Bookkeeping Practice Examination
Comprehensive Assessment: 65 Multiple-Choice Questions & Explanations
Question 1
Which account is credited when a business purchases office equipment on credit from a supplier?
● A) Office Equipment Account
● B) Cash Account
● C) Accounts Payable Account
● D) Purchases Account
Answer: C
Explanation: Credit purchases increase liability, so Accounts Payable is credited. Option A is
incorrect because Office Equipment (an asset) is debited.
Question 2
What entry is recorded when a customer pays an outstanding invoice in cash?
● A) Debit Cash, Credit Accounts Receivable
● B) Debit Accounts Receivable, Credit Cash
● C) Debit Cash, Credit Sales
● D) Debit Accounts Payable, Credit Cash
Answer: A
Explanation: Cash increases with a debit, and Accounts Receivable decreases with a credit. Option
C is wrong because the sale was already recognized previously.
Question 3
Where are individual credit purchases from suppliers first recorded before posting to ledgers?
● A) Sales Daybook
● B) General Journal
● C) Cash Book
, ● D) Purchase Daybook
Answer: D
Explanation: The Purchase Daybook (Purchases Journal) is the book of prime entry for credit
purchases. Option B is incorrect as the General Journal handles non-routine entries.
Question 4
A petty cash float is established at $200. At month-end, vouchers total $160 and cash on hand is
$40. How much cash is needed to replenish the float?
● A) $40
● B) $160
● C) $200
● D) $120
Answer: B
Explanation: Under the imprest system, the float is restored by reimbursing the exact total of
spent vouchers ($160). Option A represents the remaining unspent cash balance.
Question 5
What is the primary purpose of preparing a trial balance?
● A) To calculate net profit for the financial year
● B) To verify that total debit balances equal total credit balances
● C) To reconcile bank statements with ledger accounts
● D) To value closing inventory accurately
Answer: B
Explanation: A trial balance checks mathematical accuracy by ensuring total debits equal total
credits. Option A is incorrect because financial statements, not trial balances, compute profit.
Question 6
If an invoice of $500 for stationery is recorded in the repairs account by mistake, which type of
error occurred?
, ● A) Error of Omission
● B) Error of Original Entry
● C) Compensating Error
● D) Error of Principle
Answer: D
Explanation: Recording an expense in the wrong category violates accounting principles, making
it an Error of Principle. Option A refers to leaving a transaction out entirely.
Question 7
How is output Sales Tax (VAT collected on sales) treated in the books of a business?
● A) A liability owed to the tax authority
● B) An expense in the income statement
● C) An asset receivable from customers
● D) Revenue earned by the business
Answer: A
Explanation: Collected Sales Tax belongs to the tax authority, making it a current liability until
remitted. Option D is incorrect because tax collected is not revenue.
Question 8
Which item in a bank reconciliation requires an adjustment in the cash book rather than being
listed on the reconciliation statement?
● A) Unpresented cheques
● B) Outstanding deposits
● C) Direct debits paid by the bank not yet recorded
● D) Bank errors
Answer: C
Explanation: Bank-initiated transactions like direct debits must be entered in the cash book to
update the ledger. Options A and B are timing differences shown on the reconciliation statement.
Comprehensive Assessment: 65 Multiple-Choice Questions & Explanations
Question 1
Which account is credited when a business purchases office equipment on credit from a supplier?
● A) Office Equipment Account
● B) Cash Account
● C) Accounts Payable Account
● D) Purchases Account
Answer: C
Explanation: Credit purchases increase liability, so Accounts Payable is credited. Option A is
incorrect because Office Equipment (an asset) is debited.
Question 2
What entry is recorded when a customer pays an outstanding invoice in cash?
● A) Debit Cash, Credit Accounts Receivable
● B) Debit Accounts Receivable, Credit Cash
● C) Debit Cash, Credit Sales
● D) Debit Accounts Payable, Credit Cash
Answer: A
Explanation: Cash increases with a debit, and Accounts Receivable decreases with a credit. Option
C is wrong because the sale was already recognized previously.
Question 3
Where are individual credit purchases from suppliers first recorded before posting to ledgers?
● A) Sales Daybook
● B) General Journal
● C) Cash Book
, ● D) Purchase Daybook
Answer: D
Explanation: The Purchase Daybook (Purchases Journal) is the book of prime entry for credit
purchases. Option B is incorrect as the General Journal handles non-routine entries.
Question 4
A petty cash float is established at $200. At month-end, vouchers total $160 and cash on hand is
$40. How much cash is needed to replenish the float?
● A) $40
● B) $160
● C) $200
● D) $120
Answer: B
Explanation: Under the imprest system, the float is restored by reimbursing the exact total of
spent vouchers ($160). Option A represents the remaining unspent cash balance.
Question 5
What is the primary purpose of preparing a trial balance?
● A) To calculate net profit for the financial year
● B) To verify that total debit balances equal total credit balances
● C) To reconcile bank statements with ledger accounts
● D) To value closing inventory accurately
Answer: B
Explanation: A trial balance checks mathematical accuracy by ensuring total debits equal total
credits. Option A is incorrect because financial statements, not trial balances, compute profit.
Question 6
If an invoice of $500 for stationery is recorded in the repairs account by mistake, which type of
error occurred?
, ● A) Error of Omission
● B) Error of Original Entry
● C) Compensating Error
● D) Error of Principle
Answer: D
Explanation: Recording an expense in the wrong category violates accounting principles, making
it an Error of Principle. Option A refers to leaving a transaction out entirely.
Question 7
How is output Sales Tax (VAT collected on sales) treated in the books of a business?
● A) A liability owed to the tax authority
● B) An expense in the income statement
● C) An asset receivable from customers
● D) Revenue earned by the business
Answer: A
Explanation: Collected Sales Tax belongs to the tax authority, making it a current liability until
remitted. Option D is incorrect because tax collected is not revenue.
Question 8
Which item in a bank reconciliation requires an adjustment in the cash book rather than being
listed on the reconciliation statement?
● A) Unpresented cheques
● B) Outstanding deposits
● C) Direct debits paid by the bank not yet recorded
● D) Bank errors
Answer: C
Explanation: Bank-initiated transactions like direct debits must be entered in the cash book to
update the ledger. Options A and B are timing differences shown on the reconciliation statement.
