Accounting Multiple Choice Question – 28 August 2017

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

Select ONE answer:

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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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Accounting Multiple Choice Question – 27 August 2017

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.

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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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Accounting Multiple Choice Question – 26 August 2017

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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Accounting Multiple Choice Question – 25 August 2017

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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Accounting Multiple Choice Question – 24 August 2017

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

Select ONE answer:

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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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Economics Multiple Choice Question – 23 August 2017

Following an increase in the price of Product Z by 7%, Product Y saw a decrease in demand by 5 %. Which of the following is true?

Select ONE answer:

  1. The cross elasticity of demand (XED) of Product Y is -0.71; Product Z and Y are complements
  2. The cross elasticity of demand (XED) of Product Y is +0.71; Product Z and Y are complements
  3. The cross elasticity of demand (XED) of Product Y is -1.4; Product Z and Y are substitutes
  4. The cross elasticity of demand (XED) of Product Y is +1.4; Product Z and Y are substitutes
  5. The cross elasticity of demand (XED) of Product Y is +0.71; Product Z and Y are substitutes

What is the definition of a substitute good in economics and give examples?
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 1 – Formula for Cross Elasticity of Demand EA, B = % increase in quantity demanded of A / % increase in price of product B i.e. -5% (decrease in Quantity demanded) / +7% (increase in price) = -0.71 which shows the products are complements. In economics, a complementary good or complement is a good with a negative cross elasticity of demand, in contrast to a substitute good. This means a good’s demand is increased when the price of another good is decreased. Conversely, the demand for a good is decreased when the price of another good is increased.

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Economics Multiple Choice Question – 22 August 2017

Which ONE of the following is an example of a government failure when attempting to correct a market failure?

Select ONE answer:

  1. Privatisation of railway networks
  2. Subsidies to firms to assist with regional unemployment
  3. Use of speed cameras to reduce road traffic accidents
  4. Use of education films to reduce the consumption of tobacco
  5. Shortage of available rental properties due to rent-cap legislation

Draw the supply and demand diagram which shows how government intervention fails to correct market failure.
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This is multiple choice question is suitable for Economics KS5 classes.

The answer is 5 – Government intervention to resolve market failures can also fail to achieve a socially efficient allocation of resources. Government failure is a situation where government intervention in the economy to correct a market failure creates inefficiency and leads to a misallocation of scarce resources.

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