1) A business has only one shareholder and is not allowed to sell shares to the public. Which type of business is this? a) partnership b) private limited company c) public limited company d) sole trader 2) A business purchases machinery on credit. Which book of prime entry will this be recorded in? a) sales journal b) purchases journal c) general journal d) purchses returns journal 3) A business returns goods to S Rowe, a credit supplier. Which book of prime entry will this be recorded in? a) sales journal b) purchases journal c) general journal d) purchses returns journal 4) A sole trader paid his personal phone bill using a business cheque. To comply with the accounting concept of business entity which account should the payment be debited to? a) purchases b) drawings c) telephone d) bank 5) Inventory must be valued at the lower of cost and net realisable value. Which accounting concept is being applied? a) accruals b) business entity c) consistency d) prudence 6) A sales invoice for £198 has been entered incorrectly in the sales journal as £189. This is an example of an error of: a) commission b) omission c) original entry d) principle 7) How do you calculate straight-line depreciation? a) cost - residual value / estimated useful life b) cost + residual value / estimated useful life c) estimated useful life / cost - residual value d) estimated useful life / cost + residual value 8) How do you calculate the trade payables period? a) cash purchases x 365 / trade payables b) credit purchases x 365 / trade payable c) trade payables x 365 / cash purchases d) trade payables x 365 / credit purchases 9) Which of the following should be included in a statement of changes in equity? a) issue of ordinary shares, debenture interest, profit for the year after tax b) issue of ordinary shares, debenture interest, profit for the year before tax c) issue of ordinary shares, dividends paid, profit for the year after tax d) issue of ordinary shares, dividends paid, profit for the year before tax 10) How do you calculate the liquid capital ratio? a) current asset / current liabilities b) current assets - inventory / current liabilities c) current assets / current liabilities - inventory d) inventory / current assets - current liabilities 11) How do you calculate the current ratio? a) current asset / current liabilities b) current assets - inventory / current liabilities c) current assets / current liabilities - inventory d) inventory / current assets - current liabilities 12) A sales invoice has been incorrectly debited to the account of G Brown instead of B Brown. What type of error is this? a) commission b) original entry c) principle d) reversal 13) An overdrawn amount of cash will appear as: a) Cr in the bank statement Dr in the cash book b) Dr in the bank statement Cr in the cash book c) Dr in the bank statement Dr in the cash book d) Cr in the bank statement Cr in the cash book 14) A £20 calculator will be treated as an expense rather than a non-current asset. This is an example of which accounting concept? a) business entity b) materiality c) realisation d) prudence 15) Transactions should not be recorded until legal title passes from seller to buyer. This is an example of which accounting concept? a) business entity b) materiality c) realisation d) prudence 16) A limited company has £100,000 share capital made up of shares with a nominal value of 25 pence. What number of shares does it have? a) 100,000 b) 400,000 c) 25,000 d) 50,000 17) If 10,000 shares with a nominal value of 50p are sold for 60p, what will the entry be in the Statement of Changes in Equity? a) Share capital £6,000 b) share capital £10,000 share premium £2,000 c) Share capital £10,000 d) share capital £5,000, share premium £1,000 18) To reconcile the balance on a bank statement to the balance on a cash book you must a) deduct uncleared payments and add uncleared receipts b) add uncleared payments and deduct uncleared receipts c) add uncleared payments and uncleared receipts d) deduct uncleared payments and uncleared receipts 19) What is the trade receivables days ratio? a) credit purchases x 365 / trade payables b) trade receivables x 365 / credit sales c) credit sales x 365 / trade receivables d) trade payables x 365 / credit purchases 20) What is the trade payables days ratio? a) credit purchases x 365 / trade payables b) trade receivables x 365 / credit sales c) credit sales x 365 / trade receivables d) trade payables x 365 / credit purchases

Multiple Choice Year 1 - Set 2

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