Institute of Professional Studies and Accounting Services (IPSAS)

Bosasso, Puntland-Somalia.

Tel: 7790443/7970443

COURSE NAME: Diploma in Financial Accounting (Batch 26)

Date: Nov. 22, 2023
Progress test-4 (Chapters 1 & 2)

Student name: ______________________________________________________________

Instructions (20 marks): Work out ALL questions. Each question carries 1 mark.

1) Credits :
A. Decrease both assets and liabilities
B. Increase both assets and liabilities.
C. Decrease assets and increase liabilities.
D. Increase assets and decrease liabilities.
2) When assets are subtracted from liabilities it will be equal to?
A. Capital
B. Net income
C. Working capital
D. Profit
3) Which of the following items is not shown in the Balance sheet?
A. Cash
B. Rent receivable
C. Building
D. Office equipment
4) A bookkeeper has recorded the following transaction:
Dr Bank account Cr Lorry account
What does this represent?
A. Purchase of a lorry on credit
B. Purchase of a lorry by cheque.
C. Sale of a lorry on credit
D. Sale of a lorry by cheque.

5) Which of the following statements is correct?

EFFECT UPON
1
 __________________________________________
ASSETS LIABILITIES Capital
A. A debtor paid us by cheque. + Bank – creditors

B. The owner pays a creditor from – creditors + Capital

his private funds

C. We sold goods on credit lent – Stock + Creditors

D. Bought goods on credit + Stock + Capital

6) Which of the following would not be considered an internal user of accounting data for the
XYZ Company?
A. President of the company.
B. Production manager.
C. Purchase department officer.
D. President of the employees' labor union.
7) The right side of a t-account is:
A. The balance of an account.
B. The debit side.
C. The credit side.
D. Blank.
8) A debit is NOT the normal balance for which account listed below?
A. Machinery
B. Cash
C. Accounts Receivable (or debtors)
D. Discounts received
9) External users of financial accounting information include all of the
following except:

A. lenders such as bankers

B. governmental agencies such as the IRS
C. employees of a business
D. potential investors

10) Which of the following is NOT an external user of financial accounting information?
A. Government agencies
B. Creditors
C. Potential investors
D. Managers
11) Given the following, what is the amount of Capital? Assets: Premises £80,000; Stock
£34,000; Cash £400. Liabilities: Creditors £12,000; Loan
from Dahabshil Bank £16,000.

A. £84,400
B. £86,400
C. £129,600
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 D. £85,600
12)Which of the following which are correct?

Account to be debited Account to be credited

1. Van sold on credit to Ali Cash Van
2. Payment to a creditor by cash Creditor Capital
3. Purchase of a computer on credit Creditor Computer
4. We returned a computer to Hassan Hassan Computer
A. 1 and 3 only
B. 1 and 2 only
C. 2 and 3 only
D. 1 and 4 only
13)For which step of accounting process the accountants of business entity prepare financial
statements?
A. Identifying transactions
B. Recording business transactions as they occur.
C. Making decisions about businesses.
D. Communication of financial information.
14)Which of the following statements is correct?
EFFECT UPON
_________________________________
ASSETS LIABILITIES
A. We paid a creditor by cheque. – Bank – creditors
B. A debtor by us $90 cash + Cash + Debtors
C. Ali lent us $500 by cheque + Bank – Loan from Ali
D. Bought goods on credit + Stock + Capital
15)The debtor pays cash to proprietor and the proprietor uses the money personally. How should
we record this transaction?

S/N Account to be debited Account to be credited

A. Cash account Debtor’s account

B. Debtor’s account Capital account

C. Capital account Debtor’s account

D. Creditor’s account Cash account

16)What does a debit balance of £120 in Hassan’s account in the books of Daahir represent?

A. Daahir sold £120 goods to Hassan on credit.

B. Hassan purchased goods £120 from Daahir on credit.

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 C. Daahir owes Hassan £120

D. Hassan owes Daahir £120

17) Ahmed has recorded the following double entry in his books:
Dr Ali’s account Cr Cash account
What does this represent?
A. Cash purchase from Ali.
B. Cash receipt from Ali
C. Cash payment to Ali
D. Credit purchase from Ali
18) A DEBIT entry into an account represents which of the following?

A. Decrease in an expense

B. Increase in income

C. Increase in an asset

D. Decrease in drawings

19) Given figures showing: Sales £8,200; Opening stock £1,300; Closing stock £900; Purchases
£6,400; Carriage inwards £200, the cost of goods sold figure is
A. £6,800
B. £6,200
C. £7,000
D. None of them
20)Which of the following is the correct posting to record a cash paid to a creditor?
A. Dr Debtor account Cr Cash account

B. Cash account Cr Creditor’s account

C. Dr Bank account Cr Debtor’s account

D. Dr Creditor’s account Cr Cash account

Good luck.