Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 6)
1
If the bank statement shows a balance of $5,000, and the cash book balance is $4,500, what is the best action?
Answer
(C)
c) Reconcile the balances and find the reason for the difference.
2
A business may borrow money from its bank by __________ its bank current account.
Answer
(A)
Overdrafting
3
A company provides services to a customer in December, but the invoice is sent and payment is received in January. When should the revenue be recognized?
Answer
(A)
December
4
What action should the business take if they send an invoice to a customer with the wrong information?
Answer
(B)
Issue a new invoice with the correct details.
5
What is a statement of account?
Answer
(B)
A summary of transactions between a supplier and customer.
6
Which of the following would be debited when a business receives cash from a customer?
Answer
(B)
Cash
7
Which of the following events will result in an increase in the provision for doubtful debts?
Answer
(C)
A new debt is deemed unlikely to be paid.
8
What is the most important financial statements produce by a business from its book-keeping records?
Answer
(B)
Income statement
9
What does it mean, if the total debits exceed total credits in the cash book?
Answer
(C)
The business has some cash in hand on its premises.
10
When preparing a trial balance, total debits must equal total credits.
Answer
(A)
True
11
When a company pays for insurance in advance for multiple months, how should it be recorded?
Answer
(B)
As an asset (prepaid insurance) initially and then gradually expensed over the coverage period.
12
5. A purchase of inventory on credit will lead to which of the following?
Answer
(B)
An increase in inventory and an increase in accounts payable.
13
A business must account for any differences between the balances on its bank statement and cash book so that its cash position at the end of the month is ____
Answer
(C)
Clear
14
What should be included on an invoice?
Answer
A
B
C
15
What is the role of a sales receipt?
Answer
(B)
To provide proof of a sale.
16
Which of these errors would NOT be revealed by a trial balance?
Answer
(B)
b) An error where a transaction is completely omitted.
17
What is the main purpose of a trial balance?
Answer
(B)
To ensure the accounting equation (Assets = Liabilities + Equity) is balanced.
18
Which items will have a debit balance?
Answer
C
D
19
A debit balance in the trial balance indicates that:
Answer
(C)
Debits exceed credits.
20
Which of the following transactions are recorded in the bank account?
Answer
A
B
C
D
21
What is the purpose of a chart of accounts?
Answer
(C)
c) To organize and categorize the company's financial transactions.
22
When is a debit note issued?
Answer
(B)
When the supplier has undercharged the customer.
23
Which of the following is provided as proof of purchase and payment?
Answer
(C)
Receipt
24
Which of these groups will use information from accounting?
Answer
A
B
D
25
Which of the following describes the fundamental accounting equation?
Answer
(A)
Assets = Liabilities + Owner's Equity
26
What is the correct journal entry to record an expense for Insurance? (Paid in advance)
Answer
(A)
Debit Prepaid Insurance, Credit Cash
27
If a business is overdrawn, is it in the business's interests to do so?
Answer
(D)
No, as it is a liability.
28
What is the effect on net income if the company underestimates the allowance for doubtful accounts?
Answer
(A)
Net income is overstated.
29
What is the main reason for adjusting entries?
Answer
(C)
To update revenues and expenses to the period they belong to.
30
Which business document should be used in case of a return of goods that are damaged?
Answer
(C)
Credit Note
31
What is the effect of a provision on the financial statements?
Answer
(B)
Reduce the value of trade receivables and reduce profit.
32
In accounting, the main purpose is to measure the:
Answer
(B)
Profit or loss
33
What was the cash position of the business at the end of the month?
Answer
(A)
Cash in hand: £50, cash in bank: £800
34
What is the impact of increasing the provision for doubtful debts on trade receivables?
Answer
(B)
Reduces the value of trade receivables.
35
When will the petty cash be replenished?
Answer
(C)
When the petty cash is low
36
What is an error of omission?
Answer
(B)
An error where a transaction is completely left out of the accounting records.
37
Which type of account increases on the debit side?
Answer
(C)
Expense Account
38
What is the normal balance of a liability account?
Answer
(B)
Credit
39
For a credit transfer from the bank current account for the purchase of an asset.
Answer
(A)
Debit the account with the value of the asset purchased, Credit bank account.
40
When is the total amount owed to a supplier recorded?
Answer
(B)
When purchases are made on credit
41
What is the role of the provision for doubtful debts?
Answer
(B)
To estimate the amount of uncollectible receivables.
42
What accounting concept underlies the practice of double-entry bookkeeping?
Answer
(C)
Duality principle
43
What is the impact of a cash payment to a supplier on the accounting equation?
Answer
(C)
Assets decrease, liabilities decrease.
44
In the purchases journal, what information is usually recorded?
Answer
A
B
C
45
What is a ledger account?
Answer
(C)
A summary of transactions for each individual account.
46
Which accounting concept or principle most directly supports the use of a provision for doubtful debts?
Answer
(D)
Matching Principle
47
For a standing order from our bank current account to pay a recurring expense
Answer
(A)
Debit the account with the amount paid to the supplier, Credit bank account.
48
1. Which of the following is NOT a function of a ledger account?
Answer
(C)
Provide a chronological record of each individual transaction.
49
What is the purpose of a general journal in accounting?
Answer
(C)
To record all the accounting information to prepare the financial statements.
50
3. What would be the impact on cash in hand when a business owner makes a payment to a supplier?
