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PRINCIPLES OF ACCOUNTING
1 Which one of the following is an internal user of accounting information? A. Bank B. Creditor C. Manager D. Customer
2. Which of following is not an internal user of financial statements? A. Board of Director B. Managers C. Employees D. Creditor 3. Which one of the following is not an external user of accounting information? A. the bank B. investors C. Goverment D. managers 4. Which of the following is correct? A. Capital = Liabilities + Assets B. Liabilities = Assets + Capital C. Assets = Liabilities + Capital D. Assets = Capital - Sales 5. Which accounting equation is incorrect out of following? A. Liabilities = Assets – Capital B. Assets = Liabilities – Capital C. Capital = Assets – Liabilities D. Assets = Liabilities + Capital 6 Which of the following is correct? Assets (£) Liabilities (£) Capital (£) A. 875,000 125,000 750, B. 820,000 280,000 1,100, C. 955,000 115,000 820, D. 542,000 654,000 112, 7. Which of following is capital? A. profit
B. Cash C. Car D. expenses
8. The properties owned by business enterprises are classified as …………… A. assets B. liabilities C. capital D. Cash 9 The account used to record credit sales is ….….….….…. A. Accounts Payable B. accounts receivable C. amount receivable D. discount receivable 10. The liability arising from the purchase of goods on credit is called ….….….….…. A. accounts payable B. accounts receivable C. loan D. payable expenses 11 Items which are purchased and sold in the merchandise business is called ……….. A. machine B. liability C. goods D. expense 12 A person who owes money to a firm against goods sold is called a/an …………. A. creditor B. debtor C. shareholder D. investor 13. A person to whom money is owed by a firm for the purchase of goods is called a/an …………. A. creditor B. debtor C. investor D. manager 14. Which account is used to record borrowings from the lenders? A. Asset
D. £2,
21. The assets can be converted into cash within a short period (one year or less) are known as………………. A. current assets B. fixed assets C. net asset D. non-current assets 22. Bookkeeping is a systematic records of all.................transactions. A. personal B. financial C. non-financial D. operating 23. Which of the following is not a business transaction? A. Bought furniture of £100,000 for business B. Paid for salaries of employees £20, C. Paid sons’ fees from her personal bank account £2, D. Paid sons’ fees from the business £2, 24. What are the effects of the owner taking money out of the business bank account for private use? A. Asset increase, Capital decrease B. Asset increase, Capital increase C. Asset decrease, Capital increase D. Asset decrease, Capital decrease 25. Which of the following transactions will reduce the total assets and liabilities of the company? A. Computer purchased in cash £20, B. Repaid the bank loan £20, C. Purchased of goods on credit £20, D. Loan received from the bank £20, 26. Which of the following does not affect capital? A. Profit of the business B. Money lent to a business C. Loss of the business D. Money invested in a business by its owners 27. ABC Pizza bought equipment costing £11,000 on time. What is the effect of this transaction?
A. Increase equipment by £11,000 and decrease capital by £11, B. Increase equipment by £11,000 and increase capital by £11, C. Increase equipment by £11,000 and increase accounts payable by £11, D. Increase equipment by £11,000 and decrease accounts payable by £11,
28. If assets are £99,000 and liabilities are £32,000 then capital equals ……….. A. £32, B. £67, C. £99, D. £131, 29. If a company receives the owner’s investment of £2,000 in cash, the effect on the accounting equation would be: A. Asset decrease by £12,000 and Capital decrease by £12, B. Asset increase by £12,000 and Liability decrease by £12, C. Asset increase by £12,000 and Liability increase by £12, D. Asset increase by £12,000 and Capital increase by £12, 30. Edmund Limited has non-current assets of £101,356, current assets of £52,618, current liabilities of £42,615 and non-current liabilities of £42,000. What is the amount of capital? A. £49, B. £69, C. £153, D. £238, 31. Marina is a sole trader. During her first year of trading to 31 December 20X9, she invested £10,000 in the business, made a profit of £25,000 and withdrew £15,000 from the business. What is the balance of the capital account at 31 December 20X9? A. £10, B. £20,000 = 10,000+ 25,000 – 15, C. £35, D. £50, 32. According to accrual concept of accounting, the economic transaction is recorded …….. A. when cash is received or paid B. when transaction occurs C. when profit is computed D. when the invoice is received 33. Which accounting concept states that the transactions of a business must be recorded separately from its owners? A. Materiality concept
B. there must always be entries made on both sides of the accounting equation C. the amount of the debits must equal the amount of the credits D. there must only be two accounts affected by any transaction
40. What is the journal entry to record salaries paid by cash? A. Debit capital, Credit cash B. Debit salaries, Credit cash C. Debit cash, Credit salaries D. Debit salaries, Credit accounts payable 41. What is the double entry when the company performs a service but has not yet received payment? A. Debit service revenue and credits accounts receivable B. Debit accounts receivable and credits service revenue C. Debit service revenue and credits accounts payable D. Make no entry until cash is received. 42. Which of the following requires credit entry? A. An increase in accounts receivable B. An increase in accounts payable C. A decrease in capital D. A decrease in loan 43. Which accounts are used when the business borrowed money from a bank? A. Cash and bank B. Capital and loan C. Bank and loan D. Bank and capital 44. Withdrawal of cash by the owner is …………... A. debited to drawing B. debited to cash C. credited to drawing D. credited to capital 45. Which of the following statement is correct? A. Accounts receivable normally have credit balance B. Machinery normally has debit balance C. Accounts payable normally have debit balance D. Expenses normally have credit balance 46. Recording transaction: Goods bought by cash
A. Dr Cash; Cr Inventory B. Dr Purchases; Cr Cash C. Dr Inventory; Cr Bank D. Dr Cash; Cr Sales
47. Recording transaction: Goods bought on time A. Dr Accounts Payable; Cr Purchases B. Dr Accounts Receivable; Cr Goods C. Dr Purchases; Cr Accounts Payable D. Dr Goods; Cr Accounts Receivable 48. Recording transaction: The business paid the amount owing to Timeless Ltd. by cash A. Dr Business account; Cr Cash B. Dr Accounts Payable; Cr Cash C. Dr Accounts Receivable; Cr Cash D. Dr Cash; Cr Accounts Payable 49. Which accounts are used when Tony paid the amount owed to the company by cheque? A. Accounts payable and cash B. Accounts receivable and cash C. Accounts payable and bank D. Accounts receivable and bank 50. On July 7, 20XX, ABC Corporation received cash £1,400 for services rendered. The entry to record this transaction will include ……….. A. a debit to service revenue of £1, B. a credit to cash of £1, C. a debit to cash of £1, D. a credit to account payable of £1, 51. What transaction is represented by the following entry? Dr Account receivable Cr Sale A. The sale of goods on credit to a customer B. Purchase inventory on cash C. The sale of good on cash to a customer D. Payment by cheque to a credit customer 52. What transaction is represented by the following entry? Dr Account payable Cr Cash A. Payment by cheque to creditor
57. What transaction can be explained for double entry Dr Bank £30, Dr Receivable £220, Cr Sales £ A. Goods sold for £250, receiving £200 in Cash and £30 from Bank transferred B. Goods bought of £250, payment made of £30 from Bank transferred and the remaining amount being paid later C. Goods sold for £250, receiving £30 from Bank transferred and £220 being owed D. Goods sold for £250, receiving £200 immediately and £30 from Bank transferred 58. What transaction can be explained for double entry Dr Purchases £100, Cr Payable £30, Cr Cash £70? A. Bought £100 of inventory, paying £70 in Cash and the remaining paying later B. Bought goods of £100, paying £30 from Bank and £70 in Cash C. Goods bought of £200, in which £100 of inventory and the remaining paying later D. Goods sold for £70 Cash and £30 on time 59. What transaction can be explained for double entry Dr Receivable £50, Dr Cash £30, Cr Equipment £80? A. Bought equipment of £80, paying Cash of £30 and the remaining paying later B. Equipment sold, receiving Cash of £30 and £50 being owed C. Equipment sold for £80, owing to buyer £50 and receiving Cash of £ D. Bought equipment, paying in Cash £30 and Bank transferred £ 60. What transaction can be explained for the following changes: Receivable increased by £30, Capital increased by £10 and Inventory decreased by £20? A. Inventory cost of £30 sold on time for £ B. Owner taking £20 inventory out for private use, and putting back £30 inventory later C. Sold inventory on time of £20, making loss of £ D. Inventory cost of £20 sold on time for £30, making a profit of £ 61. What transaction can be explained for the following changes: Capital increased by £ and Receivable increased by £30? A. Goods sold on time for £ B. Owner investing £30 for the business, but paying later C. Owner payback £30 that borrowing before D. Goods sold for Cash of £ 62. Suppliers' personal accounts are found in the …… A. nominal ledger B. sales ledger C. purchases ledger D. general ledger
63. Which of the following transactions will not be included in the cashbook? A. Cash receipt from Anil for £4, B. Cash purchases of £3, C. Credit sales of £2, D. Cash sales of £4, 64.. As the total of the debit side exceeded the total of the credit side, the balance is said … A. to be a “debit balance” B. to be a “credit balance” C. to be “closed off” D. to be “balanced off” 65. What is the balance of the T account below? Tandy Sales £ Sales £ Bank £ Cash £ A. £55 on credit side B. £55 sales C. £55 on debit side D. £55 Tandy 66. The T account Tom of ABC company has the following information: Tom Sales £ Sales £ Bank £ Cash £ This means: A. Tom owes ABC nothing B. ABC owes Tom £ C. The account has credit balance of £ D. Tom owes ABC £ 67 The T acount Lee of ABC company has the following information: Lee Sales £ Sales £ Sales £ Bank £ Cash £ This means: A. Lee owes ABC nothing B. Lee owes ABC £
D. £15,000 on credit side
73. During Jan 20X2, Blake has the following transaction Purchases on time from J. Parker £1,000; Sold goods on time to A. David £1,400; Returned goods to J. Parker £200. The balance of Returns Outwards account is …… A. Debit balance of £ B. Debit balance of £1, C. Credit balance of £ D. Credit balance of £ 74. During July 20X2, Helen has the following transaction: Started in business with £15,000 at bank; Bought goods on time from J. Parker £2,000; Withdrew £1,500 goods for personal use. The balance of capital account is …… A. Credit balance of £11, B. Credit balance of £13, C. Debit balance of £11, D. Debit balance of £13, 75. During June 20X2, Tom has the following transaction: Started in business with £4,000 at bank; Bought goods on time from J. Parker £2,500; Withdrew £500 goods for personal use. The balance carried down of purchases account is …… A. £2,000 on credit side B. £2,000 on debit side C. £1,500 on debit side D. £1,500 on credit side 76. Accrued expense is ……….. A. expense account B. asset account C. liability account D. capital account 77. Business ABC rent a building for £5,000 a year. The business pays £4,500 by cash in the year. Which of the following entries is correct? A. Dr Profit and Loss £4,500; Cr Rent £4, B. Dr Rent £5,000; Cr Profit and Loss £5, C. Dr Profit and Loss £5,000; Cr Rent £5, D. Dr Rent £4,500; Cr Profit and Loss £4,
- A debit balance brought down on Insurance account could be called A. Accrued income
B. Accrued expense C. Prepaid income D. Prepaid expense
79. Business ABC rent out a building for £5,000 a year, starting from 1 December 20X2. On 31 December 20X2, rent is received £5,500 by bank transferred. Which of the following statements is correct? A. £ 500 of prepaid income B. £500 of prepayment C. £500 of receivable D. £500 of prepaid expense 80. At the end of the period, rent receivable account has the following information: Rent receivable Profit and Loss £2,000 Bank £1, The balance of the account is …………. A. £200 of accrued income and placed on the credit side B. £200 of accrued income and placed on the debit side C. £200 of prepaid income and placed on the credit side D. £200 of prepaid income and placed on the debit side 81. Business ABC rent a building for £5,000 a year. The business pays £4,500 by cash in the year. Which of the following entries is correct? A. Dr Rent expense £5,000; Cr Cash £4, B. Dr Rent expense £4,500; Cr Cash £4, C. Dr Rent expense £5,000; Cr Cash £4,500; Cr Rent receivable £ D. Dr Rent expense £5,000; Cr Cash £4,500; Cr Rent payable £ 82. At the end of the period, Insurance account has the following information: Insurance Bank £1,700 Profit and Loss £2, The balance of the account is …………. A. £300 of accrued expense and placed on the credit side B. £300 of accrued expense and placed on the debit side C. £300 of prepaid expense and placed on the credit side D. £300 of prepaid expense and placed on the debit side
B. 1,300,
C. 200,
D. 1,800,
90. XYZ Inc. had the following figures in its income statement: Sales: 3,000,000; Expenses: 500,000; Purchases: 2,000,000; Closing inventory: 800,000; Rates: 20,000. Net profit is …………. A. 2,500, B. 1,280, C. 200, D. 1,800, 91. XYZ Inc. had the following figures in its income statement: Sales: 800,000; Cost of goods sold: 350,000; Salaries: 100,000; Rent received: 200,000; Other expenses: 50, What is the amount of net profit? A. 100, B. 450, C. 500, D. 300, 92. At 31/12/20X9, Trading account has the following information: Trading Purchases £25, Sales £12, Closing inventory £3, Which of the following statements is correct? A. Gross profit 10,000 and placed on credit side of trading account B. Net profit 10,000 and placed on credit side of trading account C. Net loss 10,000 and placed on debit side of trading account D. Gross loss 10,000 and placed on credit side of trading account 93. At 31/12/20X9, Profit and Loss account has the following information: Profit and Loss Rent £2, Salaries £5,000 (^) Gross profit £12, Other expenses £3, Which of the following statements is correct? A. Net profit £1,000 and placed on debit side of Profit and Loss account B. Net loss £1,000 and placed on debit side of Profit and Loss account
C. Net profit £1,000 and placed on credit side of Profit and Loss account D. Net loss £1,000 and placed on credit side of Profit and Loss account
94. Which statement is correct? A. All the items in the trial balance have been used in the statement of profit or loss B. Not all the items in the trial balance have been used in the statement of profit or loss. The remaining balances are assets or liabilities or capital C. Not all the items in the trial balance have been used in the statement of profit or loss. The remaining balances are expenses or sales D. All the items in the trial balance have been used in the statement of profit or loss; and have zero balances at the end of the accounting period 95. Which statement is NOT correct? A. Gross profit is calculated in trading account B. Net profit is calculated in profit and loss account C. Trading account and profit and loss account comprise of the statement of financial position D. Both the trading account and the profit and loss account are part of the double entry system 96. XYZ Inc. had the following figures in its income statement: Sales: £3,000,000; Expenses: £500,000; Gross profit: £2,000,000; Purchses: £1,800,000. Ending inventory is …………… A. £800, B. £2,800, C. £700, D. £1,500, 97. At 31/12/20X9, Capital account has the following information: Capital Drawings £5, Cash £12, Net profit £7, Which of the following statements is correct? A. Balance of capital account 14,000 and placed on debit side of capital account B. Balance of capital account 14,000 and placed on credit side of capital account C. Balance of capital account 2,000 and placed on debit side of capital account D. Balance of capital account 14,000 and placed on credit side of capital account 98. XYZ Inc. had the following figures in its statement of financial position: Cash: £5,000; Receivable: £12,000; Inventory: £6,000; Machinery: £20,000; Net assets: £15, The amount of liabilities is A. £28, B. £58,
