CIE Accounting Paper-1: Specimen Questions 22 - 24 of 214

Question number: 22

MCQ▾

Question

Joe makes drawing of $2000 p. m. under the partnership deed. Interest is to be charged at 12 % p. a. What is the interest that should be charged to the partner if the amount was drawn in the beginning of the month?

Choices

Choice (4) Response
a.

$1560

b.

$240

c.

$1140

d.

$1320

Answer

a.

Explanation

The amount was drawn at the beginning of the month. Hence, interest on drawings is

InterestonDrawing=Amount×interestpercentage×112×132

24000X12100X112X132=$1560

Question number: 23

MCQ▾

Question

John sold goods to James. He sent an invoice for goods but later discovered that he had undercharged for the goods sold.

Which document will James receive to correct John mistake?

Choices

Choice (4) Response
a.

Cheque

b.

Credit note

c.

statement

d.

Debit note

Answer

b.

Explanation

The credit note is the document issued by the seller to the buyer in order to correct any undercharges against the invoice amount.

The credit note is also known as credit memorandum or memo.

Question number: 24

MCQ▾

Question

Which is a current liability for a business?

Choices

Choice (4) Response
a.

Ten year loan from bank

b.

Pre-paid insurance premium

c.

Outstanding interest charges on loan from bank

d.

Provision for depreciation

Answer

c.

Explanation

Current liabilities are liabilities which liable to pay during the year. Outstanding interest charges on loan from bank are a current liability and should be paid during the accounting year. The last year interest is yet to be paid.

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