AFIA - FA1

MCQ Test 2

Q1. Rosario sold goods to Dino on credit. Two weeks later, Dino returned the goods.

What general ledger entry should Rosario make to record the return of the goods?

A Dr Receivables Cr Sales returns

B Dr Sales returns Cr Receivables

C Dr Purchase returns Cr Payables

D Dr Payables Cr Purchase returns

Q2 Kamil bought a machine which cost $15,800. The invoice also included the following additional
costs:

Delivery $600

Installation $450

Testing $150

At what value should the machine be included in non-current assets?

A $16,400

B $16,250

C $17,000

D $16,850

Q3 At 31 May 2011 the balance on Caleb’s bank statement showed that he had $3,732 in the bank.
When he carried out the reconciliation between the bank statement and the bank account in his
general ledger he found the following:

(i) unpresented cheques $5,729

(ii) outstanding lodgement $822
(iii) bank charges $495

What overdraft balance should be reported in his statement of financial position at 31 May 2011?

A $1,670

B $8,639

C $680

D $1,175

The following information relates to questions 4 and 5:

At 1 June 20X0, Amir’s receivables allowance was $1,573. At 31 May 20X1 the balance on his
receivables ledge account was $87,541. This includes an irrecoverable balance of $1,275 and he
estimates that his receivables allowance should be adjusted to $1,855.

Q4 What charge should be included in Amir’s statement of profit or loss for receivables expense?

A $1,557

B $993

C $1,275

D $1,855

Q5 What amount should be included in Amir’s statement of financial position for receivables?

A $85,968

B $84,411

C $84,693

D $85,686

Q6 At 1 May 20X0 Lim owed his suppliers $17,822. At 30 April 20X1 he owed $16,385. During the
year to 30 April 20X1 he paid his suppliers $131,740, and made a contra entry with the receivables
ledger of $800.

What was the value of his purchases for the year to 30 April 20X1?

A $133,977

B $131,103

C $130,303

D $129,503

Q7 Omar made a cash sale for $300. The items which he sold had cost him $360. What is the effect
of the sale on his assets and capital?

Assets Capital

A increased reduced

B reduced increased

C increased increased

D reduced reduced

Q8 Which of the following statements about a trial balance are correct?

(i) the trial balance includes all of the amounts needed to complete the final accounts
(ii) the trial balance is part of the double entry system
(iii) all bookkeeping errors will lead to an imbalance in the trial balance

A none

B (i) and (ii) only

C (ii) and (iii) only

D (i) and (iii) only

Q9 At 31 October 20X0, Jemma was owed $138,644 by her customers. She has calculated that
her receivables allowance should be $2,600. How should receivables be reported in Jemma’s
statement of financial position at 31 October 20X0?

A as a current asset of $136,044

B as a current asset of $138,644 and a current liability of $2,600

C as a current liability of $136,044

D as a current liability of $138,644 and a current asset of $2,600

Q10 At 1 December 20X0 Giordi’s receivables allowance was $1,488. At 30 November 20X1 the
balance on his trade receivables account was $231,860. He has decided that balances totalling
$2,437 are irrecoverable and should be written off and that his receivables allowance should be
revised to 0·75% of the remaining balances.

What amount should be charged to Giordi’s statement of profit or loss for receivables expense
in the year to 30 November 20X1 (calculated to the nearest $1)?

A $1,721

B $2,204

C $2,670

D $233

Q11 Which of the following statements is correct?

A financial statements of a sole trader must be prepared by a qualified accountant

B financial statements do not provide useful information to lenders

C all the information needs of the owner are met by the financial statements

D financial statements are intended to meet the needs of a number of user groups
 Q12 Veronica took out a bank loan for $60,000 on 30 September 20X0, and agreed to repay
$2,000 of capital per month starting on 31 October 20X0, but actually made the first repayment
on 12 November 20X0.

How should the outstanding capital on the loan be reported on her statement of financial
position at 31 October 20X0?

Current liability Non-current liability

A $24,000 $34,000

B $24,000 $36,000

C $26,000 $34,000

D $26,000 $32,000

Q13 At 1 November 20X0 the value of Claudia’s net assets was $127,554. At 31 October 20X1 the
value was $174,529. During the year to 31 October 20X1 Claudia introduced $35,000 of capital and
her drawings were $17,150.

What was Claudia’s profit for the year to 31 October 20X1?

A $64,825

B $29,125

C $11,975

D $46,975

Q14 Zhou sells building materials. One of his suppliers agreed to accept some building materials in
settlement of an outstanding balance due by Zhou.

In which of Zhou’s general ledger accounts should entries be made?

A trade receivables and trade payables

B trade payables and bank

C sales and trade payables

D sales and trade receivables

Q15 When goods are sold on credit at a profit, what is the effect on the assets and liabilities of the
seller?

Assets Liabilities

A increase do not change

B do not change do not change

C do not change reduce

D reduce do not change

Q16 Which of the following will require an entry in a suspense account?

(i) a customer paid $190 to settle an invoice with a value of $109;

(ii) the debit and credit totals of the trial balance did not agree.

A (i) only

B (ii) only

C both (i) and (ii)

D neither (i) nor (ii)

Q17 Before making any adjustments, the balance on the bank account in Freema’s general ledger is
$2,564 credit. She knows that to complete her bank reconciliation, she needs to deal with the
following:

(i) a cheque for $420 has not been presented at the bank;
(ii) a lodgement for $1,200 has not been credited on her bank statement; and
(iii) she has not recorded bank charges of $470.

What overdraft balance should be reported on Freema’s statement of financial position?

A $1,784

B $2,094

C $2,254

D $3,034

The following information relates to questions 18 and 19:

Q18 At 31 May 20X1, Shelina was owed $38,286 by her customers, and her receivables allowance
was $1,157. She wishes to write off a balance of $178 as irrecoverable. At 31 May 20X0, her
receivables allowance was $1,284.

What charge should be reported in Shelina’s statement of profit or loss for the year to 31 May 20X1
for receivables expense?

A $51

B $305

C $1,157

D $1,335
Q19 What value should be reported in Shelina’s statement of financial position at 31 May 20X1 for
receivables?

A $36,951

B $37,129

C $37,307

D $38,235

Q20 Cameron makes capital repayments of $558 on 10th of each month on a bank loan. At 31 May
20X1 the capital balance on the loan was $18,414. How should the loan be reported in Cameron’s
statement of financial position at 31 May 20X1?

Current liability Non-current liability

A nil $18,414

B $18,414 nil

C $6,696 $11,718

D $11,718 $6,696

Q21 In the year to 28 February 20X0, Simone paid $378,942 into her bank account. This included
$40,000 of new capital and was after drawings of $26,500 had been made in cash. The balance
represented cash received from customers.

How much cash did Simone receive from customers?

A $312,442

B $365,442

C $392,442

D $445,442

Q22 Which of the following items should be treated as an asset in the financial statements of a business that
operates from a large shop?
(1) Purchase of fixed shelving units
(2) Payment of wages
(3) Repairs to fixed shelving units
A (1) only
B (1) and (2) only
C (2) and (3) only
D (1), (2) and (3) LO 1a
Q23 Which of the following items should be treated as an expenses in an entity's financial statements?
(1) Payment of local property tax
(2) Purchase of premises
(3) Installation of solar panels which will generate benefits over a ten-year period
(4) External audit fee
A (1) and (2) only
B (2) and (3) only
C (3) and (4) only
D (1) and (4) only

Q24 Brogan owns a business and often uses their own personal bank account to pay some business expenses.
Brogan wishes to include all expenses shown in their personal bank account as business expenses, but their
accountant has explained that only some of the amounts may be included.
Which of the following is the main reason why not all of Brogan's expenses can be included?
A Brogan has not recorded the full details of some of the expenditure and, because of this uncertainty, it
is more prudent not to include them in the financial statements.
B There are a large number of immaterial payments which would take a long time to examine.
C The personal expenses of the owner are separate from those of the business and are not relevant to the
statement of profit or loss.
D To be consistent with last year's financial statements only payments above $500 are
included in the statement of profit or loss.

Q25 A business paid out $23,550 in net wages to its employees. In respect of these wages, the following
amounts were shown in the statement of financial position.
$
PAYE payable 4,620
National Insurance payable – employees' 2,830
– employer's 2,640
What were the employees' gross wages before deductions?
A $28,170
B $30,810
C $31,000
D $33,640

Q26 The following data has been extracted from the payroll records of a business for the month of May 20X7.
$
Net amount paid to employees 114,000
PAYE 38,000
Employer's NIC 15,600
Employees' NIC 13,400
What is the wage expense for May 20X7?:
A $181,000
B $152,000
 C $143,000
D $114,000

Q27 Cooks Ltd has a petty cash float with an imprest amount of $250. At the end of March, vouchers in the
petty cash box totalled $144 and the amount of cash remaining in the box was $86.
Which of the following explains the difference?
A A petty cash voucher for $20 is missing.
B An employee was given $20 too little when making a petty cash claim.
C An employee reimbursed petty cash with $20 in respect of postage stamps used, but no voucher was
prepared.
D A voucher for $20 was put in the box but no payment was made to the employee.

Q28 What transaction is represented by the entries: debit non-current assets account, credit trade payables?
A The receipt of money from sale of a non-current asset
B The issue of an invoice for the sale of a non-current asset
C Receipt of an invoice for the purchase of a non-current asset
D Payment for a non-current asset

Q29 Identify whether the following statements are true or false.

Statement (1) A credit balance of $100 brought down on George's receivables ledger in Lei's accounting
records means that George owes money to Lei.
Statement (2) A debit balance of $500 on Lei's drawings account means Lei has withdrawn $500 in the
period.
A Statement (1) is true and Statement (2) is false
B Statement (1) is false and Statement (2) is true
C Both statements are true
D Both statements are false

Q30 Apricot plc makes sales of $37,800 excluding VAT and purchases of $37,800 including VAT. All sales and
purchases are on credit and are liable to VAT at 20%.
What amount is recorded in Apricot plc's trade receivables?
A $7,560
B $31,500
C $37,800
D $45,360
Q31 When a purchase invoice is received from a supplier, which of the following documents should the invoice
be agreed to?
A Sales order
B Debit note
C Goods received note
D Credit note

Q32 Apricot plc makes sales of $37,800 excluding VAT and purchases of $37,800 including VAT. All sales and
purchases are on credit and are liable to VAT at 20%.
What amount is recorded in Apricot plc's sales account?
A $7,560
B $31,500
C $37,800
D $45,360

Q33 Which two of the following matters require an adjustment to the figure for cash at bank account appearing
in Justine's draft statement of financial position as at 30 June 20X5, rather than being reconciling items
between the adjusted cash at bank account balance and the bank statement balance as at that date?
A Bank charges had been debited by the bank but had not been recorded in the cash at bank account.
B Electronic payments made by Justine on 30 June 20X5 did not clear the bank until 1 July 20X5.
C Deposits paid into the bank on 30 June 20X5 did not appear on the statement.
D An electronic payment made by Justine on 29 June was returned on 30 June due to incorrect
account details being entered, but Justine had not been aware that the payment had been
returned

Q34 The following three matters were discovered by Daisy when she prepared her month end bank
reconciliation.
(1) The electronic banking transaction report includes a receipt of $560 in respect of a receipt from a
credit customer. This was not automatically matched to a transaction by the accounting system. On
investigation, it was discovered that there was a bank error and the correct amount was $650.
(2) Bank charges debited by the bank have not yet been entered in the bank ledger account.
(3) The value of payments not processed by the bank exceeded the value of uncleared lodgements.
Which of these matters will require adjustments to the bank ledger account?
A (1) and (2) only
B (2) and (3) only
C (2) only
D (1) and (3) only
Q35 As at 31 December 20X7, a company's bank statement shows a balance in hand of $2,000. The statement
includes bank charges of $50 which have not yet been recorded in the company's bank ledger account. On
31 December 20X7, the company made an electronic transfer of $1,000 to a supplier and used a self-
service terminal outside the bank's normal operating hours to bank $600 received from a credit customer.
Neither of these items appear in the bank statement.
The bank ledger account balance on the company's statement of financial position at 31 December 20X7
should be:
A $1,600
B $3,600
C $2,400
D $400

Q36 The bookkeeper of Rose plc has entered a heat and light expense as a telephone expense.
Which of the following error types has occurred?
A Error of commission
B Transposition error
C Compensating error
D Error of principle

Q37 A business has opening inventory of $12,300 and closing inventory of $14,700. Purchases for the year were
$68,400.
What is the figure for cost of sales?
A $95,400
B $79,800
C $68,400
D $66,000

Q38 On 1 January 20X4 a company received news that a major customer had been declared bankrupt and that
its debt of $42,000 is irrecoverable. The bookkeeper has incorrectly recorded the irrecoverable debts
expense as $24,000 and credited trade receivables with the same amount.
What journal entry is required to correct the error?
A Dr Allowance for receivables; Cr Trade receivables
B Dr Irrecoverable debts expense; Cr Trade receivables
C Dr Irrecoverable debts expense; Cr Allowance for receivables
D Dr Allowance for receivables; Cr Irrecoverable debts expense

Q39 A business accounts for the expense of irrecoverable debts in administrative expenses. It has reduced its
allowance for receivables by $200.
What is the effect of the reduction in allowance on gross profit?
A Reduce by $200
 B Increase by $200
C No effect
D Increase by $400

Q40 At 28 February 20X6, a company's allowance for receivables amounted to $18,600. In the year to 28
February 20X7 it decided to write off $3,000 of debts as irrecoverable and to create an allowance for
receivables of $24,000.
What is the charge to statement of profit or loss for the year ended 28 February 20X7 for irrecoverable
debts?
A $5,400
B $24,000
C $18,600
D $8,400

Q41 The trial balance of Kanine Bros as at 31 May 20X7 includes the following:
Debit Credit
$ $
Trade receivables 60,500
Allowance for receivables at 1 June 20X6 1,420
Subsequently a review of the receivables ledger reveals the following:
Debts totalling $2,100 are considered irrecoverable and are to be written off. The business wishes to reduce
the allowance for receivables to $800.
What is the irrecoverable debt charge or credit to be included in the statement of profit or loss for the year
ended 31 May 20X7?
A $1,480 charge
B $120 credit
C $1,480 credit
D $120 charge

Q42 At 1 July 20X6 a company's allowance for receivables was $14,000.

At 30 June 20X7, trade receivables amounted to $268,000. It was decided to write off $22,000 of these
debts as irrecoverable and adjust the allowance for receivables to $12,000.
What are the final amounts for inclusion in the company's statement of financial position at 30 June 20X7?
Trade Allowance for
receivables receivables Net balance
$ $ $
A 268,000 12,000 256,000
B 246,000 12,000 234,000
C 268,000 22,000 246,000
D 246,000 34,000 212,000
Q43 At 30 September 20X7, a company has trade receivables totalling $128,000 and an allowance for
receivables of $4,800 brought forward from the previous year.
It has been decided to write off receivables totalling $10,500 and to adjust the allowance for receivables to
$3,000.
What will be the net trade receivables balance in the statement of financial position for the year ended 30
September 20X7?
A $114,500
B $120,500
C $135,500
D $141,500

Q44 A business has an allowance for receivables at 1 January 20X7 of $12,500. At 31 December 20X7, the
directors of the business determine that a receivable balance of $10,600 is irrecoverable and should be
written off and that the allowance for receivables should be increased to $13,530.
What journal entry is required to record these adjustments in the financial statements at 31 December
20X7?
A Dr Irrecoverable debt expense $24,130; Cr Trade receivables $10,600;
Cr Allowance for receivables $13,530
B Dr Irrecoverable debt expense $11,630; Cr Trade receivables $10,600;
Cr Allowance for receivables $1,030
C Dr Irrecoverable debt expense $14,560; Cr Trade receivables $1,030;
Cr Allowance for receivables $13,530
D Dr Allowance for receivables $11,630; Cr Trade receivables $10,600;
Cr Irrecoverable debt expense $1,030

Q45 Gem received a bank transfer for $25 on 30 June 20X2 from a credit customer in settlement of an
outstanding debt of $100, along with notification that the remainder of the debt will never be paid.
What is the double entry to be recorded on 30 June 20X2?
A Dr Cash at bank $25; Dr Irrecoverable debts expense $75;
Cr Trade receivables $100
B Dr Cash at bank $25; Dr Irrecoverable debts expense $75;
Cr Allowance for receivables $100
C Dr Cash at bank $25; Dr Allowance for receivables $75;
Cr Irrecoverable debts expense $100
D Dr Cash at bank $25; Dr Allowance for receivables $75;
Cr Trade receivables $100
Q46 On 1 April 20X7 Midge's allowance for receivables stood at $5,558. During the year:
(1) Cash of $900 was received from a credit customer whose debt had been written off many years ago.
(2) A debt of $2,100 was deemed irrecoverable and was to be written off.
At 31 March 20X8 Midge determined that the allowance for receivables needed to be $7,170.
What is the charge for irrecoverable debts expense in Midge's statement of profit or loss for the year ended
31 March 20X8?
A $3,712
B $2,812
C $1,612
D $712

Q47 At 31 December 20X4, Amaya had an allowance for receivables of $1,000.

During the year to 31 December 20X5, the following occurred:
(1) Irrecoverable debts of $500 were written off.
(2) Amaya received $50 in full settlement of a debt which had been written off in the previous year.
At 31 December 20X5, Amaya's total receivables were $71,000. Amaya wishes to have an allowance at
that date of $2,130.
What is the irrecoverable debts expense that should be included in Amaya's statement of profit or loss for
20X5?
A $2,580
B $1,630
C $1,580
D $1,480

Q48 Santa plc acquired a new building on 1 January 20X6, and incurred the following further costs in relation
to this building over the next year.
(1) Costs of initial adaptation of the building
(2) Legal costs relating to purchase
(3) Monthly cleaning contract
(4) Office furniture
Which of these costs should be included in the cost of the building in the company's statement of financial
position at 31 December 20X6?
A (1) and (2) only
B (2) and (3) only
C (3) and (4) only
D (1) and (4) only
Q49 Frankie is a sole trader. In the current year, Frankie has purchased an expensive item of equipment which
will last for many years. This will be treated as a non-current asset in the financial statements.
Which of the following statements provides the best explanation for this treatment of the equipment?
A A large sum of money was paid for it
B It ensures that profits are not unfairly reduced in the year the equipment was purchased
C Its use will generate income for the business in the future
D The treatment is consistent with that used by similar businesses
Q50 The net assets of Harsha's business decreased by $9,800 over the year to 31 October 20X3. During that
year, he had paid in additional capital of $10,000, drawn $1,000 in cash each month and, on one occasion,
taken goods costing $800 for his own use.
What was the loss made by the business for the year ended 31 October 20X3?
A $7,000
B $9,800
C $12,600
D $13,000

Q51 Rowan's business net assets have increased by $68,000 over the year. They took drawings of $37,000 and
paid in $10,000 cash.
What was Rowan's profit for the year?
A $21,000
B $41,000
C $95,000
D $115,000

Q52 A business has net assets of $198,400 on 31 January 20X7 and had net assets of $162,300 on 31 January
20X6. During the year, the owner of the business:
(1) took goods for their own use which cost $12,000 and had a market value of $18,000;
(2) introduced capital of $30,000; and
(3) withdrew $20,000 as salary.
What was the profit for the year?
A $28,100
B $34,100
C $38,100
D $44,100

Q53 Which of the following equations represents the closing capital of a sole trader?
A Opening capital – capital introduced + profit – drawings
B Opening capital + capital introduced + profit + drawings
C Opening capital + capital introduced + profit – drawings
D Opening capital + capital introduced – profit + drawings
Q54 The following information has been extracted from the payroll of Radley & Co, a partnership, for June.
$
Gross wages and salaries 127,600
PAYE 31,900
Employee NIC 11,484
Employer NIC 14,036
What is the total wages and salaries expense to be included in the profit and loss account for June?
A $113,564
B $185,020
C $141,636
D $127,600

Q55 Arabella has a debit balance of $123 in Fab plc's payables ledger. Which of the following would, alone,
explain this balance?
A Fab plc bought and paid for some goods for $123 which it then returned, but Arabella has not yet
issued a credit note for Fab plc to record.
B Fab plc paid $37 to Arabella in respect of an invoice for $160.
C Fab plc received a credit note for $23 from Arabella but posted it to the account of Mirabelle.
D Fab plc paid an invoice for $123 even though Arabella had issued a credit note in respect of it.

Q56 Faringdon plc records $5,196 overdrawn as the bank balance in its statement of financial position at 31
December 20X0 before reconciling to the year end bank statement. The bank statement showed interest
charged of $78 which had not previously been recorded in the cash at bank account. The company noted
that payments of $564 and receipts of $1,875 have not yet appeared on the bank statement.
What is the overdrawn balance on the bank statement at the year end?
A $3,963
B $6,507
C $6,585
D $6,663