SS1 Objective Type C

TYPE C
1) Which statement is true about financial accounting?

a. It focuses on the future financial performance of a company.
b. It reports financial information to investors and creditors.
c. It is used primarily for internal decision-making.
d. It is not governed by any standards or regulations.
2) Which financial statement reports a company's revenues and expenses over a period of time?
a. Balance sheet
b. Income statement
c. Statement of cash flows
d. Statement of retained earnings
3) Which of the following represents a liability item in the Balance Sheet?

a. Cash at bank
b. Capital introduced by the owner
c. Prepaid expenses
d. Office furniture
4) What is the primary purpose of the Balance Sheet?

a. To calculate the net profit or loss
b. To list all revenue and expenses
c. To summarize the financial position of a business
d. To record all financial transactions of the business
5) In the Balance Sheet, which side represents assets?

a. Debit side
b. Credit side
c. Both debit and credit sides
d. Neither debit nor credit side
6) Which of the following is a primary function of bookkeeping?

a. Analyzing market trends
b. Managing human resources
c. Recording financial transactions
d. Developing marketing strategies
7) In bookkeeping, what is the ledger?

a. A summary of all financial transactions
b. The original source document
c. A record of accounts and their balances
d. A statement of cash flows
8) Financial accounting is primarily concerned with:

a. Recording financial transactions
b. Reporting financial information to external users
c. Analyzing financial statements
d. Budgeting and forecasting
9) Which of the following items is included in the credit side of the Profit and Loss Account?
a. Purchases
b. Sales returns
c. Carriage inwards
d. Discounts allowed
10) What does a negative balance in the Profit and Loss Account indicate?
a. Net profit
b. Net loss
c. Gross profit
d. Gross loss
11) What is the purpose of preparing a Profit and Loss Account?

a. To determine the financial position of a business
b. To calculate the net profit or loss from trading activities
c. To list all assets and liabilities of a business
d. To calculate the value of closing stock
12) Which of the following best describes financial accounting?

a. Recording financial transactions
b. Reporting financial information to external users
c. Analyzing financial statements
d. Budgeting and forecasting
13) What is the primary purpose of financial accounting?

a. To aid management decision-making
b. To communicate financial information to internal users
c. To provide financial information to external users
d. To prepare tax returns
14) The balance sheet equation is represented as:

a. Assets = Liabilities + Equity
b. Assets + Liabilities = Equity
c. Liabilities = Assets - Equity
d. Equity = Assets – Liabilities
15) External auditors are primarily concerned with:

a. Preparing financial statements
b. Providing investment advice
c. Ensuring the accuracy of financial statements
d. Monitoring day-to-day operations
16) A company issues a cheque of $500 for rent payment. Which subsidiary book will record this
transaction?
a. Cash Book
b. Sales Book
c. Purchase Book
d. Journal Proper
17) What type of source document is used when cash is received from a customer?
a. Purchase order
b. Sales invoice
c. Receipt voucher
d. Credit note
18) When goods are sold on credit, what document is issued to the customer?
a. Purchase order
b. Sales invoice
c. Debit note
d. Goods received note
19) What is the purpose of transferring the net profit to the Capital Account?
a. To calculate the gross profit
b. To calculate the net worth
c. To calculate the cost of goods sold
d. To increase the owner's equity
20) Which of the following items is included in the Trading Account?

a. Rent expense
b. Interest income
c. Sales revenue
d. Capital introduced by the owner
21) How is the net profit or loss calculated in the Trading Account?
a. Gross profit - Expenses
b. Sales - Expenses
c. Gross profit + Expenses
d. Sales + Expenses
22) What is the purpose of preparing a Trading Account?

a. To determine the financial position of a business
b. To calculate the net profit or loss from trading activities
c. To list all assets and liabilities of a business
d. To calculate the value of closing stock
23) What is the primary use of a trial balance?

a. To identify errors in recording transactions
b. To prepare financial statements
c. To calculate the net profit or loss
d. To summarize financial transactions
24) Which accounts are usually included in a trial balance?

a. Only revenue accounts
b. Only expense accounts
c. All ledger accounts
d. Only cash accounts
25) What is the purpose of a trial balance in accounting?

a. To summarize financial transactions
b. To prepare financial statements
c. To ensure that debits equal credits
d. To record daily transactions
26) How is a trial balance usually prepared?

a. By listing all transactions chronologically
b. By totaling all revenue and expenses
c. By listing all ledger account balances
d. By calculating profit and loss
27) What does a trial balance indicate if it balances?

a. There are no errors in the ledger accounts
b. There are errors in the ledger accounts
c. The business is profitable
d. The business is facing losses
28) When is a trial balance typically prepared?

a. At the beginning of the accounting period
b. At the end of the accounting period
c. Midway through the accounting period
d. At random intervals during the accounting period
29) In double-entry bookkeeping, what is the role of the ledger in relation to subsidiary books?
a) To summarize transactions recorded in subsidiary books
b) To replace subsidiary books
c) To record transactions in chronological order
d) To prepare financial statements directly
30) Which subsidiary book is used to record cash receipts from debtors?
a) Sales day book
b) Purchases day book
c) Cash book
d) Petty cash book
31) What is the purpose of the cash book?

a) To record all financial transactions
b) To record only cash transactions
c) To prepare financial statements
d) To record only non-cash transactions
32) When posting from the cash book to the ledger, which accounts are affected?
a) Cash account and bank account
b) Cash account and expenses account
c) Sales account and debtors account
d) Purchases account and creditors account
33) How are entries from the sales day book posted to the ledger?
a) Directly to the relevant accounts
b) To a suspense account
c) To the bank account only
d) To the capital account only
34) Which subsidiary book is used to record cash payments for expenses?
a) Sales day book
b) Purchases day book
c) Cash book
d) Petty cash book
35) What is the purpose of the petty cash book?

a) To record major cash transactions
b) To record small, routine expenditures
c) To record credit sales
d) To record purchases returns
36) What is the purpose of the sales returns book?

a) To record goods returned by customers
b) To record goods purchased on credit
c) To record cash sales
d) To record discounts received from suppliers
37) What is the purpose of a quantity discount?

a) To encourage early payment
b) To reward bulk purchases
c) To discourage bulk purchases
d) To penalize late payment
38) Which type of discount is deducted from the list price before invoicing?
a) Trade discount
b) Cash discount
c) Quantity discount
d) Bulk discount
39) If the revenue is $100,000 and the expenses are $70,000, what is the net profit?
a. $30,000
b. $40,000
c. $50,000
d. $60,000
40) Calculate the net loss: Revenue = $60,000, Expenses = $70,000.

a. $10,000
b. $20,000
c. $60,000
d. $130,000
SECTION B: THEORY
(Answer all questions)
1. a) List and explain three classifications of ledger accounts {2 marks each}
b) List any six items found in the asset and liability sides of the balance sheet of a sole proprietor {6
marks}
2. a) What is the trial balance? {2 marks}

b) Define the following concepts: (i) Periodicity (ii) Historical cost (iii) Prudence {2 marks each}
3. The following trial balance of ZINOLESKY Enterprise Ltd was extracted from his books on 30 th of
April, 2016. From it prepare the trading, profit and loss account for the year ended and a balance
sheet as at that date.
Dr Cr
# #
Sales 186,000
Purchases 115,560
Stock 1st May, 2015 37,760
Carriage outwards 3,260
Carriage inwards 2,340
Returns 4,400 3,550
Salaries and Wages 24,470
Motor expenses 6,640
Rent 5,760
Sundry expenses 12,020
Motor vehicle 24,000
Fixtures and fittings 6,000
Debtors 45,770
Creditors 30,450
Cash 38,760
Bank 1,200
Drawings 20,500
Capital 128,440
348,440 348,440
Stock at 30th April, 2016 was #49,980

SS1 Objective Type C

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TYPE C

1) Which statement is true about financial accounting?

3) Which of the following represents a liability item in the Balance Sheet?

4) What is the primary purpose of the Balance Sheet?

5) In the Balance Sheet, which side represents assets?

6) Which of the following is a primary function of bookkeeping?

7) In bookkeeping, what is the ledger?

8) Financial accounting is primarily concerned with:

11) What is the purpose of preparing a Profit and Loss Account?

12) Which of the following best describes financial accounting?

13) What is the primary purpose of financial accounting?

14) The balance sheet equation is represented as:

15) External auditors are primarily concerned with:

20) Which of the following items is included in the Trading Account?

22) What is the purpose of preparing a Trading Account?

23) What is the primary use of a trial balance?

24) Which accounts are usually included in a trial balance?

25) What is the purpose of a trial balance in accounting?

26) How is a trial balance usually prepared?

27) What does a trial balance indicate if it balances?

28) When is a trial balance typically prepared?

31) What is the purpose of the cash book?

35) What is the purpose of the petty cash book?

36) What is the purpose of the sales returns book?

37) What is the purpose of a quantity discount?

40) Calculate the net loss: Revenue = $60,000, Expenses = $70,000.

2. a) What is the trial balance? {2 marks}

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