The Multiple Choice Questions Blog

How will the recovery of a debt, previously written off, affect the profit, current assets and capital of a business?

Select ONE answer:

What is the definition of a bad debt?
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This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 3 – Recovery of a debt, previously written off, will reverse the original transaction which was Dr Profit Cr Current Assets, leading to a increase in retained profits.

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Bob, Michael, and Simon are proposing to set up a limited company with a share capital of £180 000. They will be the only shareholders and originally planned to invest in the share capital using Ratio 1 below. However, circumstances have changed and they have to use Ratio 2.

What difference will it make to Bob’s investment when Ratio 2 is chosen?

Select ONE answer:

1. Invests £21 000 less
2. Invests £21 000 more
3. Invests £24 000 less
4. Invests £24 000 more
5. Invests £30 000 more

Explain your answer
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This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 3 – In Ratio 1 the £180,000 is divided by 5 shares (1+2+2) which makes Bob’s investment = £36,000. In Ratio 2 the £180,000 is divided by 15 (2+9+4) which makes Bob’s investment now = £12,000 which means he will invest £24,000 less.

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The owner of a business has decided to create a provision for doubtful debts.

Which TWO accounting concepts are being applied?

Select ONE answer:

1. Accruals and going concern
2. Accruals and prudence
3. Consistency and business entity
4. Consistency and prudence
5. Prudence and business entity

What is the prudence concept?
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This is multiple choice question is suitable for Accounting KS5 classes.

The answer is 2 – The provision is a prudent one and an accrual to ensure it is booked in the right accounting period.

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The owner of a business paid for his family’s holiday from the business bank account and recorded the payment as drawings.  Which accounting concept is being applied?

Select ONE answer:

1. Accruals
2. Business entity
3. Going concern
4. Prudence
5. Consistency

The four fundamental concepts or rules of accounting that should be followed in the preparation of all accounts and financial statements are?

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

The answer is 2 – Business entity as this is a personal expense, not a company expense.

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A business has received a credit note. What entries should be made in the business’s ledger accounts?

Select ONE answer:

What is the definition of a credit note?
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This is multiple choice question is suitable for Accouting KS5 classes.

The answer is 3 – Reduction of trade payables on the balance sheet and a credit to the profit and loss account in the purchase returns account.

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