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

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 period
for the following amounts £1 100, £2 200, £3 300, £4 400. He made
sales 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:
1.
2.
3.
4.

A) 2 200
B) 3 300
C) zero
D) 4 400

Identify the year-end balance that would be brought down in the
following account on 31 December 20x6, taking into account the
stated transaction: Ruth Jones' Loan account: A loan of £60 000
was obtained from Ruth on 1 January 20x5, on an agreement that it
will be settled in six annual instalments of £10 000 each
commencing from 31 December 20x5. The agreement is being
complied with.
1.
2.
3.

A) £40 000
B) £60 000

C) £50 000

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 enter Return outwards during the month: S.L.Cont.
P.L.Cont. Neither; Dr Cr Dr Cr a b c d e
1.
2.
3.
4.
5.

A) b
B) c
C) a
D) d
E) e

Which of the following errors would have caused a difference in the
trial balance?


1.

A)recording a sale of £30 000 as £3 000 in the Cash Book and £3 000 in the
Sales Account
2. B)posting payment of £21 000 for stationery as £12 000 to the Stationery
account

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
1.
2.

A) credit
B) debit

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:Acquisition of motor vehicles
1.
2.
3.

A)neither
B)debit
C) credit

Which of the following events will an accountant normally not
record?
1.
2.

3.

A) paying a bill that has been owing for 2 years
B) receiving an invoice for goods purchased, but not paying for them yet
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.
2.
3.

A) Dave Nicholas’s Loan a/c
B) interest account
C) expense account

Identify whether the account stated below would represent an
Asset, Liability, Income or Expenditure: Bank Loan a/c
1.
2.
3.

A) income
B) asset
C) expenditure

4.

D) liability

A 'T' account is:
1.
2.
3.
4.

A) an abbreviation for the telephone account
B) an account for all customers whose names begin with the letter T
C) the ledger account found between the Sugar account and the Milk account
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.
2.
3.
4.

A) asset
B) expenditure
C) liability
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.
2.
3.
4.

A) assets increase: ownership interest decreases
B) assets unchanged: ownership interest unchanged
C) assets decrease: ownership interest increases
D) assets decrease: ownership interest unchanged

Identify whether the posting of the transaction to the account named
would increase or reduce the balance in that account: Payments to
buy goods for sale. (Purchases account)
1.
2.

A) increase
B) reduce

The source documents for entries made in the Return Outwards
Journal are:
1.
2.
3.
4.

A) copies of Credit Notes issued to customers
B) Credit Notes issued by suppliers
C) purchase invoices
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.
2.

A) credit
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.
2.

A) debit
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.
2.
3.

A) credit
B) debit
C) neither

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. Stationery account
1.
2.

A) credit
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.
2.

A) credit
B) debit

Before inserting a closing balance, accounts representing assets or
expenses are likely to have:
1.
2.
3.
4.

A)an equal amount of debit and credit entries
B)only credit entries
C)more debit entries than credit entries
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.
2.
3.
4.

A) the bank's account in the business's payables (creditors)' ledger
B) the bank balance as shown in the previous balance sheet
C) the bank balance as shown in the bank’s ledger
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.
2.
3.

A) the sales day book
B) the sales ledger
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.
2.
3.
4.

A) £1 400
B) £67 600
C) £50 200
D) £21 800

Identify the year-end balance that would be brought down in the
following account on 31 December 20x6, taking into account the
stated transaction: Office Equipment account: The balance in the
account on 1 December 20x6 was £218 400. In December four
personal computers were bought for staff use, paying £4 500 for
each unit.
1.
2.
3.

A) £200 400
B) £236 400
C) £218 400

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. Advertising account : £240 paid for
advertising the availability of mobile phones
1.
2.

A) debit
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 of
goods. 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.
2.
3.

A) £37 950
B) £38 950
C) £71 400

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 enter the dishonouring ('bouncing') of a cheque
received from a customer S.L.Cont. P.L.Cont. Neither; Dr Cr Dr Cr a
bcde
1.
2.
3.
4.
5.

A) d
B) c
C)e
D) a
E) b

Identify whether the account stated below would represent an
Asset, Liability, Income or Expenditure: Sales account
1.
2.
3.
4.

A) asset
B) income
C) liability
D) expenditure

Which of the following is the correct terminology for the right hand

side of a ledger account?
1.
2.
3.
4.

A) positive
B) debit
C)credit
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.
2.
3.

A) publicity account
B) advertising a/c
C) expenses account

Which of the following source books (books of prime entry) will not
be required in a 'cash' business?
1.
2.
3.
4.

A) Sales Ledger

B) Nominal Ledger
C) Petty Cash Account
D) Bank Account

If a trial balance, extracted from the double entry system of a sole
trader, shows that total debits equals total credits then:
1.
2.
3.

A) the books are correct
B) no errors will have been made in posting the transactions of the business
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.
2.
3.
4.

A) debit Sales account and credit Paul Blowes with £15 600
B) debit Sales account and credit Paul Blowes account with £7 800

C) debit Peter Blowes account and credit Sales account with £7 800
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.
2.
3.
4.

A) liability
B) income
C) expenditure
D) asset

If the net assets of a business totalled £540 000 and its liabilities
totalled £316 800, its total assets on that date would amount to:
1.
2.
3.
4.

A) £223 200
B) £856 800
C) £633 600
D) £540 000

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. Cash account

1.
2.

A) debit
B) credit

Every entry in a ledger should have:
1.
2.
3.
4.

A) date and description
B) amount
C) date, description and amount
D) description and amount

If a business pays a cheque for stationery, the bookkeeping entries
are:
1.
2.
3.
4.

A) Debit Purchases Credit Bank
B) Debit Bank Credit Stationery
C) Debit Stationery Credit Bank
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.
2.

A) credit
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.
2.
3.

A) Ricky Nelson a/c
B) landlord's account
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.
2.
3.

A) furniture account
B) accounts safe a/c
C) steel cabinet a/c

Which of the following reflects the effects on the accounting
equation of a payment to trade payables (creditors)?
1.
2.
3.
4.

A) assets decrease: liabilities decrease
B) assets decrease: ownership interest decreases
C) assets increase: liabilities decrease
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 of
goods. 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.
2.
3.

A) £24 200
B) £10 000

C) £24 400

A trial balance will not reveal the following error:


1.
2.

A) a credit sale of £500 to Ashley debited to Ashley account only
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.
2.

A) credit
B) debit

Identify whether the posting of the transaction to the account named
would increase or reduce the balance in that account: Receipt of a
Loan from Kingsley Perera. (Perera's Loan account)
1.
2.

A) increase
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.
2.
3.
4.

A) £22 500
B) £45 000
C) £112 500
D) £80 000

Which of the following statements is correct? A trial balance:
1.
2.
3.
4.

A) lists the balances in all the accounts maintained on a double entry basis
B) is prepared by a business on the last day of its accounting period
C) proves the accuracy of the accounting records
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.
2.
3.
4.

A) introduction of additional capital by the owner
B) repayment of a loan
C) disposal of an asset
D) sale of goods

Having placed in a Suspense account the difference in the trial
balance, it is found that the difference arose because a pre-paid
rent of £12 000 has been brought down as a credit balance in the


Rent account. To correct this error which of the following entries
should the journal require:
1.
2.
3.
4.

A) Debit Suspense account and credit Rent account with £24 000
B) Debit Rent account and credit Suspense account with £24 000
C) Debit Rent account and credit Suspense account with £12 000
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.
2.
3.
4.

A) debit Cash account and Credit Owner’s account
B) credit Cash account and Debit Investment in business account
C) debit Cash account and Credit Capital account
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 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 enter Credit sales during the month: S.L.Cont.
P.L.Cont. Neither Dr Cr Dr Cr a b c d e
1.
2.
3.
4.
5.

A) d
B) a
C) b
D) c
E) e

How would you define the “net assets” of a business?
1.
2.
3.
4.

A) Total assets + liabilities
B) Owner’s capital + Liabilities
C) Total assets - Owner’s Capital
D) Total assets - Liabilities

Which of the following will disturb the balancing of the trial
balance?
1.
2.
3.

A) entering a wrong amount in a book of prime entry
B) posting to an asset account instead of an expenditure account
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.
2.

3.

A) the total of all assets of the business
B) total assets of the business minus its liabilities
C) cash and any other assets introduced by the owner at the commencement
of business
4. D) the amount of cash introduced by the owner at the commencement of
business

The following are business transactions of a retailer: Purchased 150
items at cost £4 each for cash. Delivered 110 items to customers for
cash at a selling price of £6.50 per item. What is the total profit of
the retailer?
1.
2.
3.
4.

A) £875
B) £440
C) £115
D) £275

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 enter Credit purchases during the month: S.L.Cont.
P.L.Cont. Neither Dr Cr Dr Cr a b c d e
1.

2.
3.
4.
5.

A) d
B) b
C) c
D) a
E) e

Identify whether the account stated below would represent an
Asset, Liability, Income or Expenditure: Van repairs account
1.
2.
3.
4.

A) Liability
B) Asset
C) Income
D) Expenditure

Identify whether the account stated below would represent an
Asset, Liability, Income or Expenditure: Staff Loan account
1.
2.
3.
4.

A) asset
B) expenditure
C) liability
D) income


Which of the following economic actions reduces the amount of
ownership interest?
1.
2.
3.
4.

A) a payment of administration wages
B) a receipt of cash from receivables (debtors)
C) a receipt of a loan from the owner’s brother
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.
2.
3.

A) debit
B) credit

C) neither

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 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.
2.
3.
4.
5.

A) b
B) a
C) e
D) c
E) d

A sales control account balance which agrees with the total of the
individual sales ledger balances tells us that:
1.
2.
3.
4.

A) it is unlikely that there is a double entry error in the sales ledger
B) no amounts arising from sales will appear in the bank reconciliation
C) it is unlikely that there is a double entry error in the ledgers as a whole

D) any remaining error in the double entry must lie in the purchase ledger

Identify the account to which you would post the following
transaction recorded in the Cash Account: £40 paid to buy fuel for a
business vehicle
1.
2.
3.

A) Motor Vehicles a/c
B) vehicle running a/c
C) depreciation account


A trial balance is a list of:
1.
2.
3.
4.

A) all the firm's assets and liabilities
B) all the firm's receivables (debtors) and trade payables (creditors)
C) all the debit and credit balances in the accounts
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.
2.

A) credit
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.
P.L.Cont. Neither Dr Cr Dr Cr a b c d e
1.
2.
3.
4.
5.

A) e
B) b
C) a
D) c
E) d

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. Van repairs account
1.
2.

A) debit
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.
2.

A) reduce
B) increase

Which one of the following statements is correct? A Trial balance:
1.
2.
3.

A) lists the balances in all the accounts on any day
B) will balance even if the bookkeeper forgets to post a payment
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.
2.

A) debit
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.
2.
3.
4.

A) debit Suspense account and credit Sally Peter’s account with £12 500
B) debit Sally Peter’s account and credit Cash account with £12 500
C) debit Suspense account and credit Sally Peter’s account with £25 000
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 own
use
1.
2.

3.

A) neither
B) debit
C) credit

Which of the following is not a debit balance?
1.
2.
3.
4.

A) Taxation Paid
B) Wages and Salaries
C) Cost of Buildings
D) Capital Account

Identify whether the account stated below would represent an
Asset, Liability, Income or Expenditure: Salaries account
1.
2.
3.
4.

A) expenditure
B) liability
C) asset
D) income

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 (telephone)
1.
2.
3.

A) neither
B) credit
C) 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 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.
2.
3.
4.
5.

A) a
B) e
C) c

D) d
E) b

Identify whether the posting of the transaction to the account named
would increase or reduce the balance in that account:Sale of goods
to customers. (Sales account)
1.
2.

A) reduce
B) increase

Identify whether the posting of the transaction to the account named
would increase or reduce the balance in that account: Owner took
some cash for his personal needs. (Capital account)
1.
2.

A) increase
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.
2.

A) debit

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.
2.
3.
4.

A) the trial balance will balance
B) total of the credit side will exceed that of the debit side by £98 500
C) total of the debit side will exceed that of the credit side by £98 500
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.
2.

A) debit
B) credit

Which one of the following is an impersonal ledger?
1.
2.

3.
4.

A) receivables (debtors) ledger
B) sales ledger
C) purchases ledger
D) general ledger

Which of the following is not a book of prime entry?
1.
2.
3.
4.

A) the Ledger
B) Returns Inwards Day Book
C) the Petty Cash Book
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.
2.

A) credit
B) debit

In a trial balance produced at the end of a financial period, opening
inventory (stock) is usually found:
1.
2.
3.
4.

A) on the credit side
B) as a note after the trial balance has been produced
C) it is not shown at all
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 of


goods. 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
of furniture as depreciation.
1.
2.
3.

A) £14 400
B) £46 850
C) £14 200

Which one of the following statements is incorrect? According to the
rules of double entry:
1.
2.
3.

A) a credit entry increases the balance in income and liability account
B) a debit entry increases the balance in the assets and expenditure accounts
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 named
would increase or reduce the balance in that account: Part
repayment of Kingsley Perera's Loan. (Perera's Loan account)
1.
2.

A) reduce
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 various
items of stationery
1.
2.

A) credit

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.
2.

A) credit
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.
2.
3.

A) inventory (stock) account
B) telephone account
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.
2.
3.
4.

A) Debit: Bank, Credit: Wages
B) Debit: Wages, Credit: Staff creditors
C) Debit: Wages, Credit: Bank
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.
2.
3.

A) £24 600
B) £20 500
C) £74 900

£30 000 being part repayment of a loan and £12 000 being interest
due on the loan have both been credited in the Cash Account. The
corresponding debit should be:
1.
2.
3.
4.

A) £42 000 in the relevant loan account
B) £30 000 in the loan account

C) £30 000 in the loan account and £12 000 in Interest on loan account
D) £18 000 in the loan account

A decrease in an asset will be recorded:
1.
2.
3.
4.

A) on the debit side of the ledger account for the asset
B) on the credit side of the ledger account for the asset
C) on both sides of the ledger account for the asset
D) nowhere in the ledger accounts

Which of the following is not a credit balance?
1.
2.
3.
4.

A) Interest Received
B) Accumulated Depreciation of Fixtures and Fittings
C) Interest Paid
D) Sales Income

£52 875 (inclusive of Value Added Tax at 17.5%) paid for acquiring
machinery, and credited to the Cash account should be posted to
the debit of:
1.
2.

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


3.
4.

C) £45 000 to Machinery account and £7 875 to Value Added Tax account
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.
2.
3.

A) earnings account
B) mobile phone a/c
C) sales account

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. Motor vehicles account : £26 500 paid
for a Vovo Lorry for business use
1.
2.

A) debit
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.
2.
3.
4.

A) a portion of the cost of the asset is matched with the income it generates
B) the assets may be reported at the amount each of them is worth
C) resources for replacing the asset are retained within the business
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.
2.
3.
4.

A) an expense of the business
B) a liability of the business
C) an asset of the business

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.
2.
3.

A) neither
B) debit
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.
2.
3.

A) trial balance balances
B) debit excess of £420
C) debit short of £420

Which one of the following is a personal ledger?
1.
2.
3.
4.

A) Petty Cash Book
B) General ledger
C) Cash Book
D) receivables (debtors) ledger

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 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 e
1.
2.
3.
4.
5.

A) b
B) d
C) e

D) a
E) c

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 £72 468; Deposits awaiting bank clearance on
this date was £11 540 and cheques drawn but not presented to the
bank for payment by this date was £28 780.
1.
2.
3.

A) £72 468
B) £55 228
C) £89 708


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. Salaries account : £2 000 paid as salary
to shop manager
1.
2.

A) debit
B) credit

Identify whether the account stated below would represent an
Asset, Liability, Income or Expenditure: Shop fittings a/c

1.
2.
3.
4.

A) Income
B) Asset
C) Liability
D) Expenditure

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. Purchases a/c
1.
2.

A) credit
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.
2.
3.
4.

A) post the amount of each invoice to the credit of Supplier's account
B) debit Purchases account and credit Cash account
C) enter particulars of the invoice in the Purchases Journal

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.
2.
3.

A) £205 100
B) £187 100
C) £205 600

Double entry accounting reflects:
1.

A) the accruals concept


2.
3.
4.

B) the matching concept
C) the prudence concept
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.
2.
3.
4.

A) the trial balance will balance
B) total of the debit side will exceed that of the credit side by £65 250
C) total of the credit side will exceed that of the debit side by £72 500
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.
2.
3.
4.

A) debit Supplier's personal account and credit Capital account
B) debit Cash account and credit Supplier's personal account
C) debit Part payment account and credit cash account
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
£11 250.

1.
2.
3.

A) £5 358 overdrawn
B) £62 638
C) £28 640

Which of the following economic actions decreases the amount of
current assets?
1.
2.
3.
4.

A) a purchase of equipment, for cash
B) a payment for rent in advance of occupancy of the property
C) a receipt of cash, from receivables (debtors)
D) a purchase of equipment, on credit

Birdland made a cash purchase of bird cages for re-sale. Which of
the following is correct?
1.
2.
3.
4.

A) there will be no effect on the total assets of the business
B) there will be an increase in the Total assets of the business
C) total assets of the business would increase

D) owner's Capital will decrease

Identify whether the account stated below would represent an
Asset, Liability, Income or Expenditure: Advertising a/c
1.

A) Expenditure


2.
3.
4.

B) Liability
C) Income
D) Asset

Identify the account to which you would post the following
transaction recorded in the Cash Account: Payment of £15 for a
Cash Book, £20 for a Ledger and £18 for some writing material.
1.
2.
3.

A) stationery account
B) miscellaneous account
C) writing material a/c

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. Capital account : £100 000 received as
capital from the owner
1.
2.

A) credit
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. Sales account
1.
2.

A) credit
B) debit

If the net assets of a business totalled £200 000 and its total assets
on that date amounted to £325 000, its liabilities would amount to:
1.
2.
3.
4.

A) not sufficient information to calculate
B) £200 000
C) £125 000
D) £525 000

Which of the following accounts will you not normally find in the
Nominal Ledger?
1.
2.
3.
4.

A) Cash account
B) Purchases account
C) Capital account
D) Motor vehicles account

The correct double entry to record closing inventory (stock) in the
accounts of a sole trader is:
1.
2.
3.

A) debit inventory (stock) account, credit sales account
B) debit inventory (stock) account, credit income statement
C) debit inventory (stock) account, credit purchases account


4.

D) credit inventory (stock) account, debit income statement

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 of
goods. Identify Jayantha’s capital as at 31 December 2001 in the
following situation: Jayantha has drawn £2 000 in cash. The cost of
goods held on 31 December 20x6 was £29 450 and furniture is to
be written off evenly over twelve years.
1.
2.
3.

A) £50 850
B) £52 850
C) £51 850

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 enter cheques received from credit customers :
S.L.Cont. P.L.Cont. Neither Dr Cr Dr Cr a b c d e
1.
2.
3.
4.
5.

A) d
B) b
C) c
D) a
E) e

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. Staff Loan account
1.
2.

A) debit
B) credit

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 enter Cash sales in the month: S.L.Cont. P.L.Cont.
Neither Dr Cr Dr Cr a b c d e
1.
2.
3.
4.
5.

A) a
B) e
C) b
D) d
E) c


The invoice for acquisition of a vehicle for £45 000 was entered in

the Purchases Day book and the net profit for the year reported as
£862 480. How would this error affect the performance and position
reported by the business:
1.
2.

A) net profit for the year and the assets by year end will both be overstated
B) net profit for the year and liability at year end will both be understated by
£45 000
3. C) net profit for the year and asset by year end will both be understated
4. D) net profit for the year and liability at year end will both be overstated by £45
000

Identify the balance that will appear on the bank statement as at 31
March 20x6 based on the following information: Cash book reports
as at 31.3.20x6 a bank overdraft of £32 840; Deposits awaiting
clearance and cheques yet to be presented, on this date, amount to
£22 540 and £54 975 respectively.
1.
2.
3.

A) £32 840 o/d
B) £405
C) £65 275 o/d

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 purchases
1.
2.
3.

A) credit
B) neither
C) debit

Is an error of omission:
1.
2.
3.

A) a transaction where the credit entry is posted as a debit entry or vice versa
B) a transaction that has been posted to the wrong ledger
C) a transaction which has not been included in the total of the ledger it is
posted in
4. D) a transaction that has been completely overlooked

Identify whether the account stated below would represent an
Asset, Liability, Income or Expenditure: Stationery account
1.
2.
3.
4.

A) Asset
B) Income

C) Expenditure
D) Liability