IGCSE Accounting: Multiple Choice Questions (Cambridge CIE)

IGCSE Accounting: Multiple Choice Questions

Level: IGCSE Cambridge (CIE)

Instructions: Choose the most appropriate answer for each question.

1. Which accounting concept assumes that a business will continue to operate for an indefinite period?

   • A. Going Concern
   • B. Business Entity
   • C. Money Measurement
   • D. Accruals

2. The accounting equation is:

   • A. Assets = Capital - Liabilities
   • B. Capital = Assets + Liabilities
   • C. Liabilities = Assets + Capital
   • D. Assets = Capital + Liabilities

3. What is the source document for a credit sale?

   • A. Cheque counterfoil
   • B. Purchase invoice
   • C. Sales invoice
   • D. Receipt

4. Which book of prime entry records all credit purchases of goods for resale?

   • A. Sales Day Book
   • B. Purchases Day Book
   • C. Cash Book
   • D. Journal

5. When a business buys a machine on credit, which accounts are affected?

   • A. Debit Machine account, Credit Bank account
   • B. Debit Machine account, Credit Creditor account
   • C. Debit Creditor account, Credit Machine account
   • D. Debit Bank account, Credit Machine account

6. If rent is paid by cheque, what is the double entry?

   • A. Debit Rent account, Credit Cash account
   • B. Debit Bank account, Credit Rent account
   • C. Debit Rent account, Credit Bank account
   • D. Debit Cash account, Credit Rent account

7. Which of these is NOT found in the Trading Section of an Income Statement?

   • A. Sales revenue
   • B. Cost of sales
   • C. Gross profit
   • D. Rent expense

8. Which item is classified as a current liability?

   • A. Bank loan (long-term)
   • B. Trade receivables
   • C. Inventory
   • D. Trade payables

9. A machine costing $10,000 has an estimated useful life of 5 years and a residual value of $1,000. Using the straight-line method, what is the annual depreciation?

   • A. $1,000
   • B. $1,800
   • C. $2,000
   • D. $2,200

10. If electricity used in December is to be paid in January, it is treated as:

    • A. A prepayment
    • B. An accrued expense
    • C. An asset
    • D. Revenue

11. What is the effect of writing off a bad debt on profit?

    • A. Increases gross profit
    • B. Decreases gross profit
    • C. Increases net profit
    • D. Decreases net profit

12. Which inventory valuation method assumes that the first goods purchased are the first ones sold?

    • A. FIFO
    • B. LIFO
    • C. AVCO
    • D. Weighted Average

13. The primary purpose of a trial balance is to:

    • A. Calculate profit or loss
    • B. Check the arithmetic accuracy of the ledger
    • C. List all assets and liabilities
    • D. Prepare bank reconciliation

14. Which of the following errors would NOT be revealed by a trial balance?

    • A. A transaction recorded only once
    • B. A transaction posted to the wrong side of an account
    • C. An error of original entry (incorrect amount in both debit and credit)
    • D. An error in calculating the balance of an account

15. Which item appearing on the bank statement would NOT normally be in the cash book until the statement is received?

    • A. Cheques deposited by the business
    • B. Direct debit payments
    • C. Cheques issued by the business but not yet presented
    • D. Bank deposits made by customers

16. What does a Sales Ledger Control Account normally show?

    • A. The total amount owed to suppliers
    • B. The total amount owed by customers
    • C. The total cash sales
    • D. The total credit purchases

17. Which of the following is an example of capital expenditure?

    • A. Repair of a machine
    • B. Purchase of raw materials
    • C. Purchase of a new delivery van
    • D. Payment of electricity bill

18. Revenue expenditure is primarily spent on:

    • A. Acquiring non-current assets
    • B. Maintaining non-current assets
    • C. Expanding the business capacity
    • D. Significantly improving non-current assets

19. If sales are $200,000, cost of sales is $120,000, and operating expenses are $30,000, what is the gross profit?

    • A. $50,000
    • B. $80,000
    • C. $170,000
    • D. $120,000

20. Using the figures from Question 19, what is the net profit?

    • A. $50,000
    • B. $80,000
    • C. $170,000
    • D. $120,000

Answer Key

1. A
2. D
3. C
4. B
5. B
6. C
7. D
8. D
9. B
10. B
11. D
12. A
13. B
14. C
15. B
16. B
17. C
18. B
19. B
20. A