Question 1

Which of the following best describes the primary purpose of financial accounting for a sole trader?

Accepted Answer

To report the financial position and performance to external users such as investors and creditors.

Question 2

Which of the following is NOT considered a fundamental element of the financial statements?

Accepted Answer

Inventory Valuation Method

Question 3

A business purchased inventory worth N$10,000 on credit. Which journal entry correctly records this transaction?

Accepted Answer

Debit Inventory N$$10,000; Credit Accounts Payable N10$$,000

Question 4

Which equation represents the fundamental accounting equation?

Accepted Answer

$$Assets = Liabilities + Owner\'s Equity$$

Question 5

If a sole trader starts a business by depositing N$50,000 cash into a business bank account, what is the effect on the accounting equation?

Accepted Answer

Increase assets and increase owner\'s equity

Question 6

Which of the following best describes the purpose of closing entries at the end of an accounting period?

Accepted Answer

To transfer balances from temporary accounts to permanent accounts

Question 7

A business has the following balances at year-end: Assets N$$120,000, Liabilities N45$$,000. What is the owner\'s equity?

Accepted Answer

$$Owner\'s\ Equity = Assets - Liabilities = N\120$$,000 - N\$$45,000 = N\75$$,000$

Question 8

Which of the following is a correct example of a control account?

Accepted Answer

Accounts Receivable Control Account

Question 9

A business discovers that N$2,000 of its trade receivables are unlikely to be collected. What is the correct journal entry to record this bad debt?

Accepted Answer

Debit Bad Debts Expense N$$2,000; Credit Trade Receivables N2$$,000

Question 10

Which of the following ratios is used to measure a company\'s ability to pay its short-term obligations?

Accepted Answer

Current Ratio

Question 11

A business has current assets of N$$40,000 and current liabilities of N20$$,000. Calculate the current ratio.

Accepted Answer

$$Current\ Ratio = \frac{Current\ Assets}{Current\ Liabilities} = \frac{N\40$$,000}{N\$$20,000} = 2:1$$

Question 12

Which of the following statements about bank reconciliation is TRUE?

Accepted Answer

Bank reconciliation helps identify errors and omissions in both the cash book and bank statement.

Question 13

A sole trader\'s trial balance shows: Sales N$$100,000, Purchases N60$$,000, Expenses N$20,000. What is the profit for the period?

Accepted Answer

$$Profit = Sales - Purchases - Expenses = N\100$$,000 - N\$$60,000 - N\20$$,000 = N\$$20,000$$

Question 14

Which of the following is an example of an adjusting entry at year-end?

Accepted Answer

Recognizing accrued expenses such as unpaid salaries

Question 15

A business has the following balances: Opening Inventory N$$5,000, Purchases N20$$,000, Closing Inventory N$7,000. Calculate the cost of goods sold (COGS).

Accepted Answer

$$COGS = Opening\ Inventory + Purchases - Closing\ Inventory = N\5$$,000 + N\$$20,000 - N\7$$,000 = N\$$18,000$$

Question 16

Which of the following is NOT a feature of single and incomplete records?

Accepted Answer

All transactions are recorded using double-entry bookkeeping.

Question 17

Which of the following is a correct definition of a journal entry?

Accepted Answer

A record of a business transaction showing which accounts are debited and credited.

Question 18

A business receives N$5,000 from a customer for services provided. Which account is credited?

Accepted Answer

Service Revenue

Question 19

Which of the following is a key reason for preparing financial statements at the end of an accounting period?

Accepted Answer

To provide a summary of the financial position and performance for decision-making.

Principles and Fundamentals of Financial Accounting: Syllabus and Study Guide

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