Accountancy Test 1: TOTAL: 20 MARKS

First ten questions carry one mark each:

1. "The firm must be treated as financially separate and distinct form its' owner(s)".
This rule is known as:
(a) The accounting equation
(b) The dual aspect concept
(c) The business entity concept
(d) The balance sheet

2. A firm buys stock for Rs100 by cheque and intends to sell it for Rs200, so the
double-entry should be:
(a) Debit bank Rs100, Credit Stock Rs100
(b) Credit bank Rs200, debit stock Rs200
(c) Debit Purchases Rs100, Credit Sales Rs200
(d) Debit Purchases Rs100, Credit Bank Rs100

Q3. The system whereby we make two records for each transaction is known as
(a) Balance Sheet accounting
(b) Double-entry
(c) Dual aspect
(d) Management accounting

Q4. Which of the following is a liability?

(a) Creditors
(b) Debtors
(c) Stock
(d) Vehicles

Q5. A 'trade debtor' of AB ltd. can best be described as:

(a) A person or firm who bought goods from AB Ltd on credit and has not yet paid.
(b) A person or firm who borrowed money from AB Ltd in the form of a loan.
(c) A person or firm who sold goods on credit to AB Ltd and has not been paid.
(d) A person or firm who made a loan to AB Ltd
Q6. The word 'credit' in book-keeping means:
(a) Add value onto an account.
(b) Deduct value from an account.
(c) Left-hand entry in an account.
(d) Right-hand entry in an account.

Q7. Which of the following is an example of 'revenue expenditure'?

(a) The buying of a delivery van
(b) Paying for a five-year lease on shop premises in city centre
(c) Putting petrol in a delivery van
(d) Re-paying a loan which was taken out three years ago.

Q8. A firm pays Rs 50 from its cash till to its bank account. The double-entry is:
(a) Debit Cash Rs 50, Credit Bank Rs 50
(b) Debit Cash Rs 25, Credit Bank Rs 25
(c) Credit Cash Rs 50, Credit Bank Rs 50
(d) Credit Cash Rs 50, Debit Bank Rs 50

Q9. Which one of the following BEST describes 'purchases'?

(a) Items bought
(b) Goods bought for re-sale
(c) Goods paid for
(d) Fixed assets bought

Q10. Akanksha sends back stock to S.S. Fabrics (a supplier), having originally
purchased it on credit. S.S. Fabrics issued a credit note for the value of these
goods. In Akanksha' books, the double-entry for this transaction should be:
(a) Debit: S.S. Fabrics; credit Purchases
(b) Debit: purchases; credit S.S. Fabrics
(c) Debit S.S. Fabrics; credit purchases returns
(d) Debit purchases returns; credit S.S. Fabrics.
Questions may have more than one correct answer. (5*2 Marks).

Q11. Which of the following groups might be interested in the accounts of a

business?
(a) Shareholders
(b) The public
(c) Employees
(d) The Government

Q12. Which of the following are 'financial accounting' activities?

(a) Finding errors in the accounts and making the appropriate corrections.
(b) Preparing a cash budget for the next six months.
(c) Analyzing the payroll records for normal pay to overtime pay ratio.
(d) Drawing up a 'Profit and Loss Account' for the year just ended.

Q13. Which of the following statements is TRUE?

(a) Liabilities = Capital + Assets
(b) Capital = Assets + Liabilities
(c) Assets - Liabilities = Capital
(d) Liabilities = Assets - Capital

Q14. An item of stock is sold on credit to T.Marques for Rs45. The item originally
cost Rs20. Which of the following are TRUE?
(a) The double-entry for this transaction is Credit: T. Marques Rs45, Debit Sales
Rs45
(b) T. Marques becomes a trade debtor.
(c) The double-entry for the sale is : Debit T.Marques Rs20, Credit Sales Rs20
(d) The original purchase of the stock represents a piece of revenue expenditure.

Q15. Our firm returns goods to a supplier, value Rs38. We originally bought these
goods on credit. Which of the following is true?
(a) The total value of liabilities of our firm has been reduced.
(b) We will appear in our suppliers' books as a debtor.
(c) After we have returned the goods, the supplier owes us a refund.
(d) We need to credit the purchases account.