Chapter 4 - Ledger accounting and double entry

Which of the following would require a debit entry in the payables account?

• Output VAT

• Cash purchases total

• Payments made to suppliers

• Early settlement discounts given to customers

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

Winn Ltd has opening trade payables of £24,183 and closing trade payables of £34,655. Purchases for the period totalled £254,192 of which £31,590 related to cash purchases. Total payments recorded in the payables ledger for the period were:

• £212,130

• £233,074

• £243,720

• £264,664

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 America Ltd’s account in Brazil Ltd’s books means that Brazil Ltd owes America Ltd £3,000.

• True

• False

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. What is the double entry to record this?

• 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

A business which is registered for VAT received the following invoice from one of its VAT registered suppliers: A further discount of £50 will be allowed if payment is received within 14 days.

Invoice: 7035

Date: 20 December 20X0

£

Goods: 100 @ £10 1,000

Less trade discount (50) 950

Assume the business is not expected to make the payment within 14 days and the VAT rate is 20%.

What amount of VAT should have been charged on the invoice?

• £180

• £190

• £200

• £210

Which of the following correctly describes credit terms of 2/10, n/30?

• A two percent discount for early payment is available if the invoice is paid before the tenth day of the month following the month the sale.

• A two percent discount for early payment is available if the invoice is paid within ten days of the date of sale.

• A ten percent discount for early payment is available if the invoice is paid within two days of the date of the invoice.

• A two percent discount for early payment is available if the invoice is paid after the tenth day, but before the thirtieth day of the invoice date.

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

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