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Accounting - Test 1


1. The liability arising from the purchase of goods or services on credit is called:
A. Creditors
B. Accounts payable
C. Loan
D. Accounts receivable


2. The basic purpose of preparing a trial balance is:
A. To find out the profit of the business
B. To show the financial position of the business
C. To test the arithmetical accuracy of the ledger
D. To calculate the net purchases of the business


3. Drawings of proprietors are:
A. Debited to income summary
B. Credited to income summary
C. Debited to capital account
D. Debited to partner's current account


4. A document prepared to authorize and describe an expenditure is termed:
A. Cash memo
B. Voucher
C. Bill
D. Debit


5. A non-cash investment by a partner is recorded in the books:
A. At the market value
B. At the value purchased by the investing partner
C. At an agreed value between the partners
D. At the depreciated value


6. Which of the following financial statements is generally prepared first?
A. Income statement
B. Balance sheet
C. Statement of retained earnings
D. Statement of cash flows


7. Which of the following accounts would NOT be reported in the income statement as an expense?
A. Depreciation expense
B. Income tax expense
C. Interest expense
D. Dividend expense


8. According to IAS-7, a bank overdraft is shown in:
A. Cash flow statement
B. Bank statement
C. Income statement
D. Retained earnings


9. Accounts receivable are considered as:
A. Income
B. Deferred receipts
C. Current assets
D. Fixed assets


10. Which of the following should be accounted for as capital expenditure?
A. The annual cost of painting a factory floor.
B. The repair of the window in a building.
C. The purchase of a vehicle by a garage for re-sale.
D. Legal fees incurred on the purchase of a building.






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