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