Accounting Basics Revision Questions

Accounting Basics Revision Questions

1)  Which one of the following accounts is debited when it is increased in value?

1. Loan
2. Bank
3. Capital
4. Sales

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2)  Which one of the following statements is incorrect.

1. Assets are classified as fixed and current
2. Liabilities are classified as long and short term
3. Expenses are classified as direct and indirect
4. Source of Funds is classified as Capital and Overheads

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3)  Which one of the following accounts is a current asset?

1. Mortgage
2. Trade Debtors
3. Trade Creditors
4. Vehicles

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4)  Cash is classified as a fixed asset?

1. TRUE
2. FALSE

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5)  Which one of the following is not a short term liability?

1. Six month loan
2. VAT
3. Trade Creditors
4. Capital

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6)  You buy a van on credit.  Which one of the following groups of accounts is affected?

1. Bank, Vehicles and VAT
2. Debtors Control, Vehicles and VAT
3. Purchases, Vehicles and VAT
4. Creditors Control, Vehicles and VAT

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7)  Which one of the following shows the balance in every Nominal account?

1. The Trial Balance
2. The Balance Sheet
3. The Profit and Loss account
4. The Sales Ledger

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8)  Which one of the following statements is incorrect?

1. The Balance Sheet shows what the business is worth
2. The Balance Sheet shows what the business owes
3. The Balance Sheet shows whether the business is profitable
4. The Profit and Loss report shows the expences of the business

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9)  If you make mistakes in your accounts, the Trial Balance, will not balance.

1. TRUE
2. FALSE

Answer

Accounting Basics Revision Answers

1)  Option (b) is correct.  Follow the PEARLS rule.  Bank is an Asset account, when it increases it is debited.  The others are on the RLS side and are credited when they increase.

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2)  Option (d) is correct.  Source of Funds and Capital are the same.  Overheads are expenses and are not even Balance Sheet items like Source of Funds/Capital.

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3)  Option (b) is correct.  Trade Debtors is a current asset.  Mortgage is a long term liability.  Trade Creditors is a current liability.  Vehicles is a fixed asset.

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4)  Option (b) is correct.  This is FALSE.  Cash is classified in the Chart of Accounts as a current asset.

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5)  Option (d) is correct.  The loan, VAT and Trade Creitors are all short-term Liabilities.

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6)  Option (d) is correct.  Your buy on credit, so Trade Creditors is involved.  Vehicles must be involved.  There would be a VAT element to the transaction, so VAT is involved.

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7)  Option (a) is correct.  It is the finction of the Trial Balance to list these Nominal balances.

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8)  Option (c) is correct.  The Balance Sheet does not indicate profitability.  That is the function of the Profit and Loss Report.

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9)  Option (b) is correct.  This is FALSE.  Although the Trial Balance is used to check for errors, it cannot identify all possible types of error.  It shows whether the sum of all the credits is equal to the sum of all the debits.  This does not mean that all these debits and credits are correct.

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