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