IGCSE Accounting Paper-1: Specimen Questions with Answers 299 - 300 of 338

Question 299

Edit

Question

MCQ▾

Mr. Adil owns a grocery shop. He bought vegetables from a farmer for $500 on 20 March 2020. Payment for the same has not been done until the end of his financial year i. e. 31 March 2020. In the balance sheet of Mr. Adil, the farmer will be shown as- (Marks 1)

Choices

Choice (4)
a.Lender
b.Debtor
c.Assets
d.Trade Creditor

Answer

d.

Explanation

  • Trade Creditors are persons or entities who have to be paid by an enterprise an amount for providing goods or services on credited.
  • The total amount standing to the credit of such persons or entities on accounts closing date should be shown as Trade Creditors.

Question 300

Edit

Question

MCQ▾

A business buys a machinery for cash $400 from Z and pays machinery insurance of $40. What will be the correct journal entry for the transaction?

Choices

Choice (4)
a.Debit- Cash $440, Credit- Machinery $440,
b.Debit- Machinery $440, Credit- Cash $440,
c.Debit- Machinery $400, Credit- Z $400,
d.Debit- Machinery $400, Credit- Cash $440,

Answer

b.

Explanation

Machinery and Cash are Real A/c so by applying the rule of real A/c-

Debit – What comes in &

Credit What goes out?

  • When machinery is bought, it COMES IN the business so, it will be debited. The whole amount -machinery cost $400 as well as $40 insurance will be treated as capital expenditure because the insurance is paid at the time of purchase. Hence, $40 will be capitalized to the cost of machinery.
  • The purchase is on cash basis, cash actually GOES OUT, so cash will be credited.

Choose Paper