What is a Credit Note?

A Credit Note is a document that indicates that a customer has already made payment in full or in part for an invoice. A Credit Note may either cancel the original invoice or indicate a reduction in the amount owed.

What is a debit note?

A debit note, or a debit memo, is an official record of the amount owed by one party to another. Youll commonly come across these notes in business-to-business transactionsfor example, one business may supply another with goods or services before an invoice is sent. The debit note makes note of the transaction for documentation purposes.

What is a credit balance?

A credit balance refers to the proceeds of a short sale which are credited to your margin account.

What is a Trial Balance?

A Trial Balance is a spreadsheet that lists all accounts and summarizes the activity of these accounts. A company prepares a Trial Balance at the end of every reporting period.

Is Capital Expenditure an expense or asset?

Capital Expenditures are usually recorded as assets, not expenses. They are classified as Fixed Assets and depreciatedexpensed over timein order to match their cost with the revenues they generate.

Accounting and Finance MCQ Quiz With Answers Test 5

1. Y returns goods to X. Which document will Y send to X?

credit note
debit note
invoice
receipt

2. Y sells goods on credit to X, How is this recorded in Y's books? Accounting and Finance MCQs Tests

A
B
C
D

3. Which of the following accounts normally has a credit balance?

capital account
motor vehicles account
purchases account
returns inward account

4. A cashbook showed a debit bank balance of $1 234 on 30 June. Items not included on the bank statement at that date were: Unpresented cheques $132 Uncredited deposits $765 What was the balance on the bank statement at 30 June?

$601 debit
$601 credit
$1 867 debit
$1 867 credit

5. A business allows a customer a 10% trade discount and 5% cash discount on goods with a list price of $1800. Assuming the customer takes the cash discount, what will be entered in the discount column in the cashbook when the customer pays the invoice?

$81
$90
$180
$261

6. At the end of the year, it was discovered that sales had been overcast by $70. A suspense account had been opened. What are the entries in the General Journal to correct this error?

credit sales account $70; debit sales ledger control account $70
credit sales account $70, debit suspense account $70
debit sales account $70, credit sales ledger control account $70
debit sales account $70, credit suspense account $70

7. How should the cash purchase of supplies be entered in the ledger? Accounting and Finance MCQs test

A
B
C
D

8. X owns a shop. To find his selling price he marks up his inventory by 50%. He took inventory for his own use costing $100 but did not pay for it, How should this be entered in the accounts? Accounting and Finance MCQs tests

A
B
C
D

9. Why does a business prepare a trial balance?

to calculate the profit and loss
to show the financial position
to check the arithmetical accuracy of the ledger
to check the cash and bank balances

10. Which error will not affect the balancing of the Trial Balance?

An electricity payment of $420 was entered correctly in the Bank account but debited as $240 in the Electricity account
A purchase invoice of $200 had not been entered in the Purchases Journal
A rent payment of $600 had been entered correctly in the Bank account but omitted from the Rent account
The Sales account was overcast by $90

11. Which item should be treated as capital expenditure in the accounts of a company?

legal costs for the purchase of property
purchase of a new computer for re-sale
renewing the electrical wiring in the office
repairs to plant and machinery

12. X is a trader in office machinery. On 31 March he purchases an office machine on credit from Y. Which sections will increase on X's Balance Sheet on 31 March?

current assets only
current assets and current liabilities
non-current assets only
non-current assets and current liabilities

13. A machine is purchased at the start of year 1 for $35 000. It is depreciated on the reducing balance method at 20% per year. What is the net book value at the end of year 2?

$17 920
$21 000
$22 400
$28 000

14. A company buys a van for $12 600 and sells it four years later for $3 750 when the provision depreciation is $7 400. What is the entry in the Income statement?

$1 450 debit
$5 200 debit
$1 450 credit
$5 200 credit

15. The balance on a provision for depreciation of machinery account was $28 000. A machine bought two years ago for $20 000 is sold for $13 000. Plant and Machinery are depreciated by 10% on cost each year. What is the balance on the provision for depreciation of plant and machinery account after this sale?

$21 000
$22 000
$24 000
$26 000

16. How is the balance of the Bad Debts account treated at the end of the financial year?

It is credited in the income statement
It is debited in the income statement
It is deducted from trade receivables in the balance sheet
It is deducted from sales in the trading section of income statement

17. On 1 January 2018 a company's Provision for Doubtful Debts account was $500. On 31 December 2018 Trade receivables were $20 000. The provision is to be maintained at 2% of Trade receivables. What adjustment to the Provision for Doubtful Debts account is needed?

$100 debit
$100 credit
$400 debit
$400 credit

18. A firm makes up its annual accounts to 30 April. Included in the ledger account balances on 1 May 2018 was insurance (debit) $800. 0n 31 October 2018 the annual insurance premium of $2 100 became due and was paid. What amount is charged for insurance in the Income statement for the year ended 30 April 2019?

$1 050
$1 850
$2 100
$2 900

19. The rent of X's premises is $700 per month payable quarterly in advance. Accounting and Finance MCQs Tests

How much is transferred to the Income statement for the year ending 31 December?

$6 300
$7 000
$8 400
$9 100

20. After preparing final accounts, X finds she has omitted $129 due for electricity. What is the effect on the final accounts after correcting this error? Accounting and Finance MCQs tests

A
B
C
D

21. A posting to the ledger from the Sales Journal of $890 is later found to have been incorrectly entered. It should have been posted as $980. Which journal entry is required to correct this error? Accounting and Finance MCQs tests

A
B
C
D

22. Which item would appear in a Purchase Ledger Control Account?

cash discounts allowed
provision for bad debts
purchases returns
trade discount received

23. Which total is shown by the closing balance on a Sales Ledger Control Account?

credit purchases
credit sales
trade payables
trade receivables

24. The books of a busine$ show premises $20 000 and other net assets $30 000. X buys the business for $60 000 and he values the premises at $28 000. How much does X pay for Goodwill?

nothing
$2 000
$8 000
$10 000

25. X provides the following information. Accounting and Finance MCQs tests

What is her net profit for July?

$10 000
$20 000
$30 000
$40 000

26. The following appear in X's Balance Sheet. Accounting and Finance MCQs Test

What is X's Working Capital?

$3 500
$4 500
$5 500
$6 500

27. If current assets are arranged in a Balance Sheet in increasing order of liquidity, which of the following will be true?

The easiest to turn into cash will come first
The easiest to turn into cash will come last
The highest value of money will come first
The highest value in money will come last

28. A business buys an item of capital equipment on credit of 30 days. What is the effect of this transaction on the Balance Sheet?

to increase current assets and increase current liabilities
to increase current assets and reduce current liabilities
to increase non-current assets and reduce current assets
to increase non-current assets and increase current liabilities

29. X and Y are partners who share profits and losses equally after allowing for interest on capital and salary. Their net profit for the year is $28 750. The table shows information for the year. Accounting and Finance MCQs test

What is the share of profit for each partner?

$8 650
$10 750
$12 375
$12 750

30. A sole trader takes cash and also goods for his own use from his business. Which of these will affect his capital?

the cash only
the goods only
both the cash and the goods
neither the cash nor the goods

31. At the end of its financial year, a business had trade receivables of $16 000 and a Provision for Doubtful Debts of $640. The provision is to be maintained at 5% of trade receivables. What entry is made in the Income statement?

$1 600 credit
$160 debit
$800 credit
$800 debit

32. H is a partner in the partnership of H, J and K. The table shows information relating to H for the financial year. Accounting and Finance MCQs

The opening credit balance on H's current account is $28 200. What is the closing balance on his current account?

$30 000
$38 000
$40 800
$43 600

33. What is the purpose of a receipts and payments account?

to calculate profit
to calculate revenue from income-generating activities
to show the cash transactions for the period
to show the surplus of the income over expenditure

34. A social club's records for a year show: Q-34

What is the total net income for the year?

$8 000
$9 800
$10 000
$12 000

35. The following information relates to a business. Q-35

What is the net profit for the year?

$9 000
$12 000
$15 000
$22 000

36. What appears as the amount of share capital in a limited company's Balance Sheet?

the market value of the authorized share capital
the market value of the issued share capital
the nominal value of the authorised share capital
the nominal value of the issued share capital

37. How is the factory cost of production calculated?

direct labour + direct material
direct labour + factory overheads
direct material + direct labour + factory overheads
direct material + direct labour + total overheads

38. A firm values its inventory at cost. At the end of the year, inventory includes goods which had cost $300 but which, because of damage, will be sold for $100. What happens when this is corrected? Accounting and Finance MCQs Tests

A
B
C
D

39. In 2018 a business had opening inventory of $10 000 and closing inventory of $15 000. Sales were $100 000 and gross profit 25% of sales. What was the inventory turnover for the year?

4 times
6 times
8 times
10 times

40. What is±he meaning of the prudence concept?

accounts should provide for all probable losses and should not anticipate profits
accounts should only include items'with a monetary value
accounts should provide for all accruals and prepayments
accounts should use the same methods from year to year