Accounting Multiple Choice Question – 20 September 2019

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

At the beginning of a VAT period, a firm which buys and sells exclusively on credit owed £2,000 to HMRC in respect of VAT.

Its credit sales and credit purchases for the period, inclusive of VAT at the rate of 20%, amounted to £72,000 and £48,000 respectively.

During the period the firm paid £3,000 to HMRC in respect of VAT.

What was the balance carried down on the firm‘s VAT account at the end of the period?

Select ONE answer:

  1. £3,000 Debit
  2. £3,000 Credit
  3. £3,400 Debit
  4. £3,900 Credit

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

VAT on sales = £72,000/ 120 * 20 = £12,000
VAT on purchases = £48,000/ 120 * 20 = £8,000

VAT balance b/d (credit entry) = £2000
VAT on Sales (credit entry) = £12,000
Total Credit entries = £14,000

VAT on purchases (debit entry) = £8,000
Bank payment to HMRC (debit entry) = £3,000
VAT balance c/d (debit entry) = £3,000
Total debit entries = £14,000

  1. Correct
  2. Incorrect
  3. Incorrect
  4. Incorrect

 

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Accounting Multiple Choice Question – 19 September 2019

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

A debit balance brought down on the VAT account in a firm’s nominal (general) ledger represents …

Select ONE answer:

  1. an expense.
  2. The VAT payable to HMRC.
  3. irrecoverable VAT.
  4. VAT recoverable from HMRC.

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. Incorrect – A debit balance on any nominal (general) ledger account can represent only either an asset or an expense. If VAT incurred was an expense, for example, in the case of an unregistered firm or a firm dealing exclusively in goods and/or services which are exempt from VAT, the amount of such expense would not be entered in the VAT account.
  2. Incorrect – A debit balance brought down cannot represent a liability.
  3. Incorrect – As for answer A above.
  4. Correct

 

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Accounting Multiple Choice Question – 18 September 2019

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

If, for any given accounting period, the total of the debit entries in a firm’s VAT account equals that of the credit entries, thus leaving no balance on the account at the end of the period . . .

Select ONE answer:

  1. the firm is not a VAT-registered firm.
  2. the firm deals exclusively in goods and/or services which are exempt from VAT.
  3. the firm does not owe any VAT to the HMRC on that date.
  4. None of the above.

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. Incorrect – An unregistered firm would not have a VAT account in its ledger.
  2. Incorrect – A firm dealing exclusively in goods and/or services which are exempt from VAT would not have a VAT account in its ledger.
  3. Correct
  4. Incorrect

 

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Accounting Multiple Choice Question – 17 September 2019

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

A firm, which is registered for VAT, purchased plant and machinery costing £12,100 (including recoverable VAT at the rate of 21%) on credit.

The figures that will be shown in the balance sheet in relation to this transaction are …

Select ONE answer:

   Plant & Machinery            VAT                Creditors

  1. £12,100                                 –                      £12,100 Cr.
  2. £9,680                                  £2,420 Dr.      £12,100 Cr.
  3. £10,000                                £2,100 Dr.      £12,100 Cr.
  4. £10,000                                –                       £12,100 Cr.

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. Incorrect
  2. Incorrect
  3. Correct – Fixed assets should be shown in the balance sheet net of recoverable VAT. Debtors and creditors are always shown inclusive of VAT. There must be a debit entry in the VAT account to reflect the fact that there is VAT recoverable from HMRC.
  4. Incorrect

 

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Accounting Multiple Choice Question – 16 September 2019

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

The payment by a firm of its VAT liability for a taxable period should initially be recorded in its …

Select ONE answer:

  1. journal.
  2. cash book (or cheque payments book).
  3. sales daybook.
  4. None of the above.

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. Incorrect
  2. Correct – All cash/cheque payments, irrespective of what the payment relates to, are initially recorded in the cash book (or cheque payments book).
  3. Incorrect
  4. Incorrect

 

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Accounting Multiple Choice Question – 15 September 2019

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

During an accounting period, a VAT-registered firm incurred advertising expenditure totalling £12,500, including VAT at the rate of 25%.

The charge for advertising which should be shown in the firm’s profit and loss account for the same period is …

Select ONE answer:

  1. £9,375
  2. £10,000
  3. £15,000
  4. £15,625

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. Incorrect
  2. Correct – In cases where VAT is recoverable, expenses should be shown in the profit and loss account net of VAT. Therefore, the amount of the expense which should be shown in this case is £12,500/ 125 * 100 = £10,000. (£10,000 + 25% = £12,500).
  3. Incorrect
  4. Incorrect

 

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Accounting Multiple Choice Question – 14 September 2019

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

The irrecoverable VAT on the purchase of fixed assets should be . . .

Select ONE answer:

  1. shown as an expense in the profit and loss account for the period in’ which the asset is purchased.
  2. shown as part of the cost of fixed assets in the balance sheet.
  3. deducted from any VAT payable on sales.
  4. None of the above.

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. Incorrect – The only irrecoverable VAT which should be shown as an expense in the profit and loss account for a period is irrecoverable VAT relating to expenses incurred during that period.
  2. Correct
  3. Incorrect – Irrecoverable VAT cannot be offset against any VAT payable on sales.
  4. Incorrect

 

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