EXELLENCE TUTORIALs

SECTION A [Total Marks = 20]

1. Which of the following calculates a sole trader’s net profit for a period?
A Closing net assets + drawings – capital introduced – opening net assets
B Closing net assets – drawings + capital introduced – opening net assets
C Closing net assets – drawings – capital introduced – opening net assets
D Closing net assets + drawings + capital introduced – opening net assets

2. Which of the following explains the imprest system of operating petty cash?
A Monthly expenditure cannot exceed a set amount
B The exact amount of expenditure is reimbursed at intervals to maintain a fixed float
C All expenditure out of the petty cash must be properly authorized
D Regular equal amounts of cash are transferred into petty cash at intervals

3. A company uses the imprest system to control its petty cash, keeping a float of K50,Sinc e
the cash was last replenished it had the following transactions:
I) K12.50 to the Milkman
II) K10.00 on taxis
III) K5.70 on stationary
IV) K20.00 advance taken by the director for a taxi fare, returned unused
V) K18.50 to the cleaner
How much should now be drawn out of the bank?

A K50.00
B. K41.70
C. K46.70
D. K31.70

4. After calculating your company’s profit for the year, you discover that: I) These two errors
have had the effect of A non-current asset costing K50,000 has been included in the purchases
account;
II) Stationery costing K10, 000 has been included as closing inventory of raw materials
instead of inventory of stationery.
A Understating gross profit by K40,000 and understating net profit by K50,000
B Understating both gross profit and net profit by K40,000
C Understating gross profit by K60,000 and understating net profit by K50,000
D Overstating both gross profit and net profit by K60,000

Prepared By Uncle Jay The Accountant

EXELLENCE TUTORIALs

5. The IASB’s Conceptual Framework for Financial Reporting identifies characteristics

which make financial information faithfully represent what it purports to represent. I) Accruals
II) Completeness
III) Going concern
IV) Neutrality
A 1 and 2 B. 2 and 4
C. 2 and 3
D. 1 and 4

6. Amy is a sole trader and had assets of K569, 400 and liabilities of K412, 840 on 1 January 20X8.
During the year ended 31 December 20X8 she paid K65, 000 capital into the business and she paid
herself wages of K800 per month. At 31 December 20X8, Amy had assets of K614, 130 and
liabilities of K369, 770.
What is Amy’s profit for the year ended 31 December 20X8?

A K32, 400
B K23, 600
C K22, 800
D K87, 800

7. Which ONE of the following is an error of principle?

A. A gas bill credited to the gas account and debited to the bank account
B. The purchase of a non-current asset credited to the asset account at cost and debited to the
payable's account
C. The purchase of a non-current asset debited to the purchases account and credited to the
payable's account
D. The payment of wages debited and credited to the correct accounts, but using the wrong
amount
I) A debit entry in the cashbook will increase an overdraft.
II) A debit entry in the cashbook will increase a bank balance.

8. Are these statements true?

A. Both true
B. Both false
C. (i) true and (ii) false
D. (i) false and (ii) true

Prepared By Uncle Jay The Accountant

EXELLENCE TUTORIALs

9. A credit balance on a ledger account indicates A. An asset or an expense

B. A liability or an expense
C. An amount owing to the organization
D. A liability or a revenue

10. Which of the following is not an objective of financial statements?

A. Providing information regarding the financial position of a business
B. Providing information regarding the performance of a business
C. Enabling users to assess the performance of management to aid decision making
D. Helping to assess the going concern status of a business

11. The double-entry system of bookkeeping normally results in which of the following
balances on the ledger accounts?
Debit balances Credit balances
A. Assets and revenues Liabilities, capital and expenses
B. Revenues, capital and liabilities Assets and expenses
C. Assets and expenses Liabilities, capital and revenues
D. Assets, expenses and capital Liabilities and revenues

12. A credit entry of K450 on X's account in the receivables ledger of Y could have arisen by
A. X buying goods on credit from Y
B. Y paying X K450
C. Y returning goods to X
D. X returning goods to Y

13. A sole trader had opening capital of K10, 000 and closing capital of K4, 500. During the
period, the owner introduced capital of K4, 000 and withdrew K8, 000 for her own use.

Her profit or loss during the period was.

A. K9,500 loss
B. K1, 500 loss
C. K7,500 profit
D. K17,500 profit

Prepared By Uncle Jay The Accountant

EXELLENCE TUTORIALs

14. Sales revenue should be recognized when goods and services have been supplied; costs
are incurred when goods and services have been received. The accounting concept which governs the
above is the
A. Accruals concept
B. Materiality concept
C. Realization concept
D. Dual aspect concept

15. Where a transaction is credited to the correct ledger account, but debited incorrectly to
the repairs and renewals account instead of to the plant and machinery account, the error is known as
an error of
A. Omission
B. Commission
C. Principle
D. Original entry

16. If a purchase return of K48 has been wrongly posted to the debit of the sales returns
account, but has been correctly entered in the supplier's account, the total of the trial balance would
show
A. The credit side to be K48 more than the debit side
B. The debit side to be K48 more than the credit side
C. The credit side to be K96 more than the debit side
D. The debit side to be K96 more than the credit side

17. You are the accountant of ABC and have extracted a trial balance at 31 October 20X4.
The sum of the debit column of the trial balance exceeds the sum of the credit column by K829. A
suspense account has been opened to record the difference. After preliminary investigations failed to
locate any errors, you have decided to prepare draft final accounts in accordance with the prudence
concept.
The suspense account balance would be treated as?

A. An expense in the income statement

B. Additional income in the income statement
C. An asset in the statement of financial position
D. A liability in the statement of financial position

Prepared By Uncle Jay The Accountant

EXELLENCE TUTORIALs

18. Carriage inwards K5, 000 has been recorded in the I/S account as an expense, as a result?
A. Net profit is understated by K15,000
B. Gross profit is overstated by K15,000, net profit is unchanged
C. Gross profit is understated by K15,000
D. Net profit is overstated by K15,000

19. When a trial balance was prepared, a suspense account was opened. It was discovered
that the only error that had been made was to record K2, 050 of discounts received on the wrong side
of the trial balance. What is the journal to correct this error?
A. Dr discounts received K2,050 Cr suspense K2,050
B. Dr suspense K2,050 Cr discounts received K2,050
C. Dr discounts received K4,100 Cr suspense K4,100
D. Dr suspense K4,100 Cr discounts received K4,100

20. When a trial balance was prepared, the closing inventory of K20, 400 was omitted. To
make the trial balance agree, a suspense account was opened.
What was the balance on the suspense account?

A. Nil
B. Debit K20,400
C. Credit K20,400
D. Debit K40,800

Prepared By Uncle Jay The Accountant

EXELLENCE TUTORIALs

SECTION B
QUESTION ONE
During the end closing for September 2013 a bookkeeper of Monk Square Ltd found the total of the
debits of the trial balance did not equal its credits. A suspense account was opened to record the
difference.
Trial Balance Extract Dr Cr
Total 584,112,042.75 584,018,830.75

The following errors and omissions were discovered.

1. The total of one page of the sales day book had been carried forward as K8,154, whereas the
correct amount was K8,514
2. An electricity bill in the sum of K152, not yet accrued for, is discovered in a filling tray
3. Included in the credit balance on the sales ledger is a balance of K600 in the name of H Solye.
This arose because a sales invoice for K600 had earlier been posted in error from the sales day book
to the debit of the account of M Solya in the purchases ledger.
4. A credit note for K179 received from a supplier had been posted to the wrong side of his account.
5. K470 has been included in the wages account and K340 in the purchases account. These amounts
represent expenditure on an extension to the business buildings.
6. Cash sales for the amount of K560 had been correctly recorded in the cash book but debited to the
purchases account as K650.
7. A receipt of cash from J Mojo K88, 000 had been entered on the credit side of the cash book and
the debit side of J.Moyo’s account
8. The discount allowed balance of K 6,000 and the discount received balance of K 14,000 had both
been entered on the wrong side of the trial balance.
9. An item of K 500 had been omitted from the sales records – i.e. the sales day book.
10. The purchase ledger account balance of K 467,572 had been included in the trial balance as K
474,772.
11. Purchase of a delivery vehicle on credit for K 57,200 had been recorded by debiting the supplier
account and crediting the motor vehicle expense account.
12. A cheque for K 1,600 received from a customer to whom goods are regularly supplied on credit
was correctly entered into the cash book, but posted to the debit side of the sales account
13. A loan of K 40,000 from one of the directors had been entered correctly in the cash book but
posted to the wrong side of the loan account.

Required:
a. Show the journal entries to correct each of the above errors and omissions.(Narratives are
not required)
b. Post and balance the suspense account

(6.5 Marks)
c. Assuming that the errors were not discovered in the current accounting period, how would your
account for the suspense account difference in the financial statements
(2 Marks)

[Total Marks = 25]

Prepared By Uncle Jay The Accountant