What is the Double-entry System?

The Double-entry System of accounting requires that for every transaction, the amounts entered as debits must be equal to the amounts entered as credits.

A cash book is a financial journal that contains all cash receipts and disbursements, which are then posted into the General Ledger.

What is the purpose of General Journals?

A General Journal is a record of business transactions. It includes columns for dates, serial numbers, and debits and/or credits. A specialized journal records only specific types of transactions, such as purchases or sales.

What is the difference between a Trial Balance and balance sheet?

The Trial Balance and the balance sheet are two different accounting reports. The Trial Balance lists the ending balances for every account, while the balance sheet may aggregate many ending account balances into each line item.

What is an income statement?

An income statement is one of the three key statements used for reporting a company's financial performance for a specific accounting period.

Accounting and Finance MCQ Quiz With Answers Test 4

1. What is the purpose of double entry bookkeeping?

to apply the dual aspect concept
to avoid errors
to prepare books of prime entry accurately
to record revenue and capital transactions correctly

2. X sells goods on credit to Y. Y returns some of these goods to X. Which document will X send to Y?

credit note
debit note
invoice
statement of account

3. X sells goods to Y on 15 February at a list price of $3 600 but subjects to a trade discount of and a cash discount of 5% for settlement within 28 days. Y paid on 20 April. How much will X receive for the goods?

$2 880
$2 907
$3 060
$3 600

4. Which of the following is part of the double entry system?

cash book
general journal
sales journal
trial balance

5. A business maintains a two-column cashbook. At 1 June the debit balance of the bank column was $500. Transactions during June were

What was the debit balance of the bank column at the end of June?

$330
$430
$570
$670

6. What is a cashbook? Accounting MCQs tests

A
B
C
D

7. Which item will be entered in the General Journal?

a correction of an error
a sale on credit
discount received
goods returned to supplier

8. The owner of a business has taken goods for personal use but not recorded this in the books. Which journal entries must be made at the end of the year? Accounting and finance mcqs test

A
B
C
D

9. The following balances were extracted from Harry's Purchases and Sales Ledgers. Accounting and finance mcqs

How much does Harry owe?

$1 800
$3 200
$5 000
$8 200

10. After which error will a trial balance still balance?

A rent payment of $150 was entered correctly in the bank account but debited to the rent account as $250
Discount received of $378 was debited to the discount allowed account
Sales of $230 were entered in the Sales Journal as $320
The purchases Journal was overcast by $100

11. A trial balance failed to agree and a Suspense Account was opened. Later it was found that Discount Received of $390 had been debited to the Discounts Allowed account. What are the entries required correcting this error? Accounting MCQs Tests

A
B
C
D

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

gross profit is overstated
net profit is understated
total assets are overytated
total assets are understated

13. A garage business buys a motor van that will be used for business purposes only. Which account in the general ledger will contain this transaction?

capital
motor expenses
motor vehicles
purchases

14. A business depreciates its non-current assets using the straight-line method. Assuming there is no scrap value, on which amount is the annual depreciation charge calculated?

book value
cost
market value
replacement cost

15. A machine costing $60 000 is depreciated by 25% per annum on the diminishing balance method. What is the depreciation charge at the end of the second year?

$11 250
$15 000
$26 250
$30 000

16. At the beginning of the year the balance on the Provision for Doubtful Debts account was $3 000. At the end of the year it is decided to write off a bad debt of $250 and to have a Provision for Doubtful Debts of $2 000. What will be the net effect of these decisions on the net profit of the business?

$750 increase
$1 250 decrease
$1 750 increase
$2 250 decrease

17. A business creates a Provision for Doubtful Debts. How is this recorded in the ledger?

by crediting the trade receivable's account
by debiting the trade receivable's account
by crediting the provision for doubtful debts account
by debiting the provision for doubtful debts account

18. In 2000 a business paid $3 000 for electricity. On 1 January 2018 $600 was owed for electricity. On 31 December 2018 $1 300 was owed for electricity. How much is charged for electricity in the Income statement for 2018?

$3 000
$3 600
$3 700
$4 300

19. A business has paid rent of $3 200 for the year 1 April 2018 to 31 March 2019. What adjustment is needed to the rent account at the end of the financial year on 31 December 2018?

an accrual of $800
an accrual of $2 400
a prepayment of $800
a prepayment of $2 400

20. A business allowed Smith, a customer, $30 cash discount. 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 Discount Allowed Account $30
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

21. At the end of the year it was discovered that the Purchase Returns account had been undercast by $50. A Suspense account had been opened. Which entries are required to correct this error?

credit purchases account $50; debit purchase returns account $50
credit suspense account $50, debit purchase returns account $50
debit purchases account $50; credit purchase returns account $50
debit suspense account $50, credit purchase returns account $50

22. A purchase Ledger Control Account is prepared from relevant figures in the following list. Accounting and Finance MCQs tests

What is the closing balance?

$600
$900
$1 100
$1 400

23. X buys $860 worth of goods on credit from Y and makes payment 7 days later. He is allowed discount of 5%. What entries must be made in X's books to record this payment? Accounting and Finance MCQs Tests

A
B
C
D

24. The table shows the assets and liabilities of X on 31 December 2018. Accounting and Finance MCQs Test

On I January 2001, Y purchased X's business for $93 000. Y took over all the assets of X at balance sheet valuation, but did not take over the liabilities. What is the value of Goodwill?

$1 000
$9 000
$25 000
$33 000

25. A trader buys goods for $20 000 and then sells three-quarters of them for $32 000. What is her gross profit?

$12 000
$15 000
$17 000
$20 000

26. On 1 January 2018 the Provision for Doubtful Debts was $1 000. During the year ended 31 December 2018 Bad Debts written off amounted to $500. At 31 December 2018 the trade receivables owed $18 000 and the Provision for Doubtful Debts was $900. What is the net figure for trade receivables in the Balance Sheet at 31 December 2018?

$16 600
$17 000
$17 100
$17 500

27. How is a prepayment by X shown in X's Balance Sheet?

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

28. On which basis should inventory be valued?

cost price
higher of cost or net realisable value
lower of cost or net realisable value
net realisable value

29. X and Y are in partnership sharing profits equally and receiving 10% interest on capital. On 31 December 2018 their capital and current accounts show the following credit balances. Accounting and Finance MCQs Test

What will be the total interest on capital allowed for the year?

$800
$1 000
$1 200
$2 000

30. At 1 January 2000 X had machinery costing $45 000 which had been depreciated by $13 500. In the Income statement for the year ended 31 December 2018, depreciation was charged at 25% on the straight-line method instead of 30% on the diminishing (reducing) balance method. As a result of this error, the net profit is:

$11 250 too high
$9 450 too low
$1800 too high
$1 800 too low

31. X rent premises at a quarterly rent of $1 200. On 1 January 2018 she owes $800. She makes the following payments in 2018. $2 000 on 3 January $1 200 on 1 April $1 200 on 1 July She fails to pay the rent due on 1 October. How much is debited in the Income statement for the year ended 31 December 2018?

$3 600
$4 400
$4 800
$5 600

32. What does a credit balance on a partner's current account represent to a business?

current asset
current liability
non-current liability
part of the capital

33. What is similar to a club's accumulated fund?

appropriation account
bank account
capital account
income statement

34. The table shows information relating to the subscription income of a club for a financial year Accounting and Finance MCQs Tests

During the year, subscriptions amounting to $1 700 were received. How much should be credited .to the Income and Expenditure account?

$1 650
$1 700
$1 750
$1 850

35. The following information is taken from a sole trader's accounts: Accounting and Finance MCQs

What is the trader's net profit?

$1 200
$2 400
$3 600
$6 000

36. What is a limited company's issued capital?

its loan capital
its paid-up share capital
the capital that the company is allowed to raise
the number of shares issued

37. At the end of the financial year, a manufacturer has inventories of finished goods, raw materials and work-in-progress. Which inventories will appear in the Manufacturing Account? Accounting and Finance MCQs tests

A
B
C
D

38. A firm's sales are $150 000, the cost of sales is $90 000 and the expenses are $45 000. What is the net profit as a percentage of the sales?

10%
30%
40%
70%

39. The following relates to X's last financial year. Accounting and Finance MCQs Tests

What were the sales for the year?

$60 000
$90 000
$108 000
$112 500

40. Two companies buy identical computer equipment. The larger company writes it off immediately, but the smaller company treats it as a non-current asset. Which accounting concepts are the companies applying?