Deck 3: Double-Entry Bookkeeping 1: Debits, Credits, T-Accounts, the Trial Balance, and the Financial Statements

Question 1

The balances on asset, liability and income accounts are all carried forward to the next accounting period when accounts are closed off at the end of each accounting period.

Answer 1

False

Question 2

During the financial year ended 31 October 2021, Susie granted her credit customers early settlement discounts of £9,200. However, only £3,700 of these discounts were taken up by her customers, with the remainder paying the full amount for their purchases. What is the correct double entry to record the discounts allowed not taken up by Susie's customers?

A) Debit cash £3,700, Credit sales £3,700
B) Debit cash £5,500, Credit sales £5,500
C) Debit expenses (discounts allowed) £3,700, Debit cash £5,500, Credit sales £9,200
D) Debit expenses (discounts allowed) £9,200, Credit sales £9,200

Answer 2

Debit cash £5,500, Credit sales £5,500

Question 3

At 1 January 2021, the allowance for receivables of Trader Limited stood at £22,375. During the financial year ended 31 December 2021, Trader Limited made sales of £852,639, received cash from customers of £858,772 and had irrecoverable debts of £6,400. The total trade receivables at 1 January 2021 were £70,080. The allowance for receivables at 31 December 2021 had been reduced to £19,221. What figure for trade receivables will appear in Trader Limited's trial balance at 31 December 2021?

A) £38,326
B) £54,393
C) £57,547
D) £60,701

Answer 3

£57,547

Question 4

Which one of the following statements is true?

A) Prepayments at the end of an accounting period are a credit entry to expense accounts.
B) Accruals at the start of an accounting period are a debit entry to expense accounts.
C) Assets + expenses = Liabilities + income
D) Debit trade receivables, Credit sales is the correct double entry to record the receipt of cash from credit customers.

Question 5

Segovia Limited receives £4,000 from a trade receivable previously written off as an irrecoverable debt. What is the correct double entry to record this transaction?

A) Debit cash £4,000, Credit irrecoverable debts £4,000
B) Debit cash £4,000, Credit sales £4,000
C) Debit trade receivables £4,000, Credit irrecoverable debts £4,000
D) Debit trade receivables £4,000, Credit sales £4,000

Question 6

Fedora Limited has a year end of 30 September. At 30 September 2020, the allowance for receivables was £19,795. At 30 September 2021, the allowance for receivables was £16,800. What is the correct double entry to record this movement in the allowance for receivables?

A) Debit allowance for receivables expense £2,995, Credit allowance for receivables £2,995
B) Debit allowance for receivables £2,995, Credit allowance for receivables expense £2,995
C) Debit trade receivables £2,995, Credit allowance for receivables expense £2,995
D) Debit trade receivables £2,995, Credit allowance for receivables £2,995