Accounting for IGCSE & O level - The Fundamentals Of Accounting (Section 9)
1
What is the effect on the income statement when the company recognizes accrued income?
Answer
(B)
Increases revenue.
2
If a company uses the accrual basis of accounting, when is revenue recognized?
Answer
(B)
When the service is performed or the goods are delivered.
3
The trial balance shows a debit balance of $10,000 for purchases. Inventory at the end of the year amounted to $2,000. What is the cost of goods sold?
Answer
(C)
$10,000
4
Who issues the debit note?
Answer
(B)
The Supplier.
5
What is the purpose of a cash book?
Answer
(B)
To record all transactions involving cash.
6
What kind of items are usually recorded in the sales journal?
Answer
(A)
Invoices issued by a business for sales on credit to its customers.
7
What is the name of the system for managing petty cash?
Answer
(B)
Imprest System
8
1.9. What is the difference between using the 'balance on the bank statement' method and the 'balance on the updated cash book' method when preparing a bank reconciliation statement?
Answer
(D)
All of the above
9
Why is it useful for a business to balance all its ledger accounts periodically?
Answer
(B)
To check for errors
10
What is the purpose of using a cash book?
Answer
(B)
To record all cash and bank transactions.
11
Who is an example of a business transaction?
Answer
(D)
All of the above
12
What type of account is "accumulated depreciation"?
Answer
(D)
d) A contra-asset account.
13
Which of the following is a primary advantage of using business documents?
Answer
(A)
Ensures accurate financial statements
14
What does a business use journals and ledgers for?
Answer
(B)
To produce financial statements
15
Which of the following is an example of a book of prime entry?
Answer
(A)
Purchases journal
16
What is the last step in the accounting cycle?
Answer
(B)
b) Prepare a post-closing trial balance.
17
What is typically found in a general ledger?
Answer
A
B
C
18
What is the purpose of a trial balance?
Answer
A
C
19
Which of the following is NOT a step in preparing financial information from book-keeping records?
Answer
(D)
Sending invoices to customers
20
What is the purpose of a closing entry?
Answer
(B)
b) To reset temporary accounts to zero at the end of the accounting period.
21
What impact do sales returns have on inventory?
Answer
(A)
Increase Inventory
22
Which of the following is a type of error that may not cause a trial balance to be unbalanced?
Answer
(C)
An error of principle
23
What is the accounting equation and why is it important?
Answer
(B)
Assets = Liabilities + Owner's Equity
24
Which financial statement shows a company's financial performance over a period of time?
Answer
(C)
c) Income Statement
25
In the context of adjusting for accrued expenses, what is the primary objective?
Answer
(C)
To ensure that expenses are recorded in the period they benefit the business.
26
What are the key steps involved in preparing a bank reconciliation statement?
Answer
(A)
a) Comparing the cash book and bank statement, identifying differences, and adjusting the cash book.
27
When posting expenses to the general ledger, which accounts are involved?
Answer
A
D
28
What is depreciation?
Answer
(B)
The allocation of the cost of an asset over its useful life
29
What is considered as a prepaid expense?
Answer
(B)
Rent
30
Why is it important to make adjustments for accrued income?
Answer
B
C
31
What are the different types of accounting errors?
Answer
A
B
C
32
A customer returns faulty goods. Which document will they receive?
Answer
(C)
Credit note
33
Which of the following would *decrease* a company's assets?
Answer
(A)
Purchasing equipment with cash.
34
What should the business account for regarding the end of the month?
Answer
(A)
Differences between the balances on the bank statement and cash book.
35
Goods sold for cash or the payment by cheque are recorded in the sales account in the general ledger, which of the following is correct?
Answer
(B)
Credit the account with the cash received.
36
Which of the following is (are) examples of accrued income?
Answer
A
C
37
What does the term "debit" in accounting mean?
Answer
(A)
An increase in assets and a decrease in liabilities.
38
Which document is sent to the customer when a supplier realizes they undercharged?
Answer
(C)
Debit Note
39
An error of principle involves:
Answer
(B)
Wrong type or class of account
40
10. What is the correct order of the accounting cycle?
