chuong 5 7

1 Identify whether the following statements are true or false.

(1) The balances on asset and liability accounts at the end of the period are brought forward to the next reporting period.

(2) The balances on income and expense accounts are summarised in an additional ledger account known as the profit and loss ledger account.

• 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 LO 1d

2 Max had trade payables of £16,400 at 1 June and during June made credit purchases of £35,500. Max paid £33,000 to his credit suppliers, after taking advantage of an early settlement discount totalling £700 that was expected to be taken at the date of purchase.

What was the balance of trade payables at the end of June?

• A £20,300

• B £18,900

• C £13,900

• D £12,500 LO 1d; 3c

Which three of the following nominal ledger accounts would normally have a credit balance on a trial balance?

• A Asset

• Liability

• C Income

• Expense

• Capital

4 The following tasks form parts of an entity's accounting process.

(1) Extract an initial trial balance

(2) Close off nominal ledger accounts

(3) Account for closing inventory, accruals and prepayments

(4) Calculate profit for the year

In which order are these tasks carried out?

• A (1), (3), (2), (4)

• B (1), (2), (3), (4)

• C (2), (1), (3), (4)

• D (2), (3), (4), (1) LO 1f; 2c; 3c

The total of the profit or loss items in Mike's final trial balance are £35,640 for the debit balances and £27,560 for the credit balances.

What entry does Mike need to make in the profit and loss ledger account to transfer his profit or loss for the period to retained earnings?

• A Cr £8,080 profit for the period

• B Cr £8,080 loss for the period

• C Dr £8,080 profit for the period

• D Dr £8,080 loss for the period LO 2c

Hilary has trade receivables of £31,200 at 1 July and during July made credit sales of £52,500 and cash sales of £9,600. She received cash from credit customers of £60,100 in the period and made payments to credit suppliers of £48,800.

What was the balance on trade receivables at the end of July?

• A £33,200

• B £23,600

• C £34,600

• D £44,500 LO 1d; 3c

7 Which three of the following accounts would normally have a debit balance in a trial balance?

• A Trade payables

• B Revenue

• C Trade receivables

• D Purchases

• F Inventory

8 Which of the following would be classified as a non-current liability?

• A Accruals

• B Prepayments

• C Expenses

• D Trade receivables LO 3c

Pinot plc is a VAT registered retailer. All transactions attract VAT at the rate of 20%. For the month of 31 December 20X7, Pinot plc sold goods on credit for £31,300 exclusive of VAT and goods for cash of £1,260 inclusive of VAT. Pinot plc also purchased goods for resale on credit for £28,800 inclusive of VAT. It did not have any balance on its VAT account at 1 December 20X7.

What is the balance on Pinot plc's VAT account at 31 December 20X7?

• A £1,460 credit

• B £291 debit

• C £1,670 credit

• D £543 debit LO 3c

1 An extract from a business's statement of profit or loss is as follows:

.......

What is the mark up applied?

• A 71.4%

• B 47.3%

• C 40.0%

• D 28.6%