CHAPTER 3

Question 1:
A business paid out £12,450 in net wages to its employees. In respect of these wages, the
following amounts were shown in the statement of financial position.

PAY payable 2,480

National Insurance payable: employees' 1,350
employer's 1,500
No other deductions were made.

Employees' gross wages, before deductions, were:

A. £12,450
B. £27,450
C. £16,280
D. £17,780

Question 2:
Which of the following is a source document that would be entered into the accounting
system? A. Debit note
B. Credit note
C. Sales order
D. Purchase order

Question 3: Which of the following best explains the imprest system of petty cash?
A. Each month an equal amount of cash is transferred into petty cash.
B. The exact amount of petty cash expenditure is reimbursed at intervals to maintain
a fixed float.
C. Petty cash must be kept under lock and key.
D. The petty cash total must never fall below the imprest amount

Question 4: On 1 April Amara had a balance of £100 (the imprest amount) in petty cash.
At the end say that she has vouchers totalling £38, a receipt for a refund for stationary of
£4 and a note to say that an employee was reimbursed £12 in respect of postage cost but
no voucher was issued.
How much does Amara need to reinstate her imprest balance at 30 April?
A. £34
B. £46
C. £54
D. £66
Question 5: The following data has been extracted from the payroll records of Kleen Ltd
for the month February 20X1.

£
PAYE 17,000
Employer's NIC 7,500
Employees' NIC 6,000
Cash paid to employees 50,000

The wage expense for the month is:

A. £50,000
B. £56,000
C. £74,500
D. £80,500

Question 6: When a purchase invoice is received from a supplier which two of the
following documents would the invoice be checked to?
A. Sales order
B. Purchase order
C. Remittance advice
D. Goods received note
E. Credit note

Question 7: George purchases goods on credit from Hardeep for £1,000. £100 of these
good- defective and George returns them to Hardeep. What document would Hardeep
George in respect of the returned goods?
A. Invoice
B. Remittance advice
C. Credit note
D. Delivery note

Question 8: Oscar downloads his bank transaction report for the day. The report shows a
cash payment of £412 which the computerised accounting system has not been able to
match to a transaction. The unmatched payment is most likely the result of:
A. the purchase of a new laptop for £412
B. payment to a regular credit supplier for an invoice totalling £412
C. a receipt from a credit customer in respect of an invoice for £450 on which a
prompt payment discount of £38 was taken
D. the payment of net wages of £412 which is consistent with the payroll ledger

Question 9: A business has the following payroll costs for a month:

£
 Gross pay 112,450
Income tax deducted 15,800
Employees' national insurance 9,810
Employer's national insurance 11,200

What is the net amount paid to employees for the month?

A. £75,640
B. £91,440
C. £102,640
D. £86,840

Question 10: The petty cash float in a business has an imprest amount of £200. At the
end of March vouchers in the petty cash box totalled £136 and the amount of cash
remaining in the box was £54.
Which of the following explains the difference?
A. A petty cash voucher for £10 is missing.
B. An employee was given £10 too little when making a petty cash claim.
C. An employee reimbursed petty cash with £10 in respect of postage stamps used,
but no voucher was prepared.
D. A voucher for £10 was put in the box but no payment was made to the employee

Question 11: A business has the following payroll costs for a month:

£
Gross pay 38,600
Income tax 5,400
Employees national insurance 3,100
Employer's national insurance 3,500

What is the wages cost to the business for the month?

A. £38,600
B. £42,100
C. £47,100
D. £50,600

Question 12: Which two of the following are source documents that contain information
that will be entered into a business's accounting system?
A. Goods received note
B. Invoice to a customer
C. Purchase order to a supplier
D. Cheque to a supplier
E. Delivery note to a customer
CHAPTER 4
Question 1: Richard is a VAT registered trader whose sales and purchases carry VAT at
the standard rate of 20%. Richard sells a customer goods on credit for £4,800 exclusive
of VAT.
What is the double entry to record this?
A. Debit Sales £4,800, Debit VAT £960, Credit Receivables £5,760
B. Debit Sales £4,000, Debit VAT £800, Credit Receivables £4,800
C. Debit Receivables £5,760, Credit Sales £4,800, Credit VAT £960
D. Debit Receivables £4,800, Credit Sales £4,000, Credit VAT £800
Question 2: What transaction is represented by the entries: Debit rent, Credit landlord?
A. The receipt of rental income by the business
B. The issue of an invoice for rent to a tenant
C. The receipt of an invoice for rent payable by the business
D. The payment of rent by the business
Question 3: In double-entry bookkeeping, which of the following statements is true?
A. Credit entries decrease liabilities and increase income.
B. Debit entries decrease income and increase assets.
C. Credit entries decrease expenses and increase assets.
D. Debit entries decrease expenses and increase assets.
Question 4: A debit balance of £3,000 brought down on A Ltd's account in B Ltd's books
means that B Ltd owes A Ltd £3,000.
A. True
B. False
Question 5: Crimson plc paid an invoice from a credit supplier and took advantage of the
early settlement discount offered. When the invoice was received and recorded, Crimson
plc did not expect to take the discount. The journal entry to record the payment of the
invoice is:
A. Debit Payables, Credit Purchases, Credit Cash at bank account
B. Debit Payables, Credit Cash at bank account
C. Debit Cash at bank account, Debit Purchases, Credit Payables
D. Debit Cash at bank account, Credit Purchases, Credit Payables
Question 6: Winn Ltd has opening trade payables of £24,183 and closing trade payables
of £34,655. Purchases for the period totalled £254,192 (£31,590 relating to cash
purchases).
Total payments recorded in the payables ledger for the period were:
A. £212,130
B. £233,074
C. £243,720
D. £264,664
Question 7: What is the correct double entry to record an invoice raised to a credit
customer who is not expected to take advantage of an early settlement discount?
A. Debit Revenue, Credit Receivables
B. Debit Payables, Credit Revenue
C. Debit Receivables, Credit Revenue
D. Debit Revenue, Credit Payables
Question 8: Which of the following could be a debit entry in the payables account?
A. Output VAT
B. Cash purchases total
C. Payments made to suppliers
D. Early settlement discounts given to customers
Question 9: A payment has been received from a credit customer in settlement of an
invoice. The customer was expected to take advantage of an early settlement discount
offered, however, payment was not made within the required timeframe and the discount
was not taken.
The correct double entry to record the receipt of funds from the customer in full
settlement of the invoice is:
A. Debit Cash at bank, Credit Receivables, Credit Revenue
B. Debit Cash at bank, Debit Revenue, Credit Payables
C. Debit Receivables, Debit Revenue, Credit Cash at bank
D. Debit Receivables, Credit Revenue, Credit Cash at bank
Question 10: A business which is registered for VAT received the following invoice
from one of its VAT registered suppliers:
Invoice: 7035
Date: 20 December 20X0
Goods: 100 @ £10 1,000
Less trade discount (50)
A further discount of £50 will be allowed if payment is received within 14 days.
Assume the business is not expected to make the payment within 14 days and the VAT
rate is 20%.
What amount of VAT should have been charged on the invoice?
A. £180
B. £190
C. £200
D. £210
CHAPTER 5
Question 1: Anchor Ltd is preparing its financial statements. After transferring the
balances on all the income and expense ledger accounts to the profit and loss ledger
account, the total credits in the profit and loss ledger account exceed the total debits by
£4,000.
Which two of the following statements about Anchor Ltd are correct?
A. Anchor Ltd has made a loss for the year of £4,000.
B. Anchor Ltd has made a profit for the year of £4,000.
C. To begin to calculate the closing capital account balance, Anchor Ltd should credit the
capital account and debit the profit and loss ledger account with £4,000.
D. The opening balance on the profit and loss ledger account for the next reporting period
is £4,000 credit.
E. The closing balance on the profit and loss ledger account of £4,000 should be deducted
from the capital account to give the profit for the year.
Question 2: Which of the following would be classified as a non-current asset?
A. Cash
B. Prepayments
C. Land
D. Receivables
Question 3: Gerrard Ltd is registered for VAT. In the month of April, it sells goods to
customers for a total of £89,436 excluding VAT and purchases goods from suppliers for a
total of £86,790 including VAT.
What is the net amount shown in Gerrard Ltd's VAT account at the end of April?
A £3,422 debit
B. £2,452 debit
C. £3,422 credit
D. £2,452 credit
Question 4: Which of the following statements concerning preparation of financial
statements is true?
A. The balances on income and expense accounts are brought down at the end of the
accounting period to be carried forward to the next accounting period.
B. The balances on asset and liability accounts are summarised in an additional ledger
account known as the statement of financial position ledger account.
C. The statement of profit or loss ledger account is a list of all the balances extracted
from the business's accounts.
D. Loss for the year is a credit entry in the statement of profit or loss ledger account.
Question 5: A sole trader had trade receivables of £2,700 at 1 May and during May made
cash sales of £7,200, credit sales of £16,500 and received £15,300 from his credit
customers.
The balance on his trade receivables account at the end of May was:
A. £1,500
B. £3,900
C. £8,700
D. £11,100
Question 6: Which of the following would be a credit balance in the trial balance?
A. Bank overdraft
B. Drawings
C. Purchases
D. Delivery outwards
Question 7: Plym plc is a VAT registered retailer. All transactions attract VAT at the
rate of 20%. For the year to 30 June 20X7, Plym plc made purchases of £69,600
including VAT and made sales of £89,400 excluding VAT. There was no change in the
figures for opening and closing inventory in the statements of financial position as at 30
June 20X6 and 20X7.
What was Plym plc's gross profit for the year ended 30 June 20X7?
A. £19,800
B. £4,900
C. £31,400
D. £16,500
Question 8: Violet had an opening trade payables balance of £3,450 on 1 December.
During the month of December, she sold goods totalling £6,780 to customers on credit,
purchased goods totalling £5,100 from suppliers on credit and made cash purchases of
£400. She also received £3,900 from credit customers and made payments to credit
suppliers of £4,200.
What was the balance on Violet's trade payables account at the end of December?
A £4,350
B. £6,330
C. £4,750
D. £2,550
Question 9: The following are balances on the accounts of Luigi, a sole trader, as at the
end of the current financial year and after all entries have been processed and the profit
for the year has been calculated.
£
Non-current assets 85,000
Trade receivables 7,000
Trade payables 3,000
Bank loan 15,000
Accumulated depreciation, non-current assets 15,000
Inventory 4,000
Accruals 1,000
Prepayments 2,000
Bank overdraft 2,000

What is the balance on Luigi's capital account?

A. £59,000
B. £66,000
C. £62,000
D. £64,000
CHAPTER 6
Question 1: Which three of the following situations are likely to result in a suspense
account being used to record a transaction?
A. A receipt of £135 from a customer who unexpectedly, but correctly, has taken a 3%
prompt payment discount.
B. A payment of £84 made to a supplier in respect of an invoice of £70 plus VAT at 20%.
C. A receipt of £3,500 from the disposal of a van with a carrying amount of £2,700.
D. A journal entry posted by the bookkeeper to write off an irrecoverable debt of £55 in
which the bookkeeper was unsure where to record the credit entry.
E. A payment made to a supplier for £90.25 in respect of an invoice for £95 on which a
prompt payment discount of 5% was expected to be taken.
Question 2: Indicate whether the following statements are true or false.
The owner's drawings are shown on the initial trial balance.
A. True
B. False
The closing inventory balance is included in the final trial balance.
C. True
D. False
Question 3: When performing a reconciliation between the bank transaction report and
the cash at bank account, which two of the following would require an entry in the cash
at bank account?
A. Deposits credited after date
B. Direct debit on bank transaction report only
C. Bank charges
D. Bank error
E. Cheque presented after date
Question 4: Epsilon's cash at bank account at 31 December 20X3 shows a balance of
£565 overdrawn. On comparing this with the transaction report downloaded from the
electronic banking system, the accountant discovers the following:
1. A cheque for £57 drawn by Epsilon on 29 December 20X3 has not yet presented for
payment.
2. A cheque for £92 from a customer, which was paid into the bank on 24 December
20X3, has been dishonoured on 31 December 20X3.
The correct balance in Epsilon's cash at bank account as at 31 December 20X3 is:
A. £473 debit
B. £714 credit
C. £657 credit
D. £473 credit
Question 5: Smyths's draft profit for the year is £324,700. After the draft profit was
calculated, the following issues were discovered.
Debts of £6,800 should have been written off as irrecoverable at the year end, but the
journal entry was not posted.
The accounting system had automatically calculated and recorded depreciation, but the
standing data was found to be incorrect. The depreciation rate for cars should have been
updated to 20% straight-line at the start of the year, but was left as 25% straight- line in
error. The balance on the car cost account at the year end was £24,000. There were no
additions or disposals of cars in the year
What is Smyths's corrected profit for the year after accounting for the above issues?
A. £323,500
B. £319,100
C. £313,100
D. £316,700
Question 6: A company's initial trial balance includes a balance of £25,000 in a
suspense account. On reviewing the exception report, the bookkeeper identified the
amount as a purchase of machinery for £25,000. The amount had been correctly recorded
in cash at bank but the other side of the transaction had not been matched by the
accounting system.
Which of the following journal entries would remove the suspense account and correctly
record the purchase of machinery?
A. DEBIT Plant and machinery £25,000
 CREDIT Cash at bank account £25,000
B. DEBIT Suspense account £25,000
CREDIT Plant and machinery £25,000
C. DEBIT Plant and machinery £25,000
CREDIT Suspense account £25,000
D. DEBIT Cash at bank account £25,000
CREDIT Suspense account £25,000
Question 7: The following information relates to a bank reconciliation. The balance in
the cash at bank account before taking the items below into account was £8,970
overdrawn.
1. Bank charges of £550 on the bank statement have not been entered in the cash at bank
account.
2. The bank has credited the account in error with £425 which belongs to another
customer.
3. Cheque payments totalling £3,275 have been entered in the cash at bank account but
have not been presented for payment.
4. Cheques totalling £5,380 have been correctly entered on the debit side of the cash at
bank account but have not been paid in at the bank.
What was the overdrawn balance as shown by the bank statement?
A. £6,990
B. £10,650
C. 11,200
D. £11,625
Question 8: Which two of the following statements about bank reconciliations are
correct?
A. In preparing a bank reconciliation, unpresented cheques must be deducted from the
balance shown in the bank statement.
B. A cheque from a customer paid into the bank but dishonoured must be corrected by
making a debit entry in the cash at bank account.
C. An error by the bank must be corrected by an entry in the cash at bank account.
D. An overdraft is a debit balance in the bank statement.
E. Bank charges that only appear on the bank statement must be debited to the cash at
bank account.
Question 9: Alpha received a statement from its credit supplier Beta, showing a balance
to be paid of £8,950. Alpha's payables ledger for Beta shows a balance due to Beta of
£4,140.
Investigation reveals the following:
1 A bank transfer made to Beta of £4,080 has not been recorded by Beta.
2 Alpha has not adjusted the payables ledger for a £40 cash discount taken by Alpha but
not allow by Beta as payment was not made on time.
3 Goods costing £380 returned by Alpha have not been recorded by Beta.
What discrepancy remains between Alpha's and Beta's records after accounting for these
items?
A. £9,310
B. £390
C. £310
D. £1,070
Question 10: Peri's customer unexpectedly took advantage of early settlement discount
for £300, paying £3,700 on an invoice which totalled £4,000. Peri's bookkeeper was not
sure where to record the discount taken and so posted the following journal entry:
DEBIT Cash at bank: 3,700
DEBIT Suspense account: 300
CREDIT Receivables: 4,000
Which of the following journal entries will remove the suspense account and correctly
record the discount?
A. Debit Receivables £300, Credit Suspense account £300
B. Debit Revenue £300, Credit Suspense account £300
C. Debit Cash at bank £300, Credit Suspense account £300
D. Debit Payables £300, Credit Suspense account £300
Question 11: Which three of the following differences between a company's cash at bank
account and its bank transaction report balance as at 30 November 20X3 would feature in
the bank reconciliation?
A. Cheques recorded and sent to suppliers before 30 November 20X3 but not yet
presented for payment.
B. Omission by the bank of a cash lodgement made by the company on 26 November
20X3
C. Bank charges
D. Cheques paid in before 30 November 20X3 but not credited by the bank until 3
December 20X3
E. A customer's cheque recorded and paid in before 30 November 20X3 but dishonoured
by the bank
Question 12: In performing a bank reconciliation exercise, which two of the following
require an entry in the cash at bank account?
A. Cheque paid in, subsequently dishonoured on the bank transaction report
B. Error by bank
C. Bank charges
D. Lodgements credited after date
E. Outstanding cheques not yet presented
Question 13: An error of principle would occur if plant and machinery purchased:
A. was omitted from the accounting records
B. was debited to the purchases account
C. was debited to the equipment account
D. was debited to the correct account but with the wrong amount
Question 14: Olivia's exception report showed £265 received in the business bank
account, and correctly recorded in cash at bank, could not be matched by the accounting
system and so had been posted to a suspense account. Olivia discovered that the receipt
was in respect of a sales invoice for £295 on which the customer had unexpectedly taken
a prompt payment discount of £30. The customer had paid within the required timeframe
and so was entitled to take the discount.
Which of the following journal entries should Olivia now post to correctly record the
receipt and clear the suspense account?
A. Debit Trade receivables £265, Credit Suspense account £265
B. Debit Revenue £30, Debit Suspense account £265, Credit Trade receivables £295
C. Debit Suspense account £265, Credit Trade receivables £265
D. Debit Trade receivables £295, Credit Revenue £30, Credit Suspense account £265
Question 15: Which of the following statements about bank reconciliations are correct?
1 All differences between the cash at bank account and the bank statement must be
corrected by means of a journal entry.
2 In preparing a bank reconciliation, cheques received from credit customers before the
period end but credited by the bank after the period end should reduce an overdrawn
balance in the bank statement.
3 Bank charges not yet entered in the cash at bank account should be dealt with by an
adjustment to the balance per the bank statement.
4 If a cheque received from a credit customer is dishonoured after date, a credit entry in
the cash at bank account is required.
A. 2 and 4
B. 1 and 4
C. 2 and 3
D. 1 and 3
Question 16: The following trade payables account contains some errors. All goods are
purchased on credit.
Trade payables
Purchases 945,800 Opening balance 384,600
Purchases (Discounts received from Cash at bank account 988,400
suppliers) 12,600
Trade receivables (contra) 4,200
Closing balance 410,400
1,373,000 1,373,000
What would be the closing trade payables balance when the errors have been corrected?
A. £325,200
B. £350,400
C. £333,600
D. £410,400
Question 17: An error of commission is one where:
A. a transaction has not been recorded
B. one side of a transaction has been recorded in the wrong account, and that account is
of a different class to the correct account
C. one side of a transaction has been recorded in the wrong account, and that account is
of the same class as the correct account
D. a transaction has been recorded using the wrong amount
Question 18: Owais's trial balance included a suspense account which had been
automatically opened by the computerised accounting system. Using the exception report,
the bookkeeper identified that the balance in the suspense account was due to the
following unmatched transactions:
1 A payment to a credit supplier for £135 related to an invoice for £120. The business
missed the deadline to take the early settlement discount it had expected to take.
2. A receipt of £90 from a credit customer who had unexpectedly (but appropriately)
taken an early settlement discount of £10.
3. Interest received in the business bank account of £70.
What is the balance on the suspense account?
A. Debit £25
B. Credit £25
C. Debit £65
D. Credit £65
Question 19: All Elmo's sales and purchases attract VAT at 20%. A customer has just
returned goods sold for £230 excluding VAT. The double entry for this transaction is:
A. Debit Trade receivables £276, Credit VAT £46, Credit Revenue £230
B. Debit Revenue £276, Credit Trade receivables £276
C. Debit Revenue £230, Debit VAT £46, Credit Trade receivables £276
D. Debit Trade receivables £230, Debit VAT £46, Credit Revenue £276
Question 20: Recording the purchase of stationery by debiting the computer equipment
account would result in:
A. A an overstatement of profit and an overstatement of non-current assets
B. an understatement of profit and an overstatement of non-current assets
C. an overstatement of profit and an understatement of non-current assets
D. an understatement of profit and an understatement of non-current assets D.
Question 21: In the trade payables of Magma plc, an invoice of £807 from Ferdinand has
been recorded as a credit note. After correcting this error, the trade payables balance will
be:
A. reduced by £807
B. reduced by £1,614
C. increased by £807
D. increased by £1,614
Question 22: Beta Ltd has calculated a draft gross profit of £150,000 and a draft net
profit of £83,000 for the year ended 31 December 20X3.
Two issues were then discovered:
1. Inventory costing £5,000, with a resale value of £7,500, was received into the
warehouse on 2 January 20X4 but had been included in the closing inventory amount at
31 December 20X3.
2. £10,000 relating to staff training costs was incorrectly capitalised as part of the
purchase cost of a new machine which had been purchased on 1 July 20X3. Beta Ltd
depreciates machinery on a straight-line basis at a rate of 20% per annum. Depreciation
should be included as an administrative expense in the year.
After correcting these issues, what amounts should Beta Ltd report for gross profit and
net profit?
Gross profit Net profit
A £142,500 £66,500
B £145,000 £69,000
C £145,000 £74,000
D £142,500 £65,500
Question 23: Ewan, a sole trader, has taken goods valued at £1,800 for his own use. This
has not been record in arriving at his draft profit figure. To record the drawings he:
Must adjust cost of sales by:
A. Debit £1,800
B. Credit £1,800
So his reported profit will:
C. Increase
D. Decrease
Question 24: The debit balance in Omar plc's cash at bank account at the year end is
£42,510. The following items appear in the bank reconciliation at the year end.
£
Unpresented cheques 2,990
Uncleared lodgements 10,270

A cheque received from a customer for £2,470 was returned unpaid by the bank before
the year end, but this has not been recorded in the cash at bank account.
What was the bank balance shown by the bank statement?
A. £37,700
B £47,320
C. £35,230
D £32,760
Question 25: Rochelle has a debit balance of £26 in Staint plc's payables ledger. Which
of the following would, alone, explain this balance?
A. Staint plc paid an invoice for £26 even though it had recorded a credit note that
Rochelle had issued in respect of this amount.
B. Staint plc bought and paid for some goods for £26 which it then returned, but Rochelle
has not yet issued a credit note.
C. Staint plc received a credit note for £26 from Rochelle but posted it to the account of
Nashalle.
D. Staint plc paid a cheque to Rochelle for £53 in respect of an invoice for £79.
Question 26: Catt plc has prepared a draft statement of profit or loss at 31 May 20X1
which shows a gross profit of £99,500. Catt plc has now discovered that at both the
beginning and the end of the period, one line of inventory, the Sungsa, has been included
at selling price: £1,240 at 31 May 20X1 and £3,720 at 1 April 20X0. The Sungsa is
always sold at a mark-up of 25% by Catt plc.
After correcting this error Catt plc's gross profit for the year to 31 May 20X1 is:
A. £99,996
B. £99,004
C. £98,880
D £100,120
Question 27: Mayo plc has prepared a draft statement of profit or loss that shows a net
profit of £75,000 for the year ended 30 April 20X5. Subsequently, the following matters
have been discovered.
1 A subscription notice for £1,000 was received in April 20X5 for the year to O April
20X6. Mayo plc pays the subscription in two equal instalments. The first instalment was
paid on 28 April 20X5 and posted to the cash at bank account and to admin expenses. No
other entries have been made.
2 Goods that cost £400 and sold at a gross margin of 75% were returned by Dandy Ltd on
30 April 20X5, after the inventory count had taken place. No credit note was issued.
Once these matters have been dealt with Mayo plc's net profit for the year ended 30 April
20X5 will be:
A. £75,400
B. £74,300
C. £75,100
D. £75,700
Question 28: Hood plc has a draft net profit of £540,000. It discovered the following
errors:
1. Repair costs of £6,600 incurred on 1 November 20X1 were debited to fixtures and
fittings. Hood plc depreciates fixtures and fittings at 25% per annum.
2. An early settlement discount of £1,785 taken unexpectedly, but appropriately, by a 2.
customer was debited to trade receivables and credited to sales.
On correction of these errors Hood plc's net profit will be:
A. £535,050
B. £531,480
C. £533,265
D. £536,430
Question 29: Net profit was calculated as being £10,200. It was later discovered that
capital expenditure of £3.000 had been treated as revenue expenditure, and revenue
receipts of £1.400 had been treated as capital receipts.
What is the net profit after correcting for these errors?
A. £5,800
B. £8,600
C. £11,800
D. £14,600
Question 30: On reviewing its cash at bank account and the transaction report
downloaded from its electronic banking system, Probla plc discovers the following
errors:
1. A cheque from a credit customer for £1,095 was recorded in trade receivables and cash
at bank account as £1,509.
2. A cheque to a credit supplier for £89 was entered incorrectly in trade payables and the
cash at bank account as £98.
What is the journal entry to correct these errors?
A. Debit Receivables £414, Credit Payables £9, Credit Cash £405
B. Debit Cash £405, Debit Payables £9, Credit Receivables £414
C. Debit Receivables £414, Debit Payables £9, Credit Cash £423
D. Debit Cash £423, Credit Receivables £414, Credit Payables £9
Question 31: In relation to trade payables at the year end of 30 April 20X1, Jitka plc has
discovered that:
1. a contra of £85 with trade receivables is required; and an early settlement discount of
£2,220, which was taken appropriately by a credit customer, was credited to revenue and
debited to trade payables. Jitka plc had not expected the customer to take the discount.
2 Before these discoveries, the balance on trade payables was £72,560. In its statement of
financial position as at 30 April 20X1 Jitka plc will have a figure for trade payables of:
A. £70,255
B. £74,695
C. £74,865
D. £76,915
Question 32: Topping plc's initial trial balance for the year ended 31 October 20X9 has
been prepared. It shows draft profit for the period of £58,147 and a credit balance on a
suspense account of £738 in respect of accrued expenses. The bookkeeper was unsure of
how to record the accrual and incorrectly debited £738 to prepayments and credited the
suspense account.
What is Topping plc's profit after tax when this error is corrected?
A. £59,623
B. £57,409
C. £58,885
D. £56,671
CHAPTER 7
Question 1: A business has opening inventory of £7,200 and closing inventory of
£8,100. Purchases for the year were £76,500, delivery inwards was £50 and delivery
outwards was £180.
What is the correct amount for cost of sales?
A. £75,550
B. £75,650
C. £75,830
D. £77,450
Question 2: Platoon plc is preparing its financial statements for the year ended 30 April
20X1, having extracted an initial trial balance.
It had no opening inventory, its purchases in the period were £686,880 and closing
inventories were valued as £18,647 on 30 April 20X1.
Which two of the following journal entries are required to record cost of sales and
closing inventories at 30 April 20X1?
A. Dr Cost of sales £686,880; Cr Inventories £686,880
B. Dr Purchases £686,880; Cr Cost of sales £686,880
C. Dr Cost of sales £686,880; Cr Purchases £686,880
D. Dr Inventories £18,647; Cr Cost of sales £18,647
E. Dr Cost of sales £18,647; Cr Inventories £18,647
F. Dr Inventories £18,647; Cr Purchases £18,647
Question 3: Muse plc began trading on 1 January 20X8 and had zero inventories at that
date. During 20X8 it made purchases of £455,000, incurred delivery inwards of £24,000,
and delivery outwards of £29,000. Closing inventories at 31 December 20X8 were
£52,000.
What is the correct amount for cost of sales for the year ended 31 December 20X8?
A. £456,000
B. £427,000
C. 432,000
D. £531,000
Question 4: Boomerang Co had 200 units in inventory at 30 November 20X1 valued at
£800. During December it made the following purchases and sales.
2/12: Purchased 1000 @ £5.00 each
5/12: Sold 700@ £7.50 each
12/12: Purchased 800 @ £6.20 each
15/12: Purchased 300 @ £6.60 each
21/12: Sold 400 @ £8.00 each
28/12: Sold 500@ £8.20 each
A. £4,460
B. £4,340
C. £4,620
D. £3,500
Question 5: The following information relates to Camberwell plc's year-end inventory
of finished goods.
Direct costs of Production Expected Expected
materials and overheads selling and selling price
labour incurred distribution
overheads
Inventories 2,470 2,100 480 5,800
category 1
Inventories 9,360 2,730 150 12,040
category 2
Inventories 1,450 850 190 2,560
category 3
13,280 5,680 820 20,400

At what amount should finished goods inventory be stated in the company's statement of
financial position?
A. £13,280
B. £18,960
C. £18,760
D. £19,580
Question 6: At its vear end Crocodile plc has 6,000 items of product A, and 2,000 of
product B. costing £10 and £5 respectively. The following information is available:
Product A - 500 are defective and can only be sold at £8 each
Product B - 100 are to be sold for £4.50 each with selling expenses of £1.50 each.
What figure should be shown in Crocodile plc's statement of financial position for
inventory?
A. £57,000
B. £68,950
C. £68,800
D. £70,000
Question 7: Indicate whether the following statements are true or false.
In a period of rising prices, applying the FIFO method to determine the cost of
inventories will give a lower gross profit figure than the AVCO method.
A True
B. False
Closing inventory is a debit in the statement of profit or loss.
C. True
D. False
Question 8: Mickey Ltd has calculated the cost of inventory using AVCO. At 1 June
20X8 there were 60 units in inventory at a cost of £12 each. On 8 June, 40 units were
purchased for £15 each, and a further 50 units were purchased for £18 each on 14 June.
On 21 June, 75 units were sold for £20.00 each.
What is the cost of closing inventory at 30 June 20X8?
A. £1,110
B. £1,010
C. £900
D. £1,125
Question 9: Morgan plc's direct production cost of each unit of inventory is £46.
Production overheads are £15 per unit. Currently the goods can only be sold if they are
modified at a cost of £17 per unit. The selling price of each modified unit is £80 and
selling costs are estimated at 10% of selling price.
At what amount should each unmodified unit of inventory be included in the statement of
financial position?
A. £48
B. £55
C. £64
D. £61
Question 10: Indicate whether the following statements are true or false.
A van for sale by a dealer is shown as a non-current asset in its statement of financial be
couonisod
A. True
B. False
Import duties are included in the cost of inventory.
C. True
D. False
Question 11: Which two of the following may be included when arriving at the cost of
finished goods inventory for inclusion in the financial statements of a manufacturing
company?
A. Delivery inwards
B. Delivery outwards
C. Depreciation of delivery vehicles
D. Finished goods storage costs
E. Production line wages
Question 12: Which of the following statements about inventory for the purposes of the
statement of financial position is correct?
A. AVCO and LIFO are both acceptable methods, under IAS 2, Inventories, of arriving at
the cost of inventories.
B. The cost of inventories of finished goods may include labour and materials cost only.
without including overheads.
C. Inventories should be included at the lowest of cost, net realisable value and
replacement cost.
D. It may be acceptable for the cost of inventories to be based on selling price less
estimated profit margin.
Question 13: A company's closing inventory at 31 January 20X3 amounted to £284,700.
The following items were included, at cost, in the total:
1 400 coats, which had cost £80 each and normally sold for £150 each. Owing to a defect
in manufacture, they were all sold after 31 January 20X3 at 50% of their normal price.
Selling expenses amounted to 5% of the proceeds.
2 800 skirts, which had cost £20 each. These too were found to be defective. Remedial
work in February 20X3 cost £5 per skirt, and selling expenses were £1 per skirt. They
were sold for £28 each.
What should be the inventory value after considering the above items?
A. £281,200
B. £282,800
C. £329,200
D. £284,700
Question 14: Sahara plc sells three products - Basic, Super and Luxury. The following
information was available at the year end.
Basic £ per unit Super £ per unit Luxury £ per unit
Original cost 6 9 18
Estimated selling 9 12 15
price
Selling and 1 4 5
distribution costs to
be incurred
Units Units Units
Units of inventory 200 250 150

What is the value of inventory at the year end?

A. £3,600
B. £4,700
C. £5,100
D. £6,150
Question 15: A company uses the FIFO method to arrive at its inventory cost. At 1 May
20X2 the company had 700 engines in inventory, valued at £190 each.
During the year ended 30 April 20X3 the following transactions took place:
20X2
1 July Purchased 500 engines at £220 each
1 November Sold 400 engines for £160,000
20X3
1 February Purchased 300 engines at £230 each
15 April Sold 250 engines for £125,000

What is the cost of the company's closing inventory of engines at 30 April 20X3?
A. £188,500
B. £195,500
C. £161,500
D. £167,500
Question 16: An inventory record card shows the following details.
February 1 50 units in inventory at a cost of £40 per unit
7 100 units purchased at a cost of £45 per unit
14 80 units sold
21 50 units purchased at a cost of £50 per unit
28 60 units sold

What is the cost of inventory at 28 February using the FIFO method?

A. £2,450
B. £2,500
C. £2,700
D. £2,950
Question 17: For the year ended 31 October 20X3 a company did a physical count of
inventory on 4 November 20X3, leading to an inventory cost at this date of £483,700.
Between 1 November 20X3 and 4 November 20X3 the following transactions took place:
1. Goods costing £38,400 were received from suppliers.
2. Goods that had cost £14,800 were sold for £20,000.
3. A customer returned, in good condition, some goods which had been sold to him in
October for £600 and which had cost £400.
4. The company returned goods that had cost £1,800 in October to the supplier, and
received a credit note for them.
What figure should be shown in the company's financial statements at 31 October 20X3
for closing inventory, based on this information?
A. £458,700
B. £505,900
C. £508,700
D. £461,500
Question 18: In preparing its financial statements for the current year, a company's
closing inventory was understated by £300,000.
What will be the effect of this error if it remains uncorrected?
A. The current year's profit will be overstated and next year's profit will be understated.
B. The current year's profit will be understated but there will be no effect on next year's
profit.
C. The current year's profit will be understated and next year's profit will be overstated.
D. The current year's profit will be overstated but there will be no effect on next year's
profit.
Question 19: At 30 September 20X3 the closing inventory of a company amounted to
£386,400.
The following items were included in this total at cost:
1 1,000 items which had cost £18 each. These items were all sold in October 20X3 for
£15 each, with selling expenses of £800.
2 Five items which had been in inventory for many years and which had been purchased
for £100 each, sold in October 20X3 for £1,000 each, net of selling expenses.
What figure should appear in the company's statement of financial position at 30
September 20X3 for inventory?
A. £382,600
B. £390,200
C. £368,400
D. £400,000
Question 20: The cost of inventory in the financial statements of Quebec Ltd for the
year ended 31 December 20X4 of £836,200 was based on an inventory count on 4
January 20X5.
Between 31 December 20X4 and 4 January 20X5, the following transactions took place:

Purchases of goods 8,600

Sales of goods (profit margin 30% on sales) 14,000
Goods returned by Quebec Ltd to a supplier 700

What adjusted figure should be included in the financial statements for inventories at 31
December 20X4?
A. £838,100
B. £842,300
C. £818,500
D. £834,300
Question 21: The closing inventory of Epsilon amounted to £284,000 at cost at the year
end of 30 September 20X1. This total includes the following two inventory lines.
1 500 items which had cost £15 each and which were included at £7,500. These items
were found to have been defective at the date of the statement of financial position.
Remedial work after that date cost £1,800 and they were then sold shortly afterwards for
£20 each. Selling expenses were £400.
2 100 items which had cost £10 each. After the date of the statement of financial position
they were sold for £8 each, with selling expenses of £150.
What amount should be shown in Epsilon's statement of financial position for inventory?
A. £283,650
B. £284,350
C. £284,650
D. £291,725
Question 22: Lamp makes the following purchases in the year ending 31 December
20X9.
Units £/unit Total
1 21.01.X9 100 12.00 1,200
2 30.04.X9 300 12.50 3,750
3 31.07.X9 40 12.80 512
4 01.09.X9 60 13.00 780
5 11.11.X9 80 13.50 1,080

At the year end 200 units are in inventory but 8 are damaged and are only worth £10 per
unit. These are identified as having been part of the 11.11.X9 delivery. Lamp operates a
FIFO system for arriving at the cost of inventory.
What is the correct figure for inventories at 31 December 20X9?:
A. £2,450
B. £2,525
C. £2,594
D. £2,700
Question 23: Bouncy Balls plc has 40 units of its special spongy balls in inventory as at
30 November 20X7. The product costs £5 per unit to manufacture and can be sold for
£15 per unit. Half of the units in inventory at the year end have been damaged and will
require rectification work costing £10 per unit before they can be sold. Selling costs are
£1 per unit.
What is the value of inventory at 30 November 20X7?
A. £160
B. £180
C. £200
D. £600
Question 24: The closing inventory of Stacks plc amounted to £58,200 excluding the
following two inventory lines:
1. 200 items which had cost £15 each. These items were found to be defective at the year-
end date. Rectification work after that date amounted to £1,200 for the batch, after which
they were sold for £17.50 each, with selling expenses totalling £300 for the batch.
2. 400 items which had cost £2 each. All were sold after the year-end date for £1.50 each,
with selling expenses of £200 for the batch.
What amount for inventory should be shown in the statement of financial position of
Stacks plc?
A. £62,000
B. £61,600
C. £60,600
D. £61,000
Question 52: Fenton plc is a manufacturer of PCs. The company makes two different
models, the M1 and M2, and has 100 of each in inventory at the year end.
Costs and related data for a unit of each model are as follows:
M1 M2
£ £
Costs to date 230 350
Selling price 400 500
Modification costs to 110 -
enable sale
Delivery outwards 65 75
What figure for inventory should be shown in the statement of financial position at the
end?
A. £57,500
B. £58,000
C. £65,000
D. £65,500
Question 26: When calculating the cost of inventory, which of the following shows the
correct methode arriving at cost?
 Include inward delivery Include production
costs overheads
A Yes No
B No Yes
C Yes Yes
D No No

Question 27: A trader who sets her selling prices by adding 50% to cost actually
achieved a mark-up of 45%.
Which of the following factors could account for the shortfall?
A. Sales were lower than expected.
B. The value of the opening inventories had been overstated.
C. The closing inventories of the business were higher than the opening inventories.
D. Goods taken from inventories by the proprietor were recorded by debiting drawings
and crediting purchases with the cost of the goods. X
Question 28: The gross profit margin is 20% where:
A. cost of sales is £100,000 and sales are £120,000
B. cost of sales is £100,000 and sales are £125,000
C. cost of sales is £80,000 and gross profit is £16,000
D. cost of sales is £80,000 and sales are £96,000
Question 29: Which of the following factors could cause a company's gross profit
margin to fall below the expected level?
A. Overstatement of closing inventories
B. The incorrect inclusion in purchases of invoices relating to goods supplied in the
following period
C. The inclusion in sales of the proceeds of sale of non-current assets
D. Increased cost of delivery borne by the company on goods sent to customers
Question 30: An extract from a business's statement of profit or loss is as follows:
£ £
Revenue 115,200
Opening inventory 21,000
 Purchases 80,000
Closing inventory (5,000)
(96,000)
19,200

What mark-up has the business applied?

A. 14.8%
B. 16.7%
C. 20.0%
D. 83.3%
Question 31: Franz plc is a manufacturer. Its 12-month reporting period ends on 31 July
and it adopts the average cost (AVCO) method of inventory usage and valuation. At 1
August 20X4 it held inventory of 2,400 units of the material Zobdo, valued at £10 each.
In the year to 31 July 20X5 there were the following inventory movements of Zobdo:
14 November 20X4 Sales 900 units
28 January 20X5 Purchase 1,200 units for £20,100
7 May 20X5 Sales 1,800 units

What was the cost of Franz plc's closing inventory of Zobdo at 31 July 20X5?
A. £11,700
B. £9,000
C. £15,075
D. £35,100
Question 32: For many years Wrigley plc has experienced rising prices for raw material
X, and has kept constant inventory levels. It has always used the AVCO method to arrive
at the cost of inventory.
What would the result be if Wrigley plc had always used the FIFO method in each
successive year's financial statements?
A. Lower cost of sales and higher closing inventory
B. Lower cost of sales and lower closing inventory
C. Higher cost of sales and lower closing inventory
D. Higher cost of sales and higher closing inventory
Question 33: During the year ended 31 March 20X4 Boogie plc suffered a major fire at
its factory in which inventory that had cost £36,000 was destroyed. An insurance
payment of 80% of cost has been agreed but not received at the year end.
Which of the following correctly completes the journal entry too take account of these
matters?
A. Debit Administrative expenses £36,000, Credit Purchases £28,800, Credit Revenue
£36,000
B. Debit trade and other receivables with £28,800 and Credit Purchases £36,000
C. Debit Administrative expenses £36,000, Credit Purchases £36,000, Credit Other
income £28,800
D. Debit Administrative expenses £7,200, Credit Purchases £36,000
Question 34: Percy plc started trading on 1 April 20X4. The cost of inventory shown in
Percy plc's statement of financial position at 31 March 20X5, using the AVCO basis, was
£6,420. Had the FIFO basis been used, the cost would have been £8,080.
What is the effect of adopting the FIFO basis on Percy plc's financial statements for the
year ended 31 March 20X5?
A. increase profits and decrease current assets by £1,660
B. increase current assets and decrease losses by £1,660
C. increase capital and decrease current assets by £1,660
D. increase current assets and increase losses by £1,660 000
Question 35: Kane Ltd has completed its inventory count for the period ended 30 June
20X8. The inventory count concluded that there were inventories costing £32,340 of
which £1. 280 were found to be damaged and so had a net realisable value of nil.
What is the journal entry to record closing inventories at 30 June 20X8?
A. Dr Cost of sales £32,340, Cr Inventories £32,340
B. Dr. Inventories £32,340, Cr Cost of sales £32,340
C. Dr Cost of sales £31,060, Cr Inventories £31,060
D. Inventories £31,060, Cr Cost of sales £31,060
CHAPTER 8
Question 1: At 30 September 20X4, Mathieson plc's allowance for receivables was
£19,500. At 30 September 20X5 it was decided to write off irrecoverable debts totalling
£6,000 and to decrease the allowance for the remaining receivables to £15,000.
What is the charge or credit to the statement of profit or loss in respect of irrecoverable
debts for the year ended 30 September 20X5?
A. £1,500 credit
B. £1,500 debit
C. £21,000 debit
D. £21,000 credit
Question 2: At 30 June 20X1 Cameron plc has decided to write off two debts of £1,300
and £2,150, respectively and to make an allowance of £6,631 against the remaining trade
receivables balance. The balance on this allowance at 1 July 20X0 was £8,540.
What is Cameron plc's irrecoverable debts expense for the year to 30 June 20X1?
A. £1,541
B. £1,909
C. 3,450
D. £5,359
Question 3: Enigma plc has reduced its allowance for receivables by £600, Indicate
whether the following statements are true or false.
This will increase gross profit by £600.
A True
B False
This will increase net profit by £600.
C True
D False
Question 4: Disaster plc's trial balance shows trade receivables of £50,000. However, no
adjustment has been made for the following items.
1 £3,250 from J Crisis & Sons who have gone into liquidation. The amount is considered
irrecoverable.
2 An increase in the allowance for receivables of £2,000.
3 Cash received from P Chaos of £2,500 which had previously been written off.
What is the revised trade receivables account balance after posting the above
adjustments?
A. £50,500
B. £50,200
C. £46,750
D. £49,250
Question 5: At 28 February 20X4, a company's allowance for receivables was £38,000.
At 28 February 20X5 it was decided to write off £28,500 of receivables and to increase
the allowance for the remaining receivables to £42,000.
What is the irrecoverable debts expense in the statement of profit or loss for the year
ended 28 February 20X5?:
A. £42,000
B. £28,500
C. £70,500
D. £32,500
Question 6: Arrow plc had a receivables balance of £7,050 at 31 December 20X0.
During the vear f500 9 was received in respect of a debt previously written off, and an
allowance for receivable of £495 was considered necessary. The allowance brought down
as at 1 January 20X0 was £1,000.
What is the correct action for Arrow plc to take respect of irrecoverable debts for the
ended 31 December 20X0?
A. charge £5
B. charge £1,005
C. write back £5
D. write back £1,005
Question 7: During 20X5 Bow plc received £500 from a customer in respect of a balance
that had previously been written off, and reduced its allowance for receivables to £100.
The allowance brought down as at 1 January 20X5 was £1,000. At the year end the
dishonour of a cheque received for £280 needs to be accounted for, and the debt related
to it needs to be written off.
What is the irrecoverable debts debit or credit in the statement of profit or loss for the
year ended 31 December 20X5?
A. £880 debit
B. £780 debit
C. £1,120 credit
D. £1,300 credit
Question 8: At 31 December 20X2 a company's receivables totalled £400,000 and an
allowance for receivables of £50,000 had been brought forward from the year ended 31
December 20X1.
It was decided to write off debts totalling £38,000 and to adjust the allowance for
receivables to £36,200.
What is the irrecoverable debts expense that should appear in the company's statement of
profit or loss for the year ended 31 December 20X2?
A. £36,200
B. £51,800
C. £38,000
D. £24,200
Question 9: At 1 July 20X2 the receivables allowance of Quaint plc was £18,000.
During the year ended 30 June 20X3 debts totalling £14,600 were written off. It was
decided that the receivables allowance should be £16,000 as at 30 June 20X3.
What amount should appear in Quaint plc's statement of profit or loss for irrecoverable
debts expense for the year ended 30 June 20X3?
A. £12,600
B. £14,600
C. £16,600
D. £30,600
Question 10: At 1 May trade receivables were £31,475. During May, sales of £125,000
were made on credit. Receipts from credit customers amounted to £122,500 and
settlement discounts of £550 that were not expected to be taken at the date of invoice
were taken by credit customers. Credit notes of £1,300 were issued to customers.
What is the closing balance on trade receivables at 31 May?
A. £34,725
B. £33,225
C. £32,125
D. £35,825
Question 11: Panther plc had an allowance for receivables at 1 July 20X1 of £450.
Panther plc wants to write off a receivables balance of £800 as irrecoverable and increase
the allowance for receivables to £2,965.
As well as crediting trade receivables with £800, what other entries must be made to
record the required adjustments in Panther plc's accounting records?
Debit Credit
A Irrecoverable debts expense £3,315 Allowance for receivables £2,515
B Allowance for receivables £2,515 Irrecoverable debts expense £3,315
C Irrecoverable debts expense £3,765 Allowance for receivables £2,965
D Allowance for receivables £2,965 Irrecoverable debts expense £3,765

Question 12: The following trade receivables account has been prepared by an
inexperienced bookkeeper and may contain errors of principle.
TRADE RECEIVABLES
20X3 £ 20X3 £
1 Jan Balance 284,680 31 Dec Cash at bank 179,790
31 Dec Sales 194,040 Contras with trade payables 800
Sales (discounts given to customers) Balance 303,590
3,660
Irrecoverable debts 1,800
484,180 484,180

An outstanding debt of £4,920 at 31 December 20X3 is to be written off.

What is the correct figure for receivables that should appear on the statement of financial
position at 31 December 20X3?
A. £289,350
B. £291,350
C. £287,750
D. £297,590
Question 13: At 30 June 20X4 a company's allowance for receivables was £39,000. At
30 June 20X5 trade receivables totalled £517,000. It was decided to write off debts
totalling £37,000 and to adjust the allowance for receivables to £24,000.
What figure should appear in the statement of profit or loss for irrecoverable debts
expense for the year ended 30 June 20X5?
A. £52,000
B. £22,000
C. £27,000
D. £23,850
Question 14: At 1 January 20X5 a company had an allowance for receivables of
£18,000.
At 31 December 20X5 the company's trade receivables were £458,000.
It was decided:
(a) to write off debts totalling £28,000 as irrecoverable; and
(b) to adjust the allowance for receivables to £21,500.
What amount for irrecoverable debts should be charged in the company's statement of
profit or loss for the year ended 31 December 20X5?
A. £49,500
B. £31,500
C. 32,900
D. £50,900
Question 15: At 1 July 20X5 a company's allowance for receivables was £48,000.
At 30 June 20X6, receivables amounted to £838,000. It was decided to write off £72,000
of these debts and adjust the allowance for receivables to £60,000.
What are the final amounts for inclusion in the company's statement of financial position
at 30 June 20X6?
Receivables Allowance for Net balance
receivables
A 838,000 60,000 778,000
B 766,000 60,000 706,000
C 766,000 108,000 658,000
D 838,000 108,000 730,000

Question 16: The following issues arose while Atkins Ltd was preparing its financial
statements for the year to 31 December 20X2.
1. £350 was received in December 20X2 in respect of a debt which had been written off
in the previous year. The receipt was correctly included in the cash at bank account, but
the computerised accounting system was unable to match this transaction and posted the
other side of the entry to a suspense account.
2. The directors determined that that the allowance for receivables should be reduced 2.
from £900 to £800 at the year end.
What journal entries should Atkins Ltd make to account for the above issues?
A. Debit Irrecoverable debts expense £450, Credit Suspense £350, Credit Allowance for
receivables £100
B. Debit Allowance for receivables £800, Credit Suspense £350, Credit Irrecoverable
debts expense £450
C. Debit Irrecoverable debts expense £450, Debit Suspense £350, Credit Allowance for
receivables £800
D. Debit Allowance for receivables £100, Debit Suspense £350, Credit Irrecoverable
debts expense £450
Question 17: If Poppy plc reduces its allowance for receivables by £300, which of the
following statements is correct?
A. Current assets decrease by £300
B. Current liabilities decrease by £300
C. Gross profit increases by £300
D. Net profit increases by £300
Question 18: At 31 December 20X4 a company's trade receivables totalled £864,000 and
the allowance for receivables was £48,000.
It was decided that debts totalling £13,000 were to be written off, and the allowance for
receivables adjusted to £42,550.
Which of the following journal entries would correctly record these adjustments?
A. DEBIT Irrecoverable debts expense £18,450
CREDIT Allowance for receivables £18,450
B. DEBIT Irrecoverable debts expense £7,550
DEBIT Allowance for receivables £5,450
CREDIT Trade receivables £13,000
C. DEBIT Irrecoverable debts expense £7,550
CREDIT Allowance for receivables £7,550
D. DEBIT Irrecoverable debts expense £55,550
CREDIT Allowance for receivables £42,550
CREDIT Trade receivables £13,000
Question 19: A business has extracted its initial trial balance as at 31 December 20X7 as
follows: Trial balance (extract)
Trial balance
Trade receivables: £441,500 (Dr.)
Allowance for receivables at 1 January 20X7 :£20,300 (Cr.)
A balance of £2,400 is to be written off as irrecoverable and the allowance for receivables
is to be £21,955.
What is the net trade receivables balance to be presented in the statement of financial
position at 31 December 20X7?
A. £417,145
B. £396,845
C. £419,545
D. £421,94
Question 20: At 1 January 20X1 Urb plc received £3,000 in full settlement of a debt that
had previously been written off.
At 31 December 20X1 Urb plc determined that a balance of £3,600 owed by a customer
was irrecoverable and should be written off.
Urb plc also decided to decrease its allowance for receivables from £2,200 to £1,500 on
31 December 20X1.
What amount should Urb plc charge or credit for irrecoverable debts in the statement of
profit or loss for the year ended 31 December 20X1?
A. £1,300 debit
B. £1,300 credit
C. £100 debit
D.£100 credit
Question 21: At this year end of 28 February 20X6 Stope plc has in its accounting
records a figure for trade receivables of £47,533, and an allowance for receivables of
£500 at 28 February 20X5.
One customer, Invincible plc, has experienced financial difficulties and has now gone
into administration. Its balance of £10,380 at 28 February 20X6 is deemed to be
irrecoverable and should be written off.
The directors of Stope plc also wish to increase the allowance for receivables to £850.
What will Stope plc record in its accounting records as at 28 February 20X6 in respect of
the above transactions?
A. Allowance for receivables of £850 and a charge in respect of irrecoverable debts of
£10,380
B. Allowance for receivables of £1,350 and a charge in respect of irrecoverable debts of
£10,730
C. Allowance for receivables of £1,350 and a charge in respect of irrecoverable debts of
£10,380
D. Allowance for receivables of £850 and a charge in respect of irrecoverable debts of
£10,730
Question 22: Moon plc's initial trial balance as at 31 October 20X1 has been extracted
and shows the following:
Trial balance (extract)
Trial balance
Allowance for receivables as at 1 November 20X0 £6,546 (Cr.)
Trade receivables 251,760 (Cr.)
As at 31 October 20X1 Grundle's balance to Moon plc of £1,860 is irrecoverable. It is
also decided that the allowance for receivables should be increased to £8,420
What amount should Moon plc include as its net trade receivables figure in the statement
of financial position as at 31 October 20X1?
A. £235,024
B. £241,480
C. £243,340
D. £236,794
Question 23: Meridi plc has an allowance for receivables of £500 on 1 July 20X7.
During the year to 30 June 20X8 the following events take place:
1. A cheque for £92 was recorded and correctly banked, but was returned unpaid on 29
June 20X8, No entries have yet been made for this return. The directors wish to write the
debt off as irrecoverable.
2. An allowance for receivables of £475 is required at the year end.
3. A cheque received for £58 in respect of an amount written off in January 20X7 was
recorded in the cash at bank account but the suspense account was used to record the
other side of the transaction.
What journal entries are required as at 30 June 20X8 to account for the above issues?
A. Debit Cash at bank £92, Credit Suspense £58, Credit Irrecoverable debts expense £9,
Credit Allowance for receivables £25
B. Debit Suspense £58, Debit Receivables £92, Credit Irrecoverable debts expense £33,
Credit Cash at bank £92, Credit Allowance for receivables £25
C. Debit Suspense £58, Debit Irrecoverable debts expense £67, Debit Allowance for
receivables £25, Credit Cash at bank £92, Credit Receivables £58
D. Debit Suspense £58, Debit Irrecoverable debts expense £9, Debit Allowance for
receivables £25, Credit Cash at bank £92