A payable ledger control balance will be treated in the final accounts as?
An item of revenue in the income statement
An expense in the income statement
A trade receivable is?
A person owing money to the business in return for goods supplied
A person to whom the business owes money in return for goods supplied
A person to whom the business owes money which was lent to finance the trading operations of the business
A person who has purchased goods from the business
What is the main purpose of an accounting system in a business?
To generate the business accounts
To calculate the tax payable by a business
To record, summarise and present information from documentation generated by business transactions
To enable the owner to know if the business is trading profitably
Which of the following is an example of an item of revenue expenditure?
Insurance of goods in transit to customers
Import duties charged on a new non-current asset for the business
Wages of employees installing a new non-current asset into the business premises
A new delivery van
Which of the following is the accounting equation?
Assets + Liabilities = Capital + Profit – Drawings
Assets – Liabilities = Capital + Profit + Drawings
Assets – Liabilities = Capital + Profit – Drawings
Assets + Liabilities = Capital – Profit + Drawings
Which of the following would be classed as revenue expenditure for a shop?
1 Assistants’ wages
2 Business rates paid
3 Purchase of a new shop counter
4 Repainting the outside of the shop
1 and 2
1, 2 and 3
1,2 and 4
3 and 4
The profit earned by a business in 2010 was $72,500. The proprietor injected new capital of $8,000 during the year and withdrew goods for his private use which had cost $2,200. If net assets at the beginning of 2010 were $101,700, what were the closing net assets?
Why is it important that a business distinguishes between current and non-current liabilities in its statement of financial position?
So the owners know how much is owed by the business at all times
So that users of the financial statements can assess the ability of the business to continue as a going concern
So that users of the financial statements can assess the level of business debt due for repayment within a fairly short time
So that users of the financial statements can assess the solvency of the business
Which of the following is a current liability?
A bank overdraft
A loan from a director of the company repayable in two years’ time
Which of the following best explains the term ‘current asset’?
An asset currently in use by a business
Something a business has or uses, which is likely to be held only for a short time
An amount owed to somebody else which is due for repayment soon
Money which the business currently has in its bank account
Which of the following should be classified as a current asset?
Michael has just started-up a business. He introduced $20,000 of his own savings, equipment worth $5,000 and obtained a bank loan of $2,000. What is the correct balance on Michael’s capital account following these transactions?
Which of the following would not be classified as capital expenditure?
The purchase of a new van
The delivery charges for the van
The signwriting on the van
The road fund licence
Which of the following should be classified as current assets?
Tax refunds due
Which of the following is a current asset?
Bank deposit account
Which of the following are examples of revenue expenditure?
Purchase of a secondhand delivery van
Purchase of inventories for resale
Repairs to the delivery van
Insurance of the delivery van
Which of the following are examples of capital expenditure?
(1) Purchase of a new computer for office use
(2) Purchase of a secondhand computer for office use
(3) Repairs to the computer
(4) Purchase of additional hardware
(1) and (4)
(1), (2) and (4)
Which of the following is the correct version of the accounting equation?
Non-current assets – current assets = capital – current liabilities + non-current liabilities
Non-current assets + current assets + current liabilities = capital + non-current liabilities
Current assets + non-current assets = capital + current liabilities + non-current liabilities
Capital = current assets + non-current assets + current liabilities + non-current liabilities
At the beginning of the year, the balance on Ian’s capital account was $53,691.
During the year Ian made drawings of $19,500 and net loss for the year was $22,222.
What is the balance on Ian’s capital account at the end of the year?
Which of the following are not recognised as users of the financial statements prepared by a business?
At 1 April 20X0 the balance on Shaan’s capital account is $71, 534. In the next year she invests an additional $20,000 of personal funding and negotiates a $30,000 loan for the business. The profit for the year ended 31 March 20X1 was $21,345 and Shaan’s drawings for the year came to $14,754.
What is Shaan’s closing capital at 31 March 20X1?
Dina purchased some equipment on 1 April 20X1 for $20,000. She incurred transportation costs of $1,000 and installation costs of $500. Shortly after the
installation Dina incurred a further $200 of costs because she moved the equipment after installation. In so doing she had to change the machines configuration and it malfunctioned. Dina depreciates 20% per annum on the reducing balance basis.
What is the net book value of the equipment at the year-ended 30 June 20X1?
Which one of the following statements correctly describes the difference between current liabilities and non-current liabilities?
Current liabilities are amounts which it is currently known must be paid, while non-current liabilities are amounts which might need to be paid in the long term
Current liabilities are amounts which must be paid within the next year, while non-current liabilities are amounts which must be paid in more than one year
Current liabilities are amounts under a certain value, while non-current liabilities are amounts greater than that value
Current liabilities are amounts for which there is currently a known value, while the value of non-current liabilities requires confirmation
Mehroz purchases a new car for $20,000. She pays for the new car by part-exchanging her old car and paying $12,000 in cash. The old car cost $15,000 two years ago. Mehroz had been depreciating the car using the straight line method over a five year useful life.
What is the profit or loss on disposal of the old car?
A non-current was purchased at the beginning of Year 1 for $2,400 and depreciated by 20% per annum by the reducing balance method. At the beginning of Year 4 it was sold for $1,200. The result of this was:
A loss on disposal of $240
A loss on disposal of $29
A profit on disposal of $29
A profit on disposal of $240
Which of the following is an acceptable definition of depreciation?
Matching the purchase cost of an asset to the period over which maintenance
Matching the cost of an asset to the expected economic benefit it will generate
Matching the cost of an asset to its eventual sales price
Matching the cost of an asset to its fair value
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.
A company bought a machine on 1 October 20X2 for $52,000. The machine had an expected life of eight years and an estimated residual value of $4,000.
On 31 March 20X7, the machine was sold for $35,000. The company’s year-end is 31 December. The company uses the straight-line method for depreciation and it charges a full year’s depreciation in the year of purchase and none in the year of sale.
What is the profit or loss on disposal of the machine?
A car was purchased for $12,000 on 1 April 20X1 and has been depreciated straight line over a five year useful life, assuming no residual value.
The company policy is to charge a full year’s depreciation in the year of purchase and no depreciation in the year of sale. The car was part exchanged for a replacement vehicle on 1 August 20X4 for an agreed figure of $5,000.
What was the profit or loss on the disposal of the vehicle for the year ended 31 December 20X4?
Jay has purchased some equipment. He is registered for sales tax. The following entries have been entered into the purchase day book:
Fax machine $35,000
Sales tax at 20% $7,000
First year maintenance $1,000
Invoice Total $43,500
What is the total value to be posted to the non-current asset cost account?
From the following details, calculate the closing bank statement balance:
Unpresented/outstanding cheques 5,000
Deposits not credited (lodgements) 4,850
Closing bank balance in the records of the business before adjustments shown below 50,000
Bank charges 250
Dishonoured cheques 400
Which of the following is not a characteristic of a standing order?
Used to make regular payments from an account
The payment amount is fixed
The recipient of the payment initiates each payment
The amount of payment can be varied
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?
Malaika, a limited liability company, depreciates its plant and machinery at 20% per annum on the reducing balance basis on assets held at the period end.
On 1 January 20X9 it held a machine which had cost $20,000 in the year ended 31 December 20X7. In the year ended 31 December 20X9 the company part-exchanged this machine for a new machine. The amount paid for the new machine was $17,000 and a part exchange allowance of $13,000 was allowed for the old machine.
Pinto’s bank reconciliation statement shows outstanding lodgements paid in by Pinto of $3,800 and outstanding cheques to suppliers of $3,500. His bank account in his ledger shows a debit balance of $25,000.
What balance does Pinto’s bank statement show?
At the start of a month, accounts receivable owed $4,529. During the month total sales were $16,540 of which 40% were for cash. Cash was received from receivables of $7,231 during the month.
What was the balance of accounts receivable at the end of the month?
The cash book shows a bank balance of $5,675 overdrawn at 31 August 20X5. It is subsequently discovered that a standing order for $125 has been entered twice, and that a dishonoured cheque for $450 has been debited in the cash book instead of credited. What is the correct bank balance?
The following information is available about a business:
Opening payables $14,550
Closing payables $12,560
Payments for purchases in the period $85,460
Of the payments, $35,640 were for cash purposes. What is the amount of purchases on credit for the period?
Receivables at 1 April were $8,450. Transactions during the month were credit sales of $19,600, cheques received from receivables of $22,430, sales returns of $1,000 and a contra with a credit supplier of $540. What was the balance on the receivables control account at 30 April?
The closing balance on the trade payables account for a period was $3,528. During the period, cash paid to creditors was $11,583. The opening balance on the trade paybles’ account was $2,660.
What were the credit purchases for the period?
During a three-month period, a business made sales of $69,200 plus sales tax at 17.5%. The balance on the receivables account at the start of the period was $5,329 and at the end of the period $4,771.
How much cash was received from receivables during the period?
On 1 August 20X8 Ez was owed $45,300 by his credit customers. During the year Ez’s credit sales totalled $523,720. Discounts allowed totalled $3,500, returns from customers were $2,800 and dishonoured cheques amounted to $4,800. On 31 July 20X9 Ez was owed $48,720 from his credit customers.
What was the amount received from credit customers during the year ended 31 July 20X9?
The trade receivables control account balance is $1,000 and the total of the individual trade receivables balances is $850.
Which of the following errors could account for this difference?
A receipt from a credit customer $150 was recorded twice in the receivables ledger and control account
A receipt from a credit customer $150 was not recorded at all in the receivables ledger
A receipt from a credit customer $150 was not recorded at all in the control account
A receipt from a credit customer $150 was recorded twice in the control account
The balance on the payables ledgers control account was $3,446. it was then discovered that the total from the cash book payments during the period has been posted as $14,576 instead of $14,756. It was also discovered that the discounts received for the period of $392 had not been posted at all.
What is the correct balance on the payables ledgers control account?
Why would you not send a statement to an account written off as an irrecoverable debt?
Doing so would advise the receivable there is no need to pay
Doing so would encourage the receivable to pay
It is against the law of contract to do so
It is against data protection legislation to do so
An account receivable is for $800. The customer is experiencing severe difficulties and has agreed to return goods costing $600. The supplier decides to write off the remaining amount. What is the double entry to record this?
Dr irrecoverable debts $200; Dr Bank $600; Cr Sales returns $800
Dr irrecoverable debts $200; Dr Sales returns $600; Cr Account receivable $800
Dr Sales returns $800; Cr irrecoverable debts $200; Cr Bank $600
At 30 June 20X1 Cook was owed $44,320 by his customers. His receivables allowance brought forward from the previous year was $9,500. At the end of each
year he estimates the value of the allowance equivalent to 10% of receivables. What entry should be made in the income statement to adjust the receivables
allowance for the year ended 30 June 20X1?
At 30 June 20X1 Mark has receivables of $100,450 and an allowance brought forward of $5,550. At the end of the year a customer, who owed $4,500, is declared bankrupt. The debt is now considered to be irrecoverable. The allowance is to be calculated based upon 2% of receivables at the year-end.
What figure will appear in the statement of financial position at 30 June 20X1 for receivables?
The following details have been provided for a business:
Opening payables 35,800
Credit purchases 400,000
Cash purchases 58,000
Payments to credit suppliers 348,000
Discounts allowed 32,000
Discounts received 28,000
Sales ledger contra 14,000
Returns inwards 3,500
Returns outwards 5,800
What should be the closing balance on the payables control account at the year end?
A company receives news that a major customer has been declared bankrupt. The double entry required to write off the debt is:
Debit Irrecoverable debts
Debit Allowance for receivables