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The Essential Accounting Dictionary of Key Financial Terms
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1 Which is Correct
A Assets + Liabilities = Capital
B Capital + Assets = Liabilities
C Assets = Liabilities + Capital
D Capital = Liabilities + Assets
  1. I think answer is correct.
2 Double-entry book-keeping involves:
A Two entries being made in the business books which are equal and opposite to one another
B Two sets of books being kept for the business
C Business book-keeping being kept by more than one person
D Every entry in the business books being checked twice
  2. I think answer is correct.
3 A DEBIT in the business books represents:
A An asset
B A payment out
C A liability
D Money or value received
  3. I think answer is correct.
4 Your CREDITORS are:
A People who owe you money
B People who provided the original capital for the business
C People to whom you owe money
D Your employees
  4. I think answer is correct.
5 Which of the following CANNOT be a current business asset:
A Bank overdraft
B Stock
C Debtors
D Pre-payments
  5. I think answer is correct.
6 Which of the following CANNOT be a current liability:
A Accruals
B Creditors
C Directors' loans
D Cash
6. I think answer is correct.
7 A CREDIT entry in the business books represents:
A Money or value given
B Payment of a debt
C Money overdrawn at the bank
D Drawings
 
7. I think answer is correct.
8 Working capital is:
A Total assets less liabilities
B Current assets less current liabilities
C Capital invested in the business by the owner
D Long-term liabilities
8. I think answer is correct.
9 Cost of sales represents:
A Stock
B Total business expenses
C Depreciation
D Purchases adjusted for stock
9. I think answer is correct.
10 GROSS profit represents:
A Income less direct costs
B Income less total costs
C Profit before taxation
D Turnover
10. I think answer is correct.
11 NET profit represents:
A Profit after taxation
B Income less total costs
C Income less direct costs
D Drawings
11. I think answer is correct.
12 Which is NOT a ledger account in the books of a business:
A General Ledger
B Sales Ledger
C Purchases Ledger
D Discount Ledger
12. I think answer is correct.
13 Which statement is NOT true:
A Cash sales are entered in a Cash Book
B Credit sales are entered in a Sales Ledger
C Cash purchases are entered in the Purchases Ledger
D Credit purchases are entered in the Purchases Ledger
13. I think answer is correct.
14 DEPRECIATION represents:
A A decline in business trade
B Discount to customers
C A decrease in value of fixed assets
D An increase in value of fixed assets
14. I think answer is correct.
15 Which of the following would NOT appear in a Profit and Loss Account:
A Drawings
B Depreciation
C Bad debts
D Accrued expenses
15. I think answer is correct.
16 Which of the following would NOT appear in a Balance Sheet:
A Depreciation
B Accrued expenses
C Drawings
D Overheads
16. I think answer is correct.
17 Which is NOT true:
A Owner's capital is increased by net profit
B Owner's capital is decreased by net loss
C Owner's capital is decreased by drawings
D Owner's capital is increased by drawings
17. I think answer is correct.
18 Equity Capital is:
A The owner's capital in a business
B Long-term loans
C Dividends to shareholders
D Director's salaries
18. I think answer is correct.
19 Dividends represent:
A Bonus payments to employees
B A payment to shareholders representing a share of the profits
C Discounts to customers
D Interest free loans to directors
19. I think answer is correct.
20 Which is NOT a method to depreciate assets:
A Straight line method
B Revaluation method
C Market value method
D Reducing balance method
20. I think answer is correct.
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