AFIA FA2

Revision Questions 2
Answer ALL Questions

1. Which of the following errors could result in a suspense account being required to
balance the trial balance?
A Cash paid to credit suppliers treated as a cash purchase
B A customer invoice for $120 recorded as $210 in the sales account
C Payments to suppliers of $120 recorded as $210 in the payables ledger
D One page omitted from the sales day book

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 cash book. 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 balance sheet at 31 December 20X7 should
be
A $1,600
B $3,600
C $2,400
D $400

5. A business has an accounting year ended 31 December 20X7. At that date the balance on
the payables control account was $57,200, but this did not agree with the total of the
individual accounts in the payables ledger.
Upon investigation the following facts were discovered:
(1) The purchases day book total for week 50 had been overcast by $1,000.
(2) A debit balance of $100 on a supplier’s account in the payables ledger had been
incorrectly treated as a credit entry, when balancing off the account.
(3) A contra of $500 has been entered in the supplier’s account in the payables ledger
but no other entry had been made.
The adjusted balance on the payables control account is $

6. The debit side of a trial balance totals $1,000 more than the credit side.
Which of the following errors would fully account for the difference?
A The cash balance of $1,000 has been omitted from the trial balance.
B A receipt of $1,000 for commission receivable has been omitted from the records.
C Discount received of $500 has been correctly entered in the payables control account
and debited to the discount allowed account.
D $500 paid for car repairs has been correctly entered in the cash book and credited to
the car asset account.

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

8. Marshall’s trial balance does not balance and a suspense account has been opened. The
draft profit has been calculated as $50,867 ignoring the suspense account. The following
errors have been discovered:
(1) A cash purchase of $90 has been entered in the cash book but no other entry was
made.
(2) Discounts allowed of $75 were entered as a credit in the discount allowed account.
(3) The balance on the receivables control account was brought down as $43,788
instead of $43,878.
(4) Sales credit notes of $1,314 were only entered in the receivables control account.
(5) A purchases credit note received from a supplier of $150 has not been entered in the
books at all.
The revised profit for the period is: $

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

10. Which TWO of the following statements are true?

A The sales day book is not a book of original entry
B The cash book can be both a book of original entry and a nominal ledger account
C The trial balance is part of the nominal ledger
D The trial balance will detect errors of principle
E The receivables ledger is not part of the nominal ledger

11. Field Ltd. operates a payables ledger control account. At the end of the accounting
period, the credit balances on the individual payables’ accounts exceed the credit balance
on the payables ledger control account by $2,720.
Which of the following errors may, alone, explain this difference?
 A A contra entry for $1,360 has been recorded twice in the payables ledger control
account
B The total on the purchase day book had been overcast by $2,720
C A credit balance of $2,720 was omitted from the list of payables’ balances
D A credit note for $2,720 received from a supplier had been omitted from the
supplier’s account

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 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 cash
book
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 balance sheet 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 cash book as
$500.
(2) Bank charges of $45 had been recorded twice in the cash book.
(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

14. Brian’s receivables ledger control account does not agree with the list of receivables
ledger balances. The receivables ledger column of the cash book had been undercast by
$300, and an invoice for $200 to a customer had been credited to his account.
Which of the following shows the correcting entries required?
Control Receivables
account ledger
A Cr $300 Dr $200
B Cr $300 Dr $400
 C Dr $300 Dr $200
D Dr $300 Dr $400

15. The bookkeeper at Patricia & Co extracted a list of receivables balances from the
receivables ledger which totalled $29,076. This did not agree with the balance on the
receivables ledger control account. Investigations revealed the following errors.
(1) A contra of $4,640 between a receivable and a payable had not been recorded in the
nominal ledger.
(2) Discounts allowed of $550 had been recorded in the nominal ledger only.
(3) An irrecoverable debt of $840 written off in the previous year was recovered and
debited to cash. A credit entry was made to the receivable’s personal account, but
no other entry has been made.
If adjustment for these errors reconciles the list of receivables balances and the
receivables ledger control account, what is the revised balance on the receivables ledger
control account?
A $24,726
B $28,526
C $29,366
D $29,916
16. Karen is preparing her bank reconciliation as at 31 March. The following cheque
payments have been recorded in the cash book 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 cash book in respect of the above items?
Bank reconciliation Cash book
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

17. Panny maintains a payables ledger control account. At the end of the year the total of
payables ledger balances exceeded the balance on the control account by $1,000.
Which of the following errors, taken in isolation, may explain this difference?
A A debit balance on the payables ledger of $1,000 has been listed twice
B A page in the purchase day book, which actually totalled $35,600, was posted as
$36,600
C A credit note of $1,000 was listed in the purchase day book but not posted to the list
of balances
D Discount received of $500 was posted to the credit of the control account

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 current account cash book to record a transfer of funds from
the current account to the savings account 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 cash book
C Yes
D No
The value of unpresented cheques exceeded the value of cleared lodgements
E Yes
F No
19. In the course of reconciling the payables ledger control account to the list of balances on
the payables ledger, the following errors were noted.
(1) The bookkeeper had recorded an invoice in the purchase day book as $269, when the
correct amount should have been $296.
(2) When adding the list of balances, debit balances of $249 were listed as credits.
Which of the following sets of entries is required?
Nominal ledger
Debit Credit List of balances
A Control account $27 Purchases $27 Increase by $27
B Purchases $27 Control account $27 Reduce by $471
C Control account $27 Purchases $27 Increase by $471
D Purchases $27 Control account $27 Reduce by $27

20. Mr Thomson maintains his petty cash records using an imprest system. The total petty
cash float is made up monthly to $200. During the month of June the following expenses
were paid from petty cash:
$
Stationery 24
Tea and coffee 40
Stamps 80
In error, the purchase of stamps was recorded as $8 and as a result a cheque for $72 was
written to top up the petty cash float.
The error made will result in which of the following?
A An imbalance in the trial balance of $72 and the petty cash balance being $72 less
than it should be
B An understatement of expenses of $72 and the petty cash balance being $128 less
than it should be
C An understatement of expenses of $72 and the petty cash balance being $72 less than
it should be
D An imbalance in the trial balance of $128 and the petty cash balance being $128 less
than it should be

21. Goods invoiced at $25 had been returned to a supplier by Samson Ltd. The return had
been treated correctly in Samson Ltd's personal ledger account for the supplier and in the
purchase ledger control account, but had been debited to the purchases account as $52.
Which of the following pairs of entries should be made to correct the above error,
assuming that a suspense account has been opened?
Debit $ Credit $
 A Suspense 27 Purchases 27
B Purchases 27 Suspense 27
C Suspense 77 Purchases 77
D Purchases 77 Suspense 77

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

23. Indicate, for each of the following errors, whether or not it would have caused a suspense
account with a debit balance to be opened.
Cash drawings by the owner had only been posted to the cash account
A Caused
B Not caused
The sales day book was undercast
C Caused
D Not caused
Non-current assets had been omitted from the trial balance
E Caused
F Not caused

24. Indicate, for each of the following, whether it would give rise to a difference in the trial
balance.
Opening inventory figure omitted
A Yes
 B No
Purchase day book miscast
C Yes
D No
Discounts allowed debited to the sales account, with the correct entry in the receivables
control account
E Yes
F No
A gas bill paid for $98 posted to the debit side of the gas expense account as $89
G Yes
H No

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 income statement for the year ended 31
October 20X7 and in the statement of financial position at that date?
Income Statement
of
statement 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' income statement 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 income statement 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 income
statement 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?
Income statement 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 income statement 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 balance sheet 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 balance sheet 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 income statement
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 income statement 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
39. Sarah Ltd’s trial balance at 31 December 20X6 does not balance, so the bookkeeper
posts the difference temporarily to a suspense account. The following matters are
subsequently discovered.
(1) The balance on the purchase ledger control account of $15,000 had been listed as a
debit balance.
(2) The accumulated depreciation account had been overcast by $500.
(3) A cash payment for rent payable of $200 had been posted in error to the debit of the
bad debts expense account. The cash entry was dealt with correctly.
What is the credit balance on the suspense account prior to its correction?
A $29,700
B $29,500
C $14,700
D $14,500

40. Amney Ltd’s accountant has been reviewing the company’s debtors 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