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MULTIPLE CHOICE QUESTIONS
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UGBS 205: FUNDAMENTALS OF ACCOUNTING METHODS

SAMPLE OBJECTIVE TEST QUESTIONS

What is the basic accounting equation?

a) Capital + liabilities=assets
b) Assets +liabilities=capital
c) Capital + assets =liabilities
d) Liabilities + capital

2. Which of the following, generally, does not appear in a debtor’s control account?
a) Discount allowed
b) Bank or cash
c) Dishonoured check
d) Provision for doubtful debt

3. Sales return was understated by GH₵1000. Which of the following is correct?

a) GH₵1000 will be deducted in the debtor control a/c
b) GH₵1000 will be credited in the debtor control a/c
c) No adjustment is required
d) GH₵500 will be debited in the debtors’ control a/c

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4. The John marketing Company provides advertising services to an investment
company
in the year 2015 but received an advertising fee in the year 2016. The John Marketing
Company recognizes this revenue in the year 2015. This action of John Marketing
Company is justified;
a) Business Entity Concept
b) Revenue Recognition Principle
c) Economic Entity Concept
d) Going Concern Concept

5. The long-term assets that have no physical existence but are right that have value
are
known as
a) Current Assets
b) Fixed Assets
c) Intangible Assets
d) Investment

6. In the bank reconciliation statement, the amount of outstanding cheques is added

to..........
balance of the cash book
a) Adjusted
b) Unadjusted
c) Understated
d) Overstated

7. Which of the following is a double entry for depreciation expenses?

a) Debit provision for depreciation and Credit depreciation expenses
b) Debit depreciation expenses and Credit fort provision depreciation
c) Debit cash and Credit depreciation expenses
d) Debit depreciation expenses and Credit cash

8. According to accrual of accounting, financial or business transaction is recorded:

a) When cash is received or paid
b) when transaction occurs
c) When profit is computed
d) When a statement of financial position is prepared

9. A company purchased a new machine for GH₵50,000 and machine test run was
started to
ensure that it worked properly. There was an expenses of GH₵5,000 incurred on the
test run.

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However, the sales proceeds from test production were GH₵2,000. You are required
to find out
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the total machine cost.
a) GH₵500,000
b) GH₵505,000
c) GH₵503,000
d) GH₵495,000

10. A trader has made a sale of GH₵75, 500 out of which cash sales amounted to
GH₵25,500.
He showed trade receivables on 31/3/2014 at GH₵25,500. Which is the following?
a) Going Concern
b) Money Measurement Concept
c) Accrual Concept
d) Cost Concept

11. Control account are kept so as to assist management in

I. Locating errors and reducing the risk of irregularities
II. Managing credit customers and credit suppliers
III. Increasing the profits for a business
IV. Improving the reliability of financial data
a) I and II
b) I, II and III
c) I, II and IV
d) I, III and IV

Use the table below to answer question 12-14

I
Bal b/d 80,000 Cash 100,000
II Bad Debts 1,000
Discount Allowed 2,000
Balance c/d III
280,000 280,000

12. Which of the following best describes (I) above?

a) Debtors control account
b) Creditors control account
c) Prepaid rent control
d) Accrued wages control

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13. Which of following best describes (II) above
a) Purchase
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b) Sales
c) Wages
d) Rent

14. What of the following best describes (III) above?

a) Gh₵80,000
b) Gh₵100,000
c) 177,000
d) 280,000

15. A bank statement reports an overdraft of Gh₵17,455 as at 31 st May, 2016. As

that date cheques
to the value of Gh₵14,280 have not been presented for payment and deposits
amounting
to Gh₵39,450 await clearance. Determine the bank balance that will be reported in
the cash
boo prior to correcting the following error that has been detected:
A cheque for Gh₵12,480 written in favor of Sir One, a trade creditor has been entered
in the cash
book as Gh₵12,840 and an automated credit from Madam One, a customer, for
Gh₵3,500
is yet to be recorded in the cash book.
a) GH₵ 4,655b) GH₵11,655 o/d
c) GH₵3,855
d) GH₵7,855 o/d

16. Land on lease should be shown in the statement of financial position contrary to
fact that the
company does not own this piece of land. This is the statement of which accounting
concept?
a) Matching Concept
b) Accrual Concept
c) Prudence Concept
d) Substance over form Concept

17. The branch of accounting that generates reports and information for the use of
internal
management is known as;
a) Tax Accounting
b) Management Accounting
c) Auditing
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d) Internal Accounting
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18. “Financial information should be natural and free from bias” is the description of
which of the
following?
a) Completeness Concept
b) Faithful Representation
c) Objectivity Concept
d) Duality Concept

19. GH₵500 deposited in a bank account was entered twice in a cash book. Identify
the correct
adjustment in the cash book
a) Gh₵500 will be credited
b) Gh₵500 will be debited
c) Gh₵10,000 will be credited
d) Gh₵10,000 will be debited

20. The balance as per cash book is Gh₵1000. Unpresented cheques Gh₵2000,
uncredited
cheques Gh₵500, deposit in transit Gh₵500.Compute the balance as per bank
statement.
a) Gh₵2000
b) Zero
c) Gh₵3000
d) Gh₵2500

21. The accounts that record expenses, gains and losses are known as
a) Nominal Accounts
b) Real Accounts
c) Personal Accounts
d) Balancing Accounts

22. The closing balance of petty cash book is considered as

a) Liability
b) Asset
c) Expenses
d) Revenue

23. Bad Debt written of during the of accounting are entered in which side of control
account
a) Debit side of creditors control account

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OFFICE OF THE COORDINATOR DESIGN TEAM MEMBER
b) Credit side of creditors control account
c) Debt side of debtors control account
d) Credit side of debtors control account
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24. The following are all bases of measurement in accounting except
a) Historical Cost
b) Net Realizable Value
c) Present (Discounted) Value
d) Real Value

25. Which of the following measures assets based on the net amount that would be
realized in the event of disposing off item
a) Historical Cost
b) Net Realizable Value
c) Present (Discounted) Value
d) Real Value

26. The cash book reports a bank balance of Gh₵4,250, without recording a credit
transfer from
a customer of Gh₵7,200 and a standing order payment of Gh₵4,500. Deposits
awaiting
clearance were Gh₵22,400 and the value of cheques yet to be presented for payment
amount to
Gh₵9,480. What will the bank balance be as reported in the bank statement?
a) Gh₵5,970 o/d
b) Gh₵19,870 o/d
c) Gh₵11,370 o/d
d) Gh₵8,690

27. The information for preparing a control account is obtained from:

a. The General Journal
b. The cash book
c. The Books of prime Entry
d. The Ledger

For questions 28-30, state the accounting concept that best describes each of the
following
scenarios

28. A shareholder of a company is furious that the accountant is always quick to

recognize losses

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in the book but hesitant in reporting gains. What fundamental principle in accounting
do you
think the shareholder is missing?
Prudence concept
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29. On the 20th of December 2016, an interest on fixed deposit account was earned
but the bank
did not credit the company’s account until 4th of January 2017. There has been a
heated argument
as to whether the interest should be recognized for the year 2016 or 2017. What
fundamental
principle is to be applied here?
Accrual concept
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30. Mr. Mensah started business on the 2nd of February 2016 with land and building
worth
Gh₵10,000. On 14th February, he decided to give some of the business inventory as a
gift to a
friend and insisted that the cost of the inventory be treated as business expense. The
accountant,
however, disagreed with him and seriously argued that the value of the inventory
given as a gift
be treated as a reduction on Mr. Mensah’s capital Account. What fundamental
principle in
accounting is the accountant applying in this scenario?
Business entity concept
..................................................................................................................

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OFFICE OF THE COORDINATOR DESIGN TEAM MEMBER