Chapter 4+5

All Peter’s sales carry VAT at the standard rate of 20%. A customer is sold goods on credit for £2,400 exclusive of VAT. The double entry to record this transaction is:

• A Dr Trade receivables £2,880, Cr Sales £2,400, Cr VAT £480

• B Dr Sales £2,400, Dr VAT £480, Cr Trade receivables £2,880

• C Dr Trade receivables £2,400, Dr VAT £480, Cr Sales £2,880

• D Dr Sales £2,880, Cr Trade receivables £2,400, Cr VAT £480

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

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

• A Credit entries decrease expenses and increase assets

• B Debit entries decrease expenses and increase assets

• C Credit entries decrease liabilities and increase income

• D Debit entries decrease income and increase assets

Identify whether the following statements are true or false.

Statement 1: A credit balance of £100 brought down on George's receivables ledger in Guy's accounting records means that George owes money to Guy.

Statement 2: A debit balance of £500 on Guy's drawings account means that Guy has withdrawn £500 in the period.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.

Reece has opening trade receivables of £42,100 and closing trade receivables of £38,600. Sales for the period totalled £186,190 (£13,400 of which were cash sales). Receipts recorded in trade receivables for the period were:

• A £169,290

• B £176,290

• C £182,690

• D £189,690

Kirsty purchased goods on credit from her supplier for £1,500 inclusive of VAT at the standard rate of 20%. The double entry to record this transaction is:

• A Dr Trade payables £1,500, Cr Purchases £1,200, Cr VAT £300

• B Dr Purchases £1,200, Dr VAT £300, Cr Trade payables £1,500

• C Dr Trade payables £1,500, Cr Purchases £1,250, Cr VAT £250

• D Dr Purchases £1,250, Dr VAT £250, Cr Trade payables £1,500

Destiny plc offers a 5% early settlement discount to any customers who pay within 10 days of receiving an invoice. It sold goods totalling £1,240 on credit to a customer who is expected to take advantage of the early settlement discount. You should ignore the effects of VAT. What is the correct double entry to record the sale?

• A Dr Trade receivables £1,240, Cr Revenue £1,240

• B Dr Trade receivables £1,178, Cr Revenue £1,178

• C Dr Revenue £1,240, Cr Trade receivables £1,240

• D Dr Revenue £1,178, Cr Trade receivables £1,178

Which of the following could be a credit entry in trade receivables?

• A Credit sales

• B Cash sales

• C Cash received from credit customers

• D Early settlement discounts received from suppliers that were not expected to be taken at the date of purchase

Millwood purchased goods on credit from Horwich. At the point of recording the invoice from Horwich, Millwood did not intend to take the early settlement discount offered, however, Millwood later decided that it would take the discount and so paid within the required timeframe. What double entry should Millwood make to record the payment to Horwich?

• A Dr Cash at bank, Cr Purchases, Cr Trade payables

• B Dr Purchases, Dr Trade payables, Cr Cash at bank

• C Dr Trade payables, Cr Purchases, Cr Cash at bank

• D Dr Cash at bank, Dr Purchases, Cr Trade payables

• A Dr Purchases £4,000, Cr Trade payables £4,000

• B Dr Purchases £3,000, Cr Trade payables £3,000

• C Dr Trade payables £3,000, Cr Purchases £3,000

• D Dr Trade payables £4,000, Cr Purchases £4,000