Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 43)
1
What is the effect on the accounting equation when a company declares and pays salaries expense?
Answer
(C)
Assets decrease, equity decreases.
2
If an error is discovered where an expense was recorded as a debit instead of a credit. what will the correction entry be?
Answer
(B)
Credit the same expense account.
3
What is one of the main goals of a good credit control?
Answer
(B)
To minimize the risk of irrecoverable debts.
4
Which of the following are examples of cash outflows?
Answer
A
D
5
What is a contra-revenue account, and how does it relate to sales returns?
Answer
(B)
An account that reduces revenue. Sales Returns and Allowances is a contra-revenue account.
6
Which of the following must be considered when recording adjusting entries?
Answer
A
C
D
7
Which of the following accounts will be used when recording the purchase of goods on credit?
Answer
B
C
8
What is the journal entry when a company buys inventory on credit?
Answer
(C)
Debit Inventory, Credit Accounts Payable.
9
What do debit balances represent?
Answer
(A)
Expenses.
10
How does the return of defective goods affect the buyer's accounts payable?
Answer
(B)
Decreases
11
Which financial statement provides information about a company's cash inflows and outflows during a specific period?
Answer
(C)
Statement of Cash Flows
12
What is the purpose of the statement of cash flows?
Answer
(C)
To report the sources and uses of cash for a specific period.
13
What is a 'deposit in transit' on a bank reconciliation?
Answer
(C)
A deposit recorded by the company but not yet by the bank.
14
When cash is withdrawn from the bank, which accounts are affected?
Answer
(B)
Cash and Bank.
15
What information is shown in the 'Statement of Account'?
Answer
(C)
Summary of all transactions with the supplier
16
Which of the following is the proper journal entry for a company purchasing office supplies on account?
Answer
(B)
Debit Office Supplies, Credit Accounts Payable
17
Which of the following accounts is affected by the adjusting entry for accrued interest revenue?
Answer
A
C
18
If the ending cash balance per the bank statement is $5,000, outstanding checks total $500, and deposits in transit are $300, what is the adjusted cash balance?
Answer
(B)
$5,200
19
In which journal are the credit sales of goods recorded?
Answer
(B)
Sales journal
20
What kind of entry reduces the amount that customers owe in a credit sale?
Answer
(B)
Sales Returns Journal entry
21
What journal entry is recorded when a customer returns goods purchased on credit?
Answer
(C)
Debit Sales Returns, Credit Accounts Receivable
22
What is the usual journal entry when writing off an uncollectible account that was previously covered by an allowance for doubtful debts?
Answer
(A)
Debit Allowance for Doubtful Debts, Credit Accounts Receivable.
23
What does a bank reconciliation statement help identify?
Answer
(B)
Reasons for differences between cash book and bank statement balances.
24
If a business decides to *reduce* its provision for doubtful debts, which of the following statements is correct?
Answer
(B)
The value of trade receivables will increase, and profit will increase.
25
If a company fails to record accrued salaries, how will this affect its financial statements?
Answer
(C)
Net income will be overstated and liabilities will be understated.
26
What is the effect on the accounting equation when a company repays a loan?
Answer
(D)
Assets decrease, Liabilities decrease, Equity stays the same
27
If a company pays for a one-year insurance policy in advance, how is this initially recorded?
Answer
(B)
Debit Prepaid Insurance; Credit Cash
28
What does the term 'prime entry' refer to in accounting?
Answer
(A)
The initial recording of a transaction in the accounting system.
29
What accounting principle is most relevant when applying trade discounts?
Answer
(C)
Revenue recognition
30
The balance of the Cash account is always a:
Answer
(A)
Debit
31
What is the journal entry required when a prepaid income becomes earned?
Answer
(A)
Debit Prepaid Income, Credit Income.
32
What is the primary purpose of a trial balance?
Answer
(D)
To make sure the total debits equal total credits.
33
What happens to a company's equity if it has a net loss?
Answer
(B)
Equity decreases.
34
A company sells goods on credit. Which of the following entries reflects this transaction?
Answer
(B)
Debit Accounts Receivable, Credit Sales Revenue.
35
Which of the following transactions will impact both the balance sheet and the income statement?
Answer
B
D
36
When are revenues recognized in accrual accounting?
Answer
B
D
37
How does the provision for doubtful debts affect the financial statements?
Answer
(B)
It reduces the value of accounts receivable on the balance sheet and decreases net income on the income statement.
38
Which of the following items is usually recorded on the debit side of the cash book?
Answer
(B)
Cash received from customers.
39
When preparing a bank reconciliation using the bank statement method, where would you find the ending balance?
Answer
(B)
On the bank statement.
40
Which of the following transactions will increase a company's assets?
Answer
A
D
41
Which journal would be used to record a cash payment for office rent?
Answer
(B)
Cash Book
42
Which documents serve as the source documents for accounting entries?
Answer
A
B
D
43
What is the correct journal entry to record an opening capital investment of $10,000 in cash?
Answer
(B)
Debit Cash $10,000; Credit Capital $10,000
44
What is the effect of a business selling goods on credit?
Answer
(C)
Debit Accounts Receivable, Credit Sales Revenue
45
What does 'Inventory' represent on the Statement of Financial Position?
Answer
(B)
Goods held for sale by the business.
46
Which of the following is the main purpose of an Income Statement?
Answer
(A)
To show a company's financial performance.
47
What type of document typically contains the phrase 'E & OE'?
Answer
(A)
Invoice
48
What impact does a purchase return have on the accounting equation?
Answer
(B)
Decreases assets and decreases liabilities.
49
Which of the following will increase net profit?
Answer
(A)
Decreasing expenses.
50
Which accounting principle is most relevant when determining the amount of bad debt expense?
