What is a statement of accounts?

A statement of accounts is a financial record that reflects all transactions between you and a customer. It tells the customer how much he or she owes you for goods received on credit during a given period.

What is the General Journal used for?

General Journals record business transactions in sequential order, and are the first place to record unique data entries for checks or invoices issued.

What's the difference between General Journal and ledger?

The General Ledger records summarized transactions, while the General Journal records in detail the transactions of a smaller number of business activities.

Why is Double-entry System important?

Double-entry accounting helps companies maintain books that balance, makes financial reporting more accurate, and reduces the chance of fraud.

What are Capital Expenditures (CapEx)?

Capital Expenditures (CapEx) refers to the acquisition, upgrading, and maintenance of physical assets, such as property, plants, buildings, technology, or equipment.

Accounting and Finance MCQ Quiz With Answers Test 1

1. H buys goods on credit from J. The goods are unsuitable and H returns them to J. What is the name of the document that H sends to J with the goods?

Credit note
Debit note
Invoice
Statement of account

2. Why is the general journal used to correct errors in the ledger?

To avoid making alterations in the ledgerTo complete the double entry To provide a record explaining ledger entries To save the bookkeeper's time
To complete the double entry
To provide a record explaining the ledger entries
To save the bookkeeper's time

3. Which book of prime entry is part of the double-entry system?

Cash book
General journal
Purchases journal
Sales journal

4. In which of the following will cash discount allowed be first recorded?

Cash book
General journal
Ledger
Sales journal

5. A cash book has separate columns for bank and cash transactions. On 1 March, the balance in the cash account was $200. Transactions during March were:

Cash banked	$30
Check drawn for cash	$70

What is the balance on the cash account at the end of March?

$100
$160
$170
$240

6. A cash book (bank column) showed a balance of $1,973 (credit) on 31 March. The following items did not appear in the bank statement on that date:

Unpresented checks	$942
Checks banked	$865

What was the balance on the bank statement on 31 March?

$1,896 (credit)
$1,896 (debit)
$2,050 (credit)
$2,050 (debit)

7. The discount column on the debit side of the cashbook adds up to $842. It was posted to the Discount Received Account. The discount column on the credit side of the cashbook adds up to $613. It was posted to the Discount Allowed Account. Which entries correct these errors?

Credit Discount Allowed Account ($229)Credit Discount Received Account ($229)
Debit Discount Allowed Account ($229)Credit Discount Received Account ($229)
Debit Discount Allowed Account ($229)Debit Discount Received Account ($229)
Debit Discount Received Account ($229)Credit Discount Allowed Account ($229)

8. The owner of a business takes inventory for her own use. What are the ledger account entries to record this?

Debit drawings, credit purchases
Debit drawings, credit inventory
Debit capital, credit sales
Debit inventory, credit drawings

9. In a business's books, the ledger account of J. Brown, a customer, shows a debit balance of $450. What does this mean?

Brown has paid $450 to the business
Brown owes the business $450
The business has paid Brown $450
The business owes Brown $450

10. A suspense account was opened with a credit balance of $840. Which error caused this?

A check of $420 received from a customer was debited to his account
Discounts allowed, $420, was debited twice in the Discounts Allowed Account
Goods costing $420 taken by the owner of the business for own use were credited to his Drawings Account
Rent received, $420, was credited twice in the Rent Receivable Account

11. A truck cost $8,000. The price included $36 for petrol. The total payment of $8,000 was debited to the Truck Account. What is the effect on the income statement and balance sheet?

No effect (Income Statement)No effect (Balance Sheet)
Profit overstated by $36 (income statement)Non-current assets overstated by $36 (balance sheet)
Profit overstated by $36 (income statement)Non-current assets understated by $36 (balance sheet)
Profit understated by $36 (income statement)Non-current assets understated by $36 (balance sheet)

12. A bookkeeper mistakenly treats a capital expenditure item as revenue expenditure. What is the effect of this error?

Gross profit is understated
Total assets are overstated
Net profit is overstated
Total assets are understated

13. X and C need to obtain two machines to make one of their products. Machines P and Q may be purchased or, if preferred, similar machines may be hired. The table below shows the details of the machines. Accounting Mcqs test

All the machines will produce the same revenue each year. Which choice of machines will produce the greatest net profit in the first year?

P and Q (Purchase)- (Rent)
P (Purchase)One machine (Rent)
Q (Purchase)One machine (Rent)
- (Purchase)Two machines (Rent)

14. A vehicle costing $20,000 is depreciated by 20% per annum on the diminishing balance method. What is the depreciation charge at the end of the second year?

$3,200
$4,000
$6,400
$8,000

15. A machine bought two years ago for $20,000 is sold for $13,000. Plant and Machinery is depreciated by 10% on cost. What is the balance on the Provision for Depreciation of Plant and Machinery Account after this sale, if provision for depreciation before this sale was $28,000?

$22,000
$24,000
$26,000
$28,000

16. What happens to the balance of the Bad Debts Account at the end of a financial year?

Transferred to the trading section of the income statement
Shown as a deduction from trade receivables in the balance sheet
Transferred to the profit and loss section of the income statement
Entered in the cash book as an expense

17. A social club's receipts and payments account for 1996 showed rent paid as $4,000. On 1 January 1996, rent owed by the club was $800. On 31 December 1996, rent owed by the club was $1,000. What is the amount charged for rent in the income and expenditure account for 1996?

$4,000
$4,200
$4,800
$5,000

18. A business rented premises to a tenant from 1 April 2018 for $10,000 a year. Rent received by the business was $5,000 on 1 May 2018 and $5,000 on 1 November 2018. In the business's income statement for the year ended 31 December 2018, what is the amount shown for rent?

$7,500 debit
$7,500 credit
$10,000 debit
$10,000 credit

19. A business allowed Smith, a customer, a cash discount of $30. This was entered correctly in the Discount Allowed Account, but omitted from Smith's account. A suspense account was opened. Which correcting entries are required to close the suspense account?

Debit Smith's account $30, credit suspense account $30
Debit suspense account $30, credit discount allowed account $30
Debit suspense account $30, credit Smith's account $30
Debit Smith's account $30, credit discount allowed account $30

20. Which item would not appear in a sales ledger control account?

Discounts allowed
Interest charged on overdue accounts
Provision for bad debts
Sales returns

21. What is the purpose of control accounts?

to calculate the sales and purchases
to find errors quickly
to make the trial balance balanced
to prevent errors

22. Inventory at 31 December 2017 overstated by $6 000. What was the effect on the gross profit for the year to 31 December 2018?

S6 000 overstated
$6 000 understated
$12 000 overstated
nil effect

23. The table shows data relating to two departments of the same business. Accounting mcqs tests

Head office expenses will not be reduced by the closure of a department. Which action will result in the highest profit?

close department 1
close department 2
close both departments
keep both departments open

24. A Trial Balance showed: Accounting mcqs Tests

The Provision is to be maintained at 5% of Trade receivables. How would the Provision be shown in the Balance Sheet?

a liability of $1,100
a deduction from receivables of $1,100
a liability of $1,250
a deduction from receivables of $1,250

25. A business had working capital of $6 000 at 31 January. On 2 February, trade receivables paid $1 150 in full settlement of debts $1 200, and damaged inventory costing $200 was written off. What was the working capital at close of business on 2 February?

$4,600
$5,750
$6,950
$7,150

26. How is an invoice for an expense owing shown in the Balance Sheet?

current asset
non-current asset
current liability
non-current liability

27. How are non-current assets normally recorded in a balance sheet?

at book value
at cost
at replacement cost
at scrap value

28. If partners do not have any agreement, how should profits or losses be shared?

equally
equally after interest has been allowed on capital
in proportion to the amount of time that the partners work
in the ratio of the partners' individual capitals

29. A manufacturer buys a machine for $20 000. Its estimated life is five years with a scrap value of $10 000. Depreciation is charged on the straight-line method. What is the percentage rate of depreciation on an annual basis?

5%
10%
20%
50%

30. Bill and Ben are in partnership sharing profit; and losses in the ratio 3:2. Bill receives a salary of $12,000 per year. The firm's net profit for the year is $52,000. What are the amounts to be credited to the partners' Current Accounts?

Bill $26,000, Ben $26,OOO
Bill $31 200, Ben $20 800
Bill $36 000, Ben $16 OOO
Bill $24 000, Ben $16 OOO

31. Which of the following is similar to a club's receipts and payments account?

a balance sheet
a cash or bank account
an income and expenditure account
an income statement

32. The following information is taken from a sole trader's accounts: Opening Capital $12 000 Closing Capital $13 800 Net Profit $3 000 What are the trader's drawings?

$1 200
$1 800
$4 800
$22 800

33. What is a limited company's authorized capital?

capital the company is allowed to raise
issued capital plus loan capital
paid up share capital
shares issued

34. What is the main reason for preparing a manufacturing account?

to calculate the cost of overheads
to calculate the cost of production
to calculate the cost of raw materials used
to calculate the prime cost

35. A manufacturing business extracts the following information from its books: Direct materials $14 000 Direct labour $11 000 Indirect expenses $4000 What is the amount of prime cost?

$18 000
$21 000
$25 000
$29 000

36. The policy of a manufacturing company is to state its profit fairly. On which basis should its inventory of finished goods is valued in its accounts?

prime cost, $20 000
cost of production, $50 000
cost of similar goods bought from another supplier, $55 000
price at which goods were transferred from the factory to the warehouse, $60 000

37. A firm's sales are $100 000, the expenses are $30 000 and the net profit is $20 000. What is the gross profit as a percentage of the sales?

10%
50%
70%
80%

38. A trader made the following forecasts for the business for the next financial year: Average inventory at cost: $80 000 Rate of inventory turnover: 6 times Gross profit margin as a percentage of cost: 25% What are the forecast sales for the next financial year?

$120 000
$480 000
$576 000
$600 000

39. Business X is managed by its owner. It pays rent for its premises. Business Y owns its premises. The owner employs a manager to run the business for him. The table shows data relating to the two businesses. Accounting mcqs test

Which profit figures allow a proper comparison of the two businesses to be made?