FA1: Recording Financial Transaction:

Mock Exam#1:
Question#1:
A
Dr Petty cash $71.55 Cr Bank $71.55
Kevin's vouchers total $71.55. This means that he has remaining cash of $48.45. To bring his cash float
back up to $120 he must deposit $71.55 in the petty cash box. He will withdraw cash of $71.55 from the
bank (Cr Bank) and pay it into petty cash (Dr Petty cash).
Question#2:
B
Neither statement
Transactions with credit suppliers are posted to the payables ledger, not the trade payables control
account. The trade payables control account is part of the general ledger so it is part of the double entry
system of accounting.
Question#3:
C
Dr Irrecoverable debts $496.70 Cr Receivables $496.70
Simon will remove Trevor's debt from amounts receivable, as it will not be received and charge the loss
to the relevant expense account. The correct entry is therefore: Dr Irrecoverable debts, Cr Receivables.
Question#4:
D
The sales day book is understated by $676
The balance on the trade receivables control account is $676 lower than the total of customer balances.
The only option which can account for this is if the total posted from the sales day book to the control
account was understated by $676.
The other options would all lead to a balance on the trade receivables control account which was higher
than the total of the individual balances.
Question#5:
C
Dr Cash Cr Rental income
The correct entry is Dr Cash (an increase in an asset) and Cr Rental income (an increase in revenue).
Question#6:
B
Credit note
A credit note is used to reduce the balance owing on the customer's account as in this example.
A debit note would increase the balance owing.
An advice note informs the customer that an order has been fulfilled.
A delivery note will accompany the goods and be checked against the original order.
Question#7:
A
Control account only
The purchase day book total is posted to the control account so this is where the error will need to be
corrected. The individual suppliers' balances will be updated from the separate transactions in the day
book so will not be affected by an error in the total.
Question#8:
B
The total of the balances on the individual suppliers' accounts
The balance on the trade payables control account should be equal to the total of the balances on the
individual suppliers' accounts.
The other options all deal with customers/receivables accounts rather than suppliers/payables.
Question#9:
A
Account 4 only
If total credits exceed total debits then the account has a credit balance. This is only the case in account
4.
Question#10:
A
Revenue
Revenue is recorded in the statement of profit or loss. The other items are shown in the statement of
financial position.
Question#11:
C
Purchase of a service by Millie
This is the purchase of a service by Millie. Warren is not selling goods, he is selling a service of window
cleaning and Millie has purchased this service and paid for it.
Question#12:
A
3 and 4
Revenue expenditure is involved in the day-to-day running of the business. Rental income is not
expenditure. Purchase of a machine is capital expenditure. Goods for resale and wages (3 and 4) are
revenue expenditure.
Question#13:
C
Dr Drawings Cr Purchases
The incorrect entry made by Tarik will have debited purchases instead of drawings. To correct this:
Dr Drawings, Cr Purchases
Question#14:
A
Credit note
Arthur will issue a credit note for $200 to Meabh. This reduces the amount that she is due to pay. A
debit note or invoice would require her to pay an additional amount. A remittance advice is issued to
accompany a payment so is not relevant here.
Question#15:
B
$860 Dr
Irrecoverable debits is an expense and therefore a debit balance. Discounts received are amounts
deducted from purchases - credits. This means that the trial balance is missing $5,780 in debit balances
and $4,920 in credit balances.
This will show up as debits being $860 less than credits so the balance on the suspense account will be a
debit of $860.
Question#16:
A
Dr Irrecoverable debt expense Cr Trade receivables
An irrecoverable receivables balance must be removed from the total of trade receivables. Trade
receivables are a debit balance so this will be a credit entry. The corresponding debit will be to the
irrecoverable debt expense account.
Question#17:
A
Journal
An error in posting an amount to the general ledger will be corrected using a journal.
Question#18:
C
23274
Parkers is a credit customer so its balance will appear under trade receivables. Therefore its code must
be in the 23000 range and the appropriate code is 23274.
Question#19:
B
Dr Sales $2,700 Cr Suspense account $2,700
This error will have caused an imbalance in the trial balance so a suspense account will be used to
correct it. It will have caused an excess credit of $2,700 (sales) so a debit posting of $2,700 will have
been made to the suspense account to balance the trial balance.
When the error is discovered, the correcting entry will be Dr Sales, Cr Suspense account.
This removes the excess posting from sales and closes off the suspense account.
Two of the options involve postings to the cash account although we have been told that the posting to
the cash account was correct. Dr Suspense account, Cr Sales is a reversal of the correct posting.
Question#20:
B
Dr Materials Cr Purchase day book
As the purchase was made on credit the correct record is to debit the statement of profit or loss
materials account with the expense and record the liability by crediting the purchase day book.
Question#21:
C
Assets and liabilities
The repayment will affect assets and liabilities. The original loan will have created an asset (cash) and
liability (amount repayable), both for $20,000. The repayment will reduce the asset (cash) by $10,000
because this amount will be paid out, and it will also reduce the liability because the amount of the loan
to be repaid is now only $10,000.
Question#22:
B
Alvin has made a payment not yet received by Darcy.
The situation which could explain this discrepancy is that Alvin has made a payment not yet received by
Darcy. Alvin could have put a cheque in the post of $1,840. When Darcy receives this she will amend
Alvin's supplier balance to $20,140.
If Darcy recorded a payment twice in error, the supplier statement balance would be lower than Alvin's
records which is the opposite of the situation we have.
Question#23:
B
The amount paid to Khalid's suppliers during May
As we are looking at the cash payments book the column must represent payments - in this case the
amount paid to suppliers.
The amount invoiced will be in the purchase day book. The amount owed will be in the purchase ledger.
The discounts will have been deducted from the payments shown in the cash payments book.
Question#24:
B
1, 3 and 4 only
Invoices are always prepared showing the amount payable net of trade discount. Therefore these
discounts are taken into account in the totals of invoices shown on suppliers statements, and will not
appear separately. Invoices, credit notes and payments will all be shown.
Question#25:
D
Capital $27,000 Assets $49,000 Liabilities $22,000
The accounting equation is:
Assets = Capital + Liabilities
Therefore, Capital $27,000, Assets $49,000, Liabilities $22,000 is correct.
Question#26:
D
Cr Discounts received $140
The cash payments book records money paid to suppliers. The discounts column will record discounts
received from suppliers which have been deducted from payments made.
The discounts received is a credit balance. The total paid will be credited to the bank account, the total
owed will be debited to trade payables and discounts received is credited with the amount of the
discount.
Question#27:
D
The trade receivables column of the cash receipts book is overstated by $2,700
The only option which would give rise to this difference is the overstatement of the receivables column
of the cash receipts book. The individual amounts received will be posted to the individual customer
balances and the total of the column will be posted to the control account. If the total of the column is
overstated by $2,700, then the control account balance has been credited (reduced) by $2,700 more
than the total customer balances, and so the balance will be $2,700 lower.
The other options would all lead to a higher balance on the control account than in the customer
accounts.
Question#28:
B
Dr Cash $4,418 Cr Accounts receivable $4,418
The correct entry is debit cash (increase in an asset) and credit accounts receivable (decrease in another
asset) with the full amount.
The sales tax has already been accounted for in posting the original invoice.
Question#29:
A
2 and 3
An aged receivables analysis is not part of the double entry system, and an aged receivables analysis is
not needed to ensure the trial balance balances. However, an aged receivables analysis is the start point
for identifying individuals to be chased up, and it is the starting point for calculating allowances for
receivables.
Question#30:
B
Debit balance of $3,677
This account has debit postings totalling $4,264 and a credit of $587. The closing balance will therefore
be a debit balance of $3,677.
Credit balance of $3,677 treats this as a credit balance rather than a debit, and the other two options
take no account of the $587.
Question#31:
C
Standing order
This is a standing order: an agreement between Joanna and her bank that a certain sum is paid to a
particular recipient on a particular date. It can only be amended by Joanna.
A direct debit is similar except that it would be an agreement between Joanna and the charity that the
charity could draw specified sums from her bank account. The charity would be able to amend the direct
debit for instance take a larger amount of money, but they would have to inform her.
A BACS payment is used to transfer sums of money between accounts and is often used to pay creditors
or salaries. Like a direct debit it is used where the amounts are variable. It would not be used for small,
regular sums of fixed amount.
A petty cash payment will use actual cash so the bank will not be involved in the payment.
Question#32:
B
2 and 4
Bank charges and standing order payments (where not already entered) will be entered into the cash
book during the reconciliation because these are items that will be extracted from the bank statement.
Unpresented cheques and outstanding lodgements are items that are already in the cash book but have
not yet appeared on the bank statement.
Question#33:
A
1, 2 and 4
The cashier will not be concerned with the credit rating of the business receiving the payment. This
would be a factor to consider if they were selling goods on credit to the company concerned, but in this
case they are buying and paying by cash.
The other checks are all valid and should be made.
Question#34:
B
$14,100 Cr
Hugo's accounts will show a credit balance of $14,100.
The bank statement shows Hugo's account in the bank's books. A debit balance of $12,800 means that
he is overdrawn by that amount.
We adjust this for outstanding lodgements and unpresented cheques:
12,800 - 3,400 + 4,700 = 14,100 Dr
This will be a credit balance in Hugo's accounts because here we are reflecting the bank's account in
Hugo's books. An overdrawn cash position will be a credit balance: the money being owed to the bank.
Question#35:
D
$162.80
Manfred will need to replace the amount of cash that has been spent in order to restore the imprest
amount of $200. Therefore he will need to pay in $162.80.
Question#36:
B
$10,000

This is calculated by separating out the debit and credit balances - an overdraft will always be a credit balance.

Dr ($) Cr ($)
Capital 9,000
Sales 32,000
Purchases 26,000
Receivables 23,000
Inventory 14,000
Payables 12,000
Overdraft - 10,000
(balancing figure)
63,000 63,000
Question#37:
B
Dr 4270 Cr 2150
The correct double entry will be to Dr Motor vehicles and Cr Bank. (We assume that Eddy is not in the
business of buying and selling vans.)
Question#38:
C
Purchase of equipment paid for by cheque
This transaction shows Cr Bank, Dr Equipment. This means that money has gone out of the bank and
equipment has been acquired.
The correct option is therefore 'Purchase of equipment paid for by cheque'.
'Receipt of a bank loan to purchase equipment' and 'Banking of the proceeds from the sale of
equipment' would mean money coming into the bank and 'Purchase of equipment on credit' would not
involve any movements of funds.
Question#39:
A
$70,965
Income tax and employee's pension contributions are deducted from gross salary so they are not an
additional cost for the employer.
The total wages and salaries expense will be gross pay plus employer's pension contributions:
65,708 + 5,257 = $70,965
$74,907 includes employee's contribution and $90,677 includes employee's contribution plus income
tax. $65,708 does not include the employer's pension contributions.
Question#40:
C
$120
Jan's basic hourly rate = 18,720 / 52 / 30 = $12
Overtime rate 12 x 2 = $24
12 hours of overtime (12 - 7) x 24 = $120
This shows her overtime pay as $120.
$480 combines her weekly rate ($360) with the 5 hours at double time so is not just her overtime pay.
$288 values the whole 12 hours at double time.
$60 is just the five hours at the normal hourly rate.
Question#41:
C
Pension contributions paid by Jasminder on behalf of her employees
The additional $4,000 can only be pension contributions paid by Jasminder on behalf of her employees.
Jasminder's drawings will not be recorded as an expense and employee income tax payments and
pension contributions will not add to wages and salaries expense - they will be deducted from the
employee's gross salary of $14,000.
Question#42:
B
Packing and posting costs payable by the customer were omitted from the invoice
A debit note is used to increase the amount payable by the customer, in this case the packing and
postage costs.
Marion refusing some of the goods and the incorrectly totalled invoice require a reduction in the
amount of the invoice which would be done by credit note.
The invoice being sent to an incorrect customer would require the whole invoice to be credited as it
should not have been issued to this customer.
Question#43:
A
Credit sale
This is a credit sale from Harvey's point of view because he has sold the goods to Bob but will not be
paid for 90 days.
Question#44:
D
Trade payables and expenses
Trade payables will be a credit balance and expenses will be a debit balance.
The other pairs will all appear on the same side:
Sales and capital - credit
Trade receivables and purchases - debit
Motor vehicles and inventory - debit
This is a credit sale from Harvey's point of view because he has sold the goods to Bob but will not be
paid for 90 days.
Question#45:
B
A bank overdraft of $880 is recorded as a positive cash balance
The options related to the $250 motor vehicle repairs, the purchase day book being over stated by $420
and Alfredo's drawings of $320 will not cause any imbalance in the trial balance so will not require any
entry to a suspense account.
A bank overdraft being recorded has a positive cash balance will mean that debits are overstated and
credits are understated and a suspense account will be created for the difference.
Question#46:
C
$81,470
Cash sales do not form part of the trade receivables balance. The other items are totalled as follows:
$
Balance b/f 92,320
Cash receipts (46,420)
Credit sales 38,170
Debts written off (2,600)
81,470
Question#47:
C
$8,500 Cr
$
Credit purchases 20,800
Returns (3,100)
Cash payment (9,200)
Total owed 8,500
As the amount is still owed this will be a credit balance.
Question#48:
B
$31,500
Sales tax should be calculated after the trade discount has been deducted.
The sales tax will be calculated as follows:
$
List price 240,000
Less 25% trade discount (60,000)
180,000
x 17.5% 31,500
$42,000 has omitted the trade discount
$35,745 has omitted the trade discount and calculated as if gross of VAT
$26,809 has calculated as if gross of VAT
Question#49:
A
To record unusual movements between accounts
The purpose of a journal is to record unusual movements between accounts.
Question#50:
D
1 and 3
Minimising record storage costs is a valid reason for having a formal document retention policy as it is
helping locate business records.
Mock Exam#2:
Question#1:
B
The sales day book total is understated by $2,840
The only option which would give a lower balance on trade receivables control account is if the sales day
book total which was posted to the trade receivables control account was understated by $2,840.
The other options would all give a balance on the trade receivables control account which was $2,840
higher than the list of balances.
Question#2:
B
Purchases
The trade payables control account will normally have a credit balance and this credit balance will
consist mainly of purchases.
Cash payments, purchase returns and contras all reduce the balance and will be posted as debits.
Question#3:
C
Goods received note
A goods received note is sent by the warehouse to the purchase ledger department detailing the goods
that have been received from the supplier. The purchase invoice will be checked against this before
being paid.
Question#4:
C
$27,500

The correct total for the individual receivables ledgers will be the same as the correct
balance on the receivables control account. This is:

$
Opening balance 32,000
Sales returns (4,300)
Day book overstated (200)
27,500
Question#5:
A
$44,000

The sales figure is revealed by separating the debit and credit balances:

Dr ($) Cr ($)
Capital 30,000
Sales 44,000

Purchases 34,000

Inventory 20,000
Receivables 28,000
Payables 19,000
Cash 11,000
93,000 93,000
Question#6:
A
Both statement 1 and statement 2
Unpresented cheques will have gone through the bank account in the general ledger but not yet been
deducted from the balance on the bank statement. Therefore they will cause the bank statement
balance to be higher.
The bank may take some time to clear a cheque which has been paid in so when the reconciliation is
done there may be lodgements which have not yet appeared on the bank statement.
So both statements are true.
Question#7:
D
Dr Petty cash $58.22 Cr Bank $58.22
To restore the imprest we need to replace what has been taken out in vouchers: $16.20 + $10.37 +
$31.65 = $58.22
This will be debited to the petty cash account (increase in an asset) and credited to the bank account
(corresponding decrease in another asset) to show that cash has moved from one to the other.
Question#8:
C
Nil
The suspense account will be adjusted as follows:

Dr ($) Cr ($)
Opening balance 3,720
Opening inventory - Dr balance in TB 1,980
Bank o/d - Cr to Bank (630 x 2) 1,260
Receivables understated - Dr Receivables 3,000
Closing balance - -
4,980 4,980
The remaining balance on the suspense account is nil.
Question#9:
C
Dr Trade Payables $7940
Cr Discounts $190 Cr Bank $7750
received
The payment of $7,750 pn 10 May 20X5 is less than the total amount payable as
Warren has received a prompt payment discount of $190.
Question#10:
C
Remittance advice
This document is known as a remittance advice.
A delivery note lists items being delivered and accompanies the goods.
A credit note is used to reduce the amount payable by the buyer.
Question#11:
C
$13,500 Dr

William's balance at the end of November will be:

$
Opening 10,000
balance
Cash sales 16,000
Cash (12,500)
purchases
Closing 13,500
balance
This is cash in hand so it is a debit balance.
Question#12:
C
Dr $1,200 Dr $600 Cr Bank $1,800
Drawings Wages
As Marina owns the hairdresser's shop the amounts she takes out for herself are treated as drawings, not wages. She will debi t $600 to the
wages expense account for payments made to Betty and Kathleen. The total amount of $1,800 will be credited to the bank account
(reduction in an asset).
Question#13:
B
Dr Purchases $298,000
Dr Sales tax $52,150
Cr Accounts payable control $350,150
The purchases expense account will be debited with the net amount, the sales tax will be debited to the
sales tax account and the payables control account will be credited with the gross amount because it is
the gross amount, including sales tax, that must be paid to the supplier.
Question#14:
A
1 and 2 only
Assets and expenses are debit balances. Liabilities, capital and income are credit balances.
A credit entry can therefore be a decrease in an asset or an increase in a liability.
3 and 4 would both be debit entries.
Question#15:
B
Paying-in slip
Marlene should list the cheques on a paying-in slip and hand that to the bank.
A BACS payment form is sent to the bank to request transfer of money to another account.
Petty cash forms and cheque requisition forms are internal documentation requesting cash or cheques
to pay for specific items.
Question#16:
C
2 and 3
Sales tax payable and trade payables are liabilities.
Trade receivables are an asset and drawings are deductions from capital.
Question#17:
C
$100,000

The figure for purchases is revealed by separating the debits and credits:

Dr ($) Cr ($)
Sales 67,000
Purchases 100,000
Capital 80,000
Trade payables 21,000
Trade receivables 35,000
Inventory 19,000
Cash 14,000
168,000 168,000
Question#18:
A
Dr Cash $68.80
Dr Irrecoverable debts $103.20
Cr Accounts receivable $172.00
Henry will have received $68.80 in settlement which will be debited to cash. However he has to write off
a total debt of $172 which will be credited to accounts receivable. The difference is $103.20. This is the
amount of the loss Henry has suffered and it will be debited to the irrecoverable debts expense account.
So the correct posting is:
$
Dr Cash 68.80
Cr Accounts Receivable 172.00
Dr Irrecoverable debts 103.20
Question#19:
C
1, 2, 3 and 4
Data protection procedures should:
Restrict access to personal information to authorised persons only
Prevent personal information from being used for unauthorised purposes
Maintain the truth and accuracy of personal information
Ensure personal information is stored for only as long as necessary or for as long as permitted by law
Question#20:
B
Cash payments book
Cash discounts received are recorded in the cash payments book. A buyer who has taken advantage of a
cash discount will not have paid the full amount of the invoice. The discount received is recorded in a
separate column in the cash payment book.
Question#21:
C
As an asset of $136,044
The trade receivables in the statement of financial position are shown net of any receivables allowance.
Jemma's receivables will therefore appear as an asset of $136,044 (138,644 - 2,600).
Question#22:
A
Assets and capital
The balance in the bank account is an asset and money that Parvez takes for personal use will be
debited to his capital account. So assets and capital will be affected.
Question#23:
C
1 only
Only errors which cause an imbalance in the trial balance need to be corrected through the suspense
account.
The incorrect posting to the wages account will create a difference of $9,000 so this will require en entry
to the suspense account.
The misposting of discounts received does not involve an incorrect amount and has been correctly
posted as a credit - it has simple been posted to the wrong account. This will be corrected using a
journal entry.
So only error 1 will go through the suspense account.
Question#24:
B
$120
In week 6 actual production is over 10% higher than target production so the bonus will be paid.
Elizabeth will receive a bonus of (1,500 x 8%) = $120.
Question#25:
D
$1,113 Cr

Felipe's account balance will be as follows:

$
4 May Goods purchased (2,800 x 95%) 2,660
20 Goods returned (1,340 x 95%) (1,273)
May
28 Payment (2,500)
May
Balance (1,113)

Felipe's balance in Mischa's receivables ledger is an account payable so it will have

a credit balance.
Question#26:
D
Both statement 1 and statement 2
The imprest system is based on a fixed amount (the imprest). When the vouchers in the tin are
removed and processed the remaining cash is topped up to the imprest amount. At any time the
vouchers held in the tin plus the cash will add up to the imprest amount.
Question#27:
B
Statement 1 only
An aged receivables report is a list of outstanding customer balances. A list of suppliers, how much is
owed to them and for how long would be an aged payables report. So only statement 1 is correct.
Question#28:
D
Dr Cash $2,209
Cr Trade receivables $2,209
This was a credit sale so at the time the sale took place postings would have been made to the sales
account and the sales tax account. Now the balance on the receivables account is being settled so the
posting is simply:
Dr Cash, Cr Trade receivables
Question#29:
C
For audit and control purposes
All journal entries must be accompanied by a narrative for audit and control purposes. This is generally
not a legal requirement of International Accounting Standards.
Question#30:
A
Dr Irrecoverable debts $3,300 Cr Receivables $3,300
Betty must remove Sean's balance from receivables because she now knows that it will not be received.
She will reflect the loss in the irrecoverable debts expense account.
So the entry will be:
Dr Irrecoverable debts $3,300, Cr Receivables $3,300
Question#31:
D
$5,666
An overcast of the purchase day book means that the balance on the payables ledger control account
will have been overstated.
Discounts received not posted means that when payments were posted the discount amounts were left
as outstanding. This also overstates the payables ledger control account balance.
So the correct balance will be $5,666 (5,891 - 135 - 90).
Question#32:
B
Bank statement
BACS payments are usually arranged by fax or email.
When the payment goes through there may be currency exchange costs or bank charges involved. This
will all be detailed on the bank statement.
Question#33:
D
Dr Payables Cr Discounts received
James has received from Eric this discount in settlement of the invoice. The discount will be credited to
discounts received and debited to Erics payables account. This means that the discount of $544 and the
amount paid of $6,256 will together clear the invoice total of $6,800.
Question#34:
B
Retention policy
A company's policy that sets out for how long different types of information should be kept is known as
its retention policy.
Question#35:
C
Dr Purchases Cr Payables
Purchases must be debited to the purchases expense account and credited to payables because they will
need to be paid for at a specified time.
No payment is being made at this time so the bank account is not affected.
Question#36:
D
1, 3 and 4
A delivery note contains descriptions and quantities of goods so that the person accepting the goods can
see that they are all there and sign for them. It does not show monetary amounts.
A quotation, a sales invoice and a remittance advice must all show monetary amounts.
Question#37:
A
$8,037
The value of the invoice is $8,037.
As the list price includes sales tax the sales tax does not need to be calculated separately. 90% of the list
price can be used: $8,930 x 90% = $8,037.
Question#38:
A
Dr Trade $177,425 Cr Sales tax $26,425 Cr Sales $151,000
receivables control

The net amount of $151,000 will be credited to the sales account and the sales tax
amount of $26,425 will be credited to the sales tax account. This is a credit posting
because it represents money that will have to be paid over to the tax authority. The
debit to the receivables control account will be for the gross amount because this is
what the customer will have to pay.
Question#39:
A
A sales invoice for $3,500 has been debited to a supplier's personal account instead of the customer's
The correct answer is the misallocation of a sales invoice which has gone through the receivables control
account but not been posted to the individual customer's account. This will make the total of customer
balances $3,500 lower than the control account balance.
An error in the purchases day book is irrelevant as we are dealing here with sales.
An undercast of the sales day book would make the customer balances higher than the control account
balance.
The omission of a sales invoice would affect the control account and the list of balances equally.
Question#40:
D
$1,811 Cr

A credit balance in the cash book means that Kwai owes money to the bank. The
adjusted cash book balance (credit) will be:

$
Opening credit balance 839
Receipt overstated 909
Bank charges not recorded 63
1,811
Question#41:
D
$28,350
The amount paid by Varsha into her pension will be deducted from her salary so is not
an additional cost for her employer.
Her employer's total expense will be her gross salary plus the additional 5%: 27,000 +
1,350 = $28,350
Question#42:
A
Master file
Master, or reference, files are permanent records which may be updated from time to time. This means
the information in the file might change but the file will continue to exist.
Question#43:
C
Dr Returns inwards $880
Dr Sales tax $154
Cr Receivables control $1,034
Sales returns will be deducted from the amount payable by the customer and will require an adjustment
to the revenue and sales tax accounts.
The net amount of $880 will be debited to returns inward (this account will be netted off against sales
revenue in the accounts). An additional 17.5% - ($154) - will be debited to the sales tax account
(reducing the amount payable to the tax authority) and the total - ($1,034) - will be credited to the
receivables control account reducing the total of the amount due from customers.
Question#44:
A
Brian purchased goods from Kelly and a discount of 20% was received when the invoice was settled
This is a purchase ledger account. The invoice payable is posted as a credit and it has been cleared by
debit postings from the bank and discounts received. (The payment will have been a credit in the bank
account).
Brian has received a discount of 20% and only been required to make a net payment of $1,008 in order
to settle the invoice.
Question#45:
D
$3,960 Dr
Harval's cash balance at 31 May 20X9 will be:
$
Savings 6,500
Loan 1,800
Goods bought for cash (2,800)
Expenses paid (1,240)
Van (4,300)
Cash sales (5,700 - 1,700)4,000
3,960
This is cash in the bank, which is an asset, so it is a debit balance.
Question#46:
B
Banking of the proceeds from the sale of motor vehicles
The transaction is: Cr Motor vehicles, Dr Bank.
Therefore the value of motor vehicles has decreased and money has entered the bank account. The
transaction is the banking of proceeds from the sale of motor vehicles.
Question#47:
B
Dr Bank Dr Sales Cr Receivables
Discounts given to a customer who was not expected to take advantage of a prompt payment discount
should be deducted from revenue recorded. They reduce the balance on the receivables account.
Therefore the double entry debits the discounts allowed expense account and credits receivables.
Question#48:
C
An invoice from a supplier
An invoice from a supplier will be recorded in the purchases day book.
A reminder will not be recorded in the purchases day book. Nor will a delivery note which simply details
the goods that have been shipped. Documents from a customer are not relevant to purchases.
Question#49:
C
To record the detailed transactions of each customer
The main purpose of receivables ledger accounts is to record the detailed transactions of each
customer. This enables statements to be sent out and overdue accounts chased.
Question#50:
A
Trade payables control account Cr $985
Total of the individual supplier accounts Add $425

The understatement of the purchase day book total only affects the trade payables
control account (the purchase ledger will have been credited with the individual
amounts). The omitted invoice must be added to both the payables ledger and the trade
payables control account.

The trade payables control account records amounts payable so will be

a credit balance.

So the correct adjustment for the purposes of the reconciliation will be:

Cr Trade payables control account $985 (560 + 425)

Add missing invoice of $425 to supplier's account.

Mock Exam#3:
Question#1:
B
$47,250
Both of these errors need to be corrected in the receivables ledger. The corrected balance will be:
50,000 - 750 - 2,000 = $47,250
Question#2:
D
Machinery owned by a business
Machinery owned by a business is an asset.
Question#3:
C
Dr Purchases Cr Payables
Where goods are purchased on credit they are debited to purchases (expense) and credited to payables
(liability).
Question#4:
A
Purchases
Purchases would be on the credit side of the account. Trade payables control 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.
Question#5:
D
Dr Bank Dr Sales Cr 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.
Question#6:
A
Assets - Capital = Liabilities
The usual form of the accounting equation is:
Assets = Capital + Liabilities
This can be expressed as:
Assets - Capital = Liabilities
Question#7:
D
Receipt
A receipt is a proof of payment. It is issued by the person who receives the payment.
Question#8:
C
Dr Payables Cr Discounts received

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

Question#9:

D
Cash book $350.60 Dr Bank statement $350.60 Cr

Warren's cash book 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.
Question#10:
A
Rent paid
Kamalar is a payable account (liability) and Ebeneezer is a receivable account (asset). Discount received
is an income account. Only rent paid is an expense account.
Question#11:
C
$4,836
As Alan's purchases exceed $5,000 he will be entitled to 7% discount. The invoice he receives will be for
$5,000 x 93% = $4,836
Question#12:
D
Irrecoverable debts expenses has been recorded as a credit balance in the trial balance
Irrecoverable debts expense recorded as a credit balance will need to be corrected through a suspense
account because the expense should be posted as a debit. This will cause an imbalance in the trial
balance which may take time to trace.
The other options will not cause an imbalance: the debit balance in the trial balance is just an expense
charged to the wrong account, overstating the sales day book will overstate both sales and receivables
by the same amount and the omission of the purchase invoice is a transaction that has not been posted
at all.
Question#13:
A
Internal cheque requisition
A cheque 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.
Question#14:
D
1 and 4
Farsa will return the goods to Kerry with a debit note. Kerry will then issue a credit note which will
reduce the amount payable on Farsa's account by the value of the goods returned.
Question#15:
B
Dr Payables control Cr Discounts received
Discounts received reduce the amount due to suppliers so they are debited to the payables control
account and the credit goes to the discounts received account.
Question#16:
D
Dr Purchases $315 Cr Payables $315

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

Sales and receivables relate to transactions with customers.

Question#17:
D
Statement 2 only
An aged receivables analysis is a list of those who owe money to the company : customers. Therefore
statement 2 is correct.
Statement 1 describes an aged payables analysis.
Question#18:
A
The amount of cash and cheques paid into the bank
A paying-in slip is handed in to the bank when making a lodgement. It lists the cheques and the
denominations of notes and coins and will be checked and initialled by the cashier.
Question#19:
B
Discounts received of $1,600 omitted from the individual accounts
Here the total of the individual ledger accounts is $1,600 higher than the balance on the control
account. The only option which could account for this is discounts received omitted from the individual
accounts. Discounts received reduce the amount payable so if they are omitted that makes the amount
payable appear higher.
The other options would all make the total of the control account $1,600 higher than the total of the
individual accounts.
Question#20:
C
Statement 1 only
Sequence codes can consist of numbers and letters, but do not contain a descriptive element.
Question#21:
A
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.
Question#22:
A
2 and 3
Liability and income accounts have credit balances. Asset and expense accounts have debit balances.
Question#23:
D
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.
Question#24:
D
It must be paid into the account of the person named on the cheque
A crossed cheque can only be paid into the account of the person named on the cheque. Most cheques
now have this automatically printed on them.
Question#25:
C
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 he has bought, how much
he must pay and when.
Question#26:
B
Dr Machinery Cr 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 payables.
Question#27:
A
Dr Cash $57.60 Dr Irrecoverable $134.40 Cr Receivables $192.00
debts

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 receivables.
The balance of $134.40 (192 x 0.7) is written off to irrecoverable debts.
Question#28:
C
Cash payments book and purchase day book
Juliette will record the payment to the supplier in the cash payments book and the credit purchase in
the purchase day book.
Question#29:
D
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.
Question#30:
C
Dr Receivables Cr Sales
As the customer owes the money the sale will be debited to receivables (asset) and the credit will be to
the sales account (income).
Question#31:
A
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.
Question#32:
D
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.
Question#33:
B
Sales
Sales will be entered as a debit balance because these are amounts owed to the company (asset). Cash
received, irrecoverable debts and credit notes all reduce the balance owed to the company so they are
credited to the account.
Question#34:
B
Dr Stationery Cr Bank
Stationery will be treated as an expense, debited to the stationery account. As payment has been made
the credit will be to the Bank account (reduction in an asset).
Question#35:
C
A bank overdraft of $280 shown as a positive cash balance
This reflects $560 credit missing from the trial balance. This could be caused by a bank overdraft (credit)
of $280 being posted as a cash balance (debit).
The opening inventory omitted from the trial balance shows a missing debit balance.
Incorrect receivables recorded in the trial balance shows a debit shortfall.
Purchase of a van recorded as motor expenses will not cause the trial balance imbalance, so no
suspense account would be needed.
Question#36:
A
$10,031 Dr
The suspense account balance will be adjusted as follows:

$ $
Balance b/f 4,697
Capital posted as debit 20,000 Missing inventory 2,672
Duplicate cash payment 2,600
- Balance c/f 10,031
20,000 20,000
Balance b/f 10,031

Note that since the capital has been posted as a debit when it should have been a credit
the adjustment has to be for double the amount.
Question#37:
A
$45,159

Barbara's receivables 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.

Question#38:
A
$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.
Question#39:
D
The sales day book total is understated by $2,840
The list of customer balances is higher than the control account balance by $2,840. This can be caused
by an understatement of the sales day book total, so that not all of the sales are debited to the control
account.
Omitting a customer balance would cause the total of the customer balances to be lower than the
balance on the control account. The other options would cause the balance on the control account to be
overstated, and therefore higher than the total of customer balances.
Question#40:
A
Receivables and purchases
Receivables (asset) and purchases (expense) are both debit balances. The other options are all a credit
followed by a debit.
Question#41:
C
$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.
Question#42:
D
$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.
Question#43:
A
$15,270
Only thing to adjust for is the credit note:
$15,590 - $680 = $15,270
$17,850 adds on $680 and adds on $1,220
$16,630 adds on $680
$16,490 deducts $680 but adds on $1,220
Question#44:
D
Sales Cr $4,900 Cash Dr $2,900 Receivables Dr $2,000

Wendy will credit the sales account with the total amount of $4,900. Of this the cash
receipt will be debited to the cash account (asset) and the balance of $2,000 is still
owed by Malcolm so it will be debited to receivables.
Question#45:
B
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.
Question#46:
$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.
Question#47:
A
To confirm the accuracy of postings
Reconciliations are performed in order to check that transactions have been correctly posted. A
receivables ledger reconciliation does this by checking the total of the receivables ledger against the
balance on the control account.
Question#48:
D
Dr Interest expense Cr Bank
Pavel will debit interest expense which is the relevant expense account, and credit the bank account
which has made the payment. This reduces the amount of cash in the bank, so it is a credit posting.
Question#49:
A
$19,500

$
Balance b/f 26,700
Cash receipts (80,000)
Credit sales 75,500
Sales returns (700)
Irrecoverable debts (2,000)
Balance c/f 19,500
Question#50:
D
Dr Payables $18,312 Cr Sales $3,052 Cr Purchase $15,260
tax returns

Purchase returns are credited against the purchases account so the net amount will be
a credit to purchase returns. The sales tax amount will be deducted from input tax,
therefore increasing the amount due to the tax authorities, so this will be a credit
(liability) to the sales tax account. The total amount will reduce the amount due to
suppliers (payables) so it will be debited to the payables account.