Introduction to accounting tutorial questions

Where business comes to life
AC110 Introduction to Accounting
Tutorial 3
Chap 5: Preparing basic financial statements
Chap 6: Error and corrections to accounting records and financial statements
1

AGENDA
1. Chapter 5 selected questions
2. Chapter 6 selected questions

CHAPTER 5

3. Gerrard Ltd is registered for VAT. In the month of April, it sells goods to
customers for a total of £89,436 excluding VAT and purchases goods from
suppliers for a total of £86,790 including VAT.
What is the net amount shown in Gerrard Ltd's VAT account at the end of
April?
A £3,422 debit
B £2,452 debit
C £3,422 credit
D £2,452 credit
Answer is
C

5. A sole trader had trade receivables of £2,700 at 1 May and
during May made cash sales of £7,200, credit sales of £16,500 and
received £15,300 from his credit customers. The balance on his
trade receivables account at the end of May was:
A) £1,500
B) £3,900
C) £8,700
D) £11,100

A) £1,500
B) £3,900
C) £8,700
D) £11,100
Dr Trade Receivables Cr
Balance b/f
Sales
2,700
16,500
19,200
Cash at Bank
Balance c/f
15,300
3,900
19,200

A) £1,500
B) £3,900
C) £8,700
D) £11,100
Answer is
B
Dr Trade Receivables Cr
Balance b/f
Sales
2,700
16,500
19,200
Cash at Bank
Balance c/f
15,300
3,900
19,200

8. Val had an opening trade payables balance of £3,450 on 1 December.
During the month of December, they sold goods totalling £6,780 to
customers on credit, purchased goods totalling £5,100 from suppliers
on credit and made cash purchases of £400. They also received £3,900
from credit customers and made payments to credit suppliers of
£4,200.
What was the balance on Val's trade payables account at the end of
December?
A £4,350
B £6,330
C £4,750
D £2,550

8. Violet had an opening trade payables balance of £3,450 on 1
December. During the month of December, they sold goods totalling
£6,780 to customers on credit, purchased goods totalling £5,100 from
suppliers on credit and made cash purchases of £400. They also
received £3,900 from credit customers and made payments to credit
suppliers of £4,200.
What was the balance on Val's trade payables account at the end of
A £4,350
B £6,330
C £4,750
D £2,550
Dr Trade Payables Cr
Cash at bank
Balance c/f
4,200
4,350
8,550
Balance b/f
Purchases
3,450
5,100
8,550

8. Violet had an opening trade payables balance of £3,450 on 1
December. During the month of December, she sold goods totalling
£6,780 to customers on credit, purchased goods totalling £5,100 from
suppliers on credit and made cash purchases of £400. She also received
£3,900 from credit customers and made payments to credit suppliers of
£4,200.
What was the balance on Violet's trade payables account at the end of
December?
A £4,350
B £6,330
C £4,750
D £2,550
Answer is A
Dr Trade Payables Cr
Cash at bank
Balance c/f
4,200
4,350
8,550
Balance b/f
Purchases
3,450
5,100
8,550

9. The following are balances on the accounts of London, a sole trader, as at the end of the current financial
year and after all entries have been processed and the profit for the year has been calculated.
£
Non-current assets 85,000
Trade receivables 7,000
Trade payables 3,000
Bank loan 15,000
Accumulated depreciation, non-current assets 15,000
Inventory 4,000
Accruals 1,000
Prepayments 2,000
Bank overdraft 2,000
What is the balance on London's capital account?
A £59,000
B £66,000
C £62,000
D £64,000

9. The following are balances on the accounts of London, a sole trader, as at the end of the current
financial year and after all entries have been processed and the profit for the year has been
calculated.
£
Bank loan 15,000
Inventory 4,000
Accruals 1,000
Prepayments 2,000
A £59,000
B £66,000
C £62,000
D £64,000
Debit Credit
85,000
7,000
3,000
15,000
15,000
4,000
1,000
2,000
2,000
98,000 36,000

9. The following are balances on the accounts of London, a sole trader, as at the end of the current
financial year and after all entries have been processed and the profit for the year has been
calculated.
£
Bank loan 15,000
Inventory 4,000
Accruals 1,000
Prepayments 2,000
A £59,000
B £66,000
C £62,000
D £64,000
Answer is C (98-36=62)
Debit Credit
85,000
7,000
3,000
15,000
15,000
4,000
1,000
2,000
2,000
98,000 36,000

Additional question 1
Sandra's bakery business has the following account balances at 30 September
20x18: ovens £38,000, inventories £4,100, trade payables £2,650, loan of
£5,000 and a bank overdraft of £1,090. Sandra's capital account as at 30
September 20x18 is:
a) £33,360.
b) £35,540.
c) £38,360.
d) £38,660.

September 20x18 is:
a) £33,360.
b) £35,540.
c) £38,360.
d) £38,660.
Debit Credit
Ovens 38,000.00
Inventories 4,100.00
Payables 2,650.00
Loan 5,000.00
Bank overdraft 1,090.00
Captial ?
42,100.00 42,100.00

September 20x18 is:
a) £33,360.
b) £35,540.
c) £38,360.
d) £38,660.
Answer is A

If sales (including VAT) amounted to £28,200 and purchases (excluding VAT)
amounted to £18,000, the balance on the VAT account, assuming all items are
subject to VAT at 20%, would be:
A) 1,100 debit
B) 1,100 credit
C) 1,682.10 debit
D) 1,682.10 credit

A) 1,100 debit
B) 1,100 credit
C) 1,682.10 debit
D) 1,682.10 credit
Output = 4700 =28200*20/120
Input = 3600 =18000*0.2
1100

A) 1,100 debit
B) 1,100 credit
C) 1,682.10 debit
D) 1,682.10 credit
Answer is
B
Output = 4700 =28200*20/120
Input = 3600 =18000*0.2
1100

CHAPTER 6

1. Which three of the following situations are likely to result in a suspense
account being used to record a transaction?
A. A receipt of £135 from a customer who unexpectedly, but correctly, has
taken a 3% prompt payment discount.
B. A payment of £84 made to a supplier in respect of an invoice of £70 plus
VAT at 20%.
C. A receipt of £3,500 from the disposal of a van with a carrying amount of
£2,700.
D. A journal entry posted by the bookkeeper to write off an irrecoverable
debt of £55 in which the bookkeeper was unsure where to record the
credit entry.
E. A payment made to a supplier for £90.25 in respect of an invoice for £95
on which a prompt payment discount of 5% was expected to be taken.
Answer is
A, C and D

4. Epsilon's cash at bank account at 31 December 20X3 shows a balance of
£565 overdrawn. On comparing this with the transaction report downloaded
from the electronic banking system, the accountant discovers the following:
1 A payment of £57 made by Epsilon on 29 December 20X3 has not yet
cleared its bank.
2 An electronic funds transfer of £92 from a customer, which was paid into
the bank on 24 December 20X3, has been dishonoured by the customer’s
bank on 31 December 20X3.
The correct balance in Epsilon's cash at bank account as at 31 December 20X3
is:
A. £473 debit
B. £714 credit
C. £657 credit
D. £473 credit
Answer is C

5. Smyths's draft profit for the year is £324,700. After the draft profit was calculated, the
following issues were discovered.
• Debts of £6,800 should have been written off as irrecoverable at the year end, but the
journal entry was not posted.
• The accounting system had automatically calculated and recorded depreciation, but
the standing data was found to be incorrect. The depreciation rate for cars should have
been updated to 20% straight-line at the start of the year, but was left as 25% straight-
line in error. The balance on the car cost account at the year end was £24,000. There
were no additions or disposals of cars in the year.
What is Smyths's corrected profit for the year after accounting for the above issues?
A £323,500
B £319,100
C £313,100
D £316,700
Answer is B

7. The following information relates to a bank reconciliation. The balance in the
cash at bank account before taking the items below into account was £8,970
overdrawn.
1 Bank charges of £550 on the bank statement have not been entered in the cash
at bank account.
2 The bank has credited the account in error with £425 which belongs to another
customer.
3 Electronic payments totalling £3,275 made shortly before the year end have
been entered in the cash at bank account but have not been cleared for payment.
4 Cash receipts totalling £5,380 have been correctly entered on the debit side of
the cash at bank account but have not been paid in at the bank.
What was the overdrawn balance as shown by the bank statement?
A) £6,990 B) £10,650
C) £11,200 D) £11,625
Answer is C

9. Alpha received a statement from its credit supplier Beta, showing a balance to be
paid of £8,950. Alpha's payables ledger for Beta shows a balance due to Beta of
£4,140.
Investigation reveals the following:
1. A bank transfer made to Beta of £4,080 has not been recorded by Beta.
2. Alpha has not adjusted the payables ledger for a £40 cash discount taken by Alpha
but not allowed by Beta as payment was not made on time.
3. Goods costing £380 returned by Alpha have not been recorded by Beta.
What discrepancy remains between Alpha's and Beta's records after accounting for
these items?
A £9,310
B £390
C £310
D £1,070
Answer is C

15. The following trade payables account contains some errors. All goods are purchased on
credit.
What would be the closing trade payables balance when the errors have been corrected?
A £325,200
B £350,400
C £333,600
D £410,400
Answer is A

20. In the trade payables of Magma plc, an invoice of £807 from
Ferdinand has been recorded as a credit note. After correcting this
error, the trade payables balance will be:
A reduced by £807
B reduced by £1,614
C increased by £807
D increased by £1,614
Answer is D

21. Beta Ltd has calculated a draft gross profit of £150,000 and a draft net profit of £83,000 for
the year ended 31 December 20X3. Two issues were then discovered:
(1) Inventory costing £5,000, with a resale value of £7,500, was received into the warehouse on 2 January 20X4
but had been included in the closing inventory amount at 31 December 20X3.
(2) £10,000 relating to staff training costs was incorrectly capitalised as part of the purchase cost of a new
machine which had been purchased on 1 July 20X3. Beta Ltd depreciates machinery on a straight-line basis at a
rate of 20% per annum. Depreciation should be included as an administrative expense in the year.
After correcting these issues, what amounts should Beta Ltd report for gross profit and net profit?
A Gross profit: £142,500; Net profit: £66,500
B Gross profit: £145,000; Net profit: £69,000
C Gross profit: £145,000; Net profit: £74,000
D Gross profit: £142,500; Net profit: £65,500
Answer is B

24. Catt plc has prepared its draft statement of profit or loss at 31 May 20X1 which
shows a gross profit of £99,500. Catt plc has now discovered that at both the
beginning and the end of the period, one line of inventory, the Sungsa, has been
included at selling price: £1,240 at 31 May 20X1 and £3,720 at 1 April 20X0. The
Sungsa is always sold at a mark-up of 25% by Catt plc.
After correcting this error Catt plc’s gross profit for the year to 31 May 20X1 is:
A £99,996
B £99,004
C £98,880
D £100,120

24. Catt plc has prepared its draft statement of profit or loss at 31 May 20X1 which
shows a gross profit of £99,500. Catt plc has now discovered that at both the
beginning and the end of the period, one line of inventory, the Sungsa, has been
included at selling price: £1,240 at 31 May 20X1 and £3,720 at 1 April 20X0. The
Sungsa is always sold at a mark-up of 25% by Catt plc.
After correcting this error Catt plc’s gross profit for the year to 31 May 20X1 is:
A £99,996
B £99,004
C £98,880
D £100,120
Answer is A

26. Hood plc has a draft net profit of £540,000 for the year ended 31 October
20X2. It discovered the following errors:
(1) Repair costs of £6,600 incurred on 1 November 20X1 were debited to fixtures
and fittings. Hood plc depreciates fixtures and fittings at 25% per annum.
(2) An early settlement discount of £1,785 taken unexpectedly, but appropriately,
by a customer was debited to trade receivables and credited to sales.
On correction of these errors Hood plc’s net profit will be:
A £535,050
B £531,480
C £533,265
D £536,430

26. Hood plc has a draft net profit of £540,000 for the year ended 31 October
20X2. It discovered the following errors:
(1) Repair costs of £6,600 incurred on 1 November 20X1 were debited to fixtures
and fittings. Hood plc depreciates fixtures and fittings at 25% per annum.
(2) An early settlement discount of £1,785 taken unexpectedly, but appropriately,
by a customer was debited to trade receivables and credited to sales.
On correction of these errors Hood plc’s net profit will be:
A £535,050
B £531,480
C £533,265
D £536,430
Answer is B

30. Topping plc’s initial trial balance for the year ended 31 October
20X9 has been prepared. It shows draft profit for the period of
£58,147 and a credit balance on a suspense account of £738 in
respect of accrued expenses. The bookkeeper was unsure of how to
record the accrual and incorrectly debited £738 to prepayments and
credited the suspense account.
What is Topping plc’s profit for the period after this error has been
corrected?
A £59,623
B £57,409
C £58,885
D £56,671

30. Topping plc’s initial trial balance for the year ended 31 October 20X9 has been
prepared. It shows draft profit for the period of £58,147 and a credit balance on a
suspense account of £738 in respect of accrued expenses. The bookkeeper was
unsure of how to record the accrual and incorrectly debited £738 to prepayments
and credited the suspense account.
What is Topping plc’s profit for the period after this error has been corrected?
A £59,623
B £57,409
C £58,885
D £56,671
Answer is B

Questions?

Introduction to accounting tutorial questions

More Related Content

Similar to Introduction to accounting tutorial questions (20)

Recently uploaded (20)

Introduction to accounting tutorial questions

Editor's Notes