ITBK - General Revision_Last1

When a payment is received from a credit customer, the VAT must be recorded separately

• True

• False

Answer explanation

The VAT on payment from a credit customer or payment to a credit supplier is not recorded. This is because the transaction now is payment. You will simply post in Bank and the corresponding RLCA/PLCA accounts. THE VAT on this transaction had been recorded at the point of sale/purchase, which took place some 10/20/30 days ago.

When a payment is made to a credit supplier, the VAT must be recorded separately

• True

• False

Answer explanation

The VAT on payment from a credit customer or payment to a credit supplier is not recorded. This is because the transaction now is payment. You will simply post in Bank and the corresponding RLCA/PLCA accounts. THE VAT on this transaction had been recorded at the point of sale/purchase, which took place some 10/20/30 days ago.

Motor expenses account has £250.00 at the start of the day. Petty cash spend during the day on Motor expenses is £72 including VAT. What will be the Motor expenses amount after this transaction?

• £250.00

• £310.00

• £322.00

• None of the above

Answer explanation

Income and expense for a business does not include VAT. If an amount is received or paid including VAT, you must remove the VAT element and post into VAT account. The amount that has no VAT will be the income or expense.

£250 was the amount before the petty cash transaction. Petty cash transaction was £72 including VAT. Amount without VAT will be £60 (£72 - £12 VAT). We will then add £250 and £60, to give us £310

An asset like cash will always have its balance c/d on the debit side

• True

• False

Answer explanation

Assets have debit side bigger than the credit side. At the end of the period, to make the two sides equal, the balancing number is posted on the credit side - this is the balance c/d.

A liability like payables will always have its balance c/d on the credit side

• True

• False

Answer explanation

Liabilities have credit side bigger than the debit side. At the end of the period, to make the two sides equal, the balancing number is posted on the debit side - this is the balance c/d.

At the start of a May, petty cash account had £25. In may, total amount withdrawn from bank into the petty cash was £225. Amount spent from the petty cash was £75. How will the closing balance be recorded?

• Bal c/d £175 Cr

• Bal b/d £175 Cr

• Bal c/d £175 Dr

• Bal b/d £175 Dr

Answer explanation

Petty cash is an asset. The debit side will always be greater than the credit side. To make the two sides the same, the balance of £175 (£25+£225-£75) will be posted on the credit side. This is 'balance c/d' as it is the closing balance.

At the start of a May, petty cash account had £25. In may, total amount withdrawn from bank into the petty cash was £225. Amount spent from the petty cash was £75. How much will be replenished into the petty cash, assuming the petty cash is an imprest system?

• £25 Cr

• £75

• £175

• £225

Answer explanation

In an imprest system, the amount replenished (refunded to the petty cashier to restore the float) is always equal to the 'amount spent'. Amount spent here is £75.

Total debit entries in bank account is £6,000; total credit entries is £7,500. The closing balance will be ..................(overdrawn figure should be in put as a negative number)

Answer explanation

If bank has debit total of £6000 and a credit total of £7500, this will show an overdrawn balance of £1,500. This should be written as -£1,500, as required by the question.

What is the closing balance in this account?

• Balance b/d, £2,000, Cr

• Balance c/d, £2,000, Cr

• Balance b/d, £2,000, Dr

• Balance b/d, £2,000, Dr

Answer explanation

As the debit side is £2,000 greater than the credit side (£100+£800+£1300-£200), the balancing number will be posted on the credit side of the account. Closing balances are balance c/d.

What is the closing balance in this account?

• Balance c/d, £2,400, Dr

• Balance c/d, £2,400, Cr

• Balance b/d, £2,400, Dr

• Balance b/d, £2,400, Cr

Answer explanation

As the credit side is £2,400 greater than the debit side (£500+£700+£1300-£100), the balancing number will be posted on the debit side of the account. Closing balances are balance c/d.