POBC_Revision Questions _1

Choose which of the following can explain the difference

• A sales invoice entered twice in RLCA

• A credit note was not recorded in a customer's account

• Discount allowed figure was overstated in RLCA

• Sales invoice was recorded on the wrong side in a customer's account

What is the payables balance at the end of the month?

(a)  

Answer explanation

Opening balance increases by purchases only. The rest of the items are deducted. [£20,000 + £18,000 - £26,000 - £1,500 - £2,300] = £8,200

What is the VAT balance at the end of the month?

(a)  

Answer explanation

Opening balance £3,260 is a credit and this increases by the VATs in Income transactions - Sales, £8,650, Purchases returns, £1,550 and Discounts Received, £1,280.

Then the debits will be the VAT in Expense transactions - Purchases, £4,750, Discounts allowed, £820 and Irrecoverable debt, £800.

The difference between the total credits and total debits is £8,350

What is the VAT balance at the end of the month?

(a)  

Answer explanation

Opening balance is a liability. This liability increase with income generating activities of the business like sales, purchase returns & discounts received. The rest are expenses.

[£3260 + £8,630 + £1,550 + £1,280 - £4,750 - £820 - £800] = £8,350

What is the receivables balance at the end of the month?

(a)  

Answer explanation

Opening balance increases by sales only. The rest of the items are deducted. [£36,500 + £12,650 - £2,500 - £18,850 - £5,000] = £22,800

Total list of receivables balances: £42,890

Total Receivables Ledger Control Account balance: £43,003.

The difference could be due to credit customer balance missing from the list of receivables balance.

• True

• False

Answer explanation

As the list of receivables balance is smaller, an explanation for this could be that a particular customer's account balance was not included by mistake.

Total list of receivables balances: £56,900

Total Receivables Ledger Control Account balance: £55,125.

The difference could be due to credit sale not recorded in the receivables control account.

• True

• False

Answer explanation

As the RLCA balance is smaller, an explanation for this could be that a particular invoice was not recorded in the RLCA by mistake.

Total list of receivables balances: £12,756

Receivables Ledger Control Account balance: £11,236.

The difference could be due to a sales return being recorded twice in the customer's account in receivables ledger.

• True

• False

Answer explanation

List of receivables balance is higher. A credit note being recorded twice there would have made the balance smaller. So this is not a likely reason for the difference.

Total list of receivables balances: £9,530

Receivables Ledger Control Account balance: £8,796.

The difference could be due to a discount allowed being recorded twice in the RLCA.

• True

• False

Answer explanation

RLCA balance is smaller. Recording discount allowed twice in the account would have made the balance smaller. So this is likely to be the reason for the difference.

Total list of payables balances: £4,453

Payables Ledger Control Account balance: £4,632.

The difference could be due to a discount received not recorded in the PLCA.

• True

• False

Answer explanation

PLCA balance is bigger. If discount received was recorded in it, the account balance would go down. As PLCA is bigger, the explanation given could not be the reason for the difference.