IGCSE Accounting Paper-1: Specimen Questions with Answers 303 - 304 of 338

Question 303

Question

MCQ▾

To which of the following concerns does the business entity principle not apply?

Choices

Choice (4)

a.

LLPs

b.

Proprietorship

c.

Partnership

d.

None of the above

Answer

d.

Explanation

  • Business Entity concept applies to every form of organization.
  • Business Entity Concept states that for the purpose of accounting, the business and its owner/s should be treated as separate entities.
  • In a partnership firm, the partners and the firm are two separate entities. In case of proprietorship, the business and the proprietor are two separate entities. In case of Companies, the company and its shareholders are separate entities. Similarly, under LLP too, the partners and the business are two separate entities.

Question 304

Question

MCQ▾

Ramzan isuues a cheque to shehnaz in payment for goods purchased from her previous month. How should this transaction be entered in the books of Ramzan?

Choices

Choice (4)

a.

Debit- Shehnaaz, Credit- Bank A/c

b.

Debit- Purchases A/c, Credit- Shehnaz

c.

Debit- Purchases A/c, Credit- Bank A/c

d.

Credit- Shehnaaz, Debit- Bank A/c

Answer

c.

Explanation

Shehnaz is Ramzan՚s supplier. Suppliers are creditors and normally have a credit balance. When a supplier is paid off, its balance decreases by that amount. To record decrease Shehnaz would be debited.

Bank A/c normally has a debit balance. When a cheque is paid, the bank balance decreases, so to record the decrease, Bank A/c will be credited.

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