Multiple choice questions

The following questions have been designed to test your knowledge of all areas covered within Part 1 of Business Accounting Volume 2, eleventh edition. Once you have completed the test, click on 'Submit Answers for Grading' to get your results.

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This activity contains 25 questions.

	When examining for deficiencies of inventory, a firm would not make allowances for:   Stealing by customers Wastage of goods Changes in market conditions Thefts by employees

	The act of buying an asset without having to make full payment in the immediate future is known as:   Finance lease Hire purchase Operating lease Sale and leaseback

	In branch accounting, if the head office maintains all the accounts then the accounts are used for three main purposes. Which one of the following would not apply?   To measure the qualities of staff To ascertain the profitability of each branch To record changes in assets, liabilities and capital To check for theft at the branch level

	Which account is used for transactions concerned with head office supplying resources to the branch?   Capital account Joint venture account Branch account Current account

	In branch accounts, the correct double entry to show a profit being transferred to the head office accounts would be:   Debit Credit A Income statement Head office Current Account B Income statement Branch Account C Debit Current Account Credit Income statement D Head office Income statement Branch Current Account   A B C D

	The double entry need to record the purchase of an asset through hire purchase would be:   Debit Credit A Non-current asset Cashbook B Hire purchase Supplier C Non-current asset Supplier D Non-current asset Hire purchase   A B C D

	When conversions due to exchange rates leads to disagreement on the trial balance then, which account should be opened?   Difference on exchange account Foreign exchange account Suspense account No account should be opened

	The rules for how to deal with foreign currency are set out in which accounting standard?   IAS 2 IAS 21 There is no specific standard IAS 7

	When repaying by instalments to a supplier for a hire purchase, the double entry to record this repayment would be:   Debit Credit A Profit & Loss Supplier B Cashbook Asset C Supplier Cashbook D Profit & Loss Cashbook   A B C D

	The rules for how to deal with leases and hire purchase contracts is dealt with in which accounting standard?   IAS 19 IAS 12 IAS 17 IAS 11

	If the firm stops making repayments and the goods or assets are taken away from them as a result, this is known as:   Annulment Forfeiture Cancellation Repossession

	Which of the following would not make a distinction between a hire purchase and a ‘normal’ purchase?   Asset does not belong to purchaser when delivery is received from supplier Trade discounts cannot be offered on hire purchase Cost to buyer is likely to be higher than it would be for a normal purchase Purchaser pays for item by instalments over a period of time

	On the balance sheet of a company, the value of the asset bought through hire purchase will appear as:   Cost less depreciation to date less amount owing on hire purchase Cost less depreciation to date Cost less depreciation to date less amount owing on hire purchase less interest owing Cost less amounts owing on hire purchase

	Which of the following is not a feature of an operating lease?   Legal title passes to the lessee Insurance is the responsibility of the leasor Supplier assumes responsibility for repairs and maintenance Rental period is usually less than the asset’s economic life

	When making repayments on a lease, the profit and loss account will contain which items relevant to the lease?   Neither interest or instalment charges Interest and instalment charges Interest only Instalment charges only

	According to the relevant accounting standard, when assets are bought by foreign branches on different dates how should we account for changes in the exchange rates on those dates?   An average exchange rate should be used to convert The exchange rate on the earliest date of purchase should be used The rates on the dates of purchase should be used for each asset bought A weighted average should be used for the exchange rate

	The depreciation on an asset purchased through hire purchase should be:   Should be straight line only Based on the total cost including interest No depreciation should be provide until the final payment is made Based on the cost price of the asset only

	The profit on interest charged on the hire purchase should appear in the income statement in what manner?   Interest should be apportioned in proportion to the repayment totals Interest should instead be capitalised on the balance sheet The total interest levied should be divided equally over the total period the for purchase agreement The interest charged in that period only should be included

	When does the asset legally belong to the purchaser under a hire purchase agreement?   Purchaser agrees to legal option to buy the asset On date of first instalment in repayment Final instalment is paid and purchaser agrees to a legal option to buy the asset Final instalment is paid

	How should current asset and current liabilities of foreign branches be valued?   Using the exchange rate at the date they were incurred Using an average rate for the exchange rate Using the exchange rate at the date of the trial balance No attempt should be made to convert liquid resources as they will change quickly anyway

	Which of the following does not give a difference between a hire purchase and a normal purchase?   Total cost of asset. Legal ownership of asset. Timing of payment for asset. Quality of asset purchased.

	Which of the following would account for the interest charges relating to hire purchase?   Debit Credit A Hire purchase interest Supplier B Hire purchase interest Profit and loss C Profit and loss Supplier D Cashbook Hire purchase interest   A. B. C. D.

	Valuing current assets and current liabilities at the exchange rate ruling on the date of the trial balance is known as which of the following?   Closing method. Valuation method. Estimation method. Temporal method.

	The taking of goods away from customers who fail to keep up with hire purchase payments is known as what?   Reapportionment. Repossession. Reallocation. Readmission.

	A change in the exchange rate of two currencies may not be known as:   depreciation. devaluation. amortisation. appreciation.

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