Accounting Multiple Choice Question – 8 September 2018

When a manufacturing business has purchased raw materials on credit then the impact on its assets and / or liabilities is:

Select ONE answer:

1. Effect upon Assets – Decrease bank / Effect upon Liabilities – Decrease creditors
2. Effect upon Assets – Increase cash / Effect upon Liabilities – No impact
3. Effect upon Assets – Increase cash / Effect upon Liabilities – Decrease loan
4. Effect upon Assets – Increase stock / Effect upon Liabilities – Increase creditors

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 4 – As a result of the business buying raw materials it has increased its stock as it now has more raw materials than it previously had, and it now has more creditors than it previously had having brought the items on credit.

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