Category: Accounting

In the case of a firm which rents the premises from which it operates, a credit balance brought down on its rent payable account at a particular date means that, at that date, …

Select ONE answer:

1. the firm owes rent.
2. the firm has paid rent in advance.
3. the firm has paid too much rent.
4. the firm has paid too little rent.

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

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

The answer is 1

1. Correct – A trial balance is a list of the balances brought down in the underlying ledger accounts. In a trial balance. credit balances represent income or liabilities whereas debit balances represent assets or expenses. In the case of rent payable, a credit balance represents a liability as rent payable cannot be income.
2. Not correct
3. Not correct
4. Not correct

 

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In the balance sheet of a sole trader, prepayments should be shown as . . .

Select ONE answer:

1. a deduction from capital.
2. part of creditors.
3. a deduction from current liabilities.
4. part of current assets.

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. Correct – Prepayments are amounts paid in advance in respect of expenses. As this means that the benefit of the money paid is yet to be received, prepayments are clearly an asset (a resource). As the advance payment normally covers no longer than the next 12 months, this asset is a current asset.

 

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In the balance sheet of a sole trader, accruals should be shown as part of . . .

Select ONE answer:

1. fixed assets.
2. drawings.
3. current assets.
4. current liabilities.

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. Correct – Current liabilities are amounts payable which are due to be discharged within one year. Accruals. being amounts owing in respect of expenses are normally due to be paid within one year. Therefore, accruals should be shown as part of current liabilities.

 

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Provision for discount allowed on outstanding debtors balances should be calculated, at an appropriate rate, on . . .

Select ONE answer:

1. total debtors net of any bad debts written off.
2. total debtors before the account is taken of bad debts.
3. total debtors less total creditors.
4. total debtors net of any bad debts written off and after deducting the cumulative amount of any provision for doubtful debts.

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. Correct – Cash discount (also known as settlement discount) is allowed only to those customers who pay their accounts on time. The total amount of debtors estimated to pay their accounts on time equals total debtors less bad debts (these customers already owe money for some time) less the provision for bad debts (an estimate of the amount currently owed by debtors which it is probable will never be received — let alone received in time to warrant a cash discount).

 

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When preparing financial statements, the bad debts account is ‘closed’ by a transfer to…

Select ONE answer:

1.  the balance sheet.
2. the profit and loss account.
3. the trading account.
4. the provision for bad debts account.

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. Correct – The purpose of the bad debts account is to accumulate the total of the bad debts written off during an accounting period. As writing off bad debts is an expense, this total must then be charged in the profit and loss account. In general, the difference between the two sides of an expense or revenue account is transferred to the profit and loss account – a balance is not carried down (and therefore not brought down) on these types of accounts. On the other hand, the difference between the two sides of an asset or liability account (balance sheet accounts) is the balance on that account – to be listed in the trial balance and subsequently shown in the balance sheet.
3. Not correct
4. Not correct

 

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