11 Accounting Quiz 4

The accounting process is typically:

• journal, ledger, trial balance

• source document, journal, trial balance

• source document, journal, ledger

• journal, trial balance, ledger

If an accounts receivable is paid by direct deposit, the source document is the:

• bank statement

• cheque

• cash register summary

• invoice

Which of the following does not produce a source document?

• generating a receipt

• finalising an invoice

• discussing on the phone the price of inventories

• completing a journal voucher

Answer explanation

No transaction has occurred when you are discussing prices. An order needs to be placed for a transaction to occur

Making a payment by electronic funds transfer ultimately results in:

• a credit to the Cash at Bank account

• a debit to a revenue account

• an invoice produced as a source document

• no entry in the records

When the owner withdraws cash, the following general journal entry is made:

• Capital Dr, Supplies Cr

• Capital Dr, Cash at Bank Cr

• Drawings Dr, Supplies Cr

• Drawings Dr, Cash at Bank Cr

The folllowing entry was recorded:

Advertising Dr $500

Preston Advertising Pty Ltd Cr $500

Which of the following statements is correct about the entry?

• Paid for advertising $500

• Bought advertising on credit $500

• Received $500 for advertising

• Preston Advertising Pty Ltd owes the business $500

The Cost of Goods Sold account is:

• an asset

• a liability

• a revenue

• an expense

The GST Credits Received account is debited because it is:

• an expense that is decreasing

• a negative liability that is increasing

• a revenue that is increasing

• an asset that is decreasing

Answer explanation

This wording is tricky. We know that GST Cr Rec reduces what we owe the government, therefore it is a liability decreasing.

It is also known as a negative liability. A negative liability means that the nature is opposite of what it should be (instead of L being Cr, a -L is Dr) so increasing it, will increase its altered nature (it will increase by debiting it)

If credit purchases are returned, the Inventories account is credited because it is:

• an expense that is decreasing

• a liability that is increasing

• a revenue that is increasing

• an asset that is decreasing

Answer explanation

This means the business bought inventories on credit. If they return those inventories, it will decrease the amount of inventories the business has.

Credit purchase = this business BOUGHT on credit from another business

Mostert Industries sent an adjustment note to N Nay for sales returns of $330, including GST. Nay will be credited with this amount. Which of the following statements is correct to record the debit side of the entry relating to the selling price element of this transaction?

• Sales Returns $300; & GST Cr Rec $30

• Sales Returns $330

• Sales Returns $300; & GST Collected $30

• Sales Returns $300; & Cost of Goods Sold $30

Answer explanation

Since Nay returned the goods, the sale of those goods didn't actually end up happening. This means we no longer need to collect the GST for the government so we reverse the transaction. Remember, GST Collected is for ALL sales transactions (even returns of sales) whilst GST Cr Rec is for ALL purchases (even returns of purchases).