Q. How is straight-line depreciation calculated for an asset costing $10,000 with a useful life of 5 years?
A.
$1,000 per year
B.
$2,000 per year
C.
$500 per year
D.
$1,500 per year
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Solution
Straight-line depreciation is calculated by dividing the cost of the asset by its useful life: $10,000 / 5 years = $2,000 per year.
Correct Answer:
A
— $1,000 per year
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Q. If a sole trader has a trial balance showing total debits of $50,000 and total credits of $48,000, what is the amount of the discrepancy?
A.
$1,000
B.
$2,000
C.
$3,000
D.
$4,000
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Solution
The discrepancy is $2,000, calculated as total debits ($50,000) minus total credits ($48,000).
Correct Answer:
B
— $2,000
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Q. If a sole trader has total assets of $50,000 and total liabilities of $30,000, what is the owner's equity?
A.
$20,000
B.
$30,000
C.
$50,000
D.
$80,000
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Solution
Owner's equity is calculated as Total Assets minus Total Liabilities, which is $50,000 - $30,000 = $20,000.
Correct Answer:
A
— $20,000
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Q. If a sole trader purchases equipment for $5,000 and expects it to last 5 years with no salvage value, what is the annual depreciation using straight-line method?
A.
$1,000
B.
$500
C.
$2,500
D.
$1,500
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Solution
Annual depreciation using the straight-line method is calculated as Cost divided by Useful Life, which is $5,000 / 5 = $1,000.
Correct Answer:
A
— $1,000
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Q. If a sole trader's net profit is $20,000 and drawings are $5,000, what is the closing capital?
A.
$15,000
B.
$20,000
C.
$25,000
D.
$30,000
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Solution
Closing capital is calculated as net profit plus opening capital minus drawings. Assuming opening capital is $10,000, it would be $20,000 + $10,000 - $5,000 = $25,000.
Correct Answer:
C
— $25,000
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Q. If the closing inventory is valued at $10,000 and the cost of goods sold is $40,000, what is the gross profit if sales are $60,000?
A.
$20,000
B.
$10,000
C.
$30,000
D.
$50,000
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Solution
Gross Profit is calculated as Sales minus Cost of Goods Sold, which is $60,000 - $40,000 = $20,000.
Correct Answer:
A
— $20,000
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Q. If the trial balance shows total debits of $100,000 and total credits of $95,000, what is the amount of the discrepancy?
A.
$5,000 debit
B.
$5,000 credit
C.
$10,000 debit
D.
$10,000 credit
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Solution
The discrepancy is the difference between total debits and total credits, which is $100,000 - $95,000 = $5,000 debit.
Correct Answer:
A
— $5,000 debit
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Q. What is the effect of an overstatement of closing inventory on the profit for the year?
A.
Understated profit
B.
Overstated profit
C.
No effect
D.
Increased expenses
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Solution
An overstatement of closing inventory leads to an understatement of cost of goods sold, resulting in overstated profit.
Correct Answer:
B
— Overstated profit
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Q. What is the journal entry for recording a cash sale of $1,000?
A.
Debit Cash $1,000, Credit Sales $1,000
B.
Debit Sales $1,000, Credit Cash $1,000
C.
Debit Cash $1,000, Credit Accounts Receivable $1,000
D.
Debit Accounts Receivable $1,000, Credit Cash $1,000
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Solution
The correct journal entry for a cash sale is to debit Cash and credit Sales.
Correct Answer:
A
— Debit Cash $1,000, Credit Sales $1,000
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Q. What is the journal entry for recording a credit sale of $2,000?
A.
Debit Accounts Receivable $2,000, Credit Sales $2,000
B.
Debit Sales $2,000, Credit Accounts Receivable $2,000
C.
Debit Cash $2,000, Credit Sales $2,000
D.
Debit Sales $2,000, Credit Cash $2,000
Show solution
Solution
The correct journal entry for a credit sale is to debit Accounts Receivable and credit Sales.
Correct Answer:
A
— Debit Accounts Receivable $2,000, Credit Sales $2,000
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Q. What is the journal entry for recording a purchase of inventory on credit for $3,000?
A.
Debit Inventory $3,000, Credit Accounts Payable $3,000
B.
Debit Accounts Payable $3,000, Credit Inventory $3,000
C.
Debit Purchases $3,000, Credit Cash $3,000
D.
Debit Cash $3,000, Credit Purchases $3,000
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Solution
The correct journal entry is to debit Inventory and credit Accounts Payable, reflecting the increase in inventory and the obligation to pay.
Correct Answer:
A
— Debit Inventory $3,000, Credit Accounts Payable $3,000
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Q. What is the journal entry for recording depreciation expense of $500?
A.
Debit Depreciation Expense $500, Credit Accumulated Depreciation $500
B.
Debit Accumulated Depreciation $500, Credit Depreciation Expense $500
C.
Debit Depreciation Expense $500, Credit Cash $500
D.
Debit Cash $500, Credit Depreciation Expense $500
Show solution
Solution
The correct journal entry for recording depreciation expense is to debit Depreciation Expense and credit Accumulated Depreciation.
Correct Answer:
A
— Debit Depreciation Expense $500, Credit Accumulated Depreciation $500
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Q. What is the journal entry for recording sales revenue of $5,000?
A.
Debit Cash $5,000, Credit Sales Revenue $5,000
B.
Debit Sales Revenue $5,000, Credit Cash $5,000
C.
Debit Accounts Receivable $5,000, Credit Sales Revenue $5,000
D.
Debit Sales Revenue $5,000, Credit Accounts Receivable $5,000
Show solution
Solution
The correct journal entry is to debit Cash and credit Sales Revenue, reflecting the increase in cash from sales.
Correct Answer:
A
— Debit Cash $5,000, Credit Sales Revenue $5,000
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Q. What method of inventory valuation uses the most recent costs for the cost of goods sold?
A.
FIFO
B.
LIFO
C.
Weighted Average
D.
Specific Identification
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Solution
The LIFO (Last In, First Out) method uses the most recent costs for the cost of goods sold.
Correct Answer:
B
— LIFO
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Q. Which accounting standard governs the preparation of financial statements in many countries?
A.
IFRS
B.
GAAP
C.
IAS
D.
FASB
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Solution
IFRS (International Financial Reporting Standards) governs the preparation of financial statements in many countries.
Correct Answer:
A
— IFRS
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Q. Which of the following is a characteristic of a sole trader's final accounts?
A.
Separate legal entity
B.
Unlimited liability
C.
Complex reporting requirements
D.
Multiple owners
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Solution
A sole trader has unlimited liability, meaning personal assets can be used to settle business debts.
Correct Answer:
B
— Unlimited liability
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