Double entry bookkeeping I (Y7C3)

1	Which one of the following can the accounting equation can be rewritten as?
	A	Assets + profit – drawings – liabilities = closing capital
	B	Assets – liabilities – drawings = opening capital + profit
	C	Assets – liabilities – opening capital + drawings = profit
	D	Assets – profit – drawings = closing – liabilities
2	A trader’s net profit for the year may be computed by using which of the following formulae?
	A	Opening capital + drawings – capital introduced – closing capital
	B	Closing capital + drawings – capital introduced – opening capital
	C	Opening capital – drawings + capital introduced – closing capital
	D	Opening capital – drawings – capital introduced – closing capital
3	The profit earned by a business in 20x7 was $72,500. The proprietor injected new capital of $8,000 during the year and withdrew goods for his private use which had cost $2,200. If net assets at the beginning of 20x7 were $101,700, what were the closing net assets?
	A	$35,000
	B	$39,400
	C	$168,400
	D	$180,000
4	The profit made by a business in 20x7 was $35,400. The proprietor injected new capital of $10,200 during the year and withdrew a monthly salary of $500. If net assets at the end of 20x7 were $95,100, what was the proprietor’s capital at the beginning of the year?
	A	$50,000
	B	$55,500
	C	$63,900
	D	$134,700
5	A sole trader took some goods costing $800 from inventory for his own use. The normal selling price of the goods is $1,600. Which of the following journal entries would correctly record this?
			Dr $		Cr $
	A	Inventory account Purchases account	800		800
	B	Drawings account Purchases account	800		800
	C	Sales account Drawings account	1,600		1,600
	D	Drawings account Sales account	800		800
6	A business can make a profit and yet have a reduction in its bank balance. Which ONE of the following might cause this to happen?
	A	The sale of non-current assets at a loss
	B	The charging of depreciation in the statement of profit or loss
	C	The lengthening of the period of credit given to customers
	D	The lengthening of the period of credit taken from suppliers
7	The net assets of Altese, a trader, at 1 January 20x2 amounted to $128,000. During the year to 31 December 20x2 Altese introduced a further $50,000 of capital and made drawings of $48,000. At 31 December 20x2 Altese’s net assets totalled $184,000. What is Altese’s total profit or loss for the year ended 31 December 20x2?
	A	$54,000 profit
	B	$54,000 loss
	C	$42,000 loss
	D	$58,000 profit
8	Jones Co has the following transactions:
	1	Payment of $400 to J Bloggs for a cash purchase
	2	Payment of $250 to J Doe in respect of an invoice for goods purchased last month
	What are the correct ledger entries to record these transactions?
	A	Dr  Cash Cr  Purchases	$650					$650
	B	Dr  Purchases Cr  Cash	$650					$650
	C	Dr   Purchases Cr  Trade Payables Cr  Cash	$400 $250					$650
	D	Dr  Cash Cr  Trade Payables Cr  Purchases	$650					$250 $400
9	T Tallon had the following transactions:
	1	Sale of goods on credit fo $150 to F Rogit
	2	Return of goods from B Bledigg originally sold for $300 in cash to B Blendigg
	What are the correct ledger entries to record these transactions?
	A	Dr Receivables Dr Sales Returns Cr Sales Cr Cash	$150 $300					$150 $300
	B	Dr Sales Dr Cash Cr Receivables Cr Sales Returns	$150 $300					$150 $300
	C	Dr Receivables Cr Sales Returns Cr Sales Returns	$450					$150 $300
	D	Dr Sales Returns Dr Sales Cr Cash	$300 $150					$450
10	Which of the following documents should accompany a return of goods to a supplier?
	A	Debit note
	B	Remittance advice
	C	Purchase invoice
	D	Credit note
11	Which of the following are books of prime entry?
	1	Sales day book
	2	Cash book
	3	Journal
	4	Purchase ledger
	A	1 and 2 only
	B	1, 2 and 3 only
	C	1 only
	D	All of them
12	In which book of prime entry will a business record debit notes in respect of goods which have been sent back to suppliers?
	A	The sales returns day book
	B	The cash book
	C	The purchase returns day book
	D	The purchase day book
13	A company’s motor vehicles at cost account at 30 June 20x6 is as follows:
	MOTOR VEHICLES – COST
	Balance b/d Additions			$ 150,500 120,950		Disposal Balance c/d			$ 85,000 186,450
				271,450					271,450
	What opening balance should be included in the following period’s trial balance for motor vehicles – cost at 1 July 20x6?
	A	$271,450 DR
	B	$271,450 CR
	C	$186,450 CR
	D	$186,450 DR
14	A company’s trade payables account at 30 September 20x1 is as follows:
	TRADE PAYABLES ACCOUNT
	Cash at bank Balance c/d			$ 21,600 11,900			Balance b/d Purchases		$ 14,000 19,500
				33,500					33,500
	What was the balance for trade payables in the trial balance at 1 October 20x0?
	A	$14,000 DR
	B	$14,000 CR
	C	$11,900 DR
	D	$11,900 CR
15	Which of the following would be recorded in the sales day book?
	A	Discount allowed
	B	Sales invoices
	C	Credit notes received
	D	Trade discounts
16	Which of the following statement is true?
	A	A debit records an increase in liabilities
	B	A debit records a decrease in assets
	C	A credit records an increase in liabilities
	D	A credit records an decrease in capital
17	How is the total of the purchases day book posted to the nominal ledger?
	A	Debit purchases, Credit cash
	B	Debit payables control, Credit purchases
	C	Debit cash, Credit purchases
	D	Debit purchases, Credit payables control
18	Which one of the following statements about an imprest system of petty cash is correct?
	A	An imprest system for petty cash controls small cash expenditures because a fixed amount is paid into petty cash at the beginning of each period.
	B	The imprest system provides a control over petty cash spending because the amount of cash held in petty cash at any time must be equal to the value of the petty cash vouchers or receipts for spending.
	C	An imprest system for petty cash can operate without the need for petty cash vouchers or receipts for spending.
	D	An imprest system for petty cash helps with management of small cash expenditures and reduces the risk of fraud.
19	Which one of the following provides evidence that an item of expenditure on petty cash has been approved or authorised?
	A	Petty cash voucher
	B	Records of the transaction in the petty cash book
	C	Receipts for the expense
	D	Transfer of cash from the bank account into petty cash

The Qualitative Characteristics of Financial Information (Y7C2)

1	Which accounting concept should be considered if the owner of a business takes goods from inventory for his own personal use?
	A	The fair presentation concept
	B	The accruals concept
	C	The going concern concept
	D	The business entity concept
2	Sales revenue should be recognised when goods and services have been supplied; costs are incurred when goods and services have been received. Which accounting concept governs the above?
	A	The business entity concept
	B	The materiality concept
	C	The accruals concept
	D	The duality concept
3	Which accounting concept states that omitting or misstating this information could influence users of the financial statements?
	A	The consistency concept
	B	The accruals concept
	C	The materiality concept
	D	The going concern concept
4	According to the IASB’s Conceptual Framework for Financial Reporting, which TWO of the following are part of faithful representation?
	1	It is neutral
	2	It is relevant
	3	It is presented fairly
	4	It is free from material error
	A	1 and 2
	B	2 and 3
	C	1 and 4
	D	3 and 4
5	Which of the following accounting concepts means that similar items should receive a similar accounting treatment?
	A	Going concern
	B	Accruals
	C	Matching
	D	Consistency
6	Listed below are some characteristics of financial information.
	1	Relevance
	2	Consistency
	3	Faithful representation
	4	Accuracy
	Which of these are qualitative characteristics of financial information according to the IASB’s Conceptual Framework for Financial Reporting?
	A	1 and 2 only
	B	2 and 4 only
	C	3 and 4 only
	D	1 and 3 only
7	Which ONE of the following statements describes faithful representation, a qualitative characteristic of faithful representation?
	A	Revenue earned must be matched against the expenditure incurred in earning it.
	B	Having information available to decision-makers in time to be capable of influencing their decisions.
	C	The presentation and classification of items in the financial statements should stay the same from one period to the next.
	D	Financial information should be complete, neutral and free from error
8	Listed below are some comments on accounting concepts.
	1	Financial statements always treat the business as a separate entity.
	2	Materiality means that only items having a physical existence may be recognised as assets.
	3	Provisions are estimates and therefore can be altered to make the financial results of a business more attractive to investors.
	Which, if any, of these comments is correct, according to the IASB’s Conceptual Framework for Financial Reporting?
	A	1 only
	B	2 only
	C	3 only
	D	None of them
9	Which of the following statements about accounting concepts and the characteristics of financial information are correct?
	1	The concept of accruals requires transactions to be reflected in the financial statements once the cash or its equivalent is received or paid.
	2	Information is material if its omission or misstatement could influence the economic decisions of users taken on the financial statements.
	3	Based on faithful representation, it may sometimes be necessary to exclude material information from financial statements due to difficulties establishing an accurate figure.
	A	1 only
	B	1 and 2 only
	C	2 only
	D	2 and 3only
10	The IASB’s Conceptual Framework for Financial Reporting gives six qualitative characteristics of financial information. What are these six characteristics?
	A	Relevance, Faithful representation, Comparability, Verifiability, Timeliness and Understandability
	B	Accuracy, Faithful representation, Comparability, Verifiability, Timeliness and Understandability
	C	Relevance, Faithful representation, Consistency, Verifiability, Timeliness and Understandability
	D	Relevance, Comparability, Consistency, Verifiability, Timeliness and Understandability
11	Which one of the following is not a qualitative characteristic of financial information according to the Conceptual framework for Financial Reporting?
	A	Faithful representation
	B	Relevance
	C	Timeliness
	D	Accruals
12	According to the IASB Conceptual framework which of the following is not an objective of financial statements?
	A	Providing information regarding the financial position of a business
	B	Providing information regarding the performance of a business
	C	Enabling users to assess the performance of management to aid decision making
	D	Providing reliable investment advise
13	Which of the following statement about accounting concepts and policies is/are correct?
	1	Companies should never change the presentation or classification of items in their financial statements, even if there is a significant change in the nature of operations.
	2	Companies should create provisions in times of company growth to be utilised in more difficult times, to smooth profits.
	A	1 only
	B	2 only
	C	1 and 2
	D	Both are incorrect