END OF EASTER TERM EXAMINATION 2025

PRINCIPLES OF ACCOUNTS FORM 4 BUSINESS Duration: 1 ½ hrs

Paper 1 Multiple choice
1. Which of the following lists of activities shows the stages of the accounting cycle in the correct order?
(A) Posting to Ledger, Journalizing, Trial Balance, Final Accounts
(B) Posting to Ledger, Trial Balance, Journalizing, Final Accounts
(C) Journalizing, Posting to Ledger, Trial Balance, Final Accounts……………………
(D) Journalizing, Trial Balance, Posting to Ledger, Final Accounts.

2. Which of the following terms describes a report which indicates whether the business has made a profit or
loss'2
(A) Ledger (B) Trial Balance (C) Balance Sheet (D) Income Statement

3. Which of the following groups of persons monitors a company's financial statements to discover a desirable
rate of return on capital?
(A) investors (B) Suppliers (C) Customers (D) Employees
4. Which statement BEST explains the term ‘consistency' as used in accounting?
(A) Procedures in accounting are subject to change each year.
(B) Firms can choose different methods each year to reflect the best financial results.
(C) Separate methods of depreciation, can be used in determining profits for taxation purposes.
(D) The accounting treatment for depreciation, once fixed, must be treated in the same way thereafter.

Items 5 -6 refer to the following information.

5. Janice purchased 20 items priced at $10 each, receiving a 5% trade discount. One month later, she paid her
bill by cheque, taking advantage of a 10% cash discount offer. Calculate the value of the trade discount.
(A) $10 (B) $19 (C) $20 (D) $29

6. What amount would Janice have paid if sshe had missed the discount period?
(A) $171 (B) $180 (C) $190 (D) $200

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7. A statement of the balances of the accounts taken from the l-edger and arranged under assets and liabilities is
called:
(A) a 'I'rial Balance (B) a Balance Sheet (C) a lncome Statement (D) a Statement of Account

8. A motor van was bought on credit from AG Motors for use in the business. How should this be recorded?
(A) Dr. Motor Vehicle Acc; Cr Bank Acc (B) Dr Motor Vehicle Acc.; Cr AG Motors Acc.
(C) Dr Purchases Acc; Cr AG Motors Acc (D) Dr Motor Van Expense Acc; Cr Bank Acc
9. Mrs Green is a dry goods merchant. Which of the following transactions would result in a debit to her cash
account?
(A) Sold goods for cash (B) Bought goods for cash
(C) Paid instalment on loan (D) Paid cash to office cleaner

10. Ram Singh purchased goods valued at$500 on credit. He paid off his bill within the grace period and so
received a l0%o cash discount. How much did he pay the firm?
(A) $50 (B) $450 (C) $490 (D) 550

11. A businessman bought a new computer for $6, 000. He paid $4,000 in cash and traded in his old computer.
What is the entry to record this transaction?
(A) Dr. New Computer $6, 000 (B) Dr. New Computer $2, 000
Cr. Old Computer $2, 000 Cr. old computer $4, 000
Cr, Cash $4, 000 Cr. Cash $2, 000

(C) Dr. New Computer $4, 000 (D) Dr. New Computer $2, 000
Cr. Old Computer $6, 000 Cr. Old Computer $4,000
Cr, cash $6,000 Cr. Cash $6, 000

12. Which of the following is entered in the purchases account of a grocery store?

(A) Computers (B) Goods for resale (C) Office stationery (D) Duplicating machines

13. The AIIC Company received a cheque from Mr Murray for $300. How must this transaction be recorded in
ABC's books?
I. Cr the Cash Book $300. III. Dr. The Bank Acc
II. Cr Mr Murray's account. IV. Dr. Mr Murray's account.
(A) I and III only (B) I and IV only (C) II and III only (D) II and IV only

14. The MAIN objective of co-operatives is to:

(A) settle disputes (B) maximize profits
(C) provide goods and services (D) maximize the welfare of members
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Items 15-16 refer to the following information 'The group below consists of four lettered headings, followed
by two numbered statements. For each numbered statement select the one heading which is MOSI' closely
related to it. Each heading may be used more than once, once or not at all.

(A) Invoice (B) Credit note

(C) Debit Note (D) Advice note

15. You wish to inform a customer that you have dispatched his goods. (d)

16. You find that you have undercharged a customer and need to adjust the charge. (c)

Item 17 – 18 refers to the following information

Bank A/c
$ $
Bal b/d 20, 000 Purchases 15, 000
Sales 2, 000 Balance c/d ?

17. What is the closing balance of the Bank account? 18. The Balance c/d in the Bank account denotes
(A) $2, 000 (A) How much profit was made;
(B) $3, 000 (B) The amt of money in the business’ bank account
(C) $5, 000 (C) The true worth of the business
(D) $7, 000 (D) None of the above

19. The balance in a cash account indicates

(A) how much profit was made (B) the cash held by the business
(C) the true worth of the business (D) how much is owed to the business

20. Under which of the following conditions would a Trial Balance still balance?

i. A debit entry was left out.

ii. A transaction was completely left out.
iii. Both Debit and credit entry were overstated by the same amount.

(A) I and II only (B) I and III only (C) II and III only (D) I, II and III

21. Which of the following features is associated with private limited companies?
(A) Family owned (B) Shares not sold publicly
(C) Financial statements published (D) Gov’t agencies purchase shares

22. The following information from the sales book of R. Lewis reveals the following:
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 2015 $ $
02 jan H. Rick
30 @ $1. 50 45
Less 33 1/3 % Trade discount 15 20

How would R. Lewis record this information in his ledger?

(A) Dr. Rick’s a/c $45; (B) Dr. Rick’s A/c $30;
Cr. Sales Day Book $30 Cr Sales A/c $45

(C) Dr. Rick’s a/c $45; (D) Dr. Rick’s A/c $30;
Cr. Sales A/c $30; Cr. Sales account $40

23. Which of the following statements is correct?

(A) Assets + Capital = Liabilities (B) capital = Assets – Liabilities
(C) Liabilities + Capital = Assets (D) liabilities = Assets – Capital

24. Which of the following is not an Asset?

(A) Stock in hand (B) Cash at bank (C) Premises (D) Creditors

25. Which of the following is a liability?

(A) Buildings (B) Debtors (C) loan from J. Henry (D) Equipment

26. Which of the following are reasons why partnerships are formed?

I. To combine capital from different persons;

II. To benefit from different skills and responsibilities.
III. To enjoy limited liability

(A) I and II only (B) I and III only (C) II and III only (D) 1, II and III

27. Which of the following errors will not be detected by the trial balance?
(A) Errors of omission (B) Errors of principle (C) Errors of commission (D) All of the above

28. An error where an amount is recorded in the wrong account but the correct amount is used is known as:
(A) Error of omission (B) Error of principle (C) Error of commission (D) Compensating error

29. If a transaction is completely omitted from the accounting records, what type of error is this considered?
(A) Compensating error (B) Error of omission (C) Error of commission (D) Error of principle

30. Which of the following errors would still allow the trial balance to balance?
(A) An error in the calculation of totals (B) A transposition error in a single account
(C) Recording the purchase of equipment as an expense (D) All of the above

31. A compensating error occurs when:

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(A) Two or more errors offset each other (B) An error is made in the record of a transaction
(C) An error is made in recording depreciation (D) A transaction is completely omitted

32. When a discount is received from a supplier, how is it recorded in the three-column cash book?

(A) Dr. Discounts column (B) Cr. Cash column

(C) Dr Bank column (D) All of the above

33. In a three-column cash book, what does the bank column represent?
(A) Cash on hand only
(B) Transactions involving bank deposits and withdrawals
(C) Amounts owed to creditors
(D) Cash discounts granted to customers

34. A company makes a cash sale of $1,000 with a 5% discount. How much cash should be recorded in the cash
column after applying the discount?
(A) $950 (B) $1,000 (C) $1,050 (D) $975

35. If a supplier allows a discount of 10% on an invoice total of $2,500, what amount will be recorded in the
Discounts column?
(A) $250 (B) $2,500 (C) $2,000 (D) $1,500

36. A customer purchases goods worth $800 and is offered a discount of 7%. How much will the customer pay
in cash after the discount is applied?
(A) $736 (B) $800 (C) $744 (D) $750

37. If a purchase is recorded in the sales account instead of the purchases account, this is an example of:
(A) Compensating error (B) Error of principle (C) Error of omission (D) Error of duplication

38. Which type of error might occur when data is incorrectly entered but results in the same total for both debits
and credits?
(A) Error of commission/ (B) Error of omission (C) Error of principle (D) All of the above

39. What are the three columns typically found in a three-column cash book?
(A) Cash, Bank, Discounts (B) Cash, Accounts Receivable, Sales
(C) Cash, Expenses, Liabilities (D) Cash, Income, Equity

40. In a three-column cash book, discounts allowed are recorded in which column?
(A) Cash column (B) Bank column
(C) Discounts column (D) None of the above

41. When a cash sale is made, how is it recorded in the three-column cash book?
(A) Dr. Cash column (B) Cr. Cash column
(C) Dr. Discounts column (D) Cr. Bank column

42. What is the primary purpose of maintaining a three-column cash book?

(A) To track purchases only (C) To prepare the balance sheet
(B) To monitor cash, bank transactions, and discounts (D) To calculate the profit and loss

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43. During a cash transaction, an amount of $600 was recorded, but a discount of 12% was applied. What is the
total amount to be recorded in the Discounts column?
(A) $72 (B) $600 (C) $528 (D) $720

44. Which of the following is NOT an accounting concept?

(A) Business Entity Concept (B) Money Measurement Concept

(C) Going Concern Concept (D) Market Fluctuation Concept

45. The Matching Concept in accounting states that:

(A) Expenses should be recorded when they are paid

(B) Revenues should be recorded when received
(C) Expenses should be recorded in the same period as the related revenues
(D) Assets should be recorded at market value

46. Which accounting convention ensures that financial statements present an unbiased view of a company's
financial position?

(A) Conservatism (B) Consistency (C) Materiality (D) Full Disclosure

47. The Going Concern Concept assumes that:

(A) A business will operate indefinitely (C) A business records transactions only when cash is received
(B) A business will be closed within a year (D) A business values its assets at market price

48. According to the Conservatism Principle, when faced with two possible financial outcomes, an accountant
should:

(A) Choose the option that maximizes profit (C) Ignore all potential losses
(B) Choose the option that minimizes losses (D) Record revenue before it is earned

49. What is the primary purpose of accounting?

(A) To record only cash transactions (C) To calculate tax for the government
(B) To provide financial information for decision-making (D) To keep track of employee salaries

50. Which of the following is NOT a branch of accounting?

(A) Financial Accounting (B) Managerial Accounting

(C) Government Accounting (D) Marketing Accounting

51. The financial position of a business is shown in which financial statement?

(A) Income Statement (B) Balance Sheet (C) Cash Flow Statement (D) Trial Balance

52. Which of the following is an example of a liability?

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(A) Accounts Receivable (B) Cash
(C) Accounts Payable (D) Inventory

53. The equation Assets = Liabilities + Owner’s Equity represents which accounting principle?

(A) Accrual Concept (B) Dual Aspect Concept

(C) Money Measurement Concept (D) Consistency Concept

54. Which of the following users of accounting information is considered an external user?

(A) Management (B) Employees (C) Investors (D) Company Directors

55. The double-entry system of accounting means that:

(A) Each transaction affects only one account (B) Each transaction affects at least two accounts
(C) Each transaction is recorded twice in the same account (D) Only cash transactions are recorded

56. In a double-entry system, every debit entry must have:

(A) A corresponding debit entry (B) A corresponding credit entry

(C) No effect on the accounts (D) A decrease in total assets

57. If a business purchases equipment on credit, the double-entry would be:

(A) Debit Equipment, Credit Cash (B) Debit Cash, Credit Equipment
(C) Debit Equipment, Credit Accounts Payable (D) Debit Accounts Payable, Credit Equipment

58. Which of the following accounts normally has a debit balance?

(A) Accounts Payable (B) Revenue (C) Capital (D) Cash

59. What is the effect of debiting an expense account?

(A) It increases the expense (B) It decreases the expense

(C) It increases the owner’s equity (D) It has no effect on financial statements

60. If a company pays off a liability, the double-entry would be:

(A) Debit Liability, Credit Cash (B) Debit Cash, Credit Liability
(C) Debit Liability, Credit Revenue (D) Debit Revenue, Credit Cash

End of examination

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 Answer
All Questions
.
1. . Fill in the blanks for the following statements. (1 mark each)
(a) The ________sales____journal is a book of original entry that is used to record credit Sales ONLY.
(b) Entries for cash, Bank receipts and payments are recorded in the ______double entry__ ________________.
(c) All accounts, other than those for customers and suppliers are recorded in the
_________general______________ledger.
(d) The _____________sales_______________ ledger is used to record customers’ personal accounts.
(e) In every transaction there are ________debit_____ or ____________credit______ accounts affected.
(f) The __________________ journal is used to record credit purchases only.
(g) The return of goods to the business is recorded in the _______________________ _____________book.

2. Using the cashbook prepared, write up a two-column cashbook for K. King from the following details and
balance off as at the end of the month.

2005
May 1 Started business with Capital in Cash $50, 000
May 2 Paid rent by cash $1, 000
May 3 O. Fraser lent us $5, 000 paying by cheque
May 4 Paid B. Mc Kenzie by cheque $6, 000
May 5 Cash Sales $9, 800
May 7 N. Miller paid us by cheque $6, 200 and cash $10, 000
May 9 Paid B. Burton in cash $2, 200
May 11 Cash Sales paid directly into the bank $25, 000
May 15 G. Motta paid us in cash $12, 000
May 16 Took out of the cash till and paid into the business bank account $$25, 000
May 22 Cash Sales $40, 000
May 26 Paid motor expenses by cheque $10, 000
May 31 Paid staff in cash $10, 000 (25 marks)

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 DATE DETAILS FO BANK CASH DATE DETAILS FO BANK CASH
2005 $ $ 2005 $ $

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 3. The following errors were discovered in the books of T Rodney:
i. Postage and Returns Outwards Accounts were both overcast by $50.
ii. Sale of office equipment for $140 was wrongly recorded as sale of goods.
iii. Receipt of cash $420 from L S Fay was wrongly recorded as receipts from P T Fay.
iv. Cash of $180 drawn out for personal use was entered in the Insurance Account.
v. An invoice for goods worth $480 purchased from T Wilson was omitted from the books of T Rodney.
Using the journal below, you are required to:
a) Prepare journal entries to correct the errors; (10 marks)
NO NARRATION IS NEEDED

DAT DETAILS FO DR CR
E
I

II

III

IV

a) Post the entries in the Journal to their correct Ledger account. (15 marks)

DATE DETAILS FO AMT DATE DETAILS FO AMT

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 DATE DETAILS FO AMT DATE DETAILS FO AMT

DATE DETAILS FO AMT DATE DETAILS FO AMT

DATE DETAILS FO AMT DATE DETAILS FO AMT

DATE DETAILS FO AMT DATE DETAILS FO AMT

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4. B. Mann has the following purchases and Sales for the month of May 2004. You are required to enter the
following transactions into their correct journal. (Use the format given below to complete this question)
2004 (25 Marks)
May 1. Bought from K. Khan 4 radios @ $30 each, 3 music ceentres @$160. Less 25%.
Credit sales to J. Johnson $305, L. Lipp $500
May 3. Bought from A. Belle: 2 washing machines @ $200 each, 5 vacuum cleaners @ $60 each, 2 dish
dryers @ $150 each. Less 20% trade discount.
Credit Sales to M. Lee $1, 500; N. Paruag $500
May 15. Bought from J. Kelly: 1 music centre @ $300 each, 2 washing machines @ $250 each. Less 25%
trade discount.
Credit sales to P. Burnette $400

______________________________

DATE DETAILS FO AMOUT

2004 $

_________________________________

DATE DETAILS FO AMOUT

2004 $

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