Accounting Quiz

A business starts each month with a petty cash float of $700 if $541 is spent during the month how much will be reimbursed at the end of the period?

• $541

• $700

• $159

• None of the above

Answer explanation

The business spends $541 from the petty cash float of $700. At the end of the month, the amount spent is reimbursed, so $541 will be reimbursed, making the correct answer $541.

A trade discount is best described as:

• a discount given if the invoice is paid

• a discount given for cash payment

• a discount given to suppliers

• a discount given to traders.

Answer explanation

A trade discount is typically offered to traders as an incentive for prompt payment. It is not specifically for cash payments or limited to suppliers, making 'a discount given if the invoice is paid' the correct choice.

A credit balance of $500 in the cash columns of the cash book would mean:

• the book-keeper has made a mistake

• we have $500 cash in hand

• we have spent $500 cash more than we have received

• someone has stolen $500 cash

Answer explanation

A credit balance of $500 indicates that expenses exceeded income by that amount, meaning we have spent $500 cash more than we have received.

An invoice shows a total of $3,200 and a 2.5% cash discount if paid within 30 days. If the invoice was paid within the time allowed, what amount would be shown on the cheque?

• $2,960

• $3,040

• $3,120

• $2,800

Answer explanation

To calculate the cash discount, multiply $3,200 by 2.5% (0.025), which equals $80. Subtract this from the total: $3,200 - $80 = $3,120. Therefore, the amount shown on the cheque is $3,120.

The total of the discount received column in the cash book is posted to the:

• credit of the discounts received account

• credit of the discounts allowed account

• debit of the discounts allowed account

• debit of the discounts received account

Answer explanation

The total of the discounts received is recorded as income, hence it is credited to the discounts received account. This reflects the increase in income from discounts received.

A bank overdraft is best described as:

• a business wasting its money

• having more receipts than payments

• a business having bought too many goods

• a business having paid more out of its bank account than it has put in it.

Answer explanation

A bank overdraft occurs when a business withdraws more money from its bank account than it has deposited. This means the correct choice is that a business has paid more out of its bank account than it has put in it.

Of the following, which should not be entered in the Journal?

• Cash payments for wages

• Bad debts written off

• purchase of a Motorvehicle

• Sale of non-current assets

Answer explanation

Cash payments for wages are typically recorded in the cash disbursements journal, not the general journal. The other options involve transactions that should be recorded in the journal.

A reduction in a provision for doubtful debts is:

• Dr. profit and loss, Cr. bad debts.

• Cr. profit and loss, Dr. provision for doubtful debts.

• Cr. profit and loss, Dr. statement of financial debts.

• Dr. profit and loss, Cr. provision for doubtful debts.

Answer explanation

A reduction in a provision for doubtful debts means decreasing the liability. This is recorded as a credit to profit and loss (increasing profit) and a debit to the provision for doubtful debts, hence the correct entry is Cr. profit and loss, Dr. provision for doubtful debts.

Which of the following items would typically appear in the credit column of a trial balance?

• accounts payable

• cash sales

• inventory purchases

• bank overdraft

Answer explanation

Cash sales represent revenue earned and are recorded in the credit column of a trial balance. In contrast, accounts payable and inventory purchases are liabilities and expenses, while a bank overdraft is also a liability.

If last year's capital is $57,500, this year's capital is $64,300 and drawings are $11,800, then the profit must have been:

• $18,600

• $18,100

• $16,600

• $19,600

Answer explanation

To find the profit, use the formula: Profit = (Current Capital + Drawings) - Previous Capital. Here, Profit = ($64,300 + $11,800) - $57,500 = $18,600. Thus, the correct answer is $18,600.