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