(i)                 Which of the following will happen if sh. 7,500 was added to rent instead of being added to fixed assets?

  1.  Gross profit would not be affected
  2. Gross profit would be affected
  3. Gross and net profits would be affected
  4. Net profits would not be affected
  5.  Neither gross profit nor net profit would be affected.
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(ii)               In the trading account, the sales returns should be

  1.  added to cost of goods sold
  2.  deducted from purchases
  3. deducted from sales
  4. added to sales
  5. added to purchases.
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(iii)             When income statements are prepared, the bad debts account is closed by a transfer to the

  1. balance sheet
  2. profit and loss account
  3. trading account
  4. creditors account
  5. debtors account.
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(iv)              If current account is maintained then the partners’ share of profit must be

  1. debited to partners’ capital accounts
  2.  credited to partners’ capital accounts
  3.  credited to profit and loss appropriation account
  4. debited to partners’ current accounts
  5. credited to partners’ current accounts.
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(v)                The value of closing inventories is found by

  1. adding opening stock to purchases
  2. deducting purchases from opening stock
  3. looking in the stock account
  4. doing a stock taking
  5. adding closing stock to sales account.
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(vi)              Which of these statements is incorrect? 

  1. Profit is another word for capital.
  2.  Loss decreases capital.
  3. Profit increases capital.
  4. Drawings decreases capital.
  5. Profit is added to the capital.
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(vii)            A bank reconciliation statement is a statement 

  1. Sent by the bank when the account is overdrawn
  2.  drawn to verify cash book balance with the bank statement balance
  3.  drawn up by the bank to verify the cash book
  4. sent by the bank to the customers when errors are made
  5.  sent by the bank customers to the friends.
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(viii)          What is meant by the term revenue expenditure? 

  1. The extra capital paid by the proprietor.
  2. Money spent on non­current assets or adding value to them.
  3.  The cost of running the business on day to day basis.
  4.  Money spent on selling non­current assets.
  5.  Cost of painting fixed asste.
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(ix)              The recommended method of departmental account is to 

  1. allocate expenses in proportion sales
  2.  charge against each department its controllable costs
  3. allocate expenses in proportion to purchases
  4. charge against each department its uncontrollable costs
  5.  allocate expenses in equal proportion.
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(x)                If the two totals of a trial balance do not agree, the difference must be entered in;

  1.  a real account
  2.  the trading account
  3.  a nominal account
  4. the capital account
  5.  a suspense account.
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