1.

The total sales for a period of time would be: A.

B.
C.
D.

2.

Which of the following statements is not true?

A.
B.
C.
D.

3.

Money received from sale of goods

All goods and other assets sold
All credit and cash sales for that period
Money received from sale of goods

An increase in liabilities leaves capital and assets both unchanged

Paying for assets with cash leaves total assets unchanged in overall value
Profit adds to capital
Drawings reduces capital

The double-entry system of bookkeeping normally results in which of the following balances on
the ledger account: -

A.
B.
C.
D.
4.

Debit
Assets and revenues
Revenues, capital and liabilities
Assets and expenses
Assets, expenses and capital

A trader took goods that had cost Rs 2, 000 from inventory for personal use.
Which of the following journal entries would correctly record this?
Debit (Rs)

5.

Credit
Liabilities, capital and expenses
Assets and expenses
Liabilities, capital and revenues
Liabilities and revenues

Credit (Rs)

A.

Drawings 2,000

Inventory 2,000

B.

Purchases 2,000

Drawings 2,000

C.

Sales 2,000

Drawings 2,000

D.

Drawings 2,000

Purchases 2,000

Consider the following account and ascertain which of the statements below the account is not
true.
Capital Account
20x2
Rs
20x2
Rs
December 31 Drawings
3,000 Jan 1
Balance b/d
5,500
December 31 Balance c/d 4,750 Mar 31 Bank
500
Dec 31 Profit and Loss ?
7,750
7,750

A. Net profits of 1,750 have been earned during the year of 20X2
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B. Capital has decreased between 1 Jan 20X2 and December 31 20X2

C. Drawings made during the year will mean that the profits will be reduced
D. The proprietor contributed more of his own private resources to the business
6.

Kathy bought goods from Corrine. The goods had a list price of Rs 800. Corrine allowed Kathy
trade discount of 20 % and cash discount of 5 %. In Corrines books, which entries record the
cheque she received from Kathy?

A.
B.
C.
D.
7.

Kathy Rs 640
Kathy Rs 760
Kathy Rs 760

Income statement
Rs 1,300
Rs 1,300
Rs 1,200
Rs 1,200

Balance sheet
Rs 75 Accruals
Rs 75 Prepayments
Rs 125 Accruals
Rs 125 prepayments

A company pays rent quarterly in arrears on 1 January, 1 April, 1 July and 1 October each year.
The rent was increased from Rs90, 000 per year to Rs120, 000 per year as from 1 October 2002.
What rent expense and accrual should be included in the companys financial statements for the
year ended 31 January 2003?

A.
B.
C.
D.
9.

Account to be credited
Kathy Rs 640

The year-end of Lands Ltd is 31 December. The company pays for electricity by a standing order
of Rs 100 per month. On 1 January 2005 the statement from the electricity supplier showed that
the company had overpaid Rs 25. Lands Ltd received electricity bills for the four quarters starting
01 January 2005 and ending 31 December 2005 for Rs 350, Rs 375, Rs 275 and Rs 300 respectively.
Which of the following is the correct entry for electricity in Lands Ltd income statement and
balance sheet for the year ending 31 December 2005?

A.
B.
C.
D.
8.

Account to be debited
Bank Rs 608
Discount Allowed Rs 32
Bank Rs 608
Discount Received Rs 32
Bank Rs 608
Discount Allowed Rs 152
Bank Rs 608
Discount Received Rs 152

Rent expense
Rs
100,000
100,000
97,500
97,500

Accrual
Rs
20,000
10,000
10,000
20,000

Stationery paid during the year amounted to Rs 1,350. At the beginning of the year there was an
inventory of stationery on hand of Rs 165 and an outstanding stationery invoice of Rs 80. At the
end of the year there was an inventory of stationery on hand of Rs 140 and an outstanding

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stationery invoice for Rs 70. The stationery figure to be shown in the income statement for the
year is:
A.
B.
C.
D.
10.

Rs 1,195
Rs 1,335
Rs 1,365
Rs 1,505

James has been advised that one of his customers has ceased trading and that it is almost certain
that he will not recover the balance of Rs 720 owned by this customer.
What entry should James make in the general ledger?

A.
B.
C.
D.
11.

Debit
Receivables
Irrecoverable debt
Receivables
Bank

Credit
Irrecoverable debts
Receivables
Bank
Receivables

At 01 January 2005, Mary has motor vehicles that cost Rs 15,000. On 31 August 2005 she sells a
motor vehicle for Rs 15,000 which had originally cost Rs 8,000 and which had a net book value of
Rs 4,000 at the date of disposal. She purchased a new motor vehicle that cost Rs 10,000 on 30
November 2005.
Her policy is to depreciate motor vehicles at the rate of 25 % per annum on the straight-line basis,
based on the number of months ownership. What is the depreciation charge for the year ended
31 December 2005?
A.
B.
C.
D.

12.

Rs 3,750
Rs 3,292
Rs 4,250
Rs 3,500

Goods are transferred from the Manufacturing account to the Trading account at factory cost of
production plus a mark up of 20 %. The transfer prices of the closing stocks of finished goods
were as follows: Year 1 Rs 39, 600
Year 2 Rs 42,000
Year 3 Rs 45,600
What was the provision for unrealized profit charged against the profit in year 3?
A.
B.
C.
D.

Rs 400
Rs 600
Rs 720
Rs 1,200

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13.

The following items appear in the accounts of a manufacturing company: (i)

Carriage inwards
(ii)
Carriage outwards
(iii)
Depreciation of warehouse machinery
(iv)
Provision for unrealized profit
Which items will be included in the manufacturing account?

14.

A.
(i) and (ii)
B.
(i) and (iii)
C.
(ii) and (iii)
D.
(ii) and (iv)
The characteristics of a current asset would not include:
A. Not bought for resale
B. Likely to change before the next accounting period is over
C. Liquidity
D. Use as part of the firm's trading operations

15.

Which one of the following expenses would normally be shown in the trading account of the
business?
A.
B.
C.
D.

16.

Which one of the following records is not a book of prime entry?

A.
B.
C.
D.

17.

Carriage outwards
Carriage inwards
Warehouse costs
Bad debts written off.

Bank statements
Petty cash book
Journal
Sales returns day book

The following information is available in respect of a sole trader

Rs
Net profit
7,000
Drawings
9,000
Capital at the end of the year
31,000
There was no new injection of capital during the year.
What was the traders opening capital?
A.
B.
C.
D.

Rs 16,000
Rs 29,000
Rs 33,000
Rs 47,000

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18.

Which of the following explanations of the prudence concept most closely follows
that in the IASBs Framework for the Preparation and Presentation of Financial
Statements?
A.
B.
C.
D.

19.

Changing the value of closing stock from cost to expected selling price might be an application of
which accounting concept?

A.
B.
C.
D.
20.

The application of a degree of caution in exercising judgments under conditions of

uncertainty
Revenue and profits are not recognized until realized, and provision is made for all
known liabilities
All legislation and accounting standards have been complied with
Understatement of assets or gains and overstatement of liabilities or losses.

Consistency.
Historical cost.
Prudence.
Going concern

Listed below are five potential causes of difference between a companys cashbook balance and
its bank statement balance as at 30 November 2003:
(1)
Cheques recorded and sent to suppliers before 30 November 2003 but not yet presented
for payment
(2)
An error by the bank in crediting to another customers account a lodgement made by
the company
(3)
Bank charges
(4)
Cheques paid in before 30 November 2003 but not credited by the bank until 3 December
2003
(5)
A cheque recorded and paid in before 30 November 2003 but dishonoured by the bank.
Which of the following alternatives correctly analyses these items into those requiring an entry in
the cashbook and those that would feature in the bank reconciliation?
Cash book entry
Bank reconciliation
A
1, 2, 4
3, 5
B
3, 5
1, 2, 4
C
3, 4
1, 2, 5
D
2, 3, 5
1, 4

21.

Which of the following is not a reason why the bank statement balance and the bank balance on
the cashbook may not be the same after the cashbook has been updated for items found on bank
statement?
A. Errors made by bank

B. Unpresented cheques
C. Credit transfers
D. Lodgements not yet credited by the bank
22.

A companys trial balance failed to agree, the totals being:

Debit Rs815, 602
Credit Rs808, 420
Which one of the following errors could fully account for the difference?
A.
The omission from the trial balance of the balance on the insurance expense account Rs7,
182 debit.
B.
Discount allowed Rs3, 591 debited in error to the discount received account.
C.
No entries made in the records for cash sales totaling Rs7, 182.
D.
The returns outwards total of Rs3, 591 was included in the trial balance as a debit
balance.

23.

A limited liability companys trial balance does not balance. The totals are:
Debit $384,030
Credit $398,580

A suspense account is opened for the difference.

Which of the following pairs of errors could clear the balance on the suspense account when
corrected?
A.
Debit side of cashbook undercast by $10,000; $6,160 paid for rent correctly entered in the
cashbook but entered in the rent account as $1,610.
B.
Debit side of cashbook overcast by $10,000; $1,610 paid for rent correctly entered in the
cashbook but entered in the rent account as $6,160.
C.
Debit side of cashbook undercast by $10,000; $1,610 paid for rent correctly entered in the
cashbook but entered in the rent account as $6,160.
D.
Debit side of cashbook overcast by $10,000; $6,160 paid for rent correctly entered in the
cashbook but entered in the rent account as $1,610.
24.

The following receivables ledger control account prepared by a trainee accountant contains a
number of errors:Receivables ledger control Account
2008
Rs
2008
Rs
1 Jan Balance
614,000
31 Jan Credit sales
301,000
31 Jan Cash from credit customers
311,000
Discount allowed
3,400
Contras against amount due to
Bad debts written off
32,000
Suppliers in payable ledger
8,650
Interest charged on overdue account
16,00
Balance
595,650
933,650
933,650
What should the closing balance in the control account be after the errors in it have been
corrected?

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A.
B.
C.
D.

Rs 561,550
Rs 578,850
Rs 581,550
Rs 568,350

25.

Alpha received a statement of account from a supplier Beta, showing a balance to be paid of
$8,950. Alphas payables ledger account for Beta shows a balance due to Beta of $4,140.
Investigation reveals the following:
(1) Cash paid to Beta $4,080 has not been allowed for by Beta.
(2) Alphas ledger account has not been adjusted for $40 of cash discount disallowed by Beta.
(3) Goods returned by Alpha $380 have not been recorded by Beta.
What discrepancy remains between Alphas and Betas records after allowing for these items?
A.
$9,310
B.
$390
C.
$310
D.
$1,070

26.

Which one of the following journal entries is correct according to its narrative?
Debit
$
Mr Smith personal account
100,000
Directors remuneration

A.

B.

Bonus Allocated to account of managing director (Mr Smith)

Purchases
Wages
Repairs to buildings

Credit
$
100,000

14,000
24,000
38,000

Transferring cost of repairs to buildings carried out by companys own employees, using materials from
inventory.
C.

Discounts allowed
Discounts received

2,800
2,800

Correction of error: discounts allowed total incorrectly debited to discounts received account
D.

Suspense account
Rent receivable
Rent payable

20,000
10,000
10,000

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Correction of error: rent received credited in error to rent payable account.

27.

What is the effect on the current ratio and quick ratio of a business if it uses cash to buy stock?
A.
B.
C.
D.

Current Ratio
Decrease
Decrease
No change
No change

Quick ratio
Decrease
Increase
Decrease
Increase

28.

The closing stock of a business was Rs 30,000 and the cost of goods sold was Rs 600,000. Stock
turnover is based on the average of the opening and closing stocks. If stock turnover was 15
times, what was the opening stock?
A. Rs 10,000
B. Rs 40,000
C. Rs 50,000
D. Rs 80,000

29.

The following is an extract of the profit and Loss Account of a company:-

Operating profit
Debenture Interest
Profit after interest
Preference dividend
Ordinary dividend
Retained profit

Rs
360,000
24,000
336,000
(16,000)
(200,000)
120,000

The companys share capital is as follows:Authorized:

Rs 1,000,000
Issued:
Rs 200,000 8 % preference shares of Rs 1.00
Rs 800,000 ordinary shares of Rs 1.00
What is the companys earnings per share?
A.
B.
C.
D.
30.

Rs 0.32
Rs 0.40
Rs 0.42
Rs 0.45

A companys gross profit as a percentage of sales increased from 24% in the year ended 31
December 2001 to 27% in the year ended 31 December 2002.
Which of the following events is most likely to have caused the increase?
A.
An increase in sales volume
B.
A purchase in December 2001 mistakenly being recorded as happening in January 2002
C.
Overstatement of the closing inventory at 31 December 2001
D.
Understatement of the closing inventory at 31 December 2001.

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