CHOOSE THE CORRECT OPTION

1.Which of the following is not an accounting concept?

A. Going concern B. Reliability C. Prudence D. Consistency B

2.Subscription received by cheque during the year 31 December 2021 was $ 500,000. Subscription
accrued at 31 December 2020 was $ 60,000. At the end of the year 31 December 2021
subscription accrued amounted to $ 70,000.

Calculate the amount of subscription that should be charged to Income and expenditure account.

A. $ 510,000 B. $ 490,000 C. $ 370,000 D. $ 500,000 A

3.The subscriptions receivable account of a club commenced the year with subscriptions in arrears
of $ 100 and subscriptions in advance of $ 150. During the year $ 24,900 was received in
subscriptions, including all the arrears and $ 240 for next year’s subscriptions.

The amount to be taken to the income and expenditure for the year is:

A. $24,410. B. $ 24,710. C. $ 25,090. D. $ 25,190. B

4.A sole trader had opening capital of $ 20,000 and closing capital of $ 9,000. During the period,
the owner introduced capital of $ 8,000 and withdrew $ 16,000 for her own use.

Her profit or loss during the period was:

A. $19,000 profit. B. $ 3,000 loss. C. $ 15,000 loss. D. $ 3,000 profit. B

5.Rent paid on 1 October 2019 for the year to 30 September 2020 was $ 3,600 and rent paid on 1
October 2020 for the year to 30 September 2021 was $ 4,800.

Rent payable as shown in Income statement for the year ended 31 December 2020 would be:

A. $ 3,600. B. $ 4,800. C. $ 3,900. D. $ 4,500. C

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6.A company uses the imprest system to control its petty cash, keeping a float of $ 1,000. Since the
cash was last replenished, it had the following transactions:
 • $ 210 reams of paper

• $ 160 cleaning materials

• $ 100 Taxi fare

• $ 240 cash receipt from employee for private phone call

• $170 cash refund to customer

How much should now be drawn from the bank?

A. $880 B. $ 640 C. $ 400 D. $ 600 C

7.The subscription ledger account had the following balances:

01 Jan 2020 $ 31 Dec 2020 $

Subscriptions in arrears 3,000 1,500

Subscriptions on advance 6,000 4,500

During the year ended 31 December 2020 total subscriptions received were $ 150,000.

Calculate the amount of subscription to be taken to the Income and Expenditure account for the
year ended 31 December 2020.

A. $150,000 B. $ 144,000 C. $ 156,000 D. $ 157,500 A

8.A company uses the imprest system to administer its petty cash, keeping afloat of $ 4,000. The
following transactions took place:

 $ 1,000 beverage.
 $ 800 hire of taxis.
 $1,600 travel incidentals, returned unused.
 $ 480 cleaning material.
 $ 456 stationery.

How much should be drawn out of the bank?

A. $ 4,000. B. $ 3,336. C. $ 3,736. D. $ 1,480. C

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9.Kazala and Sons have the following manufacturing figures:

$
 Prime cost 168,000.
Opening work in progress 18,600.
Factory overheads 13,500.
Factory cost of goods completed 171,000.

Calculate the closing work-in-progress.

A. $ 2,100. B. $ 29,100. C. $ 8,100. D. $ 35,100. B

10. A business entity buys an item of machinery for long-term use. Which of the following is NOT
capital expenditure?

A. The purchases price of $ 2,000

B. Delivery fees of $ 1,250
C. $ 350 spent on training employees to use the machine.
D. $ 500 incurred on testing the machine. C

11.A sole trader has not yet accounted for a cash discount allowed of $ 1,050. When the correct
accounting entries have been made, which one of the following statements is correct?

A. Gross profit and net profit will increase by $ 1,050.

B. Gross profit and net profit will decrease by $ 1,050.
C. Gross profit will be unaffected but net profit will increase by $ 1,050.
D. Gross profit will be unaffected but net profit will decrease by $ 1,050. D

12.A business usually has a mark-up of 20% on cost of sales. During the year, its sales were
$90,000. What was the cost of sales?

A. $15,000 B. $ 75,000 C. $ 18,000 D. $ 72,000 B

13.How is a bank overdraft classified in the statement of financial position?

A. Non-current asset. B. Current asset.

C. Current liability. D. Non-current liability. C

14.The double entry system of bookkeeping normally results in which of the following balances in
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the ledger accounts?

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Debit Credit
 A. Assets and Income Liabilities, capital and expenses
B. Income capital and liabilities Assets and expenses
C. Assets and expenses Liabilities, capital and income
D. Assets, expenses and capital Liabilities and income C

15.The most appropriate definition of depreciation is:

A. A means of estimating the benefit from the use of a non-current asset.

B. A means of setting funds aside for the replacement of the non-current asset.
C. A means of determining the decrease in fair value of a non-current asset.
D. A means of allocating the cost of a non-current asset over its economic life. D

16.At 31 March 2018, G limited had a receivables balance of $ 50 000 and an allowance for
receivables of $ 800. Following a review of receivables, G Limited wishes to write off an
irrecoverable debt of $ 1 000 and adjust their receivables allowance to $ 2 450.

What will be the charges to Income statement for the year ended 31 March 2018?

A. $ 1 000 B. $ 2 650 C. $ 2 450 D. $ 3 450 B

17.A business entity buys an item of machinery for long-term use. Which of the following is not
capital expenditure?

A. The purchase price of $ 10 000

B. Delivery fees of $ 1 250
C. $ 3 500 spent on training employee to use the machine.
D. $ 5 000 incurred maintenance of the machine D

18.Musa, a sole trader had opening inventory of $ 30,400 on 1 January 2015. His Cost of Goods
Sold figure on 31 December 2015 was $ 92,000. Closing inventory as at 31 December 2015 was
$26,000. There were some purchase returns during the year amounting to $ 10,400.

What were the purchases for the year?

A. $ 98,000 B. $ 87,600 C. $ 118,000 D. $ 77,200 A

19.If a purchase return of $ 480 has been wrongly posted to the debit side of the sales returns
account but has been correctly entered in the payables control account. What would the total of
the trial balance show?
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A. The credit to be $ 480 more than the debit side.

B. The debit side to be $ 480 more than the credit side.
 C. The credit side to be $ 960 more than the debit side.
D. The debit side to be $ 960 more than the credit side. D

20.Rudo had an opening accrual of $ 10,660 for telephone expenses. During the year she paid
invoices totalling $ 59,480. Her closing accrual was $ 9,760.

What is the correct charge for the telephone expenses in Rudo’s income statements?

A. $ 39,060 B. $ 58,580 C. $ 60,380 D. $ 79,900 B

21.Monde, a sole trader has been trading for a few years and has an accounting year that ends 31
December each year.

At 31 December 2017, she had opening net assets of $ 200,000 and closing net assets of $
600,000. During the year, she took out goods for personal use amounting to $ 410,000 and
introduced additional capital of $300,000.

What was her profit for the year ended 31 December 2017?

A. $800,000 B. $ 310,000 C. $ 510,000 D. $ 600,000 C

22.Which of the following items (i) to (v) would be classified as revenue expenditure?

(i) Purchase of delivery van for resale

(ii) Repayment of bank loan
(iii) Drawings
(iv) Repainting an office building after two years of its construction
(v) Depreciation of buildings on straight line method

A. (i), (ii), (iv) and (v) B. (i), (iv) and (v)

C. (ii), (iii) and (iv) D. (iii), (iv) and (v) B

23.Ngwira, a sole trader has sales of $ 1,200,000, purchases of $ 500,000, closing inventory of $
170,000 and applies a percentage on sales of 30% to arrive at its gross profit.

Calculate the opening inventory that Ngwira had at the start of the year.
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A. $510,000 B. $ 670,000 C. $ 360,000 D. $ 400,000 A

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 24. On January 1, 2022, RosMarie Inc. has machinery on the books that originally cost $100 000.
During 2012, the following expenditures were made:

Minor repairs 5 000

Improvements 20 000
Additions 9 000

How much would be recorded in the machinery account on December 31, 2022?

A. $105 000 B. $109 000 C. $120 000 D. $129 000 D

25. Ashdon Inc.’s cost of goods sold for 2020 was $65 000. They had beginning and ending
inventory of $12 000 and $14 000, respectively.

What was Ashdon Inc.’s inventory turnover for 2020?

A. 4.6 B. 5.0 C. 5.4 D. 5.6 B

26. ACE Builders Inc. has three items in inventory at December 31. The cost and net selling price of
each is as follows:

Item Cost Net selling price

A $10 $8
B $12 $14
C $15 $16

Using the lower-of-cost-or-market method on units’ basis of valuing inventory, what is the value
reported for inventory in the statement of financial position?

A. $34 B. $35 C. $37 D. $38 B

27. An asset is purchased for $.50,000 on which depreciation is provided annually according to the
straight-line method. the useful life is 10 years, and the scrap value is $ 10,000. The rate of
depreciation is.

A. 18% B. 8% C. 12% D. 10% B

28. Which one is capital expenditure?

A. heavy repairs on used building,

B. expenses incurred on acquisition of machines,
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C. Purchase of land for factory

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D. all of these D
 29.An expenditure is a revenue expenditure because

A. The amount is small

B. It is intended to benefit the current period
C. It is deducted from the gross sale proceeds
D. None of these. B

30. Madhu purchased goods costing $ 20,000 at 5% trade discount and 2% cash discount. Madhu
will immediately pay for the goods.

A. $ 18,620 B. 18,660, C. 18,360 D. 18,600. A

31. Interest on drawings is

A. expenditure for the business, B. expense for the business,

C. gain for the business D. loss for the business C

32. Closing inventory is valued at

A. Cost or net realisable value whichever is lower B. Cost

C. net realisable value D. None of the above A

33. The manufacturing account is prepared

A. To ascertain the cost of the manufactured goods

B. To show the sale proceeds from the goods produced during the year.
C. To ascertain the profit or loss on the goods purchased
D. None of the above A

34.Charlie is a car dealer. Joe wanted a new car and went to Charlie’s car showroom.

 On Monday Joe took a car for a test drive and decided to buy it.
 On Tuesday Joe arranged to pay for the car by cheque.
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 On Wednesday Joe collected the car and received an invoice.

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 On Thursday Joe’s cheque was cleared by the bank.

 On which day was Charlie able to account for the profit on the sale?

A Monday B Tuesday C Wednesday D Thursday C

35.Which accounting objective requires that financial information is provided in time for a decision
to be made?

A comparability B relevance
C reliability D understandability B
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