MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In the case of a sole trader . . . 1) A) earning profit does not affect capital. B) earning profit increases capital. C) capital can arise only by earning profit. D) earning profit reduces capital. 2)
A school bought a computer, which it intends to use for general administration, and paid for it by
cheque. Which of the following double-entries is the correct way to record this transaction? 2) A)
Account to Debit Account to Credit
Cash Computer
B)
Account to Debit Account to Credit
Computer Bank
C)
Account to Debit Account to Credit
Computer Cash
D)
Account to Debit Account to Credit
Bank Computer
3)
In the case of a retail garage, which of the following double-entries is the correct way to record the
lodgement of hire purchase commission received as a result of selling cars? 3) A)
Account to Debit Account to Credit
Sales Bank
B)
Account to Debit Account to Credit
Bank Commission
C)
Account to Debit Account to Credit
Bank Sales
D) None of the above. 4) When a firm pays one of its accounts payable by cheque, the effect on its assets and liabilities is: 4) A)
Effect upon Assets Effect upon Liabilities
Increase bank Increase Accounts payable
B)
Effect upon Assets Effect upon Liabilities
Reduce bank Increase Accounts payable
C)
Effect upon Assets Effect upon Liabilities
Reduce bank Reduce Accounts payable
D) None of the above 5)
In the case of a retail garage, which of the following double-entries is the correct way to record the
payment, by cheque, of an electricity bill for the current accounting period? 5)
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