1

Kieron is an antiques dealer. His inventories includes a clock which cost $15,800.

Kieron expects to spend $700 on repairing the clock which will mean that he will be able
to sell it for $26,000.
At what value should the clock be included in Kieron's inventories?
$26,000
$25,300
$15,800
$16,500

Are the below statements true or false in relation to the different types of
accounting records that a business should maintain?
. True False
The detailed listing of suppliers includes individual supplier accounts and their
balances
Sales can be calculated using both the sales returns and sales general ledger
accounts
The bank general ledger account includes all cash transactions and, in addition,
cash amounts owed to/ from other parties
A non-current asset register includes only the cost element of non-current assets

3 At 31 May 20X1 the balance on Caleb's bank statement showed that he had $3,732 in
the bank. When he carried out the reconciliation between the bank statement and the
bank account in his general ledger he found the following:

(1) Unpresented cheques $5,729

(2) Outstanding lodgement $822
(3) Bank charges $495
What overdraft balance should be reported in Caleb's statement of financial
position at 31 May 20X1?

$
4

In which general ledger accounts would a manual journal entry for a cash receipt
from a credit customer be recognised?
Bank and purchases
Bank and trade receivables
Bank and sales
Bank and trade payables

At 1 May 20X8 Trevor's allowance for irrecoverable debts was $1,468. At 30 April 20X9
the total balance on his trade receivables ledger account was $88,463. This includes a
balance of $563 which is irrecoverable. Trevor estimates that his allowance for
irrecoverable debts at 30 April 20X9 should be equivalent to 2% of the remaining
balances.
How should the movement in the allowance for irrecoverable debts be reported in
the statement of profit or loss?
A credit of $1,758
A charge of $1,758
A credit of $290
A charge of $290

Which of the following correctly explain(s) why a trial balance is prepared?

(1) To summarise the balances prior to preparation of the final accounts

(2) To provide a basic check on the accuracy of bookkeeping entries
1 only
Both 1 and 2
Neither 1 nor 2
 2 only

Accounting information should be free from material error and should be neutral.
Which of the qualitative characteristics of accounting information does this
describe?
Relevance
Faithful representation
Comparability
Understandability

8 At 31 October 20X3 Lalia had a bank overdraft of $3,681 and a bank loan of
$16,800. The bank loan is due to be repaid by three payments of $5,600 on 1 April
20X4, 1 April 20X5 and 1 April 20X6.
Which TWO of the following show how these amounts should be reported in
Lalia's statement of financial position at 31 October 20X3?
Non-current liabilities $11,200
Non-current liabilities $16,800
Current liabilities $9,281
Current liabilities $3,681

A trainee accountant is employed by a partnership and has prepared the following

current account for a partner:

$ $
Interest on capital 560 Balance b/f 54
Salary 300 Drawings 1,240
Balance c/f 2,174 Net profit 1,740
3,034 3,034

The balance brought forward is entered correctly and the other entries are all correct in
amount. However the trainee accountant thinks she might have mixed up some of the
debits and credits.
What is the balance carried forward on the account after the errors have been
corrected?

10

A business has a year-end date of 31 December 20X7.

Identify whether each of the following items should be recognised as a provision
or an accrual.
. Provision Accrual
An employee raised legal action on 4 December 20X7 against the
business and it is probable that the employee will win the case, which is
expected to be concluded in March 20X8
An invoice was received on 6 January 20X8 and related to rental charges
for the previous three months

11
At 1 April 20X3 Zia’s net assets were $58,000. In June 20X3, Zia invested a further
$22,000 of capital. During the year, the business generated $41,000 of profit. Zia
withdrew $18,000 as drawings in March 20X4.
What is the carrying amount of Zia’s net assets at 31 March 20X4?

12 Which of the following correctly calculates closing capital?

Capital introduced + Drawings - Profit + Opening capital
Capital introduced - Drawings - Profit - Opening capital
Capital introduced - Drawings + Profit + Opening capital
Capital introduced + Drawings + Profit + Opening capital
13 Wilson has returned goods that he bought on credit.
Which TWO of the following form the journal entry that Wilson should record in
his general ledger?
Dr Purchase returns
Cr Trade payables
Dr Trade payables
Cr Purchase returns

14 At 1 May 20X0, Lim owed his suppliers $17,822. At 30 April 20X1 he owed
$16,385. During the year to 30 April 20X1 he paid his suppliers $131,740, and made a
contra entry with trade receivables of $800.
What was the value of his purchases for the year to 30 April 20X1?

15

Linh has a sole supplier and has the following trade payables general ledger account:

Trade payables general ledger account

Description Dr Description Cr
$ $
Opening balance 85,600

Bank 103,000 Purchases 67,200

Returns 12,000
Closing balance 37,800

Total 152,800 Total 152,800

What does the $37,800 closing balance represent?
(1) The balance to be reconciled to the supplier statement
(2) The amount carried forward to the next accounting period
(3) The amount of accrued expenses presented in the trial balance
2 and 3 only
1 and 2 only
 1 only
1, 2 and 3

16. Jean uses a computerised accounting system. The accounting system is integrated with the
sales and purchases modules only and so any financial data entered is reflected across the full
accounting system. Jean does not accept cash sales or make cash purchases.
Which of the following statements are correct when Jean inputs data from a sales order to
the sales module of the accounting system?
. Correct Incorrect
The detailed listing of customer accounts is updated automatically
The detailed listing of supplier accounts is updated automatically
The associated cost of goods sold is recognised in the cost of sales and
inventories general ledger accounts
The sale is recognised in both the sales and trade receivables general
ledger accounts

17

Which of the following has been accounted for correctly?

Loss on disposal of property, plant and equipment:
Dr Bank
Dr Operating expenses
Cr Property, plant and equipment

Returns from customers:

Dr Trade payables
Cr Purchase returns

Repayment of loan liability:

Dr Bank
Cr Loan payable

Equipment withdrawn for owner's personal use:

Dr Equipment
 Cr Drawings

18 Jane is preparing her bank reconciliation. The bank balance in her general ledger is
$422 credit. The only items which need to be dealt with are:

(1) A cheque for $822 issued to a supplier which has not yet appeared on the bank statement
(2) Interest received of $153 which was credited by the bank, but not recorded by Jane
What is the closing balance on Jane's bank statement?
$553 cash at bank
$269 overdrawn
$1,091 overdrawn
$1,397 cash at bank

19 Candy started her own business during the year.

The following is a list of Candy's capital injections. Which TWO of these would
be included in the capital section of her statement of financial position?
A $600 business loan from Candy's bank
A van worth $350 bought by Candy for the business using her personal bank account
A $150 loan to the business from Candy's friend Jim repayable in 2 months' time.
$400 cash paid into the business by Candy from her personal bank account

20

In the year to 31 October 20X0 Vlad's sales were $142,200, all of which were made
at a mark-up of 20%. His opening inventory value was $5,400 and his closing
inventory value was $3,600.
What was the value of Vlad's purchases in the year to 31 October 20X0?

21 Is each of the following statements about going concern correct?

. Yes No
Financial statements must always be prepared on the going concern basis
If a business is not considered to be a going concern, financial statements should not
be prepared
22

Which of the following is the correct manual journal entry to recognise the
depreciation charge for the year?
Dr Depreciation charge
Cr Bank

Dr Depreciation charge
Cr Property, plant and equipment

Dr Bank
Cr Depreciation charge

Dr Property, plant and equipment

Cr Depreciation charge

23
Robin purchased and received raw materials. These would normally cost $200 per unit
but the supplier allowed Robin a trade discount of 20%. The supplier charged an
additional $10 per unit for delivery. Robin intends to modify the materials in preparation
for sale. This will lead to a labour cost of $20 per unit and a production overhead cost of
$30 per unit. The selling price will be set at $360 per unit.
At what amount should one unit of Robin’s raw material inventories be
measured?

$
24

Emily's draft accounts report a profit of $11,855. However an accrual of $398 was
treated as a prepayment, and a prepayment of $480 was incorrectly recorded as $522.
What is the correct profit?
$12,693
$11,415
$11,499
$11,017
25

At 31 May 20X3 Shelina's allowance for irrecoverable debts was $1,157. She wishes to
write off a balance of $178 as irrecoverable. At 31 May 20X2 her allowance for
irrecoverable debts was $1,284.
What charge should be reported in Shelina's statement of profit or loss for the
year to 31 May 20X3 for irrecoverable debt expense?
$1,335
$51
$305
$1,157

26

Nigel has closing inventory which cost $38,750. This includes some damaged items
which cost $3,660.

It will cost Nigel $450 to repair these. He will be able to sell them for $1,500 after the
repairs are completed.
What is the correct value of Nigel's closing inventory?
$38,750
$36,140
$36,590
$35,090

27 Zhenya uses a basic computerised accounting package. The sales and purchases
systems are integrated. However, an imbalanced manual journal entry will be
automatically balanced by posting to a suspense account.

A $1,000 (credit) suspense account has been reported on the trial balance.
Which of the following would explain the difference?
A $1,000 accrual for rental charges was omitted from the general ledger
Depreciation charges of $1,000 were incorrectly coded to the taxation expense in the general
ledger
A manual journal entry for interest received of $500 was debited to bank and credited to other
 income in the general ledger
A manual journal entry for a $2,000 cash receipt from a credit customer was debited correctly
to bank but credited to trade receivables with only $1,000 in the general ledger

28

Boris receives rental income of $1,200 each month. His tenant pays the rent relating to
the month by electronic bank transfer on the last day of each month.
What debit and credit should Boris record for the payment received?
. Rental Income $1,200 Bank $1,200 Cash $1,200
Debit
Credit

29

Paulo and Claude are in partnership sharing profits and losses in the ratio 2:3. In the
year to 31 March 20X0 the partnership profit was $144,890 and the partners withdrew
$35,000 each. Interest is charged at 8% on all drawings.

Interest on capital for the year was as follows:

$
Paulo 11,450
Claude 9,770
What is Paulo's share of the residual profit?
$47,228
$51,708
$60,358
$77,562

30

Gary bought a new machine. The invoice included costs for the following:

(1) Installation charges

(2) Routine maintenance for the first year of operation
(3) Testing the machine prior to operation
Which of the costs are asset expenditure?
2 and 3 only
1 and 3 only
1 and 2 only
1, 2 and 3

31

In June 20X8 Laura bought goods for $12,000. She paid $11,000 of the amount due by
electronic bank transfer and agreed a 45-day credit period for the balance. She has not
made any further payments in the month of June 20X8. She intends to buy more goods
for $13,000 in July 20X8.
What amount should be reported for Laura's trade payables at 30 June 20X8?
$1,000
$25,000
$14,000
$13,000

32 Which of the following would normally be recorded in a non-current asset

register?

(1) The location of each asset

(2) The serial number of each asset
(3) Accumulated depreciation on each asset

1 only
2 and 3 only
1 and 3 only
1, 2 and 3

33
In the year to 30 November 20X9 Lui accounted for $7,000 of expenditure on machinery
repairs as the cost of a new machine. Lui depreciates machinery on a straight-line
basis over 10 years and charges depreciation for a full year in the year an asset is
acquired.
What is the effect of the error on Lui's profit for the year to 30 November 20X9?
Overstated by $7,700
Overstated by $6,300
Understated by $6,300
Understated by $7,700

34

Albert and Len are in partnership. The correct entry for the partners' drawings has been
made in the cash account. A seperate capital account and current account is
maintained for each partner.
What entry is needed to complete the posting for the partners' drawings?
A debit entry in the partners' capital accounts
A credit entry in the partners' capital accounts
A debit entry in the partners' current accounts
A credit entry in the partners' current account

35 abrina sold goods with a list price of $1,200 to Marcus. Marcus receives a trade
discount of 10% and a settlement discount of 5% for payment within 14 days. Marcus is
expected to take advantage of the settlement discount.
What amount should be recorded in revenue relating to this sale?

36

Jordan pays all their suppliers within the 60-day credit term offered.
Where should a credit balance on Jordan’s trade payables general ledger account
be presented in the financial statements?
As a negative amount in current assets on the statement of financial position
 As an expense in the statement of profit or loss
As a current liability in the statement of financial position
As a non-current liability in the statement of financial position

37

On 1 July 20X8, Deniz had a balance on their trade payables general ledger account of
$2,100. All of Deniz’s sales and purchases are on credit. The following report has been
run from the computerised accounting system, summarising transactions that occurred
in July

Transactions report (1 July 20X8 to 31 July 20X8)

Description $
Purchases 3,600
Sales 4,800
Payments to suppliers 2,700
Receipts from customers 3,100
Settlement discount received 300
Settlement discount allowed 400

What is the balance on Deniz’s trade payables general ledger account at 31 July
20X8?

38 A supplier sent Giang a statement showing a balance outstanding of $55,200.

Giang’s detailed listing of supplier accounts shows a balance of $55,700 for this
supplier.
Which of the following could be the reason for the difference?
The supplier has allowed a $500 settlement discount which has been omitted from Giang's
accounting system
The supplier sent an invoice for $500 which has not yet been recognised by Giang
Giang has paid the supplier $500 which the supplier has not yet recognised
Goods returned by Giang worth $500 which the supplier has not yet accounted for
39 Maryam and Ariel have been in partnership together for a number of years and share
profits and losses in the ratio 5:4.

At 1 March 20X9 Jana was admitted to the partnership when the goodwill was valued at
$75,000. The partners decided that goodwill would not be maintained in the accounts
and drew up a new partnership agreement stating that profits would now be shared in
the ratio 1:1:1.
How much must Jana contribute to the partnership to ensure that her opening
capital balance is nil?

40 Andrew's trial balance at 31 October 20X7 includes the following:

$
Machinery at cost 85,800
Accumulated depreciation on machinery 21,750
Trade receivables 42,650
Receivables allowance 1,570
Bank overdraft 6,470
Inventory at 1 November 20X6 21,650

His inventory at 31 October 20X7 is valued at $22,300.

What value should be reported for current assets in Andrew's statement of
financial position at 31 October 20X7?

41

At 30 November 20X5 Jenny had a bank loan payable of $8,500 and $678 of cash in
her bank account.
How should these amounts be recorded on Jenny's opening trial balance at 1
December 20X5?
Credit $8,500 and Debit $678
Credit $7,822
 Debit $7,822
Debit $8,500 and Credit $678

42

Fede’s draft financial statements reported a profit for the year of $16,518 and a net
asset total of $85,288. In the draft financial statements, Fede had incorrectly valued
closing inventories at $69,780. The correct value was $76,980.
When the error is corrected, what will be Fede’s profit for the year and net asset
total?
Profit for the year: $23,718 Net assets: $92,488
Profit for the year: $9,318 Net assets: $78,088
Profit for the year: $9,318 Net assets: $92,488
Profit for the year: $23,718 Net assets: $78,088

43 Sanjay is registered for sales tax. He has recently purchased goods for resale and
received an invoice for a total of $360, including sales tax. The rate of sales tax is 20%.
At what amount should Sanjay record the purchase in his purchases account?

44

Valera entered a sales invoice in the computerised accounting system incorrectly as

$3,300 instead of the invoice amount of $330.
What manual journal entry is required to correct for this error?
Dr Sales 3,630
Cr Trade receivables 3,630

Dr Trade receivables 2,970

Cr Sales 2,970

Dr Trade receivables 3,630

Cr Sales 3,630
 Dr Sales 2,970
Cr Trade receivables 2,970

45

What is the main purpose of a statement of financial position?

To report the assets, liabilities and capital of the business at a particular date
To provide a valuation of the business at a particular date
To provide information about the activities of the business over a period of time
To report the growth in the value of capital since the business was established

46 Gilda is preparing her bank reconciliation statement. Following the necessary

correcting entries the balance on the bank account in her general ledger is $4,782
credit. She still has to deal with the following:

(1) Her bank charged fees of $365 to her account in error

(2) She has unpresented cheques totalling $1,745
(3) She has an outstanding lodgement of $1,519
What is the overdraft balance on her bank statement?

On checking his draft financial statements Ricardo notes that he had omitted an accrual
for $754 and a prepayment for $388.
By how much is the value of his current assets understated?

47

Ed's year end is 30 September. He depreciates office furniture at 15% per annum on
the straight line basis. A full year's depreciation is charged in the year an asset is
purchased, and no depreciation is charged in the year it is sold. In March 20X5 Ed
bought office furniture for $80,000.
If he sells the office furniture for $39,000 in July 20X8 what will Ed's profit or loss
be on disposal?
A profit of $7,000
A loss of $5,000
A loss of $7,000
A profit of $5,000

48

On 10 May Amanda bought goods for resale. Her supplier allowed her a credit period
of 30 days. By year end the goods have not been sold.
How is Amanda's accounting equation affected by the transaction?
Assets: Unchanged Liabilities: Increased Capital: Reduced

Assets: Increased Liabilities: Increased Capital: Unchanged

Assets: Increased Liabilities: Unchanged Capital: Reduced

Assets: Reduced Liabilities: Reduced Capital: Unchanged

49.

Gilda is preparing her bank reconciliation statement. Following the necessary correcting
entries the balance on the bank account in her general ledger is $4,782 credit. She still
has to deal with the following:

(1) Her bank charged fees of $365 to her account in error

(2) She has unpresented cheques totalling $1,745
(3) She has an outstanding lodgement of $1,519
What is the overdraft balance on her bank statement?

$
50 A sales invoice for $3,450 was recorded in Susan's general ledger as a credit note
for $3,540.
If the errors are not corrected before the final accounts are drafted how will
Susan's profit for the year be affected?
Overstated by $6,990
Understated by $90
Overstated by $90
Understated by $6,990