1. What is the purpose of double entry book-keeping?
A To avoid errors
B To calculate the owner’s equity
C To ensure no transaction is missing from the books
D To record two entries for every transaction
[1 mark]
2. How does an owner of a business make use of the business’ financial
statements?
A To calculate the amount owing by trade receivables
B To calculate the amount owing to trade payables
C To check the bank statement balance
D To monitor the progress being made by the business
[1 mark]
3. Which statement about book-keeping and accounting is correct?
A A book-keeper interprets financial statements
B A book-keeper prepares financial statements
C Accounting is dependent on the records maintained by a book-
keeper
D Accounting is only performed once in two years
[1 mark]
4. What will financial data not include?
A The good location of a clothing shop in a busy city
B Purchases for the month of May
C Return of damaged goods at cost
D Value of a building owned by a business
[1 mark]
5. Businesses make use of both book-keeping and accounting procedures.
Explain why businesses use book-keeping. [2 marks]
Bookkeeping is important for businesses because it helps provide a
clear picture of financial health. It also allows businesses to track
income and expenses, prepare financial statements, and make
informed decisions.
6. Identify three reasons why a trader measures the business profit or
loss. [3 marks]
To figure out the financial performance of a business over a specific
period, to understand whether the business is making a profit or loss,
and to make informed decisions about future investments and
strategies.
7. State five parties who might be interested in the financial statements
of a business. [5 marks]
Shareholders, Creditors, Employees, Government (+Banks), Customers.
8. Complete the following table by writing the word ‘true’ or ‘false’
against each statement. [5 marks]
9. Explain the difference between:
a Accounting and book-keeping [2 marks]
Bookkeeping means recording financial transactions systematically,
whereas accounting includes summarizing, and analysing the financial
data to make business decisions.
b Financial and non-financial data [2 marks]
Financial data is countable, recordable, information, like revenue,
expenses, and assets, while non-financial data is the quality or
describable, not countable, aspects like customer satisfaction and
business reputation.
c Analysing and interpreting financial data [2 marks]
Analysing financial data means examining the trends and comparisons
through a period of time, while interpreting financial data is basically
drawing conclusions and making strategic decisions based on the
analysis.
10. Complete the following sentences using the following words:
decreasing; compared; current; increasing; income; previous. [6 marks]
The --income-statement is used to calculate the profit a business has
made. This profit is then---compared--with that of previous years. If the
profit in the--current-- year is less than the -previous-year’s profit, then
owners and managers would want to take steps to remedy the situation
by either -decreasing--expenses or --increasing--revenue.
11. State one reason why each of the following parties would be
interested in a business’ financial statements:
a Bank [1 mark]
In order to grant loans, banks have to understand the financial stability
of the business.
b Prospective investors [1 mark]
To find the profitability and potential return on whatever investments
they do.
c Trade payables [1 mark]
To understand and figure out the ability of the business to pay its
debts.
12. State one reason why a sole trader prepares financial
statements. [1 mark]
Financial statements are very important. A sole trader prepares financial
statements to analyse the financial performance and position of the business,
in order to help in decision-making and future planning.
