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During the year ended 31 March 2007, Jay recorded a sales return of $563 in the sales returns day book as $635.
What is the journal entry required to correct this error?
Debit Sales ledger control $72; Credit Sales returns $72
Debit Sales returns $72, Credit Sales ledger control $72
Debit Suspense $72, Credit Sales returns $72
Debit Sales ledger control $72, Credit Suspense $72
IAS 2 states that inventory should be valued at the lower of cost and net realisable value.
Which of the following concepts is this in accordance with?
Bill’s business has rented out premises at a cost of $12,000 per annum. However, on 1 July 2006 the rent was increased by 10%. At 1 January 2006 Bill had a prepaid expense of $750 in respect of rent, and during the year ended 31 December 2006 Bill had paid a total of $12,850 to his landlord.
What amounts will appear in the income statement for the year ended 31 December 2006, and in the statement of financial position as at 31 December 2006 in respect of rent?
Income statement $12,600, Statement of financial position $1,000 prepayment
Income statement $12,600, Statement of financial position $1,000 accrual
Income statement $13,200, Statement of financial position $400 prepayment
Income statement $13,200, Statement of financial position $400 accrual
The trial balance totals of Gamma at 30 September 20X3 are:
Which TWO of the following possible errors could, when corrected, cause a trial balance to agree?
(1) An item for payment of rent $6,160 has not been entered into the rent payable account or the cash book.
(2) The balance on the motor expenses account $27,680 has been incorrectly listed in the trial balance as credit.
(3) $6,160 proceeds of sale of a motor vehicle have been posted to the debit of motor vehicles asset account.
(4) The balance of $21,520 on the rent receivable account has been omitted from the trial balance.
(1) and (2)
(2) and (3)
(2) and (4)
(3) and (4)
Lucas and Michael are in partnership. During the year ended 30 June 2007, the partnership made a profit of $100,000. The partnership agreement stated that profits were to be shared in the ratio of 2:1 after Michael had received a salary of $10,000 per annum. However, on 1 January 2007, it was decided to increase his salary to $16,000 per annum but that the profit-sharing ratio should remain at 2:1. What share of profits are Lucas and Michael entitled to for the year ended 30 June 2007?
Lucas $58,000, Michael $42,000
Lucas $50,000, Michael $50,000
Lucas $42,000, Michael $58,000
Lucas $60,000, Michael $40,000
In the statement of financial position at 31 December 20X5, Monty reported net receivables of $12,000. During 20X6 he made sales on credit of $125,000 and received cash from credit customers amounting to $115,500. At 31 December 20X6, Monty wished to write off debts of $7,100 and increase the allowance for receivables by $950 to $2,100. What is the net receivables figure at 31 December 20X6?
For the following transactions, what is the effect on the net profit for the period, and what double entry is needed to correct the error? An amount of $310 was received from a credit customer with a balance outstanding of $325. No entry has been made for the remaining $15, and it has now been decided to treat it as a cash discount.
Profit reduce by $15, Correction (Dr Discounts allowed $15, Cr Receivables $15)
Profit reduce by $15, Correction (Dr Discounts received $15, Cr Receivables $15)
Profit reduce by $15, Correction (Dr Discounts allowed $15, Cr Suspense $15)
No effect on Profit, Correction (Dr Sales $15, Cr Discounts received $15)
Delight sells all their goods at a mark-up of 15%. During the year ended 31 December 2007, the company made sales of $546,250. At 1 January 2007, the company had inventory valued at $75,000 and had made purchases during the year of $485,500.
What was the value of Delight’s closing inventory at 31 December 2007?
Which of the following statements about bank reconciliation are correct?
(1) A difference between the cash book and the statement must be corrected by means of a journal entry.
(2) In preparing a bank reconciliation, lodgements recorded before date in the cash book but credited by the bank after date should reduce an overdrawn balance in the bank statement.
(3) Bank charges not yet entered in the cash book should be dealt with by an adjustment in the bank reconciliation.
(4) If a cheque received from a customer is dishonoured after date, a credit entry in the cash book is required.
(2) and (4)
(1) and (4)
(1) and (3)
At 1 April 2006, Jerry had a payables' balance of $ 30,000. During the year ended 31 March 2007, Jerry paid cheques amounting to $60,000 to his suppliers. He also received prompt payment discounts totalling $3,000, and returned goods to suppliers totalling $1,000. At 31 March 2007, Jerry owed $20,000 to his suppliers.
What were Jerry’s purchases in the year ended 31 March 2007?
If a company erroneously excludes goods bought on credit from its closing inventory and also fails to record the purchase of those goods on credit in its accounting records, the effect would be to understate:
Cost of sales
A receivables ledger control account at May had balances of $32,750 debit and $1,275 credit. During May, sales of $125,000 were made on credit.
Receipts from customers amounted to $122,500 and cash discounts of $550 were allowed. Refunds of $1,300 were made to customers. What should the closing balance at 31 May amount to?
$35,175 debit and $3,000 credit
$36,675 debit and $2,500 credit
$36,725 debit and $2,000 credit
$36,725 debit and $1,000 credit
Karen and Jamie are in partnership running a training consultancy. In the year ended 30 September 20X6, the business made a profit of $180,000. The partnership agreement states that Karen is to receive a salary of $25,000 and the remaining profit is shared in the ratio 3:5. During the year, Karen took $20,000 in drawings and Jamie $60,000. What amount should be credited to Karen’s current account for the year?
The bookkeeper of Supermax made the following mistakes:
• Discount allowed $3,840 was credited to discounts received account.
• Discounts received $2,960 was debited to discounts allowed account.
• Discounts were otherwise correctly recorded.
Which of the following journal entries will correct the errors?
Dr (Discount allowed $ 7,680), Cr (Discount received $ 5,920, Suspense account $ 1,760)
Dr (Discount allowed $ 880, Discount received $ 880), Cr (Suspense $ 1,760)
Dr (Discount allowed $ 6,800), Cr Discount received $ 6,800)
Dr (Discount allowed $ 3,840), Cr (Discount received $ 2,960, Suspense account $ 880)
The International Accounting Standards Board Framework for the Preparation and Presentation of Financial Statements for financial reporting gives five qualitative characteristics which make financial information reliable.
Which of the following lists comprises these five characteristics?
Prudence, consistency, understandability, faithful representation, substance, over form
Accruals basis, going concern concept, consistency, prudence, true and fair view
Faithful representation, neutrality, substance over form, completeness, consistency
Substance over form, prudence, faithful representation, neutrality, completeness
X and Y are in partnership, sharing profits equally with the exception of bad debts which are borne 75% by X and 25% by Y. The business profit for the year ended 30 June 2005 was $576,000 after writing off bad debts totalling $10,000.
How is the profit for the year to be divided between X and Y?
X $285,500, Y $290,500
X $293,000, Y $293,000
X $280,500, Y $295,500
X $288,000, Y $288,000
When reconciling the payables' ledger control account with the list of payables' ledger balances, the following errors were found:
• The purchase day book had been overstated by $500.
• The personal ledger of a supplier had been understated by $400.
What adjustments must be made to correct these errors?
(Control account, List of payables balances)
$500 Cr, Decrease by $400
$500 Dr, Increase by $400
$400 Dr, Increase by $500
$400 Cr, Decrease by $500
A suspense account was opened when a trial balance failed to agree. The following errors were later discovered:
1 A gas bill of $420 had been recorded in the Gas account as $240.
2 Discount of $50 given to a customer had been credited to Discounts Received.
3 Interest received of $70 had been entered in the bank account only.
The original balance on the suspense account was:
At 1 April 2006, Marcus’s accounting records showed non-current assets that had cost $156,000 and an accumulated depreciation of $33,000. During the year ended 31 March 2007, Marcus disposed of non-current assets which had originally cost $14,000 and had a net book value of $5,600 at 1 April 2006.
Marcus’s policy is to charge depreciation at 40% per annum on the reducing-balance basis, with no depreciation charged in the year of disposal of an asset.
What is Marcus’s depreciation charge for the year ended 31 March 2007?
The profit of a business may be calculated by using which one of the following formulae?
Opening capital – Drawings + Capital introduced – Closing capital
Closing capital + Drawings – Capital introduced – Opening capital
Opening capital + Drawings – Capital introduced – Opening capital
Closing capital – Drawings + Capital introduced – Opening capital
At 1 April 2006, George had net assets of $50,000. At 31 March 2007, he had net assets of $75,000. During the year ended 31 March 2007, George withdrew $5,000 cash from the business and took $250 of goods for his personal use.
What profit was made by George’s business in the year ended 31 March 2007?
At 30 September 2007, Adil has a receivables' balance of $75,000 and an opening allowance for receivables of $4,750. Following a review of receivables, Adil wishes to write off bad debts totalling $2,000 and wishes to maintain the allowance for receivables at 8% of the adjusted receivables.
What is the charge to the income statement in respect of bad and doubtful debts?
At 30 April 2007, Fox, a limited liability company, was being sued by an ex-employee for wrongful dismissal. Fox has been advised that the claim is more than 50% likely to succeed, and that damages of $100,000 will be payable if the claim does succeed.
How should this matter be treated in the financial statements of Fox for the year ended 30 April 2007?
The matter should be ignored
The matter should be disclosed by note
A provision should be made for $50,000
A provision should be made for $100,000
Which of the following defines an asset?
An item owned by an entity that will lead to future economic benefits;
A physical item that can be sold;
An item controlled by an entity that will lead to future economic benefits;
An item that can be converted into cash.
On 1 January 2007, a business sells a van which it bought on 1 January 2004 for $6,000 and has depreciated each year at 25% pa by the straight-line method. It trades in this van for a new one costing $10,000 and pays the supplier $9,200 by cheque.
What is the profit or loss on the disposal of the old van?