Question 1

Which of the following statements is true?&#10;A) To record an increase in any given asset account that account must be debited&#10;B) To record a decrease in capital, the capital account must be credited&#10;C) To record an increase in any given liability account that account must be debited&#10;D) To record a decrease in any given liability account must be credited

Accepted Answer

In accounting, an increase in an asset account is recorded as a debit.

Question 2

The trading and income statement:&#10;A) Is only prepared once each year&#10;B) Shows the entity's financial position at a point in time&#10;C) Is not part of the double entry system?&#10;D) Is part of the double entry system?

Accepted Answer

The trading and income statement, which reports a company's financial performance over a specific period, is indeed part of the double entry system. Every transaction affects two accounts in this system, and the income statement reflects the outcomes of these transactions in terms of revenue and expenses.

Question 3

When a business pays its electricity bill by cheque the double entry is:&#10;A) Debit: Heat and light account Credit: Bank account&#10;B) Debit: Cash account Credit: Heat and light account&#10;C) Debit: Heat and light account Credit: Cash account&#10;D) Debit: Bank account Credit: Heat and light account

Accepted Answer

Paying an electricity bill by cheque decreases the business's bank balance and increases its expenses. Therefore, the Heat and Light account (an expense account) is debited, and the Bank account is credited.

Question 4

When a business purchases goods on credit the double entry is:&#10;A) Debit: Purchases account Credit: Bank account&#10;B) Debit: Purchases account Credit: Trade payables account&#10;C) Debit: Trade payables account Credit: Purchases account&#10;D) Debit: Purchases account Credit: Trade receivables account

Accepted Answer

When a business purchases goods on credit, it increases its inventory or purchases and also increases its obligations to pay in the future, which is recorded in the trade payables account. Thus, the purchases account is debited, and the trade payables account is credited.

Question 5

A debit balance on a ledger account indicates&#10;A) An asset or an expense&#10;B) A liability or an expense&#10;C) An amount owing to the organisation&#10;D) A liability or revenue

Accepted Answer

A debit balance typically indicates an asset or an expense in accounting, reflecting either resources owned by the organization or costs incurred.

Question 6

When goods that were sold on credit are returned the double entry is:&#10;A) Debit: Returns outward account Credit: Trade receivables account&#10;B) Debit: Returns inward account Credit: Trade receivables account&#10;C) Debit: Trade receivables account Credit: Sales return account&#10;D) Debit: Sales returns account Credit: Returns inward account

Accepted Answer

When goods sold on credit are returned, the correct double entry is to debit the Returns inward account (reflecting the return of goods into the business) and credit the Trade receivables account (reducing the amount owed by the customer).

Question 7

What transaction is represented by the entries? Debit: R. Ray
Credit: Bank

A) The purchase of goods from R. Ray by cheque
B) The sale of goods to R. Ray (they pay by cheque)
C) Receipt of a cheque from R. Ray
D) Payment by cheque to R. Ray

Accepted Answer

The debit to R. Ray indicates an increase in an asset or expense, suggesting payment to R. Ray. The credit to Bank indicates a decrease in the bank balance, confirming a payment was made by cheque.

Question 8

What transaction is represented by the entries? Debit: R. Ray
Credit: Bank

A) The purchase of goods from R. Ray by cheque
B) The sale of goods to R. Ray (they pay by cheque)
C) Receipt of a cheque from R. Ray
D) Payment by cheque to R. Ray

Accepted Answer

The entry represents the sale of goods where the payment is received by cheque, increasing the bank balance (debit) and recognizing the revenue from sales (credit).

Question 9

What transaction is represented by the entries? Debit: R. Ray
Credit: Bank

A) The purchase of goods from R. Ray by cheque
B) The sale of goods to R. Ray (they pay by cheque)
C) Receipt of a cheque from R. Ray
D) Payment by cheque to R. Ray

Accepted Answer

This transaction represents the receipt of a cheque from R. Ray, as the bank account is debited (increased) and R. Ray's account is credited, indicating a reduction in the amount owed by R. Ray to the business.

Question 10

What transaction is represented by the entry? Credit: Commission
Debit: T. McKee

A) The issue of an invoice for commission to T McKee
B) The payment of commission by the entity
C) The receipt of a bill for commission payable by the entity
D) The receipt of commission income by the business

Accepted Answer

The entry represents the issue of an invoice for commission to T McKee, where T. McKee is debited, indicating an increase in accounts receivable, and commission is credited, indicating revenue earned.

Question 11

Which of the following are correct?&#10;  &#10;A) (1) and (4) only&#10;B) (1) and (2) only&#10;C) (2) and (3) only&#10;D) (1) and (3) only

Accepted Answer

The answer of Which of the following are correct?&#10; ...

Question 12

Which of the following are incorrect?&#10;  &#10;A) (1) and (4) only&#10;B) (1) and (2) only&#10;C) (2) and (3) only&#10;D) (1) and (3) only

Accepted Answer

The answer of Which of the following are incorrect?&#10; ...

Question 13

Which of the following are not entered in the statement of financial position?&#10;A) Assets&#10;B) Drawings&#10;C) Capital introduced&#10;D) Heat and light

Accepted Answer

The answer of Which of the following are not entered...

Question 14

Which of the following correctly records the sale of a lorry on credit to D. Watson (assume no profit
Or loss on the sale):

A) Dr. Motor vehicles account Cr. Bank account
B) Dr. Bank account Cr. Motor vehicles account
C) Dr. Motor vehicles account Cr. D. Watson account
D) Dr. D. Watson account Cr. Motor vehicles account

Accepted Answer

The answer of Which of the following correctly records the...

Question 15

Which of the following correctly records the sale of a lorry on credit to D. Watson (assume no profit
Or loss on the sale):

A) Dr. Motor vehicles account Cr. Bank account
B) Dr. Bank account Cr. Motor vehicles account
C) Dr. Motor vehicles account Cr. D. Watson account
D) Dr. D. Watson account Cr. Motor vehicles account

Accepted Answer

The answer of Which of the following correctly records the...

Question 16

Which of the following correctly records the sale of a lorry on credit to D. Watson (assume no profit
Or loss on the sale):

A) Dr. Motor vehicles account Cr. Bank account
B) Dr. Bank account Cr. Motor vehicles account
C) Dr. Motor vehicles account Cr. D. Watson account
D) Dr. D. Watson account Cr. Motor vehicles account

Accepted Answer

The answer of Which of the following correctly records the...

Deck 9: The General Ledger