Chapter # 2
Double Entry System
Past Paper MCQs
1. What is the accounting equation?
A assets less liabilities equals capital
B assets plus liabilities equals capital
C capital less liabilities equals assets
D capital plus assets equals liabilities
2. Which ledger entries record the purchase of a
machine bought on credit from John Smith?
A debit John Smith, credit machinery
B debit John Smith, credit purchases
C debit machinery, credit John Smith
D debit purchases, credit John Smith
3. Which transaction is recorded in the purchases
ledger?
A cash purchases
B cheque paid to a Trade Payables
C cheque received from a Trade Receivables
D purchase of non-current (fixed) assets
4. A customer returns goods to a supplier.
How does the supplier record this in his ledger?
5. Tony owns a bookshop. He sells a book to Susie
who pays cash.
How will Tony record this transaction?
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6. Jane made a payment to a supplier for goods
bought on credit.
What is the effect on the accounting equation?
A decrease capital and decrease assets
B decrease liabilities and decrease assets
C increase assets and decrease liabilities
D increase liabilities and decrease capital
7. Which account usually has a credit balance?
A capital
B cash
C motor vehicles
D purchases
8. What are assets?
A items that are expected to be turned into cash in the
near future
B items that are owned by or owed to a business
C items that are owned by or owed by a business
D items that are purchased for long-term use by a
business
9. Winston returned goods to Hanif.
Which entries will Winston make in his ledgers?
10. Which statement is correct?
A An asset is always a credit entry.
B An expense is always a credit entry.
C An expense is always a debit entry.
D A liability is always a debit entry
11. Which is a noncurrent asset?
A bank balance
B trade receivables
C motor vehicles
D inventory
12. P. Smith is making a list of his assets and
liabilities. Which is a liability?
A computer
B Trade Payables
C loan to J. Jones
D premises
13. Rent is paid to J. Perigo in cash. 19. Which is a current liability?
How is this recorded? A long-term loan
B owner's capital
C trade payables
D trade receivables

20. Sami returns goods bought on credit from Javed.

How is this recorded in Javed’s books?

14. Bob returns goods bought on credit from Tariq.

Which ledger account entries record this in Tariq’s
books?

21. A trader took goods costing $100 for his own use.
How is this recorded in the ledger?
A debit drawings, credit inventory
B debit drawings, credit purchases
C debit inventory, credit drawings
D debit purchases, credit drawings
15. Which is a noncurrent asset of an engineering 22. Zafar returns goods bought on credit from Khalid.
company? How is this recorded in Zafar’s books?
A factory premises
B long term loan
C trade receivables
D inventory

16. Which item would be recorded by a credit entry in

an account?
A a decrease in capital
B a decrease in liabilities
C an increase in assets 23. Which increases owner’s capital?
D an increase in capital A bank loan extended from five to ten years
B purchase of machinery by cheque
17. How is the cash purchase of goods for resale C purchase of stock on credit
entered in the ledger? D transfer of vehicle to business from private use

24. In Smith's books the ledger account of Brown

shows a credit balance of $1200.
What does this mean?
A Brown bought goods, $1200, from Smith.
B Brown owes Smith $1200.
C Smith has paid $1200 to Brown.
D Smith owes Brown $1200.

18. Which best describes the assets of a business?

A cash and items that should turn into cash in the
near future
B cash invested by the owner of the business
C items bought for long term use by the business
D items owing to or owned by the business

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25. Joe is owed $500 by a customer. 31. A cheque has been received from X, a trade
How does this appear in Joe’s books? receivable.
How is this transaction recorded in the books?

26. Which is a debit balance?

A capital 32. A business buys goods on credit.
B asset Which entries should be made?
C liability
D revenue

27. A business bought a computer for the office and

paid by cheque.
How will the business record the transaction?

33. A garage business buys a motor van which will be

used for business purposes only. In which account will
this transaction be recorded?
A capital
B motor expenses
28. What is a current asset of a sports goods shop? C motor vehicles
A trade payables D purchases
B fixtures and fittings
C shop premises 34. Which is a noncurrent asset?
D stock of footballs A computer equipment
B Trade Receivables
29. In Tony's ledger, Gordon's account shows a debit C motor vehicle repairs
balance of $5000. What does this mean? D rent
A Gordon has paid Tony $5000
B Gordon owes Tony $5000 35. What is the correct entry for office furniture bought
C Tony has paid Gordon $5000 on credit from X?
D Tony owes Gordon $5000

30. A trader commenced business with a gift of

machinery from his father.
What will be the accounting entry?

36. What is the purpose of double entry bookkeeping?

A to apply the dual aspect concept
B to avoid errors
C to prepare books of prime entry accurately
D to record revenue and capital transactions correctly
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37. Brown charged Jones for carriage on goods
delivered to Jones’ premises.
What entries will Brown make in his ledger?
38. Goods for re-sale are bought for cash.
What are the entries in the books of the purchaser?
39. A business bought a computer for the office and
paid by cheque. How will the business record the
transaction?
40. Which account would have a credit balance?
A capital
B carriage inwards
C carriage outwards
D cash
41. Y’s account appears in the ledger of X as follows.
Which statement is true?
A On 1 January Y was owed $100 by X.
B On 10 January Y paid $100 into the bank.
C On 20 January Y supplied goods $400 to X.
D On 31 January Y was a debtor of X for $400.
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42. Which is a personal account?
A Trade Receivable
B office computers
C plant and machinery
D wages
43. A business purchases a motor vehicle on credit.
What is the effect of this?
A It increases noncurrent assets.
B It increases owner’s capital.
C It reduces net profit.
D It reduces the bank balance.
44. Which is an asset?
A a credit balance on a supplier’s account
B a credit balance on the bank account
C a debit balance on a customer’s account
D a debit balance on the drawings account
45. A trader buys a motor vehicle, for use in his
business, on credit from J. Sango.
How is this recorded in the trader’s ledger?
46. Which is a liability?
A items of value owned by a business
B money owed by the business
C money owed to the business
D total expenditure of the business
47. What would be classed as drawings in the
accounting records of a sole trader?
A cash withdrawn from bank for office use
B cash withdrawn from bank for petty cash
C cash withdrawn from bank for trader’s business
expenses
D cash withdrawn from bank for personal use
48. A trader invested $4000 into the business. $2000
was used to pay a credit supplier. The rest of the
money was paid into the business bank account.
What changes would take place within the accounting
equation?
 54. Jacob bought goods on credit from Mark.
49. Which statement about the division of the ledger What is the double entry in Jacob’s ledger?
is not correct?
A Checking procedures can be introduced.
B Fewer entries are needed in the sales and
purchases accounts.
C It is easier for reference and for locating accounts.
D Work can be shared between two or more book-
keepers.

50. Which will increase the current assets?

A payment of a creditor’s invoice by cheque
B receipt of a cheque from a bank loan 55. Sarah sublets part of her premises to Ruth.
C receipt of cash from a trade receivables A cheque for rent has been received from Ruth.
D repayment of a bank loan by cheque How will Sarah record this in her ledger?

51. Ann is a trader. On 1 April 2011 Cindy’s account in

Ann’s ledger showed a credit balance of $520. The
following transactions took place during April 2011.

April 2 Ann returned goods, $30, to Cindy

14 Ann bought goods, $210, from Cindy, and
paid in cash

Which statement is true about the balance on Cindy’s 56. Jane, a trader, withdrew $50 from the business
account in Ann’s ledger on 30 April 2011? bank account for office use.
A Ann owes Cindy $490. How is this recorded in Jane's books?
B Ann owes Cindy $700.
C Cindy owes Ann $490.
D Cindy owes Ann $700.

52. Smith sold goods on credit to Green.

What entries will Green make to record this?

57. X receives a cheque from a customer and pays

this into his business bank account.
How does this affect X’s current assets?

53. Abdul is a trader in office furniture. He buys

furniture on credit from Farad for use in his own
business. How will Abdul record this transaction?

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58. A trader provided the following information.
$
Capital 250 000
Current assets 26 000
Non-current assets 300 000
Current liabilities 15 000
What was the total of the non-current liabilities?
A $35 000
B $61 000
C $76 000 63. Lisa returned goods previously purchased from
D $91 000 Tara.
How did Tara record this?
59 Melanie provided the following information.
$
Non-current assets 14 000
Amount owing by credit customers 1 250
Amount owing to credit suppliers 850
Inventory 1 875
Bank overdraft 365
What was Melanie’s capital?
A $12 160
B $15 110
C $15 910
D $16 640 64. On 1 February Ahmed purchased goods on credit
from Zaffar. He returned these goods on
60 A business showed non-current assets, current 8 February.
assets, current liabilities and non-current liabilities. How did Zaffar record the transaction of 8 February?
What equals owner’s capital?
A current assets – current liabilities
B non-current assets
C total assets – current liabilities
D total assets – total liabilities

61. A business provided the following information.

$
Inventory 2880
Bank overdraft 750
Trade receivables 1600
Trade payables 1950 65. Which accounts would appear in a purchases
Loan from bank 2000 ledger?
Loan to employee 150 1 carriage inwards
Other payables 70 2 purchases
Other receivables 130 3 purchases returns
What was the total of the liabilities? 4 Sadie, a credit supplier
A $4420 A 1, 2 and 3
B $4770 B 2 and 3 only
C $4830 C 2 only
D $4920 D 4 only
62. Faraz buys and sells new and used motor 66. Which entries did Sally make to record the
vehicles. He purchased a used motor vehicle from following transaction?
Tahir for $7000 which he paid for by cheque. Rashid, a credit customer, returned damaged goods.
How would Faraz record this transaction?

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67. Dilip is a manufacturer. He purchased a machine
on credit from Sachin.
How did Dilip record this?
68. What does the owner’s equity consist of?
A the amount of money in the business bank account
B the amount owed by the business to the owner
C the total of the assets owned by the business
D the total of the current assets less the current
liabilities
69. What are assets?
70. Jai is a manufacturer. On 1 February he
purchased a machine costing $15 000 from Vinita. He
paid $10 000 immediately with a cheque from his
personal bank account. The balance was to be
paid in June.
Which entries did Jai make on 1 February?
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71. Daksha returned goods to Amina.
Which entries did Daksha make in her books?
72. Which item is an asset?
A an amount owing by credit customers
B an amount owing to credit suppliers
C interest accrued on bank loan
D rent received in advance from tenant
73. Hassan is a trader. During the financial year he
took goods from the business for his own use.
How should he record this?
74. Which formulas may be used for the accounting
equation?
1 assets = owner’s equity minus liabilities
2 liabilities = assets minus owner’s equity
3 owner’s equity = assets plus liabilities
4 owner’s equity plus liabilities = assets
A 1 and 2
B 1 and 3
C 2 and 4
D 3 and 4
75. Fatima required additional finance for her
business and borrowed funds from Ali. This was
deposited into the business bank account.
How should Fatima record this?
 What was the total of the liabilities?
A $13 920
B $14 890
C $15 270
D $17 270

80. How does a trader use the information provided by

76. Goods purchased on credit from Zamir were
returned by Ashwin.
Which entries should Zamir make to record this?
financial statements?
A to calculate the amount of cash drawings taken
B to calculate the amount that is owed by trade
receivables
C to check the balance shown on a bank statement
D to compare the business performance over a
number of years

81. A trader bought new fixtures. He paid half of the

purchase price in cash and agreed to pay the balance
in two months’ time.
77. Carl, a trader, took goods from the business for How does this purchase affect the accounting
his own use. These goods had cost $100, and $8 equation?
carriage had been paid for them to be delivered to the
business.
How would this be recorded in Carl’s accounts in the
books of the business?
A debit Carl’s capital account $100
B debit Carl’s capital account $108
C debit Carl’s drawings account $100
D debit Carl’s drawings account $108

78. William paid $500 in cash to Sonia for rent.

How did Sonia record this?
82. The following balances appeared in Hussein's
books.

79. The balances remaining on the books of a

business after the preparation of the income
statement included the following

What was the total of the liabilities?

A $4800
B $6200
C $6400
D $7200

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