Answer
(C)
Net income is understated.
18
Which of the following statements is correct about the accounting equation?
Answer
(C)
Assets are the sum of liabilities and owner's equity.
19
When is a bank reconciliation performed?
Answer
(B)
When there are differences between the cash book and bank statement.
20
Which of the following are examples of temporary accounts?
Answer
A
B
D
21
What does the term 'equity' represent in the accounting equation?
Answer
(C)
The owners' stake in the business.
22
What type of account is 'Unearned Revenue'?
Answer
(B)
A liability account.
23
What is the role of an accountant?
Answer
(B)
To record, classify, and summarize financial transactions.
24
Which items are needed to prepare an income statement?
Answer
A
B
25
Which of the following is the purpose of the closing process in accounting?
Answer
A
B
26
Why might a business offer trade discounts to their customers?
Answer
(C)
To boost sales and improve customer relations.
27
Which of the following errors would be *unlikely* to be detected by a trial balance?
Answer
(B)
Posting a debit to the wrong account.
28
What is the impact on the financial position if the business pays for the credit purchase from Spire Ltd?
Answer
(C)
Assets decrease, Liabilities decrease
29
What should a business do if it identifies an error in the cash book?
Answer
(B)
Make a correction entry in the general journal.
30
Which account is debited when a business receives cash from a customer?
Answer
(B)
Cash
31
Which events will increase owner's equity?
Answer
A
B
32
What type of account is 'Depreciation Expense'?
Answer
(D)
An expense account.
33
Which financial statement would you find information about a company's sales revenue?
Answer
(B)
Income Statement
34
A business uses a bank account. Which of the following statements is correct?
Answer
(C)
A business should have bank current account to make payments.
35
Which of the following is a key component when calculating the final price after a trade discount?
Answer
(A)
The discount rate and the list price
36
What is the accounting equation?
Answer
(C)
Assets = Liabilities + Equity
37
Which accounting principle does the allowance method support?
Answer
(B)
Matching
38
Which of the following transactions will increase an asset and also increase owner's equity?
Answer
A
C
39
Which of the following actions typically increases the balance shown in the bank column of the cash book?
Answer
(C)
A bank loan deposited into the company account.
40
Which of the following is a consequence of not recording trade discounts?
Answer
(B)
Overstated sales revenue
41
What is the impact of an error of principle?
Answer
(B)
The trial balance will still balance, even though the error is present.
42
In a double-entry bookkeeping system, every transaction affects at least how many accounts?
Answer
(B)
Two
43
What happens to the prepaid insurance at the end of the accounting period?
Answer
(B)
A portion of the insurance will become the expense.
44
If a company is making a purchase of equipment, which of the following will happen?
Answer
(A)
Debit equipment amount, credit bank amount
45
What is the function of a trial balance?
Answer
(A)
To prove the equality of debits and credits.
46
Which specialized journal is used to record transactions involving returns of goods to the suppliers?
Answer
(C)
Purchases Returns Journal
47
Which of the following are examples of non-current assets?
Answer
A
B
48
Which financial statement provides the amounts of assets, liabilities, and equity at a point in time?
Answer
(D)
Balance Sheet
49
Which of the following would decrease net income?
Answer
A
C
50
Which financial statement provides a snapshot of a company's assets, liabilities, and equity at a specific point in time?
Answer
(C)
Balance sheet