1) A business has received a credit note. What entries should be made in the ledger accounts? a) Dr purchases returns Cr trade payables b) Dr sales returns Cr trade receivables c) Dr trade payables Cr purchases returns d) Dr trade receivables Cr sales returns 2) The owner of a business paid for his family holiday from the business bank account. Which accounting concept is not being applied? a) accruals b) business entity c) going concern d) prudence 3) Which 2 accounting concepts are applied when a provision for doubtful debts is created? a) accruals and going concern b) accruals and prudence c) consistence and business entity d) consistence and prudence 4) E,F & G are setting up a limited company with a share capital of £180,000. They will invest in shares in the ratio of 2:9:4 respectively. How much will E invest? a) £24,000 b) £48,000 c) £108,000 d) £60,000 5) How will the recovery of a debt, previously written off, affect profit & current assets? a) decrease profit / decrease current assets b) increase profit / decrease current assets c) increase profit / increase current assets d) no effect on profit / increase current assets 6) The purchase of a non-current asset was debited to the purchases account. What type of error is this? a) commission b) omission c) original entry d) principle 7) Which of the following current assets is not included in the calculation of the liquid capital ratio? a) cash & cash equivalents b) inventory c) other receivables d) trade receivables 8) What does the abbreviation 'Ltd' indicate in the name of a company? a) The amount of debentures that can be issued is limited b) The company's capital is limited to a fixed amount c) the shareholders' liability for the company's debts is limited d) The shareholders' liability for the company's debts is unlimited 9) Which is the correct formula for calculating contribution? a) fixed costs divided by variable costs b) fixed costs less variable costs c) sales revenue divided by variable costs d) sales revenue minus variable costs 10) Telephone costs of £1,800 are expected to increase by 12% next year. How much will the telephone costs increase by? a) 1584 b) 2016 c) 216 d) 16 11) Which is the source document for cash being paid into the bank? a) cash receipt b) cheque counterfoil c) paying-in-slip counterfoil d) till roll 12) Which is the definition of a partnership? a) a business owned by shareholders b) a business owned by the public c) a business owned by 2 or more people with limited liability d) a business owned by 2 or more people with unlimited liability 13) Inventory which cost £6,400 can be sold for £7,100 after repairs costing £880. What value should be included in the financial statements?  a) £6,400 b) £6,220 c) £7,100 d) £5,520 14) A business received £6,000 rental income during the year. £600 of this was rent paid in advance and the business was owed £200. What amount should be included in the Income Statement? a) £5,400 b) £5,600 c) £6,400 d) £6,800 15) The owner of a shop has taken goods for her personal use. What is the correct double entry to record this? a) Dr drawings Cr inventory b) Dr inventory Cr drawings c) Dr drawings Cr purchases d) Dr purchases Cr drawings 16) Which is the correct formula to calculate rate of inventory turnover? a) average inventory / cost of sales b) average inventory x 100 / cost of sales c) cost of sales / average inventory d) cost of sales x 100 / average inventory 17) Which is the correct formula to calculate the gearing ratio? a) current liabilities x 100 /non-current liabilities b) current liabilities x 100 / issued share capital + reserves + non-current liabilities c) issued share capital + reserves x 100 / non-current liabilities d) non-current liabilities / issued share capital + reserves + non-current liabilities 18) A company has £400,000 5% debentures. What will be the finance costs for a 6 month period? a) £20,000 b) £40,000 c) £400,000 d) £10,000 19) Which best describes an error of principle? a) double entry is correct but the amount entered is incorrect b) double entry is correct but the class of account is incorrect c) double entry is incorrect as only one entry has been made d) double entry is incorrect as the debit does not equal the credit 20) A company offers a 30% trade discount and a cash discount of 2.5% for payment within 10 days. How much will a customer pay if he buys goods costing £100 and pays in 8 days? a) £67.50 b) £68.25 c) £70.00 d) £97.50

Multiple Choice Year 1 - Set 1

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