228 test bank for financial and management accounting an introduction 4th editio1

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228 Test Bank for Financial and Management

Accounting An Introduction 4th Edition

Pauline Weetman

Multiple Choice Questions

-M Biggs bought several lots of inventory (stock) throughout a periodfor the following amounts £1 100, £2 200, £3 300, £4 400 He madesales on credit throughout this period of £1 100, £2 200, £3 300, £4

400 He sells inventory (stock) at cost plus 25% His closing

inventory (stock) at the end of the period is valued at:

commencing from 31 December 20x5 The agreement is being complied with

1 A) £40 000

2 B) £60 000

3 C) £50 000

For the purpose of establishing the accuracy of the individual

personal ledger balances, a business maintains, on a memorandumbasis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont) Identify the account and its side

in which you will enter Return outwards during the month: S.L.Cont.P.L.Cont Neither; Dr Cr Dr Cr a b c d e

3 C)not accounting for £15 000 paid for purchasing goods for sale

4 D)posting to Motor vehicles account £600 paid for servicing vehicles

Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account Advertising a/c

account or do neither:Acquisition of motor vehicles

1 A)neither

2 B)debit

3 C) credit

Which of the following events will an accountant normally not

record?

1 A) paying a bill that has been owing for 2 years

2 B) receiving an invoice for goods purchased, but not paying for them yet

3 C) providing a service to a customer to be paid for in the next accounting period

4 D) agreeing to hire a new employee who will start work in the next accounting period

Identify the account to which you would post the following

transaction recorded in the Cash Account: £2 000 paid to Dave Nicholas as interest on a loan

1 A) Dave Nicholas’s Loan a/c

2 B) interest account

3 C) expense account

Identify whether the account stated below would represent an

Asset, Liability, Income or Expenditure: Bank Loan a/c

1 A) an abbreviation for the telephone account

2 B) an account for all customers whose names begin with the letter T

3 C) the ledger account found between the Sugar account and the Milk account

4 D) a simple representation of a ledger account, forming the letter 'T'

Identify whether the account stated below would represent an

Asset, Liability, Income or Expenditure: Purchases a/c

1 A) asset

2 B) expenditure

3 C) liability

4 D) income

Which of the following reflects the effect on the accounting equation

of a purchase of an item of plant and equipment, for cash?

1 A) assets increase: ownership interest decreases

2 B) assets unchanged: ownership interest unchanged

3 C) assets decrease: ownership interest increases

4 D) assets decrease: ownership interest unchanged

Identify whether the posting of the transaction to the account namedwould increase or reduce the balance in that account: Payments to buy goods for sale (Purchases account)

1 A) increase

2 B) reduce

The source documents for entries made in the Return Outwards Journal are:

1 A) copies of Credit Notes issued to customers

2 B) Credit Notes issued by suppliers

3 C) purchase invoices

4 D) copies of sales invoices

Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account Salaries account

1 A) credit

2 B) debit

Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account Shop fittings a/c

1 A) debit

2 B) credit

A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the

"input tax" calculated at 17.5 / 117.5 of the transaction value In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT

account or do neither: Cash sales

1 A) credit

2 B) debit

Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account Machinery a/c

1 A) credit

2 B) debit

Before inserting a closing balance, accounts representing assets or expenses are likely to have:

1 A)an equal amount of debit and credit entries

2 B)only credit entries

3 C)more debit entries than credit entries

4 D)more credit entries than debit entries

When preparing a bank reconciliation statement, the balance as shown in the bank statement is reconciled with:

1 A) the bank's account in the business's payables (creditors)' ledger

2 B) the bank balance as shown in the previous balance sheet

3 C) the bank balance as shown in the bank’s ledger

4 D) the bank balance as shown in the business's cash book

The total of credit sales found within a sales ledger control account comes from:

1 A) the sales day book

2 B) the sales ledger

3 C) the trial balance

4 D) the cash book

If a business commenced the day with £14 200, paid out £58 900 during the day and has £22 900 by the end of the day, it should have received during the day:

1 A) debit

2 B) credit

Jayantha commenced business on 1 January 20x6 with a capital in cash of £10 000 During the year ending on 31 December 20x6 he paid £12 000 for furniture, £92 400 for purchasing goods for sale and £31 450 for various expenses He received £139 250 by sale ofgoods Identify Jayantha’s profit for the year to 31 December 2001

in the following situation: Unsold goods remaining in hand on 31 December 20x6 had cost £24 550 and Jayantha wishes to write off the cost of his furniture equally over six years

1 A) £37 950

2 B) £38 950

3 C) £71 400

For the purpose of establishing the accuracy of the individual

personal ledger balances, a business maintains, on a memorandumbasis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont) Identify the account and its side

in which you will enter the dishonouring ('bouncing') of a cheque received from a customer S.L.Cont P.L.Cont Neither; Dr Cr Dr Cr

Identify whether the account stated below would represent an

Asset, Liability, Income or Expenditure: Sales account

1 A) asset

2 B) income

3 C) liability

4 D) expenditure

Which of the following is the correct terminology for the right hand side of a ledger account?

1 A) positive

2 B) debit

3 C)credit

4 D) negative

Identify the account to which you would post the following

transaction recorded in the Cash Account:£240 paid for advertising the availability of mobile phones for sale

1 A) publicity account

2 B) advertising a/c

3 C) expenses account

Which of the following source books (books of prime entry) will not

be required in a 'cash' business?

1 A) the books are correct

2 B) no errors will have been made in posting the transactions of the business

3 C) the business is profitable

4 D) an equal debit for every credit will have been posted and the accounts correctly added

A sale of £7 800 to Peter Blowes has been posted to Paul Blowes

To correct this the journal entry should require which of the

following:

1 A) debit Sales account and credit Paul Blowes with £15 600

2 B) debit Sales account and credit Paul Blowes account with £7 800

3 C) debit Peter Blowes account and credit Sales account with £7 800

4 D) debit Peter Blowes account and credit Paul Blowes account with £7 800

Identify whether the account stated below would represent an

Asset, Liability, Income or Expenditure: Buildings account

1 A) debit

2 B) credit

Every entry in a ledger should have:

1 A) date and description

2 B) amount

3 C) date, description and amount

4 D) description and amount

If a business pays a cheque for stationery, the bookkeeping entries are:

1 A) Debit Purchases Credit Bank

2 B) Debit Bank Credit Stationery

3 C) Debit Stationery Credit Bank

4 D) Debit inventory (stock) Credit Bank

The Cashier has recorded the following transaction in a Cash Book,entering the receipts on the debit side and the payments on the credit side Identify which side of the named account would be posted by the Bookkeeper Interest account : £2 000 paid as

interest on Dave's Loan

1 A) credit

2 B) debit

Identify the account to which you would post the following

transaction recorded in the Cash Account: £4 000 paid to Ricky Nelson, the landlord, as rent for the premises used for business purposes

1 A) Ricky Nelson a/c

2 B) landlord's account

3 C) rent account

Identify the account to which you would post the following

transactions recorded in the Cash Account:£2 500 paid for a steel cabinet to securely lock up the books of account

1 A) furniture account

2 B) accounts safe a/c

3 C) steel cabinet a/c

Which of the following reflects the effects on the accounting

equation of a payment to trade payables (creditors)?

1 A) assets decrease: liabilities decrease

2 B) assets decrease: ownership interest decreases

3 C) assets increase: liabilities decrease

4 D) assets decrease: ownership interest increases

Jayantha commenced business on 1 January 20x6 with a capital in cash of £10 000 During the year ending on 31 December 20x6 he

paid £12 000 for furniture, £92 400 for purchasing goods for sale and £31 450 for various expenses He received £139 250 by sale ofgoods Identify Jayantha’s capital as at 31 December 2001 in the following situation: Jayantha had sold out all goods purchased

during the year and wishes to write off a tenth of the cost of

furniture as depreciation

1 A) £24 200

2 B) £10 000

3 C) £24 400

A trial balance will not reveal the following error:

1 A) a credit sale of £500 to Ashley debited to Ashley account only

2 B) a credit sale of £500 made to Ashley, posted as debit sale account £500 and credit Ashley account £500

3 C) a cash sale of £500 posted to sales account only

4 D) a cash sale of £500 posted as a credit to the sales account of £500, and a credit to cash account of £500

Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account Bank Loan a/c

1 A) credit

2 B) debit

Identify whether the posting of the transaction to the account namedwould increase or reduce the balance in that account: Receipt of a Loan from Kingsley Perera (Perera's Loan account)

1 A) increase

2 B) reduce

A machinery acquired at a cost of £225 000, expected to be in use for five years, with no salvage value, is to be depreciated equally over its useful life Annual depreciation then is:

1 A) £22 500

2 B) £45 000

3 C) £112 500

4 D) £80 000

Which of the following statements is correct? A trial balance:

1 A) lists the balances in all the accounts maintained on a double entry basis

2 B) is prepared by a business on the last day of its accounting period

3 C) proves the accuracy of the accounting records

4 D) lists all entries made for accounting for business transactions

The effect of a transaction was that it reduced both the assets and the liabilities of a business by £100 000 Which of the following is that transaction likely to be:

1 A) introduction of additional capital by the owner

1 A) Debit Suspense account and credit Rent account with £24 000

2 B) Debit Rent account and credit Suspense account with £24 000

3 C) Debit Rent account and credit Suspense account with £12 000

4 D) Debit Rent account with £24 000

228 Free Test Bank for Financial and Management Accounting An Introduction 4th Edition Pauline

Weetman Multiple Choice Questions - Page 2

The accounting entries for recording £100 000 cash introduced by the owner of a business are:

1 A) debit Cash account and Credit Owner’s account

2 B) credit Cash account and Debit Investment in business account

3 C) debit Cash account and Credit Capital account

4 D) debit Cash account and Credit Investments account

For the purpose of establishing the accuracy of the individual

personal ledger balances, a business maintains, on a memorandumbasis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont) Identify the account and its side

in which you will enter Credit sales during the month: S.L.Cont P.L.Cont Neither Dr Cr Dr Cr a b c d e

How would you define the “net assets” of a business?

1 A) Total assets + liabilities

2 B) Owner’s capital + Liabilities

3 C) Total assets - Owner’s Capital

4 D) Total assets - Liabilities

Which of the following will disturb the balancing of the trial

balance?

1 A) entering a wrong amount in a book of prime entry

2 B) posting to an asset account instead of an expenditure account

3 C) entering an acquisition of an asset, on credit terms, in the Purchases Day Book

4 D) error in adding up a book of prime entry

The balance in the Capital account represents:

1 A) the total of all assets of the business

2 B) total assets of the business minus its liabilities

3 C) cash and any other assets introduced by the owner at the commencement

For the purpose of establishing the accuracy of the individual

personal ledger balances, a business maintains, on a memorandumbasis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont) Identify the account and its side

in which you will enter Credit purchases during the month: S.L.Cont.P.L.Cont Neither Dr Cr Dr Cr a b c d e

Identify whether the account stated below would represent an

Asset, Liability, Income or Expenditure: Van repairs account

1 A) Liability

2 B) Asset

3 C) Income

4 D) Expenditure

Identify whether the account stated below would represent an

Asset, Liability, Income or Expenditure: Staff Loan account

1 A) a payment of administration wages

2 B) a receipt of cash from receivables (debtors)

3 C) a receipt of a loan from the owner’s brother

4 D) a payment of cash to trade payables (creditors)

A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the

"input tax" calculated at 17.5 / 117.5 of the transaction value In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT

account or do neither: Credit sales

1 A) debit

2 B) credit

3 C) neither

For the purpose of establishing the accuracy of the individual

personal ledger balances, a business maintains, on a memorandumbasis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont) Identify the account and its side

in which you will enter discount received from suppliers for early settlement of bills: S.L.Cont P.L.Cont Neither Dr Cr Dr Cr a b c d

e

1 A) b

2 B) a

1 A) it is unlikely that there is a double entry error in the sales ledger

2 B) no amounts arising from sales will appear in the bank reconciliation

3 C) it is unlikely that there is a double entry error in the ledgers as a whole

4 D) any remaining error in the double entry must lie in the purchase ledgerIdentify the account to which you would post the following

transaction recorded in the Cash Account: £40 paid to buy fuel for abusiness vehicle

1 A) Motor Vehicles a/c

2 B) vehicle running a/c

3 C) depreciation account

A trial balance is a list of:

1 A) all the firm's assets and liabilities

2 B) all the firm's receivables (debtors) and trade payables (creditors)

3 C) all the debit and credit balances in the accounts

4 D) all the transactions in a ledger

The Cashier has recorded the following transaction in a Cash Book,entering the receipts on the debit side and the payments on the credit side Identify which side of the named account would be

posted by the Bookkeeper Sales account : £360 received from selling mobile phones

1 A) credit

2 B) debit

For the purpose of establishing the accuracy of the individual

personal ledger balances, a business maintains, on a memorandum

basis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont) Identify the account and its side

in which you will Cash purchases during the month: S.L.Cont

1 A) debit

2 B) credit

Identify, whether the posting of the transaction to the account

named would increase or reduce the balance in that account

Refund of cash to a customer who returned goods sold to him (Sales account)

1 A) reduce

2 B) increase

Which one of the following statements is correct? A Trial balance:

1 A) lists the balances in all the accounts on any day

2 B) will balance even if the bookkeeper forgets to post a payment

3 C) Lists the balances in the asset accounts and liability accounts on any day

4 D) will reveal how profitable a business has been

Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account Capital account

1 A) debit

2 B) credit

Having placed in a Suspense account the difference in the trial balance, it is revealed that the difference arose because £12 500 received from customer Sally Peter has been posted to the debit of her account To correct this error which of the following should the journal entry require:

1 A) debit Suspense account and credit Sally Peter’s account with £12 500

2 B) debit Sally Peter’s account and credit Cash account with £12 500

3 C) debit Suspense account and credit Sally Peter’s account with £25 000

4 D) debit Suspense account and credit Cash account with £12 500

A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the

"input tax" calculated at 17.5 / 117.5 of the transaction value In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT

account or do neither: Cost of goods removed by the owner for ownuse

Identify whether the account stated below would represent an

Asset, Liability, Income or Expenditure: Salaries account

1 A) expenditure

2 B) liability

3 C) asset

account or do neither: Expense (telephone)

1 A) neither

2 B) credit

3 C) debit

For the purpose of establishing the accuracy of the individual

personal ledger balances, a business maintains, on a memorandumbasis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont) Identify the account and its side

in which you will enter an extra general provision made for doubtful debts S.L.Cont P.L.Cont Neither Dr Cr Dr Cr a b c d e

1 A) increase

2 B) reduce

The Cashier has recorded the following transaction in a Cash Book,entering the receipts on the debit side and the payments on the credit side Identify which side of the named account would be

posted by the Bookkeeper Furniture account : £2 500 paid for a steel cabinet

1 A) debit

2 B) credit

If a sales invoice for £98 500 is not recorded in the Sales Day Book,the effect of the error on the trial balance would be:

1 A) the trial balance will balance

2 B) total of the credit side will exceed that of the debit side by £98 500

3 C) total of the debit side will exceed that of the credit side by £98 500

4 D) total of the debit side will exceed that of the credit side by £197 000

The Cashier has recorded the following transaction in a Cash Book,entering the receipts on the debit side and the payments on the credit side Identify which side of the named account would be

posted by the Bookkeeper Vehicle Running account : £40 paid to buy fuel for the business vehicle

1 A) debit

2 B) credit

Which one of the following is an impersonal ledger?

1 A) receivables (debtors) ledger

1 A) the Ledger

2 B) Returns Inwards Day Book

3 C) the Petty Cash Book

4 D) cash book

The Cashier has recorded the following transaction in a Cash Book,entering the receipts on the debit side and the payments on the credit side Identify which side of the named account would be

posted by the Bookkeeper Rent account : £4 000 paid to Ricky Nelson as rent for business premises

1 A) credit

2 B) debit

In a trial balance produced at the end of a financial period, opening inventory (stock) is usually found:

1 A) on the credit side

2 B) as a note after the trial balance has been produced

3 C) it is not shown at all

4 D) on the debit side

Jayantha commenced business on 1 January 20x6 with a capital in cash of £10 000 During the year ending on 31 December 20x6 he paid £12 000 for furniture, £92 400 for purchasing goods for sale and £31 450 for various expenses He received £139 250 by sale ofgoods Identify Jayantha’s profit for the year to 31 December 2001

in the following situation: Jayantha had sold out all goods

purchased during the year and wishes to write off a tenth of the cost

1 A) a credit entry increases the balance in income and liability account

2 B) a debit entry increases the balance in the assets and expenditure accounts

3 C) a debit entry decreases or eliminates balances in income and liability accounts

4 D) a debit entry increases the balance in the Capital account

Identify whether the posting of the transaction to the account namedwould increase or reduce the balance in that account: Part

repayment of Kingsley Perera's Loan (Perera's Loan account)

1 A) reduce

2 B) increase

The Cashier has recorded the following transaction in a Cash Book,entering the receipts on the debit side and the payments on the credit side Identify which side of the named account would be

posted by the Bookkeeper Stationery account : £53 paid for variousitems of stationery

1 A) credit

2 B) debit

Identify whether the balance brought down, at the year end, in the named account would be on the debit side or credit side of that account Buildings account

1 A) credit

2 B) debit

Identify the account to which you would post the following

transaction recorded in the Cash Account: £800 paid for 40 units of mobile phones to be sold in the normal course of business

1 A) inventory (stock) account

2 B) telephone account

3 C) purchases account

A supermarket pays the wages of its staff by credit transfer from its bank account The entries in the supermarket's accounts should be:

1 A) Debit: Bank, Credit: Wages

2 B) Debit: Wages, Credit: Staff creditors

3 C) Debit: Wages, Credit: Bank

4 D) Debit: Wages, Credit: Cash

A trader who commenced business on 1 January 20x5 reports the balances, as at 31 December 20x5, in the Purchases account and Sales account as £346 800 and £479 500 respectively The total of the balances in all other expense accounts is £112 200 Identify the net profit in the first year of operation The cost of goods remaining unsold by the year end was £54 400

1 A) £42 000 in the relevant loan account

2 B) £30 000 in the loan account

3 C) £30 000 in the loan account and £12 000 in Interest on loan account

4 D) £18 000 in the loan account

A decrease in an asset will be recorded:

1 A) on the debit side of the ledger account for the asset

2 B) on the credit side of the ledger account for the asset

3 C) on both sides of the ledger account for the asset

4 D) nowhere in the ledger accounts

Which of the following is not a credit balance?

1 A) Machinery account

2 B) £40 000 to Machinery account and £12 875 to Value Added Tax account

3 C) £45 000 to Machinery account and £7 875 to Value Added Tax account

4 D) Value Added Tax account

Identify the account to which you would post the following

transaction recorded in the Cash Account: £360 received from selling 12 units of mobile phone at £30 each

1 A) debit

2 B) credit

Which one of the following statements is incorrect: Assets acquired

by a business for continuous use should be depreciated in each year of its use so that:

1 A) a portion of the cost of the asset is matched with the income it generates

2 B) the assets may be reported at the amount each of them is worth

3 C) resources for replacing the asset are retained within the business

4 D) profits of the period and the position as at the end of each period is not exaggerated

228 Free Test Bank for Financial and Management

Accounting An Introduction 4th Edition Pauline

Weetman Multiple Choice Questions - Page 3

A payable (creditor) account of £8 500 in the double entry system represents:

1 A) an expense of the business

2 B) a liability of the business

3 C) an asset of the business

4 D) an item of income to the business

A business registered for Value Added Tax has to maintain a VAT account, crediting it with the "output tax" and debiting it with the

"input tax" calculated at 17.5 / 117.5 of the transaction value In respect of the transaction listed below, identify whether you would account for the VAT element by debiting or crediting the VAT

account or do neither: Expense (stationery)

1 A) neither

2 B) debit

3 C) credit

The double entry system requires that every transaction recorded

by the Cashier should be posted to an appropriate account on the side opposite the one in which the Cashier entered the amount involved If this system fails the failure is flagged up by a difference arising between the total of all debits and of all credits, when the balances in all accounts are listed in a Trial balance Identify the impact on the trial balance of the following error: Payment of £420 for stationery has not been entered anywh

1 A) trial balance balances

2 B) debit excess of £420

3 C) debit short of £420

Which one of the following is a personal ledger?

1 A) Petty Cash Book

2 B) General ledger

3 C) Cash Book

4 D) receivables (debtors) ledger

For the purpose of establishing the accuracy of the individual

personal ledger balances, a business maintains, on a memorandumbasis, a Sales Ledger Control account (S.L.Cont) and a Purchases Ledger Control account (P.L.Cont) Identify the account and its side

in which you will enter discount allowed to customers for early

settlement of bills: S.L.Cont P.L.Cont Neither Dr Cr Dr Cr a b c d

posted by the Bookkeeper Salaries account : £2 000 paid as salary

to shop manager

1 A) debit

2 B) credit

Identify whether the account stated below would represent an

Asset, Liability, Income or Expenditure: Shop fittings a/c

1 A) credit

2 B) debit

Which of the following statements is incorrect in relation to

accounting for a supplier’s invoice when accounting for goods

purchased on credit?

1 A) post the amount of each invoice to the credit of Supplier's account

2 B) debit Purchases account and credit Cash account

3 C) enter particulars of the invoice in the Purchases Journal

4 D) post the periodical total of all invoices to the debit of Purchases account

A trader who commenced business on 1 January 20x5 reports the balances, as at 31 December 20x5, in the Purchases account and Sales account as £346 800 and £479 500 respectively The total of the balances in all other expense accounts is £112 200 Identify the gross profit in the first year of operation The cost of goods

remaining unsold by the year end was £72 400 and, in addition, stationery which cost £500 remains unused

1 A) £205 100

2 B) £187 100

3 C) £205 600

Double entry accounting reflects:

1 A) the accruals concept

2 B) the matching concept

3 C) the prudence concept

4 D) the duality concept

If a sales invoice for £72 500 is recorded in the Sales Day Book as

£7 250 the effect of the error on the trial balance will be:

1 A) the trial balance will balance

2 B) total of the debit side will exceed that of the credit side by £65 250

3 C) total of the credit side will exceed that of the debit side by £72 500

4 D) total of the debit side will exceed that of the credit side by £72 500

An amount paid in part settlement of a supplier's balance is

accounted for as:

1 A) debit Supplier's personal account and credit Capital account

2 B) debit Cash account and credit Supplier's personal account

3 C) debit Part payment account and credit cash account

4 D) debit Supplier's personal account and credit Cash account

Identify the balance that will appear on the bank statement as at 31 March 20x6 based on the following information: Cash book balance

on 31.3.20x6 was £28 640; Deposits not cleared until then was £45

248 and cheques yet to be presented to the bank as at that date