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Question 01

Which of these could be considered a good reason for a business to keep detailed financial records?

a) It must, by law, employ a qualified accountant to keep good records

b) It needs to know who it owes money to and who owes it money

c) It will pay lower tax rates if its records are well kept

d) It must have detailed records available for inspection by competitors

Question 02

Which one of the following could not be classified as Revenue Income?

a) Goods sold for cash

b) Goods sold on credit

c) Income from the sale of services

d) Income from the sale of fixed assets

Question 03

Which one of the following could not be classified as Revenue Expenditure?

a) Purchase of a fixed asset, by cheque

b) Purchase of goods for resale, by cash

c) Purchase Wages paid by cashof goods for resale, on credit

d) Wages paid by cash

Question 04

Which one of the following assets could be described as a current asset?

a) Stock of goods for resale

b) Machinery to manufacture goods for resale

c) Buildings to house the machinery

d) Land on which the buildings stand

Question 05

A Profit is earned if:

a) Assets exceed Expenditure.

b) Income exceeds Expenditure.

c) Cash Inflow exceeds Cash Outflow.

d) Income exceeds Liabilities.

Question 06

The purchase journal records:

a) invoices from creditors.

b) debtors' invoices.

c) cash payments to suppliers.

d) amounts owing to employees for wages.

Question 07

The two main types of ledger are:

a) sales and purchases.

b) personal and impersonal.

c) cash in and Cash out.

d) debtors and creditors.

Question 08

If a business shows a debit balance in its own record of its bank balance, this indicates:

a) the business has a bank overdraft.

b) the business is a debtor of the bank.

c) the business has money in the bank.

d) the ledger entry must be wrong.

Question 09

The extended balance sheet equation, which is the basis of double-entry bookkeeping, is:

a) Assets + Expenses = Liabilities + Income - Capital

b) Assets - Expenses = Liabilities - Income - Capital

c) Assets - Expenses = Liabilities + Income + Capital

d) Assets + Expenses = Liabilities + Income +Capital

Question 10

A trial balance which shows equal totals for both debit and credit columns:

a) shows that the arithmetic is correct, but errors may still be present in the bookkeeping system.

b) shows that the bookkeeping system is free of errors.

c) shows that there must be more than one error within the bookkeeping system.

d) shows that there is only one error within the bookkeeping system.

Oxford University Press, Online Resource Centre, Chapter 02.

Chapter 02

Instructions