Question 1

Which of the following best describes the purpose of a bank reconciliation statement?

Accepted Answer

To compare the cash book balance with the bank statement and explain any differences.

Question 2

A business purchased a machine for $$10,000. It is expected to last 5 years with a residual value of 2$$,000. What is the annual depreciation using the straight-line method?

$$ 	ext{Depreciation} = \frac{	ext{Cost} - 	ext{Residual Value}}{	ext{Useful Life}} $$

Accepted Answer

$$ \1$$,600 $

Question 3

Which accounting concept requires that expenses should be matched with the revenues they help to generate?

Accepted Answer

Matching (Accruals) concept

Question 4

A business receives a loan of $5,000 by cheque. Which accounts are affected and what is the correct double entry?

Accepted Answer

Debit Bank $$5,000; Credit Loan 5$$,000

Question 5

Which of the following is NOT a book of prime entry?

Accepted Answer

Provision for depreciation account

Question 6

A business has the following balances: Opening inventory $$2,000, Purchases 8$$,000, Purchase returns $$500, Carriage inward 300$$, Closing inventory $$1,500. What is the cost of sales?

$$ 	ext{Cost of Sales} = 	ext{Opening Inventory} + 	ext{Net Purchases} + 	ext{Carriage Inward} - 	ext{Closing Inventory} $$ 
$$ 	ext{Net Purchases} = 	ext{Purchases} + 	ext{Carriage Inward} - 	ext{Purchase Returns} $

Accepted Answer

$$ \8$$,800 $

Question 7

Which of the following is an example of capital expenditure?

Accepted Answer

Purchase of a delivery van

Question 8

A trial balance fails to balance. Which account is used as a temporary measure to balance it?

Accepted Answer

Suspense account

Question 9

Which of the following errors will NOT be revealed by a trial balance?

Accepted Answer

Error of omission

Question 10

A business writes off an irrecoverable debt of $400. What is the effect on the income statement?

Accepted Answer

Increase expenses by $400

Question 11

Which of the following is a reason for maintaining a provision for doubtful debts?

Accepted Answer

To ensure profit is not overstated and receivables are shown at realistic value

Question 12

A business operates a petty cash book using the imprest system. At the end of the month, the petty cash balance is $$25 and total payments are 115. $$How much should be reimbursed to restore the imprest amount of $140?

Accepted Answer

$$ \125$$ $

Question 13

Which of the following is a limitation of control accounts?

Accepted Answer

They cannot detect all types of errors, such as errors of commission and omission.

Question 14

A business has trade receivables of $$10,000 and wishes to maintain a provision for doubtful debts at 3%. What is the provision amount?

$$ 	ext{Provision} = 	ext{Trade Receivables} 	imes 	ext{Percentage} $

Accepted Answer

$$ \300$$ $

Question 15

Which of the following is an example of revenue receipt?

Accepted Answer

Interest received

Question 16

A business uses the reducing balance method to depreciate a machine costing $$8,000 at 25% per annum. What is the depreciation charge for the second year?

$$ 	ext{Year 1 Depreciation} = 8,000 	imes 0.25 = 2,000 $$ 
$$ 	ext{Year 2 Depreciation} = (8,000 - 2,000) 	imes 0.25 $

Accepted Answer

$$ \1$$,500 $

Question 17

Which of the following business documents is used to record goods returned to a supplier?

Accepted Answer

Debit note

Question 18

A business receives a bank statement showing bank charges of $50 not yet recorded in the cash book. What is the correct journal entry?

Accepted Answer

Debit Bank Charges $$50; Credit Bank 50$$

Question 19

Which accounting concept states that assets should be recorded at their original cost?

Accepted Answer

Historical cost concept

Comprehensive Study Notes for Financial Accounting: Books of Prime Entry, Control Accounts, Error Correction, and Financial Statements

Study Guide - Practice Questions

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