Accounting Multiple Choice Question – 30 November 2019

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

Which of the following is capital expenditure?

Select ONE answer:

  1. The cost of repairing a vehicle.
  2. The cost of acquiring a vehicle for re-sale.
  3. Proceeds arising from the sale of a van that had been used in the business to make deliveries to customers.
  4. The cost of a new vehicle acquired for continuing use in the business.

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. Not correct – The cost of repairing a vehicle is revenue expenditure.
  2. Not correct – The cost of acquiring a vehicle for re-sale (a purchase) is revenue expenditure.
  3. Not correct – Proceeds arising from the sale of a van that had been used in the business to make deliveries to customers is a capital receipt.
  4. Correct

 

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Accounting Multiple Choice Question – 29 November 2019

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

Capital expenditure is . . .

Select ONE answer:

  1. money brought into a firm by its proprietor.
  2. expenditure incurred to finance the day-to-day operations of a firm.
  3. expenditure incurred on the acquisition or improvement of fixed assets.
  4. None of the above.

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 3

  1. Not Correct – is capital (not capital expenditure).
  2. Not Correct – is revenue expenditure.
  3. Correct
  4. Not Correct

 

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Accounting Multiple Choice Question – 28 November 2019

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

All expenditure. when incurred. is shown either as a cost of sale or an expense in the profit and loss account or as a fixed asset in the balance sheet.

In deciding where to show the expenditure. which of the following is not relevant.

Select ONE answer:

  1. The improvement value, if any, of the expenditure.
  2. The likelihood of being able to recover the expenditure in future accounting periods.
  3. The date on which the expenditure was incurred.
  4. None of the above.

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 3

  1. Not Correct – If the expenditure does not have any improvement value, it is revenue expenditure and should be shown as an expense in the profit and loss account. Otherwise. it should be shown as a fixed asset in the balance sheet.
  2. Not Correct – if there is a doubt as to whether the expenditure can be recovered in future accounting periods then it must be charged as an expense in the profit and loss account (as only assets which provide benefits over a number of years are fixed assets).
  3. Correct
  4. Not Correct

 

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Accounting Multiple Choice Question – 27 November 2019

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

On 1 April 1991, a firm bought a machine for £420,000. On that date, the machine had an expected useful economic life of five years and an expected residual value of £20,000. On 1 April 1995, the firm spent £240,000 on a major refurbishment of the machine which extended its useful life by three years and revised its estimated residual value to £60,000.

If the firm uses the straight-line method of depreciation, the depreciation charge for this machine, to be included in the accounts for the year ended?

Select ONE answer:

  1. £65,000
  2. £70,000
  3. £80,000
  4. £93,333

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 2

  1. Not Correct
  2. Initial depreciation charge = (£420,000 – £20,000) / 5 = £80,000 p.a.
    Depreciation charge for the years ended 31 March 1992 – 31 March 1995 (4 years) : £80,000 * 4 = £320,000
    Net Book Value at 1 April 1995 before refurbishment = £420k – £320k = £100,000
    Revised annual depreciation = (£100k + £240k – £60k) / 4 = £70,000
  3. Not Correct
  4. Not Correct

 

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Accounting Multiple Choice Question – 26 November 2019

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

On 1 January 1993, a firm bought a machine for £4,200. At that date, the machine’s useful economic life was estimated to be seven years and its scrap value was estimated to be zero. On 1 January 1995, the machine’s useful economic life was re-estimated to be five years in total and its scrap value was re-estimated to be £300.

If the straight-line method of depreciation was used to depreciate the machine, the depreciation charged on it for 1995 was?

Select ONE answer:

  1. £540
  2. £780
  3. £840
  4. £900

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. Not Correct
  2. Not Correct
  3. Not Correct
  4. Initial annual depreciation — (£4,200 – £0) / 7 = £600 p.a.
    Depreciation from 1 January 1993 to 31 December 1994 (2 years) = £600 * 2 = £1,200
    Net Book Value (NBV) at 1 January 1995 = £4,200 – £1,200 = £3,000
    Revised annual depreciation = (£3,000 – £300) / 3 = £900 p.a.

 

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Accounting Multiple Choice Question – 25 November 2019

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

On 1 January 1993, a firm, whose financial year-end is 31 December, bought an item of plant for £10,000. Initially, it was decided to depreciate the plant for over ten years, using the straight-line method, assuming no residual value.

On 1 January 1995, it became apparent that the plant would last only another five years, over which period it would be used equally.

The depreciation charge for 1995 in respect of the above item was:

Select ONE answer:

  1. Loss of £2,000
  2. Loss of £3,000
  3. Loss of £3,500
  4. Profit of £4,000

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 3

  1. Not Correct
  2. Not Correct
  3. Initial annual depreciation = (£10,000 – £0) / 10 = £1,000 p.a.
    Aggregate depreciation to 31 December 1994 = £1,000 p.a. * 2 years = £2,000
    Net Book Value (NBV) at 1 January 1995 = £10,000 – £2,000 = £8,000
    Revised annual depreciation = £8,000 / 5 = £1,600 p.a.
  4. Not Correct

 

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Accounting Multiple Choice Question – 24 November 2019

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

On 31 August 1992 a firm bought a machine for £44,000. At that date, the estimated useful economic life of the machine was seven years and its estimated residual value was £2,000.

On 30 June 19% the firm sold the machine for £18,000. The firm’s accounting period—end is 31 December and its policy is to calculate depreciation using the straight line method, charging a full year’s depreciation in the year of acquisition and no depreciation in the year of disposal.

The profit earned. or the loss incurred, on the disposal of the machine was:

Select ONE answer:

  1. Loss of £2,000
  2. Loss of £3,000
  3. Loss of £3,500
  4. Profit of £4,000

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 1

  1. Annual depreciation charge = (£44,000 – £2,000) / 7 = £6,000
    Total depreciation charged = 4 years * £6,000 pa. = £24,000 (1996 = 0)
    NBV = Cost – Total depreciation = £44,000 – £24,000 = £20,000
    Profit or loss on sale = Proceeds – NBV = £18,000 – £20,000 = £2,000 loss
  2. Not Correct
  3. Not Correct
  4. Not Correct

 

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