ICAEW - Chapter 3 (Seft test + Question bank)

A business paid out £12,450 in net wages to its employees. In respect of these wages, the following amounts were presented in the statement of financial position.

Pay as you earn (PAYE) payable 2,480

National Insurance (NI) payable

– employees' 1,350

– employer's 1,500

No other deductions were made.

Requirement

Employees' gross wages, before deductions, were:

• 
  £12,450

• 
  £27,450

• 
  £16,280

• 
  £17,780

Answer explanation

The PAYE and employees' NI would have been deducted from gross salary before paying net wages to the employees. We must therefore add these back to net wages to calculate gross wages: £12,450 + 2,480 + 1,350 = £16,280.

Which of the following is a source document that would be recorded in an entity’s cloud-based accounting software?

• 
  Debit note

• 
  Credit note

• 
  Sales order

• 
  Purchase order

Answer explanation

A credit note is a source document that requires recording in the cloud-based accounting software. The others are all documents used by businesses but are not source documents.

Which of the following best explains the imprest system of petty cash?

• 
  Each month an equal amount of cash is transferred into petty cash.

• 
  The exact amount of petty cash expenditure is reimbursed at intervals to maintain a fixed float.

  
  

• Petty cash must be kept under lock and key.

• The petty cash total must never fall below the imprest amount.

Answer explanation

The imprest system of petty cash requires that the exact amount of petty cash expenditure is reimbursed at intervals to maintain a fixed float. A business will decide to hold, for example, £200 of petty cash, which will be used for incidental expenses and will regularly have to top the petty cash in hand back up to that level to maintain the petty cash balance.

At 1 April, a business had a balance of £100 (the imprest amount) in petty cash. At the end of April, it had vouchers totalling £38, a receipt for a refund for stationery of £4 and a note to say that an employee was reimbursed £12 in respect of postage costs, but no voucher was issued.

Requirement

How much does the business need to reinstate its imprest balance at 30 April?

• 
  £34

• £46

• 
  £54

• 
  £66

Answer explanation

Total expenses paid out of petty cash total £50 and receipts total £4. The net expenditure is therefore £46. This amount should be withdrawn from the bank account and added to petty cash to maintain the imprest amount of £100.

The following data has been extracted from the payroll records of Kleen Ltd for the month of February 20X1.

£

Pay as you earn (PAYE) 17,000

Employer's national insurance (NI) 7,500

Employees' national insurance 6,000

Cash paid to employees 50,000

Requirement

The wages and salaries expense for the month is:

• 
  £50,000

• 
  £56,000

• 
  £74,500

• £80,500

Answer explanation

The wages and salaries expense is the employees' gross salary (which is calculated by adding PAYE and employees' NI back to the cash paid to employees) plus the employer's NI = £(50,000 + 17,000 + 6,000) + 7,500 = £80,500.

When a purchase invoice is received from a supplier which two of the following documents would the invoice be checked to before it is recorded in the cloud-based accounting software?

• 
  Sales order

• 
  Purchase order

• Remittance advice

• Goods received note

  
  

• Credit note

  
  

Answer explanation

An invoice should be agreed to a purchase order and goods received note before it is entered into the accounting software.

George purchases goods on credit from Hardeep for £1,000; £100 of these goods are defective and George returns them to Hardeep.

Requirement: What document would Hardeep issue to George in respect of the returned goods?

• 
  Invoice

• 
  Remittance advice

• Credit note

• 
  Delivery note

Answer explanation

A credit note is issued by a supplier when a customer returns goods to them (C). Invoices (A) are issued when goods are originally sold, on the basis of a delivery note (D) which shows what exactly has been sold. A remittance advice (B) is sent in by the customer to the supplier with payment.

River downloads their bank transaction report for the day. The report shows a cash payment of £412 which the computerised accounting system has not been able to match to a transaction.

Requirement

The unmatched payment is most likely the result of:

• 
  the purchase of a new laptop for £412

• payment to a regular credit supplier for an invoice totalling £412

• a receipt from a credit customer in respect of an invoice for £450 on which a prompt payment discount of £38 was taken

• 
  the payment of net wages of £412 which is consistent with the payroll ledger

Answer explanation

The cash payment represents expenditure. The purchase of a laptop is not a regular transaction, and it is therefore likely that this wouldn't be automatically matched by the accounting system. The payment of a regular supplier for the exact amount of the invoice (B) and the payment of wages matching the payroll (D) are highly likely to have been matched by the accounting system. Option C is a receipt, not a payment.

A business has the following payroll costs for a month:

Gross pay 112,450

Income tax deducted 15,800

Employees' national insurance 9,810

Employer's national insurance 11,200

Requirement

What is the net amount paid to employees for the month?

• 
  £75,640

• 
  £91,440

• 
  £102,640

• 
  £86,840

Answer explanation

The net pay to employees is after deducting income tax and employees' national insurance from gross pay. Employer's national insurance is an expense of the business and does not impact on the net amount paid to employees.

£112,450 – 15,800 – 9,810 = £86,840

The petty cash float in a business has an imprest amount of £200. At the end of March, vouchers in the petty cash box totalled £136 and the amount of cash remaining in the box was £54.

Requirement

Which of the following explains the difference?

• 
  A petty cash voucher for £10 is missing.

• An employee was given £10 too little when making a petty cash claim.

• Two vouchers totalling £10 were prepared in error in respect of postage stamps purchased.

• A voucher for £10 was put in the box but no payment was made to the employee.

  
  

Answer explanation

There is £10 less in the petty cash box than would be expected given vouchers of £136. This suggests that a petty cash voucher for £10 is missing from the petty cash box.