Accounting Multiple Choice Question – 26 December 2019

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

Accounting

A firm records all transactions relating to the expense of both postage and stationery in a single ledger account.

At the beginning of a financial year. there is both a debit balance brought down of £50 and a credit balance brought down of £100 on the account.

Which of the following alternatives could explain this situation?

Select ONE answer:

  1. The firm has a stock of stationery worth £50.
  2. Postage is prepaid to the extent of £100.
  3. The firm has a stock of stationery worth £100.
  4. Postage payable amounts to £50.

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. Correct – In any ledger account, a debit balance brought down represents either an asset or an expense and a credit balance brought down represents either a liability or income. Since the balance on an expense account is either an accrual or a prepayment, the £50 balance has to be a prepayment (asset) and the £100 balance has to be an accrual (liability). This rules out options B (£100 asset), C (£100 asset) and D (£50 liability). When the stationery expense is prepaid, there is a stock of stationery remaining at the end of the year.
  2. Not correct
  3. Not correct
  4. Not correct

 

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.

Author: stuart001uk2014

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

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s