ACCA Practice Quiz Bot

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You have 2 hours to complete the selected questions. The answers will be revealed immediately after each question.

Question #1:
Kieron is an antiques dealer. His inventory includes a clock which cost $15,800.
Kieron expects to spend $700 on repairing the clock which will mean that he will be able to sell it for $26,000.
At what value should the clock be included in Kieron’s inventory?
A. $26,000
B. $16,500
C. $15,800
D. $25,300
Answer #1:
1 Correct Answer: $15,800
Under IAS 2 Inventories, any inventory must be stated at the lower of cost and net realisable value. The clock has a cost of $15,800 and a net realisable value of $25,300 (26,000 - 700).
Therefore it should be included at $15,800.
Question #2:
Which two of the following statements about the purpose of suspense account are true?
A. It is used in the final accounts to make the statement of financial position balance
B. It is used when the total debits and total credits in the trial balance are not equal
C. It is used to keep a record of journal entries made to correct errors of complete omission
D. It is used as a temporary account when the bookkeeper does not know immediately where to post an amount
Answer #2:
2 Correct Answer
True:
Sales can be calculated by referencing both sales and sales returns general ledger accounts
The detailed listing of suppliers includes individual supplier accounts and their balances
False:
The bank general ledger account includes all cash transactions and, in addition, cash amounts owed to/ from other parties
A non-current asset register includes only the cost element of non-current assets
Question #3:
At 31 May 20X1 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:
(1) Un presented cheques $5,729
(2) Outstanding lodgments $822
(3) Bank charges $495

What overdraft balance should be reported in Caleb’s statement of financial position at 31 May 20X1? $
A. A charge of $290
B. A credit of $290
C. A charge of $1,758
D. A credit of $1,758
Answer #3:
3 Correct Answer: $1,175
Details: Balance per bank statement 3,732 | Unpresented cheques (5,729) | Outstanding lodgement 822 | Overdraft balance to be reported (1,175)
Note that the bank charges will already have been deducted from the bank statement balance. Caleb will have to enter them into his ledger in order to complete the reconciliation.
Question #4:
Kris has correctly completed the reconciliation between the balance on the payables control account in his general ledger and the list of balances from the payables ledger.
Is each of the following statement true or false?
The reconciliation provides confirmation that the balance on the payables control account is correctly stated (True/False)
The reconciliation confirms that the balance on each supplier’s account is correct (True/False)
Answer #4:
4 Correct Answer
Bank and trade receivables
Purchases and sales would be relevant for cash transactions in this context. Trade payables relates to suppliers
Question #5:
At 1 May 20X8 Trevor’s receivables allowance was $1,468. At 30 April 20X9 the total balance on his receivables ledger was $88,463. This includes a balance of $563 which is irrecoverable. Trevor estimates that his receivables allowance at 30 April 20X9 should be equivalent to 2% of the remaining balances.
How should the movement in the receivables allowance be reported in the statement of profit or loss?
Answer #5:
5 Correct Answer: A charge of $290
This will be charged as an expense.
Question #6:
Which of the following correctly explain(s) why a trial balance is prepared?
(1) To summaries the balances prior to preparation of final accounts
(2) To provide a basic check on the accuracy of bookkeeping entries
A. Neither 1 nor 2
B. 1 only
C. Both 1 and 2
D. 2 only
Answer #6:
6 Correct Answer: Both 1 and 2
A trial balance is prepared to provide a basic check on the accuracy of bookkeeping entries and to summarise the balances prior to the preparation of the final accounts.
Question #7:
Accounting information should be free from materials error and should be neutral.
Which of the qualitative characteristics of accounting information does this describe?
A. Comparability
B. Faithful representation
C. Understandability
D. Relevance
Answer #7:
7 Correct Answer: Faithful representation
Accounting information is faithfully represented if it is neutral and free from material error.
Question #8:
At 31 October 20X3 Laila had a bank overdraft of $3.681 and a bank loan of $16,800. The bank loan is due to be repaid by three payments of $5,600 on 1 April 20X4, 1 April 20X5 and 1 April 20X6.
Which TWO of the following show how these amounts should be reported in Laila’s statement of financial position at 31 October 20X3?
A. Current liabilities $9,281
B. Non-current liabilities $11,200
C. Non-current liabilities $16,800
D. Current liabilities $3,681
Answer #8:
8 Correct Answer: Current liabilities $9,281 and Non-current liabilities $11,200
Current liabilities are those due to be settled within 12 months. An overdraft is always a current liability because it is due to be settled on demand and to this we can add the repayment of $5,600 due on 1 April 20X4. This gives a total for current liabilities of $9,281. The balance is a non-current liability of $11,200 (16,800 - 5,600).
Question #9:
A trainee accountant is employed by a partnership and has prepared the following current account for a partner.

The balance brought forward is entered correctly and the other entries are all correct in the amount. However the trainee accountant thinks she might have mixed up some of the debits and credits.
What is balance carried forward on the account after the errors have been corrected? $
Answer #9:
9 Correct Answer: $1,414
The corrected account looks as follows:

<table class="w-full border-collapse border border-gray-400 my-4 bg-white text-base"><thead><tr class="bg-gray-100"><th class="border border-gray-400 p-2">Date</th><th class="border border-gray-400 p-2">Supplier</th><th class="border border-gray-400 p-2 text-right">Total ($)</th><th class="border border-gray-400 p-2 text-right">Purchases ($)</th><th class="border border-gray-400 p-2 text-right">Expenses ($)</th></tr></thead><tbody><tr><td class="border border-gray-400 p-2">13 April 20X1</td><td class="border border-gray-400 p-2">R Haslam</td><td class="border border-gray-400 p-2 text-right">550</td><td class="border border-gray-400 p-2 text-right">550</td><td class="border border-gray-400 p-2 text-right"></td></tr><tr><td class="border border-gray-400 p-2"></td><td class="border border-gray-400 p-2">NP Golding</td><td class="border border-gray-400 p-2 text-right">250</td><td class="border border-gray-400 p-2 text-right">250</td><td class="border border-gray-400 p-2 text-right"></td></tr><tr><td class="border border-gray-400 p-2"></td><td class="border border-gray-400 p-2">RG Power</td><td class="border border-gray-400 p-2 text-right">725</td><td class="border border-gray-400 p-2 text-right"></td><td class="border border-gray-400 p-2 text-right">725</td></tr><tr class="font-bold bg-gray-50"><td class="border border-gray-400 p-2"></td><td class="border border-gray-400 p-2">Total</td><td class="border border-gray-400 p-2 text-right">1,525</td><td class="border border-gray-400 p-2 text-right">800</td><td class="border border-gray-400 p-2 text-right">725</td></tr></tbody></table>

How is the total of Rekha’s purchases day book posted to her ledger accounts?
A. Dr Purchases $800, Dr Electricity $725, Cr Payables control $1,525
B. Dr Payables control $1,525, Cr Purchases $1,525
C. Dr Purchases $800, Dr Electricity $725, Cr Cash $1,525
D. Dr Cash $1,525, Cr Purchases $800, Cr Electricity $725
Answer #11:
11 Correct Answer
$58,000 + $22,000 + $41,000 - $18,000 = $103,000
Question #12:
Which of the following correctly calculates closing capital?
A. Capital introduced + Drawings – Profit + Opening capital
B. Capital introduced – Drawings + Profit + Opening capital
C. Capital introduced -Drawings – profit – Opening capital
D. Capital introduced + Drawings + Profit + Opening Capital
Answer #12:
12 Correct Answer: Capital introduced - Drawings + Profit + Opening capital
Capital is increased by profits and by any further capital introduced and reduced by drawings. So the correct formula for closing capital is:
Capital introduced - Drawings + Profit + Opening capital
Question #13:
Wilson has returned goods that he bought on credit.
Which TWO of the following form the journal entry that Wilson should record in his general ledger?
A. Cr Trade payables
B. Cr Purchase returns
C. Dr Trade payables
D. Dr Purchase returns
Answer #13:
13 Correct Answer: Dr Trade payables and Cr Purchase returns
When Wilson bought these goods the entry he posted would have been to debit purchases and credit trade payables. As he is returning the goods he will reverse these entries:
Dr Trade payables / Cr Purchase return
Question #14:
At 1 May 20X0 Lim owed his suppliers $17,822. At 30 April 20X1 he owed $16,385. During the year to 30th 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? $
Answer #14:
14 Correct Answer: $131,103
Lim's trade payables ledger will show the following:

<table class="w-full max-w-lg border-collapse border border-gray-400 my-4 bg-white text-base"><thead><tr class="bg-gray-100"><th colspan="2" class="border border-gray-400 p-2 text-center">Dr</th><th colspan="2" class="border border-gray-400 p-2 text-center">Cr</th></tr><tr><th class="border border-gray-400 p-2">Details</th><th class="border border-gray-400 p-2">$</th><th class="border border-gray-400 p-2">Details</th><th class="border border-gray-400 p-2">$</th></tr></thead><tbody><tr><td class="border border-gray-400 p-2">Payments to suppliers</td><td class="border border-gray-400 p-2">131,740</td><td class="border border-gray-400 p-2">Balance b/f</td><td class="border border-gray-400 p-2">17,822</td></tr><tr><td class="border border-gray-400 p-2">Contra</td><td class="border border-gray-400 p-2">800</td><td class="border border-gray-400 p-2">Purchases (balance)</td><td class="border border-gray-400 p-2">131,103</td></tr><tr><td class="border border-gray-400 p-2">Balance c/f</td><td class="border border-gray-400 p-2">16,385</td><td class="border border-gray-400 p-2"></td><td class="border border-gray-400 p-2"></td></tr><tr class="font-bold bg-gray-50"><td class="border border-gray-400 p-2"></td><td class="border border-gray-400 p-2">148,925</td><td class="border border-gray-400 p-2"></td><td class="border border-gray-400 p-2">148,925</td></tr></tbody></table>
Question #15:
Would each of the following errors cause a difference between the total of the debit balances and the total of the credit balances when the trial balance is extracted? (Yes / No)
The debit entry of $500 for repairs has been correctly recorded, but the credit entry was recorded as $50
An invoice from a supplier has not been recorded
Answer #15:
15 Correct Answer: 1 and 2 only
The closing balance of the (sole) trade payable is presented in the statement of financial position and the balance is carried forward to the next period. As there is a sole supplier, this will also be reconciled to the supplier statement.
Question #16:
When a trial balance is being extracted where should the balances for accumulated depreciation be entered?
A. Statement of financial position credit and statement of profit or loss debit
B. Statement of financial position debit and statement of profit and loss credit
C. Statement of financial position credit only
D. Statement of financial position debit only
Answer #16:
16 Correct Answer
Correct: * The sale is recognised in both the sales and trade receivables general ledger accounts
The detailed listing of customer accounts is updated automatically
Incorrect: * The associated cost of goods sold is recognised in the cost of sales and inventories general ledger accounts
The detailed listing of supplier accounts is updated automatically
Only sales and purchases are integrated with the accounting system – not inventories. Supplier accounts relate to purchases and not sales.
Question #17:
When completing the extended trial balance, in which column should the balance for receivables allowance be included?
A. Statement of profit or loss credit
B. Statement of financial position credit
C. Statement of financial position debit
D. Statement of profit or loss credit
Answer #17:
17 Correct Answer
Loss on disposal of property, plant and equipment:
Dr Bank
Dr Operating expenses
Cr Property, plant and equipment
The receivables allowance is posted to the statement of financial position as a deduction from trade receivables. Trade receivables is an asset account (debit) so the allowance is a credit posting. Any increase or decrease in the allowance will go to the statement of profit or loss.
Question #18:
Jane is preparing her bank reconciliation. The bank balance in her general ledger is $422 credit. The only items which need to be dealt with are:
(1) A cheque for $822 issued to a supplier which has not yet appeared on the bank statement
(2) Interest received of $153 which was credited by the bank, but not recorded by Jane
What is the closing balance on Jane’s bank statement?
A. $269 overdrawn
B. $1,091 overdrawn
C. $553 cash at bank
D. $1,397 cash at bank
Answer #18:
18 Correct Answer: $553 cash at bank
Details: Overdrawn balance per general ledger (422) | Cheque not on bank statement 822 | Interest received 153 | Balance per bank statement 553 cash at bank
Question #19:
Candy started her own business during the year.
The following is a list of Candy’s capital injections. Which TWO of these would be included in the capital section of her statement of financial position?
A. A $600 business loan from Candy’s bank
B. A van worth $350 bought by Candy for the business using her personal bank account
C. A $150 loan to the business from Candy’s friend Jim repayable in 2 months time
D. $400 cash paid into the business by Candy from her personal bank account
Answer #19:
19 Correct Answer: $400 cash paid into the business by Candy from her personal bank account and A van worth $350 bought by Candy for the business using her personal bank account
The capital section of the statement of financial position shows capital injected into the business by its owner. Therefore the $400 cash paid into the business by Candy along with the $350 paid by Candy for the van should be included in the capital section of Candy's statement of financial position.
Capital injected by third parties, such as the loan from the bank and the loan from Candy's friend Jim, are classified as liabilities in the statement of financial position.
Question #20:
In the year to 31 October 20X0 Vlad’s sales were $142,200, all of which were made at a mark-up of 20%
His opening inventory value was $5,400 and his closing inventory value was $3,600.
What was the value of Vlad’s purchases in the year to 31 October 20X0? $
Answer #20:
20 Correct Answer: $116,700
Details: Purchase value of sales (142,200 x 100 / 120) = 118,500 | Add: Closing inventory = 3,600 | Less: Opening inventory = (5,400) | Purchases = 116,700
Question #21:
Is each of the following statement about going concern correct? (Yes / No)
Financial statements must always be prepared on the going concern basis
If a business is not considered to be a going concern financial statements should not be prepared
Answer #21:
21 Correct Answer
Financial statements must always be prepared on the going concern basis - No
If a business is not considered to be a going concern, financial statements should not be prepared - No
Financial statements are normally prepared under the assumption that the business is a going concern. If the business is not a going concern this should be disclosed in the financial statements and this will affect some aspects of the financial statements such as the valuation of assets. Therefore neither statement is correct.
Question #22:
Which book of prime entry is used to record settlement discounts received?
A. Purchases account
B. Cash book
C. Purchase day book
D. General ledger
Answer #22:
22 Correct Answer
Dr Depreciation charge
Cr Property, plant and equipment
Question #23:
Davindra is reconciling the total of balances from her receivables ledger to the balance on the trade receivables control account. The total of balances is $25,627. She has discovered two errors:
(1) A customer account has been overcast by $99
(2) An invoice for $89 has been treated as a credit note
What is the corrected total of the list of balances from her sales ledger?
A. $25,706
B. $25,439
C. $25,350
D. $25,617
Answer #23:
23 Correct Answer: $170
Cost = (80% x $200) + $10 = $170
We cannot calculate the net realisable value of raw materials. However, raw materials do not need to be written down below cost if they will be used in a finished good which is profitable ($360 - $170 - $20 - $30 = $140 profit).
Question #24:
Emily’s drafts accounts report a profit of $11,855. However an accrual of $398 was treated as a prepayment and a prepayment of $480 was incorrectly recorded as $522.
What is the correct profit?
A. $11,499
B. $12,693
C. $11,415
D. $11,017
Answer #24:
24 Correct Answer: $11,017
Details: Draft profit = 11,855 | Accrual treated as prepayment (398 x 2) = (796) | Prepayment overstated (522 - 480) = (42) | Correct profit = 11,017
Note that an accrual is an expense and a prepayment is a deduction from expense. So if an accrual is treated as a prepayment profit is overstated by twice the amount of the accrual.
Question #25:
At 31 May 20X3 Shelins’s was $1,157. She wishes to write off a balance of $178 as irrecoverable. At 31 May 20X2 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 20X3 for receivables expense?
A. $1,335
B. $1,157
C. $305
D. $51
Answer #25:
25 Correct Answer: $51
Details: Irrecoverable balance written off = 178 | Reduction in allowance for irrecoverable debts (1,284 - 1,157) = (127) | Irrecoverable debt expense = 51
Question #26:
Nigel has closing inventory which cost $38,750. This includes some damaged items which cost $3,660. It will cost Nigel $450 to repair these. He will be able to sell them for $1,500 after the repairs are completed.
What is the correct value of Nigel’s closing inventory?
A. $36,590
B. $36,140
C. $38,750
D. $35,090
Answer #26:
26 Correct Answer: $36,140
Details: Cost of closing inventory 38,750 | less: Cost of damaged items (3,660) | add: Net realisable value of damaged items 1,050 | Value of closing inventory 36,140
Question #27:
In the year to 28th February 20X0 Simone paid $378,942 into her bank account. This includes $40,000 of new capital and was after Simone had taken cash drawings of $26,500. The balance represented cash received from customers.
How much cash did Simone receive from customers? $
Answer #27:
27 Correct Answer
A manual journal entry for a $2,000 cash receipt from a credit customer was debited correctly to bank but credited to trade receivables with only $1,000 in the general ledger
The impact of this error is as follows:
Dr Bank $2,000 (manually posted)
Cr Trade receivables $1,000 (manually posted)
Cr Suspense account $1,000 (automatically posted)
Question #28:
Boris receives rental income of $1,200 each month. His tenant pays the rent relating to the month by cheque on the last day of each month.
What debit and credit should Boris record for the payment received?
Rental income $1,200 / Bank $1,200 / Cash $1,200
Answer #28:
28 Correct Answer
Debit Bank $1,200 | Credit Rental Income $1,200
Boris receives the rent by electronic bank transfer so he will debit bank and credit rental income.
Question #29:
Paulo and Claude are in partnership sharing profits and losses in the ratio 2:3. In the year to 31 March 20X0 the partnership profit was $144,890 and the partners withdrew $35,000 each. Interest is charged at 8% on all drawings.
Interest on capital for the year was as follows:
Paulo $11,450
Claude $9,770
What is Paulao’s share of the residual profit?
A. $77,562
B. $51,708
C. $47,228
D. $64,204
Answer #29:
29 Correct Answer: $51,708
Details: Partnership profit 144,890 | less: Interest on capital (11,450 + 9,770) = (21,220) | add: Interest on drawings (70,000 x 8%) = 5,600 | Residual profit = 129,270 | Paulo's share (129,270 x 2 / 5) = 51,708
Question #30:
Gary bought a new machine. The invoice included costs for the following:
(1) Installation charges
(2) Routine maintenance for the first year of operation
(3) Testing the machine prior to operation
Which of the costs are capital expenditure?
A. 1 and 3 only
B. 1 and 2 only
C. 1,2 and 3
D. 2 and 3 only
Answer #30:
30 Correct Answer: 1 and 3 only
Costs which can be capitalised in respect of the machine include those incurred in bringing it to the location and condition necessary for it to operate. This includes the costs of installation and testing.
Routine maintenance will be treated as an expense.
Question #31:
In June 20X8 Laura bought goods for $12,000. She paid $11,000 of the amount due by cheque and agreed a 45 day credit period for the balance. She has not made any further payments in the month of June 20X8. She intends to buy more goods for $13,000 in July 20X8.
What amount should be reported for Laura’s payables at 30 June 20X8?
A. $25,000
B. $14,000
C. $1,000
D. $13,000
Answer #31:
31 Correct Answer: $1,000
Laura has received goods for $12,000 and only paid $11,000. Therefore her trade payables balance is $1,000.
She has not received the additional goods for $13,000. So has no payables balance in respect of them.
Question #32:
Which of the following would normally be recorded in a non-current asset register?
(1) The location of each asset
(2) The serial number of each asset
(3) Accumulated depreciation on each asset
A. 1,2 and 3
B. 1 only
C. 2 and 3 only
D. 1 and 3 only
Answer #32:
32 Correct Answer: 1, 2 and 3
A non-current asset register carries information on the details, location and carrying amount of each asset so it will record 1, 2 and 3.
Question #33:
In the year to 30 November 20X9. Lui accounted for $7,000 of expenditure on machinery repairs as the cost of a new machine. Lui depreciates machinery on a straight-line basis over 10 years and charges depreciation for a full year in the year an asset is acquired.
What is the effect of the error on Lui’s profit for the year to 30 November 20X9?
A. Overstated by $7,700
B. Understated by $6,300
C. Understated by $7,700
D. Overstated by $6,300
Answer #33:
33 Correct Answer: Overstated by $6,300
Lui has capitalised these repairs and charged $700 as depreciation. He should have charged the whole amount as an expense. The amount not charged against profit was therefore $7,000 - $700 = $6,300. His profit is overstated by this amount.
Question #34:
Albert and Len are in partnership. The correct entry for the partner’s drawings has been made in the cash account. A separate control account and current account is maintained for each partner.
What entry is needed to complete the posting for partner’s drawings?
A. A credit entry in the partners capital accounts
B. A debit entry in the partners capital accounts
C. A debit entry in the partners current accounts
D. A credit entry in the partners current accounts
Answer #34:
34 Correct Answer: A debit entry in the partners' current accounts
The cash account will have been credited with the payment made for partners' drawings and the corresponding debit entries will be to the partners' current accounts. The current accounts are credited with amounts due to them from the business and debited when they receive cash.
Question #35:
Sabrina sold goods with a list price of $1,200 to Marcus. Marcus receives a trade discount of 10% and a settlement discount of 5% for payment within 14 days. Marcus is expected to take advantage of the settlement discount.
What amount should be recorded in revenue relating to this sales? $
Answer #35:
35 Correct Answer: $1026
As Marcus is expected to take advantage of the settlement discount, it should be deducted when calculating sales revenue.
The sales price is 1,200 - (1,200 x 10%) = $1,080 - (1,080 x 5%) = $1,026
Question #36:
Richid’s extended trial balance has been extended and totalled, but the final result fot the year has not been calculated.
Rachid’s opening capital balance was $138,736 and his drawings during the year were $32,273.
The totals for the statement of profit or loss columns on his extended trial balance are as follows:
Debit $261,960, Credit $341,839.
What is Rachid’s closing capital balance?
A. $218,615
B. $186,342
C. $106,463
D. $26,584
Answer #36:
36 Correct Answer: As a current liability in the statement of financial position
Trade payables are presented within current liabilities. It is highly unlikely that a trade payable amount would ever be a non-current liability (over 12 months’ due)
Question #37:
When completing the reconciliation between the total of the list of balances on her payables ledger and the balance on the payables control account in her general ledger, Tracey found that no record has been made in her accounting system of the following:
(1) A discount received $27
(2) An invoice received $622
The total of her list of balances $84,855.
Before any adjusting entries were made what was the balance on the payables control account in Tracey’s general ledger?
A. $85,504
B. $85,450
C. $84,855
D. $84,206
Answer #37:
37 Correct Answer: $2700
$2,100 + $3,600 - $2,700 - $300 = $2,700
Question #38:
The balance on Jane’s payables ledger control account is $31,554. Jane has discovered that she has not recorded:
(1) A settlement discount of $53 received from a supplier
(2) A suppliers invoice for $622
What amount should be reported for payables on Jane’s statement of financial position? $
Answer #38:
38. Correct Answer A
The supplier has allowed a $500 settlement discount, and Giang's accounting system hasn't properly accounted for it, it could result in Giang's records showing a higher balance compared to the supplier's statement.
Question #39:
Maryam and Ariel have been in partnership together for a number of years and share profits and losses in the ratio 5:4.
At 1 March 20X9 Jana was admitted to the partnership when the goodwill was valued at $75,000. The partners decided that goodwill would not be maintained in the accounts and drew up a new partnership agreement stating that profits would now be shared in the ratio 1:1:1.
How much must Jana contribute to the partnership to ensure that her opening capital balance is nil? $
Answer #39:
39. Correct Answer: $25,000
When Jana joins the partnership the goodwill needs to be debited to the capital accounts (because the partners have decided not to maintain the goodwill in the accounts) in the new profit sharing ratio of 1:1:1.
Therefore, a debit of $25,000 (75,000 / 3) needs to be made to each partner's capital account. To have an opening balance of nil in her capital account Jana will therefore have to contribute $25,000 to the partnership which will be recorded as a credit in her capital account.
Question #40:
Andrew’s trial balance at 31 October 20X7 includes the following:

<table class="w-full max-w-md border-collapse border border-gray-400 my-4 bg-white text-base"><thead><tr class="bg-gray-100"><th class="border border-gray-400 p-2">Details</th><th class="border border-gray-400 p-2 text-right">$</th></tr></thead><tbody><tr><td class="border border-gray-400 p-2">Machinery at cost</td><td class="border border-gray-400 p-2 text-right">85,800</td></tr><tr><td class="border border-gray-400 p-2">Accumulated depreciation on machinery</td><td class="border border-gray-400 p-2 text-right">21,750</td></tr><tr><td class="border border-gray-400 p-2">Trade receivables</td><td class="border border-gray-400 p-2 text-right">42,650</td></tr><tr><td class="border border-gray-400 p-2">Receivables allowance</td><td class="border border-gray-400 p-2 text-right">1,570</td></tr><tr><td class="border border-gray-400 p-2">Bank overdraft</td><td class="border border-gray-400 p-2 text-right">6,470</td></tr><tr><td class="border border-gray-400 p-2">Inventory at 1 November 20X6</td><td class="border border-gray-400 p-2 text-right">21,650</td></tr></tbody></table>

His inventory at 31 October 20X7 is valued at $22,300.
What value should be reported for current assets in Andrew’s statement of financial position at 31 October 20X7 $______?
Answer #40:
40 Correct Answer: $63,380
Andrew's current assets will be:
Details: Trade receivables less allowance (42,650 - 1,570) = 41,080 | Inventory at 31 October 20X7 = 22,300 | Total = 63,380
Question #41:
At 30 November 20X5 Jenny had a bank loan of $8,500 and a balance of $678 in hand in her bank account.
How should these amounts be recorded on Jenny’s opening trial balance at 1 December 20X5?
A. Credit $7,822
B. Debit $8,500 and credit $678
C. Debit $7,822
D. Credit $8,500 and Debit $678
Answer #41:
41 Correct Answer: Credit $8,500 and Debit $678
Jenny's bank loan is a liability to the bank so it will have a credit balance. The amount of $678 in her current account is an asset and will be a debit balance.
Question #42:
Joyce’s trial balance has been completed and extended. The totals of the statement of profit or loss columns and the statement of financial position columns are shown below:

<table class="w-full border-collapse border border-gray-400 my-4 bg-white text-base"><thead><tr class="bg-gray-100"><th class="border border-gray-400 p-2 text-center" colspan="2">Statement of profit or loss</th><th class="border border-gray-400 p-2 text-center" colspan="2">Statement of financial position</th></tr><tr><th class="border border-gray-400 p-2 text-center">Dr ($)</th><th class="border border-gray-400 p-2 text-center">Cr ($)</th><th class="border border-gray-400 p-2 text-center">Dr ($)</th><th class="border border-gray-400 p-2 text-center">Cr ($)</th></tr></thead><tbody><tr><td class="border border-gray-400 p-2 text-center">100,478</td><td class="border border-gray-400 p-2 text-center">110,536</td><td class="border border-gray-400 p-2 text-center">120,621</td><td class="border border-gray-400 p-2 text-center">110,563</td></tr></tbody></table>

What is Joyce profit or loss?
A. A profit of $10,085
B. A profit of $10,058
C. A loss of $10,085
D. A loss of $10,058
Answer #42:
42 Correct Answer
Profit for the year: $23,718
Net assets: $92,488
Increase in closing inventories = $76,980 - $69,780 = $7,200
Profit for the year = $16,518 + $7,200 = $23,718
Net assets = $85,288 + $7,200 = $92,488
Question #43:
Sanjay is a sales tax registered trader. He has recently received an invoice for goods for resale which costs $360 including sales tax. The rate of sales tax is 20%
At what amount should Sanjay record the purchase in his purchases account? $
Answer #43:
43 Correct Answer: $300
As Sanjay is registered for sales tax he can reclaim input sales tax on his purchases. Sales tax is therefore not an expense to Sanjay's business and so purchases are recorded net of sales tax.
The net purchase price is calculated as:
$360 x 100 / 120 = $300.
Question #44:
In the year to 31 May 20X9 Ina’s sales were $174,820, and her cost of sales was $139,856. The value of her opening inventory was $11,844 and the value of her closing inventory was $13,328.
What was the value of her purchases $______?
Answer #44:
44 Correct Answer
Dr Sales 2,970
Cr Trade receivables 2,970
Decrease in sales = $3,300 - $330 = $2,970
Question #45:
What is the main purpose of a statement of financial position?
A. To report the growth in the value of capital since the business was established
B. To provide information about the activities of the business over a period of time
C. To provide a valuation of the business at a particular date
D. To report the assets, liabilities and capital of the business at a particular date
Answer #45:
45 Correct Answer: To report the assets, liabilities and capital of the business at a particular date
A statement of financial position reports on the assets, liabilities and capital of the business at the year end date.
It does not provide information about trading during the year (this is done by the statement of profit or loss) and does not provide information for valuation purposes or report on share prices.
Question #46:
On checking his draft financial statement Ricardo notes that he had omitted an accrual for $754 and a prepayment for $388.
By how much is the value of his current assets understated? $
Answer #46:
46 Correct Answer: $388
An accrual is a current liability and a prepayment is a current asset. Current assets are therefore understated by $388.
Question #47:
Ed’s year end is 30 September. He depreciates office furniture at 15% per annum on the straight line basis. A full years depreciation is charged in the year an asset is purchased, and no depreciation is charged in the year it is sold. In March 20X5 Ed bought office furniture for $80,000.
If he sells the office furniture for $39,000 in July 20X8 what will Ed’s profit or loss be on disposal?
A. A profit of $7,000
B. A loss of $7,000
C. A profit of $5,000
D. A loss of $5,000
Answer #47:
47 Correct Answer: A loss of $5,000
Details: Purchase price 80,000 | Depreciation 20X5 - 20X7 ((80,000 x 15%) x 3) = (36,000) | Carrying amount prior to disposal 44,000 | Sale proceeds (39,000) | Loss on disposal 5,000
Question #48:
On 10 May Amanda bought goods for resale. Her supplier allowed her a credit period of 30 days. To date the goods have not been sold.
How is Amanda’s accounting equation affected by the transaction?
A. Assets: Unchanged / Liabilities: Increased / Capital: Reduced
B. Assets: Increased / Liabilities: Increased / Capital: Unchanged
C. Assets: Increased / Liabilities: Unchanged / Capital: Reduced
D. Assets: Reduced / Liabilities: Reduced / Capital: Unchanged
Answer #48:
48 Correct Answer: Assets: Increased / Liabilities: Increased / Capital: Unchanged
Amanda has acquired goods for resale (inventory). This is an asset.
She also now has a payable for the cost of these goods. This is a liability.
So assets and liabilities have increased and capital is unchanged.
Question #49:
Gilda is preparing her bank reconciliation statement. Following the necessary correcting entries the balance on the bank account in her general ledger is $4,782 Credit. She still has to deal with the following:
(1) Her bank charged fees of $365 to her account in error
(2) She has outstanding cheques totaling $1,745
(3) She has an outstanding ledgement of $1,519
What is the overdraft balance on her bank statement? $
Answer #49:
49. Correct Answer: $4,921
Her bank statement will show an overdrawn balance of $4,921:
Details: Balance per general ledger 4,782 | Bank charges 365 | Unpresented cheques (1,745) | Outstanding lodgement 1,519 | Overdrawn balance 4,921
Question #50:
A sale invoice for $3,450 was recorded in Susan’s general ledger as shown below:

<table class="w-full max-w-sm border-collapse border border-gray-400 my-4 bg-white text-base"><thead><tr class="bg-gray-100"><th class="border border-gray-400 p-2">Details</th><th class="border border-gray-400 p-2 text-right">$</th></tr></thead><tbody><tr><td class="border border-gray-400 p-2">Debit sales</td><td class="border border-gray-400 p-2 text-right">3,540</td></tr><tr><td class="border border-gray-400 p-2">Credit Trade receivables</td><td class="border border-gray-400 p-2 text-right">3,540</td></tr></tbody></table>

If the errors are not corrected before the final accounts are drafted how will Susan’s net profit be affected?
A. Overstated by $6,990
B. Understated by $6,990
C. Overstated by $90
D. Understated by $90
Answer #50:
50. Correct Answer: Understated by $6,990
Susan's revenue should have been credited with $3,450. Instead it would have been debited with $3,540. The net effect of this is that revenue, and therefore profit, was understated by $6,990 (3,450 + 3,540).

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