1 What is the accounting equation for capital employed?
A current assets – current liabilities
B fixed assets + current assets – current liabilities
C fixed assets + current assets + current liabilities
D net assets – current liabilities
2 When preparing a sole trader’s annual accounts, no adjustments were made for closing amounts
prepaid. What is the effect of these omissions?
A net profit overstated | creditors understated
B net profit understated | creditors understated
C current assets overstated | owner’s capital overstated
D current assets understated | owner’s capital understated
3 Which item is revenue expenditure?
A cost of painting new office premises during construction
B cost of repairs to factory plant and machinery
C legal fees for the purchase of new factory premises
D wages of a company’s own workmen for building an office extension
4 In the cash book of a company the bank account showed a credit balance of $5000. There were
unpresented cheques amounting to $1500. The bank statement showed bank charges of $700 not
in the cash book. What is the balance on the bank statement?
A $3300 debit B $4200 debit C $4200 credit D $5800 credit
5 A business increases its provision for doubtful debts by $1600.
What will be the effect of this adjustment on the final accounts?
net profit | net debtors
A decrease by $1600 | decrease by $1600
B decrease by $1600 | increase by $1600
C increase by $1600 | decrease by $1600
D increase by $1600 | increase by $1600
6 What will always be classified in a Balance Sheet as a current liability?
B preference shares
C prepaid expense
D proposed dividend
7 There is great uncertainty about the continuance of a business. This has caused the proprietor to
make a large reduction in the valuation of the year-end stock.
Which accounting concept does this illustrate?
A going concern
D substance over form
8 The table shows information from the books of a business at 30 April 2002.
Credit sales invoiced during financial year 79 000
Goods sent to customers on 28 April 2002 and invoiced 4 May 2002 6 100
Goods sent to customers during April 2002 on sale or return basis 8 300
but not sold by 30 April 2002
What is the amount to be credited to the Trading Account as sales for the year ended 30 April
A $76 800 B $85 100 C $85 300 D $93 400
9 The balance on a Sales Ledger Control account is $40 000.
The following items are then discovered:
Total of sales day book understated 500
Discounts allowed not entered in Sales Ledger Control account 1 200
Bad debts written off not recorded in Sales Ledger Control account 400
Provision for bad debts 2 500
What is the total of the balances in the sales ledger?
A $37 900 B $38 600 C $38 900 D $41 100