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Cambridge O Level Accounting Quiz

Topics: The Fundamentals of Accounting, Sources and Recording of Data, Verification of Accounting Records (up to Trial Balance)

Student Information

1. What is the main difference between book-keeping and accounting?

A) Book-keeping involves recording transactions, while accounting involves interpreting and analyzing financial information B) Book-keeping is for large businesses only, while accounting is for small businesses C) Book-keeping is done by managers, while accounting is done by owners D) There is no difference between book-keeping and accounting

2. Which of the following best describes the purpose of measuring business profit and loss?

A) To calculate taxes owed to the government B) To determine the financial performance of a business over a period C) To satisfy legal requirements only D) To impress potential investors

3. What is the accounting equation?

A) Assets = Liabilities + Owner's Equity B) Revenue - Expenses = Profit C) Assets + Liabilities = Owner's Equity D) Income - Costs = Net Worth

4. Which of the following is NOT a component of owner's equity?

A) Capital introduced by the owner B) Retained earnings C) Bank loan D) Drawings

5. What is the double-entry system of book-keeping?

A) A system where each transaction is recorded twice in the same account B) A system where each transaction is recorded in two different accounts - one debit and one credit C) A system that uses two different colored inks for recording D) A system that requires two people to record each transaction

6. Which of the following is the correct division of the ledger?

A) Sales ledger, purchases ledger, and nominal ledger B) Income ledger, expense ledger, and asset ledger C) Cash ledger, bank ledger, and credit ledger D) Personal ledger, impersonal ledger, and general ledger

7. What is the purpose of balancing a ledger account?

A) To ensure the account looks neat and tidy B) To determine the closing balance and prepare for transfer to financial statements C) To verify that all transactions have been recorded D) To calculate the profit or loss for the period

8. Which business document is used to inform a customer of goods returned and reduction in amount owed?

A) Invoice B) Debit note C) Credit note D) Statement of account

9. What is the main advantage of using books of prime entry?

A) They eliminate the need for a ledger B) They provide a chronological record of transactions before posting to the ledger C) They replace the need for financial statements D) They are only used for cash transactions

10. Which of the following is NOT a book of prime entry?

A) Cash book B) Sales journal C) Trial balance D) Purchases returns journal

11. What is the difference between trade discount and cash discount?

A) Trade discount is recorded in the accounts, while cash discount is not B) Trade discount is given for prompt payment, while cash discount is given to certain types of customers C) Trade discount is not recorded in the double-entry accounts, while cash discount is recorded D) There is no difference between trade discount and cash discount

12. What is the dual function of the cash book?

A) It serves as both a book of prime entry and a ledger account for bank and cash B) It records both cash and credit transactions C) It is used by both the accountant and the business owner D) It shows both income and expenses

13. What is the imprest system of petty cash?

A) A system where petty cash is kept in a locked box B) A system where the petty cash balance is restored to a fixed amount after reimbursement C) A system where petty cash is only used for emergency expenses D) A system where petty cash records are kept separately from other accounts

14. What is a trial balance?

A) A statement showing all transactions for a period B) A statement of ledger balances on a particular date C) A statement of assets and liabilities D) A statement of profit and loss

15. Which of the following is a limitation of a trial balance?

A) It does not prove that all transactions have been recorded B) It does not show the financial position of the business C) It may not disclose certain types of errors D) All of the above

16. Which error would NOT affect the agreement of a trial balance?

A) Error of omission B) Error of commission C) Error of principle D) All of the above

17. What is an error of commission?

A) An error where a transaction is completely omitted from the books B) An error where a transaction is recorded in the wrong class of account C) An error where a transaction is recorded in the correct class of account but wrong account D) An error where the debit and credit entries are reversed

18. What is an error of complete reversal?

A) An error where the correct amounts are recorded but on the wrong sides of the accounts B) An error where a transaction is recorded twice C) An error where the wrong amount is recorded in both accounts D) An error where a transaction is completely omitted

19. What is an error of principle?

A) An error where a transaction is recorded in the wrong class of account B) An error where the debit and credit entries are reversed C) An error where a transaction is completely omitted D) An error where the wrong amount is recorded in both accounts

20. What is an error of original entry?

A) An error where the correct amounts are recorded but on the wrong sides of the accounts B) An error where the wrong amount is recorded in both the debit and credit entries C) An error where a transaction is recorded in the wrong class of account D) An error where a transaction is completely omitted

21. What is a compensating error?

A) An error where one error is canceled out by another error of the same amount B) An error where a transaction is recorded twice C) An error where the wrong amount is recorded in both accounts D) An error where a transaction is completely omitted

22. Which of the following errors would cause the trial balance to disagree?

A) Error of omission B) Error of commission C) Single entry made instead of double entry D) Error of principle

23. What is the purpose of a suspense account?

A) To record transactions that are in dispute B) To temporarily balance the trial balance while errors are located C) To record transactions that cannot be classified D) To record transactions that may be canceled in the future

24. How are errors that do not affect the trial balance corrected?

A) By adjusting the suspense account B) By journal entries C) By rewriting the ledger accounts D) They cannot be corrected

25. After correcting errors, what needs to be adjusted?

A) The profit or loss for the accounting period B) The statement of financial position C) Both A and B D) Neither A nor B

26. Which of the following is NOT a purpose of accounting information?

A) Monitoring progress B) Decision-making C) Predicting lottery numbers D) Measuring financial performance

27. In the accounting equation, if assets increase and liabilities remain the same, what happens to owner's equity?

A) Increases B) Decreases C) Remains the same D) Cannot be determined

28. Which business document would a supplier send to a customer showing all transactions during a period?

A) Invoice B) Credit note C) Statement of account D) Debit note

29. In double-entry bookkeeping, when a business buys goods on credit, which accounts are affected?

A) Debit purchases, credit cash B) Debit purchases, credit trade payables C) Debit trade payables, credit purchases D) Debit cash, credit purchases

30. What is the first step in preparing a trial balance?

A) List all ledger account balances B) Total the debit and credit columns C) Prepare financial statements D) Correct all errors in the ledger