SS2 Account
  • 1. Bad debts are classified as a _______.
A) Liability
B) Capital expenditure
C) Revenue expenditure
D) Asset
  • 2. The accounting treatment of bad debts is to _______.
A) Add to purchases
B) Add to sales
C) Deduct from debtors
D) Add to liabilities
  • 3. Closing entries are made to transfer balances of _______.
A) Nominal accounts
B) Capital and drawings
C) Assets and liabilities
D) Real accounts
  • 4. The purpose of closing stock is to _______.
A) Increase liabilities
B) Determine cost of goods sold
C) Increase purchases
D) Reduce sales
  • 5. Provision for doubtful debts is created to account for _______.
A) Sales returns
B) Cash discount
C) Debts likely to be uncollectible
D) Credit purchases
  • 6. Provision for doubtful debts appears in the _______.
A) Balance sheet
B) Profit and loss account
C) Trading account
D) Cashbook
  • 7. Increase in provision for doubtful debts is treated as _______.
A) An asset
B) An expense
C) A liability
D) An income
  • 8. Decrease in provision for doubtful debts is treated as _______.
A) Expense
B) Loss
C) Liability
D) Income
  • 9. Provision for discount allowed is made on _______.
A) Creditors
B) Purchases
C) Cash sales
D) Debtors
  • 10. Provision for discount received is made on _______.
A) Debtors
B) Creditors
C) Sales
D) Purchases
  • 11. Provision for discount allowed is shown in the _______.
A) Trading account
B) P&L account as an expense
C) Balance sheet as a liability
D) Balance sheet as an asset
  • 12. Provision for discount received is treated as _______.
A) Income
B) Asset
C) Expense
D) Liability
  • 13. Accrued expenses are recorded as _______.
A) Current liability
B) Long-term liability
C) Equity
D) Current asset
  • 14. Prepaid expenses are recorded as _______.
A) Capital
B) Current liability
C) Current asset
D) Income
  • 15. Income received in advance is classified as _______.
A) Expense
B) Liability
C) Asset
D) Capital
  • 16. Accrued income is classified as _______.
A) Expense
B) Asset
C) Liability
D) Capital
  • 17. Depreciation is charged because _______.
A) Assets appreciate with time
B) Increase in liabilities
C) Assets lose value with use
D) Government requirement only
  • 18. Depreciation is an example of _______.
A) Revenue expenditure
B) Prepayment
C) Deferred revenue
D) Capital expenditure
  • 19. The straight-line method assumes _______.
A) Constant depreciation yearly
B) No depreciation
C) Increasing depreciation
D) Declining depreciation
  • 20. Under reducing balance method, depreciation is charged on _______.
A) Asset cost only
B) Book value
C) Scrap value
D) Sales value
  • 21. The scrap value means _______.
A) Salvage value at end of asset life
B) Purchase price
C) Market value of asset
D) Replacement cost
  • 22. Straight-line depreciation formula is _______.
A) Scrap value × Rate
B) Cost × Rate
C) Net book value × Rate
D) (Cost – Scrap value) ÷ Useful life
  • 23. If depreciation is undercharged, net profit will be _______.
A) Overstated
B) Zero
C) Understated
D) Correct
  • 24. Machinery is an example of _______.
A) Liability
B) Current asset
C) Fixed asset
D) Intangible asset
  • 25. Depreciation is recorded in the _______.
A) Trading account
B) Cash book
C) Profit and loss account
D) Balance sheet only
  • 26. Closing stock is recorded in the _______.
A) Trading account only
B) Trading account and balance sheet
C) Balance sheet only
D) Cash book
  • 27. Carriage inwards is added to _______.
A) Expenses
B) Sales
C) Debtors
D) Purchases
  • 28. Carriage outwards is treated as _______.
A) Current liability
B) Distribution expense
C) Cost of goods sold
D) Trading expense
  • 29. A trial balance is prepared to check _______.
A) Cash balance
B) Debtors only
C) Numerical accuracy of books
D) Assets only
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