The document contains 14 multiple choice questions related to accounting for various transactions including errors, VAT, discounts, and adjustments. The questions cover topics such as calculating profit after adjustments, identifying the effect of errors on financial statements, identifying appropriate double-entry journal entries, and determining correct account balances.
The document contains 14 multiple choice questions related to accounting for various transactions including errors, VAT, discounts, and adjustments. The questions cover topics such as calculating profit after adjustments, identifying the effect of errors on financial statements, identifying appropriate double-entry journal entries, and determining correct account balances.
The document contains 14 multiple choice questions related to accounting for various transactions including errors, VAT, discounts, and adjustments. The questions cover topics such as calculating profit after adjustments, identifying the effect of errors on financial statements, identifying appropriate double-entry journal entries, and determining correct account balances.
The document contains 14 multiple choice questions related to accounting for various transactions including errors, VAT, discounts, and adjustments. The questions cover topics such as calculating profit after adjustments, identifying the effect of errors on financial statements, identifying appropriate double-entry journal entries, and determining correct account balances.
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
You are on page 1/ 4
1 A business statement of profit or loss and other comprehensive income for the year ended 31 December 20X4 showed
a net profit of $83,600. It was later found that $18,000 paid for the purchase of a motor van had been debited to motor expenses account. It is the company's policy to depreciate motor vans at 25 per cent per year, with a full year's charge in the year of acquisition. What would the net profit be after adjusting for this error? A $106,100 B $70,100 C $97,100 D $101,600
2. The accountant at Investotech discovered the following errors after calculating the company's profit for 20X3: (a) A non-current asset costing $50,000 has been included in the purchases account (b) Stationery costing $10,000 has been included as closing inventory of raw materials, instead of stationery expenses What is the effect of these errors on gross profit and net profit? A Understatement of gross profit by $40,000 and understatement of net profit by $30,000 B Understatement of both gross profit and net profit by $40,000 C. Understatement of gross profit by $60,000 and understatement of net profit by $50,000 D Overstatement of both gross profit and net profit by $60,000
3. 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 Receivables 7,000 Trade payables 3,000 Bank loan 15,000 Allowance for 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 (2 marks) 4 Beta Co has total assets of $650,000 and profit for the year of $150,000 recorded in the financial statements for the year ended 31 December 20X3. Inventory costing $50,000, with a resale value of $75,000, was received into the warehouse on 2 January 20X4 and included in the inventory value that was recorded in the financial statements at 31 December 20X3. What would the total assets figure in the Statement of Financial Position, and the adjusted profit for the year figure, be after adjusting for this error? Total assets (SOFP) Profit for year A $700,000 $200,000 B $600,000 $100,000 C $725,000 $225,000 D $600,000 $75,000
5 Riga Ltd offers a 4% early settlement discount to any customer who pay within 7 days of receiving an invoice. Riga Ltd sold goods priced at £1,500 on credit to a customer who is expected to take advantage of the early settlement discount.
What is the double-entry to record this transaction (ignore VAT)?
6 Tallinn Ltd purchased goods on credit from Oslo Ltd. When Tallinn Ltd recorded the purchase invoice in its ledgers, it did not expect to take advantage of the early settlement discount terms.However, Tallinn Ltd has now decided to take advantage of the early settlement discount terms and make early payment to Oslo Ltd.
What double-entry should Tallinn Ltd use to record the payment made to Oslo Ltd (ignore VAT)?
Debit: Cash at bank, Debit: Purchases, Credit: Trade payables
Debit: Trade payables, Debit: Purchases, Credit: Cash at bank Debit: Trade payables, Credit: Cash at bank, Credit: Purchases Debit: Trade payables, Credit: Cash at bank
7 Virgil made a sale on credit at a list price of £10,000, an amount which was then subject to trade discount of 10%. In addition, settlement discount of 5% was available to the customer if they paid within 14 days of receipt of invoice. At the point the sale, Virgil did not believe that the customer would take advantage of the early settlement discount terms.
What accounting entries would Virgil make in the nominal ledger to record this transaction (Ignore VAT)?
Debit Receivables £8,640, Credit Revenue £8,640
Debit Receivables £9,600, Credit Revenue £9,600 Debit Receivables £9,000, Credit Revenue £9,000 8. Joe made sales of £33,300, excluding VAT and purchases of £33,300 including VAT. All sales and purchases are on credit and subject to VAT at 20%
What amount was recorded for receivables?
£33,300 £39,960 £27,750 £6,660
9 Michael purchases goods for resale on credit from Julie at a cost of £3,240, inclusive of VAT at 20%. Both Michael and Julie are required to account for VAT.
What accounting entries are required for Michael to record this transaction?
10 Astral Ltd sold goods to Cosmic Ltd priced at £900. Astral Ltd offered Cosmic Ltd a discount of 4% for early settlement within 7 days of invoice date. At the point of sale, Astral Ltd did not expect Cosmic Ltd to take advantage of the early settlement discount terms. However, Cosmic Ltd did subsequently pay within 7 days of invoice date to take advantage of the early settlement discount terms.
What accounting entries should Astral Ltd post to account for the settlement of the amount due from Cosmic Ltd (Ignore VAT)?
11 Goods invoiced at £36 had been returned by Crabby Ltd to the supplier for a full refund. The only accounting entries made for the return were to debit the purchases account with £63 and credit the suspense account with £63.
Which of the following journal entries should be made to correctly record the return in the nominal ledger?
Dr Suspense £63, Cr Purchases £63
Dr Suspense £63, Cr Trade Payables £63 Dr Suspense £63, Dr Trade payables £36, Cr Purchases £99 Dr Trade payables £27, Cr Purchases £27
12 Marie’s draft accounts show a loss of £25,000 for the year. Upon investigation, you discover the following:
1. A purchase of plant and equipment on the last day of the year costing £3,000 had had been incorrectly recorded as a repair expense.
2. Cash of £800, received in respect of a debt written off last year had been credited to receivables.
3. Closing inventory includes items costing £2,000 which were sold and delivered to the customer on the year end date.
What is the adjusted loss for the year?
£25,200 £23,200 £30,800 £26,800 13 The VAT account in Britney Ltd's nominal ledger currently shows output tax and input tax for the quarter at £232,618 and £142,319 respectively. A review of the account highlights the following:
1. £5608 of VAT on invoices received has been posted to output tax
2. VAT of £4201 on sales has been posted to the debit of the VAT account 3. VAT on a purchase invoice with a total invoice value (including VAT) of £126 has not been recorded at all.
