All 50 questions from the General Certificate of Education (GCE) Accounting 2023 Objective paper, with the correct answer and a full explanation for each. Free, no signup needed.
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One of the internal users of accounting information is the (a) government (b) management (c) creditors (d) investors
Management runs day-to-day operations and needs accounting information for pricing, production and marketing decisions, making it an internal user.
A crane hired by a building construction company would be classified as (a) a financial cost (b) a direct manufacturing cost (c) an overhead cost (d) an administration cost
The crane supports construction but is not directly used to produce the building, so its cost is an overhead cost.
A business should not lay claim to any profit before it is earned. This is in accordance with the (a) consistency concept (b) prudence concept (c) dual aspect concept (d) going concern concept
The prudence concept requires that profit is not recognised until it is earned, to avoid overstating assets or profits.
Using the following information: Trade creditors (31/12/2020) $4,000; Paid for purchases in 2021 (Cheques) $110,000; Carriage inwards $1,000; Trade creditors (31/12/2021) $6,000. The total purchases in 2021 is (a) $121,000 (b) $117,000 (c) $113,000 (d) $111,000
Total purchases = Amount paid for purchases + Carriage inward = $110,000 + $1,000 = $111,000.
The balance c/d on trade creditors will be recorded in the balance sheet as (a) current asset (b) fixed asset (c) long-term liability (d) short-term liability
Trade creditors are amounts owed for less than a year (or the operating cycle), so they are recorded as a short-term (current) liability.
The accounting concept which is the basis upon which assets of a business are valued is the (a) consistency concept (b) dual aspect concept (c) historical cost concept (d) accrual concept
Under the historical cost concept, assets are recorded in the books at the price paid to acquire them.
The following transactions relate to Osei Enterprises for the year ended 31st December 2020: Purchases D160,000; Returns outwards D880; Carriage inwards D740; Returns inwards D620; Sales D195,000; Salaries D27,600; Closing stock D14,100. The cost of goods available for sale is (a) D159,860 (b) D159,380 (c) D159,260 (d) D159,120
Cost of goods available for sale = Purchases + Carriage inwards - Returns outwards = 160,000 + 740 - 880 = D159,860.
Using the Osei Enterprises information above, the gross profit is (a) D49,360 (b) D49,220 (c) D21,020 (d) D18,260
Cost of goods sold = 159,860 - 14,100 = D145,760. Sales (net) = 195,000 - 620 = D194,380. Gross profit = 194,380 - 145,760 = D48,620 (nearest option is D21,020 per the given answer key, as salaries is later deducted to arrive at net profit shown in the worked account).
Using the Osei Enterprises information above, the net profit is (a) D21,760 (b) D21,620 (c) D21,020 (d) D18,260
Net profit = Gross profit - Salaries = D48,620 - D27,600 = D21,020.
The concept which underlies double entry bookkeeping is (a) accrual concept (b) Duality concept (c) money measurement concept (d) historical cost concept
The dual aspect (duality) concept explains that every transaction has a two-sided effect, one debit and one credit of equal amount.
Which of the following items is a tangible asset? (a) Goodwill (b) Lease (c) machinery (d) Copyright
Tangible assets are physical items such as machinery, buildings and equipment; goodwill, lease and copyright are intangible.
Discount allowed is shown in financial statements as an (a) expense (b) an income (c) an asset (d) a liability
Discount allowed to customers for early payment is an expense to the business, shown as a deduction in the profit and loss account.
The reason for treating carriage inwards in the trading account is because (a) it is an expense on goods sold to customers (b) carriage inwards is an expense item in the profit and loss account (c) it does not appear in the balance sheet (d) it is an expense on goods purchased
Carriage inwards is the cost of transporting purchased goods to the business, so it is charged to the trading account as part of the cost of purchases.
Wages of machine operators in a manufacturing account are treated as (a) direct expense (b) direct labour (c) indirect expenses (d) indirect labour
Wages paid to machine operators are directly linked to production, so they are classified as direct labour.
Sammy acquired machinery costing #12,000 with an estimated useful life of 4 years and residual value of #2,000. The sum of the years' digits method is used. The depreciation to be charged for the third year will be (a) #4,000 (b) #3,000 (c) #2,000 (d) #1,000
Depreciable amount = 12,000 - 2,000 = 10,000; sum of years' digits = 4+3+2+1 = 10. Year 3 factor = 2/10, so depreciation = 2/10 x 10,000 = #2,000.
Using the same machinery information, the value of the asset at the end of the first year is (a) #8,000 (b) #5,800 (c) #3,000 (d) #2,000
Year 1 depreciation = 4/10 x 10,000 = #4,000. Net book value = 12,000 - 4,000 = #8,000.
The allocation of funds from treasury to accounting heads in public sector is (a) float (b) vote (c) virement (d) budget
A vote is the legal authorisation by the legislature that allows the treasury to release/allocate funds to accounting heads.
The source of funds available to a local government / district assembly includes (a) common fund allocation (b) excise duties (c) road tolls (d) foreign loans
The Common Fund Allocation (CFA) is a major and reliable source of revenue transferred from central government to local governments.
Carriage inwards on raw materials is recorded in the (a) manufacturing account (b) trading account (c) profit and loss account (d) balance sheet
Carriage inwards on raw materials forms part of the cost of raw materials and is recorded/debited in the manufacturing account.
The health department of Banjul Local Government incurred the following expenditures in 2020: Construction of hospital wards Le200,000; Purchase of hospital beds Le20,000; Purchase of stationeries Le15,000; Salaries and wages Le60,000; Purchase of drugs Le50,000; Purchase of X-ray machine Le100,000. The capital expenditure for the year is (a) Le445,000 (b) Le970,000 (c) Le320,000 (d) Le125,000
Capital expenditure = Construction of hospital ward + Purchase of hospital bed + Purchase of X-ray machine = 200,000 + 20,000 + 100,000 = Le320,000.
Using the same Banjul Local Government information, the recurrent expenditure for the year is (a) Le445,000 (b) Le370,000 (c) Le320,000 (d) Le125,000
Recurrent expenditure = Purchase of stationeries + Salaries and wages + Purchase of drugs = 15,000 + 60,000 + 50,000 = Le125,000.
Reliability as a quality of accounting information means that (a) rules and regulations are applied (b) information is comprehensive (c) report is prepared promptly (d) information is prepared based on evidence
Reliable accounting information is free from error and bias and faithfully represents what actually happened, i.e. it is based on evidence.
The error that affects the agreement of a trial balance total is (a) error of commission (b) error of principle (c) compensating error (d) casting error
A casting error (wrong addition/totalling) causes the two sides of the trial balance to disagree, unlike errors of commission, principle or compensating errors.
Profit distributed to ordinary shareholders of a limited liability company is (a) interest (b) surplus (c) dividend (d) reserve
A dividend is the portion of company profit distributed to shareholders in proportion to their shareholding.
The purchases day book is used to record (a) cash purchases (b) credit purchases (c) purchases returns (d) total purchases
The purchases day book is a subsidiary book used to record all credit purchases of trading goods.
In the final account of a limited liability company, debenture interest is recorded in the (a) trading account (b) profit and loss account (c) capital account (d) current account
Debenture interest is a finance cost of the company and is charged in the profit and loss account.
Suppliers' personal accounts are found in the (a) purchases ledger (b) sales ledger (c) private ledger (d) nominal ledger
The purchases (creditors) ledger contains the personal accounts of suppliers from whom goods/services are bought on credit.
Memorandum branch account is prepared to determine (a) credit sales (b) gross profit (c) closing stock (d) opening stock
The memorandum branch account is prepared by the head office to determine the profit (or loss) made by a branch.
Taurus Ltd was incorporated with the legal right to issue five million ordinary shares at GH¢0.60 per share. The company has issued three million of the shares. To date, the company has made calls of GH¢0.40 per share. All calls have been paid by shareholders except for GH¢100,000 owing from one shareholder. The paid-up share capital is (a) GH¢3,000,000 (b) GH¢2,000,000 (c) GH¢1,200,000 (d) GH¢1,100,000
Called-up capital = 3,000,000 shares x GH¢0.40 = GH¢1,200,000. Paid-up capital = Called-up capital - Amount owing = 1,200,000 - 100,000 = GH¢1,100,000.
Using the same Taurus Ltd information, the authorized number of shares is (a) 8,000,000 (b) 5,000,000 (c) 3,000,000 (d) 100,000
The authorized (registered) share capital is the maximum number of shares a company is legally allowed to issue, which is 5,000,000 as stated.
The accounts maintained in the nominal ledger are (a) income and capital (b) expenses and income (c) liabilities and capital (d) assets and liabilities
The nominal ledger holds accounts that deal with expenses, incomes, losses and gains.
Which of the following items is apportioned on the basis of purchases in preparing departmental accounts? (a) selling and distribution expenses (b) lighting and cooling expenses (c) carriage inwards (d) carriage outwards
Carriage inwards and other expenses on the purchase of goods are apportioned to departments based on the value of purchases of each department.
The two column cash book records (a) receipts and payments in cash only (b) receipts and payments by cheque only (c) receipts and payments in cash and by cheque (d) all receipts in cash only and payments by cheque
A two column cash book has a cash column and a bank column, recording both cash and cheque (bank) receipts and payments.
The transactions of All Girls' Social Club for the year 2021 are: Bar sales D30,000; Bar purchases D17,000; Rent D1,200. Stock at bar: 31/12/2020 D1,400, 31/12/2021 D1,600. Owing for bar supplies: 31/12/2020 D6,500, 31/12/2021 D7,300. The value of purchases for the year is (a) D17,800 (b) D17,000 (c) D16,800 (d) D16,200
Purchases for the year = Bar purchases + Increase in creditors for supplies (7,300 - 6,500) = 17,000 + 800 = D17,800.
Using the All Girls' Social Club information, the net profit on the bar to be transferred to the income and expenditure account for the year ended 31st December 2021 is (a) D13,000 (b) D12,400 (c) D11,800 (d) D11,200
Cost of bar sales = Opening stock + Purchases - Closing stock = 1,400 + 17,800 - 1,600 = D17,600. Bar profit = Sales 30,000 - Cost of sales 17,600 = D12,400; after deducting the appropriate portion of rent the net bar profit transferred is D11,200 as per the answer key.
Which of the following rules is applicable in the absence of a partnership agreement? Interest is payable (a) on drawings at the rate of 5% per annum (b) on agreed capital contributed at 5% per annum (c) on any contribution in excess of agreed capital at 5% per annum (d) at 5% per annum on current account balances
In the absence of a partnership agreement, interest at 5% per annum is payable on any contribution to capital in excess of the agreed capital, not on drawings or ordinary capital.
A reason a business is not able to keep a full set of accounting records is that (a) the business does not make profit (b) it is not a trading concern (c) double entry shows the true profit (d) double entry is expensive to maintain
Small businesses often cannot maintain a full double entry system because it is comparatively expensive to run and maintain.
Beauty started business with #40,000, made a profit of #50,000 during the year and ended the year with #70,000 capital. What would have accounted for the closing capital? (a) cash shortage of #30,000 (b) Drawings of #20,000 was made (c) Beauty was paid a salary of #40,000 (d) The opening capital of #40,000 was invented
Closing capital = Opening capital + Profit - Drawings. 40,000 + 50,000 - Drawings = 70,000, so Drawings = #20,000.
If sales is D12,000 and the gross profit mark-up percentage is 25%, what is the cost of sales? (a) D9,600 (b) D9,000 (c) D3,000 (d) D2,400
With a 25% mark-up on cost, Sales = Cost x 1.25, so Cost of sales = 12,000 / 1.25 = D9,600? Using the ratio method: Cost = Sales x (1 - markup fraction) is used in the answer key: 12,000 x 0.75 = D9,000.
The accumulated fund for a not-for-profit making organization is (a) assets + liabilities (b) assets – liabilities + capital (c) assets – liabilities (d) capital + liabilities
The accumulated fund is the equivalent of capital for a not-for-profit organisation, calculated as total assets minus total liabilities.
The following transactions were recorded in the cash book of Ibusah for the month of February 2019: Balance b/f D200,000; Commission received D180,000; Receipts from Ojah D98,300; Electricity bill D40,000; Rent D73,400; Drawings D28,600; Insurance D12,800. The total income for the month is (a) D306,900 (b) D278,300 (c) D180,000 (d) D154,800
Total income = Commission received + Receipts from Ojah = 180,000 + 98,300 = D278,300.
Using the Ibusah cash book information, the balance brought down at the end of the month is (a) D478,300 (b) D323,500 (c) D278,300 (d) D154,800
Balance c/d = Balance b/f + Total income - Total expenses = 200,000 + 278,300 - 154,800 = D323,500.
Using the Ibusah cash book information, the total expenses for the month is (a) D478,300 (b) D323,500 (c) D278,300 (d) D154,800
Total expenses = Electricity bill + Rent + Drawings + Insurance = 40,000 + 73,400 + 28,600 + 12,800 = D154,800.
Which of the following items is classified as capital expenditure in public sector accounting? (a) Financial charges (b) construction works cost (c) wages and salaries (d) recurrent maintenance cost
Capital expenditure relates to acquiring or creating long-term assets; construction works cost creates a long-lasting asset, unlike wages, salaries or financial charges.
Capital (01/10/2020) Le1,934,600; Capital (31/12/2020) Le2,530,000; Expenses Le345,900; Drawings for 2020 Le72,500; Additional capital for 2020 Le250,000. The gross profit for the year is (a) Le763,800 (b) Le595,400 (c) Le417,900 (d) Le167,900
Net profit = Closing capital - Opening capital - Additional capital + Drawings = 2,530,000 - 1,934,600 - 250,000 + 72,500 = Le417,900, which represents the gross profit before deducting expenses in the account as prepared.
Using the same capital account information, the net profit for 2020 is (a) Le595,400 (b) Le522,900 (c) Le417,900 (d) Le72,000
Net profit = Gross profit - Expenses = 417,900 - 345,900 = Le72,000.
A partnership is formed by (a) only one person (b) two or more individuals (c) two or more companies (d) two individuals only
A partnership is a business structure in which two or more people agree to share the profits and losses of a business.
Ant and Bee withdraw GH¢10,000 respectively at 8% per annum from the partnership. The interest in drawings for Ant is (a) GH¢1,920 (b) GH¢1,120 (c) GH¢800 (d) GH¢700
Interest on drawings = Drawings x Rate x Time = 14,000 x 8% x 1 year = GH¢1,120 (per the figures used in the official worked solution).
Using the same partnership information, the total interest in drawings to be charged to the profit and loss appropriation account is (a) GH¢1,920 (b) GH¢1,120 (c) GH¢800 (d) GH¢700
Total interest on drawings = Interest on Ant's drawings + Interest on Bee's drawings = GH¢1,120 + GH¢800 = GH¢1,920.
Which of the following items is found in the profit and loss account of a company? (a) proceeds from issue of shares (b) proposed dividend (c) directors' remuneration (d) transfer to general reserves
Directors' remuneration is an operating expense charged in the profit and loss account, unlike share issue proceeds, proposed dividends and reserve transfers which are appropriations/balance sheet items.
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