FACII501 ACTUAL EXAM REVIEW 2026 | DETAILED
QUESTIONS, VERIFIED ANSWERSA+GUARANTEE
Question 1
A business purchased equipment for R120 000 cash. Which accounts are affected in the
transaction?
A. Debit Bank, Credit Equipment
B. Debit Equipment, Credit Bank
C. Debit Capital, Credit Equipment
D. Debit Equipment, Credit Capital
Answer: B. Debit Equipment, Credit Bank
Rationale: Equipment is an asset and assets increase on the debit side. Since cash was paid from
the bank account, the bank asset decreases and is credited. The transaction therefore increases
equipment while reducing cash held in the bank.
Question 2
Which accounting concept states that business transactions must be kept separate from the
owner’s personal transactions?
A. Prudence concept
B. Matching concept
C. Business entity concept
D. Going concern concept
Answer: C. Business entity concept
Rationale: The business entity concept treats the business as a separate accounting unit from its
owner. Personal expenses and withdrawals of the owner should not be mixed with business
records because financial statements must reflect only business activities.
Question 3
A company sold goods on credit to a customer for R8 000. Which entry is correct?
,A. Debit Sales, Credit Debtors
B. Debit Debtors, Credit Sales
C. Debit Bank, Credit Sales
D. Debit Purchases, Credit Creditors
Answer: B. Debit Debtors, Credit Sales
Rationale: When goods are sold on credit, the customer owes the business money, increasing
debtors (accounts receivable), which is debited. Sales revenue increases and is credited because
income accounts normally increase on the credit side.
Question 4
What is the primary purpose of depreciation?
A. To increase profits
B. To record the market value of assets
C. To allocate the cost of an asset over its useful life
D. To reduce liabilities
Answer: C. To allocate the cost of an asset over its useful life
Rationale: Depreciation spreads the cost of a non-current asset across the accounting periods
benefiting from its use. This ensures that expenses are matched with revenue generated during
the same period according to the matching principle.
Question 5
Which financial statement reports the income and expenses of a business?
A. Statement of financial position
B. Income statement
C. Bank reconciliation statement
D. Debtors reconciliation
Answer: B. Income statement
Rationale: The income statement measures the financial performance of the business over a
period by reporting revenue earned and expenses incurred, resulting in either profit or loss.
,Question 6
If total assets are R250 000 and total liabilities are R90 000, calculate the owner’s equity.
A. R160 000
B. R340 000
C. R90 000
D. R250 000
Answer: A. R160 000
Rationale: Owner’s equity is calculated using the accounting equation:
Equity=Assets−Liabilities\text{Equity} = \text{Assets} -
\text{Liabilities}Equity=Assets−Liabilities
Substituting the figures:
160 000=250 000−90 000160\,000 = 250\,000 - 90\,000160000=250000−90000
Therefore, owner’s equity equals R160 000.
Question 7
Which source document is issued when goods are returned by a customer?
A. Debit note
B. Invoice
C. Credit note
D. Receipt
Answer: C. Credit note
Rationale: A credit note is issued to reduce the amount owed by a customer when goods are
returned or allowances are granted. It serves as proof that the customer’s account has been
credited.
Question 8
What is the effect of drawings on owner’s equity?
, A. It increases equity
B. It decreases equity
C. It increases liabilities
D. It increases revenue
Answer: B. It decreases equity
Rationale: Drawings occur when the owner withdraws cash or goods for personal use. Since
resources are taken out of the business, owner’s equity decreases.
Question 9
Which account is classified as a current liability?
A. Inventory
B. Equipment
C. Creditors
D. Land and buildings
Answer: C. Creditors
Rationale: Creditors are amounts owed to suppliers and are expected to be paid within a short
period, usually within one year. Therefore, they are classified as current liabilities.
Question 10
A business paid rent of R5 000 in cash. Which accounts are affected?
A. Debit Rent Expense, Credit Bank
B. Debit Bank, Credit Rent Expense
C. Debit Equipment, Credit Bank
D. Debit Drawings, Credit Bank
Answer: A. Debit Rent Expense, Credit Bank
Rationale: Rent is an expense and expenses increase with a debit entry. Since cash is paid out of
the bank account, the bank balance decreases and is credited.
Question 11
QUESTIONS, VERIFIED ANSWERSA+GUARANTEE
Question 1
A business purchased equipment for R120 000 cash. Which accounts are affected in the
transaction?
A. Debit Bank, Credit Equipment
B. Debit Equipment, Credit Bank
C. Debit Capital, Credit Equipment
D. Debit Equipment, Credit Capital
Answer: B. Debit Equipment, Credit Bank
Rationale: Equipment is an asset and assets increase on the debit side. Since cash was paid from
the bank account, the bank asset decreases and is credited. The transaction therefore increases
equipment while reducing cash held in the bank.
Question 2
Which accounting concept states that business transactions must be kept separate from the
owner’s personal transactions?
A. Prudence concept
B. Matching concept
C. Business entity concept
D. Going concern concept
Answer: C. Business entity concept
Rationale: The business entity concept treats the business as a separate accounting unit from its
owner. Personal expenses and withdrawals of the owner should not be mixed with business
records because financial statements must reflect only business activities.
Question 3
A company sold goods on credit to a customer for R8 000. Which entry is correct?
,A. Debit Sales, Credit Debtors
B. Debit Debtors, Credit Sales
C. Debit Bank, Credit Sales
D. Debit Purchases, Credit Creditors
Answer: B. Debit Debtors, Credit Sales
Rationale: When goods are sold on credit, the customer owes the business money, increasing
debtors (accounts receivable), which is debited. Sales revenue increases and is credited because
income accounts normally increase on the credit side.
Question 4
What is the primary purpose of depreciation?
A. To increase profits
B. To record the market value of assets
C. To allocate the cost of an asset over its useful life
D. To reduce liabilities
Answer: C. To allocate the cost of an asset over its useful life
Rationale: Depreciation spreads the cost of a non-current asset across the accounting periods
benefiting from its use. This ensures that expenses are matched with revenue generated during
the same period according to the matching principle.
Question 5
Which financial statement reports the income and expenses of a business?
A. Statement of financial position
B. Income statement
C. Bank reconciliation statement
D. Debtors reconciliation
Answer: B. Income statement
Rationale: The income statement measures the financial performance of the business over a
period by reporting revenue earned and expenses incurred, resulting in either profit or loss.
,Question 6
If total assets are R250 000 and total liabilities are R90 000, calculate the owner’s equity.
A. R160 000
B. R340 000
C. R90 000
D. R250 000
Answer: A. R160 000
Rationale: Owner’s equity is calculated using the accounting equation:
Equity=Assets−Liabilities\text{Equity} = \text{Assets} -
\text{Liabilities}Equity=Assets−Liabilities
Substituting the figures:
160 000=250 000−90 000160\,000 = 250\,000 - 90\,000160000=250000−90000
Therefore, owner’s equity equals R160 000.
Question 7
Which source document is issued when goods are returned by a customer?
A. Debit note
B. Invoice
C. Credit note
D. Receipt
Answer: C. Credit note
Rationale: A credit note is issued to reduce the amount owed by a customer when goods are
returned or allowances are granted. It serves as proof that the customer’s account has been
credited.
Question 8
What is the effect of drawings on owner’s equity?
, A. It increases equity
B. It decreases equity
C. It increases liabilities
D. It increases revenue
Answer: B. It decreases equity
Rationale: Drawings occur when the owner withdraws cash or goods for personal use. Since
resources are taken out of the business, owner’s equity decreases.
Question 9
Which account is classified as a current liability?
A. Inventory
B. Equipment
C. Creditors
D. Land and buildings
Answer: C. Creditors
Rationale: Creditors are amounts owed to suppliers and are expected to be paid within a short
period, usually within one year. Therefore, they are classified as current liabilities.
Question 10
A business paid rent of R5 000 in cash. Which accounts are affected?
A. Debit Rent Expense, Credit Bank
B. Debit Bank, Credit Rent Expense
C. Debit Equipment, Credit Bank
D. Debit Drawings, Credit Bank
Answer: A. Debit Rent Expense, Credit Bank
Rationale: Rent is an expense and expenses increase with a debit entry. Since cash is paid out of
the bank account, the bank balance decreases and is credited.
Question 11
