O-Level Principles of Accounts 3

Question 1

What is the purpose of preparing a bank reconciliation statement?

Accepted Answer

To reconcile differences between the cash book balance and the bank statement balance

Answer

To verify the cash in hand balance only

Answer

To check arithmetical accuracy of the trial balance

Answer

To confirm the net profit earned by the business

Question 2

In partnership accounts, which account records partners' salaries, interest on capital, and drawings?

Accepted Answer

Current account

Answer

Fixed capital account

Answer

Loan account

Answer

Goodwill account

Question 3

A debit balance in a suspense account after extracting a trial balance indicates:

Accepted Answer

Total debits exceeded total credits in the trial balance

Answer

Total credits exceeded total debits in the trial balance

Answer

All errors in the accounts have been corrected

Answer

The business holds more assets than liabilities

Question 4

In the accounts of a club or society, the Receipts and Payments account records:

Accepted Answer

All actual cash and bank receipts and payments during the period

Answer

Only revenue income and expenditure for the period

Answer

Outstanding subscriptions receivable

Answer

The accumulated fund at the start of the year

Question 5

What is the primary purpose of a sales ledger control account?

Accepted Answer

To provide an overall check on the accuracy of the individual debtor accounts

Answer

To replace all individual debtor accounts in the ledger

Answer

To record all credit sales made during the period

Answer

To calculate the gross profit from credit sales

Question 6

In a manufacturing account, prime cost consists of:

Accepted Answer

Direct materials and direct labour costs

Answer

Factory overhead costs only

Answer

All costs of production including factory overheads

Answer

Administrative, selling, and distribution expenses

Question 7

Which ratio measures a business's ability to meet short-term liabilities using its most liquid assets, excluding inventory?

Accepted Answer

Acid test (quick) ratio

Answer

Current ratio

Answer

Gross profit ratio

Answer

Return on capital employed