Accounting Quiz May/June 2022

Mia has agreed to supply goods to a customer on a sale or return basis. At the end of her financial year, the customer has not indicated whether they will keep the goods. Which accounting concept should Mia apply to these items in her financial accounts?

• matching

• prudence

• realisation

• substance over form

Which item should be treated as capital expenditure?

• cost of a printer for an existing computer system

• rent paid on a factory, whilst the company negotiated the purchase of the factory

• repainting the wooden office door

• repair costs to a car which are not covered by insurance

A business has a financial year end of 31 December. It purchased a vehicle on 1 January 2019 for $30,000. The business depreciates vehicles at the rate of 20% per annum using the reducing balance method. Depreciation is charged on a month-by-month basis. The vehicle was sold on 30 September 2021. A profit on disposal of $3000 had been calculated. However, no entries had been made to record the depreciation for 2021. What was the effect of not recording the depreciation for 2021 on the profit on disposal?

• $2880 overstated

• $3840 overstated

• $2880 understated

• $3840 understated

A trader bought a machine on 1 January 2019. He depreciated it at the rate of 10% per annum using the straight-line method. He sold this machine on 1 January 2021 for $4000. The profit on disposal was $200. How much had the machine cost on 1 January 2019?

• $4560

• $4750

• $5040

• $5250

Which item is recorded on the credit side of a sales ledger control account?

• discount received

• dishonoured cheques

• interest on overdue accounts

• set-off of amounts in the purchases ledger

The bank column of the cash book showed a credit balance of $2915. This did not agree with the balance shown on the bank statement. It was then discovered that: 1 a bank transfer, $150, from a customer was not recorded in the cash book 2 a cheque, $450, received from a customer was not recorded on the bank statement 3 a cheque, $530, issued to a supplier was incorrectly recorded in the cash book as $350 but was correctly recorded by the bank 4 bank charge, $25, was not recorded in the cash book. When these items were adjusted, the cash book balance agreed with the bank statement balance. What was the balance shown on the bank statement before any adjustments were made?

• $2520 debit

• $2520 credit

• $3420 debit

• $3420 credit

The correction of which error would require an entry in the suspense account?

• A sales invoice, $45, was omitted from the sales journal.

• Drawings, $60, were debited in the cash book and were credited to the drawings account.

• Vehicle repairs, $100, were debited to the vehicles at cost account.

• Wages, $150, were correctly recorded in the wages account and debited in the cash book.

Which statements regarding the financial statements of a sole trader are correct? 1 Cash drawings for the year are recorded in the income statement. 2 Gross profit for the year is shown in the statement of financial position. 3 Prepayments only appear in the income statement. 4 Trade receivables appear in the statement of financial position.

• 1 and 2

• 2 and 3

• 3 and 4

• 4 only

Which items are recorded in the income statement of a sole trader? 1 interest payable on bank loan 2 interest on capital 3 transfer to general reserve

• 1 and 2

• 1 and 3

• 1 only

• 2 and 3

Which factors may cause a partnership to revalue its tangible non-current assets? 1 admission of a new partner 2 change in the profit-sharing ratios 3 retirement of a partner

• 1 and 2

• 1 and 3

• 1 only

• 2 and 3