MULTIPLE CHOICE.

[30]
1. Why should a sole trader record all the financial information about her business?
A. because she is required to do so by law
B. because she needs to pay her creditors on time
C. so that she can prepare final accounts
D. so that she knows how much her debtors owe her

2. What is net profit?

A. the amount of money taken out of the business by the owner during the year
B. the cash in the business bank account
C. the difference between sales and cost of sales
D. the sales revenue less cost of sales and expenses

3. What is shown as a liability in a statement of financial position?

A. accrued wages
B. fixtures and fittings
C. prepaid rent
D. stock of goods

4. What information is shown by a business’s Trading Section?

A. if the business assets equal the liabilities
B. if the business has made a gross profit
C. if the business has made a net profit
D. if the business income exceeds expenditure

5. The credit side of a business’s cash book includes the following payments.

How much will be recorded as proprietor’s drawings?

A $5000 B $5020 C $5200 D $52203
6. A business sends a cheque to a supplier. The transaction is recorded in the cash
book and supplier’s account.
Which accounting principle is being applied?
A. consistency
B. duality
C. money measurement
D. prudence

7. When does a business recognise the income from a sale of goods on credit?
A. when it sends a statement to the customer
B. when the customer pays for the goods
C. when the goods are delivered to the customer
D. when the goods are ordered by the customer

8. Which describes the going concern principle?

A. Accountants apply the same treatment to similar transactions.
B. Accountants assume that the business will continue to exist indefinitely.
C. Accountants keep the transactions of the proprietor and the business
separate.
D. Accountants record the two-fold aspect of every transaction.

9. In which order are documents used when goods are purchased on credit?
A. cheque, invoice, order
B. cheque, order, invoice
C. order, invoice, cheque
D. invoice, order, cheque

10. When will a business issue a debit note?

A. when goods are received from a supplier
B. when goods are returned by a customer
C. when goods are returned to a supplier
D. when goods are sent to a customer

11. Abdul sells goods with a list price of $4000 on credit to Omar. Abdul offers the
following discounts.
Cash discount 10 %
Trade discount 20 %
What amount will be entered in the sales journal of Abdul?
A $2880 B $3200 C $3600 D $4000

12. A business keeps a three column cash book.

Where is the total of the discount column on the debit side posted?
A. to the credit side of discounts allowed account
B. to the credit side of discounts received account
C. to the debit side of discounts allowed account
 D. to the debit side of discounts received account

13. A trader purchases a motor vehicle to deliver goods to his customers.

How will he record this? B

14. Where are the personal accounts of trade customers found?

A. purchases journal
B. purchases (creditors) ledger
C. sales journal
D. sales (debtors) ledger

15. What is the main purpose of a trial balance?

A. to check the arithmetical accuracy of the double entry
B. to check the bank balance agrees with the bank statement balance
C. to check that all invoices have been sent
D. to check that all journal entries have been posted

16. Financial statements must be free from error and bias.

Which accounting policy is being applied?
A comparability
B relevance
C reliability
D understandability

17. A trader prepared a trial balance at 31 December.

Which statement about this trial balance is correct?
A It shows a summary of the financial position at 31 December.
B It shows the ledger account balances at 31 December.
C It shows the profit for the year ended 31 December.
D It shows the transactions for the year to 31 December.

18. Which statement about depreciation is correct?

A It is a cash fund to replace a non-current asset.
B It is a monetary expense as it involves the outflow of money.
 C It is an estimate of the loss in value of a current asset over its expected life.
D It is recorded in the nominal ledger and the income statement.

19. Why does a business provide for depreciation on non-current assets?

A. to charge the cost of non-current assets against profit in the year of purchase
B. to ensure that non-current assets appear at book value in the statement of
financial position
C. to ensure that the matching principle is applied when preparing financial
statements
D. to retain cash in the business for replacement of non-current assets
20. Which of the following is shown in the statement of financial position?
A. Gross profit
B. Revenue
C. Trade payables
D. Cost of sales

21. What is the purpose of preparing an income statement?

A. To show the financial position of a business at a specific date
B. To calculate the profit or loss for a period
C. To list all non-current assets
D. To record cash transactions only

22. A business has revenue of $50,000, cost of sales of $30,000, and expenses of
$10,000. What is the profit for the period?
A. $10,000
B. $20,000
C. $30,000
D. $40,000

23. Which item is classified as a non-current asset in the statement of financial

position?
A. Inventory
B. Trade receivables
C. Machinery
D. Bank overdraft

24. How is closing inventory treated in the financial statements?

A. Deducted from revenue in the income statement
B. Added to cost of sales in the income statement
C. Shown as a current asset in the statement of financial position
D. Recorded as an expense in the income statement

25. A business’s statement of financial position shows total assets of $100,000 and
total liabilities of $40,000. What is the capital?
A. $40,000
B. $60,000
C. $100,000
D. $140,000
26. What increases owner’s capital?
A bank loan extended from five to ten years
B purchase of inventory on credit
C purchase of machinery by cheque
D transfer of vehicle to business from private use

27. How should inventory be valued?

A cost
B higher of cost and net realisable value
C lower of cost and net realisable value
D net realisable value

28. What is recorded in the sales journal?

A all money received from sales
B all sales transactions
C cash sales transactions
D credit sales transactions

29. Which user of accounting statements is interested in past performance and

taking remedial action where necessary?
A government
B investors
C managers
D suppliers

30. The employees of a business are highly skilled but this is not recorded in the
financial statements of the business.
Which accounting principle is being applied?
A going concern
B money measurement
C prudence
D realisation

31. Which statement about a two-column cash book is correct?

A It is a ledger account for bank transactions only.
B It is a ledger account for cash transactions only.
C It is a book of prime entry.
D It records cash discounts.

32. Which statement about the division of the ledger is not correct?
A Checking procedures can be introduced.
B Fewer entries are needed in the sales and purchases accounts.
C It is easier for reference and for locating accounts.
D Work can be shared between two or more book-keepers.

33. Which account may appear as a credit balance in a trial balance?

 A carriage outwards
B discount received
C drawings
D inventory

STRUCTURED QUESTIONS
1. Sanath Jaffer is a trader. His financial year ends on 31 January. He provided the
following information on 31 January 2013.

Complete the following trial balance for Sanath Jaffer at 31 January 2013. Show any
 difference you find as a balance on an appropriate account.

2. Timmy buys and sells car components.

a) Complete the following sentence: Use
“inventory is valued at the…………. of…………….. or……………….…………..” [3]

b) The following information about his stock is available.

The stock of part B017 has been delivered in two consignments. Carriage inwards
has been charged at $20 per consignment.
 The stock of part C060 has been delivered in three consignments. Carriage inwards
has been charged at $20 per consignment.
REQUIRED
Calculate the value of inventory to be shown in Timmy’s Statement of financial
position at 30 April 2006.

[8]

3. Shilpa Gandhi deals in two types of inventory (stock).

She provided the following information about her inventory (stock) on 31 January
2010.

The following additional information is available at 31 January 2010.

Carriage inwards of $1 per unit was charged on Type A. This is not included in the
above figures.
40 units of Type B were found to be damaged and had to be destroyed.
REQUIRED
a) Calculate the total value of Shilpa Gandhi’s inventory (stock) on 31 January
2010.
 Show your workings.
………………………………………………………….................................................
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b) Name the accounting principle you have applied above when valuing Shilpa
Gandhi’s inventory (stock).
................................................................................................................................[1]

4. Name one accounting principle applied by Bilal in each of the following situations.

[4]

5. Benny Timber’s receipts and payments during the financial year ended 31 December
2018 included both capital and revenue items.
REQUIRED.
State the meaning of each of the following terms and give an example of each.
Capital expenditure
Meaning ....................................................................................................................
...................................................................................................................................
.................................................................................................................
Example ....................................................................................................................
........................................................................................................................
Capital receipt
 Meaning ....................................................................................................................
...................................................................................................................................
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Example ....................................................................................................................
........................................................................................................................
Revenue expenditure
Meaning ....................................................................................................................
...................................................................................................................................
....................................................................................................................
Example ....................................................................................................................
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Revenue receipt
Meaning ....................................................................................................................
...................................................................................................................................
....................................................................................................................
Example ....................................................................................................................
.................................................................................................................... [8]

6. Timmy bought a machine for $10 000 and depreciated it at the rate of 20% per
annum on the reducing (diminishing) balance basis.

a) What was the net book value at the end of year 2?

………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
………………………………………………………………………………………………
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………………………………………………………………………………………..… [4]

b) State two reasons why a trader may prepare a trial balance.

1 ..............................................................................................................................
.................................................................................................................................
...
2 ..............................................................................................................................
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[2]

7. Vinita’s accountant prepared a set of financial statements at the end of her first year
of trading on
31 December 2016.
Vinita was not familiar with some of the terms used in these statements.
REQUIRED
(a) State the meaning of each of the following terms.
i. Income statement
 ............................................................................................................................
............................................................................................................................
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.........................................

ii. Statement of financial position

............................................................................................................................
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iii. Non-current assets
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iv. Non-current liabilities
v. Capital
............................................................................................................................
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.......................................................................
(b) Give two examples of intangible assets.
................................................................................................................................
...........................................................................................................................[2]

Paper 1 February/March 2016

[Link] decides to start a business driving a taxi. She buys a suitable motor car on
1 April 2008 but has to spend more money installing a meter. Each year she has to
pay for a taxi licence and for taxi insurance.
REQUIRED
a) In the table below, place a tick (√) under the correct heading for each item of
expenditure incurred by Tina. [6]
 Tina has spent $18 000 on her taxi and decides to charge depreciation using the
reducing balance method at 30 % per annum.
REQUIRED
b) Calculate the depreciation to be charged in Tina’s accounts for each of the
following years.
(i) Year ending 31 March 2009. [3]
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………

(ii) Year ending 31 March 2010. [3]

…………………………………………………………………………………………
…………………………………………………………………………………………
…………………………………………………………………………………………
………………………………………………………………………………………..

(c) Calculate what the net book value of the taxi will be on 31 March 2010. [2]

0452/02
Paper 2 May/June 2008

9. Manny is in business as a furniture maker.

(a) State what is meant by an asset.

..............................................................................................................................
..........................................................................................................................[1]
(b) Suggest one item Manny would include in her non-current assets.
..........................................................................................................................[1]

(c) Suggest one item Manny might include in her inventory.

..........................................................................................................................[1]