Accounting for Managers

401. Working Capital is a term meaning:

  1. The total of Fixed Assets - Current Assets
  2. The capital less drawings
  3. The amount of capital invested by the proprietor
  4. The excess of the current assets over the current liabilities
Correct answer: (D)
The excess of the current assets over the current liabilities

402. If £500 was shown added to Purchases instead of being added to a fixed asset:

  1. Net profit only would be overstated
  2. Both gross and net profits would be understated
  3. Net profit only would be understated
  4. It would not affect net profit
Correct answer: (B)
Both gross and net profits would be understated

403. The Journal is:

  1. Used when other journals have been mislaid
  2. A supplement to the Cash Book
  3. Not part of the double entry system
  4. Part of the double entry system
Correct answer: (C)
Not part of the double entry system

404. Errors are corrected via the Journal because:

  1. It saves the bookkeeper's time
  2. It provides a good record explaining the double entry records
  3. It saves entering them in the ledger
  4. It is much easier to do
Correct answer: (B)
It provides a good record explaining the double entry records

405. In a Sales Ledger Control Account the Bad Debts written off should be shown in the account:

  1. As a credit
  2. As a debit
  3. As a balance carried down
  4. Both as a debit and as a credit
Correct answer: (A)
As a credit

406. Prime cost includes:

  1. Direct labour
  2. Factory overhead expenses
  3. Raw materials consumed
  4. Direct expenses
  1. (i), (iii) and (iv)
  2. (i), (ii) and (iii)
  3. (ii), (iii) and (iv)
  4. (i), (ii) and (iv)
Correct answer: (A)
(i), (iii) and (iv)

407. If it is required to maintain fixed capitals then the partners' shares of profits must be:

  1. Credited to capital accounts
  2. Debited to capital accounts
  3. Debited to partners' current accounts
  4. Credited to partners' current accounts
Correct answer: (D)
Credited to partners' current accounts

408. Net profit is calculated in the:

  1. Profit and loss account
  2. Balance sheet
  3. Trial balance
  4. Trading account
Correct answer: (A)
Profit and loss account

409. The costs of putting goods into a saleable condition should be charged to:

  1. Trading account
  2. Profit and loss account
  3. Balance sheet
  4. None of these
Correct answer: (A)
Trading account

410. If you want to make sure that your money will be safe if Cheques sent are lost in the post, you should:

  1. Always pay by cash
  2. Cross your Cheques 'Account Payee only, Not Negotiable'
  3. Always take the money in person
  4. Not use the postal service in future
Correct answer: (B)
Cross your Cheques 'Account Payee only, Not Negotiable'
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