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