ANSWER#1

Correct Answer
A credit purchase

Shashi is the supplier of Sukhdeep and, therefore, Sukhdeep is the customer. Cash is
not paid immediately and, therefore, goods are purchased on credit.

ANSWER#2

Correct Answer
Machinery owned by a business

Money owed by a business and an overdraft are both liabilities. The capital of a
business is capital (equity).
ANSWER#3

Correct Answer
Dr Purchases Cr Trade payables

Where goods are purchased on credit they are debited to purchases (expense) and
credited to trade payables (liability).

ANSWER#4

Correct Answer
Purchases

Purchases would be on the credit side of the account. Trade payables is a liability
account so it normally has a credit balance and purchases add to that balance. The
other options will all reduce (debit) the balance on the account.

ANSWER#5

Correct Answer
Dr Bank Dr Sales Cr Trade receivables

As Jacob was not expected to take advantage of the early settlement discount, the sale
would originally have been recorded without taking the discount into account. The
discount now taken is recorded by debiting sales to reduce the value of sales recorded.

ANSWER#6

Correct Answer
Assets - Capital = Liabilities

The usual form of the accounting equation is:

Assets = Capital + Liabilities

This can be expressed as:

Assets - Capital = Liabilities

ANSWER#7

Correct Answer
Purchases of $75, sales tax of $15 and a cash payment of $90

Incorrect answers:
Purchases $90, sales tax of $18 and a cash payment of $108 - Calculates sales tax on
gross amount
Purchases of $90 and cash payment for the same amount - Ignores sales tax
Purchases of $108 and a cash payment for the same amount - Calculates sales tax on
gross amount and recognises no amount in the sales tax account

ANSWER#8

Correct Answer
Dr Trade payables Cr Discounts received

Discounts from a supplier will be debited to trade payables (as it will reduce the amount
Ailsa needs to pay her supplier) and credited to discounts received.

ANSWER#9

Correct Answer
Bank ledger account $350.60 Dr Bank statement $350.60 Cr

Warren's bank ledger account will show a debit balance of $350.60. The $80 will have
been deducted off his cash balance which is a debit because it is positive. As this is the
only reconciling item the bank statement will also show $350.60 credit this time because
the bank owes the money to Warren.

ANSWER#10

Correct Answer
Rent paid
Trade payables is a liability account, trade receivables is an asset account and sales is
an income account. Only heat and light is an expense account.

ANSWER#11

Correct Answer
1, 3 and 4

Credit sales to individual customers have no impact on trade payables.

ANSWER#12

Correct Answer
The bookkeeper wishes to record a cash payment of $100 but does not know what the
payment was for.

A payment of cash would require a credit entry to the bank ledger account. Without
knowing what expense or liability this relates to, the corresponding debit entry would
need to be to the suspense account. The bookkeeper could then investigate what the
payment was for and clear the suspense account.

The other options will not cause an imbalance: the debit balance in the trial balance is
just an expense charged to the wrong account, recording a sale twice will overstate both
sales and trade receivables by the same amount and the omission of the purchase
invoice is a transaction that has not been posted at all.

ANSWER#13

Correct Answer
Internal payment requisition

A payment requisition is an internal document authorising a payment to a supplier.

A remittance advice is a document that will be sent to the supplier with the cheque.

An advice note is sent by the supplier advising that an order has been fulfilled and
specifying payment terms.

A purchase requisition authorises a purchase from a supplier.

ANSWER#14

Correct Answer
Drawings of $200 and a cash payment of $200
Incorrect answers:
Drawings of $200 and a cash receipt of $200 - Drawings are a payment and not a
receipt
Phone charges of $200 and a cash receipt of $200 - Personal expenses should not be
recognised as a business expense and drawings are a payment, not a receipt
Phone charges of $200 and a cash payment of $200 - Personal expenses should not be
recognised as a business expense

ANSWER#15

Correct Answer
$420
$396 - $282 + $132 + $60 + $114 = $420

Incorrect answers:
$372 - Closing balance less expenses, plus sales
$984 - Closing balance plus expenses, plus sales
$702 - Closing balance plus expenses only, ignoring sales

ANSWER#16

Correct Answer
Dr Purchases $315 Cr Trade payables $315

A credit transaction with a supplier will be debited to purchases (increasing the expense
balance) and credited to trade receivables (increasing the amount owing which is a
liability).

Sales and trade receivables relate to transactions with customers.

ANSWER#17

Correct Answer
Cash purchases and credit sales

The sole supplier requires immediate payment and sales are made on credit.

ANSWER#18

Correct Answer
A receipt from a customer

Incorrect answers:
A payment to a supplier - A payment to a supplier generates a credit entry in the bank
ledger account
An amount owed to credit suppliers - There is no impact on the bank general ledger
account simply with an outstanding balance
An amount owed by credit customers - There is no impact on the bank general ledger
account simply with an outstanding balance

ANSWER#19

Correct Answer
Detailed listing of customer balances

A customer balance relates to trade receivables but the trade receivables general
ledger account will only provide the overall, total balance for all customers. Individual
balances can be identified in the detailed listing of customer balances.

ANSWER#20

Correct Answer
Statement 1 only

Sequence codes can consist of numbers and letters, but do not contain a descriptive
element.

ANSWER#21

Correct Answer
Vouchers + Cash held = Imprest

The imprest is the amount that is always held in the box in the form of either money or
vouchers. Periodically cash will be drawn to cover the vouchers and the imprest
balance will then consist of cash.

ANSWER#22

Correct Answer
2 and 3

Liability and income accounts have credit balances. Asset and expense accounts have
debit balances.

ANSWER#23

Correct Answer
Human resources
Data protection legislation is designed to protect information held about
individuals. Therefore such legislation is most likely to affect the human resources
department as it deals with records concerning individual people.

ANSWER#24

Correct Answer
Dr Motor vehicles - cost
Cr Bank

The non-current asset must be created and the bank balance must be reduced.

ANSWER#25

Correct Answer
A written request to a credit customer for payment giving details of items sold

An invoice is prepared when a credit sale is made. It tells the customer what they have
bought, how much he must pay and when.

ANSWER#26

Correct Answer
Dr Machinery Cr Trade payables

Xyon will debit the machinery account to show an increase in the asset. As he still
owes the money the credit will be to trade payables.

ANSWER#27

Correct Answer
Dr Cash Dr Irrecoverable Cr Trade
$57.60 debts $134.40 receivables
$192.00

Hedley received $57.60 (192 x 0.3) from Dean which is debited to cash. As Dean's
balance has to be removed the whole amount owing ($192) is credited to trade
receivables. The balance of $134.40 (192 x 0.7) is written off to irrecoverable debts.

ANSWER#28

Correct Answer
Direct Debit
A Direct Debit mandate allows for monthly payments which may vary in amount.

ANSWER#29

Correct Answer
Payments of taxi journeys for employees occasionally working late

Taxi fares are an appropriate use of petty cash. Cars, salaries and pensions
contributions will probably be paid for by bank transfer.

ANSWER#30

Correct Answer
To provide an internal check on whether amounts have been posted to the
correct supplier account

Incorrect answers:
To help identify if errors have been made when entering a sales invoice in the
accounting system - Sales invoices do not impact trade payables

To identify which suppliers offer trade and/ or settlement discounts - A reconciliation of

balances does not identify discounts offered – this is shown in contracts

To check if expenses have been coded correctly and have not been capitalised -
Correct treatment of expenses has no impact on trade payables as the credit is still
recognised as a trade payable

ANSWER#31

Correct Answer
1, 2 and 3

Where items are recorded on one account and not the other, or where the amounts in
the accounts differ a particular supplier account may not reconcile to the suppliers
statement.

1 is a correct reason as there may be a delay in the supplier recording the cheque due
to the cheque being in the post.

2 is a correct reason as Sogo Co has not recorded the credit note but the supplier has.

3 is a correct reason as the supplier has contra'd its recent purchase from Sogo Co with
Sogo Co's customer account. Sogo Co has not performed the same contra.
4 is not a correct reason. Both parties have recorded the invoice in their accounts and
therefore it cannot be a reason for a difference between them.

ANSWER#32

Correct Answer
Unpresented cheques of $1,113

A debit in the cash book and credit in the bank statement are both positive
balances. Johan's bank statement shows $1,113 more than his cash book
balance. The option which can cause this is unpresented cheques. When these
cheques have been presented to his bank his balance will reduce by $1,113 and will
match his cash book balance. Outstanding lodgements would have made the bank
statement balance lower than the cash book balance.

ANSWER#33

Correct Answer
Dr Trade payables $25,200
Cr Purchases $25,200

Incorrect answers:

Dr Purchases $12,600
Cr Trade payables $12,600
Incorrect journal entry and with incorrect amount

Dr Trade payables $12,600

Cr Purchases $12,600
Correct journal entry with incorrect amount

Dr Purchases $25,200
Cr Trade payables $25,200
Incorrect journal entry but with correct amount

ANSWER#34

Correct Answer
Dr Stationery Cr Bank
Stationery will be treated as an expense, debited to the stationery account. As payment
has been made by an electronic bank transfer the credit will be to the Bank account
(reduction in an asset).

ANSWER#35

Correct Answer
An instruction to a bank that authorises an organisation to collect varying
amounts from a bank account, given advance notice of the amounts and dates of
collection

Incorrect answers:

The system by which depositors instruct their banks to make payments to named
accounts, without the need to use a cheque - Definition for a BACS payment

A document that orders a bank to pay a specific amount of money from one bank
account to another - Definition for a cheque payment

An instruction to a bank to make regular fixed payments to a specific account -

Definition for a Standing Order

ANSWER#36

Correct Answer
A credit note

All other documents relate to the initial purchase.

ANSWER#37

Correct Answer
$45,159

Barbara's trade receivables ledger account will appear as follows:

$ $
Balance b/f 42,390 Cash received 8,490
Sales 12,380 Irrecoverable debts 695
Returns 426
- Balance c/f 45,159
 54,770 54,770
Balance b/f 45,159

Note that cash sales do not affect the receivables amount.

ANSWER#38

Correct Answer
$45

Anton's standard rate of pay is $10 per hour (20,800 / 52 / 40).

For the first six hours he will be paid nothing extra.
For the next three (9 - 6) hours he will be paid (3 x 10 x 1.5) = $45.

ANSWER#39

Correct Answer
2 and 3 only

There is no legal obligation to have the same policies as other entities.

ANSWER#40

Correct Answer
Trade receivables and purchases

Trade receivables (asset) and purchases (expense) are both debit balances. The other
options are all a credit followed by a debit.

ANSWER#41

Correct Answer
$6,840

Gustav will be given the settlement discount so he will pay:

8,000 x 90% x 95% = 6,840

$8,000 shows no discount, $7,600 only takes account of the settlement discount and
$7,200 only takes account of the trade discount.

ANSWER#42

Correct Answer
$2,400
Total production is below target production so the 8% bonus will not be paid. However
Nanette has produced 600 extra units so she will get a bonus of (600 x 4) = $2,400.

ANSWER#43

Correct Answer
2 and 3 only

Loan payable and sales are both credit amounts in the general ledger and trial balance.

ANSWER#44

Correct Answer
$64,800
$76,000 - $3,200 - (2 x $4,000) = $64,800

Incorrect answers:

$61,600 - Error (1) deducted twice

$65,600 - Error (1) deducted twice and Error (2) calculated as only $4,000
$68,800 - Error (2) calculated as only $4,000

ANSWER#45

Correct Answer
Assets and Liabilities

Pavan has acquired an asset (car) and a liability (amount due to be paid for the car) so
Assets and Liabilities will change.

ANSWER#46

Correct Answer
$2,270

Javesh will be paid his basic salary less his income tax and state benefit contributions:
3,200 - 640 - 290 = $2,270

The benefit and pension contributions paid by his employer are not deducted from
Javesh's salary.

ANSWER#47

Correct Answer
Bank overdraft

Trade receivables, petty cash and inventories are all debit amounts in the general
ledger and trial balance.

ANSWER#48

Correct Answer
$2,690

Incorrect answers:

$690 - Sales less purchases for the month of May

$3,700 - Total credits/debits in the general ledger account
$2,000 - Opening balance brought forward

ANSWER#49

Correct Answer
$2,400 Cr

$2,400 Dr - Correct amount but a debit balance

$4,800 Dr - Incorrect amount and a debit balance
$4,800 Cr - Incorrect amount

ANSWER#50

Correct Answer
A payment of $1,100 was debited to expenses with $1,010 and credited to bank
with $1,100

$1,100 - $1,010 = $90 (debited to the suspense account as the debit side of the manual
journal entry was $90 less than the credit).

All other items create equal debits and credits and no suspense account is created.