A Level Accounting Multiple Choice Questions 2

A Business has received a Credit Note. What entries should be made in the businesses Ledger Accounts

• Dr Purchases Returns Cr Trade Payable

• Dr Sales Returns Cr Trade Receivables

• Dr Trade Payable Cr Purchase Returns

• Dr Trade Payable Cr Sales Returns

The owner of a business paid for his family’s holiday from the business bank account and recorded the payment as drawings. Which accounting concept is being applied?

• Accruals

• Business Entity

• Going concern

• Prudence

The owner of a business has decided to create a provision for doubtful debts. Which two accounting concepts are being applied

• Accruals and going concern

• Accruals and prudence

• Consistency and business entity

• Consistency and prudence

Eric, Fiona and Gary are proposing to set up a limited company with a share capital of £180 000. They will be the only shareholders and originally planned to invest in the share capital using Ratio 1 below. However, circumstances have changed and they have to use Ratio 2.

Ratio 1 - Eric (1) Fiona (2) Gary (1)

Ratio 2 - Eric (2) Fiona (9) Gary (4)

What difference will it make to Eric’s investment when Ratio 2 is chosen?

• Invests £21 000 less

• Invests £21 000 more

• Invests £24 000 less

• Invests £24 000 more

Which of these errors is revealed by a trial balance?

• Commission

• Compensating

• Original entry

• Partial omission

A sole trader received an order from a credit customer on the last day of the financial year 31 May 2016. No entries were made in the accounting records for the sale of goods until the invoice was raised on 3 June 2016. Which accounting concept is being applied?

• consistency

• going concern

• prudence

• realisation

The purchase of a non-current asset was debited to the purchases account. What is this type of error called?

• Commission

• Omission

• Original Entry

• Principle

Which is the correct formula for calculating contribution?

• Fixed costs divided by variable costs

• Fixed costs less variable costs

• Sales revenue divided by variable costs

• Sales revenue minus variable costs

A business has forecast its telephone expense for the year to be £1800. This consists of a fixed element for line rental which is 1 /3 of the total cost; the remaining 2 /3 are variable based on the telephone calls made. The business has been informed that the cost of the line rental will be reduced by ¼. However, the cost of calls will increase by 20%.

How much will the revised forecast telephone expense be, assuming the number of calls does not change?

• £1 845

• £1 890

• £1 917

• £2 040

Closing inventory that cost £12 600 has been damaged. It can be repaired at a cost of £2000 and could then be sold for £13 880. Identify the accounting concept that should be applied to the valuation of inventory.

• Prudence

• Going Concern

• Consistency

• Business Entity