SS1 Third Term Book Keeping Past Questions and Answers

Question 11:

What is the purpose of the income statement?

A) To show the financial position of a business

B) To provide a summary of cash flows

C) To report the profitability of a business over a period

D) To list the assets and liabilities of a business

Answer: C) To report the profitability of a business over a period

Question 12:

In the context of financial accounting, what does the term “depreciation” refer to?

A) Increase in the value of an asset

B) Decrease in the value of an asset over time

C) Immediate expensing of an asset

D) Increase in the market value of a liability

Answer: B) Decrease in the value of an asset over time

Question 13:

What is the normal balance of an expense account?

A) Debit

B) Credit

C) Either Debit or Credit, depending on the transaction

D) Neither Debit nor Credit

Answer: A) Debit

Question 14:

If a company borrows money from a bank, how does this affect the accounting equation?

A) Assets increase, Equity increases

B) Assets increase, Liabilities increase

C) Assets decrease, Liabilities decrease

D) Assets decrease, Equity decreases

Answer: B) Assets increase, Liabilities increase

Question 15:

What is the purpose of the general ledger?

A) To record daily transactions

B) To provide a summary of financial statements

C) To record transactions in a chronological order

D) To maintain individual accounts for each type of asset and liability

Answer: D)