CIE Accounting Paper-1: Specimen Questions 95 - 97 of 214

Question number: 95

Short Answer Question▾

Write in Short

Identify the error involved in the following transaction:

Goods of $5000 purchased on credit from Siju, is recorded in the book for $5500.

Explanation

Error of recording

This error arises when the transaction is wrongly recorded in the books of original entry. The error of recording comes under the Errors of commission. This error arise due to wrong recording, wrong posting, wrong balancing and wrong carrying forward.

Question number: 96

MCQ▾

Question

A company purchased a plant for $50000. The useful life of the plant is 10 years and the residual value is $10000.

What is the annual depreciation charge using the straight line method?

Choices

Choice (4) Response
a.

1000

b.

5000

c.

3000

d.

4000

Answer

d.

Explanation

Under the straight line method depreciation is charged every year evenly under the effective life of an asset.

Depreciation=CostofthefixedassetEstimatedresidualvalueNumberofyearsofexpectedlife

Question number: 97

MCQ▾

Question

When preparing his final accounts, a trader forgot to include an unpaid invoice for repairs to his machinery

What is the effect of this?

Choices

Choice (4) Response
a.

Fixed assets are undervalued

b.

Net profit is undervalued

c.

Fixed assets are overvalued

d.

Net profit is overvalued

Answer

d.

Explanation

The net profit is overvalued in the final accounts of the trader. Usually the expenses related to the normal activities of the trade business are recorded in the debit side of the profit and loss account.

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