1 A business receives an accountant’s bill for $1,100.

Which of the following statements correctly shows the effect upon the accounting equation
of the business, assuming the bill is unpaid?

A Capital decreases Liabilities increase

B Assets decrease Capital decreases

C Assets decrease Liabilities increase

D Capital increases Liabilities decreases

2 Charles Co entered into the following transactions:

(1) He sold goods on credit to Cody with a list price of $3,200. He allowed a 10% trade discount
and a further 2% discount for payment within seven days. Cody paid within two days.
(2) He made a credit sale to Mary allowing a 5% trade discount on the list price of $640.
(3) He purchased goods with a list price of $600, but paid only $590, receiving a discount for
early payment.

How much discount should be recorded in the Discount Received account as a

result of the above transactions?

A $352.00

B $10.00

C $57.60

D $409.60

3 Which of the following should be included within current liabilities in the accounts of a
business?

(1) A bank overdraft

(2) A bank loan repayable in ten months
(3) Return inwards
(4) Proprietor's capital

A 1 only

B 1 and 2

C 1 and 3

D 1, 3 and 4

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Business School
4 Fred is reconciling the balance on his receivables ledger control account with the total of the list of
balances from his receivables ledger. A debit balance of $200 on a customer's account has been
included in the list of balances as a credit balance.

What adjustment(s) should be made for this error?

Control account List of balances

A Credit $400 No adjustment

B No adjustment Reduce total by $400

C Credit $400 Increase total by $400

D No adjustment Increase total by $400

5 Which of the following correctly records the dual effects when goods which cost $28,000 are sold
on credit for $24,000?

A Assets (receivables) increase by $24,000; assets (inventory) decrease

by $28,000; capital decreases by $4,000.
B Assets (receivables) decrease by $24,000; assets (inventory) increase by
$28,000; capital decreases by $4,000.
C Assets (receivables) increase by $24,000; assets (inventory) decrease by
$28,000; capital increases by $4,000.
D Assets (cash at bank) increase by $24,000; assets (inventory) decrease by
$28,000; capital decreases by $4,000.

6 Grace is reconciling the total of the list of balances from her receivables ledger to the balance on
the trade receivables control account. The balance on the receivables control account in general
ledger is $25,706. She has discovered two errors:

(1) A customer's account has been overcast by $99.

(2) A credit note for $89 has been treated as an invoice.

What is the corrected balance on the receivables control account?

A $25,983

B $25,805

C $25,528

D $25,894

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Business School
7 Dot runs a retail clothing business. One of Dot’s customers returned a coat that had been bought
for $110 as she had changed her mind about the cost when she got it home.

What double entry should Dot make to record the return of the coat?

A Debit Sales returns $110; Credit Bank $110

B Debit Bank $110; Credit Receivables $110

C Debit Receivables $110; Credit Sales returns $110

D Debit Receivables $110; Credit Bank $110

8 The following transactions relate to Max's business:

1 May Purchase of goods for resale on credit $300

2 May Max injects long term capital into the business $1,400
3 May Payment of rent made $750
5 May Max withdraws cash from the business $200
7 May Sales made on credit (goods originally cost $1,350) $1,200

At the start of the week, the assets of the business were $11,750 and liabilities amounted to
$11,200.

At the end of the week, what is the amount of Max's capital?

A $850

B $1,400

C $5,350

D $1,000

9 On 1 November 2014 Leah took out a business development loan of $30,000. The loan is to be
repaid in 20 equal quarterly instalments. Leah made the first repayment of $1,500 on 1 May 2015.

How should the outstanding balance of $27,000 be reported on Leah’s statement of

financial position at 31 May 2015?

Current liability Non-current liability

A nil $27,000

B $27,000 nil

C $21,000 $6,000

D $6,000 $21,000

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Business School
10 Which of the following statements are true?

(1) Incurring an expense requires a credit to the expense account

(2) A decrease in a liability requires a debit to the liability account
(3) A decrease in an asset requires a debit to the asset account
(4) An increase in an asset requires a credit to the asset account

A 1, 2, 3 and 4

B 2 only

C 2, 3 and 4 only

D 1, 2 and 3 only

11 Which of the following statements about sales tax is/are true?

1 Sales tax is charged by all businesses when they sell products

2 Sales tax on purchases is an expense to a business if the business is not sales tax-registered.

A 1 only

B 2 only

C Both 1 and 2

D Nether 1 and 2

12 Anne has prepared the following reconciliation between the balance on her trade receivables
ledger control account in her general ledger and the list of balances from her customers ledger:

$
Balance on general ledger control account 68,566
Debit balance omitted from list of balances from receivables ledger (127)
68,439
Undercasting of sales day book 99
Total of list of balances 68,538

What balance should be reported on Anne's statement of financial position for trade
receivables?

A $68,566

B $68,439

C $68,538

D $68,665

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Business School
13 How should discounts which are allowed to customers for early settlement be treated when
the statement of profit or loss is prepared?

A As a deduction from the value of sales

B As an expense included in cost of sales

C As an expense deducted from gross profit

D As a deduction from the value of discount received

14 A sole trader is balancing and ruling off a ledger account at the end of the year. The ledger
account shows an overall debit balance. Which of the following could it represent?

(1) A liability that should be carried forward to the next year

(2) An asset that should be carried forward to the next year
(3) An expense to be transferred to the statement of profit or loss
(4) Income to be transferred to the statement of profit or loss

A 2 and 3

B 1 and 2

C 3 and 4

D 1 and 4

15 Which of the following statements about a journal is/are true?

(1) It is always used to record goods purchased.

(2) It is used to check that the trial balance is in balance.
(3) It is used to record non-routine transactions.
(4) It can be used to record corrections of errors.

A 2 and 3 only

B 3 and 4 only

C 4 only

D 1, 2, 3 and 4

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Business School
16 Wu is preparing the reconciliation between the total of the list of balances from his receivables
ledger and the balance on the receivables ledger control account in the general ledger. The
balance on the receivables ledger control account in the general ledger is $45,845.

He has discovered that a credit balance of $1,539 has been omitted from the list of balances, and
that no entry has been made to record a contra of $318 with the payables ledger.

What is the adjusted receivables ledger control account balance?

A $47,384

B $47,066

C $43,988

D $45,527

17 Shari is carrying out the reconciliation between the balance on her trade receivables control
account in her general ledger and the list of balances on accounts in her receivables ledger. She
has found the following errors:

(1) A credit balance on a customer's account has been listed as a debit balance
(2) An invoice was recorded in the sales day book for the wrong value
(3) No record has been made of a discount allowed to a customer

Which of these errors require an entry in the list of balances on accounts in her receivables
ledger?

A 2 and 3 only

B 1, 2 and 3

C 1 and 3 only

D 1 and 2 only

18 Items that appear in the financial records of a business include:

(1) Bank overdraft

(2) Discounts allowed to customers for early payment of their debts

Where should these items ultimately appear in the financial statements?

A Both items should appear in the statement of profit or loss.

B Both items should appear in the statement of financial position.

C Item (1) in the statement of financial position and item (2) in the statement of profit or loss.

D Item (1) in the statement of profit or loss and item (2) in the statement of financial position.

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Business School
19 When completing the reconciliation between the total of the list of balances on her receivables
ledger and the balance on the receivables control account in her general ledger, Tracey found that
no record had been made in her accounting system of the following:

(1) A discount allowed of $55

(2) Returns inwards of $327

The total of her list of balances is $33,185.

Before any adjusting entries were made what was the balance on the receivables control
account in her general ledger?

A $32,858

B $32,803

C $33,130

D $33,185

20 Adrian has purchased goods on credit with a list price of $29,000. The supplier offered a 5% trade
discount. Adrian intends to pay within 10 days in order to take advantage of a further 3% discount
on list price.

What are the correct accounting entries for the purchase in Adrian’s records?

A Debit purchases $27,550, Credit payables $27,550

B Debit purchases $26,680, Credit payables $26,680

C Debit purchases $27,550, Credit payables $26,680, Credit discounts received $870

D Debit purchases $27,550, Credit payables $26,723, Credit discounts received $827

21 On 10 May Amanda bought goods costing $440 for resale. Her supplier allowed her a credit period
of 30 days. All the goods have already been sold to a customer at a profit of $80.

How is Amanda's accounting equation affected by the transaction?

A Assets: Increased Liabilities: Increased Capital: Unchanged

B Assets: Increased Liabilities: Unchanged Capital: Increased

C Assets: Increased Liabilities: Increased Capital: Increased

D Assets: Unchanged Liabilities: Increased Capital: Increased

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Business School
22 At 1 September 20X1 the balance on Hai’s capital account was $31,754. In the year to 31 August
20X2 he invested an additional amount of $18,600 of personal funds, withdrew a weekly salary of
$548 and took a loan of $80,000 for the business. The statement of profit or loss for the year to 31
August 20X2 reported a profit of $48,630.

What is Hai’s closing capital balance at 31 August 20X2?

A $43,254

B $70,488

C $123,254

D $91,888

23 In June 20X8 Laura bought goods for $12,000. She paid $11,000 of this by cheque and agreed a 30
day credit period for the balance. She intends to buy more goods for $13,000 in July 20X8.

What value should be reported for Laura's payables at 30 June 20X8?

A $14,000

B $1,000

C $25,000

D $13,000

24 According to Amy’s purchase returns day book, her returns to suppliers were $2,750, including sales
tax at 10%. Amy is registered for sales tax.

How should this information be recorded in Amy's general ledger?

A Dr Payables $2,750, Cr Returns outward $2,500, Cr Sales tax $250

B Dr Returns outward $2,500, Dr Sales tax $250, Cr Payables $2,750

C Dr Payables $2,350, Cr Returns outward $2,000, Cr Sales tax $350

D Dr Returns outward $2,000, Dr Sales tax $350, Cr Payables $2,350

25 On 1 September 20X9 the opening balance on Gordon's sales tax account is $5,250 debit. During the
month he makes sales net of sales tax of $62,150 and purchases exclusive of sales tax of $71,940.

The rate of sales tax is 10%.

What is the balance on Gordon's sales tax account at 30 September 20X9?

A $6,229 Dr

B $4,925 Cr

C $5,575 Dr

D $6,794 Dr

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Business School
26 In which book of prime entry will a business record debit notes in respect of goods which have
been sent back to suppliers?

A The sales returns day book

B The cash book

C The purchase returns day book

D The purchase day book

27 Sabrina purchased goods with a list price of $750 from Marcus. Marcus allows a trade discount of 8%
and a settlement discount of 3% for payment within 1 week. The invoice was settled by cheque ten
days later.

What amount should be recorded in discounts allowed relating to this sale?

A Nil

B $20.70 C

C $60.00 D

D $75.00 E

28 Sales (including sales tax) amounted to $27,612.50, and purchases (excluding sales tax) amounted
to $18,000.

Sales tax is charged at a flat rate of 17.5%.

What is the total amount of sales tax due to or from the tax authorities?

A $1,682.10 due to the tax authorities

B $1,682.10 due from the tax authorities

C $962.50 due to the tax authorities

D $962.50 due from the tax authorities

29 Payquick purchases goods with a list price of $22,000. The supplier offers a 10% trade discount.
Payquick also intends to pay within 20 days so as to earn a cash discount of 2% on list price.

What entries should be made in Payquick’s books to record the purchase?

A Debit Purchases $19,800 Credit Discounts received $440 Credit Creditors $19,360

B Debit Purchases $21,560 Credit Discounts received $2,200 Credit Creditors $19,360

C Debit Purchases $21,560 Credit Creditors $21,560

D Debit Purchases $19,800 Credit Creditors $19,800

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Business School
30 Alfred is registered for sales tax. He makes sales of $25,000 including sales tax and purchases
goods for $7,000 excluding sales tax. The opening balance on the sales tax account was $500
credit. Sales tax is 20%.

What is the closing balance on the sales tax account?

A $3,600

B $3,000

C $2,267

D $3,267

31 One of Brian’s customers returned goods valued at $670. These had been sold on credit.

What double entry should Brian make to record the return of the goods?

A Dr Bank $670 Cr Receivable ledger control $670

B Dr Receivable ledger control $670 Cr Bank $670

C Dr Sales returns $670 Cr Receivable ledger control $670

D Dr Receivable ledger control $670 Cr Sales returns $670

32 Which one of the following costs is included in the calculation of gross profit?

A Depreciation of delivery vans

B Carriage outwards

C Carriage inwards

D Salaries of general office staff

33 Naomi received a supplier statement from John showing she owed John $56,438. This did not agree
with John’s account balance in Naomi’s payables ledger. The following discrepancies were
identified:

(1) A cheque from Naomi for $4,243 had not been received by John
(2) Naomi had not received an invoice for $2,130 from John

Which of the balance on John’s payables account in Naomi’s ledger after any corrections
are made?

A $50,065

B $54,325

C $62,811

D $52,195

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Business School
34 Your receivables ledger control account has a balance at 1 October 20X8 of $34,500 debit. During
October, credit sales were $78,400, cash sales were $2,400 and cash receipts from customers,
excluding cash sales, and after deducting cash discounts of $1,200, were $68,900.

What was the closing balance?

A $40,500

B $42,800

C $44,000

D $45,200

35 Which of the following correctly states the accounting equation?

A Assets plus liabilities equals capital

B Assets plus capital equals liabilities

C Capital plus liabilities equals assets

D Capital minus liabilities equals assets

36 Tania’s year end trial balance includes the following balances:

$
Inventory at 1 June 20X6 12,964
Trade receivables 43,728
Bank overdraft 5,872
Trade payables 28,627

Tania’s inventory at 31 May 20X7 is valued at $11,625

What was the value of Tania's current assets at 31 May 20X7?

A $33,818

B $55,353

C $56,692

D $61,225

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Business School
37 At 30 November 20X5 Jenny had a bank loan of $3,400 and a balance of $1,017 in hand in her
bank account.

How should these amounts be recorded on Jenny's opening trial balance at 1 December
20X5?

A Credit $2,383

B Debit $2,383

C Credit $3,400 and Debit $1,017

D Debit $3,400 and Credit $1,017

38 A business had capital of $42,000 at 1 January 20X4. Net profit for the year, before deducting
owner’s drawings of cash and goods, was $3,800. The owner paid herself a weekly salary of $250
and also withdrew for her own use goods costing $5,600 and with a selling price of $7,000. No
additional capital was introduced during the year.

What were the closing capital at 31 December 20X4?

A $45,800

B $27,200

C $25,800

D $40,148

39 The following transactions took place during Alan’s first month of trading:

(1) Credit sales of $121,000 exclusive of sales tax

(2) Credit purchases of $157,110 inclusive of sales tax
(3) Cash payments to credit suppliers of $82,710 inclusive of sales tax

Sales tax is 20%.

What is the balance on Alan’s sales tax control account at the end of his first month of
trading?

A $1,985 Cr

B $1,985 Dr

C $15,770 Cr

D $15,770 Dr

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Business School
40 Which of the following statements is correct?

A Ledger accounts for individual suppliers should never be included in the general ledger.

B The non-current asset register contains ledger accounts for non-current assets.

C A credit balance on a ledger account should be reported in the statement of financial position.

D Each ledger account balance should be reported only once in the final accounts.

41 Which of the following correctly describe(s) why a business entity should maintain
accounting records in double entry format?

(1) this is a legal requirement

(2) to assist managers in exercising control

A 1 only

B 2 only

C both 1 and 2

D neither 1 nor 2

42 Albert used the following balances to prepare his final accounts as at 30 April 2013:

$ $
Trade receivables 7,695
Payables 4,174
Bank overdraft 5,537
Drawings 4,100
Capital 12,500
Revenue 22,000
Purchases 19,200
Expenses 10,700

The business does not hold inventory. No further adjustments were required.

What is the value of Albert’s closing capital?

A $12,500

B $8,400

C $16,300

D $500

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Business School
43 At 30 November, Ann had the following balances in her general ledger:

Short-term deposit account $12,750 debit

Bank current account $1,325 credit
She also had $2,862 in cash, which she lodged on 1 December.

What amount should be included in Ann’s current assets at 30 November?

A $12,750

B $1,537

C $15,612

D $14,287

44 What type of business entity can the accounting equation be applied to?

(1) Sole trader

(2) Partnership
(3) Company

A 3 only

B 1 and 3 only

C 1 only

D 1, 2 and 3

45 Which of the following are original books of entry?

(1) Sales day book

(2) Journal
(3) Petty cash book
(4) General ledger

A 1, 2 and 3

B 1, 2 and 4

C 1, 3 and 4

D 2, 3 and 4

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Business School
46 Iona’s cash takings of $2,468 for 30 November were not banked until 4 December. At 30 November,
her bank balance was an overdraft of $1,573 and she had a balance of $44 in her petty cash box.

What amount should be included in current assets in Iona’s statement of financial position
at 30 November?

A $44

B $895

C $939

D $2,512

47 All John’s sales are cash sales. During the year he made sales of $45,780 and banked $38,175.
He paid sundry expenses in cash of $2,200 and wages of $4,560 in cash. His opening cash was
$365.

What is his closing cash figure?

A $1,579

B $39,020

C $1,210

D $31,780

48 Julie is preparing a reconciliation between her receivables control account and the receivables
ledger. The balance on the receivables control account is $67,240 and the total of the list of
balances in the receivables ledger is $54,568.

Which of the following would explain the difference?

A A cash receipt of $12,672 from Gary has been correctly posted to the receivables control
account, but has not been included in Gary’s account in the receivables ledger.

B An invoice to Karen of $12,672 has been omitted from the sales day book.

C Discounts allowed of $6,336 have been included on the wrong side of the receivables
control account.

D A contra with Mason of $6,336 has not been included in the receivables control account.

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Business School
49 1 September 20X8, the balance on Emma’s capital account was $31,754. In the year to 31 August
20X9, she took a bank loan out for $80,000 and introduced a machine she owned personally into the
business which had a value of $40,000. The statement of profit or loss for the year to 31 August 20X9
reported a profit of $48,634 and Emma’s drawings during the year were $28,500.

What is Emma’s closing capital balance at 31 August 20X9?

A $123,254

B $151,754

C $91,888

D $43,254

50 At 1 November 20X8 the value of Claudia’s net assets was $75,600. At 31 October 20X9 the
value was $73,800. During the year to 31 October 20X9 Claudia introduced $17,700 and her
drawings were $16,300.

What was Claudia’s profit or loss for the year to 31 October 20X9?

A $400 profit

B $3,200 profit

C $400 loss

D $3,200 loss

CamEd | 16
Business School