1 When carrying out a reconciliation between the non-current assets in her asset

register and the assets which she can physically identify, Wilma could not find one of
the assets which is recorded in her asset register.
Could each of the following reasons explain the discrepancy?
. Yes No
No record was made when the asset was sold
The supplier's invoice has not yet been received

Jerome's trade receivables ledger account has a balance of $57,840. He has decided
to write off an irrecoverable debt of $320. His receivables allowance at the last year
end was $1,368. He has calculated that this should be revised to $1,247.
What is the resulting charge to Jerome's statement of profit or loss?

3. 'A business should apply the same accounting treatment to similar items from one
accounting period to the next.'
What accounting principle is described by the statement above?
Materiality
Consistency
Business entity
Going concern

Which of the following statements describes the qualitative characteristic of

RELEVANCE?
Information which is free from material error
Information which can easily be understood
Information which is capable of making a difference in the decisions made by users
Information which is unbiased

5
Since Petra commenced trading the cost of the items she sells has increased. Petra is
trying to decide how her profit for the year will be affected by the method she uses to
value her inventory.
Which TWO of the following statements are CORRECT?
Profit for the year is affected by the method of inventory valuation
Petra should value inventory on the basis that reports the lowest profit
Weighted average will report a lower profit than first-in first-out
First-in first-out will report a lower profit than weighted average

Are the below statements true or false in relation to the different types of
accounting records that a business should maintain?
. True False
The trade receivables general ledger presents the sum of all customer account
balances
The total purchases for the period can be calculated by deducting the purchase
returns general ledger account from the trade payables general ledger account
balance
The bank general ledger account includes all cash receipts from customers
A non-current asset register includes a description of each asset, its cost and
accumulated depreciation

7. Which of the following accounting principles is most relevant in relation to the

requirements of IAS 2 Inventories in the following situations?
. Accrual Prudence
basis
Valuing inventories at the lower of cost or net realisable value
Recognising the costs of goods sold when sales are made

8. Elaine is preparing her bank reconciliation and has noted some reconciling items.
Do each of these reconciling items require an entry in Elaine's bank ledger account?
. Yes No
A cheque payable to S Wright has not been presented at the bank
The bank has levied charges on Elaine's account which have not been recorded by
Elaine

9 Bill uses the first-in first-out (FIFO) method of inventory valuation. At 1 May 20X8, he
had 60 units in inventory at a total cost of $1,320. The movement in inventory in May
20X8 was:

Purchases 14 120 units at $22.20

May
26 150 units at $22.30
May
Sales 18 90 units
May
28 80 units
May
What is the carrying amount of Bill's inventory at 31 May 20X8?

10 Ethel's trial balance includes the following balances:

$
Trade receivables 136,853 Dr
Receivables allowance 14,862 Cr
Assuming there are no other balances, what current asset and current liability
balances should be reported on Ethel's statement of financial position?
. nil $14,862 $121,991 $136,853
Current liability
Current asset

11

Estelle has prepared the following journal entry:

Dr Cash $500
Cr Trade receivables $500
What is the correct narrative for the journal entry?
Cash received from a customer
Cash paid to a supplier
Cash purchase made
Cash sale made

12

At 31 October 20X6 Gina Dobbs owed her suppliers $13,856. During the year to 31
October 20X7 her payments to suppliers totalled $95,886 and at 31 October 20X7 she
owed her suppliers $11,552.
What is the value of Gina's credit purchases for the year to 31 October 20X7?

13

In the general ledger, what should the balance on the trade receivables ledger
account show?
The total amount due to the business from its customers
The difference between the amount owed to suppliers and due from customers
The total amount received from customers during the accounting period
The total amount owed by the business to its suppliers

14
In the year to 30 November 20X7, Grace Smith obtained a 25% mark-up on all her
sales.

Her sales for the year totalled $120,600. Her opening inventory was valued at $9,340
and her closing inventory was valued at $11,855.
What was the value of Grace's purchases for the year to 30 November 20X7?

$
15
In the year to 31 May 20X9, Ina's sales were $174,820 and her cost of sales was
$139,856.
What were her gross profit margin and mark up?
. 20% 25%
Margin
Mark up

16 A company has the following ledger accounts:

Trade Receivables
$ $
Table and chair sales 3,000
Table Sales
$ $
Trade receivables 2,250
Chair Sales
$ $
Trade receivables 750
Which of the following accounting entries would result in the amounts shown in
these accounts?
Dr Table sales returns $2,250 Dr Chair sales returns Cr Trade receivables $3,000
$750

Dr Trade receivables $3,000 Cr Table sales $2,250 Cr Chair sales $750

Dr Trade receivables $3,000 Cr Table sales $3,000

Dr Table sales $2,250 Dr Chair sales $750 Cr Trade receivables $3,000

17 Shiloh has the following bank general ledger account:

Bank general ledger account

Description Dr Description Cr
$ $
Opening balance 12,000

Sales 27,000 Purchases 12,500

Expenses 11,500
Closing balance 15,000

Total 30,000 Total 39,000

What does the $15,000 closing balance represent?

(1) The bank balance for inclusion in the trial balance
(2) The opening bank balance for the next accounting period
(3) The bank balance to be reconciled with supplier statement
balances
2 and 3 only
1, 2 and 3
1 and 2 only
1 and 3 only

18.

Val has extended and totalled her extended trial balance, but has not entered the profit
or loss for the period. The total of the statement of financial position debit column is
less than the total of the statement of financial position credit column.
Which TWO of the following actions should be taken after producing a trial
balance to prepare the final accounts?
Process manual journal entries to correct for any amounts in the suspense account
Process manual journal entries for the difference between actual and budgeted sales
Accrue for any expenses incurred before the year end for which the invoice was received after
year end
Accrue for any expenses incurred after the year end for which the invoice was received in the
same period

19
Do each of the following correctly describe why a bank reconciliation is
prepared?
. Yes No
To identify errors in the entries in the bank ledger account
To identify entries which have been generated by the bank, but not recorded in the
bank ledger account

20
Paula and Quentin are in partnership sharing profits equally.

On 1 July 20X5, Raj joined the partnership and it was agreed that from that date all
three partners should share in the profit equally.

In the year ended 31 December 20X5, the profit amounted to $300,000, accruing evenly
over the year, after charging an irrecoverable debt of $30,000 which it was agreed
should be borne equally by Paula and Quentin only.
What should Paula's total profit share be for the year ended 31 December 20X5?

$
21

Which of the following is the correct journal entry to record a credit note issued
to a customer for goods returned?
Dr Sales returns Cr Cash
Dr Cash Cr Sales returns
Dr Trade receivables Cr Sales returns
Dr Sales returns Cr Trade receivables

22
At 1 November 20X8 the value of Claudia's net assets was $127,554. At 31 October
20X9 the value was $174,529. During the year to 31 October 20X9 Claudia introduced
$35,000 of capital and her drawings were $17,150.
What was Claudia's profit for the year to 31 October 20X9?

$
23

Which of the following statements best describes current assets?

Assets which are currently located on the business premises
Assets which are expected to be converted into cash in the short term
Assets which are used to conduct the organisation's current business
Assets which are not expected to be converted into cash in the short term

24

Kirandeep has been working as a sole trader for many years. They decided to remove
goods from the business for their own personal use.
Which of the following is the correct manual journal entry to recognise this
transaction in Kirandeep’s general ledger?
Dr Capital
Cr Inventories

Dr Drawings
Cr Inventories

Dr Inventories
Cr Capital

Dr Inventories
Cr Drawings

25

Ali is registered for sales tax and the tax rate is 20%. The following information is relevant
for the quarter ended 31 March 20X8:

(1) There was an opening sales tax balance of $230 on 1 January 20X8 and this was paid
promptly, on 10 January 20X8
(2) Sales, including sales tax, for the quarter ended 31 March 20X8 were $26,820
 (3) Purchases, excluding sales tax, for the quarter ended 31 March 20X8 were $18,600
What amount is owed by Ali to the revenue/ tax authority at 31 March 20X8??

26 Bill obtains a 25% margin on all his sales. In the year to 31 March 20X0 he bought
goods with a total value of $69,000. His closing inventory cost $3,000 less than his
opening inventory.
What is the value of Bill's sales in the year to 31 March 20X0?

27 Are the following statements relating to the first-in, first-out (FIFO) method of
valuing inventories true or false?
. True False
Using the FIFO method guarantees that inventories are valued at the lower of
cost and net realisable value
The value of the inventory on the statement of financial position will be the value
of the most recent units purchased

28

James and Claude are in partnership sharing profit in the ratio 3:2 respectively. On 1
June 20X7 they decide to admit Ramon as a partner and change the profit sharing ratio
to 3:2:1 for James, Claude and Ramon respectively.

Their capital account balances were as follows on 1 June 20X7:

James ($) Claude ($)

Capital accounts 68,000 Cr 52,000 Cr

The goodwill of the partnership has been valued at $36,000. Ramon pays $14,000 into
the partnership. This includes $6,000 for his share of goodwill. Goodwill is not recorded
in the accounts.
What is James' capital balance immediately after Ramon has been admitted as a
partner?
$68,000
 $71,600
$64,400
$89,600

29

Kendall commenced their sole trade on 1 August 20X5. On that date, they introduced
capital of $10,000. Kendall made a profit of $2,500 for the year ended 31 July 20X6 and
took no drawings out the business.

During the year ended 31 July 20X7, Kendall withdrew $4,000 from the business bank
account for personal use. The loss for the year ended 31 July 20X7 was $1,200.
What is the total amount recognised as overall capital on Kendall’s statement of
financial position as at 31 July 20X7?

30

Which of the following statements is CORRECT?

A prepayment arises when an expense is incurred before it is paid
Accrued expenses increase the value of liabilities
Prepaid expenses reduce the value of assets
An accrued expense is recorded when the payment is made

31

Gayle paid for office cleaning in cash. She made the following entries in her general
ledger:

Dr Trade payables
Cr Office cleaning expenses
Which accounts require an entry to correct this?
Office cleaning expenses and cash only
Office cleaning expenses and trade payables only
 Office cleaning expenses, cash and trade payables
Cash and trade payables only

32

In which of the following circumstances would an entry be made in the non-

current asset register?

(1) When an asset is traded-in

(2) When an asset is scrapped

1 only
2 only
Both 1 and 2
Neither 1 nor 2

33

When goods are sold to a customer on credit, what accounting entries should be
recorded?
Dr Sales Cr Cash

Dr Cash Cr Sales

Dr Sales Cr Trade receivables

Dr Trade receivables Cr Sales

34

Isa reconciled their trade payables general ledger account balance with the sum of all
individual supplier statement balances. The following issues have been identified:

(1) Supplier invoices totalling $2,300 have been omitted from Isa’s accounting system
 (2) Supplier invoices totalling $480 have been input twice, in error, to Isa’s accounting system
(3) Credit notes incorrectly issued by the supplier totalling $1,000 are included in the supplier
statements but are omitted from Isa’s accounting system

All purchases and purchase returns are recognised in the same general ledger account
in Isa’s accounting system.
Which of the following manual journal entries will correct Isa’s ledger accounts
for the cumulative errors above?
Dr Purchases 820
Cr Trade payables 820

Dr Trade payables 820

Cr Purchases 820

Dr Purchases 1,820
Cr Trade payables 1,820

Dr Trade payables 1,820

Cr Purchases 1,820

35

Ilhan performed supplier statement reconciliations for all accounts on the detailed listing
of supplier balances at 31 December 20X9. The trade payables general ledger account
shows a balance of $45,620 at that date and the following reconciling items were
identified by Ilhan:

(1) A supplier invoice totalling $980 was incorrectly input to the purchases module of the
computerised accounting system as $890
(2) Supplier invoices received during the financial year which were not input to the purchases
module of the computerised accounting system totalled $4,500
(3) Manual journal entries processed on 31 December 20X9 by Ilhan for supplier payments
totalled $6,400 but have not been recognised by the individual suppliers
What balance should be presented for trade payables on the statement of
financial position as at 31 December 20X9?
$

36

On 1 January 20X8, Paul purchased plant and equipment costing $90,000. Paul's
depreciation policy is to use a straight line basis over 10 years assuming a nil residual
value.
What will be the effect on Paul's profit and net assets for the year ended 31
December 20X8 if he changes his depreciation policy to the reducing balance
basis at 30% per annum from 1 January 20X8?
Profit will increase by $18,000 and net assets will decrease by $18,000
Profit will decrease by $18,000 and net assets will increase by $18,000
Profit will decrease by $18,000 and net assets will decrease by $18,000
Profit will increase by $9,000 and net assets will increase by $9,000

37

Mikel has been contacted by a customer because a part he supplied has damaged one
of the customer's machines. The customer has asked Mikel to pay costs of $5,500.

Mikel's offer to pay $3,000 has been refused by the customer leading to legal
action. Mikel's solicitor has told him that the court case will not take place until late
20X1, and that it is almost certain that he will be required to pay $4,000.
What provision should Mikel make in his statement of financial position at 20
April 20X0?
$5,500
$4,000
$3,000
nil

38

Brogan received a statement of account from a supplier, Shannon, showing a balance

outstanding of $30,800 at 31 March 20X3. Brogan’s detailed listing of supplier accounts
in the computerised accounting system shows a balance outstanding to Shannon of
$32,400 at 31 March 20X3.
From Brogan’s perspective, which TWO of the following statements could explain
the difference?
Shannon issued Brogan a $1,600 credit note for goods returned which had been omitted from
Brogan's accounting system
Brogan allocated a $1,600 payment to Shannon’s individual balance when it related to a
different supplier
Brogan made a $1,600 payment to Shannon before the year end which had not been reflected
on Shannon’s statement of account
Brogan input a $1,600 purchase invoice from Shannon to the purchases module twice

39

Tony returned items of office stationery to his supplier and his supplier sent him a credit
note.
What entries are required in Tony's general ledger?
Dr Goods for resale - returns Cr Trade payables

Dr Trade payables Cr Goods for resale - return

Dr Trade payables Cr Office stationery

Dr Office stationery Cr Trade payables

40

Isra started a sole trader business during the year and operates basic computerised
accounting software. The software automatically creates a suspense account when a
manual journal entry is imbalanced. Each type of expense has its own general ledger
account.

The following errors have been identified by Isra:

(1) The initial cash invested by Isra was coded to sales instead of capital in the
general ledger
(2) Isra has not processed the manual journal entry for the year’s depreciation
(3) Isra posted a manual journal entry for heat and light expense against the incorrect
expense account
(4) Isra processed a manual journal entry with a debit of $560 to prepayments but
only credited expenses with $506
Which of the above errors would be detected by extracting a trial balance?
1 and 2 only
1 and 3
2 and 4 only
1, 2 and 4

41

Vikki is preparing her final accounts for the year ended 31 October 20X8. The most
recent invoice in her records for electricity was a charge of $1,647 for the three months
to 31 August 20X8.
What post trial balance adjustment should Vikki make?
$549 accrual
$549 prepayment
$1,098 prepayment
$1,098 accrual

42

On 23 May 20X7, Julie used a cheque to pay the insurance on her business premises
for the three months to 31 August 20X7, in advance. She immediately made a manual
adjustment to account for this prepayment.
On 23 May 20X7, how is Julie's accounting equation affected by this transaction?
Assets reduced Liabilities unchanged Capital reduced

Assets reduced Liabilities unchanged Capital unchanged

Assets unchanged Liabilities reduced Capital reduced

Assets unchanged Liabilities unchanged Capital unchanged

43

Which of the following items should be included in the calculation of the net
profit for a partnership?

(1) Interest on a loan from a partner

(2) Salaries for employees
(3) Salaries for partners

1, 2 and 3
2 and 3 only
1 and 3 only
1 and 2 only

Which of the following items should be included in the calculation of the net profit
for a partnership?

(1) Interest on a loan from a partner

(2) Salaries for employees
(3) Salaries for partners

1, 2 and 3
2 and 3 only
1 and 3 only
1 and 2 only

44

During the year to 30 April 20X8 Trevor wrote off a debt of $563 as irrecoverable.
If in the year to 30 April 20X9 Trevor receives the $563 which was written off how
will his financial statements for that year be affected by the receipt?
His receivables balance will be increased by $563
His profit will be increased by $563
 His receivables balance will be reduced by $563
His profit will be reduced by $563

45

Which of the following statements is CORRECT?

Financial statements are intended to provide useful information to a number of user groups
All the information needs of the owner are met by the financial statements
Financial statements do not provide useful information to lenders
Financial statements of a sole trader must be prepared by a qualified accountant

46 Chimwe purchased a new non-current asset, and paid for this through an electronic
bank transfer. At the same time, a bank loan was raised to provide some of the funds
needed for the purchase.
What entry correctly records the purchase of the non-current asset?
Dr Non-current assets Cr Bank

Dr Non-current assets Cr Loan payable

Dr Loan payable Cr Non-current assets

Dr Bank Cr Non-current assets

47

Casey has processed a manual journal entry to recognise accruals correctly.

What is the debit or credit impact on the financial statements from this manual
journal entry?
. Debit Credit
Statement of financial position
Statement of profit or loss

48

Alec and Carl are in partnership sharing profits and losses in the ratio 3:2. The
statement of profit or loss for the year ended 31 October 20X8 reports a profit of
$98,500.

Interest on capital has been calculated as:

$
Alec 7,900
Carl 5,100

Both capital and current accounts are maintained in the books of the
partnership. Neither partner made any drawings in the year to 31 October 20X8.
What is the increase in the balance on Carl's current account in the year to 31
October 20X8?

49

Rosario sold goods to Dino on credit. Two weeks later Dino returned the goods.
What general ledger entry should Rosario make to record the return of the
goods?
Dr Trade receivables Cr Sales returns

Dr Sales returns Cr Trade receivables

Dr Purchase returns Cr Trade payables

Dr Trade payables Cr Purchase returns

50

The bank account in Trish's general ledger has a credit balance of $358.

The difference between this balance and the balance on her bank statement is due to:

(1) Trish incorrectly recording the value of a cheque paid to a supplier for $245 as $254
(2) A lodgement of $283 that has still to be credited by the bank
(3) The bank charging interest of $104 on her overdraft
After correcting the bank account in Trish's general ledger, which of the above
items should appear as an adjustment on the bank reconciliation statement?

1 only

2Only

1, 2 and 3

1 and 2 only