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. Which of the following is an INTERNAL user of a business's accounting information?
A) The Inland Revenue Department
B) A bank assessing a loan application
C) A supplier deciding whether to give credit
D) The owner-manager of the business
2. The branch of accounting MAINLY concerned with recording transactions and reporting the results of a business to outside users is
A) cost accounting
B) forensic accounting
C) management accounting
D) financial accounting
3. An accountant is asked to prepare the accounts of a company in which his brother owns most of the shares. Which ethical principle is MOST at risk?
A) Due care
B) Confidentiality
C) Objectivity
D) Professional competence
4. Checking a business's accounting records and statements to confirm that they give a true and fair view is called
A) budgeting
B) auditing
C) costing
D) bookkeeping
5. The accounting concept which states that the business is treated as separate from its owner is
A) the going concern concept
B) the prudence concept
C) the consistency concept
D) the business entity concept
6. Valuing closing inventory at the lower of cost and net realisable value applies the concept of
A) prudence
B) consistency
C) materiality
D) accruals
7. A business has capital of 63,000 and liabilities of 19,400. What are its total assets?
A) 63,000
B) 82,400
C) 43,600
D) 81,400
8. A business pays a supplier 2,000 by cheque. What is the effect on the accounting equation?
A) Liabilities fall by 2,000 and capital rises by 2,000
B) Assets rise by 2,000 and liabilities fall by 2,000
C) Assets fall by 2,000 and liabilities fall by 2,000
D) Assets fall by 2,000 and capital falls by 2,000
9. Goods sold on credit to K. Ramsaran for 3,200 are FIRST recorded in
A) the sales journal
B) the cash book
C) the purchases journal
D) the general journal
10. At the end of a period the analysis columns of a petty cash book are totalled. Each total is
A) debited to the bank column of the cash book
B) credited to the capital account
C) debited to the related expense account in the general ledger
D) credited to the related expense account in the general ledger
11. Goods with a list price of 5,000 are sold less 20% trade discount, with a 5% cash discount for payment within 14 days. The customer pays within 14 days. How much does the customer pay?
A) 4,750
B) 3,750
C) 4,000
D) 3,800
12. Discount allowed is entered in the three-column cash book on
A) the credit side, in the discount column
B) the debit side, in the bank column
C) the credit side, in the cash column
D) the debit side, in the discount column
13. A cheque received from a customer is returned by the bank marked "refer to drawer". In the cash book this is recorded as
A) a credit in the bank column
B) a debit in the cash column
C) a credit in the discount column
D) a debit in the bank column
14. Which source document is used to write up the returns inwards journal?
A) A credit note received from a supplier
B) An invoice sent to a customer
C) A debit note sent to a supplier
D) A credit note sent to a customer
15. A credit sale of 650 to J. Pierre was debited to the account of J. Peters. This is an error of
A) principle
B) commission
C) original entry
D) omission
16. Which pair of accounts BOTH normally have debit balances?
A) Drawings and Carriage inwards
B) Discount received and Rent payable
C) Sales and Returns inwards
D) Capital and Drawings
17. Discount received of 240 was correctly entered in the cash book but was not posted to the Discount Received account. What effect does this have on the trial balance?
A) The debit total is 240 greater than the credit total
B) The credit total is 240 greater than the debit total
C) It still balances, because this is an error of omission
D) The debit total is 480 greater than the credit total
18. Returns inwards of 180 were CREDITED to the Returns Inwards account instead of being debited. The difference was placed in a suspense account. To correct the error, the Returns Inwards account must be
A) debited with 180
B) credited with 180
C) debited with 360
D) credited with 360
19. The double entry to record rent received by cheque is
A) debit Rent Payable, credit Bank
B) debit Bank, credit Rent Received
C) debit Bank, credit Capital
D) debit Rent Received, credit Bank
20. The owner pays 5,000 of her private savings into the business bank account. Which account is CREDITED?
A) Sales
B) Bank
C) Capital
D) Drawings
21. Which of the following is a PERSONAL account?
A) The Motor Vehicles account
B) The Wages account
C) The Rent Received account
D) The account of M. Baptiste, a credit customer
22. Opening inventory 6,200; purchases 38,500; returns outwards 1,100; carriage inwards 900; closing inventory 7,400. What is the cost of sales?
A) 35,300
B) 37,100
C) 36,200
D) 39,300
23. Carriage outwards is shown in
A) the trading section of the Income Statement, added to purchases
B) the Statement of Financial Position, as a current liability
C) the trading section of the Income Statement, deducted from sales
D) the profit and loss section of the Income Statement, as an expense
24. Gross profit is 42,000. Expenses are wages 18,500, rent 6,000 and electricity 2,300. Discount received is 700. What is the net profit?
A) 26,800
B) 14,500
C) 15,900
D) 15,200
25. A business has inventory 9,800, accounts receivable 6,400, cash at bank 2,300, accounts payable 7,900 and wages owing 600. What is its working capital?
A) 10,000
B) 10,600
C) 27,000
D) 8,500
26. Cost of sales for the year was 48,000. Opening inventory was 5,000 and closing inventory 7,000. What is the rate of inventory turnover?
A) 6.9 times
B) 4 times
C) 8 times
D) 9.6 times
27. Sales are 80,000 and gross profit is 20,000. What is the gross profit margin?
A) 33⅓%
B) 20%
C) 75%
D) 25%
28. Rent paid in advance at the end of the financial year is shown in the Statement of Financial Position as
A) a non-current asset
B) a current asset
C) part of capital
D) a current liability
29. Equipment costing 18,000 was bought on 1 April. It is depreciated at 10% per annum on cost, charged for each month owned. The year ends on 31 December. What is the depreciation charge for the first year?
A) 1,350
B) 1,800
C) 450
D) 1,200
30. Commission receivable for the year is 4,800, but only 4,200 has been received; 600 is still due. How is this shown in the final accounts?
A) Income of 4,800, with 600 as a current asset
B) Income of 4,200, with 600 as a current liability
C) Income of 4,200, with 600 as a current asset
D) Income of 4,800, with 600 as a current liability
31. A debt of 350 written off last year is unexpectedly paid in full this year. How is the 350 treated?
A) As an increase in the provision for doubtful debts
B) As a reduction in the owner's capital
C) As an expense, called bad debts
D) As income, called bad debts recovered
32. Accounts receivable are 30,000 and the provision for doubtful debts is to be 4% of this. The existing provision is 1,500. What adjustment is made in the Income Statement?
A) A charge of 1,200, shown as an expense
B) A reduction of 1,200, shown as income
C) An increase of 300, shown as an expense
D) A reduction of 300, shown as income
33. At the start of the year 300 of insurance had been paid in advance. During the year 4,200 was paid. At the year end 500 is paid in advance. What is the insurance expense for the year?
A) 4,000
B) 4,200
C) 4,400
D) 5,000
34. A van cost 30,000 and its accumulated depreciation at the start of the year is 12,000. It is depreciated at 20% per annum on the reducing balance. What is this year's depreciation charge?
A) 6,000
B) 3,600
C) 14,400
D) 2,400
35. Which of the following is REVENUE expenditure?
A) Legal fees paid when buying the shop premises
B) Repainting the walls of the existing shop
C) Delivery charges on a new machine
D) Installing new display shelving in the shop
36. Which item is entered on the DEBIT side of the Purchases Ledger Control Account?
A) The opening balance owed to suppliers
B) Credit purchases
C) Interest charged by suppliers on overdue accounts
D) Discounts received
37. Opening accounts payable 9,200; credit purchases 31,500; payments to suppliers 28,700; discounts received 600; returns outwards 1,100. What is the closing balance on the Purchases Ledger Control Account?
A) 13,700
B) 10,900
C) 12,000
D) 10,300
38. Bank charges of 45 appear on the bank statement but not in the cash book. How is the cash book corrected?
A) Debit the bank column with 45
B) Credit the bank column with 45
C) Deduct 45 from the bank statement balance
D) Add 45 to the bank statement balance
39. The updated cash book shows a debit bank balance of 2,640. Cheques of 580 have not yet been presented, and a deposit of 1,100 has not yet been credited by the bank. What balance will the bank statement show?
A) 2,120
B) 4,320
C) 3,160
D) 960
40. Which item appears in a partnership's Appropriation Account?
A) Wages paid to employees
B) Interest on a bank loan
C) A salary paid to a partner
D) Depreciation of equipment
41. A partner withdraws 6,000 on 1 July. Interest on drawings is charged at 10% per annum and the year ends on 31 December. How much interest is charged on this drawing?
A) 450
B) 300
C) 600
D) 150
42. A partner's current account has a DEBIT balance at the end of the year. This means that the partner has
A) been owed money by the business
B) withdrawn more than the profit share credited to them
C) earned interest on their capital
D) invested additional capital in the business
43. Xavier and Yolanda share profits and losses in the ratio 3 : 1. After interest on capital and salaries, the remaining profit is 22,000. What is Yolanda's share of it?
A) 5,500
B) 16,500
C) 11,000
D) 7,333
44. The document that sets out how profits are shared and how much capital each partner contributes is
A) the articles of association
B) the partnership agreement (deed)
C) the memorandum of association
D) the certificate of incorporation
45. A sports club's bar had sales of 15,600. Opening bar inventory was 1,200, bar purchases 9,800 and closing bar inventory 1,500. What was the bar profit?
A) 5,500
B) 5,800
C) 6,100
D) 3,100
46. A club's Income and Expenditure Account shows a deficit. This means that
A) expenditure for the period was greater than income
B) the club's bank account is overdrawn
C) the accumulated fund has increased
D) payments were greater than receipts
47. At the end of the year some members have paid next year's subscriptions. In the club's Statement of Financial Position these are shown as
A) a current liability
B) a current asset
C) part of the accumulated fund
D) income of the current year
48. Debentures issued by a limited company are
A) profits kept back in the company
B) shares which carry voting rights
C) long-term loans on which fixed interest is paid
D) payments to shareholders out of profit
49. Compared with ordinary shareholders, preference shareholders
A) have more votes at general meetings
B) receive whatever profit is left after the other dividends
C) receive a fixed rate of dividend before ordinary shareholders are paid
D) are repaid before the debenture holders
50. A company has 400,000 5% preference shares of 1.00 each and 600,000 ordinary shares of 0.50 each. It pays the full preference dividend and an ordinary dividend of 0.04 per share. What is the total dividend paid?
A) 44,000
B) 32,000
C) 24,000
D) 20,000
51. Opening retained earnings were 35,000. Profit for the year was 62,000. Dividends of 40,000 were paid and 10,000 was transferred to a general reserve. What are the closing retained earnings?
A) 87,000
B) 22,000
C) 57,000
D) 47,000
52. In a co-operative society, each member
A) has votes in proportion to the shares they hold
B) must work for the society full time
C) has one vote, however many shares they hold
D) has unlimited liability for the society's debts
53. Which of the following is a DIRECT cost in a manufacturing business?
A) The factory supervisor's salary
B) Depreciation of factory machinery
C) Wages of the machine operators who make the product
D) Rent of the factory building
54. Prime cost is 52,000 and factory overheads are 18,000. Opening work in progress is 4,000 and closing work in progress is 5,500. What is the cost of production?
A) 60,500
B) 68,500
C) 70,000
D) 71,500
55. Opening inventory of raw materials 3,600; purchases of raw materials 24,000; carriage on raw materials 800; closing inventory of raw materials 4,100. What is the cost of raw materials consumed?
A) 23,500
B) 25,300
C) 24,300
D) 24,800
56. A business buys 200 units at 4.00 each and then 300 units at 5.00 each. Using the weighted average cost method, what is the cost per unit?
A) 4.40
B) 4.60
C) 4.50
D) 5.00
57. An employee's gross pay is 4,000. Deductions are income tax 520, national insurance 160 and union dues 40. What is her net pay?
A) 3,320
B) 4,720
C) 3,440
D) 3,280
58. A salesperson earns a basic 2,500 a month plus 3% commission on sales above 20,000. Her sales in March were 48,000. What is her gross pay for March?
A) 3,940
B) 3,340
C) 2,840
D) 3,100
59. Which is an advantage to a small business of preparing a cash budget?
A) It shows in advance when the business may need an overdraft
B) It records the transactions that actually took place
C) It shows the profit made for the year
D) It lists all the assets and liabilities of the business
60. A trader buys a radio for 400 and adds a mark-up of 25%. What is the selling price?
A) 100
B) 533.33
C) 500
D) 425