Accounting Multiple Choice Question – 1 May 2019

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

The correct way to record stock taken by the proprietor of a firm for his own personal use, without him paying for it, is?

Which of the following, on its own, could explain this?

Select ONE answer:

  1. Account to Debit – Drawings / Account to Credit – Sales
  2. Account to Debit – Drawings / Account to Credit – Stock
  3. Account to Debit – Sales / Account to Credit – Drawings
  4. Account to Debit – Drawings / Account to Credit – Purchases

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

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

This multiple choice question is suitable for Accounting KS5 classes.

The answer is 4

  1. Stock purchased and paid for by the proprietor is a sale whereas stock was taken by the proprietor, without him paying for it is drawings. A single amount of stock cannot represent both a sale and drawings.
  2. There isn’t a ledger account for stock.
  3. As for answer 1 above, except that in this case the possible entries are reversed.
  4. The term ‘purchases’ means the purchase of goods intended for, and available for, resale. Once goods which were purchased are taken by the proprietor, they are no longer available for resale. Therefore, the purchases figure should be reduced (credited) so that the balance remaining in the purchases account is the total of goods purchased which are available for sale (or were available and were subsequently sold).

 

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