Maintaining Financial Records / Financial Accounting

1. W is registered for sales tax. The managing director has asked four staff in the accounts department
why the output tax for the last quarter does not equal 20% of sales (20% is the rate of tax). Which
one of the following four replies she received was NOT correct?

A. The company had some exports that were not liable to sales tax.
B. The company made some sales of zero-rated products.
C. The company made some sales of exempt products.
D. The company sold some products to businesses not registered for sales tax.

2. The following information relates to Eva Co's sales tax for the month of March 20X3:
$
Sales (including sales tax) 109,250.
Purchases (net of sales tax) 64,000

Sales tax is charged at a flat rate of 15%. Eva Co's sales tax account showed an opening credit
balance of $4,540 at the beginning of the month and a closing debit balance of $2,720 at the end of
the month.
What was the total sales tax paid to regulatory authorities during the month of March 20X3?

$_______

3. Alana is not registered for sales tax purposes. She has recently received an invoice for goods for
resale which cost $500 before sales tax, which is levied at 15%. The total value was therefore $575.
What is the correct entry to be made in Alana's general ledger in respect of the invoice?

A. DEBIT Purchases $500, DEBIT Sales tax $75, CREDIT Payables $575
B. DEBIT Purchases $575, CREDIT Sales tax $75, CREDIT Payables $500
C. DEBIT Purchases $500, CREDIT Payables $500
D. DEBIT Purchases $575, CREDIT Payables $575

4. Information relating to Lauren Co's transactions for the month of May 20X4 is shown below:
$
Sales (including sales tax) 140,000*
Purchases (net of sales tax) 65,000

Sales tax is charged at a flat rate of 20%. Lauren Co's sales tax account had a zero balance at the
beginning of the month and at the end of the month.

* Lauren Co's sales for the month of $140,000 included $20,000 of sales exempt from sales tax.

What was the total sales tax paid to regulatory authorities at the end of May 20X4 (to the nearest $)?

A. $7,000
B. $20,000
C. $23,333
 D. $13,000
5. A business commenced with capital in cash of $1,000. Inventory costing $800 plus sales tax is
purchased on credit, and half is sold for $1,000 plus sales tax, the customer paying in cash at once.
The sales tax rate is 20%.

What would the accounting equation after these transactions show?

A. Assets $1,800 less Liabilities $200 equals Capital $1,600

B. Assets $2,200 less Liabilities $1,000 equals Capital $1,200
C. Assets $2,600 less Liabilities $800 equals Capital $1,800
D. Assets $2,600 less Liabilities $1,000 equals Capital $1,600

6. The net assets of Altese, a trader, on 1 January 20X2 amounted to $128,000. During the year to 31
December 20X2 Altese introduced a further $50,000 of capital and made drawings of $48,000. On 31
December 20X2 Altese's net assets totalled $184,000.

What is Altese's total profit or loss for the year ended 31 December 20X2?

A. $54,000 profit
B. $54,000 loss
C. $42,000 loss
D. $58,000 profit

7. Jones Co has the following transactions: 1.

 Payment of $400 to J Bloggs for a cash purchase
 Payment of $250 to J Doe in respect of an invoice for goods purchased last month.

What are the correct ledger entries to record these transactions?

A. DEBIT Cash $650; CREDIT Purchases $650

B. DEBIT Purchases $650; CREDIT Cash $650
C. DEBIT Purchases $400; DEBIT Trade Payables $250; CREDIT Cash $650
D. DEBIT Cash $650 CREDIT Trade Payables $250 CREDIT Purchases $400

8. T Tallon had the following transactions:

 Sale of goods on credit for $150 to F Rogit
 Return of goods from B Blendigg originally sold for $300 in cash to B Blendigg.

What are the correct ledger entries to record these transactions?

A. DEBIT Receivables $150 DEBIT Sales Returns $300 CREDIT Sales $150 CREDIT Cash $300
B. DEBIT Sales $150 DEBIT Cash $300 CREDIT Receivables $150 CREDIT Sales Returns $300
C. DEBIT Receivables $450 CREDIT Sales $150 CREDIT Sales Returns $300
D. DEBIT Sales Returns $300 DEBIT Sales $150 CREDIT Cash $450
9. Which of the following documents should accompany a return of goods to a supplier?

A. Debit note.
B. Remittance advice
C. Purchase invoice
D. Credit note

The following information is relevant for Questions 10 and 11

On 1 May 20X9 Marshall's cash book showed a cash balance of $224 and an overdraft of $336. During
the week ended 6 May the following transactions took place.

May 1 Sold $160 of goods to P Dixon on credit.

May 1 Withdrew $50 of cash from the bank for business use.
May 2 Purchased goods priced at $380 from A Clarke, on credit, less 15% trade
discount.
May 2 Repaid a debt of $120 owing to R Hill, taking advantage of a 10% settlement
discount. The payment was by cheque.
May 3 Sold $45 of goods for cash.
May 4 Sold $80 of goods to M Maguire on credit, offering a 12 1/2% discount if payment
made within 7 days. Marshall expects Maguire to take up this discount.
May 4 Paid a telephone bill of $210 by cheque.
May 4 Purchased $400 of goods on credit from D Daley.
May 5 Received a cheque from H Larkin for $180.
May 5 Sold $304 of goods to M Donald on credit.
May 5 Purchased $135 of goods from Honour Co by cheque.
May 6 Received a cheque from D Randle for $482.
May 6 Purchased $100 of goods on credit from G Perkins.

10. What is the total of the sales day book?

$_____

11. What is the total of the purchases day book?

$_____

12. Which ONE of the following statements does NOT describe a way in which an effective accounting
system facilitates the provision of useful accounting information?

A. By requiring authorisation in line with organisational policies

B. By processing and recording transactions in accordance with accounting rules
C. By preventing transactions from being processed inaccurately
D. By enabling transactions to be recorded as necessary to permit preparation of financial
statements
13. Which of the following statements is/are TRUE or FALSE?

 Cash purchases are recorded in the purchases day book.

 The sales day books is used to keep a list of invoices received from suppliers.

A. Both statements are TRUE

B. Both statements are FALSE
C. Statement 1 is TRUE and statement 2 is FALSE
D. Statement 1 is FALSE and statement 2 is TRUE

14. At 30 November 20X5 Jenny had a bank loan of $8,500 and a balance of $678 in hand in her bank
account.

How should these amounts be recorded on Jenny's opening trial balance at 1 December 20X5?

A. DEBIT $7,822
B. CREDIT $7,822
C. CREDIT $8,500 and DEBIT $678
D. DEBIT $8,500 and CREDIT $678

15. The following transactions relate to Titan’s business:

$
1 March Purchase of goods for resale on credit 1,300
2 March Titan injects capital into the business 1,400
3 March Payment of rent made 750
5 March Titan withdraws cash from the business 400
7 March Sales made on credit 1,200

The goods sold on 7th March originally cost $600. At the start of the week, the assets of the business
were $15,700 and liabilities amounted to $11,200. At the end of the week, what is the amount of Titan’s
capital? $___________

16. Services rendered for cash will result in a/an

A. Increase in cash and a decrease in capital

B. Increase in cash and an increase in fees earned
C. Decrease in cash and an increase in fees earned
D. Increase in fees earned and a decrease in capital
17. One of the local fast-food outlets hired a first-year accounting student to oversee the cash-collection
procedures. When the firm pays the student his weekly wage, the transaction will

A. Increase an asset, increase a liability

B. Decrease an asset, decrease a liability
C. Increase an asset, increase owner's equity
D. Decrease an asset, decrease owner's equity

18. BS Corporation provides laptop repair services. It offers services on the advance part-payment
policy. A customer walked into their shop for services, paid Rs.2,000 in the beginning, and once the
laptop got repaired, he paid Rs.2,000 upon delivery.

Post the accounting entry for the above when the laptop is repaired and handed over to the customer.

A. Cash = 2,000 (Debit) and Accounts receivable = 2,000 (credit)

B. Cash = 2,000 (Debit) and Service revenue = 2,000 (credit)
C. Cash = 2,000 (Debit) and Accounts payable = 2,000 (credit)
D. Cash = 2,000 (Debit) and Other income = 2,000 (credit)

19. A grocery business has net assets of $64,800 at 31st January 2008 and the net profit for the year to
31st January 2008 was $30,600. On 31 st August 2007, the proprietor introduced additional capital of
$7,200. He also withdrew $960 per month and on 24 th December 2007 withdrew goods amounting
to $840.

What were the net assets at 1st February 2007?

A. $39,360
B. $51,720
C. $13,920
D. $50,040
20. An accountant has inserted all the relevant figures into the trade payables account but has not yet
balanced off the account.
Trade Payables Account
Bank a/c 100,750 b/d 250,225

Purchases 325,010

c/d ?

Assuming there are no other entries to be made, other than to balance off the account, what is the
closing
balance on the trade payables account? $ ___________

A. 474,485
B. 474,845
C. 574,485
D. 574,845

21. What is the correct narration for the following General Journal entry?
$ $
DEBIT Purchases 1,000
CREDIT Cash 500
Trade Payables 500
A. Made sales of $1,000, $500 of which were on credit
B. Paid an expense of $1,000 in cash
C. Bought materials for $1,000, half for cash and half on credit
D. Give cash payment to payables of $1,000

22. The petty cash balance at 30 November 20X9 was $25. The following transactions occurred during
November 20X9:

(1) Refreshments were purchased at a cost of $7.25.

(2) Travel expenses of $12.75 were reimbursed to an employee.
(3) The cleaner was paid $15.

What was the petty cash float at 1 November 20X9?

A. $25
B. $60
C. $35
D. $50
23. What are the accounting entries required to record sales on credit of $10,000, on which sales tax is
applied at the rate of 20%?

A. Debit Trade receivables’ control account $12,000, Credit Sales revenue $10,000 and Credit
Sales tax $2,000
B. Debit Trade receivables’ control account $10,000, Credit Sales revenue $8,000 and Credit
Sales tax $2,000
C. Debit Sales revenue $10,000, Debit Sales tax $2,000 and Credit Suspense $12,000
D. Debit Sales revenue $8,000, Debit Sales tax $2,000 and Credit Suspense $10,000

24. Simran uses the imprest method of accounting for petty cash. She counted the petty cash and there
was $66∙00 in hand. There were also the following petty cash vouchers:

$
Sundry purchases 22.00
Loan to sales manager 10.00
Purchase of staff drinks 19.00
Sundry sales receipts 47.00

What is Simran’s imprest amount?

$ ___________

25. Sasha has prepared a draft statement of profit or loss for her business as follows:
$ $
Sales 256,800
Cost of sales
Opening inventory 13,400
Purchases 145,000
Closing inventory (14,200)
–––––––
(144,200)
––––––––
Gross profit 112,600
Expenses (76,000)
––––––––
Net profit 36,600
––––––––
Sasha has not yet recorded the following items:

 Carriage in of $2,300
 Discounts received of $3,900
 Carriage out of $1,950
After these amounts are recorded, what are the revised values for gross and net profit of Sasha’s
business?

Gross profit Net profit

$ $
A. 108,350 36,250
B. 108,350 28,450
C. 110,300 28,450
D. 110,300 36,250