Cambridge AS Level

Accounting
MCQ - Revision
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1 Which list is a long-term source of additional funds for a limited company?

A bank loan, bonus issue of shares, debenture issue

B bank loan, leasing of premises, rights issue of shares
C bonus issue of shares, leasing of premises, trade credit
D debenture issue, rights issue of shares, trade credit

2 Which statements describe advantages of maintaining full accounting records?

1 A more complete assessment of business performance is possible.

2 Book-keeping costs are minimised.
3 Business managers can make more informed decisions.
4 Financial statements will be free from errors and inaccuracies.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

3 Maria recorded a cheque for $475 received from Josh, a credit customer. Josh had deducted a
5% cash discount. The cheque has now been returned as dishonoured.

What is the correct entry to record the return of the cheque in Maria’s books?

debit $ credit $
A bank 475 Josh 500
discount received 25
B Josh 500 bank 475
discount received 25
C bank 475 Josh 500
discount allowed 25
D Josh 500 bank 475
discount allowed 25

4 A business purchased a shop and incurred the following costs.

purchase price of the shop 680 000

legal fees incurred in the purchase of the shop 7 200
cost of initial inventory 12 500
cost of installing air conditioning 47 300

What was the total capital expenditure?

A $680 000 B $687 200 C $734 500 D $747 000

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5 A used motor vehicle was part exchanged for a new motor vehicle. The balance of the purchase
cost of the new motor vehicle was settled by cheque.

What were the entries to record the part-exchange value?

account debited account credited

A bank disposal
B bank motor vehicles
C motor vehicles bank
D motor vehicles disposal

6 A non-current asset of a business cost $300 000 in 2021. It is depreciated using the reducingbalance
method at the rate of 40% per annum. A full year’s depreciation is provided in the year of acquisition
but none in the year of sale. The financial year of the business ends on 31 December.

In 2023, the item was sold for $150 000. Disposal costs of $15 000 were incurred.

What was the profit on disposal?

A $27 000 B $42 000 C $57 000 D $70 200

7 A business received $100 cash from a credit customer in settlement of a debt. When recording it,
an error of commission was made.

Which statement about the debit and credit columns of the trial balance is correct?

A The total of the credit column was $100 higher than the total of the debit column. B
The total of the debit column was $100 higher than the total of the credit column. C
The totals of both columns were the same as if the error had not taken place.
D The totals of both columns were understated by the same amount.

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8 A company’s trial balance includes a suspense account. It was found that the only errors were
discounts received of $240 and discounts allowed of $312, which had both been entered on the
incorrect sides of the respective ledger accounts.

What is the double entry required to clear the suspense account balance?

debit credit
account
$ $

A discounts allowed 312

discounts received 240
suspense 72

B discounts allowed 624

discounts received 480
suspense 144

C discounts received 240

suspense 72
discounts allowed 312

D discounts received 480

suspense 144
discounts allowed 624

9 Which statements describe the benefits of preparing a bank reconciliation statement?

1 checks the accuracy of transactions recorded on the bank statement

2 ensures that cash in the till agrees with the total of the cash column in the cash book
3 eliminates the possibility of fraud by members of staff
4 ensures that the trial balance and financial statements contain an up-to-date figure
for cash at bank

A 1 and 2 B 1, 3 and 4 C 1 and 4 only D 2 and 3

10 A trader’s cash book shows a debit balance of $12 460 at 30 April. Bank charges of $4500 have
not been entered in the cash book.

A cheque for $14 470 received from a credit customer and a cheque for $1740 paid to a supplier
appear in the cash book but not on the bank statement.

What is the balance shown on the bank statement at 30 April?

A $4770 credit
B $4770 debit
C $20 690 credit
D $20 690 debit

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11 A credit customer gave cash to a sales ledger clerk in part settlement of her debt. The clerk was
dishonest and kept the cash for himself. He entered the receipt in the customer’s sales ledger
account but made no entry in the cash book.

What caused the theft to be discovered?

A A bank reconciliation statement was prepared.

B A sales ledger control account reconciliation statement was prepared.
C A statement of account was sent to and checked by the customer.
D A trial balance was extracted from the books of account.

12 The following information is available.

balance of trade receivables at the start of the year 48 000

balance of trade receivables at the end of the year 65 300
trade discount given to credit customers 3 000
cash discount taken by credit customers 4 500
irrecoverable debt written off during the year 6 200
increase in allowance for irrecoverable debts for the year 2 700
cash received from credit customers during the year 516 000

What is the total value of credit sales for the year?

A $541 000 B $544 000 C $546 700 D $547 000

13 At a business’s financial year-end there were expenses owing, expenses prepaid, income owing
and income received in advance.

How will the ledger account balances brought down at the start of the new financial year appear
in the general ledger?

debit balances credit balances

A expenses owing expenses prepaid
income owing income received in advance
B expenses owing expenses prepaid
income received in advance income owing
C expenses prepaid expenses owing
income owing income received in advance
D expenses prepaid expenses owing
income received in advance income owing

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14 A business prepared its statement of profit or loss for the year ended 31 December.

During that year, on 30 April, a non-current asset had been sold. The following information is
available in respect of this item.

cost $130 000

sale proceeds $53 500
residual value $10 000
carrying value at 1 January $52 500
expected life 8 years

Non-current assets are depreciated using the straight-line method, with depreciation being
charged for each month of ownership.

No accounting entries had been made in respect of this non-current asset for the year
ended 31 December.

What was the effect of this omission on the profit for the year?

A $1000 understated
B $5000 overstated
C $6000 understated
D $9000 overstated

15 The owner of a trading business prepared draft financial statements for the year ended
31 December.

It was then discovered that the following transactions occurring during the year had not been
recorded.

1 A cheque for $500 had been received for commission earned.

2 Cash amounting to $2900 was received for a sale of goods which had cost $3000.
3 Inventory costing $5000 had been taken from the business by the owner for
personal use.
4 Non-current assets with a carrying value of $6500 had been sold for $7000 cash.

Which transactions will affect both the gross profit for the year and the total value of net assets
on the statement of financial position?

A 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

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16 A business sells some inventory for $80 on credit. This originally cost $50.

How does this affect the statement of financial position?

current assets owner’s capital

A decrease by $30 decreases by $30

B decrease by $30 increases by $30
C increase by $30 decreases by $30
D increase by $30 increases by $30

17 Which entries are made to record interest on capital in partnership accounts?

debit credit

A appropriation account capital account

B appropriation account current account
C capital account appropriation account
D current account appropriation account

18 L and M are in partnership, sharing profits and losses in the ratio of 3 : 2 respectively.

For the year ended 31 March, their statement of profit or loss showed a profit for the year of
$68 000.

The following information relates to the partnership for the same period.

interest on loan from L 400

total for both partners:
interest on capital 2 600
interest charged on drawings 1 200
salaries 20 000

How much of the residual profit will L receive?

A $26 520 B $27 720 C $27 960 D $28 200

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19 Which reserves are revenue reserves?

1 general reserve
2 retained earnings
3 revaluation reserve
4 share premium account

A 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

20 A limited company has the following in its statement of financial position at 31 March.

equity $

ordinary share capital 200 000

retained earnings 82 500
share premium 80 000

Ordinary shares have a par value of $0.40 each.

A bonus issue is made on the basis of 3 shares for every 8 shares held at 31 March. The issue is
made so that reserves are kept in their most flexible form.

What are the balances on the reserve accounts after the bonus issue has been made?

retained share
earnings premium
$ $

A 7 500 80 000
B 52 500 80 000
C 82 500 5 000
D 82 500 80 000

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21 A company has calculated inventory turnover periods for two successive years.

inventory
year turnover
in days

1 90
2 120

Company directors have suggested the following reasons for the change.

1 Purchases have decreased.

2 Purchases have increased.
3 Sales have decreased.
4 Sales have increased.

What are the possible reasons for the change?

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

22 The following information is available for a business at the end of its financial year.

credit purchases 140 000

credit sales 220 000
total purchases 160 000
total sales 250 000
trade payables 15 000
trade receivables 16 000

What is the trade receivables turnover?

A 24 days B 27 days C 35 days D 40 days

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23 A business commenced trading on 1 January. The purchases and sales of inventory for January
were as follows:

date purchases sales

January 4 3 at $200 each –

13 – 2 at $400 each
26 3 at $250 each –
28 – 2 at $400 each

The business used the first in first out (FIFO) method of inventory valuation.

What was the gross profit for January?

A $250 B $650 C $700 D $750

24 A company has been asked to quote a price for a specific job. Estimated costs are as follows:

direct materials 2000

direct labour 3300

Overheads are charged at 50% of labour cost.

Profit is 20% of the total job cost.

What is the total of the quotation for the job?

A $5300 B $6360 C $6950 D $8340

25 A manufacturing business has a service department, X, and production departments, Y and Z.

Department Z is labour intensive.

How is the overhead absorption rate set for department Z?

first task second task third task

A apportion total overheads reapportion X’s overheads divide Z’s overheads by
across X, Y and Z to Y and Z budgeted labour hours
B apportion total overheads reapportion X’s overheads divide Z’s overheads by
across X, Y and Z to Y and Z actual labour hours
C subtract X’s overheads from apportion remaining divide Z’s overheads by
total overheads overheads across Y and Z budgeted labour hours
D subtract X’s overheads from apportion remaining divide Z’s overheads by
total overheads overheads across Y and Z actual labour hours

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26 What would cause overheads to be under absorbed?

A Overhead absorbed is greater than overhead budgeted.

B Overhead absorbed is less than overhead budgeted.
C Overhead incurred is greater than overhead absorbed.
D Overhead incurred is less than overhead absorbed.

27 A business produces two types of product, P and Q, for the month of January. Overheads are
absorbed using direct labour hours. The production details are as follows:

P Q

units manufactured and sold 5000 2000

direct labour hours per unit 1.5 1

Direct costs for the month were $23 750.

The fixed overheads were $6500.

What was the overhead absorption rate per hour?

A $0.68 B $2.50 C $3.18 D $3.39

28 Which statements about marginal costing are correct?

1 Contribution is the difference between sales revenue and total production costs.
2 Costs are classified as variable costs or fixed costs only.
3 Variable costs include variable selling expenses.

A 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3 only

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29 The following information relates to a manufacturing business.

production for the period 2400 units

closing inventory 400 units
$
direct material costs 12 000
direct labour costs 6 000
factory fixed expenses 4 080

There was no opening inventory.

Closing inventory is valued using marginal costing.

What is the marginal cost per unit of the finished goods?

A $7.50 B $9.00 C $9.20 D $11.04

30 Which statement reflects how cost–volume–profit (CVP) analysis can help with management
decision-making?

A separating out fixed and variable elements of cost

B setting short-term prices
C understanding changes in the business environment
D understanding changes in the product mix

31 Which list is a long-term source of additional funds for a limited company?

1 bank loan, bonus issue of shares, debenture issue

2 bank loan, leasing of premises, rights issue of shares
3 bonus issue of shares, leasing of premises, trade credit
4 debenture issue, rights issue of shares, trade credit

32 Which statements describe advantages of maintaining full accounting records?

1 A more complete assessment of business performance is possible.

2 Book-keeping costs are minimised.
3 Business managers can make more informed decisions.
4 Financial statements will be free from errors and inaccuracies.

1 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

33 Maria recorded a cheque for $475 received from Josh, a credit customer. Josh had deducted a
5% cash discount. The cheque has now been returned as dishonoured.

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What is the correct entry to record the return of the cheque in Maria’s books?

debit $ credit $
A bank 475 Josh 500
discount received 25
B Josh 500 bank 475
discount received 25
C bank 475 Josh 500
discount allowed 25
D Josh 500 bank 475
discount allowed 25

34 A business purchased a shop and incurred the following costs.

purchase price of the shop 680 000

legal fees incurred in the purchase of the shop 7 200
cost of initial inventory 12 500
cost of installing air conditioning 47 300

What was the total capital expenditure?

A $680 000 B $687 200 C $734 500 D $747 000

© UCLES 2023 9706/12/O/N/23 [Turn over

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35 A used motor vehicle was part exchanged for a new motor vehicle. The balance of the purchase
cost of the new motor vehicle was settled by cheque.

What were the entries to record the part-exchange value?

account debited account credited

A bank disposal
B bank motor vehicles
C motor vehicles bank
D motor vehicles disposal

36 A non-current asset of a business cost $300 000 in 2021. It is depreciated using the reducing
balance method at the rate of 40% per annum. A full year’s depreciation is provided in the year of
acquisition but none in the year of sale. The financial year of the business ends on 31 December.

In 2023, the item was sold for $150 000. Disposal costs of $15 000 were incurred.

What was the profit on disposal?

A $27 000 B $42 000 C $57 000 D $70 200

37 A business received $100 cash from a credit customer in settlement of a debt. When recording it,
an error of commission was made.

Which statement about the debit and credit columns of the trial balance is correct?

1 The total of the credit column was $100 higher than the total of the debit column.
2 The total of the debit column was $100 higher than the total of the credit column.
3 The totals of both columns were the same as if the error had not taken place.
4 The totals of both columns were understated by the same amount.

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38 A company’s trial balance includes a suspense account. It was found that the only errors were
discounts received of $240 and discounts allowed of $312, which had both been entered on the
incorrect sides of the respective ledger accounts.

What is the double entry required to clear the suspense account balance?

debit credit
account
$ $

A discounts allowed 312

discounts received 240
suspense 72

B discounts allowed 624

discounts received 480
suspense 144

C discounts received 240

suspense 72
discounts allowed 312

D discounts received 480

suspense 144
discounts allowed 624

39 Which statements describe the benefits of preparing a bank reconciliation statement?

1 checks the accuracy of transactions recorded on the bank statement

2 ensures that cash in the till agrees with the total of the cash column in the cash book
3 eliminates the possibility of fraud by members of staff
4 ensures that the trial balance and financial statements contain an up-to-date figure
for cash at bank

1 1 and 2 B 1, 3 and 4 C 1 and 4 only D 2 and 3

40 A trader’s cash book shows a debit balance of $12 460 at 30 April. Bank charges of $4500 have
not been entered in the cash book.

A cheque for $14 470 received from a credit customer and a cheque for $1740 paid to a supplier
appear in the cash book but not on the bank statement.

What is the balance shown on the bank statement at 30 April?

1 $4770 credit
2 $4770 debit
3 $20 690 credit
4 $20 690 debit

© UCLES 2023 9706/12/O/N/23 [Turn over

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41 A credit customer gave cash to a sales ledger clerk in part settlement of her debt. The clerk was
dishonest and kept the cash for himself. He entered the receipt in the customer’s sales ledger
account but made no entry in the cash book.

What caused the theft to be discovered?

1 A bank reconciliation statement was prepared.

2 A sales ledger control account reconciliation statement was prepared.
3 A statement of account was sent to and checked by the customer.
4 A trial balance was extracted from the books of account.

42 The following information is available.

balance of trade receivables at the start of the year 48 000

balance of trade receivables at the end of the year 65 300
trade discount given to credit customers 3 000
cash discount taken by credit customers 4 500
irrecoverable debt written off during the year 6 200
increase in allowance for irrecoverable debts for the year 2 700
cash received from credit customers during the year 516 000

What is the total value of credit sales for the year?

A $541 000 B $544 000 C $546 700 D $547 000

43 At a business’s financial year-end there were expenses owing, expenses prepaid, income owing
and income received in advance.

How will the ledger account balances brought down at the start of the new financial year appear
in the general ledger?

debit balances credit balances

A expenses owing expenses prepaid
income owing income received in advance
B expenses owing expenses prepaid
income received in advance income owing
C expenses prepaid expenses owing
income owing income received in advance
D expenses prepaid expenses owing
income received in advance income owing

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44 A business prepared its statement of profit or loss for the year ended 31 December.

During that year, on 30 April, a non-current asset had been sold. The following information is
available in respect of this item.

cost $130 000

sale proceeds $53 500
residual value $10 000
carrying value at 1 January $52 500
expected life 8 years

Non-current assets are depreciated using the straight-line method, with depreciation being
charged for each month of ownership.

No accounting entries had been made in respect of this non-current asset for the year
ended 31 December.

What was the effect of this omission on the profit for the year?

1 $1000 understated
2 $5000 overstated
3 $6000 understated
4 $9000 overstated

45 The owner of a trading business prepared draft financial statements for the year ended
31 December.

It was then discovered that the following transactions occurring during the year had not been
recorded.

1 A cheque for $500 had been received for commission earned.

2 Cash amounting to $2900 was received for a sale of goods which had cost $3000.
3 Inventory costing $5000 had been taken from the business by the owner for
personal use.
4 Non-current assets with a carrying value of $6500 had been sold for $7000 cash.

Which transactions will affect both the gross profit for the year and the total value of net assets
on the statement of financial position?

1 1 and 2 B 1 and 4 C 2 and 3 D 3 and 4

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46 A business sells some inventory for $80 on credit. This originally cost $50.

How does this affect the statement of financial position?

current assets owner’s capital

A decrease by $30 decreases by $30

B decrease by $30 increases by $30
C increase by $30 decreases by $30
D increase by $30 increases by $30

47 Which entries are made to record interest on capital in partnership accounts?

debit credit

A appropriation account capital account

B appropriation account current account
C capital account appropriation account
D current account appropriation account

48 L and M are in partnership, sharing profits and losses in the ratio of 3 : 2 respectively.

For the year ended 31 March, their statement of profit or loss showed a profit for the year of
$68 000.

The following information relates to the partnership for the same period.

interest on loan from L 400

total for both partners:
interest on capital 2 600
interest charged on drawings 1 200
salaries 20 000

How much of the residual profit will L receive?

A $26 520 B $27 720 C $27 960 D $28 200

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49 Which reserves are revenue reserves?

1 general reserve
2 retained earnings
3 revaluation reserve
4 share premium account

1 1 and 2 B 1 and 3 C 2 and 4 D 3 and 4

50 A limited company has the following in its statement of financial position at 31 March.

equity $

ordinary share capital 200 000

retained earnings 82 500
share premium 80 000

Ordinary shares have a par value of $0.40 each.

A bonus issue is made on the basis of 3 shares for every 8 shares held at 31 March. The issue is
made so that reserves are kept in their most flexible form.

What are the balances on the reserve accounts after the bonus issue has been made?

retained share
earnings premium
$ $

A 7 500 80 000
B 52 500 80 000
C 82 500 5 000
D 82 500 80 000

© UCLES 2023 9706/12/O/N/23 [Turn over

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51 A company has calculated inventory turnover periods for two successive years.

inventory
year turnover
in days

1 90
2 120

Company directors have suggested the following reasons for the change.

1 Purchases have decreased.

2 Purchases have increased.
3 Sales have decreased.
4 Sales have increased.

What are the possible reasons for the change?

1 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

52 The following information is available for a business at the end of its financial year.

credit purchases 140 000

credit sales 220 000
total purchases 160 000
total sales 250 000
trade payables 15 000
trade receivables 16 000

What is the trade receivables turnover?

1 24 days B 27 days C 35 days D 40 days

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53 A business commenced trading on 1 January. The purchases and sales of inventory for January
were as follows:

date purchases sales

January 4 3 at $200 each –

13 – 2 at $400 each
26 3 at $250 each –
28 – 2 at $400 each

The business used the first in first out (FIFO) method of inventory valuation.

What was the gross profit for January?

A $250 B $650 C $700 D $750

54 A company has been asked to quote a price for a specific job. Estimated costs are as follows:

direct materials 2000

direct labour 3300

Overheads are charged at 50% of labour cost.

Profit is 20% of the total job cost.

What is the total of the quotation for the job?

A $5300 B $6360 C $6950 D $8340

55 A manufacturing business has a service department, X, and production departments, Y and Z.

Department Z is labour intensive.

How is the overhead absorption rate set for department Z?

first task second task third task

A apportion total overheads reapportion X’s overheads divide Z’s overheads by
across X, Y and Z to Y and Z budgeted labour hours
B apportion total overheads reapportion X’s overheads divide Z’s overheads by
across X, Y and Z to Y and Z actual labour hours
C subtract X’s overheads from apportion remaining divide Z’s overheads by
total overheads overheads across Y and Z budgeted labour hours
D subtract X’s overheads from apportion remaining divide Z’s overheads by
total overheads overheads across Y and Z actual labour hours

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56 What would cause overheads to be under absorbed?

1 Overhead absorbed is greater than overhead budgeted.

2 Overhead absorbed is less than overhead budgeted.
3 Overhead incurred is greater than overhead absorbed.
4 Overhead incurred is less than overhead absorbed.

57 A business produces two types of product, P and Q, for the month of January. Overheads are
absorbed using direct labour hours. The production details are as follows:

P Q

units manufactured and sold 5000 2000

direct labour hours per unit 1.5 1

Direct costs for the month were $23 750.

The fixed overheads were $6500.

What was the overhead absorption rate per hour?

A $0.68 B $2.50 C $3.18 D $3.39

58 Which statements about marginal costing are correct?

1 Contribution is the difference between sales revenue and total production costs.
2 Costs are classified as variable costs or fixed costs only.
3 Variable costs include variable selling expenses.

1 1, 2 and 3 B 1 and 2 only C 1 and 3 only D 2 and 3

only

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59 The following information relates to a manufacturing business.

production for the period 2400 units

closing inventory 400 units
$
direct material costs 12 000
direct labour costs 6 000
factory fixed expenses 4 080

There was no opening inventory.

Closing inventory is valued using marginal costing.

What is the marginal cost per unit of the finished goods?

A $7.50 B $9.00 C $9.20 D $11.04

60 Which statement reflects how cost–volume–profit (CVP) analysis can help with management
decision-making?

1 separating out fixed and variable elements of cost

2 setting short-term prices
3 understanding changes in the business environment
4 understanding changes in the product mix

© UCLES 2023 9706/12/O/N/23 [Turn over