FA1 Recording Financial Transactions M.M NEW BOOK A4

PAGE 1
Accounting equation
Question 1: Which of the items in the following list are liabilities and which of them are assets?
a) Loan to C Shirley
b) Bank overdraft
c) Fixtures and fittings
d) Computers
e) We owe a supplier for inventory
f) Warehouse we Own
Question 2: Classify the following items into liabilities and which of item are assets?
a) Motor Vehicles
b) Premises
c) Accounts payable for inventory
d) Inventory
e) Accounts receivable
f) Owing to bank
g) Cash in hands
h) Loan from David
i) Machinery
a) Computer for office use
b) Loan to James
c) Account payable
d) Stationary
e) Cash in bank
f) Trade payable
g) Fixtures and fittings
a) Loan from bank
b) Premises
c) Plant
d) overdraft
e) Inventory
f) Office
g) Loan from Charles
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Question 5: State which of the following are wrongly classified:

Assets Liabilities
Loan from Charlie Inventory
Cash In Hand Accounts receivable
Machinery Money owing to bank
Accounts Payable
Premises
Motor
Question 6: State which of the following are shown under the wrong headings?
Assets Liabilities
Cash at bank Loan from J Graham
Fixtures Machinery
Accounts payable Motor vehicles
Building
Inventory
Accounts receivable
Capital
Question 7: Complete the gaps in the following table?

Assets Liabilities Capital
£ £ £
a) 12,500 1,800 ?
b) 28,000 4,900 ?
c) 16,800 ? 12,500
d) 19,600 ? 16,450
e) ? 6,300 19,200
f) ? 11,650 39,750
Question 8: Complete the gaps in the following tables:

£ £ £
a) 55,000 16,900 ?
b) ? 17,200 34,400
c) 36,100 ? 28,500
d) 119,500 15,400 ?
e) 88,000 ? 62,000
f) ? `49,000 110,000
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Question 9: Complete the gaps in the following table

£ £ £
a) 180,750 3,700 ?
b) 765,550 200,500 ?
c) ? 7,800 115,000
d) ? 40,850 67,800
e) 450,830 ? 320,000
f) 287,650 ? 150,540
Question 10: Complete the gaps in the following table

£ £ £
a) 120,000 27,600 ?
b) 24,300 7,900 ?
c) 18,400 ? 17,500
d) 25,000 ? 20,450
e) ? 87,300 119,200
f) ? 11,450 400,750
Question 11: Draw up G putty’s Accounting equation from the following information as at 31 December
2008:
£
Capital 9,700
Accounts receivable 1,200
Van 3,800
Accounts payable 4,400
Fixtures 1,800
Inventory 4,500
Cash at bank 2,800
Question 12: Draw up M Kelly’s Accounting equation as at 30 June 2006 from the following items:
£
Capital 10,200
Equipment 3,400
Accounts Payable 4,100
Inventory 3,600
Accounts Receivable 4,500
Cash at bank 2,800
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Question 13: Draw up B Blake’s accounting equation as at 30 June 2006 from the following items:
£
Cash and Bank 570
Capital 20,000
Receivables 3,700
Inventory 8,900
Cash at bank 7,650
Fixtures 6,500
Payables 3,200
Loan 4,120
Question 14: Draw up S Robin accounting equation as at 30 June 2006 from the following items:
£
Capital 36,843
Account Receivables 1,500
Inventory 8,300
Cash 4,700
Account Payables 3,457
Land 50,000
Building 175,000
Loan 200,000
Van 800
Question 15: Identify effects on account head

a. We pay a creditor £70 in cash
b. Bought fixtures £200 paying by cheque.
c. Bought goods on credit £275
d. The proprietor introduces another £500 in cash into business
e. J walker lends the business £200 in cash
f. A debtor pays us £50 by cheque
g. We return goods costing £60 to supplier whose bill we had not paid
h. Bought additional shop premises paying £5,000 by cheque.
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Question 16: Identify effect on account heads

a. Bought a van on credit £8,700
b. Repaid by cash a loan owed to F Duff 10,000
c. Bought goods for £1,400 paying by cheque.
d. The owner puts further £4,000 cash into the business.
e. A debtor returns to us goods worth £150. We agree to make an allowance for them.
f. Bought good on credit £760
g. The owner takes out £200 cash for his personal use.
h. We pay creditor £1,150 by cheque

a. Brought lorry for cash
b. Paid creditor, T Lake, by cheque.
c. Repaid P Logan’s loan by cash.
d. Sold lorry for cash.
e. Bought office machinery on credit from Ultra Ltd.
f. A debtor, A hill, pays us by cheque
g. A debtor, J Cross, pays us by cheque
h. Proprietor puts a further amount into the business by cheque
i. A loan of £200 in cash in received from L Lowe.
j. Paid a creditor, D lord, by cash.
Question 18: Complete the following table:

a. Goods bought on credit from J Reid.
b. Goods sold on credit to B Perkins.
c. Vans bought on credit from H Thomas
d. Goods sold a cheque being received immediately
e. Goods sold for cash.
f. Goods purchased by us returned to supplier, H Hardy.
g. Machinery sold for cash
h. Goods sold returned to us by customer , J nelson
i. Goods bought on credit from D Simpson.
j. Goods we returned to H Forbes
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a) Started business with £16,000 in the bank.
b) Bought Van paying by cheque £6,400.
c) Bought office fixtures £900 on credit from old Ltd.
d) Brought van on credit from carton cars Ltd £7,100
e) Took £180 out of the bank and put it into the cash till
f) Bought office fixtures paying by cash £120
g) Paid carton cars Ltd a cheque for £7,100
h) A loan of £500 cash is received from B berry.
i) Paid £400 of the cash in hand in to the bank account
j) Bought more office fixtures paying by cheque £480
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Double Entries
Question 1
a) Started business with £15,000 in the bank
b) Bought office furniture by cheque £1,200
c) Bought machinery £1,400 on credit from Trees Ltd.
d) Bought a van paying by cheque £6,010
e) Sold some of the office furniture – not suitable for the business- for £150 on credit to D
Twig & Sons.
f) Paid the amount owing to Trees Ltd £1,400 by cheque.
g) Received the amount due from D Twig & Sons £150 in cash.
h) Bought more machinery by cheque £650.
Question 2
a) Started business with £12,000 in cash.
b) Paid £11,700 of the opening cash into a bank account for the business.
c) Bought office furniture on credit from Dream Ltd for £1,900
d) Bought a van paying by cheque £5,250
e) Bought equipment from Pearce & sons on credit £2,300
f) Returned faulty office furniture coasting £120 to Dream Ltd.
g) Sold some of the equipment for £200 cash
h) Paid amount owing to Dream Ltd £1,780 by cheque
i) Took £130 out of the bank and added to cash
j) F Brown lent us £4,000 – giving us the money by cheque.
Question 3
a) Started business with £750 cash and £9,000 in the bank.
b) Received a loan of £2,000 from B Blane by cheque.
c) Bought a computer for cash £600
d) Bought display equipment on credit from Clear count Ltd £420
e) Took £200 out of the bank and put in the cash till.
f) Repaid part of Blane’s loan by cheque £500
g) Paid amount owing to Clear count Ltd £420 by cheque
h) Repaid part of Blane’s loan by cash £250
i) Bought a printer on credit from F Jones for £200.
Question 4
a) Started in balance with £8,000 in the bank.
b) Bought goods on credit from the following persons: L Frank £550; G Byers £290; P Lee
£610;
c) Cash sales £510.
d) Paid wages in cash £110.
e) Sold goods on credit to; J Snow £295; K Park £360; B Tyler £640.
f) Bought goods for cash £120.
g) Bought goods on credit from; G Byers £410; P Lee £1,240.
h) Paid wages in cash £110.
i) Sold goods on credit to; K Park £610; B Tyler £205.
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j) Bought shop fixtures on credit from stop Ltd. £740.

k) Paid G Byers by cheque £700.
l) We returned goods to P Lee £83.
m) Paid stop Ltd. a cheque for £740.
n) B Tyler paid us his account by cheque £845.
o) We returned goods to L Frank £18.
p) G prince lent us £1,000 by cash.
q) Bought a van paying by cheque £6,250.
Question 5
a) Started in business with £15,000 in the bank.
b) Bought goods on credit from: J Small £290; F Brown £1,200; T Rae £610; R Charles £530.
c) Cash sales £610.
d) Paid rent by cheque £175.
e) Paid business rates by cheque £130.
f) Sold goods on credit to: T Potts £85: J Field £48; T Gray £1,640.
g) Paid wages by cash £290.
h) We returned goods to: J Small £18; R Charles £27.
i) Bought goods on credit from: R Charles £110; t Rae £320; F Jack £165.
j) Goods were returned to us by: J Field £6; T Potts £14.
k) Bought vans on credit from Turnkey Motors £4,950.
l) We paid the following by cheque: J Small £272; F Brown £1,200; T Rae £500.
m) Bought another van paying by cheque immediately £6,200.
n) Received a loan of £750 cash from B Bennet.
o) Received cheques from: T Potts £71; J Field £42.
p) Proprietor brings a further £900 into the business, by a payment into the business bank
Question 6
1. Started business with 150,000 in cash and 25,000 in bank.
2. Deposited 100,000 from the cash in the bank.
3. Sold goods to Mr. A Rs 1000.
4. Received Debit Note from Mr. A Rs 150.
5. Paid rent expense Rs 100.
6. Cash sales Rs. 150.
7. Received Rs 500 from Mr. A as full settlement.
8. Purchased goods Rs. 900 from Mr. B
9. Goods returned by us to B Rs 200.
10. Received rent income Rs 150.
11. Paid electricity expense Rs 50.
12. Received commission income Rs 100.
13. Cash purchases Rs 150.
14. Purchased Machinery Rs 6,000.
15. Purchased furniture Rs 1,000.
16. Paid Mr.B amount due to him.
17. Owner with draws Rs 100.
18. Paid telephone expense Rs 50.
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19. Sales to Mr.C Rs 1000.

20. Issued Credit Note Rs 500 to Mr. C.
21. Received Rs 300 as full settlement.
22. Bought goods gross Rs 500. Received trade discount of Rs 100.
23. Purchased goods from Mr. D Rs 1000.
24. Debit Note issued Rs 150 to Mr. D
25. Paid Mr. D as full settlement Rs 500.
26. Owner invested Rs 1000 in the business.
27. Sold some office furniture for Rs 100.
28. Paid telephone expense Rs 150.
29. Took loan of Rs 2000 from E.
30. F lent us Rs 600.
31. Repaid Rs 1000 to E.
32. Received commission income Rs 150.
33. Sold goods on credit to J Rs 2000.
34. Received the amount from J after deducting cash discount of Rs 50.
35. Purchased Merchandise inventory on cash Rs 200.
36. Purchased goods from I Rs 500.
37. Received credit note from I Rs 100.
38. Paid to I Rs 50 as full settlement.
39. Sold goods to G Rs 190.
40. Issued credit note Rs 50.
41. Received Rs 100 as full settlement.
42. Purchased goods from K Rs.290.
43. Purchase returns to K Rs 100.
44. Paid the amount owing to K.
45. Owner invested Rs 100 in the business.
46. Purchased car Rs 50.
47. Sold some machinery Rs 40.
48. Paid sundry expense Rs 120.
49. Purchased goods for cash Rs 160.
50. Sold goods for cash Rs 100.
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T – Accounts / Ledgers & Trial Balance
Question 1
a) Started in balances with capital in cash of £800 and £2,200 in the bank.
b) Bought goods on credit from the following persons: J Ward £610; P Green £214; M Taylor, £174;
S Gemmill £345; P Tone £542.
c) Sold goods on credit to; J Sharpe £340; G Boycott £720; F Titmus 1, 152.
d) Paid rent by cash £180.
e) J Sharpe paid us his account by cheque £340.
f) F Titmus paid us £1,000 by cheque.
g) We paid the following by cheque: M Taylor £174; J Ward £610.
h) Paid carriage by cash £38.
i) Bought goods on credit from P Green £291; S Gemmill £940.
j) Sold goods on credit to G Boycott £810.
k) Paid rent by cheque £230.
Question 2
a) Started in business with £ 10,500 cash.
b) Put £9,000 of the cash into a bank account.
c) Bought goods for cash £550.
d) Bought goods on credit from; T Dry £800, F Hood £930; M Smith £160; G Low £510.
e) Bought stationary on credit from Buttons Ltd £89.
f) Sold goods on credit to: R Tong £170; L Fish £240; M Singh £326; A Tom £204.
g) Paid rent by cheque £220.
h) Bought fixtures on credit from Chiefs Ltd £610.
i) Paid salaries in cash £790.
j) Returned goods to: F Hood £30; M Smith £42.
k) Bought van by cheque £6,500.
l) Received loan from B Barclay by cheque £2,000.
m) Goods returned to us by R Tong £5; M Singh £20.
n) Cash sales £145.
o) Sold goods on credit to: L Fish £130; A Tom £410; R Pleat £158.
p) We paid the following by cheque: F Hood £900; M Smith £118.
q) Received cheques from: R Pleat £158; L Fish £370.
r) Receive a further loan from B Barclay by cash £500.
s) Received £614 cash from A Tom
Question 3
a) Started in business with £7,400 cash.
b) Paid £7,000 of the opening cash into the bank.
c) Bought goods on credit £410 from J Watson.
d) Bought goods for cash £362.
e) Sold goods on credit £218 to L less.
f) Returned goods to J Watson £42.
g) Sold goods for cash £54.
h) Bought fixtures on credit from firelighters Ltd £820.
i) Sold goods on credit to F Holmes £1,500.
j) F Holmes sent us £1,500 paying us the money by cheque.
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k) We paid J Watson his account by cheque £368.
Question 4
a) Started in the business with £20,000 in the bank.
b) R Hughes lent us £5,000 in cash.
c) Took £200 of the cash and paid it into the bank.
d) Sold goods on credit to H Rise £1,374.
e) Sold goods on credit from P Taylor £341.
f) Bought goods on credit from B brown £488.
g) H rise returned goods to us £65.
h) Sold goods on credit to G pate £535 and R sim £262
i) We returned goods to B Brown £94.
j) Bought Van on credit from Aberdeen Cars Ltd £4.370
k) Bought office furniture on credit from J winter Ltd £1,800.
l) Bought goods on credit from L jess £200 .
m) Returned goods to L jess £130
n) Bought goods for cash £390
o) Goods sold for cash £110.
p) Paid money owing to B Brown by cheque £394
q) Goods returned to us by G. Pate £34
r) Returned some of office furniture costing £180 to J Winter Ltd.
s) L Linda put further £2500 into the business in the form of cash
t) Paid Aberdeen Cars Ltd £4,370 by cheque
u) Bought office furniture for cash £365.
Question 5
a) Started business with cash £8,500
b) Bought goods on credit from W young £420
c) Paid rent by cash £210
d) Paid £6,000 of the cash of the business into a bank account
e) Sold goods on credit to D Unbar £192
f) Bought stationery £25 paying by cheque
g) Cash Sales £81
h) Goods returned by us to W Young £54
i) Sold goods on credit to J Harper £212
j) Paid for repairs to the building by cash £78
k) D Unbar returned goods to us £22
l) Paid W Young by cheque £366
m) Cash purchases £470
n) Bought a van paying by cheque £3,850
o) Paid motor expenses in cash £62
p) Bought fixtures £840 on credit from B Coal
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Question 6
a) Sales on credit to J Bee £520; T Day £630; J Souls £240.
b) Purchases on credit D Blue £390; F Rise £510; P Lee £280.
c) Sales on credit to T Day £640; L Hope £418.
d) Purchases on credit from F Rise £92; R James £870.
e) Return inwards from J Soul £25; T Day £190.
f) We returned goods to F Rise £12; R James £84.
g) We paid D Blue by cheque £390.
h) J Bee paid us by cheque £400.
i) We paid R James by cheque £766.
j) J Bee paid us by cash £80.
k) L Hope pays us by cheque £418.
Question 7
a) Started in business with £11,000 in the bank and £1,600 cash.

b) Bought goods on credit: J Biggins £830; D Martin £610; P Lot £590.
c) Bought goods for cash £370.
d) Paid rent in cash £75.
e) Bought stationary paying by cheque £62.
f) Sold goods on credit: D Twigg £370; B Hogan £290; K Fletcher £410.
g) Paid wages in cash £160.
h) We returned goods to D Martin £195.
i) Paid rent in cash £75.
j) B Hogan returns goods to us £35.
k) Sold goods on credit to: T Lee £205; F Sharp £280; G Rae £426.
l) Paid business rates by cheque £970.
m) Paid insurance in cash £280.
n) Paid rent by cheque £75.
o) Bought van on credit from B Black £6,100.
p) Paid motor expenses in cash £24.
q) Paid wages in cash £170.
r) Received part of amount owing from K Fletcher by cheque £250.
s) Received refund of business rates £45 by cheque.
t) Paid by cheque: J Biggins £830; D Martin £415: B Black £6,100.
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ERRORS NOT AFFECTING TRIAL BALANCE

Question 1: Correcting entries
a) A motor delivery vehicle costing $20,000 has been bought on credit from Ajax motors. The
purchases account has been debited and Ajax Motors account credited
b) A cheque for $500 received from P Sill has been debited in the Cash Book and also debited in P
Sill’s ledger account
c) Discount received from R Bean, amounting of $30 has been included in the discount column of
the cash book but has not been posted to Bean’s account
d) Goods valued at $1000 less 25% trade discount have been sold on credit to N Hood. Correct
entries have been made in the Sales Day Book (Sales Journal) but $700 has been posted to
hood’s ledger account
e) $400 spent by Weiss on his personal expenses has been posted to the office expense account

a) A sale of goods for $412 to T More had been entered in T Mone’s account
b) The purchase of machine on credit from J Frank for $619 had been completely omitted from our
books
c) The purchase of a computer for $550 had been entered in error in the office expenses account
d) A sale of $120 to B Wood had been entered in the books, both debit and credits as $102
e) Commission received $164 had been entered in error in the sale account
f) A receipt of cash from T. Blair $68 had been entered on the credit side of the cash book and
debit side of the T.Blair’s account
g) Discount allowed $48 had been entered in error on the debit side of the discount received
account

a) Purchases $1410 on credit from A Ray had been entered in B Roy’s account
b) A cheque of $94 paid for printing had been entered in the cash column of the cash book instead
of in the bank column
c) Sale of goods $734 on credit to D Rolls had been entered in error in D Rollo’s accounts
d) Purchase of goods on credit L Hand $819 entered in the correct accounts in error as $891
e) Cash Paid to G Boyd $64 entered on the debit side of the cash book and the credit side of G
Boyd’s account
f) A sale of fittings $320 had been entered in the sales account
g) Cash withdrawn from bank $200 had been entered in the cash column on the credit side of the
cashbook, and in the bank column on the debit side
h) Purchase of goods $1,182 has been entered in error in the furnishings account
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a) Extra capital of 5000 paid into the bank had been credited to sales account
b) Goods taken for own use $72 had been debited to sundry expenses
c) Private rent $191 had been debited to the rent account
d) A purchase of goods from D Pine $246 had been entered in the books as $426
e) Cash banked $410 had been credited to the bank column and debited to the cash column in the
cash book
f) Cash drawings of $120 had been credited to the bank column of the cash book
g) Returns inwards $195 from G Will had been entered in error in T Young’s account
h) A sale of a printer for $100 had been credited to Office Expenses

a) Rent received $430 have been credited to the commissions received account
b) Bank charges $34 have been debited to the business rates account
c) Completely omitted from the books is a payment of motor expenses by cheque $37
d) A purchase of a fax machine $242 has been entered in the purchases account
e) Returns inwards $216 have been entered on the debit side of the returns outward account
f) A loan from G Bain $2,000 has been entered on the credit side of the capital account
g) Loan interest of $400 has been debited to the van account
h) Goods taken for own use $84 have been debited to the Purchases account and credited to
Drawings
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INCOME STATEMENT & Balance sheet
Question 1: Income statement

Debit Credit
Sales 190,576
Purchases 119,832
Salaries 56,527
Motor expenses 2,416
Rent 1,894
Insurance 372
General expenses 85
Premises 95,420
Motor vehicles 16,594
Cash at bank 16,519
Cash in hand 342
Drawings 8,425
Capital 138,066
345,166 345,166
Inventory at 31 December 2008 was £12,408.
Question 2: Income Statement

Debit Credit
General expenses 305
Business rates 2,400
Motor expenses 910
Salaries 39,560
Insurance 1,240
Purchases 121,040
Sales 235,812
Car 4,300
Premises 53,000
Cash at bank 2,715
Cash in hand 325
Capital 23,263
Drawings 23,400
270,275 270,275
Inventory at 31 December 2008 was £4,486.
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Question 3: Income Statement & Balance Sheet

Dr Cr
Sales 210,420
Purchases 108,680
Inventory: 1 May 2006 9,410
Carriage outward 1,115
Carriage inward 840
Returns inward 4,900
Returns outward 3,720
Salaries and wages 41,800
Motor expenses 912
Rent 6,800
Sundry expenses 318
Motor vehicles 14,400
Fixtures and fittings 912
Cash at bank 4,100
Cash in hand 240
Drawings 29,440
Capital 18,827
247,067 247,067
Inventory at 30 April 2007 was £11,290.
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Question 4: Income statement & Balance sheet

Dr Cr
Sales 265,900
Purchases 154,870
Rent 4,200
Lighting and heating expenses 530
Salaries and wages 51,400
Insurance 2,100
Building 85,000
Fixtures 1,100
Account receivable 31,300
Sundry expenses 412
Account payable 15,910
Cash at bank 14,590
Drawings 30,000
Vans 16,400
Motor running expenses 4,110
Capital 114,202
396,012 396,012
Inventory at 30 June 2008 was £16,280
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Question 5: Income statement & Balance sheet

Dr Cr
Inventory: 1 April 2008 52,800
Sales 276,400
Purchases 141,300
Carriage inward 1,350
Carriage outwards 5,840
Returns outwards 2,408
Wages and salaries 63,400
Business rates 3,800
Communication expenses 714
Commissions paid 1,930
Insurance 1,830
Sundry expenses 208
Buildings 125,000
Fixtures 1,106
Cash at bank 31,420
Cash in hand 276
Drawings 37,320
Capital 210,516
514,194 514,194
Inventory at 31 March 2009 was £58,440.
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Question 5
Dr Cr
Capital 49,675
Drawings 28,600
Cash at bank 4,420
Cash in hand 112
Inventory 30 September 2007 72,410
Van 5,650
Office equipment 7,470
Sales 391,400
Purchases 254,810
Returns inwards 2,110
Carriage inwards 760
Returns outward 1,240
Carriage outwards 2,850
Motor expenses 1,490
Rent 8,200
Telephone charges 680
Wages and salaries 39,600
Insurance 745
Office expenses 392
Sundry expenses 216
468,615 468,615
Inventory at 30 September 2008 was £89,404.
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INCOME STATEMENT ERRORS
Question 1
Company A has un-adjusted profit of 34,000. Following errors were discovered
- Sales overstated by 6,000
- Purchases overstated by 2,500
- Rent expense of 1,800 omitted
- Opening stock overstated by 2,600
- Closing stock understated by 2,500
Adjusted Profit
Question 2
- Carriage Inwards overstated by 2,000
- Carriage outward overstated by 1,500
- Electricity expense of 3,300 omitted
- Sales return overstated by 1,300
Adjusted Profit
Question 3
- Purchase returns overstated by 4,200
- Sales return understated by 3,900
- Closing stock overstated by 6,400
- Carriage outwards of 2,400 omitted
- Discount received omitted of 5,000
Adjusted Profit
Question 4
- Discount allowed of 4,500 overstated
- Commission income of 2,500 omitted
- Postage expense understated by 1,500
- Purchase returns understated by 2,500
Adjusted Profit
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Question 5
- Sales of 2,400 recorded as sales return
- Purchases of 1,500 recorded as machine
- Rent expense of 1,400 recorded as rent income
Adjusted Profit
Question 6
- Discount allowed of 4,200 recorded as discount received
- Purchases of 5,200 recorded as purchase return
- Purchase return of 4,100 recorded as sales return
- Gain on disposal of machine of 5,200 not recorded
- Closing stock of 1,400 understated
Adjusted Profit
Question 7
- Sales of 2,400 recorded as purchases
- Discount allowed of 1,500 recorded as rent expense
- Sales of 1,400 recorded as purchase return
- Carriage inward of 1,500 recorded as purchase return
- Opening stock understated by 2,500
Adjusted Profit
Question 8
- Rent expense of 1,400 recorded as carriage outward
- Discount received of 1,200 recorded as discount allowed
- Sales of 6,400 recorded as rent income
- Purchase return of 1,200 recorded as purchases
- Sales return of 1,400 recorded as purchases
Adjusted Profit
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SUSPENSE
st
Question 1: On 31 December trial balance was extracted by Noman ltd which was not balanced and the
debit side is less than credit side by £1,120. On investigation following error were found:
1. Additional fixed assets costing £1440 had been bought. The purchase account had been debited.
2. An expense payment £864 was entered in the accounts as £846.
3. A cheque for £320 was sent to a creditor. The bank and the creditor’s account were both
credited with this amount.
4. The total of the purchase day book had been under-added by £480.
5. A credit note for £148 was sent to a customer but it had not been put through the books.
Required: Prepare Journal entries to correct each of these errors and eliminate the suspense
account.
Question 2: Bill lee prepared a trial balance on 31st March 2013. The debit balance did not agree with
the total of credit balance. The difference of £490 Debit was posted to suspense account. Later
investigation revealed following errors in the books.
1. A cheque for £235 from a debtor was entered in the books as £325.
2. A payment of £180 was made to a creditor. The bank and the creditor’s account were credited
with this sum.
3. Surplus fixed assets were sold for £310 during the year and the proceeds credited to the sales
account.
4. The purchases day book had several addition errors amounting to an under cast of £130.
5. A sales invoice for £490 was entirely omitted from the books
Required: write up a suspense account with relevant entries
Question 3: On 30 June 1993, Carson drew up a trial balance which showed that the total of the credit
balance was £78 greater than the total of the debit balances. A suspense account was opened for the
amount of this difference. Checking then revealed the following errors:
1. The sales day book had been under cast by £200.

2. The total of the discount allowed column in the cash book, £130, had been credited to the
discounts received account in error.
3. Carson paid his private electricity bill of £148 from the business bank account. The bank account
was entered correctly but the Sundry expenses account was debited in error.
4. A credit note for £64 received form Aspen had been entered correctly in the appropriate
subsidiary book but was wrongly posted to Aspen’s account as £46.
Required: Prepare the journal entries to correct the above errors and write up a suspense account
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Question 4: K. Lee. A trader drew up a trial balance on 30 September 2002. It showed that the total of
the credit balance was $93 greater than the total of the debit balances. A suspense account was opened
with this amount to make the books balance. Investigations later revealed the following errors:
1. The sales day book had been undercast by $200.

2. $3000 paid for computer equipment for use in the accounts office had been posted to the
purchases account.
3. $85 received from Ong ting was correctly entered in cash book but wrongly posted in the Ong
ting account as $58.
4. The total of the discount allowed column in the cash book $160 had been credited to the
discounts received account in error.
Required: Prepare the journal entries to correct the above errors and write up the suspense account.
Question 5: V. Morris prepares trial balance mostly. The trial balance prepares January 1997 was drawn
up from the following list of balance:
Capital 25,000
Drawings 11,200
Equipment 12,600
Debtors 11,900
Creditors 5,340
Stock 9,900
Bank 4,600
Sales 120,900
Purchases 94,300
Sundry expenses 7,200
As the trial balance did not agree a suspense account was opened for the amount of the difference.
After investigation, the following errors were discovered:
1. An item of £120 had been debited twice in the sundry expenses account.
2. A sale to Cooper had been correctly entered in the sales day book as £230 but was wrongly
posted to Cooper’s account as £320.
3. The sales day book had been over-added by £200.
4. Goods costing £550 bought from James had been credited to the account of Jameson.
5. The drawings total of £11,300 had been wrongly listed as £11,200.
6. A banker’s order for £240 for payment of Morris’s rent had been posted to the wrong side of the
bank account.
7. Goods £70 taken for own use by Morris had been entered in his drawings account but no other
entry had been made.
Required: When the necessary amendments had been made the suspense account balance was nil and
the account was closed.
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Question 6: V. Lee. Drew up a trial balance from the following list of balance on 30 September 1999:
Equipment 14,000
Debtors 12,300
Creditors 5,740
Sales 121,400
Purchases 93,400
Bank 4,200
Stock 10,800
Sundry expenses 8,110
Capital 31,400
Drawings 16,200
As the trial balance did not agree a suspense account was opened for amount of the difference. After
investigation, the following errors were discovered;
1. The purchases day book was under-added by £400.

2. Goods costing £700 bought from Simpkins were credited to the account of Simpson.
3. An item of £240 was debited twice in the sundry expenses account.
4. A purchases from Suimat was correctly entered in the purchases day book as £430 but was
wrongly entered in Suimat’s account as £340.
5. The debtors’ total of £12,400 was wrongly listed as £12,300.
6. Goods £280 taken for own use by Lee were debited to his drawings account but no credit entry
was made in any other account.
7. A banker’s standing order for £180 for payment of Lee’s insurance was entered on the wrong
side of the bank account.
Required: Suspense Account
Question 7: The trial balance as at 30 April 2010 of Timber Products Limited was balanced by the
inclusion of the following debit balance difference on trial balance suspense account $2,513.
Subsequent investigations revealed the following errors:
1. Discount received of $324 in January 2010 have been posted to the debit of the discounts
allowed account
2. Wages of $2,963 paid in February 2010 have not been posted from the cash book
3. A remittance of $940 received from K. Mitcham in November 2009 has been posted to the
credit of B Mansell Limited
4. In December 2009, the company took advantage of an opportunity to purchase a large quantity
of stationery at a bargain price of $2,000. No adjustments have been made in the accounts for
the fact that three-quarters, in-value, of this stationary was in the inventory on 30 April 2010
5. A payment of $341 to J Winters in January 2010 has been posted in the personal account as
$143
6. A remittance of $3,000 received from D North, a credit customer, in April 2010 has been
credited to sales
Required: Write up the suspense account to clear the difference
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Question 8: Nelson drew up the following trial balance from his ledger balance on 31 March 1993.
However, the totals failed to agree and he had to open a suspense account for the difference.
Debtors 10,310
Creditors 3,460
Sales 121,400
Purchases 94,750
Sundry Expenses 7,380
Bank 4,670
Fixtures 5,250
Stock 7,339
Drawings 9,500
Capital 14,000
After investigation, the following errors were discovered. When the necessary amendments had
been made the suspense account balance was eliminated.
1. A banker’s order (standing order) for £100 for payment of an insurance premium had been
posted to the wrong side of the bank account but correct posted to sundry expense.
2. The purchase day book had been over-added by £90.
3. £455 paid for fixture for use in the business had been posted to the purchase account.
4. A sale to Rodney of £196 was entered correctly in the sale day book but had been wrongly
posted to Rodney’s account as £169.
5. A creditor credit balance of £67 for Anson had been omitted from the trial balance figure.
Books are correct
Required: Prepare the Journal entries to correct the above errors and write up the suspense account
including your calculation of the opening balance.
Question 9: Chi Knitwear Ltd is an old-fashioned business with a handwritten set of books. A trial
balance is extracted at the end of each month, and an income statement and a statement of financial
position are computed. This month, however, the trial balance will not balance, the credits exceeding
debits by $1,536. You are asked to help and after inspection of the ledgers discover the following errors:
1. A balance of $87 on a debtor’s account has been omitted from the schedule of debtors, the total
of which was entered as accounts receivable in the trial balance
2. A small piece of machinery purchased for $1,200 had been written off to repairs
3. The receipts side of the cash book had been under cast by $720
4. The total of one page of the sales day book had been carried forward as $8,154, whereas the
correct amount was $8,514
5. A credit note for $179 received from a supplier had been posted to the wrong side of his
account
6. An electricity bill in the sum of $152, not yet accrued for, is discovered in a filling tray
7. Mr. Smith, whose past debts to the company had been the subject of a provision, at last paid
$731 to clear his account. His personal account has been credited but the cheque has not yet
passed through the cash book
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Required: Write up the suspense account to clear the difference
Question 10: The book keeper of a firm failed to agree the trial balance at 30 June, the end of the
financial year. She opened a suspense account into which she entered the amount she was out of
balance and carried this amount to a draft statement of financial position which she prepared.
The following errors were subsequently discovered in the books:
1. The purchase day book had been under cast by $10

2. Goods bought on credit from A Supplier for $5 had been posted to his account as $50
3. A new machine costing $70 had been posted to the debit of the repairs to machinery account
4. S Kane, a customer, returned goods valued at $10. This had been entered in the sales returns
day book and posted to the debit of the customer’s account
5. The sale on credit of various items of plant and machinery at their book value of $300 had been
recorded in the sales day book
6. $60 owed by D Clarke, a customer, had been overlooked when drawing up a schedule of
accounts receivable from the ledger
7. An item of cash discount allowed $2 had been correctly entered in the cash book but had not
been posted to the account of B Luck wood, the customer
8. Business rates, treated as having been paid in advance in the previous accounting period.
Amounting to $45 had not been brought down as a balance on the business rates account at the
start of the accounting period. Instead it was included in the prepayments account
Required: Prepare the suspense account, including the initial opening entry made by the bookkeeper,
along with all the necessary adjusting entries identified above
Question 11: A trial balance was taken out for A. Suma on 31 August 2003. Unfortunately the trial
balance failed to agree and a suspense account was opened for differences. Investigation revealed the
following errors:
1. A sale of goods worth $910 to J. Lee had been correctly entered in the sales journal but had not
been posted to Lee’s account
2. A credit note for $140 received from F. Kerry had been correctly entered in the appropriate
journal but had been posted to Kerry’s account as $410
3. Discount allowed $190 had been wrongly credited to the Discount Received account. No entry
had been made in the Discount Allowed account
Required: Prepare the suspense account, including the initial opening entry made by the bookkeeper,
along with all the necessary adjusting entries identified above
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Question 12: Thorpe prepared a trial balance on 31 May. The debit balance did not agree with the total
of the credit balances. The difference was posted to suspense account. Later investigations revealed the
following errors in the books.
1. The total of the purchase return book, amounting to £270, had not been posted to the ledger and
Purchase return account.
2. The purchase for £420 of equipment for use in the office had been posted to the purchase
account.
3. A sale of £500 to C. White was entered wrongly as £600 in his account.
4. A debit balance of £870 of A. Fleming’s account was brought down as £780. This latter figure
was included in the debtors total entered in the trial balance.
Required: Prepare the Journal entries to correct the above errors and write up the suspense account
including your calculation of the opening balance.
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DAY BOOKS
Daybooks are also called ‘’Prime Entry Books’’.

Purchase Day book Credit Purchases
Sales Daybook Credit Sales
Purchase Return daybook Purchase Return
Sales Return Daybook Sales Return
Cashbook/Petty cashbook Money related transactions
Journal Non routine/one off entries.
Journal entries contain narrations.
Question 1: You are to enter up the sales, purchases, return inwards and returns outwards day books
from the following details, then to post the items to the relevant accounts in the sales and purchases
ledgers. The total from the day books are then to be transferred to the accounts in the General Ledger.
1. Credit sales: T Thompson £56; L Rodriguez £148; K Barton £145.
2. Credit purchases: P Potter £144; H Harris £25; B Spencer £76.
3. Credit sales K Kelly £89; N Mendes £78; N Lee £257.
4. Credit purchases B Perkins £24; H Harris £58; H Miles £123.
5. Goods returned by us to: P Potter £12; B Spencer £22.
6. Goods returned to us by T Thompson £5; K Barton £11; K Kelly £14.
7. Credit purchases: H Harris £54; B Perkins £65; L Nixon £75.
8. Goods returned by us B Spencer £14.
9. Credit sales K Mohammad £57; K Kelly £65; O Green £112.
10. Goods returned to us by N Mendes £24.
11. Credit sales N Lee £55.
Question 2: You are to enter the following items in the books, post to personal accounts, and show the
transfer to the General ledger.
1. Credit purchases from: K Hill £380; M Norman £500; N Senior £106.
2. Credit sale to: E Rigby £510; E Phillips £246; F Thompson £356.
3. Credit purchases from: R Morton £200; J Cook £180; D Edwards £410; C Davies £66.
4. Credit sales to A Green £307; H George £250; J Ferguson £185.
5. Returns outwards to: M Norman £30; N Senior £16.
6. Returns inward from: E Phillips £18; F Thompson £22.
7. Credit sales to E Phillips £188; F Powell £310; E Lee £420.
8. Credit purchases from: C Ferguson £550; K Endeavor £900.
9. Returns inwards from: E Phillips £27; E Rigby £30.
10. Returns outwards to: J Cook £13; C Davies £11.
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Question 3: Enter the following in the three-column cash book of an office supply shop balance-off the
cash book at the end of the month and show the discount accounts in the general ledger.
1. Balances brought forward: cash £420; bank £4,940.
2. The following paid us by cheque; in each deducting a 5 per cent cash discount: S Braga £820; L
Pine £320; G Hood £440; M Rae £1,040.
3. Cash sales paid direct into the bank £740.
4. Paid rent by cash £340.
5. We paid the following accounts by cheque, in each case deducting 2 ½ % (cash discount): M
Peters £360; G Graham £960; F Bell £ 400.
6. Withdrew cash from the bank for business use £400.
7. Cash sales £1,260.
8. B Age paid us their account of £280 by cheque less £4 cash discount. Paid wages by cash £540.
9. We paid the following accounts by cheque: R Todd £310 less cash discount £15; F Dory £412 less
cash discount £12.
10. Bought fixtures by cheque £4,320.
11. Bought lorry paying by cheque £14,300.
12. Received £324 cheque from A Line.
13. Cash sales £980.
14. Bought stationery paying by cash £56.
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Question 4:
A three-column cash book for a wine wholesaler is to be written up from the following details, balanced-
off, and the relevant discount account in the general ledger shown.
1. Balances brought forward: cash £620; bank £7,142.
2. The following paid their accounts by cheque, in each case deducting 5 per cent cash discounts: G
Slick £260; P Fish £320; T Old £420 (all amounts are pre-discount).
3. Paid rent by cheque £430.
4. F Black lent us £5,000 paying by cheque.
5. We paid the following accounts by cheque in each case deducting a 2 ½ per cent cash discount:
R White £720; G Green £960; L Flip £1,600 (all amounts are pre-discount).
6. Paid motor expenses in cash £81.
7. J Pie pays his account of £90, by cheque £88, deducting £2 cash discount.
8. Paid wages in cash £580.
9. The following paid their account by cheque, in each case deducting 5 per cent cash discount: A
Pony £540; B Line & son £700; T Owen £520 (all amounts are pre-discount).
10. Cash withdrawn from the bank £400 for business use.
11. Cash drawings £200.
12. Paid W Peat his account of £160, by cash £155, having deducted £5 cash discount.
13. Bought fixtures paying by cheque £720.
14. Received commission by cheque £120.
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Petty Cash:
A small amount of cash held in business for day to day transactions.
Petty Cashier:
Who has access to petty cash
Petty Cash Voucher:
It is a source of document in which detail of transaction is recorded.
Imprest System:
System commonly used for Petty cash, where the total amount of cash in petty cash tin is periodically topped
up, up to a given limit.
Imprest Amount= Total Cash in tin + Petty cash vouchers
I.O.U:
When someone borrows cash, he or she must put in I.O.U into the petty cash box.
Imprest Amount= Total cash in tin+ petty cash voucher+ I.O.U
Float-Expenses+ Income+ top up= Float
Imprest System:
Question 5:
Float = 800
Income= 300
Top up = 100
Required: Expense?
Question 6:
Float = 1000
Income= 300
Top up = 200
Required: Expense?
Question 7:
Float = 600
Expense= 300
Top up = 200
Required: Income?
Question 8:
Float = 1200
Expense= 400
Income= 250
Required: Top up?
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Question 9:
Float = 2000
Expense= 500
Income= 100
Float increased by 300 at the end of the month
Required: Top up?
Question 10:
Float = 800
Top up = 300
Income= 500
Float increased by 200 at the end of the month
Required: Expense?
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Question 11: The following is a summary of the petty cash transactions of jock field Ltd for May 2008.
£
1. Received from cashier £300 as petty cash float.
2. Postage 18
3. Travelling 12
4. Cleaning 15
5. Petrol for delivery van 22
6. Travelling 25
7. Stationery 17
8. Cleaning 18
9. Postage 5
10. Travelling 8
11. Stationery 9
12. Cleaning 23
13. Postage 13
14. Delivery van 5,000 mile services 43
15. Petrol 18
16. Cleaning 21
17. Postage 5
18. Petrol 14
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Question 12: Rule up a petty cash book with analysis columns for office expenses, motor expenses,
cleaning expenses and casual labour. The cash float is £600 and the amount spent is reimbursed on 30
June.
1. F Black – casual labour 18
2. Letter headings 41
3. Abel Motors – motor repairs 67
4. Cleaning materials 4
5. Envelopes 11
6. Petrol 22
7. P Lyon – casual labour 16
8. T Upton – cleaner 8
9. Paper clips 3
10. Petrol 19
11. Adhesives tape 2
12. Petrol 25
13. Motor taxation 95
14. F Luck – casual labour 19
15. T Upton – cleaner 14
16. J Lamb – casual labour 27
17. Copy paper 8
18. Lively cars – motor repairs 83
19. Petrol 24
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Daybooks Practice Questions:

Question#1:
Kevin operates his petty cash with an imprest of $120. At the end of one particular week he had
vouchers in the petty cash tin of $17.45, $32.16 and $21.94.No other transactions took place.
In order to restore the petty cash balance what transaction should Kevin post?
A. Dr Petty cash $71.55 Cr Bank $71.55
B. Dr Bank $48.45 Cr Petty cash $48.45
C. Dr Petty cash $48.45 Cr Bank $48.45
D. Dr Bank $71.55 Cr Petty cash $71.55
Question#2:
Which of the following checks should the petty cashier make prior to paying out petty cash?
(1) That the claim is supported by appropriate documentation
(2) That the claim has been authorized by an appropriate signature
(3) The credit rating of the business receiving the payment
(4) That the amount is within the petty cash limit
A. 1,2 and 4
B. 3 and 4
C. 2 and 3
D. 1 and 2 only
Question#3:
Manfred runs his own business and operates an imprest system of petty cash maintaining a float of
$200.At the end of November there is cash of $37.20 and vouchers of $162.80.
How much will Manfred need to pay into petty cash to maintain the float?
A. $200
B. $125.60
C. $37.20
D. $162.80
Question#4:
Talik maintains a petty cash balance of $150 each week. At the end of one particular week he has
vouchers within petty cash of $16.20, $10.37 and $31.65.
In order to restore the petty cash balance, what transaction should talik record?
A. Dr Bank $91.78 Cr Petty cash $91.78
B. Dr Bank $58.22 Cr Petty cash $58.22
C. Dr Petty cash $91.78 Cr Bank $91.78
D. Dr Petty cash $58.22 Cr Bank $58.22
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Question#5:
The following statements relate to an imprest system of petty cash:
(1) The total cash and total vouchers in the petty cash tin will always add up to the imprest amount
(2) The total amount in the petty cash tin is periodically topped up to a fixed limit
Which of the above statements are correct?
A. Statement 1 only
B. Neither statement
C. Statement 2 only
D. Both statements
Question#6:
With an imprest system of petty cash which of the following is correct?
A. Vouchers + Cash held = Imprest
B. Imprest + Vouchers = Cash held
C. Cash held + Imprest = Vouchers
D. Cash held – Vouchers = Imprest
Question#7:
Which of the following employee related expenses would be paid out of petty cash?
A. The purchase of a car to be driven by the sales director
B. Payment of pension’s contribution
C. Payment of monthly salaries for the production staff
D. Payments of taxi journeys for employees occasionally working late
Question#8:
There has been a break-in at your office and money has been stolen from the petty cash tin, which now
contains only 37 cents in coins. There are petty cash vouchers in the tin for the month to date totaling
237.41. the petty cash book shows that at the start of the month, there was a balance of 74.50 in petty
cash, and that on the first day of the month the petty cash balance was increased to $400 under
imprest system.
How much money has been stolen from petty cash?
A. $162.22
B. $162.96
C. $236.72
D. $637.04
Question#9:
Fatima has made an error in posting a sales return from the sales returns day book to the general
ledger.
Which book of prime entry should be used to record the correction of the error?
A. Journal
B. General ledger
C. Sales return day book
D. Sales day book
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Question#10:
Jenny has a bank balance of $550 at the start of the week. During the week the following transactions
occurred:
Day 1 She sold goods on credit for $876
Day 2 She received a cheque for $400 from a credit customer
Day 3 She purchased office equipment with a list price of $1,000 but received a 10% discount for
paying immediately by cheque
How much does Jenny have in the bank at the end of the week?
A. $2,826
B. $400
C. $50
D. $126
Question#11:
What is the purpose of a journal?
A. To record unusual movements between accounts
B. To record when all transactions were made between accounts
C. To record the purpose of all transactions made in the accounts
D. To record all individual transactions entered into the sales day book
Question#12:
Which one of the following books of prime entry would settlement discounts received be recorded?
A. Sales day book
B. Cash payments book
C. Purchase day book
D. Cash receipts book
Question#13:
Why must all journal entry be accompanied by a narrative?
A. As it is a legal requirement in most regimes
B. As it is a requirement of international accounting standards
C. For audit and control purposes
D. For future training purposes
Question#14:
Which one of the following is the correct posting for purchases from the purchase day book?
A. Dr Payables Cr Purchases
B. Dr Purchases Cr Bank
C. Dr Purchases Cr Payables
D. Dr Bank Cr Purchases
Question#15:
Which of the following should be recorded in the purchases day book?
A. A reminder received about an overdue invoice
B. A credit note received from a customer
C. An invoice form a supplier
D. A delivery note from a supplier
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Question#16:
Which TWO of the following employee related expenses would be paid out of petty cash?
A. The purchase of a car to be driven by the finance director
B. Payment of salaries
C. Payment for stationery
D. Payments of taxi journeys
Question#17:
Which of the following are books of prime entry?
(i) General ledger
(ii) Purchases day book
(iii) Sales returns day book
(iv) Journal
A. (i), (iii) and (iv)
B. (i), (ii) and (iv)
C. (ii), (iii) and (iv)
D. (i), (ii) and (iii)
Question#18:
A customer returns goods to Talha because she is not happy with the quality of the items delivered.
In which book of prime entry will Talha record this?
A. Sales day book
B. Sales returns day book
C. Purchases day book
D. Purchases returns day book
Question#19:
Aamir has returned goods to a supplier because they were faulty, and the supplier has sent him a credit
note.
In which book of prime entry will Amir record this?
A. The cash book
B. The sales returns day book
C. The purchase returns day book
D. The sales day book
Question#20:
A sole trader has received an invoice from a supplier.
In which book of prime entry (manual or computerized) will this be entered?
A. The cash book
B. The purchase day book
C. The Journal
D. The sales day book
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Question#21:
Alif operates his petty cash with an imprest of $150. At the end of one particular week she had vouchers
in the petty cash tin of $20, $32 and $40.No other transactions took place.
In order to restore the petty cash balance what transaction should Alif post?
A. Dr Petty cash $58 Cr Bank $58
B. Dr Bank $58 Cr Petty cash $58
C. Dr Petty cash $92 Cr Bank $92
D. Dr Bank $92 Cr Petty cash $92
Question#22:
The following is a summary of the petty cash transactions for a week:
Income Expenditure
$ $
Opening balance 500 Travelling expenses 150
Sale of stamps 10 Subsistence expenses 250
Sale of paper 50
Petty cash is maintained using the imprest system.
What sum should be reclaimed by the cashier at the end of the week?
A. $160
B. $340
C. $400
D. $500
Question#23:
Jhonson runs his own business and operates an imprest system of petty cash maintaining a float of
$500.At the end of November there is cash of $180 and vouchers of $320.
How much will Jhonson need to pay into petty cash to maintain the float?
A. $180
B. $500
C. $320
D. $100
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VALUE ADDED TAX

Question 1: Transaction during the year:
Sales 500,000 (Exclusive VAT)
Purchases 300,000 (Inclusive VAT)
VAT 20%
VAT Liability at 1st Jan 08 20,000
During the year Mr.X paid 25,000 to tax authority
Required: VAT Liability at 31Dec 08

Sales 400,000 (Inclusive VAT)
Purchases 250,000 (Exclusive VAT)
VAT 20%
During the year Mr. X paid 30,000 to tax authority
Required: VAT Liability at 31 Dec 08

VAT 20%
st
VAT Liability at 1 Jan 08 30,000

Purchases 400,000 (Exclusive VAT)
VAT 20%
Question 5: A Co. has following data:

Opening balance 1000 (Dr)
A car was purchased worth 50,000 (Exclusive VAT)
Another car was purchased 10,000 (Inclusive VAT)
During the year VAT refund of 700 was received
Required: VAT Payable/ Receivable?
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Question 6: A Co. has following data:

Opening balance 500 (Cr)
A car was purchased worth 6,000 (Exclusive VAT)
Another car was purchased 7,000 (Exclusive VAT)
During the year VAT was paid 500
Required: VAT Payable/ Receivable?

Sales 500,000 (Exclusive)
Sales Return 30,000 (Inclusive)
Purchases 380,000 (Exclusive)
Purchase Return 15,000 (Inclusive)
VAT 20%
st
VAT Liability at 1 Jan 08 40,000

Sales 20,000 (Inclusive)
Sales Return 1,000 (Exclusive)
Purchases 24,000 (Inclusive)
Purchase Return 3,200 (Inclusive)
VAT 20%
Question 9
Selling price = 1000
Trade Discount = 20%
Cash Discount = 5%
VAT % = 20%
Required: VAT?
Question 10
Cash Discount = 3%
VAT % = 20%
Required: VAT?
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Question 11
Cash Discount = 3%
VAT % = 20%
Required: VAT?
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BANK RECONCILIATION
Question 1: Steve’s business bank statement showed an overdraft balance of $3080 on 31 October
20X3. When this was reconciled to the cash book, the following differences were noted.
Unpresented Cheques $1,220
Unrecorded lodgments $1,240
Standing order for insurance premium not entered in the cash book $890
Overdraft interest not recorded in the cash book $80
Credited in error to Steve’s accounts by the bank $300
Required: what was the original balance on Steve’s cash book at 31 October 20X3?
Question 2: Kieran’s bank account in his cashbook has a balance on 31 March of $875. Kieran is awaiting
a bank statement for March. In the meantime, he ascertains from correspondence that bank charges
imposed in March will amount to $27, interest credited will be $4, and direct debits and standing order
drawn upon his business account will total $390. Kieran made some payments by cheque amounting to
$420 on 30 March, but also deposited some cheques from customers totaling $510 on 29 March. These
were entered in his cashbook, but will be too late for the March bank statement.
Required: prepare cash book and predict the balance that will appear in his bank statement
Question 3: Britannia is trying to reconcile her cash book to her bank statement at 31 December X5. On
investigation, she finds.
1. The cash book omits a standing order for $50 paid on 31 December for rates for the current year
2. Cheques totaling $195 have been credited to the cash book on 31 December but not appeared
on the bank statement until 5 January X6
3. Cheques from customers totaling $230 on 23 December were entered in the cash book but
Britannia had only just managed to get to the bank as it shut for Christmas and so the bank had
not dealt with them until January
4. A cheque received for $569 had appeared on the bank statement in error as $596
Before and adjustments are made, her cash book had a debit balance of $1,350
Required: find out the adjusted balance of the cash book
Question 4: the cash book of Knight Ltd showed a balance of $15,243 (debit) at 28 January 20X6. A
subsequent reconciliation to the bank statement revealed the differences shown in the tale
Unpresented Cheques $14,239
Un-cleared lodgments $2,032
Amount credited in error Knights Ltd’s account by the bank $850
Receipt of $1,330 recorded incorrectly in the cash book as $1,303
Required: what was the balance on the bank statement at 28 February 20X6?
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Question 5: At the end of the financial year on 31 March, Martin’s business is sent a bank statement
showing a balance 0f $1,250, the balance in the cashbook at the yearend is however, only $928. Martin
goes through the entries in both for the same period and discovers the following discrepancies
1. Bank charges of $25 appear only on the bank statement
2. Interest credited of $5 appears only on the bank statement
3. The bank has deducted $86 in respect of a cheque Martin has recorded as $68. Martin has a
copy of the cheque and is certain that his figure is correct
4. Two cheques recently written by Martin for $210 and $550 appear only in the cash book
5. A deposit made by Martin on 20 march of $400 also appears only in the cash book
Required: Use the reconciliation statement format given to derive the balance martin should have after
adjusting his cashbook. Then adjust the balance to arrive at the unadjusted balance
Question 6: Kenny Ltd’s bank control account shows a balance overdrawn on $6,530 as at 31 December
20X3.on comparing the bank statement with the cash book it is discovered that the following items have
not been recorded in the cash book
1. Bank charges of $100 and overdraft interest of $50
2. A credit transfer from a customer of $2,000
3. A direct debit to a supplier of $1000
The following items have been recorded in the cash book but not in the bank statement
1. Cheques received from customers $1900
2. Cheques drawn in favor of suppliers $2300
Required: what figure will be shown in the balance sheet as at 31 December 203 for bank overdraft?
Question 7: When preparing a bank reconciliation for a client, you have noted that:
1. The balance on the bank account in the nominal ledger is $2,983 debit
2. The balance on the bank statement is $9,820 overdrawn
3. Cheques totaling $2,187 have not yet been presented to the bank
4. Lodgments totaling $15,200 have not been credited by the bank
5. A cheque for $400, drawn on your client’s personal account, has been debited by the bank to
business account
6. A cheque which was recorded in the cheque journal with a value of $2,870 has been correctly
debited the bank statement as $2,780
7. A customer has paid $1,500 directly to the bank account (this payment has not been recorded in
your clients books)
8. Standing orders to a total value of $780 have been paid by the bank, but have not been
recorded in your client’s books
9. The bank has charged $200 for bank fees (this has not been recorded in your client’s day book
Required: Reconcile the statement with cash book
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Question 8: You are preparing accounts for Sylvia Avery for the year to 30 November 20X2. At that date,
the bank current account in Sylvia’s nominal ledger had a credit balance of ($15,503) while the bank
statement shows cash at bank of $3,628
You have obtained the following information from an examination of Sylvia’s records:
1. A cheque paid to a supplier for $4,595 has been recorded in the nominal ledger as $5,495.
2. Cheques written by Sylvia in November totaling $22,865 were presented at the bank in
December
3. A lodgment for $5,634 made on 29 November was credited on the bank statement on 2
December
4. A customer’s cheque for $400 which had been lodged on 18 November was not honoured by
drawer’s bank. Sylvia’s bank had debited the cheque on her statement on 25 November
5. Standing orders with a total value of $3,600 had been debited on the bank statement during the
year but had not been included in Sylvia’s records
6. Included on the current account statement is a lodgment for $5,000. This should have been
credited to Sylvia’s deposit account
Required: Reconcile the statement with cash book
Question 9: Wilson is preparing his bank reconciliation at 31 May 20X5.His Bank statement shows a
balance of $228 cash at the bank. The balance on the bank account in his general ledger is $113 (credit)
He has noted the following reasons for the difference:
1. Cheque number 958602 was incorrectly recorded in Wilson’s cash book as $760.The cheque was
correctly debited on the bank statement on 2 May as $670
2. Bank charges of $428 were debited by the bank on 4 May
3. A customer’s cheque for $320 was returned by Wilson’s bank in May as the customer had
insufficient funds in his account. Wilson has not recorded the return of the cheque in his records
4. The bank has incorrectly credited Wilson’s account with interest of $220.This is interest on a
deposit account held by Wilson personally. The bank had not corrected the error by 31 May
5. A lodgment of $850 entered in Wilson’s cash book on 31 May was credited on the bank
statement on 3 June
6. Five cheques have not yet been presented at the bank These are:
Cheque No $
956784 625 (see note 7)
956892 326
958452 469
958541 122
958668 87
Cheque number 956784 was lost in the post and was cancelled. Wilson has not recorded the
cancellation of the cheque
Required: Reconcile the statement with general ledger
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Question 10
Sarah prepares a bank reconciliation statement for her business bank account at the end of each month.
At 31 May 2007 her ledger balance was $2,759 (credit) and her bank statement showed that she had
funds of $131 at the bank. She has the following information:
1. The bank debited Sarah’s account with charges of $129 during May. Sarah has not recorded the
charges
2. Sarah arranged for $2,500 to be transferred from her personal bank account into the business
bank account. The bank made the transfer on 30 May, but Sarah has not made any entry for it in
her records
3. On 22 May Sarah withdrew $100 cash which she did not record
4. Cheque number 543987 which Sarah issued to a supplier appears on the bank statement as
$650. Sarah incorrectly recorded the cheque as $560
5. On 31 May, Sarah lodged $457. This amount appears on the bank statement dated 3 June
6. Sarah was advised by the bank that she earned $52 interest for the period in May that her
account was in credit. Sarah recorded this in May, but the bank did not credit her account until
June
7. Three of the cheques issued in May, with a total value of $942, were not debited on the bank
statement until after 31 May
8. A cheque for $276, issued to a supplier was cancelled, but Sarah has not recorded the
cancellation of the cheque
Required: Reconcile the statement with general ledger
Question 11
A company’s bank statement shows an overdraft of $3,204 at 31 March 20X7. The statement includes
bank charges of $46 which have not yet been recorded in the company’s cash book. The statement does
not include cheques for $780 paid to suppliers, nor an amount of $370 received from a debtor; both of
these amounts appear in the bank statement for April 20X7.
Required: If the company prepares a balance sheet at 31 March 20X7, the figure for the bank overdraft
should be?
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CONTROL ACCOUNT
Question 1: You are required to prepare a sale ledger control account from the following information
for the month of November:
Sales ledger balances 23,220
Totals for November:
Sales journal 14,194
Returns inward journal 826
Cheque and cash received from customers 17,918
Discounts allowed 312
Required: Prepare the sales ledger control account
Question 2: Nathan’s books show the following details for the month of June 2000:
Sales ledger Control account balances b/f 15,000 Dr
Purchases ledger control account balances b/f 12,000 Cr
1. Purchases for month 18,000
2. Sales for month 24,000
3. Returns inwards 1,500
4. Payments to creditors 16,500
5. Receipts from debtors 23,250
6. Customer’s cheque returned unpaid by bank 750
7. Bad debts written off 450
8. Discount received 750
9. Discount allowed 800
10. Transfer of debit balances from sales ledger to purchases ledger during month 500
Required: Prepare the sales ledger control account and purchases ledger control account for the month
of June 2000
Question 3: The books of Mary Rose gave the following information for the month ended 31st May 2003.
All sales and purchases were on credit
1. Sales ledger balance at 1 May 2003 5,627
2. Purchases ledger balance at 1 May 2003 4,388
3. Sales for the year 100,384
4. Purchases for the year 64,987
5. Sales returns 1,997
6. Purchases returns 8,64
7. Payment received from debtors (all balanced) 92,760
8. Payments made to creditors 63,520
9. Debtors dishonored cheques 109
10. Discount allowed 4,082
11. Discount received 3,241
12. Bad debts written off 1,884
13. Debit balances transferred to purchases ledger control account 208
Required: Extract the relevant information from above and prepare the sales ledger control account for
the month ended 31 May 2003
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Question 4: The following information relating to sales and debtors was extracted from the books of a
firm for the month of October 1993:
1. Total debtors at 1 October 1993 1,750
2. Sales for cash 15,200
3. Sales on credit 10,800
4. Total receipt from all customers 21,450
5. Discount allowed to credit customers 450
6. Sales returns from credit customers 400
8. Increase in the provision for bad debts 300
9. Debit balance in the sales ledger set off against purchases ledger balances 80
10. Sales ledger credit balance balances at 31 October 1993 120
Required: Using the appropriate balances and information above, prepare the sales ledger control
account in the General ledger for October 1993
Question 5: The following information was obtained from the books of vale:
1 March 2002 Debtors 9,506
Creditors 2,580
1. Credit Sales 20,345
2. Credit purchases at list price 7,200
3. Purchases returns at list price 200
4. Sales returns 120
5. Cash and cheques received from debtors 19,580
6. Customers cheques dishonored 250
7. Cash and cheques paid to suppliers 5,170
10. Interest charged to customers on overdue accounts 70
12. Balance in the sales ledger set off against balance in the purchases ledger 350
13. Cash refunds from suppliers for overpayments 60
14. Debit balances in purchases ledger 40
15. Credit balances in sales ledger 64
All purchases and purchase returns were subject to a trade discount of 10% on the list price
Required: Select the appropriate balances and prepare the Purchases Ledger control account for the
month of March
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Question 6: The following details are available from Winston’s books for the month of May 1996:
1 May 1996
Sales ledger control account balance b/f 10,000
Purchases ledger control account balance b/f 8,000
31 May 1996
1. Purchases for month 12,000
2. Sales for month 16,000
3. Return Inwards 1,000
4. Return Outwards 400
5. Payments to creditors 11,000
6. Receipts from debtors 15,500
7. Customer’s cheque returned unpaid by bank 500
11. Transfer of debit balances from sales ledger to purchases ledger during month 400
12. Credit balances in sales ledger 31 May 1996 600
13. Debit balances in purchases ledger 31 May 1996 200
Required: prepare the Sales ledger control account and the purchases ledger control account for the
month of May 1996
Question 7: The sales ledger control account does not agree with its debtor’s ledger balance of $39,150.
The following errors were discovered:
1. A credit balance of $70 on one’s debtor account in the sales ledger has been listed as a debit
balance
2. A debit balance of $40 on another’s debtor’s account in the sales ledger had been listed as a
credit balance
3. The list of balances had been over casted by $60
The current debit balance brought down on the Debtor’s ledger account is:
a) $39,030
b) $39,060
c) $39,150
d) $39,130
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Question 8: The sales ledger balance of $29,175 did not agree with the sales ledger control account
balance. The following errors were discovered:
1. A credit balance of $80 on a debtor’s account, in the sales ledger had been listed as a debit
balance
2. A debit balance of S67 on a debtor’s account, in the sales ledger had been listed as a credit
balance
3. $220 received from a debtor had been entered in the purchases ledger, instead of the Sales
ledger
4. The list of balance had been overcast by $72
The Correct (debit) balance on the sales ledger control account is:
a) $28,857
b) $28,870
c) $29,001
d) $29,297
Question 9: Purchases ledger control account had a balance of $37,564 but this did not agree with the
purchases ledger balance listed on the same date. The following errors were discovered
1. A refund of $140 received from a credit supplier because of an over payment that had been
posted to the wrong side of the Control account
2. Returns outwards $310 had also been posted to the wrong side of the control account
3. The list of balances had been under casted by $200
4. Discounts received of $275 were not recorded in the control account
The correct credit balance on the Purchases Ledger control account is:
a) 36,948
b) 37,118
c) 37,500
d) 37,678
Question 10: Jean balanced he Purchases ledger control account on 31st May 1994 and is showed a
credit balance of $19,950. She then listed the individuals suppliers balances in the Purchases ledger and
the total came to $18,960 at the same date.
When she examined the records, the following errors were found, and corrected:
1. Goods costing $850 had been bought from North on credit, but no entries had been past in any
of the books.
2. West had allowed cash discount $20 to Jean. This had been entered on the wrong side of West’s
account but entered correctly in the cash book
3. The Purchases return day book showed that a credit note for $60 had been received from East
but it had not been posted to East’s account
4. The Purchases day book had been over cast by $1,000
5. South’s credit balance of $90 had been omitted when the Purchases ledger balances had been
listed
Required: You are required to complete the following creditor’s ledger control account balance and
to reconcile this corrected balance with the amended total of individual creditor
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Question 11: At 30 November 20X5 the balance on the debtors ledger control account of Andrew’s Ltd
totaled $25,390.27. Unfortunately when the individual debtor account in the sales ledger were balanced
and totaled this total came to $24,993.57. The accounts were investigated and the following errors were
discovered:
1. The account balance for P. Hull totaling $227.40 was omitted from the total of individual
debtors balances
2. An invoice for $372.19 to M Skinner was posted to the account of B Skinner in error
3. An invoice to M. Catt for $58.64 has been entered in the sales day book as $85.64
4. A debt due from J Keller of $169.30 has been written off as a bad debt in J Keller’s individual
sales ledger accounts but not in the nominal ledger
Required: You are required to complete the following debtor’s ledger control account balance and
to reconcile this corrected balance with the amended total of individual debtor
Question 12: Judith Kelly has extracted and listed the balances on her customer’s personal accounts, but
the total of the list does not agree with the balance on the receivables ledger control account in her
general ledger.
You have obtained the following information from an examination of her records:
1. The total of the list of balance is $122,409
2. The balance on the receivables ledger control account in the general ledger is $120,539
3. An account balance of $7,540 (debit) has been included in the list as $5,740 (debit)
4. Goods with value of $2,648 were returned by a customer, and a credit note was issued. The
credit note was posted to the personal account, but no other entries were made
5. A credit balance of $3,289 has been included in the list as a debit balance
6. Judith agreed to accept a payment of $9,000 in full settlement of a balance of $9,010 due by a
customer. The balance on the personal account was cleared, but the discount has not been
recorded in the nominal ledger
7. A credit balance of $500 has been omitted from the list
8. During the year, one of the Judith’s customers went into liquidation. The balance due ($ 750)
was written off as irrecoverable in the personal ledger but no entries were made in the general
ledger
Required: Reconcile the individual balances with balance of control account.
Question 13: You have been completing the year end accounts of a client and have the following data:
Total creditors balances - Per control account $42,578
Per list of balances $44,833
1. A credit note for $372 has been received from a supplier but has not been recorded in the
Purchases Returns book
2. A credit balance of $ 2,597 has been included in the list of balances as $2,579
3. Standing order payments to a supplier totaling $3,000 have not been recorded in the cash book
4. An account with a debit balance of $700 has been included in the list of balances s a credit
balance.
5. A supplier has agreed to write off a balance of $27 as discount. The necessary entry has been
made in the suppliers account but no other entry has been made
6. An error was made in totaling the invoices in the purchases day book. Total was under cast by
$900
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Question 14: The balance on the Purchases ledger control account in Tina’s nominal ledger is $48,395.
The total of the listing of the balances in the personal ledgers is $46,644.
On checking, Tina found the following reasons for the difference:
1. A cheque for $4,300 was paid to a supplier in full settlement of an invoice for $4,320. The
discount was recorded in the personal account, but was not recorded in the nominal ledge.
2. The purchase day book total for June was over cast by $90
3. The total of cheques issued to suppliers was $78,056, but was posted to the control account as
$78,065
4. An invoice of $459 was entirely omitted from the books
5. A credit balance of $870 on a suppliers account was included to the listing as a debit balance of
$780
Question 15: Glenda balanced her purchases ledger control account on 30 September 1999 and it
showed a credit balance of $21,600. The individual suppliers balances were then listed and the totaled
$21,310
The records were examined and the following errors were found and corrected:
1. Tracey allowed prompt payment discount $30 to Glenda. This was treated as a credit entry in
Tracey’s account. It was entered correctly in the Cash Book
2. The Purchases day book was over added by $200
3. Goods costing $1150 were bought from Cullen on credit but no entries were made in any of the
books
4. Stamford’s credit balance of $150 was omitted when the suppliers balances were listed
Required: Draw up an adjusted Purchases ledger control account and reconcile the original total of
the supplier’s balances with the adjusted Purchases ledger control account balance
Question 16: The balance on the sales ledger control account at 31 December is $61,752.Ths does not
agree with the list of Debtors ledger balances on that date, which amount as $61,500.
On checking the accounts, you discover the following errors:
1. A balance of $198 has been omitted from the list of debtors ledger balances a 31 December
2. A debtor’s account has been under cast by $325
3. A sales invoice for $2,520 has been completely omitted from the books
4. Sales figure for the month should have been listed as $230,256, not 230,265
5. A debtor who owed the business $280 has been declared bankrupt. This has been correctly
entered in the control account, but no entry has been made to cancel the debt in the debtor’s
personal account
Required: Draw up an adjusted Sales ledger control account and reconcile the original total of the
customer’s balances with the adjusted Sales ledger control account balance
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Question 17: The total of the balances in Noel’s purchases ledger amounts to $67,660, which does not
agree with the closing balance in the control Account.
The balance as per creditor control account is $72,270
The following errors were then discovered:
1. Discount received had been overstated by $1,000
2. A credit purchases invoices for $2,040 had been completely omitted from the books
3. A purchases ledger account had been understated by $100
4. A credit balance of $850 in the purchases ledger had been set off against a contra entry in
the sales ledger but no entry had been made in the control accounts
5. A payment of $1,450 had been debited to the creditor’s account but was omitted from the
bank account
6. A credit balance of $3,210 had been omitted from the list of creditors
Required: Draw up an adjusted Purchases ledger control account and reconcile the original total of
the supplier’s balances with the adjusted Purchases ledger control account balance.
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Payroll:
Gross Pay: Total earnings of an employee.

Net Pay: Pay which an employee can take home.
Pay slip: It is a source of document in which details of gross pay, deductions and net pay is given.
Deductions:
Statutory Non Statutory

o Income Tax Pension Contribution
o Social Security Holiday scheme
Benefit Contribution Charity Scheme
Or Other Voluntary deductions
National Insurance Contribution
How to Calculate Net Pay:
Gross Pay xxx
Less:
Statutory & Non Statutory (xxx)
deductions
Net Pay xxx
How to calculate Employer’s Expense:
Gross Pay xxx
Add: Employer’s Pension or
Social security contribution xxx
Employer’s Expense xxx
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Practice Questions:
Question#1:
The following information for wages and salaries has been taken from the accounts of Roman:
$
Wages and salaries (gross) 65,708
Income tax 15,770
Employer’s pension contributions 5,257
Employees’ pension contributions 3,942
There are no statuary or non-statutory deductions other than the above.
What is the Roman’s total wages and salaries expense?
A. $70,965
B. $74,907
C. $90,677
D. $65,708
Question#2:
Jasminder had correctly recorded a wages and salaries expense of $32,000 in her accounts. She only has two
employees who each earn a gross salary of $14,000 per annum.
Which of the following could explain the difference between the gross salaries and total wages and
salaries in the accounts?
A. Employee pension contributions
B. Jasminder’s Drawings
C. Pension contributions paid by Jasminder on behalf of her employees
D. Employee income tax payments
Question#3:
During the year ended 30 November 20X8 Varsha earned a gross salary of $27,000. She paid 10% and her
employer paid 5% of her gross salary into a pension fund.
What amount will her employer record as the total wages and salaries expense for Varsha for the year
ended 30 November 20X8?
A. $27,000
B. $25,650
C. $31,050
D. $28,350
Question#4:
Javesh has a basic salary of $3,200 for November. His income tax on the salary is $640 and he pays state
benefit contribution of $290. His employer also pays state benefit contributions of $340 and pension
contributions for Javesh of $160.
How much will Javesh receive as his net pay for November?
A. $2,270
B. $1,770
C. $1,930
D. $2,770
Question#5:
In some jurisdictions employers have a duty to collect what from employees’ gross wages and
salaries?
A. Holiday pay
B. Income tax for the self employed
C. Income tax for the employed
D. Sales tax
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Question#6:
The payroll function in a business is important. Why is this? (select from the following options)
(i) Wage costs form a large proportion of total spending in a business
(ii) Employee relations are important
(iii) The company acts as a collector of tax
(iv) Security issues are
involved
A. (i), (ii), (iv)
B. (ii), (iii)
C. (iii), (iv)
D. (i), (ii), (iii), (iv)
Question#7:
An employee received a guaranteed minimum wage of $50 per week and works on a piecework system
where output is paid at $10 per unit. Time worked in excess of 40 hours is paid at $3 per hour. In a given
week the employee produced seven units and worked for 45 hours.
What is the employee’s gross pay?
A. $85
B. $65
C. $70
D. $135
Question#8:
Each month a company pays its sales staff commission of 3% on all sales up to the value of $100,000
and 5% on all sales over $100,000. In May 20X2 a member of the sales staff made total sales of
$125,000.
How much commission will she be paid for the month?
A. $3,000
B. $3,750
C. $4,250
D. $6,250
Question#9:
An employee earns $24,000 per annum ($2,000 per month). In May a salary increase was agreed to
$26,400 pa, which was backdated to 1st April. In addition, a 2% bonus of basic monthly salary is payable if
the company profits exceed a certain figure. The profit threshold was passed for May.
What is the employee's gross pay for May?
A. $2,244
B. $2,444
C. $2,040
D. $2,440
Question#10:
Which of the following is an example of a non compulsory disclosure on an employee payslip?
A. Employee's national insurance number
B. Gross pay
C. The deductions from gross pay (and what they are for)
D. The net pay
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Question#11:
For the month of May, the following figures have been extracted from a trader’s records with regard to
wages.
(i) Employees’ social security $678
(ii) Gross basic wages $9,900
(iii) Income tax $2,000
(iv) Employer’s social security $925
What will be the total charge for wages and salaries in the final accounts?
A. $10,825
B. $10,578
C. $11,503
D. $13,503
Question#12:
Which of the following is NOT a payroll function?
A. Calculation of gross pay
B. Notification of holiday entitlement
C. Calculation of tax and other deductions
D. Distributing pay slips
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THEORY
Capital expenditure:
Expenditure which results in the acquisition of non-current assets or an improvement in their earning
capacity is called capital expenditure. E.g. purchase of machine, installation.
Revenue expenditure:
Expenditure which is incurred for the purpose of the trade of business or to maintain it e.g. the existing
earning capacity of non-current asset, electricity wages, repair of van.
Tangible Assets:
Which hold some physical existence e.g. land, building, plot & machine.
Intangible Assets:
They don’t hold physical existence.
x Goodwill
x Brand name
x Trade marks / copy rights.
Difference of Purchases & Inventory:

Purchases:
Inventory which is sold.
Purchases are shown as expense.
Inventory / Goods / Merchandise Inventory:

It is inventory which is not sold.
This is shown as an asset.
Trade Receivable:
A person owing money to the business in return for goods supplied. It is an asset of the business.
Receivable ledger control A/C:

It helps to ensure that all transactions have been correctly recorded and reduce the chance of fraud
between business & customer in relation to transaction. It also makes the detection of error easier.
Integrated receivable ledger means customer accounts are part of the double entry bookkeeping system
Aged receivable analysis:

List of credit customers (and amounts owed), analyzed according to how long it has been since the
invoice was issued. It provides information about debt collecting efficiency to management. It is also
used in determining irrecoverable debt.
Irrecoverable debt:
A debt for which payment is reasonable certain not to be received is called bad debt.
Journal entries:
They are one of or non-routine entries, usually used for the correction of errors. All journal entries must
have a narrative explanation.
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Account:
A record of similar financial transaction in a business is called account.
Memorandum/ individual/ personal account:

These are individual accounts and are not the part of double entry book keeping system. E.g. supplier’s
individual Account.
Personal account for customer is required to deal with customer queries, to prepare monthly statement,
to monitor customer credit limits, and to match cash received with invoices
Control Account:
It is an account in the general ledger in which a record is kept of the total value of a number of similar
individual items. It is the control A/C balances which will appear in the final Accounts of business.
Purpose of control account:

x To check accuracy of entries made in personal account
x Assist in location of errors, Identify errors in the day books and postings to the general ledger
x Internal check where there is segregation of duties
x Quick extraction of balance, Provide a total of receivables and payables at any time
Trial balance:
A list of ledger accounts which helps to ensure that the book keeping has been accurate is called trial
balance.
Suspense account:
Temporary account used to identify the difference between trial balance columns totals once errors
have been identified and corrected, the suspense account is closed.
Retention Policy:
It is a policy to store information and records. It states that for how long a company should retain the
records. It is a tax law legal requirement. It mitigate risks arising from internal and external disputes of
the business it increases operational efficiency.
Date protection legislation:

Company is obliged, not to disclose customer and employees information. Confidential business
documents that are no longer needed should be archived, microfilmed or microfiche or securely
destructed.
Personal data:
Data about a specific customer/employee is called a personal data
Batch processing:
Is where similar transactions are gathered into batches, and then each batch is sorted and processed by
the computer.
Control totals:
It is used to make sure that the data has been completely processed when the batch is input. A control
total is used to make sure that the total value of transactions input is the same that previously
calculated.
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Module:
It is a computer program that deals with one particular part of a business account system.
i. Purchase Module
ii. Sales Module
iii. Marketing Module
Aged payable analysis:

List of creditors, analyzed accounting to how long it is due to payable. It is maintain to prevent the
business missing opportunities to claim discount.
Settlement discount (or cash discount):

Discount for early payable of an invoice recorded in the nominal (general) ledger as discounts allowed or
discount received or a reduction in the invoice price by supplier.
Trade discount:
A discount on the price of goods or services agreed in advance (and often granted to regular customer
or for bulk purchase).
Rebate:
Concession in all amounts after using certain limit
Allowance:
Free amount is given after some limit order
Book of prime entry:

A ‘book’ in which details of transactions is listed for the first time as a first step towards recording them
in the accounts.
Things written on purchase book:

x Registered office and company registration number
x Sales tax registration number
x Quantity and price of goods ordered
Cash book:
Analyzed cash book ensure that receipts and payments are summarized under suitable headings for
posting purposes
Tax point:
The date on which a transaction is deemed to have taken place for sales purpose is called tax point.
Income tax code:

It helps to reflect the tax allowances and reliefs available to an employee
Sales tax:
A tax levied on the sales of goods & services administered by government.
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Bank reconciliation statement:

Statement reconciling the balance of the cash book, bank account, and the bank statement. Large retail
group should reconcile bank statement daily to avoid errors
Function of personnel department:

x Recruiting and dismissing employees
x Maintaining records of employment
x Employee relations and welfare
Purpose of purchase invoice

x To claim back tax
x To Identify the goods bought
x To record how much is owed to supplier
x To record the amount of sales tax on purchase
x To state the date that payment in due
SOURCE OF DOCUMENTS
Quotation:
Documents sent to a potential customer quoting price for some goods or a service if signed and
accepted by the customer it becomes a purchase order form for the customer. Or indication of the costs
of a specific contract or job. It is given by supplier which contains detail and prices of goods.
Purchase invoice:
Written request for payment from a supplier, giving details of items delivered.
Purchase order:
Order from a customer on a form or document produced by the customer.
Purchase requisition:
Request for an item to be purchased for the business it should be authorized before being acted on.
Sales invoice:
Written request to a credit customer for payment, giving details of items sold.
Pro-forma invoice:
It is a document which is provided by a supplier where payment with order is required.
Sale order form:

Order from a customer
Internal cheque requisition:

Form for use within a business, properly authorizing payment to be made to a supplier. It is raised by
any department to finance dept. that they need a cheque in order to support expenses.
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Receipt:
Written statement of an amount of money that has been paid / received is called receipt.
Delivery note:
Document sent with products delivered to a customer. One copy kept by the customer, or copy signed
by the customer and retained by the supplier.
It is issued by supplier as a confirmation that goods are delivered.
Till roll:
Printed listing of all payments received through a till/point of sale desk in a retail outlet.
Advice note:
Document issued to a customer or received from a supplier advising that a delivery will be made on a
specific day and listing the items to be delivered.
Remittance advice:
Documents sent with payment, listing the items / invoices that are being paid & providing the details of
amount being paid.
Cash received sheets or a remittance list are used to collect receipts ready for recording on a form
produced by the seller
Credit note:
Documents issued to a customer or received from a supplier, indicating that the amount owed is being
reduced for sales return / purchase return.
Debit note:
Documents issued to a customer or received from a supplier, indicating that the amount owed is being
increased because of an error and to request a credit note.
Time sheet:
It is a record of time spent by employee on certain work or jobs.
Statement of account:
A list of invoices, credit notes, settlement discount and payment for a given period of time, sent by a
supplier to a credit customer. The statement also shows the current amount owed by the customer.
PAYROLL
Payroll:
List of employees and the wages or salaries due to each is called payroll.
Function of payroll department:

Calculation and payment of wages is the function of payroll department
x Calculation of gross pay
x Calculation of tax and other deduction
x Distributing pay slips
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Importance of payroll functions:

x Wage costs from a large proportion of total spending in a business
x Employee relation are important
x The company acts as a collector of tax
x Security issues are involved
Control to ensure the accuracy of payroll transactions:

x Reconciliation of payroll to bank statement and general ledger
x Segregation of duties between payroll preparation and authorizing payment. Segregation of
duties reduce the risk of fraud
Gross pay:
Money due to an employee before deductions for income tax, NIC, etc.
Net pay:
Money payable to an employee after deduction for income tax, NIC, etc.
Pay slip:
Documents given to each employee giving details of pay and detection from pay is called payslip. It
contain details of gross pay deductions and net pay
Compulsory disclosures on an employee pay slip by statute:

x Employee’s national insurance number
x Gross pay
x Deduction from gross pay
State benefit contribution/ National insurance contribution (NIC):

Amount paid by employees (and possible the employer) to the state for purposes of social security.
PETTY CASH
Petty cash:
A small amount of cash held for the payment of expenses which is not dealt with through the bank
account.
Petty cash voucher:

Document kept in the petty cash giving of money paid out and the reason for the expense. Following
things will appear on petty cash voucher
x Purpose of expenditure
x Name and signature of recipient
x Name and signature of person authorizing payment
x Date
To ensure petty cash payments have been made for authentic expenditure you have to staple
appropriate receipts to the voucher.
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Imprest system:
System commonly used for petty cash where by the total amount of cash in the petty cash tin is
periodically topped up to a given limit. At all times, the petty cash voucher plus the money in the tin
should be equal to this limit.
BANKING SYSTEM
Banking System in UK:

1. Bank of England is the central bank which controls the banking industry.
2. Clearing or retail banks: Clearing banks or retail banks are smaller sized banks which give
common banking facilities to its customer such as
a. Credit Cards
b. Loans etc.
3. Smaller retail banks:
What is clearing?
Bank clearing system is the mechanism for obtaining payment for cheques
Who is a banker?
A banker is a person who:
1. Put money and cheques received on a customer’s behalf into his account.
2. Take out payments from customers account demanded by customers.
3. Keep records of customers’ accounts.
Who is a customer?
A person becomes a customer as soon as the bank opens an account form him in his name.
Customer/bank relationship:
1. Receivable and payable
2. Bailor and bailee
3. Principal and agent
4. Mortgagor and mortgagee
5. Fiduciary relationship
Payee = the one who receives cheque

Drawee = Bank
Drawer = the one who signs cheque
Drawer of a cheque:
Account holder of person/business writing a cheque.
Payee:
The person being paid is called payee.
Duty of customer towards bank is:
x To inform bank when a cheque book is lost or stolen
x To repay overdraft on demand
x To operate their A/C with care to minimize the risk of fraud
x Not encourage fraudulent activities
x Not to misuse any cheque guarantee card
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Bankers draft / Pay order:

It is the most secured method of payment in which bank gives guarantee for payment. These are paid
directly into the bank in the same manner as cheque.
Bank guarantee card:

It is a card issued by bank which acts as a guarantee that a person’s cheque will not dishonor.
Dishonor cheque/Bounced cheque:

A cheque is remained unpaid if wrong signature, insufficient fund, wrong date, over writing.
Expiry of cheque:
A cheque gets expired after 6 months of date stated on the cheque.
Debit card:
In this transaction, a person uses his funds held at bank through a card.
Credit card:
In this transaction, a person uses credit/loan limit from bank through a card.
It is important to check that credit card is signed, valid and has not been tempered before receiving
payment from it.
Bank mandate form: It is a form in which names and specimen signatures of individuals authorized to
sign cheques supplied to a bank
BACS: (Banks automated clearing system)

Automated payments by bank transfer BACS is commonly used to pay salaries to employees and to pay
regular suppliers.
Crossed cheque:
A cheque is crossed by drawing two parallel vertical lines on it. A crossed cheque must be paid into a
bank account.
An endorsement means a cheque has been signed by the payee on the back, together with a written
instruction to pay a third party
Following features should be agreed with cheque.

1. Amount guaranteed
2. Customer’s name
3. Account Number
4. Bank sort code
5. Expiry date
Bank Giro Credit:

They are directly paid into a bank account by the customers of the business.
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Standing order:
An order to a bank to make regular payment out of a bank account, the amount to be paid is notified to
account holder. An amount is fixed. The recipient of the payment initiates each payment.
Direct debit:
It is an order to a bank to make regular payments out of a bank account. The amounts to be paid are
notified to the bank by the payee. The account holder should give written authority to the bank for the
payee to do this. An amount is variable.
Security for cash banking:

x Night safes
x Security firm’s collections
x Banking by cashier
Paying-in-slip:
It should be made when cash to be paid into bank account. It is a source document of financial
transaction
EFTPOS:
It stands for electronic funds transfer at point of sales funds are automatically transferred from a
customer’s bank account to the organization’s bank when goods are purchased.
Control over payments:

x Making sure each payment is authorized
x Limiting the authority of persons approving payments
x Ensuring each request for payment is supported by documentary evidence
Methods of payment:
i. Cheque
ii. Credit card
iii. Debit card
iv. Online transfer/credit transfer
v. Demand draft or Banker’s order or Pay order.
Cash physical security consideration:

x Safes
x Protective glass
x Strong box
x Security guard and collection
x Night safes
x Frequent Banking
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CODING SYSTEM
Types of codes:
1. Sequential codes:
Coding is allocated to items in strict numerical order. There are random allocations of codes.
2. Faceted codes:
Codes or broken down into a number of facets or fields, each of which signifies a unit of
information.
3. Mnemonic codes:
Codes are usually in alpha numeric form and incorporate some description element that makes
it easy to find the correct code.
4. Block codes:
Block codes are allocation of code. For example: form 0-100 for non-current asset, from 101-200
for current asset etc.
5. Hierarchical codes:
Hierarchical codes are a type of faceted code where each digit represents a classification, and
each digit further to the right represents a smaller subset than to the left. For example: 0-100 or
non-current asset. 0 is for office furniture, 1 is for motor car.
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FA1 – Recording Financial Transactions
Suspense Account Exam Kit
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CONTROL ACC UNTS, BANK RECONCILIATIONS AND T E INITIAL

T IAL BALANCE
180 Phillip's bank reconciliation statement shows outstandin lod1emen paid in
Phi ip of $3,800 and outstanding cheques to suppliers of $3,500. His bank account
in his ledger shows a debit bala of $25,000.
What balance does Phillip's ank statement show?

A $25,000
8 $24,700
C $25,300
D $32,300
181 Which of the following would not lead to a difference between the total of the
e
balances on the accounts receivab e ledger and the balance on the rc ivabtes
ledger control account?
A An error in totalling the sales day book
B An error in totalling the receipts column of the cash book
C An overstatement of an entry in an accounts receivable account
D An entry posted to the rong account receivable account
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MUSTAFA MIRCHAWALA

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PAGE 1

Question 5: State which of the following are wrongly classified:

Question 7: Complete the gaps in the following table?

Question 8: Complete the gaps in the following tables:

Question 9: Complete the gaps in the following table

Question 10: Complete the gaps in the following table

Question 15: Identify effects on account head

Question 16: Identify effect on account heads

Question 17: Identify effect on account heads

Question 18: Complete the following table:

Question 19: Identify effect on account heads

j) Bought shop fixtures on credit from stop Ltd. £740.

19. Sales to Mr.C Rs 1000.

T – Accounts / Ledgers & Trial Balance

k) We paid J Watson his account by cheque £368.

a) Started in business with £11,000 in the bank and £1,600 cash.

ERRORS NOT AFFECTING TRIAL BALANCE

Question 2: Correcting entries

Question 3: Correcting entries

Question 4: Correcting entries

Question 5: Correcting entries

INCOME STATEMENT & Balance sheet

Question 1: Income statement

Question 2: Income Statement

Question 3: Income Statement & Balance Sheet

Question 4: Income statement & Balance sheet

Inventory at 30 June 2008 was £16,280

Question 5: Income statement & Balance sheet

Inventory at 30 September 2008 was £89,404.

INCOME STATEMENT ERRORS

1. The sales day book had been under cast by £200.

1. The sales day book had been undercast by $200.

1. The purchases day book was under-added by £400.

Required: Write up the suspense account to clear the difference

The following errors were subsequently discovered in the books:

1. The purchase day book had been under cast by $10

Daybooks are also called ‘’Prime Entry Books’’.

Float-Expenses+ Income+ top up= Float

Daybooks Practice Questions:

VALUE ADDED TAX

Question 2: Transaction during the year:

Question 3: Transaction during the year:

Question 4: Transaction during the year:

Question 5: A Co. has following data:

Question 6: A Co. has following data:

Question 7: Transaction during the year:

Question 8: Transaction during the year:

Gross Pay: Total earnings of an employee.

Statutory Non Statutory

Difference of Purchases & Inventory:

Inventory / Goods / Merchandise Inventory:

Receivable ledger control A/C:

Aged receivable analysis:

Memorandum/ individual/ personal account:

Purpose of control account:

Date protection legislation:

Aged payable analysis:

Settlement discount (or cash discount):

Book of prime entry:

Things written on purchase book:

Income tax code:

Bank reconciliation statement:

Function of personnel department: