1) Which of the following is an asset of a firm? a) An overdrawn balance on the firm's bank account. b) Money owed by the firm to one of its suppliers in respect of goods purchased on credit. c) The capital of the firm. d) Machinery owned by the firm. 2) Which of the following is correct? a) Assets Liabilities Capital 7,850 1,250 6,600 b) Assets Liabilities Capital 9,550 1,150 8,200 c) Assets Liabilities Capital 5,420 6,540 1,120 d) Assets Liabilities Capital 8,200 2,800 11,000 3) The following is a list of the assets and liabilities of a firm at a particular date. Premises owned by the firm 20,000 Money owed by the firm to its Accounts payable 3,000 Inventory owned by the firm 8,500 Loan received by the firm from a bank 4,000 Cash in the firm's safe 100 The firm's capital at that date is: a) 21,600 b) 21,100 0) 32,400 d) None of the above. 4) lfthere is a separate ledger account for each debtor and each creditor, which of the following double-entries is the correct way to record the lodgement of money received from P. Doyle, a debtor? a) Account to Debit: Bank Account to Credit: Cash b) Account to Debit: P.Doyle Accountto Credit: Bank c) Account to Debit: Cash Account to Credit: P.Doyle d) Account to Debit: Bank Account to Credit: P.Doyle 5) In the case of a retail garage, which of the following double-entries is the correct way to record the payment, by cheque, of an electricity bill for the current accounting penod? a) Account to Debit: Electricity Account to Credit: Bank b) Account to Debit: Bank Accountto Credit: Electricity c) Account to Debit: Electricity Account to Credit: Cash d) None of the above. 6) The purpose of a firm preparing a trial balance is to establish whether a) the total of the debit balances brought down in its nominal (general) ledger equals that of the credit balances brought down. b) its bank balance is correct. c) the double-entry record it has made for all transactions is correct. d) it has earned a profit or incurred a loss. 7) An error of commission arises when a) a correct figure is entered in the double-entry accounting records, once in the correct ledger account and once in the wrong person's account. b) a transaction is not recorded in the double-entry accounting records. 0) either the debit entry or the credit entry for a particular transaction is recorded in the wrong class of ledger account. d) None of the above. 8) In the case of a newsagent's shop, which of the following is an error of principle? a) A sale is not recorded in the double-entry accounting records. b) A credit sale to A. Barker is entered on the credit side of the sales account and on the debit side of A. Baker's account. c) The cost of purchasing a photocopier on credit is entered on the debit side of the purchases account and on the credit side of the creditor's account. d) None of the above. 9) lfthe total of a firm's sales for the month of May is 300,000 and its gross profit is equal to 25% of its cost of sales, its cost of sales for May was: a) 240,000 b) 60,000 c) 225,000 d) 75300 10) A firm's current assets are a) amounts which it is due to receive within one year of its statement of financial position (balance sheet) date. b) amounts which it is due to receive as a result of credit sales made by it within the last year. 0) its cash and positive bank balances and other assets likely to be converted into cash or bank balances within one year of its statement of financial position (balance sheet) date as a result of its normal trading operations. d) the total of its accounts receivable, its inventory and its cash and bank balances. 11) On 1 January a sole trader had capital of 25,000. During the year, he withdrew 23,000 for his own use and, at 31 December, he had capital of 31 ,000. If he did not introduce any new capital during the year, his net profit for the year was: a) 23,000 b) 29,000 c) 17,000 d) 32,000 12) The following information relates to a sole trader. Total of all assets at 1 June 2,300 Total of all liabilities at1 June 2,500 Net profit earned during June 1,000 Capital introduced during June 5,000 Drawings during June 700 The sole trader's capital at 30 June was: a) 5,300 b) 5,100 0) 5,600 d) 5,500 13) Carriage inwards is included in the cost of sales calculation because a) it is a cost associated with the purchase of goods. b) carriage outwards is shown as an expense in the profit and loss account. c) it should not be shown in the statement of financial position (balance sheet). d) None of the above. 14) A sole trader incurred a loss of10,000 during his most recent accounting period, yet had more money in his bank account at the end of the period than he had at the beginning of it. Which of the following, on its own, could explain this? a) The introduction of 1 5,000 new capital during the period. b) The purchase of Non-current assets during the period. 0) His customers taking longer than normal to pay the amounts they owe to him. d) An increase in the amount of his Inventory over the course of the period. 15) Tom set up a business on 1 January. He bought Non-current assets costing 53,000 and Inventory costing 6,600. He had financed these in advance of commencing businesswith a personal loan of25,000 from his brother and a business loan from a bank. On 31 December of the same year his net assets totalled 37,200. His net profit for the year was 21,100. Tom's drawings during the year were: a) 8,900 b) 16,100 0) 18,500 d) 1,300 16) The going concern concept means that, when preparing accounts a) unless there is specific information to the contrary, the firm for which the accounts are being prepared should be assumed to continue in operational existence for the foreseeable future at a level of activity not significantly less than the current level of activity. b) profit should not be anticipated and losses should be provided for as soon as they are foreseen. c) revenues and costs are recognised as they are earned or incurred, not as money is received or paid. d) items should normally be accounted for in a manner consistent with the way in which they were accounted for in previous years. 17) The accruals concept a) applies to assets and liabilities only. b) is not a fundamental accounting concept. c) applies to revenues, expenses, assets and liabilities. d) applies to revenues and expenses only. 18) The Sales Daybook is used to record a) the names, addresses, credit terms and other details regarding Accounts receivable. b) money received from Accounts receivable. c) invoices issued to customers in respect of goods sold on credit. d) None of the above. 19) A firm which purchased five items on credit at a cost of 80 each, less 25% trade discount, is entitled to deduct a cash discount of 5% if it pays for them, in full, within 14 days of the invoice date. If the firm pays within the above two-week period, it will have to pay: a) 285 b) 280 0) 260 (:1) None of the above. 20) Which of the following is revenue expenditure? a) The transfer of surplus funds from a bank current account to a bank deposit account. b) The introduction of additional capital by a proprietor. c) The cost of acquiring machinery for continuing use in the business. d) The cost of advertising a mid-season sale. 21) 'Obsolescence' means a) the decline in the book value of non-current assets as a result of them being depreciated using the straight-line method of depreciation. b) the decline in the book value of non-current assets as a result of them being depreciated using the reducing balance method of depreciation. c) the decline in the value of non-current assets as a result of them becoming outdated by technological improvement and invention. d) None of the above. 22) A firm bought a non-current asset for 500,000. The asset has an estimated useful economic life of ten years and an estimated scrap value of 50,000. If the asset is depreciated at the rate of 20% per annum, using the reducing balance method, the depreciation charge, in relation to this asset alone, in the second year of its life will be: a) 80,000 b) 45,000 c) 72,000 d) 90,000 23) On 31 March the balance brought down on a firm's bank account in its ledger was 3,600, credit. At the same date, outstanding cheques amounted to 1,400 and outstanding lodgements amounted to 2,000. A cheque for 500, received from a debtor, was subsequently dishonoured. The receipt of the cheque had been correctly recorded but no entry has yet been made in the accounting records in respect of it being dishonoured. On the basis of the above information, the balance on the firm's bank statement at 31 March was: a) 4,200 overdrawn. b) 3,500 credit. c) 4,700 overdrawn. d) 3,700 credit. 24) In the Statement of Financial Position (balance sheet) of a sole trader, prepayments should be shown as a) part of current assets. b) a deduction from current liabilities. c) a deduction from capital. d) part of accounts payable. 25) If a 500 salaries accrual was inadvertently treated as a prepayment, net profit would be a) overstated by 500. b) overstated by 1 ,000. c) understated by 1 ,000. d) understated by 500. 26) If an accumulated provision for depreciation account is in use then the entries for the year's depreciation would be: a) Credit Provision for Depreciation Account, debit Profit and Loss Account b) Credit Asset Account, debit Provision for Depreciation Account c) Debit Asset Account, credit Profit and Loss Account d) Credit Profit and Loss Account, debit Provision for Depreciation Account 27) Cash, accounts receivables, inventories, deposits, prepaid expenses a) are current assets on the balance sheet b) are liabilities on the balance sheet c) are classifications of stockholders' equity d) None of the above 28) Given opening capital of16,500, closing capital as 11,350 and drawings were 3,300, then: a) Loss for the year was 8,450 b) Loss for the year was 1,850 c) Profit for the year was 1,850 d) Profit for the year was 8,450 29) Which one of the following would be classified as a current asset for a furniture retailer? a) Property b) Furniture held for resale c) Bank overdraft d) Shop fittings 30) The debit side of a company's trial balance totals $800 more than the credit side. Which one of the following errors would fully account for the difference? a) $400 paid for plant maintenance has been correctly entered in the cash book and credited to the plant asset account. b) Discount received $400 has been debited to discount allowed account c) A receipt of $800 for commission receivable has been omitted from the records d) The petty cash balance of $800 has been omitted from the trial balance. 10