Accounting Principles &

Quiz 1 The Double-Entry System

Name: ________________________________________________________ Batch: EMBA2K19
Max Marks: 40 Time Allowed: 60 minutes

Clearly encircle or tick the right option

1. Which of the following statements is incorrect? (1 mark) 9. This accounting principle assumes that a company will continue
A. Assets – Capital = Liabilities to exist long enough to carry out its objectives and commitments
B. Liabilities + Assets = Capital and will not liquidate in the foreseeable future. Foreseeable
C. Liabilities + Capital = Assets future here is considered to be: (2 marks)
D. Assets – Liabilities = Capital A. a period of not less than 3 months
B. a period of not less than 3 years
2. Which of the following is not an asset? (1 mark) C. a period of not less than 12 months
A. Buildings D. a period of not less than 12 years
B. Cash balance
C. Goods sold on credit 10. Materiality principle states that errors or mistakes in accounting
D. Goods bought on credit procedures, that which involves immaterial or small amount,
may be ignored and are not worth rectifying unless straight-
3. Which of the following is a liability? (1 mark) forward. (2 marks)
A. Machinery ❑ True ❑ False
B. Creditors for goods
C. Motor Vehicles 11. All business resources acquired should be valued and recorded
D. Cash at Bank based on the actual cash equivalent or original cost of acquisition
and not the prevailing market value or future value. (2 marks)
4. Which of the following best describes the meaning of ❑ True ❑ False
‘Purchases’? (1 mark)
A. Items bought 12. Which of the following accounting concepts require the
B. Goods bought for resale recorded amounts to have some form of impartial supporting
C. Goods bought on credit evidence or documentation? (2 marks)
D. Goods paid for A. Matching
B. Prudence
5. Which of the following best describes a trial balance? (1 mark) C. Independence
A. Shows the financial position of a business D. Objectivity
B. Shows all the entries in the books
C. It is a list of balances on the books 13. Given the following, what is the amount of Capital? Assets:
D. It is a special account Premises £20,000; Stock £8,500; Cash £100. Creditors £3,000;
Loan from A Adams £5,000 (2 marks)
6. Profit is: (1 mark) A. £21,100
A. Sales less Purchases B. £21,600
B. Excess of sales over cost C. £20,600
C. Cost of goods sold + Opening stock D. £21,400
D. Net profit less expenses of the period.
14. Which of the following is correct? (1 mark)
7. Capital is a type of liability. This is the amount that is due to the A. Profit does not alter capital
owner(s) of the business and can only increase by any new B. Profit increases capital
capital injected into the business. (1 mark) C. Profit reduces capital
❑ True ❑ False D. Capital can only come from profit

8. Any personal transactions of its owner should not be recorded in 15. What best describes fixed/non-current assets? (1 mark)
the business accounting book unless the owner’s personal A. Bought to be used in the business
transaction involves adding and/or withdrawing resources from B. Items which will not wear out quickly
the business. (1 mark) C. Long life and are not bought specifically for resale.
❑ True ❑ False D. Expensive items bought for the business

Business Accounting Page 1 of 3

16. If Sales (during the period) were £8,200; Opening stock (at year 20. Which accounting concept states that omitting or misstating this
start) was £1,300; Closing stock (at year end) is £900; Purchases information could influence users of the financial statements?
(during the period) were £6,400, the profit figure is: (2 marks) (1 mark)
A. £6,800 A. The consistency concept
B. £6,200 B. The accruals concept
C. £7,000 C. The materiality concept
D. Another figure D. The going concern concept

17. A business can make a profit and yet have a reduction in its 21. Which of the following accounting concepts means that similar
bank balance. Which ONE of the following might cause this to items should receive a similar accounting treatment? (1 mark)
happen? (2 marks) A. Going concern
A. Sale of an assets at a loss B. Accruals
B. Overcharging expenses C. Substance over form
C. Lengthening of the period of credit given to customers D. Consistency
D. Lengthening of the period of credit taken from suppliers
22. Which of the following is incorrect? (2 marks)
Assets Liabilities Capital
18. A trial balance is made up of a list of debit balances and credit £ £ £
balances. Which of the following statements is correct? A. 7,850 1,250 6,600
(1 mark) B. 8,200 2,800 5,400
A. Every debit balance represents an expense. C. 6,540 1,120 5,420
B. Assets are represented by debit balances. D. 9,550 1,150 8,200
C. Liabilities are represented by debit balances.
D. Income is included in the list of debit balances.

19. Which accounting concept should be considered if the owner of

a business takes goods from inventory for his own personal use?
A. The substance over form concept (1 mark)
B. The accruals concept
C. The going concern concept
D. The business entity concept

23. Which of the following statements about accounting concepts are correct? (2 marks)
1. Prudence concept means that understating of assets and overstating of liabilities is desirable in preparing financial statements.
2. Reliability concept means that even if information is relevant, if it is very unreliable, it may be misleading to recognize it in the financial
statements.
3. Accruals concept requires that revenue earned must be matched against the expenditure incurred in earning it.
4. Substance over form convention is that, whenever legally possible, the economic substance of a transaction should be reflected in financial
statements rather than simply its legal form.

A. 1, 2 and 3 C. 1, 3 and 4
B. 1, 2 and 4 D. 2, 3 and 4

24. Bert has extracted the following list of balances from his general ledger at 31 October 20X9:
$
Sales 258,542
Stock 9,649
Purchases 142,958
Expenses 34,835
Premises 63,960
Receivables 31,746
Payables 13,864
Cash at bank 1,783
Capital 12,525
What is the total of the debit balances in Bert's trial balance at 31 October 20X9? (2 marks)
A. $267,049 C. $283,148
B. $275,282 D. $284,931

Business Accounting Page 2 of 3

25. Which of the following are correct? (2 marks)
Account to be debited Account to be credited
(i) Bought office furniture for cash Office furniture Cash
(ii) A debtor, P Sangster, pays us by cheque Bank P Sangster
(iii) Introduced capital by cheque Capital Bank
(iv) Paid a creditor, B Lee, by cash B Lee Cash

A. (i), (ii) and (iii) only C. (i) and (iv) only

B. (ii), (iii) and (iv) only D. (i), (ii) and (iv) only

26. Which of the following are incorrect? (2 marks)

Account to be debited Account to be credited
(i) Goods sold for cash Cash Sales
(ii) Goods bought on credit from T Carter Purchases T Carter
(iii) Goods returned by us to C Barry C Barry Returns outwards
(iv) Van bought for cash Purchases Cash

A. (i) and (iii) only C. (ii) and (iv) only

B. (iv) only D. (iii) only

27. Which of the following are correct? (2 marks)

Account to be debited Account to be credited
(i) Received commission by cheque Bank Commission received
(ii) Paid rates by cash Rates Cash
(iii) Paid motor expenses by cheque Motor expenses Bank
(iv) Received refund of insurance by cheque Insurance Bank

A. (i) and (ii) only C. (ii), (iii) and (iv) only

B. (i), (ii) and (iv) only D. (i), (ii) and (iii) only

- - - End of Quiz - - -

Business Accounting Page 3 of 3