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Accounting Multiple choice Question and Answers

Question 1

The following statements relate to the nature and function of accounting:

  1. (i)  Financial information is required only by undertakings aiming to maximize profits.
  2. (ii)  An accounting entity is an independently existing economic unit, the financial transactions of which must be dealt with separately from those of any other unit.
  3. (iii)  Management accounting deals with the reporting of the financial achievements of an entity as a whole.
  4. (iv)  The financial position of an undertaking is best reflected by the bank statement.
  5. (v)  With the arrival of the computer no amendment of the theory of accountancy was necessary.
  6. (vi)  All liabilities redeemable within one year must be treated as current liabilities.

Which one of the following groups correctly reflects all the statements that are true?

  1. (i) (iii) (v)
  2. (ii) (iv) (vi)
  3. (i) (v) (vi)
  4. (ii) (v) (vi)
  5. None of the above

Question 2

How many of the following statements are correct?

  1. (i)  Communication of financial information is known as reporting.
  2. (ii)  The more financial statements represent the subjective opinion of management, the more useful the information to the user.
  3. (iii)  The application of the concept of consistency is essential if users are to rely on financial statements.
  4. (iv)  Prudence is a quantitative restriction on accounting information.
  1. One
  2. Two
  3. Three
  4. Four
  5. None of the above

44

ASSIGNMENT 1 (continued)
Question 3
Which one of the following statements is incorrect?

  1. The policy of materiality requires that only transactions and occurrences which have an essential bearing upon the nature and scope of the entity’s activity should be brought into account.
  2. According to the cost principle, assets should be initially brought into account in the accounting process at the cost which the entity incurred in acquiring those assets.
  3. The realisation principle determines that costs and losses are brought into account as soon as they are realised.
  4. The policy of consistency requires that a specific basis, method, procedure or approach once chosen should be maintained.
  5. None of the above

Question 4

Boo-Bip Co Ltd uses control accounts in their accounting system. Which one of the following errors/omissions will affect the debtor’s control account?

  1. The purchases returns journal was undercast by R60.
  2. An invoice for goods sold for cash to B Bean for R300 was not at all entered in the books.
  3. Goods to the value of R45, returned by E Emery, were never entered in the books, although the necessary debit note was made out.
  4. An invoice for R300 was not posted from the sales journal to the account of P Perry.
  5. None of the above

ASSIGNMENT 1 (continued)

Question 5

45 FAC1502/101/3

Xanta Limited sold a machine, originally costing R500, to Alpha Limited for R750 on credit.

Which one of the following alternatives correctly reflects the influence of the above transaction on the accounting equation of Xanta Limited?

Assets = Liabilities + Owners’ equity
1. 2. 3. 4. 5. -R750 -R750 +R750 +R750 +R750 -R500
None of the above
+ R750 + R500+ R250 + R250

Question 6

The following transactions were incurred by a firm of consulting engineers operating on a favourable bank balance:

  1. (i)  Cheque received in payment of services rendered on credit – R3 000
  2. (ii)  Cheque issued for payment of office rent – R2 500
  3. (iii)  Cheque issued to a creditor in payment of an outstanding account – R1 200
  4. (iv)  Cheque for R4 000 issued for payment of assets purchased for cash.

Which one of the following alternatives represents the effect of the above transactions on the owners’ equity of the firm?

  1. +R 500
  2. -R2 500
  3. -R4 700
  4. +R3 000
  5. None of the above

ASSIGNMENT 1 (continued)

Question 7

46

In the process of assisting the bookkeeper of Rapid Services to rectify the trial balance at 28 February 2011, the following errors, which resulted in the difference of the totals of the trial balance, were traced. Control accounts are in use.

a) The total of the February 2011 cash payments journal amounting to R29 800 has not been transferred to the bank account in the general ledger. The business operated on a bank overdraft.

  1. (b)  A payment of R300 to a creditor was entered in the cash payments journal and posted to the creditor’s personal account, but it has not been analysed in the creditor’s column of the cash payments journal.
  2. (c)  Rent amounting to R600, paid for February 19.5, was correctly entered in the cash payments journal, but posted to the credit side of the rent account in the general ledger.

Which one of the following amounts represents the difference in the totals of the trial balance, before the above mistakes were rectified?

  1. R28 000
  2. R29 500
  3. R28 300
  4. R29 800
  5. None of the above

Question 8

The following post-closing trial balance at 31 January 2011 was prepared by an inexpe- rienced bookkeeper of Help-my-sukkel Traders:

Trial balance at 31 January 2011

Delivery vehicle at cost
Accumulated depreciation: Delivery vehicle Debtors
Creditors
Fixed deposit at UK Bank
Accrued income
Prepaid expenses
Inventory – merchandise
Capital – 1 February 2010
Net income for the year

R
80 000 20 000 28 000

3 000 50 000

R

40 000 10 000 5 000

83 000 150 000

181 000

181 000

The trial balance balances, but with the wrong totals.

On checking the items, you found that some of the amounts, although correct, were listed on the wrong side of the trial balance. In addition the bookkeeper also omitted the bank balance.

ASSIGNMENT 1 (continued)

47 FAC1502/101/3

Which one of the following answers represents the bank balance?

  1. R67 000 favourable
  2. R81 000 favourable
  3. R51 000 favourable
  4. R61 000 favourable
  5. None of the above

Question 9

Which one of the following alternatives represents the side and general ledger account to which the total of the discount column in the cash payments journal should be posted monthly?

The “payments to creditors” column includes the amount of the actual payment as well as the discount.

  1. Debit side of the settlement discount received account.
  2. Debit side of the creditors control account.
  3. Credit side of the settlement discount allowed account.
  4. Credit side of the settlement discount received account.
  5. None of the above

Question 10

The following account appears in the general ledger of Stardust Limited.

Irrecoverable credit losses
30/1/2011 Sales 300

Which one of the following books of first entry (subsidiary book) was used to make the adjustment entry on 30 January 2011?

  1. Sales journal
  2. General journal
  3. Cash receipts journal
  4. Bills receivable journal
  5. None of the above

ASSIGNMENT 1 (continued)

Question 11

48

On 1 June 2010 Dan Traders, invested R100 000 at the O K Bank at an interest rate of 13% per annum. No interim interest payments were made by the O K Bank regarding this investment up to 31 December 2010, the end of Dan Trader’s financial year.

Which one of the following journal entries correctly reflects the adjustment that must be made at 31 December 2010 in the books of Dan Traders in respect of the above?

  1. Accrued income Interest received Narration
  2. Interest received Accrued income Narration
  3. Interest received Accrued income Narration
  4. Accrued income Interest received Narration
  5. None of the above

Question 12

RR 7 583

7 583

7 583
7 583

5 417
5 417

5 417
5 417

Happy Limited took out three insurance policies during 2010, namely one each on 1 April, 1 July and 31 December. The annual premiums (payable in advance) were R2 000, R3 000 and R1 000 respectively.

Which one of the following alternatives will appear on the income statement of the company in respect of “insurance” for the year ended 31 December 2010?

  1. Insurance – R3 000
  2. Prepaid expenses (insurance) – R3 000
  3. Insurance – R6 000
  4. Insurance – R5 000.
  5. None of the above

ASSIGNMENT 1 (continued)

Question 13

49 FAC1502/101/3

On 1 December 2010 ABC Limited received an amount of R2 400 representing a fee re- ceived for services to be rendered on a monthly basis during the six months 1 January 2011 to 30 June 2011.

On 1 January 2011 ABC Ltd had to make an advance payment of R600 in respect of rent for the period 1 January 2011 to 31 March 2011. The latter payment was necessary to en- able ABC Limited to render the above-mentioned services.

Which one of the following amounts represents the net profit/loss of ABC Limited, resulting from the above, for the period ended 28 February 2011, the end of their financial year? (The matching as well as the accrual principles are to form the basis for your calculations.)

  1. R 400 profit
  2. R 800 profit
  3. R1 800 profit
  4. R 600 loss
  5. None of the above

Question 14

During 2009 White Dairy sold milk coupons to the value of R150 000 to clients. During 2009, however, only R135 000 worth of coupons were exchanged for milk. During 2010 coupons to the value of R140 000 were sold whilst coupons worth R143 000 were exchanged for milk.

According to the accrual principle, which one of the following answers represents the income for 2010?

  1. R135 000
  2. R143 000
  3. R147 000
  4. R140 000
  5. None of the above

Question 15

You are the auditor of Vosrau (Pty) Ltd. On comparing the cash book (cash receipts and cash payments journals) with the bank statement at 31 March 2010, you ascertained the following:

1. Items in the cash receipts and cash payments journals of
March 2010 that could not be ticked off on the bank statements: R

  1. 1.1  A deposit on 31 March 2010 325
  2. 1.2  Cheque number 2001 issued on 28 March 2010 450

ASSIGNMENT 1 (continued)

50

  1. Items on the bank statement that could not be ticked off in the cash book (cash receipts and cash payments journals) of March 2010:
    1. 2.1  Cheque number 1801 issued on 27 February 2010 350
    2. 2.2  A deposit paid directly into the company’s bank account by a debtor C. Os 475
    3. 2.3  A deposit that should have appeared on the account of Rauvos (Pty) Ltd 150
    4. 2.4  Interest on bank overdraft, R25 and bank charges R15 40
  2. Additional information:
    Bank overdraft as per bank statement at 31 March 2010 225

Which one of the following amounts represents the correct balance on the bank account in the general ledger at 31 March 2010?

  1. R100 favourable
  2. R250 favourable
  3. R500 unfavourable
  4. R850 unfavourable
  5. None of the above

Question 16

The following transactions by Heymans Limited occurred during October 2010:

  1. Interest received on investment at Bay Bank – R180.
  2. Cash sales for the month – R1 600.
  3. E Walllis, a creditor, was paid R120 on his account.
  4. Sold merchandise on credit to M May for R500.
  5. Rent paid – R100.
  6. Merchandise purchased on credit from E Wallis for R200.
  7. A cheque of R100 was sent to E Wallis in part-payment of his debt.
  8. M May returned merchandise, unfit for use, with a selling price of R50.

Which one of the following amounts represents the correct balance on the bank account in the general ledger of Heymans Limited at 31 October 2010, after the totals of the cash journals have been transferred? The favourable bank balance at 1 October 2010 amounted to R200.

  1. R1 460 Cr
  2. R1 710 Cr
  3. R1 660 Dr
  4. R2 160 Dr
  5. None of the above

ASSIGNMENT 1 (continued)

Question 17

The following information was extracted from the accounting records of Cord Limited on 28 February 2011:

Balance at 31 January 2011: Debtors control account Creditors control account Inventory account

Balances at 28 February 2011: Debtors control account Creditors control account Inventory account

Extract from the cash payments journal at 28 February 2011: Payments to creditors

Additional information:

  1. (a)  Gross profit mark-up is 20% on cost.
  2. (b)  Inventory is kept on the perpetual system.
  3. (c)  All purchases and sales take place on credit.

R 13 500

10 500 12 500

10 000 12 150 15 000

35 850

51 FAC1502/101/3

Which one of the following alternatives represents the correct combination of (i) credit sales and (ii) receipts from debtors during February 2011?

Receipts Credit sales from debtors

RR

  1. 35 000
  2. 42 000
  3. 65 000
  4. 42 000
  5. None of the above

38 500 16 340 68 500 45 500

52

ASSIGNMENT 1 (continued)
Question 18
The following account appeared in the debtor’s ledger of Kobie Importers:

Boutique Magda

2011 Jan 1 8 10 30 31Balance
Sales
Sales returns
Settlement discount granted Sales
b/d SJ SRJ CRJ SJR
4 000 3 300 300 150 2 400
2011 Jan 5 5 30Bank Bank BalanceCRJ CRJ c/dR
4 000 3 000 3 150
10 15010 150
31Balanceb/d3 150

The balance at 1 January 2011 were correct but various errors were made in writing up the above account:

The merchandise returned on 10 January was part of the sales on 8 January. According to the cash receipts journal a cheque for R2 850 was received on 30 January in settlement of the account of R3 000.

Which one of the following amounts reflects the correct debit balance of the account?

  1. R3 000
  2. R2 400
  3. R2 100
  4. R2 250
  5. None of the above

Question 19

The following information was taken from the accounting records of Vals Ltd at 30 April 2010 before any adjustments, or closing entries had been made:

Trade debtors
Allowance for credit losses (balance at 1 May 2009) Credit losses written off during the year

Additional information:

R 30 640

1 500 600

A further amount of R140 must be written off as credit losses. Allowance for credit losses is to be adjusted to 5% of the debtors.

ASSIGNMENT 1 (continued)

53 FAC1502/101/3

Which one of the following alternatives represents the net amount in respect of debtors to be disclosed on the statement of financial position of Vals Ltd at 30 April 2010?

  1. R30 500
  2. R29 000
  3. R28 975
  4. R28 405
  5. None of the above

Question 20

You are the accountant of Vetjan and Marjan (Pty) Ltd. The following information for March 2010 was obtained from the records before any adjustments were made:

Total sales for the month
Cash receipts from debtors
Settlement discount granted in respect of receipts from debtors during the

month

R 40 000 24 000

750

Additional information:

  1. (i)  The sales journal has been overcast by R1 000.
  2. (ii)  The cash sales for the month amounted to R9 000.
  3. (iii)  The debtors control account reflected a debit balance of R30 500 on 1 March 2010.
  4. (iv)  The card of a creditor with a debit balance was transferred to the debtor’s ledger. This person will in future be a debtor, R1 000.

Which one of the following alternatives represents the correct balance on the debtors control account at 31 March 2010?

  1. R35 750
  2. R36 750
  3. R38 250
  4. R38 750.
  5. None of the above

ANSWERS TO THE MULTIPLE CHOICE QUESTIONS

QuestionAnswer
1(4)
2(2)
3(1)
4(4)
5(4)
6(2)

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