1. Basic Accounting Equation
Question 1: What is the fundamental accounting
equation?
A. Assets = Liabilities – Equity
B. Assets = Liabilities + Equity
C. Assets + Equity = Liabilities
D. Assets – Equity = Liabilities
Answer: B
Rationale: The fundamental accounting equation is
Assets = Liabilities + Equity. This equation shows that all
assets are financed either by borrowing money (liabilities)
or by the owners’ investments (equity).
2. Journal Entry – Capital Injection
Question 2: Peter starts a business by depositing
R100,000 of his own money into the business bank
account. Which journal entry is correct?
A. Debit Bank R100,000; Credit Capital R100,000
B. Debit Capital R100,000; Credit Bank R100,000
C. Debit Cash R100,000; Credit Revenue R100,000
D. Debit Revenue R100,000; Credit Cash R100,000
Answer: A
Rationale: A capital injection increases both the asset
(bank account) and the owner’s equity (capital). Thus,
,debit (increase) the Bank account and credit (increase) the
Capital account.
3. Double-Entry Recording
Question 3: In the double-entry system, which of the
following must always be true?
A. Total debits always exceed total credits
B. Total credits always exceed total debits
C. Total debits equal total credits
D. Total assets equal total expenses
Answer: C
Rationale: Double-entry accounting requires that every
transaction is recorded with at least one debit and one
credit, and the total debit amount must equal the total
credit amount for each transaction.
4. Revenue Recognition
Question 4: Under the accrual basis of accounting, when
should revenue be recognized?
A. When cash is received
B. When goods are delivered or services performed,
regardless of cash receipt
C. At the end of the fiscal period
D. When the invoice is issued
Answer: B
Rationale: The accrual basis requires that revenue be
, recognized when earned (i.e., when goods or services
have been delivered or performed), regardless of when
cash is received.
5. Expense Recognition (Matching Principle)
Question 5: According to the matching principle,
expenses should be recognized:
A. Only when the cash is paid
B. In the period in which revenue related to those
expenses is earned
C. At the end of the fiscal year
D. In the period following when the expense is incurred
Answer: B
Rationale: The matching principle requires that expenses
be recognized in the same period as the revenues that
they help generate, ensuring that income and related
costs are reported together.
6. Depreciation Method
Question 6: Which depreciation method allocates an
equal expense amount over the useful life of the asset?
A. Declining Balance Method
B. Sum-of-the-Years’ Digits Method
C. Units-of-Production Method
D. Straight-Line Method
Question 1: What is the fundamental accounting
equation?
A. Assets = Liabilities – Equity
B. Assets = Liabilities + Equity
C. Assets + Equity = Liabilities
D. Assets – Equity = Liabilities
Answer: B
Rationale: The fundamental accounting equation is
Assets = Liabilities + Equity. This equation shows that all
assets are financed either by borrowing money (liabilities)
or by the owners’ investments (equity).
2. Journal Entry – Capital Injection
Question 2: Peter starts a business by depositing
R100,000 of his own money into the business bank
account. Which journal entry is correct?
A. Debit Bank R100,000; Credit Capital R100,000
B. Debit Capital R100,000; Credit Bank R100,000
C. Debit Cash R100,000; Credit Revenue R100,000
D. Debit Revenue R100,000; Credit Cash R100,000
Answer: A
Rationale: A capital injection increases both the asset
(bank account) and the owner’s equity (capital). Thus,
,debit (increase) the Bank account and credit (increase) the
Capital account.
3. Double-Entry Recording
Question 3: In the double-entry system, which of the
following must always be true?
A. Total debits always exceed total credits
B. Total credits always exceed total debits
C. Total debits equal total credits
D. Total assets equal total expenses
Answer: C
Rationale: Double-entry accounting requires that every
transaction is recorded with at least one debit and one
credit, and the total debit amount must equal the total
credit amount for each transaction.
4. Revenue Recognition
Question 4: Under the accrual basis of accounting, when
should revenue be recognized?
A. When cash is received
B. When goods are delivered or services performed,
regardless of cash receipt
C. At the end of the fiscal period
D. When the invoice is issued
Answer: B
Rationale: The accrual basis requires that revenue be
, recognized when earned (i.e., when goods or services
have been delivered or performed), regardless of when
cash is received.
5. Expense Recognition (Matching Principle)
Question 5: According to the matching principle,
expenses should be recognized:
A. Only when the cash is paid
B. In the period in which revenue related to those
expenses is earned
C. At the end of the fiscal year
D. In the period following when the expense is incurred
Answer: B
Rationale: The matching principle requires that expenses
be recognized in the same period as the revenues that
they help generate, ensuring that income and related
costs are reported together.
6. Depreciation Method
Question 6: Which depreciation method allocates an
equal expense amount over the useful life of the asset?
A. Declining Balance Method
B. Sum-of-the-Years’ Digits Method
C. Units-of-Production Method
D. Straight-Line Method
