Accounting for IGCSE & O level - Accounting Procedures (Section 17)
1
In a situation of a contra entry, which ledgers are involved?
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(C)
Both sales and purchases ledgers.
2
What is the primary purpose of a control account?
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(B)
To verify the arithmetical accuracy of the subsidiary ledgers.
3
When a business replaces a roof, what would be the correct accounting treatment?
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(B)
Capitalize the cost as a capital expenditure.
4
What will be the correct entry when a drawing of £6,000 was not recorded?
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(A)
Debit Drawings, Credit Capital
5
Which of the following errors can be revealed by the trial balance?
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A
B
D
6
What is the purpose of a sales journal?
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(C)
To record all credit sales transactions.
7
Which of the following is NOT a type of revenue receipt?
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(C)
Sale of spare land.
8
If a business recorded a $1000 payment for rent as a debit to the utilities expense account, this is an example of:
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(B)
An error of commission
9
Which of the following statements is correct regarding the Purchases Ledger Control Account?
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(B)
It controls and summarizes all transactions with suppliers.
10
What is the primary role of the balance sheet?
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(B)
To show a company's assets, liabilities, and equity at a specific point in time.
11
If a customer pays their outstanding balance in full, how will this impact the Sales Ledger Control Account?
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(B)
It is credited.
12
How does the disposal of a non-current asset affect the statement of financial position?
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A
B
13
What is the primary function of the purchases ledger control account?
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(B)
To provide a summary of purchases on credit.
14
A company had opening balance of $10,000 in the Sales Ledger Control Account. During the month, it made credit sales worth $50,000, received cash from customers worth $40,000, and issued credit notes for $2,000. What is the closing balance of the Sales Ledger Control Account?
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(A)
$18,000 (Debit)
15
Which of the following errors can occur despite the trial balance balancing?
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A
C
16
A company has a debit balance in its Sales Ledger Control Account. What does this signify?
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(C)
Customers owe money to the company.
17
Identify the corrections required in the journal before correcting an error where the purchase journal was understated by £200.
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(A)
Debit £200 from purchases account and credit suspense account.
18
What effect will an understated purchase have on profit?
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(C)
Overstated profit
19
What is the effect of a credit sale on the Sales Ledger Control Account?
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(A)
Debit the account.
20
What should be done if the sales ledger control account does not agree with the total of the individual customer balances?
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(C)
Investigate to find and correct the errors.
21
Which of the following best describes the purpose of the units-of-production method?
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(B)
To depreciate an asset based on its usage or output
22
What will be the impact of the overstatement of expenses in the income statement?
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(A)
Profit will be understated.
23
Which of the following entries would *increase* the balance of a trade receivable account?
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A
C
24
Which book of prime entry is used to record credit purchases?
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(B)
Purchases journal
25
In the sales ledger, which accounting entry is made when a customer pays their account balance?
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(B)
Credit the customer’s account and debit cash.
26
A company purchases equipment for $100,000. The equipment has an estimated useful life of 10 years with a salvage value of $10,000. Using the straight-line method, what is the annual depreciation expense?
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(A)
$9,000
27
What is meant by the term 'book value' of an asset?
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(C)
The cost of the asset less accumulated depreciation.
28
What is the effect on profit if a revenue expenditure is incorrectly treated as a capital expenditure?
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(B)
Profit is overstated.
29
In the purchases ledger, what accounting entry is recorded when a business receives a credit note from a supplier for returned goods?
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(C)
Debit the purchase returns account and credit the supplier account.
30
A payment of £500 was credited to the wages account and debited to the bank account. Which financial statement is most directly impacted?
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(B)
Balance Sheet
31
An item was originally recorded in the correct account, but with the incorrect amount. Which of the following errors has occurred?
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(C)
Error of Original Entry
32
If a company incorrectly records a cash payment for rent as a capital expenditure, what will be the immediate impact on the financial statements?
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(A)
Assets will be overstated and expenses will be understated.
33
What should happen to the accumulated depreciation account when a non-current asset is disposed of?
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(B)
The account balance should be decreased to zero.
34
A sales invoice for $500 was entered in the sales journal, but the corresponding entry to the customer's account in the sales ledger was only $50. How will this error affect the sales ledger control account?
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(A)
The sales ledger control account will be understated.
35
A drawing of £6,000 was not recorded, what effect will it have on the financial position?
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(C)
Cash in bank understated by £6,000, capital understated by £6,000.
36
What is the impact on the profit if an expense is overstated?
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(B)
Profit will be understated.
37
What type of error occurs if a purchase of goods on credit is recorded as a cash purchase?
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(A)
Error of Principle
38
What is the primary goal when correcting errors in accounting records?
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(B)
To make the financial statements reflect the true and fair view of the business.
39
What is the purpose of distinguishing between capital and revenue receipts in accounting?
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(B)
To accurately assess the financial position of the business.
40
Which of the following transactions *increases* the balance of the Purchases Ledger Control Account?
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(D)
Purchasing goods on credit.
41
What is the appropriate journal entry to record a return of goods to a supplier?
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(A)
Debit Purchases Returns, Credit Supplier Account
42
Which actions would decrease the balance in the Sales Ledger Control Account?
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A
B
D
43
What is the impact on the company's assets if an asset is scrapped and has no salvage value?
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(A)
Assets decrease.
44
What effect does recording depreciation have on the net profit of a company?
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(A)
Decreases net profit
45
What is the impact on the financial statements if drawings of £6,000 were not recorded?
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A
C
46
Which of the following would be classified as a capital expenditure?
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(B)
Installation charges for a new machine
47
What type of account is the purchases ledger?
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(C)
Personal account.
48
What is the formula for calculating the annual depreciation expense using the straight-line method?
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(A)
(Cost - Salvage Value) / Useful Life
49
What is the effect of a compensating error?
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(C)
It creates an error that offsets another error
50
What is the main objective of calculating depreciation expense?
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(B)
To match the cost of an asset to the revenue it generates.
