ACCA FA · Chapter 3
Double entry bookkeeping and the accounting equation MCQs with Answers
10 multiple-choice questions on Double entry bookkeeping and the accounting equation for ACCA FA Financial Accounting. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
A sole trader's capital at the start of the year was $45,000. During the year she introduced a further $5,000, made a profit of $12,600 and withdrew $8,200 for personal use. What was her capital at the end of the year?
- A) $62,600
- B) $70,800
- C) $54,400
- D) $49,400
Show answer & explanation
Answer: C) $54,400
Closing capital = opening capital + capital introduced + profit - drawings. $45,000 + $5,000 + $12,600 - $8,200 = $54,400. Adding drawings gives $70,800, omitting the capital introduced gives $49,400, and ignoring drawings gives $62,600.
Question 2
A trader's net assets were $38,000 at the start of the year and $51,500 at the end. During the year the trader introduced capital of $6,000 and took drawings of $9,000. What was the profit for the year?
- A) $10,500
- B) $13,500
- C) $28,500
- D) $16,500
Show answer & explanation
Answer: D) $16,500
Increase in net assets = $51,500 - $38,000 = $13,500. This increase equals capital introduced + profit - drawings, so profit = $13,500 - $6,000 + $9,000 = $16,500. Reversing the treatment of capital introduced and drawings gives $10,500, and adding both gives $28,500.
Question 3
What is the double entry to record the purchase of goods for resale on credit?
- A) Debit Payables, Credit Purchases
- B) Debit Purchases, Credit Payables
- C) Debit Purchases, Credit Revenue
- D) Debit Inventory, Credit Cash
Show answer & explanation
Answer: B) Debit Purchases, Credit Payables
Buying goods for resale increases the purchases expense, which is a debit. Because the goods are bought on credit, the business now owes the supplier, so trade payables are credited. Inventory is only adjusted at the period end for closing inventory, and cash is not affected until the supplier is paid.
Question 4
The owner of a shop takes goods costing $350 from inventory for personal use. What is the double entry to record this?
- A) Debit Drawings $350, Credit Revenue $350
- B) Debit Purchases $350, Credit Drawings $350
- C) Debit Drawings $350, Credit Purchases $350
- D) Debit Capital $350, Credit Cash $350
Show answer & explanation
Answer: C) Debit Drawings $350, Credit Purchases $350
Goods taken by the owner are drawings, which reduce capital and are debited to the drawings account. The goods were not sold, so revenue is not credited; instead purchases are credited at cost so that cost of sales only includes goods used in the business. No cash is involved.
Question 5
In which book of prime entry would a credit note issued to a credit customer for goods returned first be recorded?
- A) The sales day book
- B) The sales returns day book
- C) The cash book
- D) The purchase returns day book
Show answer & explanation
Answer: B) The sales returns day book
A credit note issued to a customer reduces the amount the customer owes for goods returned, so it is a sales return and is recorded in the sales returns day book. Credit notes received from suppliers go in the purchase returns day book. The sales day book records invoices issued, and the cash book records receipts and payments.
Question 6
A business operates a petty cash imprest system with a float of $350. During the month, petty cash vouchers totalling $212 were paid out, and an employee repaid $30 for personal telephone calls, which was put into the petty cash box. How much cash is needed to restore the float at the end of the month?
- A) $168
- B) $212
- C) $242
- D) $182
Show answer & explanation
Answer: D) $182
Cash in the box at the month end = $350 - $212 + $30 = $168. To restore the imprest of $350, the amount required = $350 - $168 = $182 (equivalently, expenditure of $212 less the $30 received). $168 is the cash remaining, not the top-up needed.
Question 7
A customer's account in the receivables ledger had an opening debit balance of $1,200. During the month, credit sales of $4,500 were made to the customer, the customer paid $3,800, and goods worth $350 were returned by the customer. What is the closing balance on the account?
- A) $350 debit
- B) $1,550 debit
- C) $1,900 debit
- D) $2,250 debit
Show answer & explanation
Answer: B) $1,550 debit
Closing balance = $1,200 + $4,500 - $3,800 - $350 = $1,550 debit. Ignoring the returns gives $1,900, adding the returns instead of deducting them gives $2,250, and omitting the opening balance gives $350.
Question 8
Which type of transaction would normally be recorded in the journal?
- A) An invoice sent to a credit customer
- B) Cash received from a credit customer
- C) A cheque paid to a supplier
- D) The correction of an error in the ledger accounts
Show answer & explanation
Answer: D) The correction of an error in the ledger accounts
The journal is the book of prime entry for transactions not recorded in any other book of prime entry, such as corrections of errors, year-end adjustments and non-current asset transactions. Routine receipts and payments go through the cash book, and sales invoices through the sales day book.
Question 9
Which of the following accounts would normally have a CREDIT balance in a trial balance?
- A) Carriage inwards
- B) Bank overdraft
- C) Drawings
- D) Discount allowed
Show answer & explanation
Answer: B) Bank overdraft
A bank overdraft is a liability, and liabilities have credit balances. Drawings reduce capital and are a debit, while carriage inwards and discounts allowed are expenses, which are also debit balances.
Question 10
A business buys a delivery van on credit. What is the effect on the accounting equation?
- A) Assets do not change in total
- B) Assets increase and capital increases
- C) Assets increase and liabilities increase
- D) Liabilities increase and capital decreases
Show answer & explanation
Answer: C) Assets increase and liabilities increase
The van is a new non-current asset, so assets increase. Since it was bought on credit, a liability to the supplier is created for the same amount. The accounting equation (assets = capital + liabilities) remains in balance and capital is unaffected.