IGCSE Accounting Basic Quiz

Double entry bookkeeping: What is the purpose of the double entry system in accounting?

• To create confusion and errors

• To make the accounting process more complicated

• To ensure accuracy and maintain balance

• To allow for discrepancies and mistakes

Double entry bookkeeping: Explain the concept of debit and credit in double entry bookkeeping.

• Debit always represents an increase in assets

• Debit and credit are interchangeable terms in accounting

• Debit and credit are the two sides of the same coin, representing the dual aspect concept in accounting.

• Credit always represents a decrease in liabilities

Trial balance: What is the purpose of preparing a trial balance in accounting?

• To ensure that the total of all debit balances equals the total of all credit balances

• To calculate the net profit of the business

• To determine the amount of cash in the business

• To identify the total assets of the business

Trial balance: What are the potential errors that may not be detected by a trial balance?

• Errors of multiplication

• Errors of original entry, omission, commission, principle, and compensating errors

• Errors of subtraction

• Errors of addition

Income statement: Define the income statement and its significance in financial reporting.

• A financial report that shows a company's revenues, expenses, and net income over a specific period.

• A report that details the company's employee salaries

• A document that outlines the company's marketing strategy

• A balance sheet that shows a company's assets and liabilities

Income statement: Explain the difference between gross profit and net profit in an income statement.

• Net profit is the profit before deducting any expenses

• Gross profit is the remaining amount after deducting all expenses from the net profit

• Gross profit is the profit before deducting any expenses

• Net profit is the remaining amount after deducting all expenses from the gross profit.

Partnership: What are the main characteristics of a partnership business structure?

• Shared ownership, limited profits, unlimited life

• Limited ownership, individual profits, mutual agency

• Shared ownership, shared profits and losses, mutual agency, and limited life

• Single ownership, shared profits, unlimited life

Partnership: Discuss the advantages and disadvantages of a partnership as a form of business ownership.

• Partnership provides no opportunity for shared responsibility and decision-making

• Partnership has no potential for conflict and unlimited liability

• Partnership offers shared responsibility and decision-making, but also comes with potential for conflict and unlimited liability.

• Partnership does not involve any form of business ownership

Ratios: Define the term 'liquidity ratios' and provide examples of such ratios used in financial analysis.

• Solvency ratios measure a company's ability to meet long-term obligations, such as debt to equity ratio and interest coverage ratio

• Liquidity ratios measure a company's ability to meet short-term obligations using its liquid assets. Examples of liquidity ratios include current ratio, quick ratio, and cash ratio.

• Profitability ratios measure a company's ability to generate profit, such as return on assets and return on equity

• Efficiency ratios measure how well a company utilizes its assets and liabilities, such as asset turnover ratio and inventory turnover ratio

Ratios: Explain the significance of the debt-to-equity ratio in evaluating a company's financial health.

• It shows the company's customer satisfaction level

• It measures the company's profit margin

• It measures the proportion of a company's financing that comes from debt compared to its equity, indicating the level of financial risk.

• It indicates the company's market share