Quiz

1. Fill in the Blanks:

a. A partnership firm normally requires a maximum of persons.
b. Owners of a Partnership are liable to for all liabilities of the firm.
d. Partners have a relationship between them.
e. The individuals who own the partnership business are called collectively referred to as
.
Answers
(a) 20 persons
(b) Pay
(c) Legal
(d) Partnership
2. Which of the following statements are TRUE or FALSE?
a. A partner may sometimes not work in a partnership that he part owns.
b. The interests of partners may not be used as future capital in the business.
c. A partnership firm has separate legal entity from its owners.
Answers
(a) True
(b) False
(c) False
3. Which of the following statement are TRUE or FALSE ?
(a) The members of a co-operative get a fixed rate of dividend from profit.
(b) A co-operative society can not enter into any contract.
(c) The liability of the members of a co-operative is unlimited.
(d) A co-operative society needs not be registered.
(e) A member of a co-operative society may have voting power based the amount of shares owned.
Answers
(a) True
(b) True
(c) False
(d) False
(e) False

4. Fill in the blanks:

(a) A co-operative society may not cease to exist with the of a member.
(b) New members of a co-operative are obtained .
(c) is the primary motive of a co-operative.
(d) The maximum membership to get a co-operative registered is .
(e) Most co-operative society are restricted by .
Answers
(a) death
(b) Voluntarily
(c) Service
(d) Unlimlited
(e) Capital
5. Which of the following statements are TRUE or FALSE ?
(a) The minimum membership for a public limited company is 50.
(b) A company is dissolved with the entry of a new member.
(c) The members of a company may transfer their shares through on the stock market.
(d) The liability of the members of a Joint Stock Company is limited.
Answer
(a) False
(b) False
(c) True
(d) True
6. Fill in the blanks:
(a) A company has existence.
(b) A company may enjoy the benefits of operation.
(c) A partnership may be managed by .
(d) When the scale of operation of the business is a sole proprietorship form is preferred.
(e) The capital of a sole trader may not be in the stock market.
Answer
(a) Perpetual
(b) Large Scale
(c) Partners
(d) Small
(e) not

7. Fill in the blanks with suitable word/words:

(a) Accrual concept relates to the determination of ____________.
(b) Goods of Rs.50000 are sold on 25th March 2006 but payment is received on 10th April 2007. It
will be a revenue
for the year ending _____________.
(c) Accrual concept requires revenue is recognised when ____________.
(d) Expenses are matched with ____________ generated during a period.
(e) Income is the excess of revenues over ____________.
Answers
(a) Revenue
(b) 2006
(c) Service is rendered or goods are delivered
(d) Revenues
(e) Expenses

Quiz
Question

Answer

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Quiz
Question 1
On December 31, 2010, John Henry found that the debit side of his trial Balance exceeded the credit
side by $492. The difference was put to a suspense account. February 11 of 2011 the following errors
were discovered in the books:
1. $165 paid for the purchase of Fixtures had been entered to Purchases account.

2. Commissions received of $112 was debited to the Commissions received account.

3. The Returns Inwards Book was overcast by $57 and the wrong amount was entered to the Returns
Inwards account.
4. $ 217 cash paid to Mike Collester was debited to his account as $271.
5. $15 goods sold to Lee Gray was debited to Lee Mays account.
6. A cheque for $157 received from M. Ruddock was not entered to his account.
Required:
(a) State one purpose of the Trial Balance.
(b) Prepare the necessary Journal entries to correct the above mistakes.
(c) Enter up the Suspense Account.
(d) Identify from the above, ONE error of principle and ONE error of commission.
Solution
(a) The Trial Balance acts as a statement which arithmetically proves that proper double entry is
observed in making accounting entries. There are several errors which will not be revealed by the

Trial Balance.

(b)

c)

(d)(i) Error of Principle occurred in error # 1 where $165 paid for the purchase of Fixtures had been
entered to Purchases account.
(ii) Error of Commission occurred in error # 5 where $15 goods sold to Lee Gray was debited to Lee
Mays
account.
Question 2
R. Guberman keeps a three column Cash Book. All cheques received are banked immediately. All
small payments of $20 or less are paid out of a petty cash float of $50 and recorded in a Petty Cash
Book with four analysis columns: Postage, Travelling, Sundry Expenses, and small purchases of
stock.
Using the following information, you are required to:
1. Write up his Cash Book and balance it.
2. Write up the Petty Cash Book and balance it.
October 16 Balances: Bank
Cash

574
126

Petty Cash

19

17

Reimbursed petty Cash Float

17

E Winters settled his debt of $580 by cash

less 5% discount.
19

Received cheque from A. Adam

675

19

Paid for stock by cheque.

473

20

Bank charges for services.

21

Cash sales for the week

720

21

Purchased postage stamps

12

21

Purchased small items of stock

17

22

Banked cash

22

Paid for stock by cheque

650

23

Drew cheques for wages.

300

23

Paid taxi fare for errands

7.65

24

Sent R. Boone a cheque to settle a debt

500

of $750 , less 4% cash discount.

26

Reimbursed petty cash float

26

Paid for postage of package.

28

Cash sales for the week

1,275

28

Banked cash

1,553.35

30

A. Adams cheque for $675 marked

18

Dishonoured was returned.

31 Paid for cleaning and painting.
Solution
1.

2.

15

Question 3
The following were transactions for Green Food Enterprises for the month of June 2007.
$
September 1

Sold Goods to V. Bentley

4,500

September 6

V. Bentley returned goods to us

September 9

Bought goods on credit from M. Mickey

September 11

Sold goods on credit to C. Ryan

September 17

Credit purchases from Discount Wholesalers

September 22

Returned goods to M. Mickey

September 24

Bought Fixtures from Best Furnishings for use in the business

September 28 Sold goods on credit to B. Gumby

1,200
8,400
2,400
3,000
400
4,900

1,350

Required:
(A) Make Entries in the books of original entry (subsidiary books) for Green Food Enterprises.
(B) Post the books of original entry to the ledger at the end of the month.
Solution

(A)

(B)

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Question
Garvey had the following transactions for the month of January 2007.
2007

January 1 Started business with cash

50,000.

January 1 Paid cash for rent

500

January 2 Paid cash for fixtures.

5,000

January 3 Purchased on credit goods from

E. John.

475

January 5 Cash Purchases

1599

January 13 Cash sales

300

January 18 Sold goods on credit to A. Goodman

742

January 27 Received cash from A. Goodman

500

January 31 Stock of goods sold for cash

520

Required:
(A)Record and balance transactions in the relevant accounts including a cash account in the ledger of
A. Garvey.
(B)Extract a Trial Balance.
Solution

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Quiz
Question 1
The records of R. Graham showed the following purchases and sales of stock for the months of May
and June 2006.
May 2

Purchased 12 boxes of wine at $40 per box

May 17 Purchased 20 boxes of sodas at $20 per box

June 8

Purchased 10 boxes of vinegar at $60 per box

June 25 Purchased 5 boxes of vinegar at $10 per box

June 30 Sold 32 boxes at $65 each.
Required:
Use the LIFO, FIFO and AVCO methods of stock valuation to calculate the value of closing stock.
Please show all workings clearly.
Solution

Question 2
The Following balances were extracted from the Trial balance of T. Brooks Wholesale at the end of
2005.
Creditors

1400

Purchases

32,000

Returns Outwards

3,600

Opening Stock

4,800

Closing Stock

3,200

Rent owing
Debtors
Cash in hand

600
2,000
2,800

Required:
1. Calculate the following Ratios:
(a)Current Ratio
(b)Acid Test Ratio
(c)Rate of Stock Turnover
2. What is the purpose of each ratio?
3. Identify one limitation associated with the use of accounting ratios.
Solution
1.

2.
(a) Current Ratio provides indication of the business to meet its short term financial commitments.
The comparison is made with (current) assets which will become liquid within a year and (current)
liabilities which should be paid within the same period of one year. This will indicate if the business
has enough short term assets to meet its short term payments.
(b) Acid test ratio indicates the ability of the business to meet it short term payments given the
situation where all debtors settle and all creditors are paid at the same time.
(c) Stock turn provides an indication as to how fast or slow stock is been sold. It also indicates the
efficiency of the business in terms of its control of stock levels. Assuming that gross profit percentage
remains constant, a faster sale of stock will mean increases in profits from sales, likewise a slower
sale of stock could mean decreases in profits.
3. Ratios may become misleading if they are not used in proper context. The same ratios need to be
used as a means of comparison for different time periods of a business, or in comparison with similar
business entities.
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Quiz
Question 1
Sam Browns accounting period is from January 1 to December 31. The following provides
information for three periods.
Year

Debtor Balances

Provision for Doubtful Debts

2000

20,000

5%

2001

30,000

6%

2002

25,000

4%

Required:
Write up the Provision for Doubtful Debts Account for each of the three years ending December 31
2000 to 2002.
Solution

Question 2

Novelty Chemicals bought a Motor Vehicle for $110,000 on January 5, 2002. The estimated useful
life of the vehicle is ten years. The disposal value is estimated at $10,000. Annual depreciation is on
the straight line method.
Required for years 2002, 2003 and 2004:
(a)The accumulated Depreciation account- Motor Vehicle
(b)The Balance Sheet extracts for motor vehicle and its related depreciation.
(c)The Profit and Loss accounts extracts for annual depreciation
Solution

Question 3
The Trial balance of Wholesome Groceries as at December 31, 2005 is shown below.

Notes:
Closing Stock $18,000
Rent paid in advance $4,000
Wages and Salaries owing $3,400
Insurance owing $600
Provision for doubtful debt to be created $600
Depreciation on machinery and equipment for the period $3,000
Prepare the Following for Wholesome Groceries:
1. The Trading and Profit and Loss account for the period ending December 32, 2005
2. The Balance Sheet as at December 31, 2005.

Solution
1.

2.

The following errors were found in the books of Bell Traders:

-Credit sales $536 to V. Bennett was omitted from the books.
-$758 discount received was mistakenly debited to Discount Received Account.
-$530 discount allowed was entered in error as $503 in T. Wilsons account.
-There was a bank overdraft of $626 which was entered in error in the bank account as $662.
-A discount received of $474 was entered in the cash book but was not entered in S. Riddick account
who was a creditor.
-A credit sale of $2,000 to G. Jones had been omitted from the accounts.
-A machine bought for cash $1,000 as a fixed asset was entered to Purchases book.

Required:
1. Journalize the correction of the above errors.
2. Post the relevant entries to Suspense account.
3. Enter in Suspense account the figure which represented the original difference in the Trial
Balance.
Solution
1.

2.

3.The figure which represented the original difference in the Trial Balance is $1033.
Question 2
The following Details were extracted from the books of Angene Bisor;
2007
October 1 Debit balances for Sales Ledger
Credit balances for Sales Ledger
Credit balances for Purchases Ledger
Debited balances for Purchases Ledger

3,050
150
12,500
925

Totals for the month ending October 31, 2007

Credit sales
Cash and cheques received

10,050
7,100

Bad Debts written off

375

Discounts Allowed

250

Returns Inwards

500

Dishonoured cheques from customers

Purchases Journal
Cheques paid to suppliers

700
15,750
17,500

Discount Received

870

Returns Outwards

300

Required:
(A)Enter up the Sales Ledger Control accounts and The Purchases Ledger Control Accounts for
October 2007.
(B)From which books would the total of Credit Sales, Discount allowed, and Returns Inwards be
taken.

Solution
(A)

(B)
Items for entry in Control Account

Source

Total Credit Sales

The Sales Journal

Discounts Allowed

The Cash Book

Returns Inwards

The Returns Inwards Journal

Question 3
The Following is a summary of the bank account in the Cash Book of X. Wethernorth for the month
of April 2001.

You are informed that:

-Bank charges of $70 shown on the bank statement have not been entered in the cash book.
-Four cheques in the sums of $100, $150, $125 and $175 have not been presented to the bank
-A Standing Order for Utilities of $200 was paid by the bank but not entered to the cash book.
-A customers cheque for $400 was returned by the bank marked refer to drawer. No entry was
made in the cash book.
-The bank did not credit Wethernorths current account with a lodgement of $ 2,500 made on April
30 2001.
-Two customers D. Mark and F. Garvey deposited $200 and $300 respectively directly into the
current account of Wethernorth.
Required:
(a)Show the adjustments you will make in Wethernorths Cash Book.
(b)Prepare a Bank Reconciliation Statement as at April 30, 2001 to show the Bank Statement
balance.
Solution

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