Business Accounting

Business Accounting Q1. A supermarket based in Hounslow pays a supplier, Patel Wholesale Ltd, the amounts owed in cash. The entries in the supermarket account should be: A. Debit: Purchases, Credit: Cash B. Debit: Cash, Credit: Patel Wholesale Ltd C. Debit: Patel Wholesale Ltd, Credit: Cash D. Debit: Cash, Credit: Purchases Answer: C, The cash account is giving up an amount of cash in order to pay amounts owed to Patel Wholesale Ltd. The cash account is the giving account, and so it must be credited. Q2. A business changes from depreciating its vehicles at 25% on a straight line basis to 10%. What will be the effect of this change on profit? A. Decrease Profits B. Increase Profits C. No Effect D. No change in profits Answer: B, since expenses will decline, net profits will rise. Q3. Which of the following equations properly represents a derivation of the fundamental accounting equation? A. Assets + liabilities = owner's equity. B. Assets = owner's equity C. Cash = Assets D. Assets – Liabilities = Owners Equity Answer: D, Assets=Liabilities + Equity, here you have liabilities on the right hand side.