Accounting Multiple Choice Question – 19 November 2019

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

Accounting

Upon the disposal of a vehicle, the double-entry which a furniture retailer should make to record the receipt of the sale proceeds is:

Select ONE answer:

Account to Debit        Account to Credit

  1. Bank                                  Sales
  2. Vehicle disposals            Vehicle
  3. Bank                                  Vehicle disposals
  4. Vehicle                              Provision for depreciation

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. The disposal of a fixed asset is not a ‘sale’ and therefore should not be recorded in the sales account. Only sales of goods which were purchased with the intention of being re-sold should be recorded in the sales account.
  2. This is the double-entry required to transfer of cost of the vehicle being disposed of out of the vehicle account and into the vehicle disposal account.
  3. As money has been received, the bank balance will improve. Such an increase in an asset account requires a debit entry. The vehicle disposal account is used to calculate any profit or loss arising on the disposal. Therefore. the amount of the proceeds, clearly part of the calculation. must be recorded in that account – as a credit since the entry in the bank account is a debit.
  4. This is not the correct way to record any part of a fixed asset disposal.

 

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Author: stuart001uk2014

Referral marketing, business, economics and accounting s​pecialist & corporate mentor

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