Foundations in Accountancy

FA1 – Recording Financial Transactions

Multiple Choice Questions

1) A machine which costs $7,500 is bought on credit from X. Subsequently $1,000 of the debt to X is paid by cheque.
Which of the following correctly records the transaction?
A) Debit X $7,500, Credit machine $7,500. Debit Bank $1,000, Credit X $1,000
B) Debit X $7,500, Credit Machine $7,500. Debit X $1,000, Credit Bank $1,000
C) Debit Machine $7,500, Credit X $7,500. Debit Bank $1,000, Credit X $1,000
D) Debit Machine $7,500, Credit X $7,500. Debit X $1,000, Credit Bank $1,000

2) Which of the following statements are correct?

A) Output tax charged to customers is debited to the sales tax account
B) A machine is purchased for $300 plus sales tax $50. The Machine account is debited with $300 and the sales tax
account is debited with $50. The sales tax is irrecoverable.
C) If the sales tax account has a debit balance at the end of the sales tax quarter, the balance is recoverable from
the government.
D) The sales figure in the income statement of a sales tax registered business includes sales tax.

3) You have bought stationery with a company cheque from the stationery shop next door. How should this transaction
be recorded?
A) DR Stationery CR Payable
B) DR Cash CR Payable
C) DR Stationery CR Bank
D) DR Payable CR Bank

4) Bill sets up his own computer consultancy from home. He buys a laptop for $2,000 and puts $1,000 into a business
bank account. During the first month he invoices a client for $1,500 and pays $600 to a freelance programmer. The
client has not yet paid. What is Bill's capital balance at the end of the month?
A) $1,900
B) $2,400
C) $3,900
D) $4,500

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 5) These are the year end balances for Josie's business.
Sales 54,000
Purchases 21,000
Inventory 9,500
Cash 27,250
Receivables ?
Motor vehicle 7,500
Payables 5,500
Capital 18,500
If the trial balance balances, what is the missing figure for receivables?
A) $15,500
B) $13,250
C) $9,250
D) $12,750

6) The cost of repairs to a machine has been posted to the non-current asset account. The result of this is:
A) Profits are understated and assets are overstated
B) Profits are overstated and assets are understated
C) Profits are overstated and assets are overstated
D) Profits are understated and assets are understated

7) Which document will the warehouse issue when deliveries are received?
A) A receipt
B) A purchase order
C) A goods received note
D) A remittance advice

8) The following entries appear in a cash account in March; payments by customers $15,000, rent received $250,
insurance paid $150, drawings $700, capital paid in $2,000. The balance at 1 st march was $2,000. What was the
closing balance at 31st March?
A) 14,400
B) 18,400
C) 15,800
D) 10,400

9) Which of the following statements is correct?

A) The balance on a bank loan will appear in the debit column of a trial balance
B) The sales return account balance will appear in the credit column of a trial balance
C) Loan interest paid will appear in the debit column of a trial balance
D) Purchases returns will appear in the debit column of a trial balance.

10) Which of the following statements concerning credit entries is correct?

A) Credit entries record decrease in capital or liabilities
B) Credit entries record increase in assets
C) Credit entries record increase in profits
D) Credit entries record increases in expenses.

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