Accounting Progress Test 2

Which three of the following situations are not likely to result in a suspense account being used to record a transaction?

• A purchase of office equipment for £1,200 is mistakenly recorded in the rent expense account.

• A cash receipt of £8,000 is received from an unknown source and cannot be matched to any customer account.

• The bookkeeper of a business reduced cash sales by £200 because he was not sure what the £200 represented. In fact, it was drawings.

• Cash discount of £150 had been taken on paying a supplier, JW, even though the payment was made outside the time limit. JW is insisting that £150 is still payable.

• A receipt of £500 from a customer who unexpectedly, but correctly, has taken a 2% prompt payment discount.

When performing a reconciliation between the bank transaction report and the cash at bank account, which three of the following would require an entry in the cash at bank account?

• Dividends received of £225 had been paid directly into the bank and not entered in the cash at bank account.

• Direct debit shown on bank transaction report only

• The bank has made a mistake in crediting the account with £110 belonging to another customer – an error not yet rectified.

• Electronic transfers received, amounting to £400, had been entered in the cash at bank account but had not yet cleared the bank.

• An electronic payment for £50 received from Sunil was recorded and banked on 29 June. This was returned unpaid by Sunil’s bank on 30 June.

Which three of the following statements about bank reconciliations are correct?

• Payments received from customers before the period end but not yet credited by the bank should be added to the balance per the bank statement.

• Differences between the cash at bank account and the bank statement can be corrected by means of a journal entry.

• In preparing a bank reconciliation, unpresented cheques must be added to the balance shown on the bank statement.

• Bank charges that appear only on the bank statement must be recorded as a debit in the cash at bank account.

• If a payment from a customer is dishonoured by their bank, it should be corrected by a credit entry in the cash at bank account.

A bank reconciliation for Worth Ltd at 31 December 20Y1 is in course of preparation. In the light of the information given below:

1. Overdrawn balance per bank statement is £ 850

2. £700 credited in the bank statement under a standing order not yet entered in the cash at bank account. 

3. Payments to a supplier £2,563 made by debit card entered in cash book but not yet shown in the bank statement. 

4. Bank charges of £2,565 debited by bank not entered in the cash book. 

5. Cash and cheques of £1,269 received and entered in cash book but not yet credited in the bank statement. 

6. Bank error: a cheque for £397 wrongly credited to Worth’s account. 

7.Dividends received of £225 had been paid directly into the bank and not entered in the cash at bank account. 

Compute the original balance shown by the cash at bank account.

• 901 DR

• 901 CR

• 499 DR

• 499 CR

A bank reconciliation for Gamma Ltd at 31 December 20Y2 is in course of preparation.

Gamma received a statement from its credit supplier Delta, showing a balance to be paid of £10,500. Gamma’s payables ledger for Delta shows a balance due to Delta of £5,800. Investigation reveals the following:

1. A bank transfer made to Delta of £5,200 shortly before year-end has not been recorded by Delta.

2. Gamma has not adjusted the payables ledger for a £60 cash discount taken by Gamma, but not allowed by Delta, as payment was not made on time.

3. An invoice for £700 issued by Delta has not been recorded by Gamma in its payables ledger.

4. A payment of £300 made to Delta has been incorrectly recorded as £30 in Gamma's payables ledger.

   What discrepancy remains between Gamma’s and Delta’s records after accounting for these items?

• A. £870

• B. £990

• C. £410

• D. £130

Which of the following statements are correct?

1)An error of commission occurs when one side of a transaction has been recorded in the wrong account, and that account is of a different class to the correct account

2)An error of principle occurs when one side of a transaction has been recorded in the wrong account, and that account is of the same class as the correct account

3)An error of principle occurs when a transaction is recorded in the wrong amount, but within the same class of accounts

4)An error of commission occurs when a transaction is recorded in the wrong amount, but within the same class of accounts.

5)An error of commision occurs when one side of a transaction has been recorded in the wrong account, and that account is of the same class as the correct account

• (1) and (2)

• (1) and (3)

• (2) and (4)

• (2) and (5)

• (5) only

The following trade receivables account contains a number of errors of principle. What should the balance c/d be once the errors are corrected?

• 125,200

• 132,400

• 116,400

• 103,600

John's trial balance included a suspense account which had been automatically opened by the computerized accounting system. Using the exception report, the bookkeeper identified that the balance in the suspense account was due to the following unmatched transactions:

1) A payment to a credit supplier for £210 related to an invoice for £200. The business missed the deadline to take the early settlement discount it had expected to take.

2) A receipt of £180 from a credit customer who had unexpectedly (but appropriately) taken an early settlement discount of £20.

3) Interest received in the business bank account of £50.

What is the balance on the suspense account?

• A) Debit £20

• B) Credit £20

• C) Debit £30

• D) Credit £30

Goods invoiced at £25 had been returned by Samson Ltd to its supplier for a full refund. The only accounting entry made for the return was to debit the purchases account and credit the suspense account with £52. Which of the following journal entries should be made to correctly record the return in the nominal ledgers?

• A. DR Suspense £52; CR Purchases £52

• B. DR Suspense £52; CR Trade payables £52

• C. DR Suspense £52; DR Trade payables £25; CR Purchases £77

• D. DR Trade payables £27; CR Purchases £27

Taylor maintains their petty cash records using an imprest system. The total petty cash float is made up monthly to £200. During the month of June, the following expenses were paid from petty cash:

In error, the purchase of stamps was recorded as £8 and, as a result, £72 was withdrawn from the bank to top up the petty cash float.

The error made will result in which of the following?

• An overstatement of expenses of £72 and the petty cash balance being £72 more than it should be

• An understatement of expenses of £72 and the petty cash balance being £128 less than it should be

• An understatement of expenses of £72 and the petty cash balance being £72 less than it should be

• An overstatement of expenses of £128 and the petty cash balance being £128 less than it should be