cee PRACTICE MULTIPLE CHOICE QUESTIONS CSEC Principles rod Nace ar i BS uae Lee Celtel cee Carl Herrera, Kirk PhilipCo. \e Kad minded ond SRARE ans book Low your fyrends) scnool teacineG Class, even yO Side Man, Side gyal and is Friend. lor dse Jumbbee geingto L wish allu do best. IWilliam Collins’ dream of knowledge for all began with the publication of his first book in 1819. A self-educated mill worker, he not only enriched millions of lives. but also founded a flourishing publishing house Today, staying true to this spirit, Collins books are packed with inspiration, innovation and practical expertise. They place you at the centre of a world of possibility and give you exactly what you need to explore it. Collins. Freedom to teach, Published by Collins ‘An imprint of HarperCollinsPublshers The News Building | London Bridge Street London SEI 9GF Browse the complete Collins Caribbean catalogue at www.collins.co.uk/caribbeanschools © HarperCollinsPublishers Limited 2018 10987654321 ISBN 978-0-00-826040-8 Practice Multiple Choice Questions: CSEC® Principles of Accounts is an independent publication and has not been authorised, sponsored or otherwise approved by CXC". CSEC® is a registered trademark of the Caribbean Examinations Council (CXC°). All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted)in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the Publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyri Licensing Agency Ltd., Barnard’s Inn, 86 Fetter Lane, London, EC4A IEN. British Library Cataloguing in Publication Data A catalogue record for this publication is available from the British Library. ‘The publishers gratefully acknowledge the permission granted to reproduce the copyright material in this book. E effort has been made to trace copyright holders and to obtain their permission for the use of copyright material. The publishers will gladly receive any information enabling them to rectify any error or omission at the first opportunity. ‘Authors: Lystra Stephens-James, Dyan Barras, Carl Herrera, Kirk Philip Publisher: Eline Higgleton ‘Commissioning editor:Tom Hardy Inchouse project lead: Caroline Green Project manager: Alissa McWhinnie, QBS Learning Copy editor: Stephen Cashmore Proofreader: Alta Bridges [ 5 Mix ‘Answer checker: Kay Hawkins Paper trom Production controller:Tina Paul ESC, Sean a iMustrator: QBS Leat ‘emkems | FSC™ COO7454 ‘Typesetter: QBS Learning This book is produce from independently centfed FSC™ pap Cover designers: Kevin Robbins and Gordon MacGilp to ensure responsible forest management Printed and bound by Grafica Veneta, SpA, Italy For more information visit: www harpercolins.co.uk/greenContents Introduction .. 1 Accounting as a profession ll 12 13 14 Concept, principles and purpose of accounting ... The users of accounting information .. Traditional and emerging careers in the field of accounting Ethical issues in the field of accounting ‘Accounting as a system ai. 2.2 23 24 25 2.6 27 28 29 Concepts and conventions The accounting cycle Business organisations ..... The financial statements of business organisations Role and impact of technology .. Concept ofa balance sheet . Components of a balance sheet ‘Types of assets and liabilities Construction of a balance sheet ... 2.10 Changes in the balance sheet Books of original entry 3.1 3.2 3.3 3.5 3.6 37 3.8 3.9 Using books of original entry Cash and credit transactions Source documents related to books of original entry .. Translation of source documents into transactions .. Using source documents to complete books of original entry Trade and cash discounts ... Discounts allowed and discounts received . Balancing cash books . 3.10 Interpreting cash book balances 3.11 Treatment of totals from books of original entry .41 4.2 43 44 45 46 47 48 49 5.1 5.2 5.3 54 5.5 5.6 ‘5.7 5.8 59 61 63 6.4 65 6.6 67 68 69 6.10 6.11 6.12 6.13 Ledgers and trial balance 5 The preparation and analysis of financial statements of a sole trader 6 Accounting adjustments Different classes of accounts .. Different types of ledger . Significance of debit and credit in each type of account .. Draw up simple accounts Posting from books of original entry to ledger accounts .. Balancing and closing accounts ... Interpreting entries and balances Using balances brought down to construct the trial balance ‘The uses and limitations of the trial balance .. Purpose of preparing financial statements .. Components of financial statements Income statement for sole traders Classified balance sheet Working capital Performance ratios . Calculating ratios .... The effects of net profit or loss on capital .... Making recommendations based on ratio analysis .. Accounting concepts underpinning adjustments Journal entries and ledger accounts reflecting adjustments Bad debts .. es Journal entries and ledger accounts for bad and doubtful debts . Bad and doubtful debts in the income statement and balance sheet .. Depreciation ; Straight and reducing methods of calculating depreciation .. Journal entries and ledger accounts for depreciation .. Capital and revenue expenditure Transferring revenues or expenses to the income statement... Preparing income statements to reflect adjustments .. Preparing financial statements after adjustments, iv7 Control systems 7.1 Uses of control systems in the accounting process . 7.2 Commonly used control systems in the accounting process 7.3 Errors which affect and those which do not affect the trial balance 74 — Journal entries for the correction of errors 7.5 Uses of the suspense account .. 7.6 Constructing suspense accounts ... 7.7 Effects of errors on the income statement and balance sheet 7.8 Uses of control accounts ... 7.9 — Sources of information for entries in control accounts .. 7.10 Sales ledger and purchases ledger control accounts 7.11 Balances on control accounts 7.12 Items that will result in differences between cash book and bank statement balances 7.13 Bank reconciliation statement Accounting for partnerships 8.1 Definition of a partnership . 8.2 Features of a partnership 8.3 Reasons for forming a partnership 8.4 Components of a partnership agreement 8.5 The capital account of partners ... 8.6 Methods of sharing profit or loss ... 8.7 The appropriation account 8.8 The current account 8.9 Debit and credit balances on the current account 8.10 Treatment of current account balances in the balance sheet .. Accounting for limited liability companies, co-operatives and non-profit organisations 9.1 Features and principles of limited liability companies, cooperatives and non-profit organisations .., 9.2 Types of limited liability companies, co-operatives and non-profit organisations 9.3 Advantages and disadvantages of limited liability company . 9.4 Methods of raising capital .10 iL 95 9.6 98 99 9.10 9.1 ‘Manufacturing and inventory control 10.1 10.2 10.3 10.4 10.5 10.6 10.7 Accounting for the entrepreneur ul 2 113 4 1S 11.6 17 18 19 ‘Types of shares .. . Journal entries to record the issue of shares and debentures Appropriation of profits between dividends and reserves Final accounts of limited liability companies and co-operatives Calculation and interpretation of accounting ratios .... Preparation of receipts and payment accounts for non-profit organisations ...... Elements of cost Preparation of manufacturing accounts Calculation of unit cost of items produced Preparation of final accounts for a manufacturing concern Basic costing principles Methods of inventory valuation Calculation of the value of closing inventory .... Methods of payment ... Source documents of the payroll... Preparation of payroll and wage documents Main accounting software used for payroll Statutory and voluntary/non-statutory deductions Calculation of employees’ earnings Preparation of simple cash flow projection and outflow . Preparation of simple sales and production budgets .. Preparation of a simple business planIntroduction Structure of the CSEC’ Principles of Accounts Paper 1 Examination There are 327 questions in the examination. The duration of each examination is 1% hours. The papers are worth 30% of your final examination mark. The Paper 1 examination test the following core areas of the syllabus. Section ‘Number of Questions |. Accounting as a profession 16 ._ Accounting as a system 26 Books of original entry 30 ._ Ledgers and the trial balance 35 . The preparation and analysis of financial statements of the sole- 37 trader . Accounting adjustments 35 Control systems 25 . Accounting for partnerships 25 1. Accounting for limited liability companies, co-operatives and 50 non-profit organisations 10. Manufacturing and inventory control 20 Ll, Accounting for the entrepreneur 28 Total Questions 327 Each question is allocated 1 mark. You will not lose a mark if a question is answered incorrectly. Examination Tips General strategies for answering multiple choice questions: + Read every word of each question very carefully and make sure you understand exactly what it is asking. Even if you think that the question appears simple or straightforward there may be important information you could easily omit. When faced with a question that seems unfamiliar, re-read it very carefully, Underline or circle the key pieces of information provided. Re-read it again if necessary to make sure you are very clear as to what it is asking and that you are not misinterpreting it. Each question has four options, A, B, Cand D, and only one is the correct answer. Look at all the options very carefully as the differences between them may be very subtle; never stop when you come across an option you think is the one required. Cross out options that you know are incorrect for certain. There may be two options that appear very similar; identify the difference between the two so you can select the correct answer.You have approximately 14 minutes per question. Some questions can be answered in less ti while other questions may require longer because of the reasoning or calculation involved. Do. not spend too long on any one question. Ifa question appears difficult place a mark, such as an asterisk, on your answer sheet alongside) the question number and return to it when you have finished answering all the other questiot Answer every question. Marks are not deducted for incorrect answers. Therefore, it is in your best interest to make an educated guess in instances where you do not know the answer. Never leave a question unanswered. ‘Always ensure that you are shading the correct question number on your answer sheet. It is ver easy to make a mistake, especially if you plan on returning to skipped questions. Some questions may ask which of the options is NOT correct or is INCORRECT. Pay close attention to this because itis easy to fail to see the words NOT or INCORRECT and answer question incorrectly. Some questions may give two or more answers that could be correct and you are asked to deter which is the BEST or MOST LIKELY. You must consider each answer very carefully before making. yur choice because the differences between them may be very subtle. When a question gives three answers numbered I, II, IIT, one or more of these answers may be correct. You will then be given four combinations as options, for example: (A) Tonly — (B) Tand 1 (©) Land forMandIM ~—(D) I, and IT Place a tick by all the answers that you think are correct before you decide on the final correct combination. Do not make any assumptions about your choice of options; just because two answers in succession have been C, it does not mean that the next one cannot be Cas well. Phrases or options may be provided to match scenarios that may relate to more than one question, Place a tick by all answers you think are correct before you decide on the final option for each question. Be Try to leave time at the end of the examination to check over your answers, but never change answer until you have thought about it again very carefully. If your country has already adopted doing CXC® multiple choice questions online, please reme to scroll back to incomplete questions and ensure that you have clicked on the correct answer. Strategies for the CSEC® Principles of Accounts Paper 1: A silent, non-programmable calculator is allowed in the examination. You are required to car your own calculator. Since different brands of calculators have unique features itis advisable to take a calculator you are familiar with. Be careful and accurate when performing calculations, It is very easy to make an error and the ‘may be an incorrect option similar to your calculation. For questions requiring you to perform a calculation, work out the answer before you look at the four options. Do this by writing your working on the question paper. If you do not find your answer in the options, you can then go back and recheck your working for mistakes, Keep track of all units during calculations. The final unit in the result is a good clue if the calculation was done correctly. Some questions are accompanied by diagrams, graphs, table or prose. Read and inspect these carefully and use them to derive the best option for the question. You may make your own sketches to help you answer the questions. viiiSection 1: Accounting as a profession 1.1 Concept, principles and purpose of accounting @ Accounting is (A) recording anything that happens in a business. (B) recording the transactions of a business. (© recording, analysing and interpreting the business’ transactions. (D) recording, summarising, analysing and interpreting the business’ transactions. © The recording of the transactions in the accounting books of a business is called (A) accounting. (B) book-keeping. (©) liabilities. (D) resources. © The purposes of preparing accounting documents and financial statements are to I show information of the resources of a business. II show who has claims on the business’ resources. IIT help users of financial information make decisions about the business. (A) Tand II (B) Land III (© Mand it (D) I, Hand Tit ©Oe&® iu ©Oe@® ©OG®— 1.2 The users of accounting information © Which lists represents both internal and external users of financial statements? (A) Banks, government and investors (B) Creditors, government and managers (© Creditors, banks and investors (D) Suppliers, investors and banks © Which accounting user is correctly matched with its need? (A) Banker - to determine taxes to charge the business (B) Government - to find out if the business can repay a loan (© Supplier - to find out if he should invest capital in the business (D) Owner - to determine the profit of the business over the financial period @© Which of the following statements is NOT a need of a user of accounting informati (A) To determine whether to invest further (B) To determine the profitability of the business (C) To find out the number of owners in the business (D) To add to the country’s Gross Domestic Product (GDP) 1.3 Traditional and emerging careers in the field of accounting @ Woy is accounting necessary in an organisation? (A) Itis required by law (B) To help the government (© To report on financial data (D) To have enough employeeswWowre © bn which of the following industries can people who are trained and skilled in accounting be employed? I Banking II Insurance III Construction (A) Tand II (B) Land IIT (© Mand I (D) I, Wand IT 1.4 Ethical issues in the field of accounting © Maclon Bttienne prepared the financial statement for BrowniTown Hardware. He is of the view that the statements should show more information about the transactions that are important to the owners than simply following accounting principles. His view is against the ethical principle in accounting of (A) integrity. (B) objectivity. (© confidentiality. (D) professional competence. © Gordon Corbin, the manager of See Sea Hotel, fired his accountant, He then promoted his niece, Janet Cain, the bartender, who has no accounting training or experience, as the accountant. Which of the following does Janet lack? (A) Integrity (B) Objectivity (© Confidentiality ©OoG® (D) Professional competence| @ Salina is newly employed as a clerk in the accounts department of Zanny Stores. Shi shared with her friend, the messenger, the alances in the three bank accounts of tl business. Which ethical principle in accounting has she breached? (A) Integrity (B) Objectivity (© Confidentiality (D) Professional competence @ Allan Piper prepared a cheque for $100 (000 in his name and forged signatures on t! cheque, Which of the following has Allan displayed a lack of (A) Integrity (B) Objectivity (© Confidentiality (D) Professional competence @ John Dough, the accountant, does not lock unused cheques away securely; leaves cheques on his desk incomplete and accessible by other employees, and prepares reports two months after the month has passed. ‘Which of the following describes John’s behaviour? (A) Lack of objectivity (B) Lack of confidentiality (© Unprofessional behaviour (D) Unprofessional competence @® Applying accounting principles appropriately leads to I no errors being recorded in the information. II correct calculation of financial information. IIT the true nature of the transaction being reported. (A) Land II (B) Land Ill (© Mand Ill (D) L, Mand IIT@ A cashier at a leading private high school, responsible for collecting school fees from students, uses the fees from time to time to loan to employees, charging the employees 10% of the loan. The cashier hopes the employees repay quickly so that the missing fands will not be noticed. Some of the employees have not been repaying the loans and the manager has now asked the cashier to account for the shortages in the cash, Which ofthe following has the cashier been committing? (A) Fraud ® (B) Tax evasion (© Theft © (D) Errors © @ Anemployee that commits fraud or practices any other inappropriate application of accounting principles, may be I fired. II fined. III imprisoned. (A) Land I (B) Land IIT © Mand WT (D) Wand I Section 2: Accounting as a system 2. Concepts and conventions NU ©0808 @ Which of the following ensures that accountants use the same principles and methods of recording from year to year within a company? (A) Accrual ® (B) Prudence (© Consistency © (D) Separate entity ©@© A business which switches its stock valuation method regularly is violating the accounting principle of (A) double entry. (B) consistency. (C) business entity. (D) prudence. oa 2.2 The accounting cycle © Which of the following stages of the accounting cycle is, correct? (A) Journalising, posting to the ledger, trial balance, financial statements (B) Posting to the ledger, journalising, trial balance, financial statements (© Posting to the ledger, trial balance, financial statement, journalising (D) Trial balance, financial statements, posting to the ledger, journalising —, 2.3 Business organisations ; © Which ofthe following are business organisations formed by members? I Cooperatives II Non-profit organisations III Partnerships (ay (B) I (©) land (D) Land IIT© BLT Limited’s Board raised its funds through the stock exchange. Which of the following is this activity a feature of? (A) Partnership (B) Non-trading organisation (C) Corporation (D) Cooperative Society Limited mane 2.4 The financial statements of business organisations @ In which of the following are a sole trader's profits and losses recorded? (A) Income Statement (B) Income and Expenditure Account (C) Balance Sheet (D) Cash Flow Statement @ Which of the following are financial reports of a Cooperative Society Limited? I Income and Expenditure Account II Balance Sheet III Income Statement (A) Tand IT (B) Tand III (©) Mand Il (D) I, Hand III © Which of the following statements reports on a business’ cash receipts and cash payments for a specified period? (A) Income Statement (B) Income and Expenditure (C) Balance Sheet (D) Cash Flow Statement QO@OCG® ©Oe&® ©OG® (ONGRORG)—- 2.5 Role and impact of technology © Which of the following is NOT an advantage of a computerised accounting system? 1 instructions prepared by people. II packages embedded in programs. (A) High installation and security costs III devices stored in the hardware of a computer. (A)T « (B) Greater storage of accounting information (C) Less time spent in accessing and retrieving data (D) Quicker access to accounting information and financial reports © Computer software can be described as (B) TI (©) Land 1 (D) Land 11 @ Which of the following accounting processes would MOST LIKELY NOT be used i computerised accounting system? (A) Payroll (B) Inventory control (© Receivable schedule (D) Signing of cheques2.6 Concept of a balance sheet Item 12 refers to Kaleb’s assets and liabilities, shown in the table. Cash in hand ‘Accounts payable 2500 Bank overdraft 3000 ‘Accounts receivable 5000 Premises 70000 Cash at bank 5000 @ Kaleb’s capital amount is (A) $75000 (B) $80500 (C) $81000 (D) $86000 @ itis the end of Tiffany's financial year. She had total assets of $5000 and capital of / $3600. How much were her liabilities? (A) $1400 (B) $3600 (©) $5000 () $8600 ©oOo©®2.7 Components of a balance sheet @® Under which of the following would Cash be classified in a Balance Sheet? (A) Current Assets (B) Current Liabilities (©) Non-current Assets (D) Non-current Liabilities © Under which of the following headings would Accounts Receivable be entered in t Balance Sheet? (A) Capital (B) Fixed Assets (© Current Assets (D) Current Liabilities @® Which of the following would be entered in the liabilities section of the Balance $I (A) Capital, accounts payable, cash ; (B) Cash, cash at bank, accounts payable (© Accounts payable, bank overdraft, loan (D) Capital, cash, accounts payable @ Resources owned by the business are known as (A) assets. (B) capital. (© expenses. (D) liabilities. 10@® Mortgage and a five-year bank loan are classified in the Balance Sheet as (A) current assets. (B) current liabilities. (C) non-current assets. (D) non-current liabilities. 2.8 Types of assets and liabilities Items 19 and 20 refer to the following balance sheet. Land Furniture Motor vehicles Machinery Inventory Accounts receivable Cash at bank Cash in hand po Capital Atstart 100000 ‘Add net profit: 28000 128000 Less drawings: 8000) 120000 Liabilities Creditors 3000 Bank overdraft 8000 131000© The value of the total current assets is (A) $16000 (B) $21000 (©) $110000 (D) $115000 ©® The total value of the non-current assets (fixed assets) is (A) $ 16000 (B) $115000 (© $120000 (D) $131000 @® Which of the following is a typical example of a non-current (long-term) liability? (A) Mortgage (B) Accounts payable (©) Accounts receivable (D) Factory building — 2.9 Construction of a balance sheet ® Which group of assets below is recorded in the ‘Order of Permanence’? (A) Cash, bank, accounts receivable, inventory (B) Accounts receivable, cash, bank, inventory (©) Inventory, bank, accounts receivable, cash (D) Inventory, accounts receivable, bank, cash© The following lists of assets were found in Ashley's Balance Sheet. If they were to be arranged in the ‘Order of Liquidity’, the sequence would be (A) building, land, cash, bank. (B) bank, cash, building, land. (© cash, bank, building, land. (D) land, bank, building, cash. Items 24 and 25 refer to the following Balance Sheet information. Balance Sheet as at 1 Januai Salim Inventory 6000 ‘Accounts Receivable q Cash at Bank 3000 | 11000 "11000 aif 9000 Capital 2000 1.000 @ What sum of money is represented by I above? (A) $2000 (B) $4000 (© $11000 (D) $16000 © Which of the following BEST describe II above? (A) Total Assets (B) Total Capital (©) Total Expenses (D) Total Liabilities ©C@O® ®©@Oe&® ORORORS)| — 2.10 Changes in the balance sheet @ How would the purchase of buildings on credit affect a firm’s Balance Sheet? (A) Increase assets; decrease liabilities (B) Decrease assets; decrease liabilities (©) Increase assets; increase liabilities (D) Decrease assets; increase liabilities Section 3: Books of original entry 3.1 Using books of original entry @ Keri Walters, a sole trader, sold an old computer no longer suited to her business credit. In which journal should Keri record her transaction? (A) General Journal + B) Sales Journal (©) Sales Returns Journal (D) Petty Cash Book © Which of the following are entries made in the Purchases Journal? I Bought goods on credit Il Vehicle purchased on credit I Goods bought on credit that have been undercharged (A) Tonly (B) Land I only © Iand If only (D) Iand Ill only© The total of inventory sent back by credit customers is recorded in which book? | } (A) Sales Day Book > (B) Purchases Day Book (C) Sales Returns Day Book “ (D) Purchases Returns Day Book © he total value of goods sent back to credit suppliers is recorded in which book? (A) Sales Day Book (B) Purchases Day Book (©) Sales Returns Day Book (D) Purchases Returns Day Book » ®O@Oe® ©OO® 3.2 Cash and credit transactions © In which book of original entry should the business record a cheque sent to N. Rampersad for goods purchased? (A) Purchases Day Book (B) Sales Day Book (C) General Journal (D) Cash Book - e Which of the following transactions should be debited in the Cash Book? (A) Payment received from debtors (B) Goods sold on credit (©) Payment made for goods purchased (D) Goods bought for cash ©OG©® ©OoL®3.3 Source documents related to books of original entry @ Arfer a business sold goods on credit to Ann Wilson it was discovered that she undercharged. Which of the following documents should be issued to her? (A) Invoice (B) Credit note (© Debit note (D) Advice note © Deiails from which of the following are used to prepare the Petty Cash Book? (A) Vouchers (B) Cheques © Invoices (D) Receipts Items 9 and 10 refer to the following information. Philip Leslie, a customer, returned some goods previously purchased. They were the wrong colour. © In which book of original entry will this transaction be recorded? (A) Purchases Journal (B) Customers’ Return Journal (©) Returns Inwards Journal (D) Returns Outwards Journal @® What source document should be issued to Mr. Leslie? (A) Invoice (B) Voucher (©) Debit note (D) Credit notea 3.5 Translation of source documents into transactions @ The terms stated on an invoice were 5/14, n/30. This means that the customer is ¢ entitled to (A) 30% if paid between 5-14 days. (B) 5% if paid in 14 days, (C) 14% if paid in 5 days. (D) nothing down for 30 days. Items 12 and 13 refer to the following Credit Note. CREDIT NOTE Kwesi Car Supplies Ltd ‘Omega Drive To: Josiah Auto No. 10030 7 July, 2018 Item Quantity | Unit Prices | Amount $ Engine Seals 125 50 6250 Wiper Blades 24 20 480 @ tn which of Kwesi Car Supplies Ltd books of original entry should the transaction be recorded? (A) Sales Journal (B) Purchases Journal (©) Sales Returns Journal (D) Purchases Returns Journal W7 (ORORORO) QOOeO®© Which of the following statements BEST describes the transaction which gave rise the above document? (A) Kwesi Car Supplies Ltd returned goods to Josiah Ltd (B) Josiah Auto returned goods to Kwesi Car Supplies Lid“ (C) Kwesi Car Supplies Ltd purchased goods from Josiah Auto (D) Josiah Auto purchased goods from Kwesi Car Supplies Ltd 3.6 Using source documents to complete books of original entry @ In which of the following does a business record the details of an invoice sent to a customer? (A) Cash Book (B) Sales Journal (© General Journal (D) Purchases Journal © In which of the following does a business record the details of a credit note recei (A) Sales Journal (B) Purchases Returns Journal (© Sales Return Journal (D) Purchases Journal @ Which of the following is NOT a contra entry? (A) Deposited cash into bank (B) Cashed cheque for office till (© Withdrew cash from bank for office use. (D) Cash sales paid directly into bank® Which of the following are contra entries? I Dr Cash; Cr Bank II Dr Bank; Cr Cash II Dr Cash; Cr Cash (A) Land II t (B) and II (© Hand tl (D) I, Hand I (ONOROR) Items 18 and 19 refer to the following incomplete invoice. Garnet Grocery Main Road Spring Village Sold To: Kyle Confectionery Invoice No. 0501 4 November 2018 Item Quantity | UnitPrice | Amount (9) Sugar 20bags_|__ $20 400 Chocolate 50 Ibs. 315 750 , Sale is subject to 6% trade discount © In the books of Kyle Confectionery, the above invoice would be recorded in the (A) Cash Book. (B) Sales Journal. (© General Journal. (OR@RORC) (D) Purchases Journal.| @ The amount to be entered in the journal is (A) $1081. ¥ (B) $1150. © 81219. (D) $2450. Trade and cash discounts Items 20-22 refer to the following information. Mr. Clunis bought goods on credit with a total list price of $1 800 less 10% trade disco He is entitled to a further 5% cash discount if he settles his account in 30 days. ©@ What amount would Mr. Clunis record in his Purchases Journalt (A) $1530 (B) $1539 (©) $1620 (D) $1800 @ The amount of the trade discount is (Ay $90 AB) $180 (© $190 (D) $270 © What amount would Mr. Clunis pay if he settles his account in 30 days? (A) $81 (B) $1539 (C) $1620 (D) $18003.8 Discounts allowed and discounts received © CaP Lid paid Wright Enterprises $2910 after deducting a 3% discount. The value of the discount was (A) $90.00. j (B) $87.30. | © $30.00. (D) $29.10. G0Ooe® @ Mr. Gary settled his account of $3250 with Stapler Inc. by cheque and was allowed $50 off for early payment. How should the $50 be entered in Mr. Gary's cashbook? (A) Discount allowed column on debit side (B) Discount received column on credit side - (C) Discount received column on debit side ©OoO® (D) Discount allowed column on credit side 3.9 Balancing cash books > Items 25 and 26 refer to the information in the following table. Petty cash balance b/d 30 To restore imprest at start 170 Petty cash expenses 10 © What is the balance c/d at the end of the period? (A) $30 (B) $90 - (© $110 () $170 OROROR) 21© How much will be needed to restore the imprest at the end of the period? (A) $310 (B) $200 (©) $170 (D) $110 3.10 Interpreting cash book balances @ A credit bank balance in the Cash Book indicates that (A) aloss was made. (B) a profit was made. (©) the business had a surplus. (D) the business used its overdraft. 3.11 Treatment of totals from books of original entry © The total of the Sales Return Journal will be posted to the respective account i which ledger? (A) General Ledger (B) Sales Ledger (© Returns Ledger (D) Purchases Ledger © Where is the total of the Discount Received column in the Cash Book posted? (A) Debit side discount received account (B) Credit side discount received account * (©) Debit side discount allowed account (D) Credit side discount allowed account 22Item 30 refers to the following entry in the Returns Outwards Journal. he Returns Outwards Journal * s March 14 N. Gomez PL 16 168 ; March 18 W. Gittens PL40 109 © What is the amount to be transferred to the Returns Outwards account? (a) $59 (B) $109 © si68 () 8277 Section 4: Ledgers and Trial Balance 4.1 Different classes of accounts @© Which ofthe following accounts is NOT a real account? (A) Land . (B) Furniture (©) Motor vehicle (D) Motor vehicle repairs . © Nominal accounts include I Purchases and Sales TI Motor car and Furniture III Carriage Inwards and Carriage Outwards ar (B) Land It (© Land til (D) and I NN ©0808 GOe® ©Oo©®lh © Which type of account is Building, Machinery and Office Equipment classifie (A) Real account (B) Contra account (© Personal account (D) Nominal account © Which class of account does Debtors and Creditors belong to? (A) Real accounts (B) Contra accounts (© Personal accounts (D) Nominal accounts 4.2. Different types of ledger © You wish to make an entry in debtor Soomai's account, Select the option/s MOST closely related to it. Each option MAY be used more than once, or not} (A) Cash book ; (B) General ledger (©) Purchases (accounts payable) ledger (D) Sales (accounts receivable) ledger. @ ‘ou want to find records of expenses, capital and revenue (income accounts) the option/s which is MOST closely related to it, Each option MAY be used once, or not at all. (A) Cash book (B) General ledger (© Purchases (accounts receivable) ledger (D) Sales (accounts receivable) ledger 24OO lllt— 4.3 Significance of debit and credit in each type of account @ Which of the following transactions should be credited in the bank account? (A) Paid wages by cash (B) Received a loan from Shemeu! (© Sold goods and received a cheque (Dy Bought goods and paid by cheque + o Which of the following double-entry rules apply to the owner contributing cash to the 1 ©ee® business? I Dr Assets 11 Cr Capital Il Dr Liabilities (at (B) (© Land II, (D) Wand I (ORORORC) Makes Soanes started a data processing company with $50000 cash. Which of the following are accurate assumptions? 1 Increase asset and capital I Decrease asset and capital TI Debit cash and credit capital (Al @ (© land IT (D) Land IIItem 10 refers to the following information. Bank ale June 1 10000 3 20000 Vehicle ale 2017 June 6 20000 (Capital ale 2017 June 1 10) 6 20 Bank Loan ale x 2017 June 3 201 @® The entries in the ledger accounts show that the business I started with money in the bank. TI received a bank loan. IIT purchased a vehicle. (Ay (B) “(© Tand I (D) Tand IIL 264.4 Draw up simple accounts @ Aviclis a creditor of Moira and Malia (M & M) Ltd. The business settles a debt of $500 less 59 discount by cash. The entry to record this transaction in the books of M & M Ltd is a Ariel Discount allowed 25 Cash Tas Ariel Discount received Cash Ariel Discount received () Discount received 25 Ariel 500(A) (B) © () @ Tia Marie purchased office equipment on credit from Raebekah for $4000. to record this transaction in Tia Marie’s books is Equipment maintenance repairs 4000 Bank 4000 _Dr$ Purchases 4000 ‘Accounts payable ~ Raebekah 4000 [ps Crs Equipment 4000 Bank Equipment 4000 “Accounts payable - Raebekah 4000(A) Keevan See, a sole trader, ‘New motor vehicle }-100000 Old motor vehicle [T3000 Cash 10000 @) (D) New motor vehicle 90.000 Cash {| 10000 | Old motor vehicle 100000 New motor vehicle 10000 Cash 90000 Old motor vehicle Old motor vehicle 90000 Cash 10000 New motor vehicle 100000 bought a new motor vehicle for $100000. The business paid $10000 in cash and traded in an old vehicle for the remainder. The entry to record this transaction is ® @ Ateba More withdraws goods from his business for his own use. The double entry to record this is (A) Dr Purchases (B) Dr Drawings (© Dr Cash (D) Dr Drawings ©O@®| | @ Rachel Difference is a seamstress. She bought materials from Mikela Maha: Store and paid by cheque. The CORRECT double entry in Rachel’ ledger is (A) Dr Purchases Cr Bank (B) Dr Bank Cr Purchases (© Dr Bank Cr Mikela Maharaj Textile Store (D) Dr Purchases Cr Mikela Maharaj Textile Store Kaleb Grant paid $400 by cheque for wages. This transaction was entered in | Cash Book and posted to another ledger. The CORRECT double entry to transaction is (A) Dr Bank Cr Wages (B) Dr Wages Cr Bank (© Dr Kaleb Grant Cr Bank (D) Dr Cash Cr Wages @ Salim Williams receives a cheque ‘of $10000 as commission. The entry to r | transaction in Salim’s books is (A) Dr Bank Cr Commission | (B) Dr Commission Cr Bank , (©) Dr Bank Cr Cash (D) Dr Cash Cr Bank | @® Kimmy Sahatoo deposited a cheque received from Keevan. Which of the fe entries would be made in Kimmy’s books to record the cheque deposited? I Debit cash II Debit bank II Credit Keevan (ay (B) Land II (©) Land III | (D) Wand 14.5 Posting from books of original entry to ledger accounts ® Item 19 refers to the information below. © Kaleb Grant prepared the Purchases Day Book fr the month of June 2017 with the prep: y © following information. Kaleb Grant Purchases Day Book [pate | Details phe ‘Amount _ 2017 $ ® June 20 _| Rochard Liverpool 350.00 ® June 25 _| George Wales 250.00, oh © @ How should Grant post this information in his ledger at the end of June 2017? © (A) Dr Rochard Liverpool $350 ® Cr Purchases $600 is Cr George Wales $250 ® (B) Dr Purchases $600 Cr Rochard Liverpool $350 © Cr George Wales $250 © (©) Dr Rochard Liverpool $350 © Dr George Wales $250 Cr Purchases $600 (D) Dr Purchases $350 © Cr George Wales $600 Cr Rochard Liverpool $250 31entry will be posted in the Credit notes received entered in a specific book of original general ledger to the (A) Sales account. (B) Purchases account. (C) Purchases Returns account. (D) Sales Returns account. ©OO® Items 21-22 refer to the following information. Karissa’s Cash Book ae 2017 July 1 | July 18 Totals 20 @ To which ledger would the totals ofthe discount columns be posted? . (A) Sales ledger | (B) Purchases ledger (© General ledger | (D) Cash book @ 70 which ledger would the entry on July 18 be posted? (A) Sales ledger (B) Purchases ledger (© General ledger (D) Returns ledger 32‘The cash book has unique features that are different from other books of original entry. It functions as a 1 journal. Il trial balance. MIT ledger account. 1 (B) Land I © and (D) Mand UT refers to the following information. Sheree General Journal entry for posting to the ledger is Dr Equipment Cr Lesley Burrows Dr Cash Cr Equipment Dr Lesley Burrows Cr Equipment Dr Equipment Cr Cash© The analysis columns’ totals from the petty cash book are posted to the I General ledger. II Accounts Receivable ledger. III Accounts Payable ledger. (A) Land IT (B) Land IIT (© Wand m1 (D) I, Hand 11 ew 4.6 Balancing and closing accounts Item 26 refers to the following information. ©Oe©® The following account was extracted from the Sales ledger. Aaliyah Devulge a/c May-05 Cash 12 __ [Sales 3000 13__ [Bank 2500 15__| Sales 2000 13 _ [Discount Allowed] 300 | 18 [Bank 1500 $12 $17: ® What is the closing balance? $20 (A) Debit balance b/d of $700 (B) Credit balance b/d of $700 (©) Debit balance b/d of $5800 (D) Credit balance b/d of $5800 ©CG@®127 refers to the following information, 4.7 Interpreting entries and balances sent an invoice to a customer for $8000 less 25% trade discount. Later, the istomer returned one-fifth (1/5) of the goods. What amount would be entered in his urns inwards account? $750 3) $1200 =) $1750 $2000 ,Item 29 refers to the following information. A business uses the following steps to balance its individual ledger accounts. I The debit total and the credit total are drawn to be shown on the same line II Total both sides to determine which is greater III The balance is entered in the line below the total line TV Deduct the lesser side from the greater side V Enter the balance on the lesser side to make it equal ® Which of the following is the correct sequence to balance the ledger accounts? (A) 1, ITIL IV, V (B) WL ILIV. Vv (© 1, V,0L 1,1 (D) If, IV, V, I, II (ORORORS) © Which of the accounts will ALWAYS have a debit balance? (A) Cash ® (B) Bank (© Debtor © (D) Creditor © © Which of the following describes a ledger account with a balance brought down (b/d) ‘on the debit side? (A) Asset ® (B) Capital (© Income © (D) Liability ()4.8 Using balances brought down to construct the trial balance 2 refers to the following information. Bank a/c Mid Soo vig 1) Opening balance Sales [Furniture Balance c/d [Salaries On which side of the Trial Balance will the CORRECT closing balance be shown? Dr $3000 : (B) Cr $3000 Dr $10000 ®©@Oe® (D) Cr $10000 |Which of the following entries are NOT shown on the debit side of a Trial Balance? Purchases, Drawings, Cash ‘{B) Sales returns, Furniture and Fixtures, Office Equipment C) Purchases returns, Accounts Payable, Bank overdraft D) Accounts Receivable, Wages expense, Stock/Inventory ©OOe® hich of the following accounts should be entered in the credit column of a Trial ance? Drawings B) Cash in hand Accounts Receivable D) Bank overdraft ©Oo©®ae 4.9 The uses and limitations of the trial balance © The listing prepared by accounts personnel to determine the arithmetical accuracy of double entry postings is known as the (A) Trial Balance. (B) Balance Sheet. (©) Control Accounts OROROR) (D) Income Statement. Section 5: The preparation and analysis of financial statements of a sole trader 5.1 Purpose of preparing financial statements @© What MAIN need of an owner is satistied by the preparation of financial statements? (A) Getting information included in the Gross Domestic Product (GDP) (B) Helping to decide whether to extend credit facilities (©) Helping to assess whether to negotiate for increased wages for employees ©OG©® (D) Determining if the business is profitable © What needs of government are satisfied by the preparation of financial statements? I Gross Domestic Product (GDP) information TI To provide assistance for firms III To assess taxes owed by the business (A) Land II (B) Land III (© Mand Il (D) I, Wand 1 ©OOO®at category of user requires information about the business’ ability to repay its Appropriation Account Balance Sheet C) Cash Flow Statement D) Income Statement hich financial statement of a business shows the business’ financial position? Appropriation Account 3) Balance Sheet 2) Cash Flow Statement D) Income Statement 5.3 Income statement for sole traders of the following represents Opening Inventory added to Net Purchases? A) Cost of goods sold Cost of goods available for sale Gross profit D) Total expenses@ What is the name of the figure from which closing inventory is subtracted? (A) Opening Inventory (B) Net Purchases (©) Cost of Goods Available for Sale (D) Cost of Goods Sold ©G©OG©®D © Which of the following represents the figure obtained when Closing Inventory is deducted in the Income Statement? (A) Net Sales (B) Cost of Goods Sold (© Gross Profit (D) Net Income (ORORORS) © Another name for transportation on purchases is (A) Carriage Inwards, (B) Carriage Outwards. (C) Returns Inwards. (D) Returns Outwards. -OO©® @® Returns inwards is (A) added to Purchases. (B) subtracted from Purchases. (© added to Sales. (D) subtracted from Sales. ©OG®D @ Returns Outwards is (A) added to Purchases. (B) subtracted from Purchases. (C) added to Sales. (D) subtracted from Sales. ©O&©®Demerara Supermarket provides a delivery service to customers. The supermarket pays ‘the drivers for delivering the groceries to the customers. What is this cost to Demerara Supermarket called? (A) Carriage Outwards (B) Carriage Inwards (C) Returns Outwards (D) Returns Inwards ©Oo&® ‘Wages is listed as ~ (A) revenue in the Income Statement. (B) expense in the Income Statement. (©) acurrent asset in the Balance Sheet. (D) a current liability in the Balance Sheet. ©OoG® The salary for the delivery person employed by San Fernando Enterprises is listed as (A) revenue in the Income Statement. (B) expense in the Income Statement. (©) a current asset in the Balance Sheet. (D) a current liability in the Balance Sheet. ©Ooe®Items 15-17 refer to the following Income Statement. Jonny Bake Income Statement for the year ended December 2017 Sales 60000 1 (2500) Net Sales 57500 4000 Purchases 38000 Less: Returns Outwards I 0 Cost of Goods Available for Sale 37500 Less: Closing Inventory (2500) (35.000) Gross Profit Iv Less: Total Expenses (19500) Net Income penn Wom @ L represents which item in the above Income Statement? | (A) Cost of Sales | (B) Net Purchases (©) Opening Inventory (D) Returns Inwards ©Oo©® @ The value of His (A) $4500. (B) $1200. (© $22500. (D) $33500. (ORORORS) 42(ORORORS) (D) $33500. ‘ich equation represents Gross Profit? ) Net Purchases ~ Net Sales }) Net Sales - Net Purchases wad Net Sales - cost of Goods Available for Sale dsad2 son ©Oe® )) Net Sales - cost of Sales ted2 sone! equation represents Net Income? Net Sales ~ Gross Profit aa Gross Profit - Cost of Goods Sold. Gross Profit - Total Expenses “Fede > ORORORO) ‘Net Sales - Cost of Goods Sold sas As 5.4 Classified Balance Sheet 5.5 Working capital 2 = Current Asset in the Balance Sheet. Current Liability in the Balance Sheet. Non-current Asset in the Balance Sheet. Non-current Liability in the Balance Sheet.@ Creditors or Accounts Payable are listed as a (A) Current Asset in the Balance Sheet. (B) Current Liability in the Balance Sheet. (© Non-current Asset in the Balance Sheet. ORORORO) (D) Non-current Liability in the Balance Sheet. @ Short-term investments are listed as a (A) Current Asset in the Balance Sheet. (B) Current Liability in the Balance Sheet. (©) Non-current Asset in the Balance Sheet. ©Oe&® (D) Non-current Liability in the Balance Sheet. © Bank overdraft is listed as a (A) Current Asset in the Balance Sheet. (B) Current Liability in the Balance Sheet. (C) Non-current Asset in the Balance Sheet. ©O&® (D) Non-current Liability in the Balance Sheet. @ Inventory is listed as a (A) Current Asset in the Balance Sheet. (B) Current Liability in the Balance Sheet. (© Non-current Asset in the Balance Sheet. (D) Non-current Liability in the Balance Sheet. ©G@OG®25 refers to the figures in the following table. Opening Inventory [_ss600 | That is the Stock Turnover / Inventory Turnover? t) 3.15 times ) 3.51 times » 3.95 times 6.70 times . S310 ») {Gross Profit 0 18% ©) {Current Assets $48.00 2)© What is the value of the Gross Profit Percentage / Gross Margin? (A) 43.06% @ (B) 47.69% (C) 64.58% © (D) 91.18% © © What is the value of Net Profit / Net Income? (A) $6120 (B) $8640 (C) $11700 (D) $12960 Item 29 refers to the information in the following table. Net Sales 10000 15000 Gross Profit 5000 5000 Net income 1000 1500 I Firm A has a greater gross profit percentage than Firm B Il Firm B has a greater gross profit percentage than Firm A II Firm A and Firm B has the same net profit percentage . © Which of the statements above are true? (A) Land II (B) Land IIT (© Mandi (D) I, Mand IT5.7 Calculatingratios 1 refers to the information in the following table. Inventory Accounts Receivable Cash’ Mortgage 5000. | Equip 26000 fermine the value of the Current Ratio or Working Capital Ratio. 0.40:1 current ratio of 2 : Current liabilities are greater than current assets For every $1.00 of current assets short-term debt of $2.50 For every $1.00 of current liabil ss has $2.50 of current assets The business should close because it is not able to pay its short-term debt ®©CG® ® © © ©OGO®anne 5.8 The effects of net profit or loss on capital © Terrel George started business with a retail store in Castries, St. Lucia, with a building worth $2000 and cash of $8 000. At the end of the year he had an ending capital of $36000 after making drawings during the year of $4000. What is his net income (net profit) for the year? (A) $4000 ® (B) 812000 (© s28000 © (D) $32000 © Item 34 refers to the following information. ‘The following information is supplied from the business of Ms. Analise Hosam, a sole trader in St. Marys, Jamaica. a i iy Jan-01 | Capital at start ‘Additional Capital invested | _7000 Drawings 3500 © what is the net income for the year? (A) $13500 ® (B) $20500 (© $34500 © (D) $63500 ® Item 35 refers to the following information. J. Sanchez, owner of the Fig Tree Restaurant in Fig Tree, Nevis, supplied the following balances. Capital at 1 Sept. 2017 $45000 Capital at 31 Aug. 2018 —-$39000 Drawings $1700What is the net profit or loss for the accounting period? Net Loss $11 000 Net Profit $11 000 Net Profit $23000 {D) Net Profit $67000 nd 37 refer tothe following information of Grand Bahama is evaluatin iders to determine to which it provide a loan of $100000. ae - Gross Profit Percentage Net Profit Percentage 30% ind payment immediately? Firm A Firm B ») Firm C ) Firm D hich firm seems to have the highest percentage of expenses? firm has the best ability to repay short-term obligations should creditors OROTORS) ©LOQOH O8G®Section 6: Accounting adjustments 6.1 Accounting concepts underpinning adjustments Items 1-4 refer to the following table. Commission Earned a/c i Be i as ie Bank 2250 Balance c/d 250 @ The amount of commission earned to be recorded in the Income Statement is (A) 8250 (B) $2000. (©) $2250. (D) $2500. © What does the balance of $250 represent? ) (A) Prepaid expense ® (B) Prepaid revenue (C) Accrued expense © (D) Accrued revenue © © “he amount of $250 should be shown in the Balance Sheet under which ofthe following? (A) Current Assets ® (B) Current Liabilities (©) Non-current Liabilities © (D) Owner's Equity © 50accounting concept which guides the above account is known as the Prudence concept. _ (B) Accruals concept. Consistency concept. (D) Entity concept. 6.3 Journal entries ¢ adjustments relates to the following table. Balance b/d ‘hat does the amount of $350 rej An amount owing ‘The expense for the period An amount paid in advance D) The amount paid for the p ness recorded rent paid of $90¢ sue on 30 June. The accountant later d that the payment was for three ding 31 August. How will this ustment be recorded on 30 June? Dr Prepaid Rent $6000; Cr Rent: Dr Bank $6 000; Cr Profit and’ Dr Balance Sheet $6000; Cr Rent $5000