Deck 5: Double-Entry Bookkeeping 2: Books of Prime Entry, Accounting Systems and Other Double-Entry Applications

Question 1

Credit sales invoices record:
Please select all that apply.

A) The value of goods or services supplied
B) Sales taxes on the value of goods or services supplied
C) Cash received
D) A unique sequential invoice number

Answer 1

A, B, D

Question 2

Which of the following are deductions from gross pay?
Please select all that apply.

A) PAYE
B) Employer's national insurance
C) Trade union subscriptions
D) Pension contributions

Answer 2

A, C, D

Question 3

Sales invoices record the amounts owed by customers for goods supplied on credit.

Answer 3

False

Question 4

Credit notes in the purchases system:
Please select all that apply.

A) Represent purchase returns
B) Are given a unique sequential number in the purchases system
C) Record the cancellation of expenses
D) Are debit entries to expense accounts in the nominal ledger

Question 5

The total amounts recorded on sales invoices - the total amounts recorded on sales credit notes = the total sales income earned by an entity during a financial period

Question 6

Purchase invoices show the value of goods or services supplied, any VAT charged on the supply of goods and services and the total amount owed by the entity (value of the goods or services supplied + the VAT). What other features would you expect to see on a purchase invoice when it is received by an organisation?
Please select all that apply.

A) Supplier's name and address.
B) Unique sequential internal invoice number added during posting of the invoice to the purchase day book.
C) Details of goods or services supplied.
D) Supplier's VAT number.

Question 7

The petty cash book is a book of prime entry which is the first record of the receipt of small sums of cash from the bank and of small sums of cash paid out of the business on a day to day basis.

Question 8

Books of prime entry:
Please select all that apply.

A) Are the first point at which transactions are recorded in the accounting system.
B) Represent daily listings of transactions.
C) Are used to complete the double entry into the nominal ledger.
D) Record individual amounts owed by customers and individual amounts owed to suppliers.

Question 9

Which one of the following is not an accurate description of the sales day book?

A) Also known as the sales listing.
B) The book of prime entry for sales and sales returns.
C) Records the daily sales made on each trading day of the year.
D) Records the total amount due from each customer, the net sales value of each sale and the VAT due on each sale.

Question 10

Cash payments in the cash book:
Please select all that apply.

A) Reduce liabilities
B) Split payments to trade payables into net purchases and VAT
C) Are analysed into various headings
D) Are credit entries in the bank account in the nominal ledger

Question 11

Which one of the following is not a function of the purchase day book?

A) To record purchases of goods and services each day.
B) To maintain the book of prime entry for purchases of goods and services.
C) To record the total amount, the net goods and services cost and the VAT amount on each purchase invoice.
D) To record the amounts due to each individual supplier.

Question 12

Cash receipts in the cash book represent all the income of an organisation for the financial period.

Question 13

Which one of the following would not be recorded in the sales returns day book?

A) The transaction date on a credit note.
B) The customer name.
C) Details of goods or services to which the credit note relates.
D) The credit note total amount.

Question 14

An entity's payroll system calculates two expenses, gross pay and employer's national insurance, and a series of liabilities for settlement at a later date.

Question 15

Credit notes from suppliers in the purchase returns day book:
Please select all that apply.

A) Reduce amounts owed to trade payables.
B) Record the total amount of the credit note, the net expense and the VAT on the net expense.
C) Are totalled up daily and the daily total credited to the trade payables control account.
D) Analyse net credits from suppliers across nominal ledger expense headings.

Question 16

Debit trade receivables, Credit sales, Credit VAT is the correct double entry to record cash sales made by a business

Question 17

In November, Pia Limited's gross wages and salaries were £54,000. PAYE of £12,000 and NIC of £5,400 were deducted from gross wages and salaries for the month, leaving net wages and salaries to be paid of £36,600. What is the correct double entry to record gross wages and salaries in the books of Pia Limited?

A) Debit wages and salaries £36,600, Credit wages control account £36,600.
B) Debit wages control account £36,600, Credit cash £36,600.
C) Debit wages and salaries £54,000, Credit wages control account £54,000.
D) Debit wages and salaries £54,000, Credit wages control account £36,600, Credit PAYE and NIC control account £17,400.

Question 18

In April, Gina received credit notes from her suppliers for equipment hire services which were ordered and invoiced but never provided. The credit notes total up to £7,200 which includes VAT of 20%. What is the correct double entry to record these credit notes in Gina's books of account?

A) Debit trade payables control account £7,200, Credit equipment hire £7,200.
B) Debit cash £7,200, Credit equipment hire £6,000, Credit VAT £1,200.
C) Debit trade payables control account £7,200, Credit equipment hire £6,000, Credit VAT £1,200.
D) Debit equipment hire £6,000, Debit VAT £1,200, Credit trade payables control account £7,200.

Question 19

Debit VAT account, Credit cash is the correct double entry to record the payment of VAT to HM Revenue and Customs.

Question 20

In June, Hitesh Limited received cash from trade receivables of £54,000. The company is registered for VAT and charges VAT of 20% on all the sales of services it makes. What is the correct double entry to record this receipt of cash from trade receivables?

A) Debit trade receivables control account £54,000, Credit cash £54,000.
B) Debit cash £54,000, Credit trade receivables control account £54,000.
C) Debit cash £54,000, Credit sales £45,000, Credit VAT £9,000.
D) Debit trade receivables control account £54,000, Credit sales £45,000, Credit VAT £9,000.

Question 21

Debit interest receivable, Credit cash is the correct double entry to record the receipt of interest from the bank.

Question 22

During January, Meera Limited makes credit purchases of goods for resale at a net cost of £42,000. Meera Limited's suppliers charge 20% VAT on the net cost of purchases. What is the correct double entry to record these credit purchases of goods for resale?

A) Debit purchases £42,000, Debit VAT £8,400, Credit trade payables control account £50,400.
B) Debit trade payables control account £50,400, Credit purchases £42,000, Credit VAT £8,400.
C) Debit purchases £42,000, Debit VAT £8,400, Credit cash £50,400.
D) Debit purchases £35,000, Debit VAT £7,000, Credit trade payables control account £42,000.

Question 23

In September, Hamza Limited makes cash sales with a net sales value of £2,400. The company is registered for VAT and charges VAT at the rate of 20% on the net sales value. What is the correct double entry to record these cash sales in the books of Hamza Limited?

A) Debit cash £2,880, Credit sales £2,400, Credit VAT £480.
B) Debit trade receivables control account £2,880, Credit sales £2,400, Credit VAT £480.
C) Debit cash £2,400, Credit sales £2,000, Credit VAT £400.
D) Debit trade receivables control account £2,400, Credit sales £2,000, Credit VAT £400.

Question 24

When cash is paid to settle the net wages and salaries due to employees the correct double entry to record this transaction is Debit wages control account, Credit bank.

Question 25

In March, Imtiaz Limited made payments of cash from the bank to trade payables for purchases of raw materials of £90,000. The company's suppliers charge VAT of 20% on all raw materials supplied. What is the correct double entry to record this payment of cash to trade payables?

A) Debit cash £90,000, Credit purchases £75,000, Credit VAT £15,000.
B) Debit trade payables control account £90,000, Credit purchases £75,000, Credit VAT £15,000.
C) Debit cash £90,000, Credit trade payables control account £90,000.
D) Debit trade payables control account £90,000, Credit cash £90,000.

Question 26

Yu Limited records a VAT inclusive figure for sales of £105,000 for the month of August. All sales are made on credit and VAT is charged at the rate of 20% on the net sales value of each sale. What is the correct double entry to record these sales?

A) Debit trade receivables £126,000, Credit sales £105,000, Credit VAT £21,000.
B) Debit cash £126,000, Credit sales £105,000, Credit VAT £21,000.
C) Debit trade receivables £105,000, Credit sales £87,500, Credit VAT £17,500.
D) Debit cash £105,000, Credit sales £87,500, Credit VAT £17,500.

Question 27

Debit interest payable, Credit cash is the correct double entry to record the payment of interest to the bank.

Question 28

Debit wages and salaries expense account, Credit cash is the correct double entry to record the payment of PAYE and NIC to HM Revenue and Customs.

Question 29

Hina Limited records a VAT inclusive figure for sales returns of £9,600 for the month of October. All sales are made on credit and VAT is charged at the rate of 20% on the net sales value of each sale. What is the correct double entry to record these sale returns?

A) Debit trade receivables control account £9,600, Credit sales £8,000, Credit VAT £1,600.
B) Debit cash £9,600, Credit sales £8,000, Credit VAT £1,600.
C) Debit sales £8,000, Debit VAT £1,600, Credit cash £9,600.
D) Debit sales £8,000, Debit VAT £1,600, Credit trade receivables control account £9,600.

Question 30

Jiafan Limited's production payroll for May shows deductions from wages for PAYE and employee's NIC totalling £18,900. What is the correct double entry to record these PAYE and employee's NIC deductions from wages?

A) Debit wages £18,900, Credit PAYE and NIC control £18,900.
B) Debit wages control £18,900, Credit PAYE and NIC control £18,900.
C) Debit cash £18,900, Credit PAYE and NIC control £18,900.
D) Debit PAYE and NIC control £18,900, Credit cash £18,900.

Question 31

Debit wages control account, Credit PAYE and NIC control account is the double entry required to record employer's NIC.

Question 32

Which of the following statements accurately describe the sales ledger?
Please select all that apply.

A) The total of the balances on each individual sales ledger account added together at the end of each accounting period should be equal to the total balance carried forward at the end of the same accounting period on the trade receivables control account.
B) The function of the sales ledger is to exercise control over the amounts owed by individual customers.
C) The sales ledger is part of the double entry system.
D) Each individual customer's sales ledger account is debited with the total sales invoice value for each invoice raised and credited with any credit notes issued and any cash received.

Question 33

Discounts received are debited to each individual sales ledger account.

Question 34

Maintaining a sales ledger account for each trade receivable enables entities to exercise very close control over their trade receivable assets.

Question 35

The sales ledger records transactions with individual credit customers. Are the transactions listed below debits or credits in each individual customer's sales ledger account?

A) Cash refunds = Debit
B) Cash received = Credit
C) Irrecoverable debts = Credit
D) Sales invoices = Debit

Question 36

Which of the following transactions would you expect to find on each purchase ledger account for each individual supplier?
Please select all that apply.

A) Purchase invoices for goods and services bought on credit.
B) Discounts allowed.
C) Cash paid.
D) Credit notes for purchase returns.

Question 37

The purchase ledger records transactions with individual suppliers of goods and services. Are the transactions listed below debits or credits in each individual supplier's purchase ledger account?

A) Credit notes = Debit
B) Purchase invoices = Credit
C) Discounts received = Debit
D) Cash refunds = Credit

Question 38

Maintaining a separate purchase ledger account for each individual supplier = control.

Question 39

VAT is a liability because:
Please select all that apply.

A) There is a present obligation arising from past events.
B) There is expected to be a transfer of an economic resource.
C) It represents a right that has the potential to produce economic benefits.
D) It can be measured in such a way that a faithful representation of its monetary value is achieved.

Question 40

The total cost of paying employees is the gross wages and salaries expense.

Question 41

When a sale is described as being VAT inclusive, this means that the VAT at a rate of 20% on that sale is calculated by dividing the VAT inclusive figure by 6.

Question 42

PAYE and employee's NIC increase the cost of employees' wages and salaries.

Question 43

Charging VAT on the sales of goods and services increases the total invoice amount but does not increase income.

Question 44

The first step in preparing the bank reconciliation is to ensure that all the transactions recorded in the bank statement are also recorded in the cash book.

Question 45

The bank balance in the bank statement + cash book receipts not yet recorded in the bank statement - cash book payments not yet recorded in the bank statement = the bank balance in the cash book.

Question 46

The bank balance in the cash book + cash book receipts not yet recorded in the bank statement - cash book payments not yet recorded in the bank statement = the cash balance in the bank statement.

Question 47

Mansoor's bank statement at 30 September shows a cash balance in the bank of £32,341.61. There is a deduction of £250 for bank charges in the bank statement but not yet recorded in Mansoor's cash book. Cash book receipts paid into the bank but not yet recorded in the bank statement by 30 September total up to £2,494.24 while cash book payments that have not been listed as payments on the bank statement at 30 September add up to £5,875.40. What is the bank balance in Mansoor's cash book at 30 September once any necessary adjustments to the bank balance in the cash book have been made?

A) £28,710.45
B) £28,960.45
C) £29,210.45
D) £35,472.77

Question 48

Zahid's bank statement at 30 November shows a cash balance in the bank of £18,472.38. There is a receipt for £850.00 from a customer in the bank statement but not yet recorded in Zahid's cash book. Cash book receipts paid into the bank but not yet recorded in the bank statement by 30 September total up to £4,321.67 while cash book payments that have not been listed as payments on the bank statement at 30 September add up to £8,733.41. What is the bank balance in Zahid's cash book at 30 November once any necessary adjustments to the bank balance in the cash book have been made?

A) £13,210.64
B) £14,060.64
C) £14,910.64
D) £23,734.12

Question 49

Aurora's bank statement at 30 June shows a cash balance in the bank of £42,489.79. There is a receipt for £1,050.00 from a customer in the bank statement which has not yet been recorded in Aurora's cash book. Bank charges and interest totalling up to £814.57 have been deducted from the cash in the bank statement but have not yet been recorded in Aurora's cash book. Cash book receipts paid into the bank but not yet recorded in the bank statement by 30 June total up to £914.32 while cash book payments that have not been listed as payments on the bank statement at 30 June add up to £675.43. What is the bank balance in Aurora's cash book at 30 June once any necessary adjustments to the bank balance in the cash book have been made?

A) £42,486.33
B) £42,493.25
C) £42,728.68
D) £42,964.11

Question 50

The bank balance shown in Reza's cash book at 31 July is £93,497.60. Receipts recorded in the cash book and paid into the bank which have not yet been recorded as receipts on the bank statement at 31 July total up to £8,741.90. Payments recorded in the cash book that have not yet been listed as payments on the bank statement at 31 July add up to £10,432.25. What is the bank balance on the bank statement at 31 July?

A) £91,807.25
B) £93,497.60
C) £95,187.95
D) £112,671.75

Question 51

The bank balance shown in Jay's cash book at 31 October is £52,135.67. Receipts recorded in the cash book and paid into the bank, which have not yet been recorded as receipts on the bank statement at 31 October total up to £5,981.45. Payments recorded in the cash book that have not yet been listed as payments on the bank statement at 31 October add up to £4,621.40. The bank statement shows a direct payment to a supplier of £275.22 which has not been recorded in the cash book. What is the bank balance on the bank statement at 31 October once any necessary adjustments to the bank balance in the cash book have been made?

A) £50,500.40
B) £50,775.62
C) £51,050.84
D) £53,220.50

Question 52

The bank balance shown in Florian's cash book at 31 December is £22,988.44. Receipts recorded in the cash book and paid into the bank, which have not yet been recorded as receipts on the bank statement at 31 December total up to £4,762.12. Payments recorded in the cash book that have not yet been listed as payments on the bank statement at 31 December add up to £8,269.74. The bank statement shows a direct receipt from a customer of £481.66 and a direct payment to a supplier of £212.33 neither of which has been recorded in the cash book. What is the bank balance on the bank statement at 31 December once any necessary adjustments to the bank balance in the cash book have been made?

A) £19,750.15
B) £26,226.73
C) £26,496.06
D) £26,765.39

Question 53

If the total of the credit entries on the non-current asset disposals account is greater than the total of the debit entries, then a profit has been made on the disposal of non-current assets.

Question 54

During the financial year ended 30 September, Daria Limited sells a piece of plant and machinery. This piece of plant and machinery had originally cost £30,000 when it was acquired four years ago. What is the correct double entry to record the removal of the cost of this piece of plant and machinery from the books of account of Daria Limited?

A) Debit cash £30,000, Credit plant and machinery cost account £30,000.
B) Debit non-current asset disposals account £30,000, Credit cash £30,000.
C) Debit non-current asset disposals account £30,000, Credit plant and machinery cost account £30,000.
D) Debit plant and machinery cost account £30,000, Credit non-current asset disposals account £30,000.

Question 55

£50,000 cash is received on the disposal of property, plant and equipment. What is the correct double entry to record this cash receipt in the books of account of an organisation?

A) Debit cash £50,000, Credit property, plant and equipment cost account £50,000.
B) Debit non-current asset disposals account £50,000, Credit cash £50,000.
C) Debit non-current asset disposals account £50,000, Credit property, plant and equipment cost account £50,000.
D) Debit cash £50,000, Credit non-current asset disposals account £50,000.

Question 56

The accumulated depreciation at the date of sale of a non-current asset is £25,600. What is the correct double entry to record the removal of this accumulated depreciation on the disposal of the non-current asset in the books of account of an organisation?

A) Debit depreciation expense £25,600, Credit accumulated depreciation £25,600.
B) Debit accumulated depreciation £25,600, Credit non-current asset disposals account £25,600.
C) Debit non-current asset disposals account £25,600, Credit accumulated depreciation £25,600.
D) Debit accumulated depreciation £25,600, Credit depreciation expense £25,600.

Question 57

A debit balance on the non-current asset disposals account means that a loss has been made on the disposal of non-current assets.

Question 58

Jess runs a market stall, selling stationery for cash. Her cash balance at 1 March 2018 was £250 and her cash balance at 28 February 2019 was £400. She paid £92,617 of cash into her business bank account and paid cash to her suppliers totalling up to £48,913. What were Jess's sales of stationery in the financial year ended 28 February 2019?

A) £141,280
B) £141,380
C) £141,530
D) £141,680

Question 59

Michael buys and sells second hand goods for cash. During the financial year ended 31 October 2019, his total cash takings were £150,325. He paid £70,895 to sellers of goods and paid £50,240 into his bank account. His cash balance at 1 November 2018 was £495 and he had cash in the till of £525 at 31 October 2019. Michael takes money out of his cash takings to pay for his personal living expenses. What were Michael's drawings in the financial year ended 31 October 2019?

A) £28,170
B) £29,160
C) £29,190
D) £29,220

Question 60

Fran runs a small retail store. During the financial year ended 30 September 2019, Fran's store generated cash sales of £210,329. She paid £62,510 into the business bank account and withdrew £30,000 from cash for her personal living expenses. Cash at 1 October 2018 was £150 and cash at 30 September 2019 was £300. Fran pays cash for her purchases when these are delivered to the store. How much cash did Fran pay for purchases during the financial year ended 30 September 2019?

A) £117,369
B) £117,669
C) £117,819
D) £117,969

Question 61

What type of error results in two or more errors cancelling each other out?

A) A complete reversal of entries.
B) An error of original entry.
C) A compensating error.
D) An error of principle.

Question 62

An error of commission arises when:

A) A transaction is completely missed out.
B) A transaction is posted to the correct type of account (income, expense, asset, liability or capital) but the wrong account is debited or credited.
C) Two or more errors cancel each other out.
D) Transactions are posted to the correct accounts, but the debit and credit entries are reversed.

Question 63

An error of principle arises when:

A) The correct accounts are debited and credited, but the wrong amount is recorded.
B) Transactions are posted to the correct accounts, but the debit and credit entries are reversed.
C) A transaction is completely missed out.
D) A transaction is posted to the wrong type of account.

Question 64

Which one of the following is not a complete reversal of entries error?

A) Debit trade payables, Credit cash with cash payments to trade payables.
B) Debit trade receivables, Credit cash with cash received from trade receivables.
C) Debit VAT, Debit sales, Credit trade receivables with the daily credit sales total.
D) Debit irrecoverable debts, Credit cash with amounts recovered from irrecoverable debts previously charged as an expense.

Question 65

An error of omission arises when:

A) Two or more errors cancel each other out.
B) A transaction is posted to the correct type of account (income, expense, asset, liability or capital) but the wrong account is debited or credited.
C) A transaction is completely missed out.
D) A transaction is posted to the wrong type of account.

Question 66

An error of original entry arises when:

A) A transaction is completely missed out.
B) A transaction is posted to the wrong type of account.
C) Transactions are posted to the correct accounts, but the debit and credit entries are reversed.
D) The correct accounts are debited and credited, but the wrong amount is recorded.

Question 67

Farzana Limited makes credit sales of £225,324 (including VAT of £37,554) in September. The double entry to record these sales was Debit trade receivables £252,324, Credit Sales £210,270, Credit VAT £42,054. What is the journal entry required to correct this error of original entry?

A) Debit sales £27,000, Credit trade receivables £27,000.
B) Debit trade receivables £27,000, Credit sales £27,000.
C) Debit sales £22,500, Debit VAT £4,500, Credit trade receivables £27,000.
D) Debit trade receivables £27,000, Credit sales £22,500, Credit VAT £4,500.

Question 68

Marwan Limited made sales net of VAT of £90,000 in May. These net sales were posted in error to the credit side of the purchases account. What is the journal entry required to correct this error of principle?

A) Debit sales £90,000, Credit purchases £90,000.
B) Debit purchases £90,000, Credit sales £90,000.
C) Debit sales £180,000, Credit purchases £180,000.
D) Debit purchases £180,000, Credit sales £180,000.

Question 69

Fortuna Limited received an invoice for purchases of goods for resale of £20,000. This invoice was debited to the salaries expense account and credited to trade payables. What is the journal entry required to correct this error of commission?

A) Debit purchases £20,000, Credit salaries £20,000.
B) Debit salaries £20,000, Credit purchases £20,000.
C) Debit trade payables £20,000, Credit salaries £20,000.
D) Debit purchases £20,000, Credit trade payables £20,000.

Question 70

Errors Limited made credit sales of £12,000 inclusive of VAT. The double entry to records these sales was Debit sales £10,000, Debit VAT £2,000, Credit trade receivables £12,000. What is the journal entry required to correct this error?

A) Debit trade receivables £12,000, Credit sales £10,000, Credit VAT £2,000.
B) Debit cash £12,000, Credit sales £10,000, Credit VAT £2,000.
C) Debit trade receivables £24,000, Credit sales £20,000, Credit VAT £4,000.
D) Debit cash £24,000, Credit sales £20,000, Credit VAT £4,000.