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ICAM Technician practice questions

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Question 1Technician Diploma in Accounting

Under the double-entry principle, which entry records the purchase of office stationery on credit?

  1. Debit Accounts Payable; credit Stationery Expense
  2. Debit Stationery Expense; credit Accounts Payable Correct answer.
  3. Debit Cash; credit Stationery Expense
  4. Debit Stationery Expense; credit Cash

Explanation

An expense increases on the debit side, and a liability (the amount owed to the supplier) increases on the credit side. Therefore the stationery account is debited and the payable account credited. Cash is unaffected because the purchase is on credit.

Question 2Technician Diploma in Accounting

Which document is normally prepared by the seller and sent to the buyer to request payment for goods supplied on credit?

  1. A goods received note
  2. A sales invoice Correct answer.
  3. A purchase order
  4. A remittance advice

Explanation

The sales invoice is issued by the supplier and states the amount due, the goods supplied and the payment terms. It is the buyer's source document for recording a credit purchase. The other documents serve different purposes in the purchasing cycle.

Question 3Technician Diploma in Accounting

A business records a transaction in the correct ledger accounts but on the wrong side of both accounts. Which type of error is this?

  1. An error of complete reversal Correct answer.
  2. An error of omission
  3. An error of principle
  4. A compensating error

Explanation

An error of complete reversal occurs when the correct accounts are used but the debit and credit entries are swapped. Because the trial balance totals still agree, it is not revealed by the trial balance. An error of principle would involve the wrong class of account.

Question 4Technician Diploma in Accounting

What is the purpose of a trial balance?

  1. To confirm that every transaction has been recorded
  2. To calculate the profit for the period
  3. To prove that no fraud has occurred in the ledger
  4. To check the arithmetical equality of debit and credit balances Correct answer.

Explanation

A trial balance lists ledger balances and tests whether total debits equal total credits, thereby detecting arithmetic and one-sided posting errors. It does not guarantee accuracy, because errors of principle, omission and reversal still balance. Profit is determined by the statement of profit or loss.

Question 5Technician Diploma in Accounting

A sole trader's capital account is credited with which of the following?

  1. A net loss for the year
  2. Drawings taken by the owner
  3. Payment of a supplier's account
  4. Additional cash introduced by the owner Correct answer.

Explanation

Capital represents the owner's stake in the business, so any additional funds introduced increase it and are credited to the capital account. Drawings and losses reduce capital and are debited. Paying a supplier reduces cash and payables and does not affect capital.

Question 6Technician Diploma in Accounting

Which of the following is a current liability on a statement of financial position?

  1. Retained earnings
  2. Motor vehicles held for use in the business
  3. A bank loan repayable in five years
  4. Accrued electricity expense Correct answer.

Explanation

An accrued expense is an amount owed but not yet paid at the reporting date and is settled within the next period, so it is a current liability. Long-term loans and non-current assets fall outside current liabilities. Retained earnings form part of equity, not liabilities.

Question 7Technician Diploma in Accounting

Goods costing 400 are sold on credit for 600. Which entry correctly records the sale in the seller's books?

  1. Debit Sales 600; credit Receivables 600
  2. Debit Receivables 600; credit Sales 600 Correct answer.
  3. Debit Receivables 600; credit Inventory 400
  4. Debit Cash 600; credit Sales 600

Explanation

Revenue is credited at the selling price of 600, and the customer becomes a receivable, which is debited. The cost of goods sold is recorded separately by debiting cost of sales and crediting inventory. Cash is not involved in a credit sale.

Question 8Technician Diploma in Accounting

A business pays 1,200 for a one-year insurance premium in advance on 1 April. At 31 December, three months remain unexpired. What is the prepayment at year end?

  1. 1,200
  2. 100
  3. 300 Correct answer.
  4. 900

Explanation

The annual premium is 1,200, so the monthly cost is 100. Three months remain unexpired at the year end, giving a prepayment of 3 x 100 = 300. The remaining 900 is charged as an expense for the current period.

Question 9Technician Diploma in Accounting

Which method of depreciation charges an equal amount each year over the asset's useful life?

  1. Reducing balance
  2. Straight line Correct answer.
  3. Sum of digits
  4. Revaluation

Explanation

The straight-line method spreads the depreciable amount evenly across the useful life, giving a constant annual charge. The reducing-balance method produces a declining charge because it applies a fixed percentage to the carrying amount. Revaluation is not a depreciation method.

Question 10Technician Diploma in Accounting

A machine costs 10,000, has an estimated residual value of 1,000 and a useful life of four years. Using straight-line depreciation, what is the annual charge?

  1. 2,250 Correct answer.
  2. 1,800
  3. 2,000
  4. 2,500

Explanation

The depreciable amount is cost less residual value, that is 10,000 minus 1,000 = 9,000. Dividing by four years gives an annual charge of 2,250. Residual value must be excluded because it will be recovered at disposal.

Question 11Technician Diploma in Accounting

A supplier's statement shows a balance of 5,000 while the business's payable ledger shows 4,800. Which item could explain the difference?

  1. Depreciation charged on office equipment
  2. Goods returned by the business but not yet recorded by the supplier Correct answer.
  3. Cash sales made by the business during the month
  4. An increase in the business's inventory

Explanation

Goods returned to the supplier reduce the amount the business owes, but the supplier may not yet have processed the credit note. This makes the ledger balance lower than the supplier's statement. Cash sales, depreciation and inventory movements do not affect the payable balance.

Question 12Technician Diploma in Accounting

In a bank reconciliation, cheques paid to suppliers but not yet presented at the bank are described as which of the following?

  1. Unpresented cheques Correct answer.
  2. Standing orders
  3. Uncredited deposits
  4. Dishonoured cheques

Explanation

Unpresented cheques have been issued and recorded in the cash book but have not yet cleared the bank, so they appear as a timing difference. They are deducted when reconciling the bank statement balance to the cash book. Uncredited deposits are the opposite timing difference.

Question 13Technician Diploma in Accounting

Which of the following best describes the accrual basis of accounting?

  1. Revenue is recognised when an order is placed by a customer
  2. Income and expenses are recognised when they are earned or incurred, not when cash moves Correct answer.
  3. Transactions are recorded only when cash is received or paid
  4. Expenses are recognised when the invoice is paid

Explanation

Under the accrual basis, income is recognised when earned and expenses when incurred, regardless of the timing of cash flows. This requires adjusting entries for accruals and prepayments. The cash basis, by contrast, records items only when money changes hands.

Question 14Technician Diploma in Accounting

A trader's inventory at the start of the year was 3,000 and at the end 4,000. Purchases were 20,000. What is the cost of goods sold?

  1. 21,000
  2. 19,000 Correct answer.
  3. 27,000
  4. 20,000

Explanation

Cost of goods sold equals opening inventory plus purchases less closing inventory: 3,000 + 20,000 - 4,000 = 19,000. Closing inventory is deducted because those goods remain unsold. The formula reflects the cost of items actually sold.

Question 15Technician Diploma in Accounting

Which accounting concept requires that a business's financial statements be prepared separately from the owner's personal affairs?

  1. Consistency
  2. Prudence
  3. Going concern
  4. Business entity Correct answer.

Explanation

The business entity concept treats the business as separate from its owners, so personal transactions are excluded from the accounts. Going concern assumes the business will continue trading. Prudence and consistency govern measurement and method choice respectively.

Question 16Technician Diploma in Accounting

A business receives an invoice for electricity covering the three months to 31 March but does not pay it until April. What adjustment is required at 31 March?

  1. Debit Accrued Expenses; credit Electricity Expense
  2. No adjustment is required until payment is made
  3. Debit Electricity Expense; credit Accrued Expenses Correct answer.
  4. Debit Electricity Expense; credit Cash

Explanation

The electricity has been consumed before the year end, so the expense must be recognised then, with a corresponding liability. The entry debits the expense and credits accrued expenses. When payment occurs in April, the accrual is debited and cash credited.

Question 17Technician Diploma in Accounting

Which item would appear in a partner's current account rather than the capital account?

  1. A share of profits for the year Correct answer.
  2. A permanent reduction of capital agreed by all partners
  3. The original capital introduced on formation
  4. The partner's share of a revaluation surplus

Explanation

A partner's current account records fluctuating items such as profit shares, drawings and interest on capital. The capital account records the fixed, long-term stake introduced on formation. Revaluation gains are normally credited to capital or revaluation reserve.

Question 18Technician Diploma in Accounting

A company issues 10,000 ordinary shares of 1 each at a premium of 0.50 per share. How should the proceeds be recorded?

  1. Debit Bank 15,000; credit Share Capital 10,000 and Share Premium 5,000 Correct answer.
  2. Debit Bank 10,000; credit Share Capital 10,000
  3. Debit Bank 15,000; credit Share Capital 15,000
  4. Debit Share Capital 10,000; credit Bank 15,000

Explanation

The total received is 10,000 shares at 1.50, which is 15,000. The nominal value of 10,000 is credited to share capital and the excess of 5,000 to share premium. Share premium cannot be treated as share capital.

Question 19Technician Diploma in Accounting

Which of the following is a capital expenditure?

  1. Repainting the office interior
  2. Installing a new lift in a building to extend its capacity Correct answer.
  3. Paying the monthly electricity bill
  4. Replacing a broken window

Explanation

Capital expenditure acquires or enhances the earning capacity of a non-current asset, so a new lift that extends capacity is capitalised. Repairs, replacements restoring condition and running costs are revenue expenditure charged to profit or loss.

Question 20Technician Diploma in Accounting

A suspense account was opened with a credit balance of 250. It is later found that a credit sale of 250 had been completely omitted from the books. What entry corrects this?

  1. Debit Receivables 250; credit Sales 250
  2. Debit Sales 250; credit Suspense 250
  3. Debit Suspense 250; credit Receivables 250
  4. Debit Suspense 250; credit Sales 250 Correct answer.

Explanation

The omitted credit sale means sales and receivables are both understated, which caused the credit balance in the suspense account. Recording the sale clears the suspense by debiting it and credits sales. Receivables would then be debited in a full correction of the omission.

Question 21Technician Diploma in Accounting

Which ratio measures a company's ability to meet short-term obligations using its current assets?

  1. Inventory turnover period
  2. Gross profit margin
  3. Current ratio Correct answer.
  4. Return on capital employed

Explanation

The current ratio divides current assets by current liabilities and indicates short-term liquidity. A ratio comfortably above one suggests the entity can settle obligations falling due. The other measures address profitability or operational efficiency.

Question 22Technician Diploma in Accounting

A company has current assets of 60,000 including inventory of 20,000, and current liabilities of 30,000. What is the quick ratio?

  1. 1.33 Correct answer.
  2. 3.00
  3. 0.67
  4. 2.00

Explanation

The quick ratio excludes inventory: (60,000 - 20,000) / 30,000 = 40,000 / 30,000 = 1.33. Inventory is excluded because it may take time to convert into cash. Including inventory would give the current ratio of 2.00.

Question 23Technician Diploma in Accounting

In a manufacturing account, which cost is treated as a direct cost of production?

  1. Factory supervisor's salary
  2. Factory rent
  3. Direct materials consumed Correct answer.
  4. Depreciation of office computers

Explanation

Direct materials are traceable to the product and form part of prime cost. Factory overheads such as supervision, rent and machinery depreciation are indirect and are added later to derive production cost. Office costs are administrative, not production costs.

Question 24Technician Diploma in Accounting

A business uses the allowance method for doubtful debts. It decides to write off a specific debt of 500 as irrecoverable. What is the effect of the write-off on the statement of financial position?

  1. Receivables decrease and profit is unchanged
  2. Receivables decrease and profit decreases Correct answer.
  3. Receivables are unchanged and the allowance increases
  4. Cash decreases and profit decreases

Explanation

Writing off an irrecoverable debt removes the amount from receivables and charges it as an expense, reducing profit. The allowance for doubtful debts is a separate estimate and is not increased by the write-off itself. No cash movement occurs.

Question 25Technician Diploma in Accounting

Which statement about the imprest system for petty cash is correct?

  1. Petty cash payments are recorded only in the cash book
  2. The petty cashier keeps no vouchers for small payments
  3. The petty cashier is reimbursed the exact amount spent, restoring the float Correct answer.
  4. The float is increased each time a payment is made

Explanation

Under the imprest system the petty cashier starts with a fixed float and is reimbursed periodically for the vouchers collected, restoring the float to its original amount. Vouchers support every payment and are analysed in the petty cash book. The float stays constant.

Question 26Technician Diploma in Accounting

Under the double-entry system, what is the correct entry to record a credit purchase of inventory from a supplier?

  1. Debit purchases, credit payables Correct answer.
  2. Debit cash, credit inventory
  3. Debit inventory, credit cash
  4. Debit payables, credit purchases

Explanation

A credit purchase increases the expense/cost of goods bought, so purchases is debited, and it creates an obligation to the supplier, so payables is credited. Cash is untouched because no payment has yet been made.

Question 27Technician Diploma in Accounting

A trial balance fails to agree by 180, and the figure 180 appears in the trial balance where 810 was expected. What type of error does this indicate?

  1. An error of principle
  2. An error of omission
  3. A compensating error
  4. An error of transposition Correct answer.

Explanation

A transposition error occurs when the digits of a number are reversed, such as recording 180 instead of 810. Because the difference (630) is divisible by 9, it is consistent with a transposition.

Question 28Technician Diploma in Accounting

Which document is sent by a seller to a customer to formally request payment for goods supplied on credit?

  1. A remittance advice
  2. A sales invoice Correct answer.
  3. A credit note
  4. A purchase order

Explanation

A sales invoice is issued by the seller and states the amount owed for goods or services supplied on credit. It serves as the customer's request to pay and the basis for the buyer's purchase recording.

Question 29Technician Diploma in Accounting

A business records its sales day book total of 4,600 in the sales account as 6,400. Which correction is required?

  1. Debit suspense 1,800
  2. Credit receivables 1,800
  3. Debit sales 1,800 Correct answer.
  4. Credit sales 1,800

Explanation

Sales has been overstated by 1,800 (6,400 - 4,600). Sales is a credit-balance income account, so it must be debited by 1,800 to reduce it, with the opposite entry in the suspense account.

Question 30Technician Diploma in Accounting

A trader takes goods costing 300 from inventory for personal use. What is the correct double entry?

  1. Debit purchases, credit drawings
  2. Debit drawings, credit purchases Correct answer.
  3. Debit inventory, credit drawings
  4. Debit drawings, credit cash

Explanation

Goods withdrawn by the owner are treated as drawings, so drawings is debited. The goods came out of purchases (or inventory), so that account is credited to remove the cost from the business.

Question 31Technician Diploma in Accounting

What is the main purpose of preparing a trial balance?

  1. To record transactions as they occur
  2. To value closing inventory
  3. To calculate the profit for the period
  4. To check the arithmetical accuracy of the double-entry ledger Correct answer.

Explanation

A trial balance lists debit and credit balances to confirm that total debits equal total credits. It detects certain arithmetic errors but does not itself measure profit or value stock.

Question 32Technician Diploma in Accounting

Which of the following would be classified as a non-current asset?

  1. A delivery van used in the business Correct answer.
  2. Trade receivables due within 30 days
  3. Inventory held for resale
  4. A bank overdraft

Explanation

A delivery van is held for use in the business over several years, so it is a non-current (fixed) asset. It is not intended for resale in the ordinary course of trading.

Question 33Technician Diploma in Accounting

A business's gross profit is 45,000 and its expenses total 28,000. What is the net profit?

  1. 17,000 Correct answer.
  2. 45,000
  3. 73,000
  4. 28,000

Explanation

Net profit is gross profit less expenses: 45,000 - 28,000 = 17,000. Expenses are deducted from gross profit to arrive at the profit for the period.

Question 34Technician Diploma in Accounting

Which accounting concept supports the separate recording of a business's transactions from those of its owner?

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

Explanation

The business entity concept treats the business as separate from its owners for accounting purposes. Personal transactions of the owner are therefore excluded from the business records.

Question 35Technician Diploma in Accounting

Which item would appear in the capital account of a partner rather than the current account?

  1. A partner's share of profit for the year
  2. Interest charged on a partner's drawings
  3. The original capital introduced by the partner Correct answer.
  4. A partner's drawings during the year

Explanation

The capital account records fixed, long-term capital contributions. Profits, drawings and interest on drawings are fluctuating items recorded in the current account.

Question 36Technician Diploma in Accounting

A company issues 20,000 ordinary shares of 1 each at 1.60 per share. How should the proceeds be recorded?

  1. Debit bank 32,000; credit share capital 20,000 and share premium 12,000 Correct answer.
  2. Debit bank 20,000; credit share capital 20,000
  3. Debit bank 32,000; credit share capital 32,000
  4. Debit bank 12,000; credit share premium 12,000

Explanation

The total received is 20,000 x 1.60 = 32,000. Of this, the nominal value of 20,000 goes to share capital and the excess of 0.60 per share, totalling 12,000, goes to share premium.

Question 37Technician Diploma in Accounting

Which of the following is a revenue expenditure?

  1. Installing a new lift in the warehouse
  2. Repainting the office building Correct answer.
  3. Purchasing a new delivery vehicle
  4. Legal fees on the purchase of a building

Explanation

Repainting maintains the asset in working order and does not increase its earning capacity, so it is revenue expenditure charged to the income statement. Capital items add to or improve a non-current asset.

Question 38Technician Diploma in Accounting

Using the reducing balance method, an asset costs 8,000 and is depreciated at 25% per year. What is the depreciation charge for the second year?

  1. 2,000
  2. 1,125
  3. 500
  4. 1,500 Correct answer.

Explanation

Year one charge is 25% of 8,000 = 2,000, leaving a carrying amount of 6,000. Year two charge is 25% of 6,000 = 1,500.

Question 39Technician Diploma in Accounting

A business has opening inventory of 5,000, purchases of 30,000 and closing inventory of 6,000. What is the cost of sales?

  1. 41,000
  2. 29,000 Correct answer.
  3. 31,000
  4. 30,000

Explanation

Cost of sales = opening inventory + purchases - closing inventory = 5,000 + 30,000 - 6,000 = 29,000. Closing inventory is deducted because it remains unsold.

Question 40Technician Diploma in Accounting

A business has current assets of 80,000 including inventory of 30,000, and current liabilities of 40,000. What is the acid test (quick) ratio?

  1. 0.75
  2. 1.33
  3. 2.00
  4. 1.25 Correct answer.

Explanation

The quick ratio excludes inventory: (80,000 - 30,000) / 40,000 = 50,000 / 40,000 = 1.25. Inventory is excluded because it may not quickly convert to cash.

Question 41Technician Diploma in Accounting

Which cost in a manufacturing account is treated as a direct cost of production?

  1. Factory supervisor's salary
  2. Carriage inwards on raw materials Correct answer.
  3. Factory rent and rates
  4. Depreciation of factory machinery

Explanation

Carriage inwards on raw materials is part of the cost of getting materials into production, so it is a direct cost added to raw materials consumed. Factory overheads such as depreciation, supervision and rent are indirect.

Question 42Technician Diploma in Accounting

A business uses the allowance method for doubtful debts and decides to write off a specific debt of 700 as irrecoverable. What is the correct double entry?

  1. Debit allowance for doubtful debts, credit receivables
  2. Debit cash, credit irrecoverable debts
  3. Debit receivables, credit irrecoverable debts
  4. Debit irrecoverable debts, credit receivables Correct answer.

Explanation

Writing off a bad debt removes the amount from receivables and charges it as an expense. Irrecoverable debts is debited and the customer's receivable balance is credited.

Question 43Technician Diploma in Accounting

A business receives an invoice for rent covering three months to 31 March but pays it in April. Under the accrual basis, how should the rent be treated in the year-end financial statements?

  1. Deducted from capital
  2. Ignored until the invoice is paid
  3. Charged as an expense and shown as an accrual liability Correct answer.
  4. Recorded as a prepayment asset

Explanation

Under accrual accounting, expenses are recognised when incurred, not when paid. Rent relating to the period is charged to the income statement and the unpaid amount is shown as an accrual within current liabilities.

Question 44Technician Diploma in Accounting

A supplier's statement shows a balance of 6,200 while the business's payable ledger shows 6,000. Which item could explain the difference?

  1. A discount allowed to a customer
  2. A payment made by the business and already received by the supplier
  3. Goods returned to the supplier recorded by the business but not yet credited by the supplier Correct answer.
  4. An invoice recorded by both parties in the same period

Explanation

If the business has returned goods and reduced its payable, but the supplier has not yet processed the credit note, the supplier's statement will be higher. Timing differences of this kind explain such discrepancies.

Question 45Technician Diploma in Accounting

A company has a gross profit margin of 40% and sales of 250,000. What is its gross profit?

  1. 62,500
  2. 100,000 Correct answer.
  3. 150,000
  4. 40,000

Explanation

Gross profit margin is gross profit divided by sales, so gross profit = 40% x 250,000 = 100,000. The remaining 150,000 represents cost of sales.

Question 46Technician Diploma in Accounting

A business purchases a machine for 12,000 with an estimated residual value of 2,000 and a useful life of five years. Using straight-line depreciation, what is the annual charge?

  1. 1,600
  2. 2,400
  3. 2,000 Correct answer.
  4. 2,200

Explanation

Straight-line depreciation is (cost - residual value) / useful life = (12,000 - 2,000) / 5 = 2,000 per year. The residual value is deducted to give the depreciable amount.

Question 47Technician Diploma in Accounting

A business's bank statement shows a balance of 3,400 credit, while its cash book shows a debit balance of 3,900. Cheques paid to suppliers of 800 have not yet been presented. What is the adjusted bank statement balance after allowing for unpresented cheques?

  1. 4,700
  2. 2,600 Correct answer.
  3. 3,100
  4. 4,200

Explanation

Unpresented cheques reduce the bank statement balance once they clear. The adjusted balance is 3,400 - 800 = 2,600, which should then reconcile with the cash book after other adjustments.

Question 48Technician Diploma in Accounting

A business has a mark-up of 25% on cost and sales for the year of 50,000. What is the cost of sales?

  1. 37,500
  2. 50,000
  3. 62,500
  4. 40,000 Correct answer.

Explanation

With a mark-up of 25% on cost, sales = cost x 1.25. Therefore cost of sales = 50,000 / 1.25 = 40,000, and gross profit is 10,000.

Question 49Technician Diploma in Accounting

Which of the following best explains why a suspense account is opened?

  1. A customer has not paid an overdue invoice
  2. An asset has been fully depreciated
  3. The business wishes to set aside cash for future purchases
  4. The trial balance totals do not agree and the difference is temporarily placed there Correct answer.

Explanation

A suspense account is used when the trial balance fails to balance, holding the difference until the error is located and corrected. It is a temporary device, not a permanent ledger account.

Question 50Technician Diploma in Accounting

Which accounting record is the book of prime entry in which credit sales to customers are first recorded?

  1. The receivables ledger
  2. The sales returns day book
  3. The sales day book Correct answer.
  4. The general journal

Explanation

The sales day book is the book of prime entry that lists credit sales invoices in date order before any posting to ledger accounts. It captures the transaction at source, while the receivables ledger is a memorandum record of balances per customer.