ACCOUNTING

REVISION PAPER 04 - ADVANCED LEVEL 2021

NAME-
………………………………………………….. TIME-1 HOUR

Part 01
 Underline the most suitable answer.
1) Which of the following statements is incorrect in relation to the double entry system?
a) The double entry system provides basis for accounting equation.
b) It is the method of posting transactions to the ledger.
c) The fundamental rule is that for every debit entry there should be a credit entry.
d) It helps to assure the arithmetic accuracy of the transactions posted to the ledger.
e) It ensures that all transactions have been correctly recorded in the ledger.

2) Which of the following is not recorded in the general journal.

a) Error correction entries.
b) Adjusting entries at the end of the financial year.
c) Opening entries of a new accounting period.
d) Exchange of noncurrent assets on credit.
e) Disposal of property, plant and equipment on cash.

3) The source document and the prime entry book to record sales returns are:
a) Debit note and sales journal
b) Credit note and sales journal
c) Debit note and return inwards journal
d) Credit note and sales return journal
e) Journal voucher and general journal

4) What is the underlying assumption of financial statements according to the framework for
financial reporting?
a) Entity
b) Going concern
c) Periodicity
d) Accrual
e) Money measurement

5) What is not an enhancing qualitative characteristic from the following?

a) Comparability
b) Relevance
c) Timeliness
d) Verifiability

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 e) Understandability
6) Which of the following accounting concepts provides the basis for not recognizing managerial
skills of the directors of a company in the financial statements?
a) Entity
b) Accrual
c) Going concern
d) Money measurement
e) Periodicity

7) What is the concept that is most applicable in the following situation of “adjustments for
inflation are not made in financial statements of a company”?
a) Going concern
b) Historical cost
c) Matching
d) Prudence
e) Realization

8) The bank overdraft of a business was settled from the personal funds of the owners. How
would this transaction affect the accounting equation of a business?
a) Increase both assets and equity
b) Increase liabilities and decrease equity
c) Decrease liabilities and increase equity
d) Decrease both assets and liabilities
e) Decrease both assets and equity

9) Which information about a business entity is mostly interested by trade creditors from the list
given below?
a) Annual dividend
b) Profit for the year
c) Ability pay debts as they fall due
d) Ability to recognize the business entity
e) Revaluation surplus

10) A business purchased goods worth of Rs.15 000 on credit basis subject to a 20% trade
discount. Subsequently it received a 10% cash discount at the settlement. The value at which
the transaction is recorded in the purchase account is:
a) Rs.10 500
b) Rs.10 800
c) Rs.12 000
d) Rs.13 500
e) Rs.15 000

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11) Use the Description Rs.’000 following
information to
answer the Sales 7000 given questions.
Interest earned 500
Gain on sale of a motor vehicle 400
Interest expenses 700
Operating expenses 1800
Cost of sales 2100
Drawings of goods 300

I. The total income to be recognized by the business for the year ending
31/03/2020.
a) Rs.7000 000
b) Rs.7500 000
c) Rs.7900 000
d) Rs.8200 000
e) Rs.8500 000

II. The total expense to be recognized by the business for the year ending
31/03/2020.
a) Rs.2500 000
b) Rs.2800 000
c) Rs.3900 000
d) Rs.4600 000
e) Rs.4900 000

12) Which of the following are the characteristics of assets as per conceptual framework
of accounting?
A. It is a resource controlled by the firm
B. Future economic benefits are expected to flow to the firm
C. Its cost or value can be measured reliably
D. As a result of past transaction or event
a) B only
b) A and B only
c) A, B and C only
d) A, B and D only

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 e) All A B C D

 Write suitable answers for the following.

1) State the appropriate classification for the following accounts maintained in the
general ledger.
a) Trade Receivable - Asset
b) Return Inward - Expense
c) Depreciation - Expense.
d) Trade Payable - Liability
e) Sales Advance - Liability
f) Bad Debts - Expense
g) Provision For Depreciation - Asset
h) Return Outward - Income
i) Discount Received - Income
j) Bank Overdraft - Liability

2) Rs.80 000 from a debtor was accepted as the full settlement of Rs.100 000. Write the
journal entry including cash to record this transaction.
Cash account Dr 80 000
Discount allowed Dr 20 000
Debtor / trade receivable Cr 100 000

3) State the double entry for reimbursement of petty cash.

Petty cash account Dr
Cash account Cr

4) During the year the assets of a sole trader increased by Rs.400 000 and the liabilities
increased by Rs.50 000. If the profit for this year was Rs.250 000, how much additional
capital was introduced by the owner?
Rs.100 000

5) Use the following information to answer the given questions.

Manisha has commenced a business on 01/04/2019 investing Rs.500 000 cash.

During the year, Manisha provided a Rs.200 000 worth of photocopier for the
business and withdraw Rs.50 000 from the business as drawings. The business
earned profit of Rs.120 000during the year ending 31/03/2020.

i. What is the net assets of the business as at 31/03/2020?

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 Rs.770 000(500 000+200 000-50 000+120 000)
ii. State two items that contribute to increase in equity of the business of Manisha as
at 31/03/2020.
Investing Rs.500 000 cash
Providing a Rs.200 000 worth of photocopier

6) State two situations where there can be a credit balance in a personal account of a
customer maintained in the subsidiary ledger.
Over payments made by them
Sales return after full payments
Not recording of discount allowed

7) Write the purpose of the following.

a) Statement of profit or loss
To calculate net profit or loss for the accounting period
b) Statement of financial position
To calculate operational results
8) Use the following information to answer the given questions.

Rs.
List price of a credit sales 4 000 000
invoice
Trade discount 20%
Value added tax 10%
Cash discount 10%
Cost of this stock 2 500 000

I. Calculate the amount of trade discount.

4 000 000*20/100= Rs.800 000
II. Calculate the amount to be recorded in the sales account.
4 000 000-800 000= Rs.3 200 000
III. Calculate the amount of VAT.
3 200 000 *10/100 =320 000
IV. Calculate the total amount to be recorded in the debtors account.
3200 000+320 000=3520 000

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 V. Calculate the amount of cash discount.
3520 000*10/100=352 000

VI. Calculate the amount of cash received.

3520 000-352 000=3168 000
VII. Calculate the gross profit.
3200 000-2500 000=700 000
VIII. Calculate the net profit.
700 000-352 000=348 000

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