Chapter 01 Practice Questions

Question 1
Ostrich is given a haircut by lamb, who owns his own business. Ostrich pays with a $10 note.
What kind of transaction is this?
A. Sale of goods by lamb
B. Sale of service by Ostrich
C. Purchase of goods by Lamb
D. Purchase of a service by Ostrich
Question 02:
(Data is same from Question 01)
What kind of transaction is from Lamb’s point of view?
A. Cash sale
B. Credit sale
C. Cash purchase
D. Credit purchase
Question 03:
(Data is same from Question 01)
What is Lamb’s business?
A. Partnership
B. Private company
C. Public company
D. Sole trader
Question 4:
Which of the following terms would be used to classify a payment for electricity in the
business premises of a firm of plumbers?
A. Expense
B. Purchase
C. Receipt
D. Sales
Question 05:
Which of the following statement is correct?
A. Business is a place where money is received and paid
B. Business is a process where resources are mixed together for the purpose of benefits
C. Business is an activity, which results in profit alone
D. Business is only the process of selling and buying commodities
Question 06:
In which form of business are profits and losses shared between the owners in accordance with
the agreement between them?
A. Partnership
B. Private limited company
C. Public limited company
D. Sole trader/ proprietorship

Prepared by: Lamiyah Fawad Khan

Chapter 01 Practice Questions

Question 07:
Why do business organizations keep accounting records?
A. In order to know profit
B. To have control of the organization
C. To get loan
D. To pay tax
Question 08:
Jack runs a stationery business and has sold computer supplies to Peter for payment in one
month. Which of the following are true in respect of this transaction?
(1) It is a cash transaction
(2) The expenditure must be authorized by Jack
(3) A record of the transaction must be kept in case of future query
(4) Jack will need to ensure payment is received in one month
A. 1 only
B. 2 and 3
C. 3 and 4
D. All of the above
Question 09:
When goods are taken out of the business for personal use by owner of a business, these will
be recorded as?
A. Drawings
B. As expense
C. Stock
D. A liability
Question 10:
Which of the following is not an asset?
A. Building
B. Cash balance
C. Debtors
D. Loan from Jim
Question 11:
Which of the following is a liability?
A. Machinery
B. Creditors
C. Motor vehicles
D. Cash at bank
Question 12:
What is the main purpose of an accounting system to a business?
A. To generate the business accounts
B. To calculate the tax payable by a business
C. To record, summarize and present information from documentation generated by
business transactions
D. To enable the owner to know if the business is trading profitably

Prepared by: Lamiyah Fawad Khan

Chapter 01 Practice Questions

Question 13:
Which of the following is a current asset?
A. Bank deposit account
B. Premises
C. Computer
D. Tools
Question 14:
Which of the following should be classified as a current asset in a business selling scaffolding
equipment?
A. Transport vehicle
B. Scaffolding
C. Creditors
D. Bank loan
Question 15:
Which of the following would be a non-current asset?
A. Stock/inventory
B. Debtors/account receivables
C. Factory premises
D. Bank overdraft
Question 16:
Which of the following best describe the meaning of purchases?
A. Items bought
B. Goods bought on credit
C. Goods bought for resale
D. Goods paid for

Prepared by: Lamiyah Fawad Khan