Paper: FA1

Mock: 1

1)

Velma sent an invoice to Marion for goods purchased. Velma subsequently issued a
debit note to Marion.
Which of the following would explain the issue of the debit note?
Packing and posting costs payable by the customer were omitted from the invoice

The invoice should have been sent to a customer called Maureen not Marion

Marion has refused some of the goods as they were faulty

The invoice was incorrectly totalled and overstated by $500

Correct Answer
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.

2)

Brian issues a document to a customer indicating that the amount owed is being
reduced to reflect sales returns.
What is this document?
 Debit note

Credit note

Advice note

Delivery note

Correct Answer
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.

3)

Arthur sold goods to Meabh for $5,400. He subsequently realised he had overcharged
Meabh by $200.
Which of the following documents would Arthur issue to correct this overcharge?
Credit note

Invoice

Remittance advice

Debit note

Correct Answer
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.
4)

Which of the following would appear on a supplier's statement?

(1) Invoices issued during the period
(2) Trade discounts given during the period
(3) Credit notes issued during the period
(4) Payments made during the period
1 and 4 only

1, 2, 3 and 4

2 and 3 only

1, 3 and 4 only

Correct Answer
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.

5)

The following extract of account codes is taken from a business's accounting manual:

Current assets (account numbers 20000 to 25999)

Bank 20000
Cash 21000
Petty cash 22000
Trade receivables 23000
Other receivables 24000
Inventory 25000
Current liabilities (account numbers 40000 to 44999)
Trade payables 40000
Other payables 42000
Bank overdraft 44000
Which of the following would be an appropriate account code for Parkers, a credit
customer?
23274

25545

40402

44564

Correct Answer
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.

6)

Eddy has purchased a van paying by cheque. Eddy uses account codes in his ledgers.
His account codes include:

Bank 2150
Motor Vehicles 4270
Purchases 3820
Which of the following is the correct double entry to record the transaction to the
correct accounts?
Dr 4270 Cr 2150

Dr 2150 Cr 3820

Dr 2150 Cr 4270
 Dr 3820 Cr 2150

Correct Answer
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.)

7)

Fatima has made an error in posting a sales return from the sales returns day book to
the general ledger.
Which book of prime entry should be used to record the correction of the error?
Journal

Sales return day book

Sales day book

General ledger

Correct Answer
Journal

An error in posting an amount to the general ledger will be corrected using a journal.

8)

Dorien owns a shop and rents out the flat above the shop.
What is the correct double entry to account for the rent she receives?
Dr Sales Cr Cash

Dr Rental income Cr Cash

 Dr Cash Cr Sales

Dr Cash Cr Rental income

Correct Answer
Dr Cash Cr Rental income
The correct entry is Dr Cash (an increase in an asset) and Cr Rental income (an
increase in revenue).

9)

At the start of the year Bharvinder had an interest free loan of $20,000. During the year
he repaid $10,000.
Which parts of the accounting equation will change as a result of the loan
repayment?
Capital and assets

Assets and liabilities

Capital and liabilities

Liabilities and profit

Correct Answer
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.

10)

Which of the following correctly represents the accounting equation?

Capital $49,000 Assets $22,000 Liabilities $27,000

Capital $22,000 Assets $27,000 Liabilities $49,000

 Capital $49,000 Assets $27,000 Liabilities $22,000

Capital $27,000 Assets $49,000 Liabilities $22,000

Correct Answer
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.

11)

Cash sales of $15,800 have been correctly entered in the cash account but entered as
$18,500 in the sales account.
What is the double entry to correct this transaction?
Dr Sales $2,700 Cr Cash $2,700

Dr Sales $2,700 Cr Suspense account $2,700

Dr Suspense account $2,700 Cr Sales $2,700

Dr Cash $2,700 Cr Sales $2,700

Correct Answer
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.

12)

Esther received $4,418 from a customer to whom she had sold goods on credit for
$3,760 plus sales tax of $658.
What is the double entry for this receipt in the accounts of Esther?
Dr Cash $3,760 Cr Sales $3,760

Dr Sales $3,760 Cr Cash $3,760

Dr Accounts receivable $4,418 Cr Cash $4,418

Dr Cash $4,418 Cr Accounts receivable $4,418

Correct Answer
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.

13)

What is the purpose of a journal?

To record all individual transactions entered into the sales day book

To record the purpose of all transactions made in the accounts

To record unusual movements between accounts

To record when all transactions were made between accounts

Correct Answer
To record unusual movements between accounts

The purpose of a journal is to record unusual movements between accounts.

14)

Which of the following should be reported in the statement of profit or loss?

Receivables

Non-current assets

Payables

Revenue

Correct Answer
Revenue

Revenue is recorded in the statement of profit or loss. The other items are shown in the
statement of financial position.

15)

Which of the following would be classified as revenue expenditure?

(1) Rental income
(2) Purchase of machine
(3) Purchase of goods for resale
(4) Employees' wages
2 and 4

1 and 2

1 and 3

3 and 4

Correct Answer
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.

16)

Joanna makes regular payments to a specific charity. The cash goes straight from her
account and the charity cannot amend the amount paid.
What method of payment is Joanna using?
Direct debit

BACS payment

Petty cash payment

Standing order

Correct Answer
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.

17)

Which of the following are valid reasons for having a formal document retention
policy?
(1) To help minimise costs associated with maintaining business records
(2) To ensure that all business records are kept for the maximum time possible
(3) To help locate business records
(4) To ensure the trial balance balances
2 and 4

1 and 4

1 and 3

2 and 3

Correct Answer
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.

18)

The following information for wages and salaries has been taken from the accounts of
Roman:

$
Wages and salaries (gross) 65,708
Income tax 15,770
Employer's pension contributions 5,257
Employee's pension contributions 3,942

There are no statutory or non-statutory deductions other than the above.

What is Roman's total wages and salaries expense?
$74,907

$65,708

$70,965

$90,677
Correct Answer
$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.

19)

Jan is employed at an annual salary of $18,720. She is contracted to work 30 hours per
week. She is not paid for the first seven hours of overtime worked in a week. Any
overtime in excess of seven hours in a week is paid for at double time.

During one week Jan worked 12 hours of overtime.

What will be Jan's overtime pay for the week?
$288

$480

$120

$60

Correct Answer
$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.

20)

Jasminder had correctly recorded a wages and salaries expense of $32,000 in her
accounts. She only has two employees who each earn a gross salary of $14,000 per
annum.
Which of the following could explain the difference between the gross salaries
and total wages and salaries in the accounts?
Employee pension contributions

Employee income tax payments

Jasminder's drawings

Pension contributions paid by Jasminder on behalf of her employees

Correct Answer
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.

21)

Which of the following accounts would show a credit balance?

Account 1: Total Dr $400 Total Cr $200
Account 2: Total Dr $200 Total Cr $100
Account 3: Total Dr $300 Total Cr $300
Account 4: Total Dr $200 Total Cr $300
Accounts 3 and 4

Accounts 2 and 3
 Accounts 1 and 2

Account 4 only

Correct Answer
Account 4 only

If total credits exceed total debits then the account has a credit balance. This is only the
case in account 4.

22)

Which of the following entries correctly records a purchase of materials on

credit?
Dr Materials Cr Purchase day book

Dr Cash book payments Cr Materials

Dr Materials Cr Cash book payments

Dr Purchase day book Cr Materials

Correct Answer
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.

23)

The following is an extract from a ledger account:

Cash ledger
$ $
9 Oct Cash 1,270 26 Oct Cash 587
19 Oct Cash 1,959
30 Oct Cash 1,035
What is the closing balance on the cash account?
Credit balance of $3,677

Debit balance of $4,264

Debit balance of $3,677

Credit balance of $4,264

Correct Answer
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.

24)

A transaction has been recorded in the ledger of Samir as follows:

$ $
Equipment
19 Oct Bank 16,800

Bank
19 Oct Equipment 16,800
What was the transaction?
Banking of the proceeds from the sale of equipment

Purchase of equipment on credit

Purchase of equipment paid for by cheque

 Receipt of a bank loan to purchase equipment

Correct Answer
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.

25)

In Khalid's cash payments book for the month of May, the trade payables column
totalled $7,400.
What does this amount represent?
The amount invoiced by Khalid's suppliers in May

The amount owed to Khalid's suppliers at the end of May

The amount paid to Khalid's suppliers during May

The discounts received from Khalid's suppliers in May

Correct Answer
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.

26)
Kevin operates his petty cash with an imprest of $120. At the end of one particular week
he had vouchers in the petty cash tin of $17.45, $32.16 and $21.94. No other
transactions took place.
In order to restore the petty cash balance what transaction should Kevin post?
Dr Petty cash $48.45 Cr Bank $48.45

Dr Bank $71.55 Cr Petty cash $71.55

Dr Petty cash $71.55 Cr Bank $71.55

Dr Bank $48.45 Cr Petty cash $48.45

Correct Answer
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).

27)

Which of the following checks should the petty cashier make prior to paying out
petty cash?
(1) That the claim is supported by appropriate documentation
(2) That the claim has been authorised by an appropriate signature
(3) The credit rating of the business receiving the payment
(4) That the amount is within the petty cash limit
2 and 3

1, 2 and 4

3 and 4

1 and 2 only
Correct Answer
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.

28)

Manfred runs his own business and operates an imprest system of petty cash
maintaining a float of $200. At the end of November there is cash of $37.20 and
vouchers of $162.80.
How much will Manfred need to pay into petty cash to maintain the float?
$200

$37.20

$125.60

$162.80

Correct Answer
$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.
29)

Bob bought $2,000 of goods from Harvey on 1 November 20X7. He agreed to pay
Harvey on 31 January 20X8.
What kind of transaction is this from Harvey's point of view?
Credit sale

Cash sale

Cash purchase

Credit purchase

Correct Answer
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.

30)

Rodger is registered for sales tax which is charged at 17.5%. A customer is invoiced for
goods with a list price of $240,000. The customer is given a trade discount of 25%.
How much sales tax should be included on the invoice?
$31,500

$26,809

$42,000

$35,745

Correct Answer
$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.
31)

What is the correct double entry to write off an irrecoverable receivables

balance?
Dr Trade payables Cr Irrecoverable debt expense

Dr Irrecoverable debt expense Cr Trade payables

Dr Trade receivables Cr Irrecoverable debt expense

Dr Irrecoverable debt expense Cr Trade receivables

Correct Answer
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.

32)
Simon was owed $496.70 from Trevor. He subsequently found out that Trevor had gone
bankrupt and could not pay. Simon therefore wanted to write off Trevor's debt.
What would be the correct double entry to write off Trevor's debt?
Dr Irrecoverable debts $496.70 Cr Receivables $496.70

Dr Sales $496.70 Cr Receivables $496.70

Dr Receivables $496.70 Cr Irrecoverable debts $496.70

Dr Receivables $496.70 Cr Sales $496.70

Correct Answer
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.

33)

Which of the following are valid reasons for preparing an aged receivables
analysis?
(1) It is part of the double entry system
(2) To identify receivables which need to be followed up to ensure payment
(3) To help calculate allowances for receivables
(4) To ensure the trial balance balances
1 and 4

2 and 4

2 and 3

1 and 3

Correct Answer
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.

34)

Jenny has trade receivables of $92,320 at the start of November. During November she
had the following transactions:

$
Cash sales 15,200
Cash receipts from customers 46,420
Credit sales 38,170
Irrecoverable debts written off 2,600
What is the balance on Jenny's trade receivables at the end of November?
$81,470

$66,270

$97,970

$96,760

Correct Answer
$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
35)

Warren is a window cleaner. He cleaned Millie's windows and she paid him $10 in cash.
What kind of transaction is this?
Purchase of goods by Warren

Purchase of a service by Millie

Sale of goods by Warren

Sale of a service by Millie

Correct Answer
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.

36)

The total of the discounts column in the cash payments book is $140.
How should this be posted in the ledger?
Cr Discounts received $140

Dr Discounts received $140

Cr Trade payables $140

Dr Trade payables $140

Correct Answer
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.

37)

Xena buys goods from Alex for $20,800 on credit. She subsequently returns goods
worth $3,100 and pays him $9,200.
In Xena's ledger, what is the balance with Alex as a result of these transactions?
$8,500 Cr

$8,500 Dr

$26,900 Dr

$26,900 Cr

Correct Answer
$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.

38)

Alvin received a supplier statement from Darcy showing Alvin owed Darcy
$21,980. Alvin's records showed he only owed Darcy $20,140.
Which of the following could be responsible for the discrepancy?
 Darcy has performed a contra against a balance she owes to Alvin

Darcy has recorded a payment made by Alvin twice in error

Alvin has made a payment not yet received by Darcy

Darcy has issued a credit note to Alvin which he has not yet received

Correct Answer
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.

39)

The following statements relate to the trade payables control account:

(1) It is used to record transactions with credit customers

(2) Amounts posted to it are not part of the double entry system of accounting
Which of the above statement(s) is/are correct?
Statement 2 only

Both statement 1 and statement 2

Statement 1 only

Neither statement 1 nor statement 2

Correct Answer
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.

40)
When performing a bank reconciliation, which of the following would require
adjustments to the cash book balance?
(1) Unpresented cheques
(2) Bank charges not yet accounted for
(3) Outstanding lodgements
(4) Standing order payments not accounted for
2 and 4

1 and 3

1 and 4

2 and 3

Correct Answer
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.

41)

The bank statement of Hugo showed a debit balance of $12,800. The bank
reconciliation showed there were outstanding lodgements of $3,400 and unpresented
cheques of $4,700.
What is the correct amount of cash that should be recorded in Hugo's accounts?
$14,100 Cr

$14,100 Dr

$11,500 Cr

$11,500 Dr

Correct Answer
$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.

42)

The trade receivables control account has a balance of $4,214. The total on the list of
individual customer balances is $4,890.
Which of the following would explain the difference?
The sales day book is understated by $676

A customer owing $676 has been omitted from the list of customer balances
A contra with the payables ledger for $676 has been accounted for in the list of customer
balances but not accounted for in the control account
An irrecoverable debt of $676 has been written off a customer's individual account but
has not yet been written off the control account

Correct Answer
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.

43)

The trade receivables control account shows a balance of $42,500 but the list of
customer balances shows a total of $45,200.
Which of the following could explain the difference?
 The sales day book is overcast by $2,700

The trade receivables column of the cash receipts book is overstated by $2,700

A customer balance of $2,700 has been omitted from the list of balances
A credit note of $2,700 has been correctly treated in the customer's individual account but
not entered into the control account

Correct Answer
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.

44)

Desmond is performing a control account reconciliation between the trade payables

control account and the list of suppliers' balances. He finds that a purchase day book
total has been understated by $3,000.
Where will the error need to be corrected to ensure the two balances reconcile?
Control account only

Both the control account and the list of suppliers' balance

List of suppliers' balances only

Neither the control account nor the list of suppliers' balances

Correct Answer
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.
45)

In an accounting system, what other figure needs to be equal to the balance on

the trade payables control account?
The balance on the trade receivables control account reconciled for items in transit

The total of the balances on the individual suppliers' accounts

The total of the balances on the individual customers' accounts

The balance on the trade receivables control account

Correct Answer
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.

46)

The following is extracted from the trial balance at the year end:

$
Capital 9,000
Sales 32,000
Purchases 26,000
Trade receivables 23,000
Inventory 14,000
Trade payables 12,000
Bank overdraft ?
What is the figure for the bank overdraft?
$12,000

$10,000

$22,000

$28,000

Correct Answer
$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 (balancing figure) - 10,000
63,000 63,000

47)

Which of the following items would appear on opposite sides of the trial balance?
Trade payables and expenses

Motor vehicles and inventory

 Trade receivables and purchases

Sales and capital

Correct Answer
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

48)

In error Tarik posted goods he purchased for his own use into the business purchases
account.
Which of the following journals will correct this error?
Dr Purchases Cr Drawings

Dr Sales Cr Drawings

Dr Drawings Cr Sales

Dr Drawings Cr Purchases

Correct Answer
Dr Drawings Cr Purchases

The incorrect entry made by Tarik will have debited purchases instead of drawings. To
correct this:

Dr Drawings, Cr Purchases

49)
When the trial balance was prepared the following two ledger accounts were omitted
and a suspense account had to be created to make it balance:

$
Irrecoverable debts expense 5,780
Discounts received 4,920
What was the balance on the suspense account?
$860 Dr

$860 Cr

$10,700 Dr

$10,700 Cr

Correct Answer
$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.

50)

Alfredo runs his own business maintaining receivables and payables control accounts
as part of his accounting system.
When preparing the trial balance which one of the following errors would require
the creation of a suspense account?
Alfredo's drawings of $320 have been recorded as wages and salaries

The purchase day book is overstated by $420

$250 of motor vehicle repairs is posted to the motor vehicles account

A bank overdraft of $880 is recorded as a positive cash balance

Correct Answer
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.