$\text{Purchases Account} \quad \text{Dr} \quad K2,500$ $\text{Creditors Account} \quad \text{Cr} \quad K2,500$

$\text{Wages Account} \quad \text{Dr} \quad K4,000$ $\text{Bank Account} \quad \text{Cr} \quad K4,000$

Question 1

Which of the following best describes the purpose of preparing final accounts in financial accounting?

Accepted Answer

To determine the profitability, net worth, and liquidity of a business over a given period.

Question 2

Which accounting convention requires that business transactions are recorded separately from the personal transactions of the owner?

Accepted Answer

Business Entity Convention

Question 3

A company purchased goods on credit for K2,500 on October 2, 2018. Which journal entry correctly records this transaction?

Accepted Answer

$	ext{Purchases Account} \quad 	ext{Dr} \quad K2,500$ 
$	ext{Creditors Account} \quad 	ext{Cr} \quad K2,500$

Question 4

Which of the following is NOT a main element dealt with in the Balance Sheet?

Accepted Answer

Revenue

Question 5

On December 31, ICU Enterprises received a cheque of K246,000 from Chulu. How should this transaction be recorded in the cashbook?

Accepted Answer

Debit the Bank column with K246,000

Question 6

Which statement best describes the Accruals Convention in accounting?

Accepted Answer

Transactions are recorded when they occur, not when cash is received or paid.

Question 7

A business paid wages by cheque amounting to K4,000 on October 19, 2018. What is the correct double entry for this transaction?

Accepted Answer

$	ext{Wages Account} \quad 	ext{Dr} \quad K4,000$ 
$	ext{Bank Account} \quad 	ext{Cr} \quad K4,000$

Question 8

If a business receives a cheque from a customer for K10,000, which account is credited?

Accepted Answer

Debtors Account

Question 9

Which of the following is a use of accounting information for external stakeholders?

Accepted Answer

To assess the profitability and financial position of the business for investment decisions.

Question 10

A business paid for stationery by cash K2,500 on December 6. What is the effect on the accounting equation?

Accepted Answer

Assets decrease by K2,500; no effect on liabilities; equity decreases by K2,500.

Question 11

Which of the following is NOT a recognized international accounting standard or body?

Question 12

Kabubi's account shows a credit invoice of K10,000 on 5/09/18. What does this transaction represent?

Accepted Answer

Kabubi purchased goods on credit worth K10,000.

Question 13

A business received cash from Kinsey K6,500 on December 12. How should this be recorded in the cashbook?

Accepted Answer

Debit the Cash column with K6,500

Question 14

Which of the following best describes the Prudence principle in accounting?

Accepted Answer

Anticipate no profits, but provide for all possible losses.

Question 15

A business withdrew cash from the bank for official use K1,250. What is the correct double entry?

Accepted Answer

$	ext{Cash Account} \quad 	ext{Dr} \quad K1,250$ 
$	ext{Bank Account} \quad 	ext{Cr} \quad K1,250$

Question 16

Which of the following is a correct statement about the preparation of a bank reconciliation statement?

Accepted Answer

It explains the differences between the cashbook balance and the bank statement balance.

Question 17

A partnership shares profits equally among three partners. If the profit for the year is K60,000, how much does each partner receive?

Accepted Answer

$\frac{K60,000}{3} = K20,000$

Question 18

Which of the following transactions would be recorded in the cash column of a three-column cashbook?

Accepted Answer

Payment for stationery by cash

Question 19

A company proposes an end-of-year dividend of 5% on share capital of K40,000. What is the dividend amount?

Accepted Answer

$K40,000 	imes 0.05 = K2,000$

Question 20

If a business has assets of K178,000 and liabilities of K67,000, what is the owner's equity?

Accepted Answer

$K178,000 - K67,000 = K111,000$

Financial Accounting Assignments and Core Concepts Study Guide

Study Guide - Practice Questions