AFIA

Revision Questions 2
Answer ALL Questions

2. Alasdair’s business bank statement showed an overdrawn balance of $4,800 on 31 May

20X7. When this was reconciled to the cash book, the following differences were noted:
$
Bank charges not recorded in the cash book 30
Unpresented cheques 1,000
Standing order for local property tax not entered in the cash book 300
Outstanding lodgements 1,300
Credited in error to Alasdair’s account by the bank 100
What was the original credit balance on Alasdair's cash book at 31 May 20X7?
A $4,600
B $4,270
C $5,200
D $4,870

3. The following receivables control account contains a number of errors:

RECEIVABLES CONTROL ACCOUNT
$ $
Balance b/d 58,600 Credit sales 235,700
Cash from credit customers 226,700 Discounts 3,200
Contra against suppliers 7,200 Irrecoverable debts 5,400
Balance c/d

What should the closing balance be once the errors are corrected?
A $62,600
B $66,200
C $58,200
D $51,800
4. As at 31 December 20X7 a company's bank statement shows a balance in hand of
$2,000. The statement includes bank charges of $50 which have not yet been recorded in
the company's bank ledger account. On 30 December 20X7 the company had paid a
cheque of $1,000 to a supplier and banked $600 received from a trade receivable; neither
of these items appear in the bank statement.
The cash at bank balance on the company's statement of financial position at 31
December 20X7 should be
A $1,600
B $3,600
C $2,400
D $400

7. A receivables ledger account had a closing debit balance of $4,200. It contained a contra
to the payables ledger account of $100, but this had been entered on the wrong side of
the receivables ledger account.
The correct debit balance on the receivables ledger account should be
A $4,000
B $4,100
C $4,300
D $4,400

9. Which TWO of the following items could appear on the debit side of a payables ledger
account?
A Cash paid to suppliers
B Irrecoverable debts written off
C Discounts received
D Purchases
E Cash refunds from suppliers

12. Which TWO of the following matters require an adjustment to the figure for cash at bank
appearing in Justine’s draft statement of financial position as at 30 June 20X5, rather
than being reconciling items between the adjusted cash at bank ledger balance and the
bank statement balance as at that date?
A Bank charges had been debited by the bank but had not been recorded in the bank
ledger account
B A number of cheques drawn by Justine in June remained unpresented at the year end
C A cheque paid into the bank on 30 June 20X5 did not appear on the statement
 D A cheque had been returned unpaid on 30 June 20X5 but Justine had not been
notified of this by the bank

13. At 30 April 20X7 the draft statement of financial position of Ali correctly showed cash at
bank as $2,900 after correcting all errors made by Ali’s bookkeeper. The bank
reconciliation exercise at that date had identified the following items.
(1) A cheque received from a customer for $50 had been entered in the bank ledger
account as $500.
(2) Bank charges of $45 had been recorded twice in the bank ledger account.
(3) There were unpresented cheques at 30 April 20X7 totalling $750.
What was the balance shown on Ali’s bank statement at 30 April 20X7?
A $3,245
B $3,305
C $3,650
D $3,695
16. Karen is preparing her bank reconciliation as at 31 March. The following cheque
payments have been recorded in the bank ledger account when calculating the balance at 31
March.
Date of cheque Date cleared on bank statement $
27 March 31 March 2,064
31 March 6 April 932
1 April 11 April 1,372
Which of the following sets of adjustments does Karen have to make in her bank
reconciliation and her bank ledger account in respect of the above items?
Bank reconciliation Bank ledger account
A Deduct $932 from balance per bank statement Debit $1,372
B Deduct $2,304 from balance per bank statement No adjustment
C Deduct $2,304 from balance per bank statement Debit $1,372
D Deduct $4,368 from balance per bank statement Debit $2,304

18. The following points were discovered by Daisy when she prepared her month end
current account bank reconciliation. Indicate, for each point, whether or not the required
adjustment will result in a reduced current account balance at the month end.
The cashier has debited the bank ledger account to record a transfer of funds from a
customer whilst the bank statement has yet to record the transaction
A Yes
B No
Bank charges debited by the bank have not yet been entered in the bank ledger account
C Yes
D No
The value of unpresented cheques exceeded the value of cleared lodgements
E Yes
F No

22. Peter’s draft accounts show a loss of $22,000 for the year. On investigation you discover
the following.
(1) $2,000 of repairs had been incorrectly recorded as a purchase of non-current assets
(machinery) on the last day of the year.
(2) Cash of $500, received in respect of a debt written off many years ago, had been
credited to receivables.
(3) Closing inventory includes items costing $1,000 which have already been recorded
as sold.
What is the adjusted loss for the year?
 A $25,500
B $24,500
C $23,500
D $19,500

25. A business compiling its financial statements for the year to 31 October each year pays
rent quarterly in advance on 1 January, 1 April, 1 July and 1 October each year. The
annual rent was increased from $96,000 to $120,000 per year from 1 March 20X7.
What figure should appear for rent in the statement of profit or loss for the year ended 31
October 20X7 and in the statement of financial position at that date?
Statement Statement
of
Of P/L Financial
position
A $112,000 $20,000
B $104,000 $10,000
C $112,000 $10,000
D $110,000 $20,000

26. A business has received telephone bills as follows:

Date received Amount of Date paid
bill
$
Quarter to 30 November December 336.50 January 20X6
20X5 20X5
Quarter to 28 February 20X6 March 20X6 364.20 April 20X6
Quarter to 31 May 20X6 June 20X6 313.70 June 20X6
Quarter to 31 August 20X6 September 335.80 October 20X6
20X6
Quarter to 30 November December 361.20 January 20X7
20X6 20X6
Quarter to 28 February 20X7 March 20X7 403.80 March 20X7
In the income statement for the year ended 31 December 20X6 its charge for telephone
expense should be
A $1,388.10
B $1,266.70
C $1,522.80
D $1,401.30
 27. An extract from a business' statement of profit or $ $$$
loss is: $$$$$$$$$
Sales 70,000
Opening inventory 10,300
Purchases 42,300
52,600
Closing inventory 2,600
50,000
20,000
The mark up achieved is %

28. A company receives rent from a large number of properties. The total received in the
year ended 31 October 20X7 was $325,600.
The following are the amounts of rent in advance and in arrears at 31 October 20X6 and 20X7.
31 October 31 October
20X6 20X7
$ $
Rent received in advance 18,300 19,200
Rent in arrears (all subsequently received) 28,700 23,400
What amount of rental income should appear in the company's statement of profit or loss
for the year ended 31 October 20X7?
A $340,200
B $331,800
C $325,600
D $319,400

29. An insurance prepayment of $1,050 was treated as an accrual in a sole trader’s statement
of profit or loss at the year end. As a result the profit was:
A Understated by $1,050
B Understated by $2,100
C Overstated by $2,100
D Overstated by $1,050

30. A company receives rent for subletting part of its office block.
Rent, receivable quarterly in advance, is received as follows:
Date of receipt Period covered $
3 months to 31 December 15,000
1 October 20X6
20X6
 30 December 20X6 3 months to 31 March 20X7 15,000
4 April 20X7 3 months to 30 June 20X7 18,000
1 July 20X7 3 months to 30 September 18,000
20X7
1 October 20X7 3 months to 31 December 18,000
20X7
What figures, based on these receipts, should appear in the company’s financial
statements for the year ended 30 November 20X7?
Statement of P/L Statement of financial
position
$68,000 Debit Accrued income (Dr)
A
$6,000
B $68,000 Credit Deferred income (Cr)
$12,000
C $68,000 Credit Deferred income (Cr)
$6,000
D $68,000 Credit Accrued income (Dr)
$6,000

31. The trial balance of Kanine Bros as at 31 May 20X7 includes the following:
$ $
Receivables control account 60,500
Allowance for receivables at 1 June 20X6 1,420
Subsequently a review of the receivables ledger reveals the following:
Debts totalling $2,100 are considered irrecoverable and are to be written off. There is
some doubt over the recoverability of another receivable owing $800. The business
wishes to make a specific allowance for this.
What irrecoverable debt expense will the statement of profit or loss for the year ended 31
May 20X7 include?
$

32. At 1 July 20X6 a company’s allowance for receivables was $14,000.

At 30 June 20X7, trade receivables amounted to $268,000. It was decided to write off
$22,000 of these debts and adjust the allowance for receivables to $12,000.
What are the final amounts for inclusion in the company’s statement of financial position
at 30 June 20X7?
Allowance
for
Trade receivables Net balance
receivables
$ $ $
A 268,000 12,000 256,000
B 246,000 12,000 234,000
C 268,000 22,000 246,000
 D 246,000 34,000 212,000

33. At 30 September 20X7 a company has receivables totalling $128,000 and a specific
allowance for receivables of $4,800 brought forward from the previous year.
It has been decided to write off receivables totalling $10,500 and to adjust the allowance
for receivables to $3,000.
The net receivables in the statement of financial position as at the year end of 30
September 20X7 will be $

34. A company purchases a machine for which the supplier's list price is $130,000. The
company pays $100,000 in cash and trades in an old machine, which has a carrying
amount of $32,000. It is the company's policy to depreciate such machines at the rate of
10% per annum on cost.
What is the carrying amount of the machine after one year?
A $88,200
B $117,000
C $90,000
D $61,200

35. A company purchases a machine for $20,000 on the first day of the accounting period.
After incurring transportation costs of $1,000 and spending $2,000 on installation, the
machine unfortunately breaks down and costs $800 to repair. Depreciation is charged at
20% per annum.
At what carrying amount will the machine be shown in the company’s statement of
financial position at the year end?
$

36. A company buys a machine on 31 August 20X3 for $36,000. It has an expected life of
seven years and an estimated residual value of $2,400. On 30 June 20X7 the machine is
disposed of for $12,000. The company's year end is 31 December. Its accounting policy
is to charge depreciation using the straight line method.
Calculate the loss on disposal of the machine which will appear in the statement of profit
or loss for the year ended 31 December 20X7.
$

37. A sole trader purchased a van on 1 October 20X7 for a total cost of $20,000 by paying
$16,000 cash and trading in an old van. The old van had cost $18,000 and the related
accumulated depreciation was $12,200.
 What is the loss on disposal of the old van that will appear in the statement of profit or
loss for the year ended 31 December 20X7?
$

38. Brenda Ltd has a year end of 30 June.

At 30 June 20X7 Brenda Ltd’s statement of financial position included an accrual in
respect of insurance of $340. At 30 June 20X8 the statement of financial position
showed a prepayment of $180 in respect of insurance.
During the year to 30 June 20X8 Brenda Ltd paid $3,000 for insurance.
What should be included in respect of insurance as an expense in Brenda Ltd’s profit and
loss account for the year ended 30 June 20X8?
A $2,480
B $2,840
C $3,000
D $3,160

40. Amney Ltd’s accountant has been reviewing the company’s receivables at 31 May 20X6,
and wishes to make the following adjustments.
(1) $600 is owed by Angela. The accountant had allowed for this debt in full but now
decides to write it off.
(2) Julie is disputing a sum of $2,000 and the accountant decides to allow against this
debt in full.
(3) Cash of $1,500 has been received from Trisha, in respect of a debt which had been
written off in 20X3.
By how much will these adjustments decrease the company’s profit for the year ended 31
May 20X6?
A $500
B $1,100
C $2,000
D $2,600