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