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SS2 Account
Contributed by: Obalanlege
  • 1. Bad debts are classified as a _______.
A) Liability
B) Capital expenditure
C) Asset
D) Revenue expenditure
  • 2. The accounting treatment of bad debts is to _______.
A) Add to liabilities
B) Add to sales
C) Deduct from debtors
D) Add to purchases
  • 3. Closing entries are made to transfer balances of _______.
A) Nominal accounts
B) Real accounts
C) Capital and drawings
D) Assets and liabilities
  • 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) Credit purchases
B) Sales returns
C) Cash discount
D) Debts likely to be uncollectible
  • 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) A liability
B) An expense
C) An asset
D) An income
  • 8. Decrease in provision for doubtful debts is treated as _______.
A) Liability
B) Expense
C) Loss
D) Income
  • 9. Provision for discount allowed is made on _______.
A) Purchases
B) Cash sales
C) Debtors
D) Creditors
  • 10. Provision for discount received is made on _______.
A) Creditors
B) Sales
C) Debtors
D) Purchases
  • 11. Provision for discount allowed is shown in the _______.
A) Trading account
B) Balance sheet as a liability
C) Balance sheet as an asset
D) P&L account as an expense
  • 12. Provision for discount received is treated as _______.
A) Expense
B) Income
C) Asset
D) Liability
  • 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) Current asset
B) Income
C) Current liability
D) Capital
  • 15. Income received in advance is classified as _______.
A) Capital
B) Expense
C) Asset
D) Liability
  • 16. Accrued income is classified as _______.
A) Capital
B) Liability
C) Expense
D) Asset
  • 17. Depreciation is charged because _______.
A) Increase in liabilities
B) Assets lose value with use
C) Government requirement only
D) Assets appreciate with time
  • 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) Constant depreciation yearly
C) Declining depreciation
D) No 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) Replacement cost
B) Salvage value at end of asset life
C) Purchase price
D) Market value of asset
  • 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) Correct
B) Understated
C) Zero
D) Overstated
  • 24. Machinery is an example of _______.
A) Current asset
B) Intangible asset
C) Liability
D) Fixed asset
  • 25. Depreciation is recorded in the _______.
A) Profit and loss account
B) Trading account
C) Cash book
D) Balance sheet only
  • 26. Closing stock is recorded in the _______.
A) Trading account only
B) Trading account and balance sheet
C) Cash book
D) Balance sheet only
  • 27. Carriage inwards is added to _______.
A) Purchases
B) Debtors
C) Sales
D) Expenses
  • 28. Carriage outwards is treated as _______.
A) Cost of goods sold
B) Trading expense
C) Current liability
D) Distribution expense
  • 29. A trial balance is prepared to check _______.
A) Assets only
B) Numerical accuracy of books
C) Debtors only
D) Cash balance
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