Quiz revision 1

A trader's profit for the year for the year may be computed by using which of the following formulae?

• Opening capital + Drawings – Capital introduced – Closing capital

• Opening capital – Drawings + Capital introduced – Closing capital

• Closing capital + Drawings – Capital introduced – Opening capital

• Closing capital – Drawings + Capital introduced – Opening capital

Answer explanation

Answer explanation

The trade payables are due to be paid within 12 months, the overdraft is repayable on demand.

In respect of purchase invoices, which TWO of the following correctly describe how they are recorded

initially into the accounting system?

• The purchase invoice will be created by the supplier and the supplier will input into the recipient's

  accounting system

• Purchase invoices are created within the accounting system from the purchase order

• The purchase invoice must be coded correctly and input manually into the accounting system

• The purchase invoice will be the source document for initially recording the total monetary

  amount due including details of any sales tax

When Fred's trial balance was extracted, the debit total was $400 less than the credit total.

Which of the following errors could have caused this difference?

• A sales invoice for $200 was debited to both the revenue account and the trade receivables

  account

• A bank receipt for $200 was entered twice in the general ledger

  

• A bank payment for expenses for $200 was credited to both the expense account and the bank

  account in the general ledger

  

• The purchases account was undercast by $200

Answer explanation

$200 has been credited to the expense account when it should have been debited. The effect of this is

to make the debit total short by $400.

Option 1 would cause the credit total to be $400 less. Option 2 would not cause any imbalance.

Option 4 would make the debit total only $200 less.

Mr Bod has paid rent of $2,400 for the period 1 January 20X8 to 31 December 20X8. His first

financial statements are being drawn up for the nine months ended 30 September 20X8.

What should his first financial statements show?

• Only a rent expense of $2,400

• A rent expense of $1,800 and a pre-payment of $600

•  A rent expense of $1,800 and accrued income of $600

• A rent expense of $2,400, with an explanatory note that this is the usual charge for 12 months

Answer explanation

9 months expense, 3 months prepaid. Therefore the expense is 9/12 x $2,400 = $1,800 and the

prepayment is 3/12 x $2,400 = $600.

In the year to 30 September 20X3 Rena paid a total of $2,850 for business car expenses. This includes

$350 which Rena paid from her personal funds. There was an opening accrual of $329 on the car

expenses account and the closing accrual was $464.

What is the charge for car expenses to be reported in Rena's statement of profit or loss for the year to

30 September 20X3?

Answer explanation

At 30 November 20X6 the balance on Claire's receivables ledger is $37,890. Clare has decided to write

off balances totaling $1,570. She has also calculated that an allowance equivalent to 2.5% of the

remaining balances is required.

What value of receivables should be reported in Claire's statement of financial position at

30 November 20X6?

Answer explanation

($37,890 – $1,570) – (2.5% x $36,320).

Shirley wishes to write off an irrecoverable receivables balance. She has made the correct entry in the

irrecoverable debt expense account.

What entry is needed to complete the double entry?

• DEBIT Trade receivables

  

• CREDIT Trade receivables

•  DEBIT Allowance for receivables

  

• CREDIT Allowance for receivables

During May 20X7, Sarah's purchases were $126,500, and her sales were $150,000. Sarah's gross

profit was 20% of sales. The value of her inventory at 1 May 20X7 was $12,500.

What was the value of Sarah's inventory at 31 May 20X7?

Answer explanation

Which of the following is the correct formula to calculate cost of goods sold?

• Purchases – Opening inventory – Closing inventory

•  Purchases + Opening inventory + Closing inventory

•  Purchases – Opening inventory + Closing inventory

  

• Purchases + Opening inventory – Closing inventory