1. A debit entry may signify:

Question

A a decrease in asset accounts
B a decrease in liability accounts
C an increase in equity accounts
D an increase in liability accounts

2. A receipt of cash from a credit customer in payment of his account would be recorded by a:
A debit to cash at bank; credit to debtor
B debit to debtors; credit to cash at bank
C debit to cash at bank; credit to creditor
D debit to creditor; credit to cash at bank
3. A listing of ledger account balances with titles of the accounts on a given date is referred to as:
A income summary
B income statement
C balance sheet
D trial balance
4. Gateway Travel provided travel services to its clients on credit and recorded revenues of K 28 000. The business’ asset which was increased as a result of this transactions is:
A accounts receivable
B travel service revenue
C cash at bank
D accounts payable

5. Which of the following is an example that decreases both an asset and a liability?
A sale of goods on credit
B purchase of goods on credit
C cash received from debtors
D cash paid to creditors

6. Which of the following best describes an income statement?
A a statement of business transactions for the year
B a statement showing business results for a period
C a statement of assets, liabilities and equity of a business
D a summary of revenue items and expense items for year

7. On 1 November 2015 Theodist Ltd signed a contract with EMTV to run advertisements during January and March 2016 to promote school supplies at an agreed amount of K 12 000. Theodist Ltd paid the agreed amount on the same day.
Which of the following is the correct double entry made by Theodist Ltd on 1 November 2015.
Dr Cr
A Advertising expenses K 12 000 Cash at bank K 12 000
B Advertising expenses K 12 000 Accounts payable – EMTV K 12 000
C Prepaid expenses K 12 000 Cash at bank K 12 000
D Accounts receivable- EMTV K 12 000 Cash at bank K 12 000

8. Which of the following documents is issued when goods are returned to a creditor?
A Invoice
B Credit note
C Purchase order
D Delivery docket

9. “ A business will continue to trade in the foreseeable future”. Which accounting principle is referred to in this statement?
A accrual
B business entity
C consistency
D going concern

10. The purpose of making provisions for doubtful debts is:
A to cancel a particular debt
B to provide for possible bad debt
C to write off outstanding debts more than 9 months
D to follow up outstanding debts

11. A business entity increases its provision for doubtful debts by K 1 600. What will be the effect of this adjustment on net profit and current assets?
Net profit Current assets
A Decrease by K 1 600 Decrease by K 1 600
B Decrease by K 1 600 Increase by K 1 600
C Increase by K 1 600 Decrease by K 1 600
D Increase by K 1 600 Increase by K 1 600

12. Business cash at bank account showed K 5 000 debit balance as at 31 March 2016. On this date there were K 4 750 unpresented cheques and K 4 600 unrecorded deposits. What will be the balance as per bank statement?
A K 4 600 Dr
B K 6 500 Cr
C K 4 850 Cr
D K 5 150 Cr
13. The prime function of accounting is:
A recording economic data
B providing information for decision making
C classifying and recording business transactions
D summarizing accounting data
14. Which of the following statements is correct?
A an asset account always shows a credit balance
B an expense account always shows a credit balance
C an expense account always shows debit balance
D a liability account always shows a debit balance

15. Which of the following transactions would affect the owner’s equity of a business?
A purchase of furniture on credit
B a receipt from a debtor
C a purchase of a photocopier
D a sale of a goods which cost K 15 000 on credit for K 22 000

16. In a business Peter’s account showed a debit balance of K 9 000. Which of the following is correct?
A Peter has paid a K 9 000 to the business
B Peter owes the business K 9 000
C the business has paid Peter K 9 000
D the business owes Peter K 9 000

17. A trader provided the following information.
K
Cost of sales 70 000
Operating expenses 8 000
Profit for the year 14 000
What was the sales revenue?
A K 48 000
B K 62 000
C K 84 000
D K 92 000
18. On a bank reconciliation, a deposit not recorded in the bank statement would be:
A added to the bank balance as per business records
B subtracted from the bank balance as per business records
C added to the credit balance as per bank records
D subtracted from the bank balance as per bank records

19. Which of the following is correctly describes the purpose of having a petty cash system?
A reduction of workload of the chief cashier
B prevent from theft and fraud
C distribution of work between cashier and petty cahier
D reduction of entries in cash receipts journal

20. Which of the following is correct?
A Re-imbursable amount = Imprest amount + Amount spent
B Re-imbursable amount = Cash in hand + Amount spent
C Re-imburseable amount = Imprest amount + Cash in hand
D Imprest amount = Cash in hand + Value of paid vourchers

21. Which of the following correctly describes bank overdraft?
A a loan taken by a business entity
B the amount withdrawn from a cheque account over and above the available balance
C an amount given to an employee when he/she is distress
D amount of money payable to the bank

22. Which of the following lists the information required to calculate depreciation expense of an asset?
A cost, number of years used and rate of depreciation
B date of purchase, cost and useful life
C cost and accumulated depreciation
D cost, estimated residual value and useful life

23. Which of the following describes the purpose of adjusting unearned revenue?
A to repay excess amount received and clear customer’s account
B to record amount receivable from customers
C to record unexpired portion in the income statement
D to record revenue earned during the year

24. A business provides the following information:
Debtors account balance K 8 000
Bad debts to be written off K 1 500
Provision for doubtful debts to be made: 5%
The amount to be credited to the provision for doubtful debt account is:

A K 400
B K 325
C K 725
D K 75

Answer 1

25. Which of the following accounts would be closed at the end of the accounting year?
A. Cash at bank
B. Accounts payable
C. Prepaid expenses
D. Income summary