About Adjustments: depreciation, accruals, doubtful debts and inventory in O Level Accounting
Adjustments: depreciation, accruals, doubtful debts and inventory is one of the 6 main topics in our O Level Accounting (Cambridge (CAIE) 7707) question bank, and about 18% of its real questions come from it. Tayyari Karo has 78 real questions on this topic from 2021 to 2026, from Paper 1, Paper 2; 73 are multiple choice and marked instantly, and the rest are structured questions with a model answer. By difficulty: 43 medium, 26 hard, 9 easy.
Work through the questions below, then open the explanation for each one. Redo the ones you missed a few days later.
Try 6 real questions
These are real past-paper questions. Think of your answer first, then open the explanation.
May/June 2026 · Paper 1 · Adjustments: depreciation, accruals, doubtful debts and inventory
Ahmed's financial year ends on 30 April. On 1 February 2025, he purchased a machine for $12 000. He depreciates machinery at 25% per annum, using the straight-line method. Depreciation is charged on a month-by-month basis. Ahmed has no other non-current assets.
What was the balance brought down on Ahmed's provision for depreciation account on 1 May 2026?
- $3500 debit
- $3500 credit
- $3750 debit
- $3750 credit
Show answer and explanation
Answer: D. $3750 credit
$3000 a year for 15 months (1 Feb 2025 to 30 Apr 2026) = $3750, a credit balance.
Oct/Nov 2025 · Paper 1 · Adjustments: depreciation, accruals, doubtful debts and inventory
What is the effect on total assets and on equity in the statement of financial position if the value of closing inventory is overstated?
- total assets overstated, equity overstated
- total assets overstated, equity understated
- total assets understated, equity overstated
- total assets understated, equity understated
Show answer and explanation
Answer: A. total assets overstated, equity overstated
Overstated closing inventory reduces cost of sales, so both profit (equity) and current assets are overstated.
Oct/Nov 2024 · Paper 1 · Adjustments: depreciation, accruals, doubtful debts and inventory
Machine cost $10000, SL 10% 2 years, sold for cash, loss $700. Replacement bought $12400 cash same day. Net decrease in cash?
- $3700
- $5100
- $11700
- $13100
Show answer and explanation
Answer: B. $5100
Sale proceeds = (10000-2000) - 700 = 7300; net cash = 12400 - 7300 = 5100.
Oct/Nov 2023 · Paper 1 · Adjustments: depreciation, accruals, doubtful debts and inventory
Why are non-current assets depreciated? 1 avoid overstating NCA 2 charge cost as expense over lifetime 3 comply with historic cost 4 match capital expenditure against income earned
- 1, 2 and 4
- 1, 3 and 4
- 1 and 3 only
- 2 and 3
Show answer and explanation
Answer: A. 1, 2 and 4
May/June 2022 · Paper 1 · Adjustments: depreciation, accruals, doubtful debts and inventory
Nula's financial year ends on 31 December. She maintains a provision for doubtful debts of 5% of trade receivables. On 1 January 2021, the provision amounted to $800. On 31 December 2021, trade receivables owed $13400, of which $600 was regarded as irrecoverable. How much was the provision for doubtful debts on 1 January 2022?
- $600
- $640
- $660
- $670
Show answer and explanation
Answer: B. $640
5% x (13400-600) = 5% x 12800 = 640.
May/June 2021 · Paper 1 · Adjustments: depreciation, accruals, doubtful debts and inventory
Machinery which had cost $6290 was sold for $3100. The disposal account showed a profit on disposal of $584. How much was the depreciation up to the date of disposal and on which side of the disposal account was it recorded?
- $2606 on the credit side
- $2606 on the debit side
- $3774 on the credit side
- $3774 on the debit side
Show answer and explanation
Answer: C. $3774 on the credit side
