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