Total marks: 60 · Duration: 1 hour 30 minutes
Instructions to candidates
- This paper has 60 questions. Answer ALL questions.
- Each question is worth ONE mark.
- For each question there are four options, A, B, C and D. Choose the ONE you think is correct. In the January 2027 sitting, Paper 01 is taken online, so you select your answer on screen.
- All amounts are in dollars. A silent, non-programmable calculator may be used.
- The questions follow the syllabus spread for Paper 01: Accounting as a Profession (1–4), Accounting as a System (5–8), Books of Original Entry (9–14), Ledgers and the Trial Balance (15–21), Financial Statements of the Sole Trader (22–27), Accounting Adjustments (28–35), Control Systems (36–39), Accounting for Partnerships (40–44), Limited Liability Companies, Co-operatives and Non-Profit Organisations (45–52), Manufacturing and Inventory Control (53–56), Accounting for the Entrepreneur (57–60).
Paper
Section A — Multiple Choice (60 marks)
1. The main purpose of accounting is to
A) record, classify and summarise financial information so that users can make decisions
B) make sure that a business always earns a profit
C) calculate the income tax a business must pay each year
D) keep a record of the cash held by a business
2. Which of the following is an EXTERNAL user of a business's accounting information?
A) The accounts clerk
B) The managing director
C) The sales manager
D) The tax authority (Inland Revenue)
3. An accountant tells a friend the salaries of employees at the firm where she works. Which ethical principle has she broken?
A) Confidentiality
B) Professional competence
C) Due care
D) Objectivity
4. A bank loans officer studies a business's financial statements mainly to
A) calculate the wages of the business's employees
B) judge whether the business can repay a loan with interest
C) decide the selling prices of the business's goods
D) prepare the business's income tax return
5. The accounting concept which requires that revenue should be recognised when it is earned, rather than when cash is received, is known as the
A) Accruals concept
B) Materiality concept
C) Prudence concept
D) Money measurement concept
6. Which of the following is an example of a capital receipt?
A) Interest received on a bank deposit
B) Proceeds from the sale of a motor vehicle used in the business
C) Cash received from the sale of goods to customers
D) Commission received for services rendered
7. The owner of a shop takes goods from the business for his family and records them as drawings, not as a business expense. Which concept is he applying?
A) Business entity (separate entity) concept
B) Consistency concept
C) Going concern concept
D) Prudence concept
8. A business has assets of 86,000 and liabilities of 31,500. What is the owner's capital?
A) 31,500
B) 54,500
C) 86,000
D) 117,500
9. A business purchased goods on credit from Thompson Ltd for 4,500. The correct double entry to record this transaction is:
A) Debit Thompson Ltd 4,500; Credit Cash 4,500
B) Debit Purchases 4,500; Credit Thompson Ltd 4,500
C) Debit Sales 4,500; Credit Thompson Ltd 4,500
D) Debit Thompson Ltd 4,500; Credit Purchases 4,500
10. A petty cash book operated on the imprest system had a float of 500. During the month, payments totalling 378 were made. How much cash should be reimbursed to restore the imprest?
A) 878
B) 122
C) 500
D) 378
11. A three-column cash book contains columns for
A) Debit, Credit and Balance
B) Cash, Bank and Discount
C) Cash, Bank and Petty Cash
D) Cash, Bank and VAT
12. In which book of original entry is the return of faulty goods TO a supplier first recorded?
A) Returns inwards journal
B) Returns outwards journal
C) Purchases journal
D) Sales journal
13. Which source document is used to write up the sales journal?
A) Each credit note received from suppliers
B) Each goods received note
C) A copy of each sales invoice sent to customers
D) The counterfoil of each cheque written
14. The general journal is used to record
A) the purchase of a non-current asset on credit
B) cash sales of goods
C) payments of wages by cheque
D) credit purchases of goods for resale
15. Which of the following errors would be revealed by the trial balance?
A) A cash purchase omitted entirely from the books
B) Rent paid debited to the Landlord's personal account
C) Discount received credited only to the Discount Received Account
D) A credit sale of 650 recorded as 560 in both the Sales Account and the customer's account
16. Which of the following accounts normally has a CREDIT balance?
A) Drawings
B) Purchases
C) Motor vehicles
D) Accounts payable
17. A trial balance has a debit total of 48,600 and a credit total of 47,950. The difference is placed in a suspense account. What is the entry?
A) Credit suspense 1,300
B) Debit suspense 96,550
C) Debit suspense 650
D) Credit suspense 650
18. Rent paid of 900 was entered in both accounts as 90. This is an error of
A) original entry
B) commission
C) principle
D) omission
19. The purchase of office furniture was debited to the Purchases Account. This is an error of
A) commission
B) compensation
C) principle
D) complete reversal
20. A customer's account shows total debits of 3,450 and total credits of 2,980. The balance is
A) 6,430 credit: the business owes the customer
B) 6,430 debit: the customer owes the business
C) 470 credit: the business owes the customer
D) 470 debit: the customer owes the business
21. A trial balance that agrees proves only that
A) every transaction has been recorded in the books
B) the business has made a profit for the period
C) the total of debit entries equals the total of credit entries
D) there are no errors of any kind in the books
22. Samuel's business has the following balances at 30 April: bank overdraft 2,400; accounts receivable 8,600; inventory 5,200; accounts payable 6,300. What is the value of Samuel's working capital?
A) 13,900
B) 5,100
C) 7,500
D) 11,500
23. Marissa's business showed a net profit of 28,400 for the year. Her drawings were 15,600 and she introduced additional capital of 8,000. If her opening capital was 52,000, what is her closing capital?
A) 72,800
B) 64,800
C) 88,800
D) 44,800
24. Which of the following appears in the Trading Account?
A) Discount allowed
B) Carriage outwards
C) Salaries of office staff
D) Carriage inwards
25. Sales were 64,000; opening inventory 7,500; purchases 41,200; closing inventory 9,100. What is the gross profit?
A) 22,800
B) 21,200
C) 24,400
D) 6,200
26. A business has current assets of 18,000 and current liabilities of 7,500. What is its current ratio?
A) 2.4 : 1
B) 0.42 : 1
C) 10,500
D) 1.4 : 1
27. Which of the following is a non-current liability?
A) Accounts payable
B) A bank loan repayable in five years
C) A bank overdraft
D) Wages owing
28. The Provision for Depreciation Account is classified as
A) A liability
B) An expense
C) Capital
D) A contra asset
29. Marcus bought a delivery van for 48,000 at the start of Year 1. He depreciates it at 25% per annum using the reducing balance method. What is its net book value at the end of Year 2?
A) 36,000
B) 24,000
C) 12,000
D) 27,000
30. Bad debts written off during the year are recorded in the Income Statement as
A) An operating expense
B) A reduction in assets
C) An addition to gross profit
D) A deduction from sales
31. Equipment cost 24,000, has an estimated residual value of 4,000 and a useful life of 5 years. What is the annual depreciation using the straight-line method?
A) 20,000
B) 5,600
C) 4,000
D) 4,800
32. Insurance paid during the year was 3,600, of which 900 relates to next year. What is the insurance charge in this year's Income Statement?
A) 4,500
B) 2,700
C) 900
D) 3,600
33. Electricity paid during the year was 5,400 and 600 was owing at the year end. What is the electricity charge in the Income Statement?
A) 600
B) 6,000
C) 5,400
D) 4,800
34. Accounts receivable are 24,000 and the provision for doubtful debts is to be 5% of this. The existing provision is 800. What appears in the Income Statement?
A) An expense of 1,200
B) An expense of 2,000
C) An income of 400
D) An expense of 400
35. A machine that cost 15,000, with accumulated depreciation of 9,000, is sold for 4,500. What is the result of the disposal?
A) A profit of 1,500
B) A loss of 10,500
C) A loss of 1,500
D) A profit of 4,500
36. A Control Account is used to
A) Control the errors made by bookkeepers
B) Check the accuracy of entries in individual accounts in the ledger
C) Record all transactions with customers
D) Prepare the Trial Balance
37. Which of the following would be recorded in the Sales Ledger Control Account?
A) Returns outwards
B) Cash purchases
C) Bad debts written off
D) Discounts received
38. Opening accounts receivable were 12,400; credit sales 36,800; receipts from customers 33,900; discounts allowed 700; returns inwards 1,100. What is the closing balance of the Sales Ledger Control Account?
A) 13,500
B) 14,200
C) 17,100
D) 15,300
39. In a bank reconciliation statement that starts with the balance on the bank statement, which item is ADDED?
A) Bank charges not yet entered in the cash book
B) A customer's cheque returned dishonoured
C) A deposit not yet credited by the bank
D) A cheque not yet presented for payment
40. In partnership accounting, interest on drawings is
A) Credited to the partner's Current Account and debited to the Appropriation Account
B) Credited to the partner's Capital Account
C) Debited to the partner's Current Account and credited to the Appropriation Account
D) Debited to the Profit and Loss Account as an expense
41. Brown and White share profits and losses 3 : 2. The agreement allows interest on capital at 8% per annum. Brown's capital is 45,000 and White's is 55,000. Net profit is 34,000. What is Brown's total share, including his interest on capital?
A) 24,000
B) 15,600
C) 20,400
D) 19,200
42. Where there is no partnership agreement, the law provides that partners
A) receive salaries agreed by the majority
B) share profits and losses equally
C) receive interest on capital at 5%
D) share profits in the ratio of their capitals
43. Which of the following is CREDITED to a partner's current account?
A) Interest on capital
B) A share of a loss
C) Drawings
D) Interest on drawings
44. Ali and Bea share profits equally. Net profit is 30,000. Ali receives a salary of 6,000 and interest on capital totals 4,000. What is EACH partner's share of the remaining profit?
A) 12,000
B) 10,000
C) 13,000
D) 15,000
45. A club received 12,000 in subscriptions during the year. Subscriptions in arrears were 1,800 at the start of the year and 2,200 at the end. Subscriptions in advance were 900 at the start and 1,400 at the end. What amount is credited to the Income and Expenditure Account for subscriptions?
A) 12,900
B) 12,800
C) 12,100
D) 11,900
46. The difference between a Receipts and Payments Account and an Income and Expenditure Account is that the Receipts and Payments Account
A) Shows a surplus or deficit
B) Includes capital receipts and payments
C) Is prepared on an accruals basis
D) Records only revenue items
47. A company's authorised share capital is 500,000 ordinary shares of 1.00 each. It has issued 300,000 shares, fully paid. What is the value of the issued capital?
A) 500,000
B) 800,000
C) 200,000
D) 300,000
48. The main purpose of the appropriation account of a limited company is to show how
A) Capital has been raised
B) Net profit has been distributed
C) Gross profit has been distributed
D) Net profit has been calculated
49. The ordinary shareholders of a company are
A) creditors paid before the preference shareholders
B) employees who receive shares as part of their pay
C) lenders who receive a fixed rate of interest
D) owners whose dividend varies with the profits made
50. A company has 200,000 ordinary shares of 1.00 each issued. A dividend of 6% is declared. What is the total dividend?
A) 120,000
B) 1,200
C) 12,000
D) 6,000
51. A co-operative shares part of its surplus among members in proportion to the goods they bought from it. This is called a
A) transfer to retained profit
B) debenture interest payment
C) patronage refund (dividend on purchases)
D) preference share dividend
52. In the accounts of a club, the accumulated fund is equivalent to a sole trader's
A) capital
B) current liabilities
C) net profit
D) drawings
53. Which of the following is a factory overhead?
A) Raw materials used in production
B) Wages of machine operators
C) Salaries of the sales staff
D) Depreciation of factory machinery
54. Direct materials cost 18,000, direct labour 12,500 and factory overheads 6,400. What is the prime cost?
A) 30,500
B) 18,900
C) 36,900
D) 24,400
55. A trader buys 100 units at 5.00 each and then 100 units at 6.00 each, and sells 120 units. Using FIFO, what is the value of the closing inventory?
A) 400
B) 440
C) 480
D) 600
56. A factory's cost of production for a month is 45,000 for 1,500 units. What is the cost per unit?
A) 30.00
B) 300.00
C) 3.00
D) 15.00
57. Which of the following is a STATUTORY deduction from an employee's pay?
A) Credit union savings
B) Union dues
C) National insurance (social security) contribution
D) Health insurance premium
58. An employee earns 20.00 per hour for a 40-hour week and time-and-a-half for overtime. She works 45 hours. What is her gross pay?
A) 950.00
B) 1,350.00
C) 975.00
D) 900.00
59. Which document records the hours an employee has worked?
A) A sales invoice
B) A pay slip
C) A time card (clock card)
D) A credit note
60. A business expects receipts of 12,000 and payments of 14,500 in March. Its cash balance at 1 March is 1,800. Its cash position at 31 March will be
A) a cash balance of 700
B) a cash balance of 4,300
C) an overdraft of 2,500
D) an overdraft of 700