Question

The following statements relate to general accounting concepts and principles:

(a) If a business entity settles its outstanding account with a creditor, a receipt will be issued by the business receiving the money.

(b) The effect of a cash purchase of equipment on equity is positive.

(c) The general ledger is a book of prime entry.

(d) The general ledger of a business entity is started off from scratch (all accounts with zero balances) at the beginning of each financial year.

(e) Duplicate receipts are used as the source document to record payments received from debtors.

Which one of the following groups correctly reflects all the statements that are true?

(1) (a), (c), (d)

(2) (b), (d)

(3) (a), (d), (e)

(4) (a), (e)

(5) (b), (c), (d)

3. Which one of the following transactions will result in a change in the equity of an entity operating on a bank overdraft?

(1) A direct deposit in the bank account of an entity by a creditor in payment of his/her account.

(2) A direct deposit of the salary of an employee into his/her bank account.

(3) A cheque issued for payment of assets purchased for cash.

(4) Property bought on credit.

(5) Receive money from a debtor in payment of his/her account.

Answer 1

The following statements relate to general accounting concepts and principles:
(a) If a business entity settles its outstanding account with a creditor, a receipt will be issued by the business receiving the money.	Correct
(b) The effect of a cash purchase of equipment on equity is positive.	incorrect	The effect of a cash purchase of equipment on equity is neutral. Assets (Equipment) will increase Asset (cash) will decrease
(c) The general ledger is a book of prime entry.	Correct	A book of prime entry consist of cash book, petty cash book, sales day book , purchases day book, ledger account
(d) The general ledger of a business entity is started off from scratch (all accounts with zero balances) at the beginning of each financial year.	Correct
(e) Duplicate receipts are used as the source document to record payments received from debtors.	incorrect	Receipts are accounting source documents normally issued to acknowledge that money has been received by one party from another.
Which one of the following groups correctly reflects all the statements that are true?
(1) (a), (c), (d)	correct option
(2) (b), (d)
(3) (a), (d), (e)
(4) (a), (e)
(5) (b), (c), (d)
3. Which one of the following transactions will result in a change in the equity of an entity operating on a bank overdraft?
(1) A direct deposit in the bank account of an entity by a creditor in payment of his/her account.
(2) A direct deposit of the salary of an employee into his/her bank account.	Correct option	This transaction will impact the net income which in turn impact the retained earnings.
(3) A cheque issued for payment of assets purchased for cash.
(4) Property bought on credit.
(5) Receive money from a debtor in payment of his/her account.