Cambridge International Examinations
Cambridge Ordinary Level
PRINCIPLES OF ACCOUNTS 7110/12
Paper 1 Multiple Choice May/June 2016
1 hour
Additional Materials: Multiple Choice Answer Sheet
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There are thirty questions on this paper. Answer all questions. For each question there are four possible
answers A, B, C and D.
Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet.
Read the instructions on the Answer Sheet very carefully.
Each correct answer will score one mark. A mark will not be deducted for a wrong answer.
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This document consists of 10 printed pages and 2 blank pages.
IB16 06_7110_12/FP
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1 Which task would not be carried out by a book-keeper?
A posting cash receipts
B preparing financial statements
C recording entries in the purchases ledger
D writing up the sales returns journal
2 Goods purchased by Anna from Winston were returned before they were paid for.
Where will Anna record the return of goods?
A cash book and purchases ledger
B general ledger only
C general ledger and purchases ledger
D purchases ledger only
3 Which document does a trader send to a credit customer to summarise the transactions for the
month?
A credit note
B debit note
C receipt
D statement of account
4 Aldo buys and sells goods on credit.
A cheque received by Aldo was dishonoured by the bank.
How would he record this dishonoured cheque?
account to be account to be
debited credited
A bank credit customer
B bank credit supplier
C credit customer bank
D credit supplier bank
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5 Waseem received a bank statement. He found that the bank had charged interest twice in error
and that a dividend had been received on an investment.
Waseem then updated the cash book and prepared a bank reconciliation statement.
Where did he record these two items?
bank error dividend
A bank reconciliation statement bank reconciliation statement
B bank reconciliation statement updated cash book
C updated cash book bank reconciliation statement
D updated cash book updated cash book
6 The following account appeared in Amna’s ledger.
Syed account
debit credit balance
date details
$ $ $
Sept 1 Balance b/d 400 dr
14 Sales 600 1000 dr
26 Bank 390 610 dr
26 Discount 10 600 dr
Which statement is true?
A On 1 September Amna owed Syed $400.
B On 14 September Syed purchased goods, $600, on credit from Amna.
C On 26 September Amna paid Syed $390 by cheque.
D On 26 September Syed allowed $10 cash discount to Amna.
7 What is a trial balance?
A a statement of assets and liabilities on a particular date
B a statement of income and expenditure for a particular period
C a statement of ledger balances on a particular date
D a statement of profit or loss for a particular period
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8 A trial balance did not balance.
Which error caused this?
A A cheque, $300, received from M. Green was credited in the cash book and debited in
M. Green’s account.
B Purchase of goods from J. Black, $750, was debited in the purchases account and credited
in J. Blackshaw’s account.
C Repairs, $500, were debited in the premises account.
D The sales journal was overcast by $1000.
9 Alice’s financial year ends on 31 December.
The balances in her books on 1 January included the following.
commission received 250 dr
rent receivable 500 cr
What do these balances represent?
commission received rent receivable
A income outstanding income outstanding
B income outstanding income prepaid
C income prepaid income outstanding
D income prepaid income prepaid
10 Motor repairs, $250, have been posted in error to the motor vehicles account.
What is the effect on the financial statements?
profit for the year non-current assets
A overstated overstated
B overstated understated
C understated overstated
D understated understated
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11 A business allowed Lee, a customer, $40 cash discount. The discount was entered in the
discount allowed account but omitted from Lee’s account.
A suspense account was opened.
What are the correcting entries?
account to be debited account to be credited
A discount allowed Lee
B Lee discount allowed
C Lee suspense
D suspense Lee
12 A trader provided the following information.
Feb 1 sales ledger control account balance 6 320 dr
28 sales journal total 51 200
sales returns journal total 1 024
cash received from credit customers 830
cheques received from credit customers 50 340
discount allowed 670
What was the balance on the sales ledger control account on 28 February?
A $4656 B $5326 C $5486 D $7180
13 A trader provided the following information.
non-current assets 137 000
current assets 44 500
current liabilities 18 000
non-current liabilities 15 500
What was the capital employed?
A $110 500 B $148 000 C $163 500 D $179 000
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14 How is working capital calculated?
A current assets − current liabilities
B current assets − total liabilities
C non-current assets − current liabilities
D non-current assets − total liabilities
15 Leroy sublets part of his premises to Boris.
How can Leroy calculate the rent receivable for the year?
A amount received – opening accrual – closing prepayment
B amount received – opening accrual + closing prepayment
C amount received + opening accrual – closing prepayment
D amount received + opening accrual + closing prepayment
16 Which group of items appears in a partnership appropriation account?
A drawings, interest on capital, partners’ salaries
B interest on capital, interest on drawings, partners’ salaries
C interest on capital, partners’ loan interest, partners’ salaries
D interest on drawings, interest on capital, partners’ loan interest
17 Fran and David are sole traders. They agree to amalgamate their businesses and to share profits
and losses equally.
Fran’s goodwill was valued at $8000 and David’s at $6000.
How will goodwill be recorded in the books of the new business?
account to be account to be
$ $
debited credited
A Fran 8 000 goodwill 14 000
David 6 000
B goodwill 14 000 Fran 8 000
David 6 000
C Fran 7 000 goodwill 14 000
David 7 000
D goodwill 14 000 Fran 7 000
David 7 000
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18 What may appear in the income and expenditure account of a sports club?
A decrease in bank balance during the year
B increase in inventory of refreshments
C purchase of new sports equipment
D receipts from renting out clubhouse
19 A sports club provided the following information.
$
subscriptions received during the year 12 000
subscriptions owing at the start of the year 1 200
subscriptions owing at the end of the year 800
What was the amount of subscriptions shown in the income and expenditure account?
A $11 600 B $12 400 C $12 800 D $13 200
20 A trader supplied the following information.
$
capital at start of the year 30 000
capital at end of the year 50 000
drawings during the year 12 000
additional capital introduced during the year 18 000
What was the profit for the year?
A $10 000 B $14 000 C $20 000 D $26 000
21 What is mark-up?
A gross profit expressed as a percentage of cost of sales
B gross profit expressed as a percentage of sales
C profit for the year expressed as a percentage of cost of sales
D profit for the year expressed as a percentage of sales
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22 Which item is directly affected by the dividend policy of a limited company?
A general reserve
B ordinary share capital
C preference share capital
D retained earnings
23 A limited company provided the following information.
issued share capital – 50 000 ordinary shares of $1 each 50 000
profit for the year ended 30 April 2016 13 000
transfer to general reserve on 30 April 2016 6 000
interim ordinary share dividend paid during the year 3 000
On 30 April 2016 it was decided to use the remaining profit to pay a final ordinary share dividend.
What percentage final dividend would the ordinary shareholders receive?
A 8% B 14% C 20% D 26%
24 A manufacturer provided the following information.
cost of raw materials consumed 20 000
direct wages 10 000
light and heat 5 000
machinery repairs 3 000
What was the prime cost?
A $20 000 B $30 000 C $35 000 D $38 000
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25 At the end of the financial year a manufacturer had inventory of finished goods, raw materials and
work-in-progress.
Which inventories will appear in the manufacturing account?
finished goods raw materials work-in-progress
A
B
C
D 1h=$4
1.5h=$6
2h=$8
26 Dhoni’s basic pay is $4 per hour. He is paid overtime as follows. when overtime,(sat)
1h=$6
Saturday time and a half 6h=$(6x6) =$36
(sun),
Sunday double time
1h=$8
4 h=$32
Dhoni worked 6 hours on Saturday and 4 hours on Sunday.
$32+$36=$68
How much was he paid for the overtime worked?
A $40 B $44 C $60 D $68
27 An employer deducts income tax from staff wages each week and pays it to the government once
a month on the last day of the month.
What does the entry posted to the credit side of the income tax account on 10 January
represent?
A a payment made to the government
B a refund of income tax to an employee
C the amount deducted from staff wages on that date
D the total for the month owed to the government
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28 A company provided the following information.
$ $
revenue 500 000
opening inventory 35 000
purchases 310 000
345 000
closing inventory 45 000
cost of goods sold 300 000
gross profit 200 000
What was the rate of turnover of inventory?
A 5 times
B 6.67 times
C 7.5 times
D 8.57 times
29 Omar purchased land ten years ago for $25 000. He has been offered $60 000 for the land. He
thinks that the land may now be worth $100 000.
At what value should the land be recorded in Omar’s statement of financial position?
A $25 000 B $60 000 C $75 000 D $100 000
30 Which statement is not true about reasons for using international accounting standards?
A helps when making comparisons between companies
B improves the reliability of accounting information
C narrows the areas of difference between companies
D makes the preparation of financial statements less time consuming
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