Question 1

A trial balance failed to agree and the difference was entered in a suspense account. Subsequently the following errors were identified and corrected, which resulted in the balance on the suspense account being eliminated.
Discount allowed of £690 had been credited to the discount received account in error Motor expenses of £840 had been debited to the motor vehicles account in error.
The credit side of the cash book had been under-cast by £1,000 when computing the closing balance. The original difference on the trial balance that was entered in the suspense account was:

Accepted Answer

A)  £380 
B)  £460 
C)  £1,220 
D)  £3,220 A

Question 2

Which of the following is a casting error?

Accepted Answer

A)  Entering a purchase invoice for £994 as £949 in the customer's account. 
B)  Entering a purchase invoice for £994 twice. 
C)  Adding up the purchase day book incorrectly. 
D)  Not preparing a purchase control account. C

Question 3

Which of the following postings is most likely to correct the error?
The trial balance of Alma Ltd is out by £5,000. The balances are as follows:

Accepted Answer

A)   
B)   
C)   
D)   C

Question 4

Net profits were calculated as being £20,400. It was discovered that revenue receipts of £2,800 had been treated as capital receipts and capital expenditure of £6,000 has been treated as revenue expenditure.
The correct net profit should have been:

Accepted Answer

A)  £29,200 
B)  £23,600 
C)  £17,200 
D)  £11,600

Question 5

An increase in the provision for doubtful debts has been treated as a decrease in the financial statements. The amount is £4,000. Which of the following explains the resulting effects?

Accepted Answer

A)  Net profit is overstated by £8,000, statement of financial position trade receivables is overstated by £4,000 
B)  Net profit is overstated by £8,000, statement of financial position trade receivables is overstated by £8,000 
C)  Net profit is understated by £8,000, statement of financial position trade receivables is understated by £8,000 
D)  Gross profit is overstated by £8,000, statement of financial position trade receivables is overstated by £8,000

Question 6

Select your answer by means of the following code
: If 1, 2 and 3 are correct
If 1 and 2 only are correct
If only 1 is correct
If only 3 is correct
Which of the following statements about suspense accounts is/are correct?

Accepted Answer

A)  If an error is made but the trial balance is not affected, a suspense account must still be opened. 
B)  A suspense account is not opened unless the trial balance differs by more than £100. 
C)  If the final financial statements have to be prepared, a debit balance on the suspense account will . appear on the assets side of the statement of financial position.

Question 7

After calculating your company's profit for 20X1, you discover that:
(i) A non-current asset costing £50,000 has been included in the purchases account
(ii) Stationery costing £10,000 has been included as closing inventory of raw materials instead of stock of stationery.
These two errors have had the effect of:

Accepted Answer

A)  Understating gross profit by £40,000 and understating net profit by £50,000 
B)  Understating gross profit and net profit by £40,000 
C)  Understating gross profit by £60,000 and understating net profit by £50,000 
D)  Overstating both gross profit and net profit by £60,000

Question 8

Which of the following is regarded as an internal control weakness?

Accepted Answer

A)  Entering a purchase invoice for £994 as £949 in the customer's account. 
B)  Entering a purchase invoice for £994 twice. 
C)  Adding up the purchase day book incorrectly. 
D)  Not preparing a purchase control account.

Question 9

When an incorrect amount has been entered in a book of prime entry, this is known as:

Accepted Answer

A)  An error of commission 
B)  An error of original entry 
C)  Error of omission 
D)  Double posting error

Question 10

An error of principle entry would occur if the sale of goods was:

Accepted Answer

A)  Credited to a non-current asset account 
B)  Entered correctly to the sales account, but entered in the customer's account using the incorrect amount 
C)  Debited to the sales account and credited to the customer's account 
D)  Debited and credited to the correct accounts using the incorrect amount in both instances.

Question 11

When an invoice dated 28 December has not been included in the accounts for the company to the year end 31 December, this is known as:

Accepted Answer

A)  An error of commission 
B)  An error of original entry 
C)  Error of omission 
D)  Double posting error

Question 12

Which of the following is a transposition error?

Accepted Answer

A)  Entering a purchase invoice for £994 as £949 in the customer's account. 
B)  Entering a purchase invoice for £994 twice. 
C)  Adding up the purchase day book incorrectly. 
D)  Not preparing a purchase control account.

Question 13

A bad debt of £14 which should have been written off Carter's account was entered in the bad debts account correctly but was accidentally written off Hagan's account as £41?

Accepted Answer

A)   
B)   
C)   
D)

Question 14

Which of the following is an error or principle?

Accepted Answer

A)  Entering a purchase invoice for £994 as £949 in the customer's account. 
B)  Entering a purchase invoice for £994 twice. 
C)  Adding up the purchase day book incorrectly. 
D)  Not preparing a purchase control account.

Question 15

A double posting error entry would occur if the sale of goods was:

Accepted Answer

A)  Credited to a non-current asset account 
B)  Entered correctly to the sales account, but entered in the customer's account using the incorrect amount 
C)  Debited to the sales account and credited to the customer's account 
D)  Debited and credited to the correct accounts using the incorrect amount in both instances.

Question 16

An error of original entry would occur if the sale of goods was:

Accepted Answer

A)  Credited to a non-current asset account 
B)  Entered correctly to the sales account, but entered in the customer's account using the incorrect amount 
C)  Debited to the sales account and credited to the customer's account 
D)  Debited and credited to the correct accounts using the incorrect amount in both instances.

Exam 21: Errors and Suspense Accounts

Which of the following is a casting error?

Which of the following postings is most likely to correct the error? The trial balance of Alma Ltd is out by £5,000. The balances are as follows:

Net profits were calculated as being £20,400. It was discovered that revenue receipts of £2,800 had been treated as capital receipts and capital expenditure of £6,000 has been treated as revenue expenditure. The correct net profit should have been:

An increase in the provision for doubtful debts has been treated as a decrease in the financial statements. The amount is £4,000. Which of the following explains the resulting effects?

Select your answer by means of the following code : If 1, 2 and 3 are correct If 1 and 2 only are correct If only 1 is correct If only 3 is correct Which of the following statements about suspense accounts is/are correct?

Which of the following is regarded as an internal control weakness?

When an incorrect amount has been entered in a book of prime entry, this is known as:

An error of principle entry would occur if the sale of goods was:

When an invoice dated 28 December has not been included in the accounts for the company to the year end 31 December, this is known as:

Which of the following is a transposition error?

A bad debt of £14 which should have been written off Carter's account was entered in the bad debts account correctly but was accidentally written off Hagan's account as £41?

Which of the following is an error or principle?

A double posting error entry would occur if the sale of goods was:

An error of original entry would occur if the sale of goods was: