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BGCSE Bookkeeping & Accounts study materials
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BGCSE Bookkeeping & Accounts practice questions

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Question 1Accounting concepts, principles and the accounting equation

Which accounting concept requires that a business's financial statements contain only transactions that can be measured in monetary terms?

  1. The matching concept
  2. The business entity concept
  3. The money measurement concept Correct answer.
  4. The going concern concept

Explanation

The money measurement concept states that accounting records only those items that can be expressed in monetary units. Events such as the hiring of a skilled manager are excluded because no reliable money value can be attached. This keeps records objective and comparable.

Question 2Accounting concepts, principles and the accounting equation

A trader keeps his private household electricity bill out of the business accounts. Which concept is being applied?

  1. Consistency
  2. Realisation
  3. Prudence
  4. The business entity concept Correct answer.

Explanation

The business entity concept treats the business as separate from its owner, so personal income and expenses are not recorded in the business books. The owner's private electricity payment is therefore excluded. If the owner pays it from business cash, it is recorded as drawings instead.

Question 3Accounting concepts, principles and the accounting equation

Using the accounting equation, what is owner's equity when assets are $84,000 and liabilities are $31,000?

  1. $84,000
  2. $115,000
  3. $53,000 Correct answer.
  4. $31,000

Explanation

The accounting equation is assets = liabilities + owner's equity, so equity equals assets minus liabilities. Here $84,000 minus $31,000 gives $53,000. Equity represents the owner's residual interest after outside claims are met.

Question 4Accounting concepts, principles and the accounting equation

Which pair of accounts is increased by a debit entry?

  1. Drawings and capital
  2. Revenue and liabilities
  3. Capital and revenue
  4. Expenses and assets Correct answer.

Explanation

Debits increase assets and expenses, while credits increase liabilities, capital and revenue. Drawings also increase with a debit but capital increases with a credit. Recognising these normal balances is the basis of double-entry posting.

Question 5Accounting concepts, principles and the accounting equation

Which statement best describes the dual aspect concept?

  1. Every transaction affects profit in two ways
  2. Each account must be balanced at the year end
  3. Assets must always equal liabilities
  4. Every transaction has two equal effects on the accounting equation Correct answer.

Explanation

The dual aspect concept holds that every transaction produces two effects of equal value, which keeps the accounting equation in balance. For example, buying equipment for cash raises one asset and lowers another by the same amount. This is the foundation of double-entry bookkeeping.

Question 6Accounting concepts, principles and the accounting equation

Goods costing $600 are sold on credit for $900. Under the realisation concept, which amount is recognised as revenue at the time of sale?

  1. $900 Correct answer.
  2. $600
  3. $1,500
  4. $300

Explanation

The realisation concept recognises revenue when the sale is made and the amount is reasonably certain, regardless of when cash is received. The sales figure is therefore the agreed selling price of $900. The $600 cost is matched separately as cost of sales.

Question 7Accounting concepts, principles and the accounting equation

A business buys a delivery van for $20,000 cash. What is the effect on the accounting equation?

  1. Assets increase by $20,000 and liabilities increase by $20,000
  2. One asset increases by $20,000 and another asset decreases by $20,000 Correct answer.
  3. Assets decrease by $20,000 and equity decreases by $20,000
  4. Assets increase by $20,000 and equity increases by $20,000

Explanation

Paying cash for a van exchanges one asset for another of equal value, so total assets are unchanged and only their composition alters. Equity and liabilities are unaffected because there is no profit, owner contribution or borrowing. The equation therefore remains balanced.

Question 8Accounting concepts, principles and the accounting equation

A firm values closing inventory at the lower of cost and net realisable value. Which concept does this best illustrate?

  1. Materiality
  2. Going concern
  3. Consistency
  4. Prudence Correct answer.

Explanation

Prudence requires that assets are not overstated and that anticipated losses are recognised rather than anticipated gains. Valuing inventory at the lower of cost and net realisable value prevents an inflated asset and profit figure. It is a cautious approach to uncertainty.

Question 9Accounting concepts, principles and the accounting equation

A business changes from straight-line to reducing-balance depreciation without explanation, making this year's figures hard to compare with last year's. Which concept has been breached?

  1. Business entity
  2. Dual aspect
  3. Consistency Correct answer.
  4. Money measurement

Explanation

Consistency requires that accounting methods are applied uniformly from one period to the next so that results can be compared meaningfully. A change of method without disclosure and justification undermines comparability. Where a change is justified, it should be disclosed and its effect explained.

Question 10Accounting concepts, principles and the accounting equation

Which item would be recorded in the books of a business under the money measurement concept?

  1. The planned future expansion of the firm
  2. The excellent reputation of the owner
  3. A legally binding purchase of goods on credit Correct answer.
  4. The loyalty of the workforce

Explanation

A credit purchase has an objectively measurable money value and is therefore recorded. Reputation, staff loyalty and future plans lack a reliable monetary measure at the transaction date. They may matter greatly to the business but fall outside the money measurement concept.

Question 11Accounting concepts, principles and the accounting equation

Assets total $150,000 and liabilities total $60,000. The owner then introduces additional capital of $25,000 in cash. What is owner's equity immediately afterwards?

  1. $90,000
  2. $65,000
  3. $125,000
  4. $115,000 Correct answer.

Explanation

Equity before the contribution is $150,000 minus $60,000, which equals $90,000. A cash capital injection raises both assets and equity by $25,000, giving equity of $115,000. Liabilities are unchanged by the contribution.

Question 12Accounting concepts, principles and the accounting equation

Which of the following is a liability of a business?

  1. A bank loan repayable in three years Correct answer.
  2. Inventory awaiting sale
  3. Motor vehicles owned by the business
  4. Cash held in the bank current account

Explanation

A liability is a present obligation to transfer economic benefits to another party in future. A bank loan repayable in three years creates such an obligation and is therefore a liability. Vehicles, cash and inventory are resources owned or controlled by the business, making them assets.

Question 13Accounting concepts, principles and the accounting equation

A business receives a $4,000 bank loan and immediately uses it to buy equipment. What is the net effect on total assets?

  1. Decrease of $4,000
  2. No change Correct answer.
  3. Increase of $8,000
  4. Increase of $4,000

Explanation

Receiving the loan raises cash by $4,000 and liabilities by $4,000. Buying the equipment then converts that cash into an asset of equal value, so total assets end unchanged at their original level. The only lasting effect is the new liability matched by the equipment asset.

Question 14Accounting concepts, principles and the accounting equation

An accountant records a $2 stapler as an expense rather than as a non-current asset. Which concept justifies this treatment?

  1. Going concern
  2. Realisation
  3. Materiality Correct answer.
  4. Prudence

Explanation

Materiality allows items too small to influence users' decisions to be treated in the simplest practical way. A $2 stapler is immaterial, so expensing it rather than depreciating an asset is acceptable. The concept avoids unnecessary cost and complexity in the accounts.

Question 15Accounting concepts, principles and the accounting equation

Which statement about the going concern concept is correct?

  1. It assumes the business will continue in operation for the foreseeable future Correct answer.
  2. It means profits must be distributed to the owner each year
  3. It requires all liabilities to be settled within one year
  4. It requires assets to be valued at their forced sale price

Explanation

Going concern assumes the entity will continue trading for the foreseeable future without intending or needing to liquidate. This justifies recording assets at cost and depreciating them over their useful lives rather than at break-up values. If the assumption fails, a different basis of preparation is required.

Question 16Accounting concepts, principles and the accounting equation

A firm sells goods on credit in December but receives payment in January. Under which concept is the sale recorded in December?

  1. Accrual Correct answer.
  2. Consistency
  3. Prudence
  4. Business entity

Explanation

The accrual concept records revenue when it is earned and expenses when they are incurred, not when cash changes hands. Because the sale was made in December, it belongs to December's accounts even though cash arrives in January. The unpaid amount is shown as a receivable at the year end.

Question 17Accounting concepts, principles and the accounting equation

A trader's assets are $72,000 and capital is $45,000. What are the liabilities?

  1. $27,000 Correct answer.
  2. $117,000
  3. $72,000
  4. $45,000

Explanation

Rearranging the accounting equation gives liabilities = assets minus capital. Subtracting $45,000 from $72,000 gives $27,000. This residual represents the claims of outsiders against the business's resources.

Question 18Accounting concepts, principles and the accounting equation

A machine bought for $12,000 is expected to have a scrap value of $2,000 after four years. Using straight-line depreciation, what is the annual charge?

  1. $2,500 Correct answer.
  2. $3,000
  3. $3,500
  4. $2,000

Explanation

Straight-line depreciation spreads the depreciable amount, being cost less residual value, evenly over the useful life. Here $12,000 minus $2,000 equals $10,000, divided by four years gives $2,500 each year. The scrap value is not depreciated because it is expected to be recovered at disposal.

Question 19Accounting concepts, principles and the accounting equation

A business has assets of $95,000 and liabilities of $38,000. It then pays a trade payable of $9,000 from bank. What is owner's equity after the payment?

  1. $57,000 Correct answer.
  2. $66,000
  3. $48,000
  4. $47,000

Explanation

Opening equity is $95,000 minus $38,000, which equals $57,000. Paying a payable reduces cash and liabilities by the same $9,000, so total assets fall to $86,000 and liabilities to $29,000. The difference remains $57,000 because settling a debt does not affect equity.

Question 20Accounting concepts, principles and the accounting equation

Which pair of events both leave total owner's equity unchanged?

  1. Cash purchase of inventory; payment of a trade payable by bank transfer Correct answer.
  2. Loan received in cash; wages paid in cash
  3. Cash received from a debtor; owner withdraws cash for private use
  4. Owner introduces capital; goods sold at a profit for cash

Explanation

A cash purchase of inventory only swaps one asset for another, and settling a payable reduces cash and the liability equally, so neither alters equity. Transactions that create profit, add capital or record drawings do change equity. Recognising which events touch equity is central to analysing the equation.

Question 21Double-entry bookkeeping and the books of original entry

Which book of original entry is used to record the purchase of goods on credit from a supplier?

  1. Cash book
  2. Sales journal
  3. General journal
  4. Purchases journal Correct answer.

Explanation

The purchases journal, also called the purchases day book, is the book of original entry for all credit purchases of goods for resale. Each entry is later posted to the supplier's personal account in the purchases ledger and to the purchases account in the general ledger. Cash purchases are recorded in the cash book instead.

Question 22Double-entry bookkeeping and the books of original entry

A business returns faulty goods to a credit supplier. In which book of original entry is this recorded?

  1. Sales returns journal
  2. Sales journal
  3. Cash book
  4. Purchases returns journal Correct answer.

Explanation

Goods returned to a supplier are recorded in the purchases returns journal, also called the returns outwards day book. The supplier's account is debited and the returns outwards account is credited. This keeps records of credit purchases and returns separate from cash dealings.

Question 23Double-entry bookkeeping and the books of original entry

In double-entry bookkeeping, what is the rule for recording an increase in an asset?

  1. Credit the asset account
  2. Debit the liability account
  3. Credit the capital account
  4. Debit the asset account Correct answer.

Explanation

Assets are increased by debits and decreased by credits. The same rule applies to expenses, which are debited when they increase. Liabilities, capital and income are increased by credits instead.

Question 24Double-entry bookkeeping and the books of original entry

Which accounting document is sent by a seller to a buyer to correct an overcharge on a previous invoice?

  1. Purchase order
  2. Debit note
  3. Statement of account
  4. Credit note Correct answer.

Explanation

A credit note is issued by a seller to reduce the amount owed by a customer, for example when goods are returned or an invoice was overcharged. The seller records it in the sales returns journal. A debit note works the other way, sent by a buyer to claim a reduction.

Question 25Double-entry bookkeeping and the books of original entry

What is the main purpose of a trial balance?

  1. To record cash receipts and payments
  2. To prove the arithmetic accuracy of the double-entry records Correct answer.
  3. To show the market value of the assets
  4. To calculate the profit for the period

Explanation

A trial balance lists all ledger balances and checks that total debits equal total credits. If the two totals agree, the arithmetic of the double-entry postings is probably correct. It does not prove that every transaction was posted to the right account.

Question 26Double-entry bookkeeping and the books of original entry

Which account is debited when a business receives cash from a credit customer?

  1. Cash account Correct answer.
  2. Capital account
  3. Sales account
  4. Trade receivable account

Explanation

Receiving cash increases the asset cash, and an increase in an asset is a debit. The customer's personal account is credited to reduce the amount owed. This entry is made in the cash book and posted to the ledger.

Question 27Double-entry bookkeeping and the books of original entry

Which of the following is a book of original entry?

  1. Sales journal Correct answer.
  2. Trial balance
  3. Balance sheet
  4. Ledger account

Explanation

Books of original entry are the day books and the cash book where transactions are first written down from source documents. The sales journal is one of these day books. Ledger accounts, the trial balance and the balance sheet are all derived from the original entries.

Question 28Double-entry bookkeeping and the books of original entry

What does the imprest system control in a petty cash book?

  1. The amount of credit allowed to customers
  2. The level of stock held in the warehouse
  3. The reimbursement of the exact amount spent Correct answer.
  4. The interest charged on a bank loan

Explanation

Under the imprest system the petty cashier starts with a fixed float and is reimbursed at the end of each period by exactly the amount spent. This restores the float to its original figure. It makes the cashier's spending easy to check and control.

Question 29Double-entry bookkeeping and the books of original entry

A trader buys goods on credit for $400 from a supplier. Which double entry records this transaction?

  1. Debit trade payable $400; credit purchases $400
  2. Debit purchases $400; credit cash $400
  3. Debit cash $400; credit purchases $400
  4. Debit purchases $400; credit trade payable $400 Correct answer.

Explanation

A credit purchase increases the expense purchases, which is debited, and increases the liability to the supplier, which is credited. The entry is first made in the purchases journal and then posted to the ledger. No cash moves at the time of the transaction.

Question 30Double-entry bookkeeping and the books of original entry

Goods costing $250 are returned by a credit customer. Which double entry is required in the seller's books?

  1. Debit sales returns $250; credit trade receivable $250 Correct answer.
  2. Debit trade receivable $250; credit sales returns $250
  3. Debit purchases returns $250; credit trade receivable $250
  4. Debit sales $250; credit cash $250

Explanation

A sales return reduces the income from sales, so the sales returns account is debited. It also reduces the amount the customer owes, so the customer's personal account is credited. The entry is listed in the sales returns journal and posted to the ledger.

Question 31Double-entry bookkeeping and the books of original entry

Which error would still allow the trial balance totals to agree?

  1. Adding the debit column incorrectly
  2. Entering a debit balance in the credit column
  3. Recording only the debit side of a transaction
  4. Posting a sale to the wrong customer's account Correct answer.

Explanation

Posting a sale to the wrong personal account keeps the total debits and total credits equal, so the trial balance still balances. The error is one of principle of allocation rather than of arithmetic. Errors of omission, commission, original entry and reversal also leave the trial balance in agreement.

Question 32Double-entry bookkeeping and the books of original entry

A payment of $90 for rent was entered in the cash book only. What effect does this have on the trial balance?

  1. Debit total exceeds credit total by $90
  2. Both totals are understated by $90
  3. Credit total exceeds debit total by $90 Correct answer.
  4. The trial balance still agrees

Explanation

Only the credit entry in the cash book was made, so credits exceed debits by $90. The rent account was never debited, leaving the debit total short. The missing debit must be posted before the trial balance can agree.

Question 33Double-entry bookkeeping and the books of original entry

Which source document supports an entry in the purchases journal?

  1. A purchase invoice received from a supplier Correct answer.
  2. A credit note issued by the business
  3. A copy of a sales invoice issued by the business
  4. A paying-in slip

Explanation

The purchases journal is written up from purchase invoices received from suppliers. Each invoice shows the supplier, date, amount and credit terms. The business keeps the invoice as evidence of the credit purchase.

Question 34Double-entry bookkeeping and the books of original entry

What is the effect of the contra entry between the cash and bank columns of a two-column cash book?

  1. It reduces the total of both columns
  2. It increases the total of both columns
  3. It records a discount allowed to a customer
  4. It transfers cash from one column to the other without changing the overall total Correct answer.

Explanation

A contra entry records money moving between cash and bank, such as banking cash or withdrawing cash for office use. The cash column and bank column are affected in opposite directions, so the combined total is unchanged. Both sides of the entry appear in the cash book itself.

Question 35Double-entry bookkeeping and the books of original entry

A business uses the imprest system with a float of $150. At the end of the month, petty cash vouchers total $118. How much reimbursement is needed to restore the float?

  1. $150
  2. $118 Correct answer.
  3. $268
  4. $32

Explanation

Under the imprest system the petty cashier is reimbursed exactly the amount spent, which is $118. This brings the cash in hand back up to the $150 float. The float itself is not paid again each period.

Question 36Double-entry bookkeeping and the books of original entry

Which of these transactions is recorded in the general journal rather than in a day book?

  1. A credit purchase of goods from a supplier
  2. Cash received from a debtor
  3. The owner taking goods for personal use Correct answer.
  4. A credit sale of goods to a customer

Explanation

Drawings of goods by the owner is not a routine sale or purchase, so it is recorded in the general journal. The entry debits drawings and credits purchases. Day books are reserved for regular credit sales, credit purchases and returns.

Question 37Double-entry bookkeeping and the books of original entry

What is meant by the term 'posting' in bookkeeping?

  1. Sending invoices to customers by post
  2. Checking the trial balance totals
  3. Balancing the petty cash book
  4. Transferring entries from the books of original entry to the ledger accounts Correct answer.

Explanation

Posting is the process of transferring amounts from the day books and cash book into the appropriate ledger accounts. Each posting must follow the double-entry rule so the ledger stays in balance. The ledger then provides the balances used to prepare the trial balance.

Question 38Double-entry bookkeeping and the books of original entry

A credit customer is also a credit supplier to the same business. Where are both relationships best recorded?

  1. In the sales journal only
  2. In the purchases journal only
  3. In a separate account for each relationship in the ledgers Correct answer.
  4. In the petty cash book

Explanation

A business may both sell to and buy from the same firm, and the two relationships must be kept apart. The customer relationship is recorded in the sales ledger and the supplier relationship in the purchases ledger. This prevents the balances from being wrongly offset.

Question 39Double-entry bookkeeping and the books of original entry

Which item would appear on the debit side of a customer's account in the sales ledger?

  1. Goods returned by the customer
  2. A discount allowed to the customer
  3. A credit sale made to the customer Correct answer.
  4. Cash received from the customer

Explanation

In a customer's personal account, a credit sale increases the amount owed, so it is entered on the debit side. Payments received, discounts allowed and returns all reduce the debt and appear on the credit side. The balance of the account shows the amount still owing.

Question 40Double-entry bookkeeping and the books of original entry

A purchase of office equipment on credit was entered in the purchases journal. Which type of error is this?

  1. Error of omission
  2. Error of principle Correct answer.
  3. Error of original entry
  4. Compensating error

Explanation

An error of principle occurs when a transaction is recorded in the wrong class of account, here treating a fixed asset as a purchase of goods. The double entry still balances, so the trial balance agrees. The correction is made through the general journal.

Question 41Double-entry bookkeeping and the books of original entry

A sales invoice for $540 was entered in the sales journal as $450. Which correction is needed?

  1. Debit the customer $450; credit sales $450
  2. Debit the customer $90; credit sales $90 Correct answer.
  3. Debit sales $90; credit the customer $90
  4. Debit sales $540; credit the customer $540

Explanation

The sale was understated by $90, so the customer's account and the sales account must both be increased by that amount. The customer is debited and sales is credited. This is an error of original entry corrected through the general journal.

Question 42Double-entry bookkeeping and the books of original entry

A trader pays a supplier $600 by cheque after deducting a cash discount of $30. What is the correct double entry?

  1. Debit supplier $630; credit bank $600; credit discount received $30 Correct answer.
  2. Debit supplier $630; credit bank $630
  3. Debit bank $600; debit discount received $30; credit supplier $630
  4. Debit supplier $600; credit bank $600

Explanation

The supplier's account must be cleared of the full $630 owed, so it is debited with $630. The bank is credited with the $600 actually paid and discount received is credited with $30. The discount is income to the buyer, which is why it is credited.

Question 43Double-entry bookkeeping and the books of original entry

A trial balance has debit totals of $8,420 and credit totals of $8,240. A discount allowed of $180 was entered only in the discount column of the cash book. Which correction restores agreement?

  1. Debit discount allowed $180 Correct answer.
  2. Credit discount allowed $180
  3. Debit the customer $180
  4. Credit the bank $180

Explanation

The $180 discount was credited to the customer in the cash book but never debited to the discount allowed account, so debits are $180 short. Debiting discount allowed with $180 supplies the missing entry. The totals then agree at $8,420.

Question 44Double-entry bookkeeping and the books of original entry

Which statement best explains why the trial balance cannot detect a credit sale that was completely left out of the books?

  1. The sale affects only the sales account
  2. The cash book is not part of the double-entry system
  3. Both the debit and credit sides are missing, so the totals still agree Correct answer.
  4. The customer's account has no opening balance

Explanation

If a transaction is omitted entirely, neither its debit nor its credit is recorded. The two totals therefore remain equal and the trial balance still balances. Such an omission is found by comparing ledger records with source documents.

Question 45Double-entry bookkeeping and the books of original entry

A business records all credit sales in the sales journal and posts the total monthly to the sales account. What is the main advantage of this procedure?

  1. It removes the need for personal accounts
  2. It replaces the need for source documents
  3. It reduces the number of postings to the general ledger Correct answer.
  4. It guarantees that no errors occur

Explanation

Posting the column total once a month means the sales account is written up only once instead of after every invoice. Individual amounts are still posted to each customer's account in the sales ledger. This saves time and reduces the chance of posting mistakes.

Question 46Double-entry bookkeeping and the books of original entry

A business returns faulty office chairs to a supplier and receives a credit note. Which book of original entry records this transaction?

  1. Sales returns journal
  2. General journal
  3. Purchases returns journal Correct answer.
  4. Purchases journal

Explanation

Goods returned to a supplier are recorded in the purchases returns journal, sometimes called the returns outwards book. The credit note issued by the supplier is the source document, and the total is later posted to the debit of the supplier's account.

Question 47Double-entry bookkeeping and the books of original entry

Which entry correctly records a cash sale of $300 in the seller's books?

  1. Debit cash $300, credit purchases $300
  2. Debit cash $300, credit sales $300 Correct answer.
  3. Debit sales $300, credit capital $300
  4. Debit sales $300, credit cash $300

Explanation

Cash received increases the asset cash, and assets increase on the debit side. The sale increases income, and income increases on the credit side, so sales is credited.

Question 48Double-entry bookkeeping and the books of original entry

A trader pays a supplier by cheque and receives a cash discount. Which source document does the trader use to record the discount?

  1. A remittance advice sent with the payment Correct answer.
  2. The cheque counterfoil
  3. The supplier's invoice
  4. The supplier's statement of account

Explanation

A cash discount is not shown on the original invoice, which records the full amount due. The trader records the discount on the basis of the remittance advice, which sets out the invoice value, the discount deducted and the net payment.

Question 49Double-entry bookkeeping and the books of original entry

A petty cash book is kept on the imprest system with a float of $200. Vouchers for the month total $165 and the cash box holds $35. What entry restores the float?

  1. Debit cash book $165, credit petty cash $165
  2. Debit cash book $200, credit petty cash $200
  3. Credit cash book $35, debit petty cash $35
  4. Credit cash book $165, debit petty cash $165 Correct answer.

Explanation

Reimbursement equals the vouchers paid, which is $165, and it brings the float back to $200. The petty cash book is debited to restore the cash and the main cash book is credited because money leaves the bank.

Question 50Double-entry bookkeeping and the books of original entry

A credit sale of $720 was correctly entered in the sales journal but posted to the customer's account as $270. Which journal entry corrects the customer's account?

  1. Debit sales $450, credit the customer $450
  2. Debit the customer $720, credit sales $720
  3. Debit the customer $450, credit sales $450 Correct answer.
  4. Debit the customer $270, credit sales $270

Explanation

The customer was debited $270 instead of $720, so a further $450 debit is needed to reach the correct balance. The sales account was posted from the journal total and is already correct, so the correction must not disturb it.