ENGLISH FOR ACCOUNTING 2

PRACTICE TEST 2
PART 1: THEORY
Exercise 1: Are statements below TRUE or FALSE
STATEMENTS TRUE/ FALSE
1. Drawings is added to capital in the balance sheet.
2. Stock included in the balance sheet is the opening stock.
3. The trading and profit and loss account can be displayed
horizontally or vertically.
4. Drawings cannot be in the form of cash.
5. If drawings is in the form of goods, it is necessary to show a
reduction from purchases in the trading account.
6. Drawings can be in the form of goods.
7. Opening stock appears both in the trading account and in
the balance sheet.

Exercise 2: Choose the correct answer

1. Accrual of income means that income due for the financial year has not been ……. by the
end of the year.
a. receive b. received c. pay d. paid
2. The provision for ………….. make up the amount of depreciation year by year.
a. depreciation b. depreciate c. bad debt d. doubtful debt
3. The asset account is ………….. if no provision for depreciation is made.
a. understated b. understate c. overstated d. overstate
4. The main …………. of depreciation are physical deterioration, economic factors and time
factors.
a. causes b. items c. cause d. ideas
5. If you take no account year-by-year of the fall in value of fixed assets, the annual profit
figures are ………
a. overstated b. understated c. undercast d. underestimate
6. Any debts written off are a/an …………of the business.
a. benefit b. gain c. loss d. expense
7. Capital is …….. when drawing is made.
a. reduced b. increased c. rose d. grew
8. Bad debts are debts that the business is unable to………..
a. buy b. pay c. give d. collect
9. Any decrease in the provision for doubtful debts is a ……….. to the firm.
a. profit b. growth c. loss d. reduction
10. The float figure can be ………..
a. amended b. moved c. left d. altered
PART 2: PRACTICE
Exercise 3:
On 1 January year 4, Tonny Green bought a motor vehicle for 12,000 by cheque. She decided to
depreciate the motor vehicle by 25% per annum using reducing balance method. She sold the
motor vehicle on 31 December year 7 for £4,700 received in cheque.
Show the

1
 a. Motor vehicle account
b. Provision for depreciation of motor vehicle account, and
c. Disposal account for the financial year ending 31 December years 4,5,6 and 7.
d. An extract of Profit and Loss account at 31 December year 7, showing the transfer of
Profit/ Loss on Sales of fixed assets

Exercise 4:
From the following details, you are required
1. To bring the cash book up to date at 31 October Year 2 (10 pts)
2. To draw up a bank reconciliation statement at 31 October Year 2, to obtain the
balance at that date shown on the bank statement (10 pts)
Balance at bank as shown in the cash book £
at 31 October Year 2 960 Cr
Cheques paid into bank but not yet shown on the bank statement 440
Credit transfer from Tom Farer had not entered in the cash book 320
Standing Order to D Motors had not been entered in the cash book 150
Cheques drawn but not yet presented 280
Bank charges had not been entered in the cash book 45

Exercise 5:
From the following Extract of the Trial balance at 31 December Year 5.
Dr (£) Cr (£)
Fixtures and Fittings, at cost 46,900
Provision for depreciation on fixtures and Fittings 10,900
Bad debts, written off 2,860
Debtors 85,000
Motor vehicles at cost 81,300
Provision for depreciation on motor vehicles 19,700
Wages and salaries 63,020
Provision for doubtful debts 1,780
Insurance 6,660

The following additional information was available at 31 December Year 5:

£
1. Insurance prepaid 530
2. Wages and salaries accrued 1,210
T Malone decided to:
a. Provide for depreciation:
Fixtures and fittings: 20% on cost
Motor vehicles 20% on reducing balance
b. Adjust the provision for doubtful debts to 3% of debtors
REQUIRED:
Show the related accounts in Profit and Loss accounts at 31 December Year 5: