Chapter 4: Ledger accounting & double entry

Richard is a VAT registered trader whose sales and purchases carry VAT at the standard rate of 20%. Richard sells a customer goods on credit for £4,800 exclusive of VAT. The double entry to record this transaction is:

• Debit Sales £4,800, Debit VAT £960, Credit Receivables £5,760

• Debit Sales £4,000, Debit VAT £800, Credit Receivables £4,800

• Debit Receivables £5,760, Credit Sales £4,800, Credit VAT £960

• Debit Receivables £4,800, Credit Sales £4,000, Credit VAT £800

What transaction is represented by the entries: Debit rent, Credit landlord?

• The receipt of rental income by the business

• The issue of an invoice for rent to a tenant

• The receipt of an invoice for rent payable by the business

• The payment of rent by the business

In double-entry bookkeeping, which of the following statements is true?

• Credit entries decrease liabilities and increase income

• Debit entries decrease income and increase assets

• Credit entries decrease expenses and increase assets

• Debit entries decrease expenses and increase assets

A debit balance of £3,000 brought down on A Ltd's account in B Ltd's books means that B Ltd owes A Ltd £3,000

• True

• False

Crimson plc paid an invoice from a credit supplier and took advantage of the early settlement discount offered. When the invoice was received and recorded, Crimson plc did not expect to take the discount.

The journal entry to record the payment of the invoice is:

• Debit Payables, Credit Purchases, Credit Cash at bank account

• Debit Payables, Credit Cash at bank account

• Debit Cash at bank account, Debit Purchases, Credit Payables

• Debit Cash at bank account, Credit Purchases, Credit Payables

Winn Ltd has opening trade payables of £24,183 and closing trade payables of £34,655. Purchases for the period totalled £254,192 (£31,590 relating to cash purchases).

Total payments recorded in the payables ledger for the period were:

• £212,130

• £233,074

• £243,720

• £264,664

A bakery business, which is registered for VAT, issued the following invoice to one of its customers:

Assuming the VAT rate is 20% and that the invoice amounts are exclusive of VAT, what amount of VAT should have been charged on the invoice?

• £360

• £300

• £285

• £342

What is the correct double entry to record an invoice raised to a credit customer who is not expected to take advantage of an early settlement discount?

• Debit Revenue, Credit Receivables

• Debit Payables, Credit Revenue

• Debit Receivables, Credit Revenue

• Debit Revenue, Credit Payables

Which of the following could be a debit entry in the payables account?

• Output VAT

• Cash purchases total

• Payments made to suppliers

• Early settlement discounts given to customers

A payment has been received from a credit customer in settlement of an invoice. The customer was expected to take advantage of a settlement discount offered, however, payment was not made within the required time-frame and the discount was not taken.

The correct double entry to record the full settlement of the invoice is:

• Debit Cash at bank, Credit Receivables, Credit Revenue

• Debit Cash at bank, Debit Revenue, Credit Payables

• Debit Receivables, Debit Revenue, Credit Cash at bank

• Debit Receivables, Credit Revenue, Credit Cash at bank