1. What is the main function of book-keeping?

A. communicating information
B. interpreting information
C. recording information
D. summarising information

2. Ava had $4000 in the bank. She paid a supplier $575 by cheque in full settlement of $600 owing.
Which changes would take place within the accounting equation?

ans C

3. In April Meena sent Ralph invoices for $170, $240, $125 and a credit note for $63. In the same month
Ralph sent Meena a debit note for $70 and a cheque for $107. What was the balance on Meena’s
account in Ralph’s books on 1 May?

A. $295 credit
B. $295 debit
C. $365 credit
D. $365 debit

3. Winston returned goods to Hanif. Which entries will Winston make in his ledgers?

ans C
4. Jane invoiced John for goods, $5000. John took a cash discount of 5% and sent Jane a cheque for the
amount due. Which entries will appear in Jane’s cash book?

Ans A

5. On 30 September 2018, Ahmed’s bank statement showed a credit balance of $2500. Ahmed found
that a cheque issued for $90 and a deposit of $500 had not been included on the bank statement.

What was the balance at bank shown in Ahmed’s cash book on 30 September 2018?

A. $1910
B. $2090
C. $2910
D. $3090

6. After preparing a trial balance it was found that a cheque, $300, received from Oliver, had been
debited in Oliver’s account and credited in the bank account. No other errors were found.

Which statement about the trial balance before correcting the error is correct?

A. The credit column was equal to the debit column.

B. The credit column was $300 more than the debit column.
C. The debit column was $300 more than the credit column.
D. The debit column was $600 more than the credit column.

7. Seema’s financial year ends on 30 September. She rents premises at a monthly rent of $2000. During
the year ended 30 September 2018 she paid $26 000 rent. Which journal entry will Seema make on 30
September 2018 to transfer the rent to the income statement?

Ans A
8. On 1 January 2005 a company’s provision for doubtful debts was $500. On 31 December 2005 debtors
were $20 000. The provision is to be maintained at 2% of debtors.

Which adjustment to the provision for doubtful debts account is needed?

A. $100 debit
B. $100 credit
C. $400 debit
D. $400 credit

9. Leroy has an engineering business. On 31 May he received an invoice from AB Machines showing the
following:

1) Cost of replacement parts for machine

2) Cost of repairs to machine
3) Cost of machine
4) Cost of installation of machine

Which costs are capital expenditures in Leroy’s books?

A. machine, installation
B. machine only
C. replacement parts, machine
D. replacement parts, repairs, installation

10. Why is depreciation charged on a non-current asset?

A. to accumulate a fund of money to replace the asset

B. to charge the cost of using the asset against income
C. to determine the market value of the asset
D. to ensure that profits are not understated

11. On 1 January 2017 Wayne purchased a motor vehicle for $8000. He decided to depreciate it using
the diminishing (reducing) balance method at 20% per annum. Which journal entry did Wayne make on
31 December 2018?

Ans A
12. A draft income statement showed a gross profit of $12 200. It was later found that carriage on
purchases, $260, and carriage on sales, $230, had both been included as expenses in the profit and loss
section of the income statement. What was the corrected gross profit?

A. $11 710
B. $11 940
C. $12 460
D. $12 690

13. A business made the correct entry in its cash book for rent paid of $100 but credited the rent
account. A suspense account was opened. Which correcting entries are required?

Ans C

14. A business has the following assets and liabilities at 31 December 2005.

What is the working capital?

A. $11 000
B. $19 000
C. $81 000
D. $91 000

15. Which is a service business?

A. garage selling petrol and diesel

B. motor insurance agency
C. second-hand car trader
D. shop dealing in motor parts
16. Winston and Leroy are considering forming a partnership. Which is a disadvantage to Winston of
going into partnership with Leroy?

A. share losses
B. share profits
C. share responsibilities
D. share work-load

17. Maria and Lucy decide to amalgamate their businesses and agree to share profits and losses equally.
Maria’s goodwill is valued at $3000 and Lucy’s goodwill is valued at $2000. How is the goodwill recorded
in the books of the partnership?

Ans D

18. The New Street Sports Club provided the following information on 1 July 2006.

What is the accumulated fund?

A. $35 390
B. $35 490
C. $38 390
D. $38 490
19. The following information is taken from the accounts of a sole trader.

What is the trader’s net profit?

A. $10 000
B. $12 500
C. $15 000
D. $17 500

20. Meyer Ltd was established on 1 January 2001. On 1 January 2006 the company’s profit and loss
account showed a credit balance of $55 000. What does this represent?

A. net loss for the previous year

B. net profit for the previous year
C. total profits brought forward from previous years
D. undistributed profits brought forward from previous years

21. The financial year of Paul Bergen, who is a manufacturer, ends on 30 June. On 30 June 2006 he had
three stocks – finished goods, raw material and work in progress. Where will these stocks appear in Paul
Bergen’s final accounts prepared on 30 June 2006?

Ans D

22. Stewart has a working week of 40 hours for which he is paid $10 per hour. For hours worked in
excess of this he is paid 1¼ times the basic rate. Stewart worked a total of 50 hours in the first week of
July. What is Stewart’s gross pay for this week?

A. $400
B. $500
C. $525
D. $625
23. Balances in the books of a business include the following

What is the current ratio?

A. 2.5: 1
B. 4.5: 1
C. 5: 1
D. 5.25:1

24. Anna has applied the straight-line method of depreciation on her motor vehicles. She wishes to use
the reducing balance method for the current year. Which accounting principle advises Anna against
changing the method of depreciation?

A. consistency
B. going concern
C. historical cost
D. matching

25. “Financial information should represent actual events and must be free from errors and bias.”

Which accounting objective is being described?

A. comparability
B. materiality
C. reliability
D. understandability

26. Muriel had a bank overdraft of $3820 and was owed $2100 by Ada. Ada paid promptly by cheque
and received a 5% cash discount. What was the effect on Muriel’s statement of financial position when
Ada paid her debt?

Ans C
27. A business provided the following information.

What was the value of the purchases?

A. $85 000
B. $95 000
C. $105 000
D. $115 000

28. A limited company provided the following information.

A dividend of 10% on ordinary shares was paid during the year. What were the retained earnings on 31
December?

A. $13 000
B. $23 000
C. $25 000
D. $35 000

29. What is not included in a statement of changes in equity of a limited company for the year ended 31
March 2019?

A. an issue of additional ordinary shares that was made during the year
B. an interim dividend paid to the ordinary shareholders on 1 November 2018
C. a proposed final dividend which is to be paid to ordinary shareholders on 1 August 2019
D. a transfer made to general reserve from retained earnings on 31 March 2019
30. A business’s sales are $100 000, the expenses are $30 000 and the profit for the year is $20 000.

What is the gross profit/sales ratio?

A. 10%
B. 50%
C. 70%
D. 80%

31. Which statement is not correct about reasons for using international accounting standards?

A. helps when making comparisons between companies

B. improves the reliability of accounting information
C. narrows the areas of difference between companies
D. makes the preparation of financial statements less time consuming

32. Raj is both a customer of and a supplier to Balbir. Raj’s account in Balbir’s sales ledger showed a
debit balance of $300. There was a credit balance of $100 on Raj’s account in the purchases ledger. A
contra entry between the two accounts was agreed.

Which entry would Balbir make in Raj’s account in the purchases ledger?

A. credit $100
B. credit $200
C. debit $100
D. debit $200

33. A trader does not keep full accounting records. How can credit purchases for his first year of trading
be calculated?

A. cheques paid + discounts received + amount owing to suppliers at year end

B. cheques paid + discounts received – amount owing to suppliers at year end
C. cheques paid – discounts received + amount owing to suppliers at year end
D. cheques paid – discounts received – amount owing to suppliers at year end

34. A trader provided the following information.

What was the mark-up?

A. 20%
B. 33.33%
C. 40%
D. 66.67%
35. Which items are statutory deductions from an employee’s gross pay?

A. donation to charity and club subscription

B. donation to charity and social security contribution
C. income tax and club subscription
D. income tax and social security contribution