SS2 Third Term Book Keeping Past Questions And Answers

SS2 Bookkeeping questions with options and answers:

 

Question: What is the purpose of a subsidiary ledger?

 

a) To record daily transactions

b) To track individual accounts in detail

c) To prepare financial statements

d) To calculate tax liabilities

 

Answer: b) To track individual accounts in detail

 

Question: How does a credit entry affect an equity account?

 

a) Increases equity

b) Decreases equity

c) Has no effect on equity

d) Increases liabilities

 

Answer: b) Decreases equity

 

Question: What is the purpose of the cash basis of accounting?

 

a) To recognize revenues and expenses when they are incurred

b) To recognize revenues and expenses when cash is received or paid

c) To ensure accurate financial statements

d) To calculate return on investment

 

Answer: b) To recognize revenues and expenses when cash is received or paid

 

Question: Which financial statement reports the company’s cash inflows and outflows from operating activities?

 

a) Income Statement

b) Balance Sheet

c) Cash Flow Statement

d) Statement of Retained Earnings

 

Answer: c) Cash Flow Statement

 

Question: What is the purpose of the ledger in the accounting system?

 

a) To record daily transactions

b) To prepare financial statements

c) To analyze business trends

d) To organize and classify accounts

 

Answer: d) To organize and classify accounts

 

Question: How are dividends classified in the cash flow statement?

 

a) Operating Activities

b) Investing Activities

c) Financing Activities

d) Assets Activities

 

Answer: c) Financing Activities

 

Question: What is the purpose of the adjusting entry for accrued expenses?

 

a) To decrease expenses

b) To recognize expenses that have been incurred but not yet paid

c) To increase liabilities

d) To adjust revenue accounts

 

Answer: b) To recognize expenses that have been incurred but not yet paid

 

Question: Which accounting principle states that assets should be recorded at their original cost?

 

a) Cost Principle

b) Matching Principle

c) Revenue Recognition Principle

d) Conservatism Principle

 

Answer: a) Cost Principle

 

Question: How does a debit entry affect a liability account?

 

a) Increases the liability

b) Decreases the liability

c) Has no effect on the liability

d) Increases the asset

 

Answer: b) Decreases the liability

 

Question: In the context of the accounting equation, if liabilities increase, what happens to equity?

 

a) Equity increases

b) Equity decreases

c) No effect on equity

d) Equity becomes negative

 

Answer: c) No effect on equity

 

Question: What is the purpose of the statement of cash flows?

 

a) To show the financial position of a company

b) To report changes in equity over a period

c) To analyze cash inflows and outflows

d) To calculate return on assets

 

Answer: c) To analyze cash inflows and outflows

 

Question: How does a credit entry affect an income account?

 

a) Increases income

b) Decreases income

c) Has no effect on income

d) Increases expenses

 

Answer: b) Decreases income

 

Question: What is the purpose of the contra account?

 

a) To increase the value of an asset

b) To offset the balance in another account

c) To record daily transactions

d) To calculate tax liabilities

 

Answer: b) To offset the balance in another account

 

Question: What is the formula for calculating the debt-to-equity ratio?

 

a) Total Debt / Total Assets

b) Total Equity / Total Assets

c) Total Debt / Total Equity

d) Total Assets / Total Equity

 

Answer: c) Total Debt / Total Equity

 

Question: How are prepaid expenses treated in the accounting equation?

 

a) Increase assets

b) Decrease liabilities

c) Increase equity

d) Decrease expenses

 

Answer: a) Increase assets

 

Question: What is the purpose of the statement of comprehensive income?

 

a) To show the financial position of a company

b) To report changes in equity over a period

c) To analyze cash inflows and outflows

d) To present all items affecting shareholders’ equity

 

Answer: d) To present all items affecting shareholders’ equity

 

Question: In double-entry bookkeeping, if a liability account increases, which account must also increase?

 

a) Asset

b) Revenue

c) Equity

d) Another liability

 

Answer: d) Another liability

 

Question: How is the book value of an asset calculated?

 

a) Original Cost – Accumulated Depreciation

b) Original Cost + Accumulated Depreciation

c) Original Cost x Accumulated Depreciation

d) Original Cost / Accumulated Depreciation

 

Answer: a) Original Cost – Accumulated Depreciation

 

Question: What is the purpose of the closing entries in the accounting cycle?

 

a) To record closing entries

b) To update account balances for accruals and deferrals

c) To prepare financial statements

d) To calculate tax liabilities

 

Answer: a) To record closing entries

 

Question: How does a credit entry affect an ex

pense account?

 

a) Increases the expense

b) Decreases the expense

c) Has no effect on the expense

d) Increases income

 

Answer: a) Increases the expense