Accounting O-Level MCQ'S P-1 Topical/Yearly Article No. 101

O-LEVEL ACCOUNTING MULTIPLE CHOICE QUESTIONS (TOPICAL& YEARLY) (2019-20 edition)

Article # 101

Muhammad Nauman Malik FCMA,MS Accounting (Gold Medalist), MBA (Finance), PIPFA, DCMA, B.Com (Gold Medalist) Keynesian Institute of Management & Sciences (KIMS)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the Author.

Cambridge International has not provided these questions or answers and can take no responsibility whatsoever for their accuracy or suitability for the examinations.

Title

Accounting O Level - Multiple Choice Questions (Topical& Yearly)

Author

Muhammad Nauman Malik Cell: 0321-8414262, 0300-8414262 E-mail: nauman.kims@gmail.com

Published by

Read & Write Publications

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PREFACE Cambridge University has adopted MCQs as a part of O Level Accounting Examinations since 2000. Now almost 33.3% of weightage is allocated to MCQs. Each topic of the syllabus has been covered in a separate chapter containing MCQs from the past papers. All the MCQs have been compiled according to the year in which they were set in the O Level Cambridge examinations. For the better understanding of the questions detailed answers are also given at the end of each chapter. Students will find “Student Evaluation Card� quite useful. This will enable them to compare their performances and focus on the weaker areas.

The correct answers to the Questions are given in the answer key at the end of each chapter.

In the current edition Financial statements of sole traders has been subdivided into four topics so that students may focus on each sub topic independently.

Constructive criticism and suggestions to make the subsequent editions more useful would be appreciated and thankfully acknowledged.

Muhammad Nauman Malik Mobile No: 0300-8414262 0321-8414262 E-mail: nauman.kims@gmail.com

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TABLE OF CONTENTS PREFACE 3 CHAPTER 1 ACCOUNTING BASICS 8 ANSWER KEY ............................................................................................................................................. 18 DETAILED ANSWERS ................................................................................................................................. 18 CHAPTER 2 BOOKS OF ORIGINAL ENTRY 22 ANSWER KEY ............................................................................................................................................. 35 DETAILED ANSWERS ................................................................................................................................. 35 CHAPTER 3 CASH BOOK AND DISCOUNTS 42 ANSWER KEY ............................................................................................................................................. 49 DETAILED ANSWERS ................................................................................................................................. 49 CHAPTER 4 BANK RECONCILIATION STATEMENTS 54 ANSWER KEY ............................................................................................................................................. 58 DETAILED ANSWERS ................................................................................................................................. 58 CHAPTER 5 BAD DEBTS & PROVISION FOR DOUBTFUL DEBTS 62 ANSWER KEY ............................................................................................................................................. 68 DETAILED ANSWERS ................................................................................................................................. 68 CHAPTER 6 ACCOUNTING FOR NON-CURRENT ASSETS 72 ANSWER KEY ............................................................................................................................................. 82 DETAILED ANSWERS ................................................................................................................................. 82 CHAPTER 7 TRIAL BALANCE 90 ANSWER KEY ............................................................................................................................................. 92 DETAILED ANSWERS ................................................................................................................................. 92 CHAPTER 8 INCOME STATEMENTS OF SOLE TRADERS 94 ANSWER KEY ........................................................................................................................................... 100 DETAILED ANSWERS ............................................................................................................................... 100 CHAPTER 9 BALANCE SHEETS OF SOLE TRADERS 104 ANSWER KEY ........................................................................................................................................... 114 DETAILED ANSWERS ............................................................................................................................... 114 CHAPTER 10 ADJUSTMENTS IN FINANCIAL STATEMENTS 120 ANSWER KEY ........................................................................................................................................... 130 DETAILED ANSWERS ............................................................................................................................... 130 CHAPTER 11 ACCOUNTING CONCEPTS & CONVENTIONS 136 ANSWER KEY ........................................................................................................................................... 142 CHAPTER 12 CAPITAL AND REVENUE 144 ANSWER KEY ........................................................................................................................................... 150 DETAILED ANSWERS ............................................................................................................................... 150 CHAPTER 13 ERRORS NOT AFFECTING AGREEMENT OF TRIAL BALANCE 154 ANSWER KEY ........................................................................................................................................... 162 DETAILED ANSWERS ............................................................................................................................... 162 CHAPTER 14 SUSPENSE ACCOUNT 168 ANSWER KEY ........................................................................................................................................... 178 DETAILED ANSWERS ............................................................................................................................... 178 CHAPTER 15 CONTROL ACCOUNTS 184 ANSWER KEY ........................................................................................................................................... 194 DETAILED ANSWERS ............................................................................................................................... 194 CHAPTER 16 ACCOUNTS FROM INCOMPLETE RECORDS 200 ANSWER KEY ........................................................................................................................................... 207 DETAILED ANSWERS ............................................................................................................................... 207 CHAPTER 17 ACCOUNTS OF NON PROFIT ORGANISATIONS 214

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ANSWER KEY ........................................................................................................................................... 222 DETAILED ANSWERS ............................................................................................................................... 222 CHAPTER 18 MANUFACTURING ACCOUNTS 228 ANSWER KEY ........................................................................................................................................... 234 DETAILED ANSWERS ............................................................................................................................... 234 CHAPTER 19 PARTNERSHIP 238 ANSWER KEY ........................................................................................................................................... 245 DETAILED ANSWERS ............................................................................................................................... 245 CHAPTER 20 COMPANY ACCOUNTS 250 ANSWER KEY ........................................................................................................................................... 256 DETAILED ANSWERS ............................................................................................................................... 256 CHAPTER 21 INTERPRETATION OF ACCOUNTS 260 ANSWER KEY ........................................................................................................................................... 271 DETAILED ANSWERS ............................................................................................................................... 271 MAY/JUNE 2016 PAPER 12 280 ANSWER KEY ........................................................................................................................................... 285 OCTOBER/NOVEMBER 2016 PAPER 12 286 ANSWER KEY ........................................................................................................................................... 290 MAY/JUNE 2017 PAPER 12 291 ANSWER KEY ........................................................................................................................................... 295 OCTOBER/NOVEMBER 2017 PAPER 12 296 ANSWER KEY ........................................................................................................................................... 300 MAY/JUNE 2018 PAPER 12 301 ANSWER KEY ........................................................................................................................................... 305 OCTOBER/NOVEMBER 2018 PAPER 12 306 ANSWER KEY ........................................................................................................................................... 311 MAY/JUNE 2019 PAPER 12 312 ANSWER KEY ........................................................................................................................................... 318

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Accounting O Level P-1 Topical

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CHAPTER-1

Ch-1: Accounting Basics

Topics Answer Key

ACCOUNTING BASICS

O-Level Accounting Paper 1 Multiple Choice Questions (Topical & Yearly)

Muhammad Nauman Malik Cell: +92-321-84-14-262 nauman.kims@gmail.com

Sale Point: Shop # 25-28 Lower Ground Floor, Haadia Haleema Centre, Ghazni Street, Urdu Bazar, Lahore.

Tel: +92 42-35714038 Cell: +92 336-5314141 Web: www.readnwrite.org E-mail: readandwriteoffice@gmail.com

Detail Answer

Accounting O Level P-1 Topical

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CHAPTER 1 1

Ch-1: Accounting Basics

ACCOUNTING BASICS

The owner of a business takes inventory for her own use.

What are the ledger account entries to record this?

A debit drawings, credit purchases B debit drawings, credit inventory C debit capital, credit sales D debit inventory, credit drawings Specimen 2000 Q8

2

In a business’s books, the ledger account of J Brown, a customer, shows a debit balance of $450. What does this mean?

A Brown has paid $450 to the business B Brown owes the business $450 C the business has paid Brown $450 D the business owes Brown $450 Specimen 2000 Q9/ May 06 P1 Q7/ Nov 06 P1 Q10

3

A supplier’s account in a customer’s books, has a credit balance of $8 000. What does this mean?

A the customer owes the supplier $8 000 B the customer has paid the supplier $8 000 C the supplier has paid $8 000 D the supplier owes $8 000 May 00 P1 Q7/ May 07 P1 Q10/Nov 08 P1 Q8

4

Bob returns goods bought on credit from Tariq.

Which ledger account entries record this in Tariq’s books?

Debit Credit A Bob sales returns B Bob purchases returns C sales returns Bob D purchases returns Bob May 00 P1 Q8/ Nov 03 P1 Q1/Nov 05 P1 Q8/ May 10 P1 Q2/ Nov 13 P12 Q3

5

Which ledger entries record the purchase of a machine bought on credit?

A debit trade payables, credit machinery B debit machinery, credit trade payables C debit trade payables, credit purchases D debit purchases, credit trade payables Nov 00 P1 Q7/ Specimen 2008 Q7

6

What is the purpose of double entry bookkeeping?

A to apply the dual aspect concept B to avoid errors C to prepare books of prime entry accurately D to record revenue and capital transactions correctly

7

May 01 P1 Q1/ May 04 P1 Q1 The owner of a business has taken goods for personal use but not recorded this in the books.

Which journal entries must be made at the end of the year?

Debit Credit A drawings Purchases B drawings sales C purchases drawings D sales drawings May 01 P1 Q8/ May 05 P1 Q30 /Nov 06 P1 Q31/ May 08 P1 Q21

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8

How should the cash purchase of supplies be entered in the ledger?

Account debited Account credited A cash purchases B cash supplier C purchases cash D supplier cash Nov 01 P1 Q7/ Nov 04 P1 Q9/ Nov 16 P12 Q4

9

A sole trader takes cash and also goods for his own use from his business.

Which of these will affect his capital?

A the cash only B the goods only C both the cash and the goods D neither the cash nor the goods Nov 01 P1 Q30

10

A business bought a computer for the office and paid by cheque. How will the business record this transaction?

Debit Credit A bank account office equipment account B office equipment account bank account C bank account purchases account D purchases account bank account May 02 P1 Q1/ May 07 P1 Q1/ May 14 P12 Q3

11

Y’s account appears in the ledger of X as follows. $ Jan 1 Balance b/d 100 Jan 10 Bank Jan 20 Sales 400 Jan 31 Balance c/d 500 Which statement is true?

A On 1 January Y was owed $100 by X B On 10 January Y paid $100 into the bank C On 20 January Y supplied goods $400 to X D On 31 January Y was a trade receivable of X for $400

$ 100 400 500

May 02 P1 Q8 12

The owner of a business takes goods costing $6 000 from his shop for his own use.

What are the book keeping entries?

A B C D

13

Debit drawings account drawings account purchase account inventory account

Credit $6 000 purchases account $6 000 $6 000 inventory account $6 000 $6 000 drawings account $6 000 $6 000 drawings account $6 000 May 02 P1 Q28/ Nov 07 P1 Q31/ Nov 13 P12 Q20/ May 14 P12 Q19

A trader takes goods that have a selling price of $200 from his shop for his own use. The cost price of these goods is $150.

How is this transaction recorded in his accounting records?

A B C D

Account(s) debited $ drawings 200 purchases 200 drawings 150 purchases 150

Account(s) credited $ purchases 200 drawings 200 purchases 150 drawings 150 May 03 P1 Q30/May 13 P12 Q20

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Ch-1: Accounting Basics

The owner of a business takes inventory for her own use.

What are the ledger account entries to record this?

Account debited Account credited A capital drawings B capital sales C drawings purchases D drawings inventory Nov 03 P1 Q27/ May 07 P1 Q28

15

Brown charged Jones for carriage on goods delivered to Jones’ premises.

What entries will Brown make in his ledger?

Debit Credit A carriage inwards Jones B carriage outwards Jones C Jones carriage inwards D Jones carriage outwards May 04 P1 Q8

16

Which entry records a cheque paid to a supplier for goods bought on credit?

Account debited Account credited A bank trade payable B bank purchases C trade payable bank D purchases bank

17

What is the correct entry for office furniture bought on credit from X? Account to be debited Account to be credited A bank office furniture B office furniture bank C office furniture X D X office furniture

18

Which is a personal account?

A trade receivable C plant and machinery

Nov 04 P1 Q1

May 05 P1 Q1/ Nov 10 P1 Q10 B D

office computers wages May 05 P1 Q10

19

A cheque has been received from X, a trade receivable.

How is this transaction recorded in the books?

A B C D

account debited bank X sales X

Account credited X bank X sales May 06 P1 Q1

20

A business buys goods on credit.

Which entries should be made?

A B C D

account debited bank purchases purchases supplier

account credited purchases bank supplier purchases May 06 P1 Q8

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Ch-1: Accounting Basics

Which statement is correct?

A An asset is always a credit entry.

B An expense is always a credit entry.

C An expense is always a debit entry.

D A liability is always a debit entry.

Nov 06 P1 Q1

22

Carl is a customer of Jason. The balance on Carl’s account in Jason’s books is $200 debit. Carl sends Jason a cheque for $50.

What is the balance on Carl’s account after this transaction?

A C

$150 credit $250 credit

B D

$150 debit $250 debit Nov 07 P1 Q9

23

What is the accounting equation?

A assets less liabilities equal capital B assets plus liabilities equal capital C capital less liabilities equals assets D capital plus assets equals liabilities Specimen 2008 Q2/ Nov 08 P1 Q2/ May 10 P1 Q1/May 13 P12 Q2/May 18 P12 Q3

24

The following account appears in the ledger of Ahmed.

Sara account 2006 Debit ($) June 01 Balance 14 Sales 300 16 Bank 18 Sales returns

Credit ($)

100 25

Balance ($) 100 dr 400 dr 300 dr 275 dr

Which statement is true?

A Ahmed owed Sara $100 on 1 June 2006.

B Ahmed returned goods to Sara on 18 June 2006.

C Sara owed Ahmed $275 on 18 June 2006.

D Sara sold goods to Ahmed on 14 June 2006.

Specimen 2008 Q8 25

Which is a service business?

A garage selling petrol and diesel C second-hand car trader

B D

motor insurance agency shop dealing in motor parts Specimen 2008 Q18

26

A trader prepares a ledger account using the running balance method.

Which statement is correct?

A The balance is shown after each transaction.

B The balance is shown only after a credit transaction.

C The balance is shown only after a debit transaction.

D The balance is shown only at the month end.

May 08 P1 Q10

27

Which is a service business?

A business installing computer systems B business selling computers and printers C stationery shop D TV and video shop Nov 08 P1 Q21/Nov 11 P1 Q20/ Nov 14 P12 Q21

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Ch-1: Accounting Basics

Which best describes the assets of a business?

A cash and items that should turn into cash in the near future B cash invested by the owner of the business C items bought for long term use by the business D items owing to or owned by the business May 09 P1 Q1

29

Which businessman is operating a trading business?

A accountant B computer software developer C hairdresser D second hand car dealer May 09 P1 Q23

30

Javed had the following assets and liabilities. $ 10 000 8 000 2 000 4 000 5 000 6 000 3 000

Equipment motor vehicle bank balance amount owing to suppliers amount owing by customers Inventory loan to Davinder What was Javed’s capital?

A $20 000 B

$24 000

C

credit

$26 000

31

Tony owns a bookshop. He sells a book to Susie who pays cash.

How will Tony record this transaction? account to be debited account to be credited A cash Sales B cash Susie C sales Cash D Susie Sales

32

A trader prepares a ledger account using the running balance method.

Which statement is correct?

A The balance is shown after each transaction.

B The balance is shown only at the month end.

C There are fewer calculations than in a traditional 'T' account.

D This method is not suitable for computerised accounts.

33

Which group contains only trading businesses?

A driving school, motor insurance agent, motor vehicle repairer B driving school, motor insurance agent, petrol station C motor parts shop, motor repairer, used car dealer D motor parts shop, petrol station, used car dealer

D

$30 000 Nov 09 P1 Q2

Nov 09 P1 Q3

May 10 P1 Q7

May 10 P1 Q18/ May 14 P12 Q18 34

Which does not reduce the owner’s capital?

A business expenses paid using a personal cheque B cash withdrawn from the business bank account for personal use C goods taken from inventory (stock) for personal use D personal expenses paid using business cash Nov 10 P1 Q2/ May 19 P12 Q2

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Ch-1: Accounting Basics

A customer returns goods to a supplier.

How does the supplier record this in his ledger? account to be debited account to be credited A customer purchases returns B customer sales returns C purchases returns customer D sales returns customer Nov 10 P1 Q3/ May 12 P11 Q3

36

The following incomplete account appears in Singh’s sales ledger.

Bashir account 2010 Debit $ Credit $ June 1 Balance 5 Sales 620 12 Sales returns 30 29 Bank 800

Balance $ 800 dr ? ? ?

What was the balance on Bashir’s account on 30 June?

A $590 credit B $590 debit C $1010 credit D $1010 debit Nov 10 P1 Q11/ Nov 13 P12 Q24 37

The following account appears in the ledger of Chan.

Fu account 2010 $ 2010 $ Aug 28 Bank 100 Aug 01 Balance b/d 100 31 Balance c/d 250 12 Purchases 250 350 350 Which statement is true?

A Chan is owed $100 by Fu on 1 August.

B Chan paid Fu $100 by cheque on 28 August.

C Fu is a debtor of Chan for $250 on 31 August.

D Fu purchased goods, $250, from Chan on 12 August.

Nov 10 P1 Q12/Nov 15 P12 Q9/ May 19 P12 Q8

38

Businesses make use of both book-keeping and accounting procedures. What is the purpose of bookkeeping?

A to interpret the double entry records B to prepare financial statements at regular intervals C to record all the financial transactions of the business D to summarise the financial position of the business May 11 P1 Q2/ Nov 14 P12 Q1

39

Which would be recorded by a credit entry in an account?

A a decrease in capital B C an increase in assets D

40

a decrease in liabilities an increase in capital May 11 P1 Q3/Nov 15 P12 Q3

Which is the accounting equation?

A assets − current liabilities = owner’s equity (capital) B assets − liabilities = owner’s equity (capital) C current assets − current liabilities = owner’s equity (capital) D non-current assets − liabilities = owner’s equity (capital) May 11 P1 Q5

Accounting O Level P-1 Topical

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Ch-1: Accounting Basics

41

Jane, a trader, withdrew $50 from the business bank account for office use. How is this recorded in Jane's books? account to be debited account to be credited A bank cash B bank drawings C cash bank D drawings bank May 11 P1 Q9

42

Which is not a service business?

A hairdresser C private tutor

B D

manufacturer window cleaner May 11 P1 Q20

43

Melanie provided the following information at the end of her financial year. $ non-current assets at cost 14 000 amount owing by customers 1 250 amount owing to suppliers 850 inventory 1 875 bank overdraft 365 What was Melanie's capital?

A $12 160 B

$15 110

C

$15 910

D $16 640 Nov 11 P1 Q1/Nov 16 P12 Q3

44

Which statements about book-keeping and accounting are correct?

1 Accounting is performed periodically rather than daily.

2 Accounting relies on having accurate book-keeping records.

3 Book-keeping involves the preparation of financial statements.

4 Book-keeping is based on the double entry system of recording.

A 1, 2 and 4 B 1 and 3 C 2, 3 and 4 D 2 and 4 May 12 P11 Q1/Nov 18 P11 Q1//Nov 18 P12 Q1

45

Padma started a business on 1 April 2011 with $30 000 of her own money. On 31 March 2012 her assets and liabilities were: $ machinery at net book value 38 000 other assets 15 000 long-term loan from bank 16 500 What was Padma’s capital on 31 March 2012?

A $30 000 B $36 500 C $46 500 D $53 000 May 12 P11 Q2

46

A company began trading on 1 January 2012. During that month, the following transactions took place. received capital from shareholders, $10 000 received goods for resale, $4 000 despatched goods to customer, $5 000 paid $3 000 for goods received What was the total in the bank account on 31 January 2012?

A $7 000 B $8 000 C $11 000 D $12 000 May 12 P11 Q8

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Which is an intangible asset?

A goodwill C machinery

B D

Ch-1: Accounting Basics

inventory trade receivables May 12 P11 Q21/ Nov 14 P12 Q19/ May 18 P12 Q17

Which is not a service business?

A accountant B insurance company C motor trader D travel agent May 12 P11 Q22

49

Which task would not be carried out by an accountant?

A comparing one year’s results with those of previous years B interpreting the accounting records C preparing financial statements D recording the financial transactions May 12 P12 Q1

50

Jane made a payment to a supplier for goods bought on credit. Jane does not have a bank overdraft.

What is the effect on the accounting equation?

A decrease capital and decrease assets B decrease liabilities and decrease assets C increase assets and decrease liabilities D increase liabilities and decrease capital May 12 P12 Q2

51

On 1 January Tan, a sole trader, lent Chan$4 000. On 1 November Chan repaid part of the loan leaving an amount outstanding of $1 000.

Which entry was made in the accounts of Tan on 1 November?

A B C D

account to be debited Bank Bank Chan loan Chan loan

$ 1 000 3 000 1 000 3 000

account to be credited Chan loan Chan loan Bank Bank

$ 1 000 3 000 1 000 3 000

Nov 12 P12 Q3 52

Melissa made payments to the following suppliers.

Which suppliers is a service business?

A B C D

name of business M1 Insurance Company Music & Move Company PJ Garages Ltd The Petrol Station

reason for payment Cost of motor insurance purchase of car radio Cost of motor vehicle purchase of petrol May 13 P12 Q19

53

How is owner’s equity calculated?

A money invested in the business by the owner, plus the net current assets B money invested in the business by the owner, plus the non-current liabilities C total of non-current assets and working capital, less the non-current liabilities D total of non-current assets, long term liabilities and net current assets Nov 13 P12 Q2

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Ch-1: Accounting Basics

The following account appeared in a trader’s ledger.

2013 July 31 August 2

equipment account debit credit Details $ $ Balance Bank 7 500

balance $ 4 000 Dr

What was the balance on the account on 2 August?

A $3 500 credit B $3 500 debit C $11 500 credit D $11 500 debit Nov 13 P12 Q7 55

A trader purchased a motor vehicle for his business using a cheque from his personal bank account. How is this recorded in the books of the business? account to be debited account to be credited A Bank motor vehicles B capital motor vehicles C motor vehicles Bank D motor vehicles capital Nov 14 P12 Q3

56

What is prepared by a book-keeper?

A appropriation account B cash book C income statement D statement of financial position Nov 15 P12 Q1

57

Which task would not be carried out by a book-keeper?

A posting cash receipts B preparing financial statements C recording entries in the purchases ledger D writing up the sales returns journal May 16 P12 Q1

58

Which statement is not true about reasons for using international accounting standards?

A helps when making comparisons between companies B improves the reliability of accounting information C narrows the areas of difference between companies D makes the preparation of financial statements less time consuming May 16 P12 Q30

59

A company employs a book-keeper and an accountant.

Which task would the accountant perform?

A extracting balances from the ledger accounts to produce a trial balance B making entries in the journal to adjust a provision for doubtful debts C preparing a monthly report that analyses the profit ability of the company D recording sales and purchase invoices in the books of prime (original) entry Nov 16 P12 Q1

60

Which is a trading business?

A food store C investment adviser

B D

hairdresser motor vehicle repairer Nov 16 P12 Q20

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Ch-1: Accounting Basics

Which accounts all have debit balances?

A capital, insurance, purchases B drawings, sales, purchases returns C inventory, motor vehicles, cash D rent received, drawings, wages May 17 P12 Q7

62

A trader invested $4 000 into the business. $2 000 was used to pay a credit supplier. The rest of the money was paid into the business bank account.

What changes would take place within the accounting equation? assets A B C D

–$2 000 +$2 000 +$2 000 +$4 000

owner’s equity (capital) –$4 000 +$2 000 +$4 000 +$4 000

liabilities +$2 000 no effect –$2 000 no effect Nov 18 P11 Q2

63

The balance of which account will appear in the debit column of a trial balance?

A carriage inwards B discounts received C provision for doubtful debts D purchases returns Nov 18 P11 Q8

64

Ava had $4 000 in the bank. She paid a supplier $575 by cheque in full settlement of $600 owing.

Which changes would take place within the accounting equation? assets A B C D

–$600 –$600 –$575 +$575

owner’s equity (capital) –$25 +$25 +$25 –$25

liabilities –$625 –$625 –$600 +$600 Nov 18 P12 Q2

65

What is the main function of book-keeping?

A communicating information B interpreting information C recording information D summarising information May 19 P12 Q1

66

What would be recorded by a debit entry in a ledger account?

A a decrease in an asset B an increase in a liability C an increase in an asset D an increase in capital employed May 19 P12 Q3

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Ch-1: Accounting Basics

ANSWER KEY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

A B A C B A A C C B D A C C D C C

18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

A A C C B A C B A A D D C A A D A

35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51

D B B C D B C B C A B A A C D B B

52 53 54 55 56 57 58 59 60 61 62 63 64 65 66

A C D D B B D C A C C A C C C

DETAILED ANSWERS 2

Question shows position (balance) of an account at a particular date. “A” and “C” options are examples of accounting transactions and do not represent balances, whereas “D” option represents a liability on part of the business. Moreover debit balance indicates an asset (receivable) so “B” option is correct.

3

“D” option shows that amount is payable by the supplier to the customer whereas opposite is true. “B” and “C” options are the examples of accounting transactions (not balances).

4

Although for Bob this return is Purchases return but for Tariq this is Sales return so when Bob will return the goods, then sales income of Tariq will decrease (debited) with decrease in amount receivable from Bob (credited).

11

Balance on 1 January represents amount receivable by X as part of X whereas opposite was given in option “A”. Transaction on 10 January (“B” option) shows cheque received by X from Y. Transaction on 20 January (“C” option) shows that X supplied goods to Y. “D” option is correct as debit side is more than the credit side so represents an asset (receivable) by X.

13

Drawings of goods are always recorded at cost price and that is $150.

15

As amount of carriage outwards is charged to Jones, so his account will be debited as the amount receivable from him has increased whereas carriage outwards expense will decrease and will be credited.

16

“C” option is correct as payment is made to a trade payable (supplier). “A” option represents receipt from a trade payable whereas “D” option is the entry to record cash purchases.

18

Personal accounts simply mean accounts of persons i.e. “A” option is correct.

22 Balance b/f

25

Carl’s account $ 200 ___ 200

Bank Balance c/d (Dr)

“B” option is correct whereas businesses in other three options are trading organisations.

$ 50 150 200

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Ch-1: Accounting Basics

27

“A” option is correct as business installing computer systems is not selling anything rather it is giving services to others whereas businesses in other three options are trading organisations.

28

“D” option is correct. “A” option describes definition of current assets only whereas “C” option tells definition of non-current assets only. “B” option, on the other hand gives definition of owner’s capital.

29

“D” option is correct. Items in other three options are examples of trading businesses.

30

Assets Equipment Motor vehicle Amount owing by customers Inventory Loan to Davinder Liabilities Bank balance Amount owing to suppliers Javed’s capital

$ 10 000 8 000 5 000 6 000 3 000

$

32 000

2 000 4 000

(6 000) 26 000

33

“D” option is correct as driving school, motor insurance agent and motor vehicle repairer are all service businesses.

34

“A” option is correct whereas items in “B”, “C” and “D” options show withdrawals by partners and will reduce their capitals.

Bashir account 2010 Debit $ Credit $ Balance $ June 1 Balance 800 dr 5 Sales 620 1 420 dr 12 Sales returns 30 1 390 dr 29 Bank 800 590 dr

36

38

“C” option is correct whereas items in other three options are purposes of Accounting.

39

“D” option is correct whereas items in other three options are recorded by a debit entry.

41

“C” option is correct as the amount is withdrawn from bank so involves credit entry in bank account. In addition as amount is withdrawn for office (business) use so should not be recorded as Drawings.

43

$ 17 125 (1 215) 15 910

Assets ($14 000 + $1 250 + $1 875) Less Liabilities ($850 + $365) Capital 45

Assets at 31 March 2012 Machinery at net book value Other assets Liabilities at 31 March 2012 Long-term loan from bank Capital at 31 March 2012

46 Capital

48

$ 38 000 15 000

$ 53 000 (16 500) 36 500

Bank account $ 10 000 Purchases ____ Balance c/d 10 000

“C” option is correct as accountant, insurance company and travel agent are all service businesses.

$ 3 000 7 000 10 000

Accounting O Level P-1 Topical

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Effects of this transaction are: Trade payable Bank

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Ch-1: Accounting Basics

(liabilities)  (assets)

51

As asset of loan has been decreased by $3 000 (from $4 000 to $1 000) so bank would have been increased (debited) and Asset of Chan’s loan would have been decreased (credited) by $3 000.

53

Owner’s equity is equal to non-current assets + working capital –non-current liabilities (option C).

54

The account has an opening debit balance and there is a debit entry on 2 August, so the balance after this transaction must be a debit of $11 500.

56

“B” option is correct whereas statements in “A”, “C” and “D” options are prepared by accountants.

57

A book-keeper would not prepare financial statements as this is the responsibility of accountants.

58

The statements made in options ‘A’, ‘B’ and ‘C’ are correct. Statement ‘D’ is not true as the application of international accounting standards has no effect on the time taken to prepare financial statements.

62

Effects of this transaction are: Bank $4 000  (assets) Trade payable $2 000  (liabilities)

64

Effects of this transaction are: Trade payable $600  (liabilities)

Bank $575  (assets)

Capital Bank

$4 000  (capital) $2 000  (assets)

Dis. Received $25  (income/capital)

Accounting O Level P-1 Topical

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CHAPTER-2

Ch-2: Books of Original Entry

Topics Answer Key

BOOKS OF ORIGINAL ENTRY

O-Level Accounting Paper 1 Multiple Choice Questions (Topical & Yearly)

Muhammad Nauman Malik Cell: +92-321-84-14-262 nauman.kims@gmail.com

Sale Point: Shop # 25-28 Lower Ground Floor, Haadia Haleema Centre, Ghazni Street, Urdu Bazar, Lahore.

Tel: +92 42-35714038 Cell: +92 336-5314141 Web: www.readnwrite.org E-mail: readandwriteoffice@gmail.com

Detail Answer

Accounting O Level P-1 Topical

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CHAPTER 2

Ch-2: Books of Original Entry

BOOKS OF ORIGINAL ENTRY

1

H buys goods on credit from J. The goods are unsuitable and H returns them to J. What is the name of the document, which H sends to J with the goods?

A credit note B debit note C invoice D statement of account Specimen 2000 Q1/ May 07 P1 Q2/ Nov 10 P1 Q5/Nov 15 P12 Q4/May 18 P12 Q4

2

Why is the General journal used to correct errors in the ledger?

A to avoid making alterations in the ledger B to complete the double entry C to provide a record explaining ledger entries D to save the book-keeper’s time Specimen 2000 Q2/ May 07 P1 Q8/Nov 11 P1 Q8

3

Which book of prime entry is part of the double entry system?

A cash book B general journal C purchases journal D sales journal Specimen 2000 Q3/ Nov 04 P1 Q7/ May 08 P1 Q6

4

Goods bought on credit by X from Y are returned before they are paid for. X keeps a full double entry system.

Where will X record the return of goods?

A cash book and purchases ledger B general ledger only C general ledger and purchase ledger D purchase ledger only May 00 P1 Q1/ May 08 P1 Q3/May 12 P12 Q3/May 16 P12 Q2

5

A firm buys goods on credit.

Which document does the firm use to record this?

A credit note B C sales invoice D

purchase invoice supplier’s statement May 00 P1 Q2 / Nov 03 P1 Q2

6

X sends back $800 of faulty goods to Y. In which book of prime entry would Y record this transaction?

A general journal B purchases returns journal C sales journal D sales returns journal May 00 P1 Q3/ Nov 04 P1 Q3

7

A bookkeeper discovers that an amount paid to a supplier has been wrongly entered in another supplier’s account.

Which book of original entry will the bookkeeper use when correcting this error?

A cash book B general journal C purchases day book D sales day book May 00 P1 Q6 X invoices goods to Y. They are found to be damaged.

Which document will X then send to Y? A copy invoice B credit note C debit note D statement of account Nov 00 P1 Q2/ Nov 04 P1 Q2/ Nov 14 P12 Q5

8

Accounting O Level P-1 Topical

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Ch-2: Books of Original Entry

Which transaction is entered in the general journal?

A credit sale of goods B goods returned to supplier C purchase of a non-current asset on credit D purchase of inventory for cash Nov 00 P1 Q6

10

X sells goods on credit to Y. Y returns some of these goods to X. Which document will X send to Y? A credit note B debit note C invoice D statement of account May 01 P1 Q2

11

Which of the following is part of the double entry system?

A cash book B general journal C sales journal D trial balance May 01 P1 Q4 / Nov 02 P1 Q3/ May 05 P1 Q3

12

Which item will be entered in the General Journal?

A a correction of an error B a sale on credit C discount received D goods returned to supplier May 01 P1 Q7/Nov 05 P1 Q7

13

Y returns goods to X. Which document will Y send to X? A credit note C invoice

B D

debit note receipt Nov 01 P1 Q1/ Nov 07 P1 Q2

14

15

Y sells goods on credit to X. How is this recorded in Y’s books? book of prime entry A purchases B purchases C sales D sales

account to be debited Y purchases X Sales

account to be credited Purchases Y sales X Nov 01 P1 Q2

X buys goods on credit from Y. What is the name of the document used by X to settle the liability to Y? A cheque B credit note C receipt D statement of account May 02 P1 Q2

16

Which should be recorded in the general journal?

A debt written off as bad B goods returned to supplier C goods sold for cash D trade discount allowed to customer May 02 P1 Q6

Accounting O Level P-1 Topical

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Ch-2: Books of Original Entry

Which transaction is recorded in the sales ledger?

A cash sales B cheque paid to a trade payable C cheque received from a trade receivable D sale of non-current assets Nov 02 P1 Q1/ May 10 P1 Q3/ May 13 P12 Q3

18

In which book is a credit note from a supplier entered?

A purchases journal B purchases returns journal C sales journal D sales return journal Nov 02 P1 Q2/ May 09 P1 Q6/ Nov 13 P12 Q4/May 17 P12 Q3

19

Which transaction is entered in the general journal?

A cash paid to supplier B C machinery bought on credit D

20

A business has purchased inventory on credit and received the goods. At the end of the year the business had not received an invoice from the supplier, Harvey.

Which adjustment is necessary at the year-end?

A B C D

21

cash received from customer inventory bought on credit Nov 02 P1 Q7 /Nov 06 P1 Q9

Debit purchases account purchases account inventory account Harvey account

Credit inventory account Harvey account bank account bank account

X keeps a full set of books of account.

Where will the Sales account appear?

A general journal C sales journal

B D

Nov 02 P1 Q22

general ledger sales ledger May 03 P1 Q2

22

A firm has received the following business documents from X, a supplier.

October 5 October 10 October 12 October 22 November 4

Invoice invoice credit note invoice invoice

$ 650 120 150 230 790

There was no opening balance on X’s account and the firm made no payments to X during October.

What was the balance on the supplier’s statement of account at 31 October?

A $850 B $1 150 C $1 640 D $1 940 May 03 P1 Q3/ May 08 P1 Q5 23

X buys goods on credit from Y, who issues an invoice. The goods are unsuitable and X returns them to Y without paying for them.

Which document should Y issue to X on receipt of the returned goods?

A credit note B debit note C purchase invoice D receipt May 03 P1 Q4

Accounting O Level P-1 Topical

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Ch-2: Books of Original Entry

Ben a trader started purchasing goods on credit from David on 1 March.

Transactions during March were as follows: $ 1 600 1 200 90 18

Purchases Cash paid Purchases returns Discount received What is the closing balance of David’s account in the books of Ben? A $292 credit B $328 credit C $472 credit D $508 credit

May 03 P1 Q11 25

Which item is recorded in the General Journal?

A cash sales B C goods sold on credit D

non-current assets bought on credit petty cash payments Nov 03 P1 Q6

26

There is a debit balance of $100 on Yasmin’s account in Shula’s sale ledger.

What does this mean?

A Yasmin has paid $100 to Shula B Yasmin has returned goods, $100 to Shula C Yasmin owes $100 to Shula D Shula owes $100 to Yasmin Nov 03 P1 Q7

27

George sent an invoice for $4 500 to a customer. He entered the amount correctly in the Sales Journal but posted it to the customer’s account as $5 400.

Which book of prime entry does George use to correct the error?

A cash book B general journal C sales journal D sales returns journal Nov 03 P1 Q15

28

What is the original document for sales returns?

A credit note from the purchaser B C invoice from the purchaser D

a credit note from the supplier invoice from the supplier May 04 P1 Q2

29

Goods returned to a supplier were entered in the supplier’s appropriate journal.

Which account should be debited in the supplier’s general ledger?

A purchases B returns inwards C returns outwards D sales May 04 P1 Q4

30

31

New shop fittings are bought on credit for $4 000.

Where is this transaction entered first?

A cash book B C purchases journal D

general journal purchases ledger May 04 P1 Q6/ May 07 P1 Q4/ Specimen 2008 Q6

What is the purpose of a credit note?

A to allow for cash discount B to ask for payment in advance C to increase the amount due on an invoice D to reduce the amount payable on an invoice May 05 P1 Q2

Accounting O Level P-1 Topical

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Ch-2: Books of Original Entry

A business maintains a full set of books of prime entry.

Which book is written up from credit notes received?

A purchases journal B purchases returns journal C sales journal D sales returns journal May 05 P1 Q4

33

X keeps a full set of books of account.

Where will the purchases account appear?

A general journal B C purchases journal D

general ledger purchases ledger Nov 05 P1 Q1

34

Which source document is used to make an entry in the purchases returns journal?

A credit note issued by the business B credit note issued by the supplier C invoice issued by the business D invoice issued by the supplier Nov 05 P1 Q2

35

Which is entered in the purchases journal?

A invoices from suppliers B C payments from customers D

invoices to customers payments to suppliers Nov 05 P1 Q4

36

What would a business use to pay for goods?

A cheque B C receipt D

invoice statement of account May 06 P1 Q2

37

What is entered in a business’s general journal?

A purchase of a new motor vehicle on credit B return of faulty goods by a credit customer C standing order for payment of insurance premium D transfer of surplus office cash into the bank May 06 P1 Q3/ May 10 P1 Q6

38

A provision for doubtful debts is to be reduced.

Which book of prime entry will be used?

A C

cash book purchases journal

B D

general journal sales journal May 06 P1 Q4

39

X receives a credit note from one of his suppliers. How would X record this?

A B C D

account to be debited purchases purchases returns supplier supplier

account to be credited supplier supplier purchases purchases returns Nov 06 P1 Q2

Accounting O Level P-1 Topical

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Ch-2: Books of Original Entry

X purchases goods on credit from Y. How will Y record this?

A B C D

Book of prime entry purchases purchases sales sales

account to be debited purchases Y sales X

account to be credited Y purchases X Sales Nov 06 P1 Q3/ May 12 P11 Q7

41

Powell returns goods purchased on credit from Wilson. Where will this transaction be entered in Wilson’s books? book of prime entry account debited Account credited A sales journal Powell Sales B sales journal sales Powell C sales returns journal Powell sales returns D sales returns journal sales returns Powell May 07 P1 Q3

42

Which transaction is recorded in the purchases ledger?

A cash purchases B cheque paid to a trade payable C cheque received from a trade receivable D purchase of non-current assets Nov 07 P1 Q1/May 09 P1 Q5/ Nov 10 P1 Q4

43

Smith returns goods purchased on credit from Jones. Where will this transaction be entered in Smith’s books?

A B C D

book of prime entry purchases purchases purchases returns purchases returns

account debited Jones purchases Jones purchases returns

account credited Purchases Jones purchases returns Jones Nov 07 P1 Q3

44

Which is recorded in the general journal before it is entered in the ledger?

A bad debt written off B cash sales C equipment purchased by cheque D purchases returns Nov 07 P1 Q7/May 12 P12 Q9

45

Which document is issued by a supplier when a customer returns goods?

A credit note B debit note C invoice D statement Specimen 2008 Q3

46

Which statement about a debit note is correct?

A It is sent to a customer to request payment of an account.

B It is sent to a customer when his order cannot be supplied in full.

C It is sent to a supplier to order additional goods.

D It is sent to a supplier when goods are received damaged.

May 08 P1 Q4/May 15 P12 Q5

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47

Ch-2: Books of Original Entry

Winston sold goods on credit to Leroy.

What entries should Winston make in his ledgers?

A B C D 48

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sales ledger credit Leroy credit sales debit Leroy debit sales

general ledger debit sales debit Leroy credit sales credit Leroy Nov 08 P1 Q3/ May 12 P11 Q4/May 15 P12 Q2/Nov 16 P12 Q5

Omar sends a credit note to Miriam for goods returned.

How will Miriam record the transaction? account to be debited account to be credited A purchases returns Omar B sales returns Miriam C Omar purchases returns D Miriam sales returns Nov 08 P1 Q4

49

How many of the following transactions should be recorded in the general journal?

1. credit purchase of a non-current asset 2. credit sale of goods 3. goods taken by owner for personal use 4. writing off a bad debt A 1 transaction B 2 transactions C 3 transactions D 4 transactions Nov 08 P1 Q6

50

The following account appears in the ledger of Melissa. Julia account 2008 $ 2008 Jan 01 Sales 100 Jan 14 bank 19 Sales 50 discount __ Dec 31 bad debts 150 Which statement is correct?

A On 14 January Julia allowed Melissa trade discount.

B On 14 January Melissa allowed Julia trade discount.

C On 31 December Julia wrote off Melissa’s account.

D On 31 December Melissa wrote off Julia’s account.

$ 95 5 50 150

May 09 P1 Q12 51

Dipankar often trades with Ashok.

In which order would the following documents be issued?

A cheque, credit note, invoice, receipt B credit note, receipt, invoice, cheque C invoice, credit note, cheque, receipt D receipt, cheque, invoice, credit note Nov 09 P1 Q4

52

Which is entered in the general journal?

A cash payment to an employee for expenses B correction of an error C credit purchase of goods for resale D return of goods by a customer Nov 09 P1 Q5

Accounting O Level P-1 Topical

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Ch-2: Books of Original Entry

53

Sally supplies goods to Jake.

In Sally’s books the account of Jake shows a debit balance of $350. Jake sends Sally a cheque for $75.

What is the balance on Jake’s account after this transaction?

A $275 debit B $275 credit C $425 debit D $425 credit Nov 09 P1 Q8

54

Which document does a trader send to a credit customer to summarise the transactions for the month?

A credit note B debit note C receipt D statement of account May 10 P1 Q4/May 11 P1 Q7/May 16 P12 Q3

55

Where is the total of the purchases journal posted?

A credit income statement (trading account) B debit income statement (trading account) C credit purchases account D debit purchases account Nov 10 P1 Q6/ May 13 P12 Q5

56

Wayne has sent the following business documents to Len, a customer. $ Jan 01 invoice 250 Jan 12 invoice 370 Jan 14 credit note 90 Jan 18 invoice 480 Feb 02 invoice 670 There was no opening balance on Len’s account and no payments made by Len during January.

What is the amount to be paid by Len to clear his January account?

A $1 010 B $1 190 C $1 680 D $1 860 May 11 P1 Q6

57

Hassan maintains a sales journal, purchases journal, sales returns journal and a purchases returns journal. At the end of his first month’s trading, Hassan transfers the total of each of these journals to the general ledger. Which entries will Hassan make in his general ledger to record these totals? account to be debited account to be credited A purchases returns purchases sales sales returns B purchases returns Purchases sales returns sales C purchases purchases returns sales sales returns D purchases purchases returns sales returns sales May 11 P1 Q8/May 15 P12 Q4

58

Ann is a trader. On 1 April 2011 Cindy’s account in Ann’s ledger showed a credit balance of $520. The following transactions took place during April 2011.

April

02 14

Ann returned goods, $30, to Cindy Ann bought goods, $210, from Cindy, and paid in cash

Which statement is true about the balance on Cindy’s account in Ann’s ledger on 30 April 2011?

A Ann owes Cindy $490.

B Ann owes Cindy $700.

C Cindy owes Ann $490.

D Cindy owes Ann $700.

May 11 P1 Q10

Accounting O Level P-1 Topical

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Ch-2: Books of Original Entry

Eli buys goods on credit from Mona.

What entries should Eli make in his ledgers? general ledger purchases ledger A credit Mona debit purchases B credit purchases debit Mona C debit Mona credit purchases D debit purchases credit Mona Nov 11 P1 Q3

60

Raoul trades with Christine. They exchange the following documents.

Which document would normally be issued first?

A credit note B debit note C invoice D statement Nov 11 P1 Q4

61

There is a credit balance of $100 on Yasmin's account in Shula's purchases ledger.

What does this mean?

A Shula owes $100 to Yasmin B Shula has returned goods, $100, to Yasmin C Yasmin has paid $100 to Shula D Yasmin owes $100 to Shula Nov 11 P1 Q10

62

Dave supplies goods to Peter on credit. On 1 April, Peter owed Dave $440. Dave sent or received the following documents in April.

April 07 12 13 15

$ 360 429 50 50

Invoice Cheque (after deducting $11 cash discount) Debit note Credit note

What was the closing balance on the statement of account on 30 April 2011?

A $260 B $310 C $321 D $421 May 12 P11 Q6 63

Sukesh’s account in the books of Jack showed the following.

Sukesh account date Debit ($) May 1 balance 4 Sales 200 8 Bank 8 discount

Credit ($)

432 18

Balance ($) 450 dr 650 dr 218 dr 200 dr

Which statements about the transactions on 8 May are correct?

1 Jack made a payment to Sukesh.

2 Jack received a payment from Sukesh.

3 Sukesh allowed a discount to Jack.

4 Sukesh received a discount from Jack.

A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4 May 12 P11 Q11/May 17 P12 Q8

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Ch-2: Books of Original Entry

What is true about a statement of account issued by a business?

1 It is a source document for the purchases journal.

2 It is a source document for the sales journal.

3 It is sent by a customer to a supplier.

4 It is sent by a supplier to a customer.

A 1 and 3 B 2 and 4 C 3 only D 4 only May 12 P12 Q4

65

What is the purpose of an invoice?

A to confirm that a payment has been received B to confirm that damaged goods have been returned C to show details of all transactions with a customer during the month D to show details of goods that have been supplied on credit Nov 12 P12 Q4

66

A customer received an invoice for $98 for goods priced at $88.

Which document will the customer use to inform the supplier of this error?

A credit note B debit note C receipt D statement of account May 13 P12 Q4

67

The following partly-completed account appeared in Edward’s sales ledger.

Ann account 2013 debit Credit $ $ Jan 04 Sales 21 500 11 sales returns 500

balance $

On 30 January, Ann paid $10 000 by cheque and was given a cash discount of $200. Which is correct on 31 January?

A Ann owesEdward$10 800.

B Ann owesEdward$11 200.

C Edward owes Ann $10 800.

D Edward owes Ann $11 200.

May 13 P12 Q8/ May 18 P12 Q7 68

A trader divides his ledger into sales, purchases and general ledgers.

Which statement is not correct?

A It is easier to locate and refer to ledger accounts.

B Maintaining the ledger can be divided between several people.

C The same type of accounts can be kept together.

D There are fewer entries in the sales and purchases accounts.

May 14 P12 Q4

69

On 1 April Jane sold goods on credit to Martha subject to a trade discount of 25%. Martha returned goods, list price $200, to Jane on 7 April.

How will Martha record the transaction of 7 April? book of prime (original) entry account to be debited account to be credited A purchases returns journal Jane $150 purchases returns $150 B purchases returns journal Jane $200 purchases returns $200 C sales returns journal sales returns $150 Martha $150 D sales returns journal sales returns $200 Martha $200 May 14 P12 Q5/ May 19 P12 Q5

Accounting O Level P-1 Topical

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Ch-2: Books of Original Entry

70

The following account appeared in Sue’s ledger.

Tony account $ $ May 1 balance b / d 400 May 16 returns 21 12 sales 590 28 bank 284 discount 6 ––– 31 balance c / d 679 990 990 Which statement is correct?

A On 12 May Tony sold goods, $590, to Sue. B On 16 May Sue returned goods, $21, to Tony.

C On 28 May Tony received discount, $6, from Sue. D On 31 May Sue owed $679 to Tony.

May 14 P12 Q8/May 15 P12 Q7/Nov 17 P12 Q6

71

Arnold’s ledgers contain an account for Jim, a credit supplier, and a purchases account.

In which ledgers will these accounts appear?

Jim account purchases account A general ledger general ledger B general ledger purchases ledger C purchases ledger general ledger D purchases ledger purchases ledger Nov 14 P12 Q4

72

Logan records his sales invoices in a sales journal.

What happens at the end of the month?

A Each customer’s account is credited with the total of that customer’s invoices for the month.

B Each customer’s account is debited with the total of that customer’s invoices for the month.

C The sales account is credited with the total of the sales invoices.

D The sales account is debited with the total of the sales invoices.

Nov 14 P12 Q6

73

Alex issued a credit note to Marcus.

In which book of prime (original) entry would Alex record this?

A purchases journal B purchases returns journal C sales journal D sales returns journal Nov 16 P12 Q6

74

A trader sends a monthly statement to a credit customer.

What is the purpose of sending this statement?

A to demand immediate payment in cash B to inform the customer of his credit limit C to provide a summary of transactions D to notify the customer of goods a waiting delivery

75

A trader provided the following extract from his sales journal. sales journal 2017 $ $ October 7 J Sango Goods 100 trade discount 20 80 Which entry was made in the account of J Sango in the sales ledger?

A credit $80 B credit $100 C debit $80

Nov 16 P12 Q7

D

debit $100 Nov 17 P12 Q3

Accounting O Level P-1 Topical

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Ch-2: Books of Original Entry

Which transaction is recorded in the general journal?

A payment of cash into a business bank account B purchase of a motor vehicle on credit C receipt of a cheque from a customer D sale of goods on credit Nov 17 P12 Q5

77

Mark sold goods on credit to Paul for $5000. Paul returned goods costing $200 to Mark.

What were the balances in Paul’s ledger accounts after these transactions?

A B C D

purchases account $ 4 800 credit 4 800 debit 5 000 credit 5 000 debit

purchases returns account $ 200 credit 200 debit 200 debit 200 credit

Mark account $ 5 000 debit 5 000 credit 4 800 debit 4 800 credit Nov 17 P12 Q7

78

On 1 September 2018 Chan owed Tan $570. During September 2018 the following transactions took place.

Tan sold goods, $380, on credit to Chan Chan returned goods, $150, to Tan Chan paid Tan $500 by cheque What was the balance brought down on Chan’s account in Tan’s ledger on 1 October 2018?

A $300 credit B $300 debit C $840 credit D $840 debit Nov 18 P11 Q7/ Nov 18 P12 Q7

79

Winston returned goods to Hanif.

Which entries will Winston make in his ledgers?

A B C D

Ledger General General purchases purchases

debit entry account Hanif purchases returns Hanif purchases returns

Ledger Purchases Purchases General General

credit entry Account purchases returns Hanif purchases returns Hanif Nov 18 P12 Q3

80

Andy purchases goods from Charles.

The account of Charles in Andy’s books for the month of September showed the following entries. debit $ Sept 1 purchases 8 returns 17 purchases 30 bank

credit $ 625

27 317 598

balance $ 625 cr 598 cr 915 cr 317 cr

Which document would be issued by Charles on 8 September?

A cheque B credit note C debit note D invoice Nov 18 P12 Q4

Accounting O Level P-1 Topical

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Ch-2: Books of Original Entry

Lisa is a credit customer of Daniel. Her account in Daniel’s ledger showed the following entries. debit $ Aug 1 balance Aug 8 sales

300

credit $

balance $ 10 cr ?

On 10 August Lisa returned goods, list price $140, subject to a 20% trade discount.

What was the debit balance on Lisa’s account after this transaction?

A $150 B $170 C $178 D $198 Nov 18 P12 Q8 82

In April Meena sent Ralph invoices for $170, $240, $125 and a credit note for $63. In the same month Ralph sent Meena a debit note for $70 and a cheque for $107.

What was the balance on Meena’s account in Ralph’s books on 1 May? A $295 credit B $295 debit C $365 credit D $365 debit May 19 P12 Q4

Accounting O Level P-1 Topical

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Ch-2: Books of Original Entry

ANSWER KEY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

B C A C B D B B C A A A B C A A C B C B B

22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42

A A A B C B B B B D B B B A A A B D D D B

43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63

C A A D C C C D C B A D D A D A D C A B D

64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82

D D B A D A C C C D C C B D B C B C C

DETAILED ANSWERS 1

As H is buyer of goods so when he returns goods to J; then he will send J a debit note to indicate that J’s account has been debited.

3

Option “A” is correct as it has two sides of debit and credit and also acts as an account.

4

Return of credit purchases involves the following entry: Debit : Trade payable Credit : Purchases returns We know that trade payables’ accounts are kept in Purchases ledger; whereas all impersonal accounts (including purchases returns) are maintained in general ledger so both will be used to record the transaction.

5

As evident from the name, purchase invoice will be used to record purchases of goods.

6

As X is returning goods to Y so for Y this is a sale return and will be entered in the sales return journal.

7

“B” option is correct. Cash book (“A” option) is used to record receipts and payments of cash and bank.

Purchases day book (“C” option) records credit purchases whereas sales day book (“D” option) is used to record credit sales.

8

As goods sold by X are found to be damaged so amount receivable from Y by X on account of sales will reduce and X will credit Y’s account by sending him a credit note.

9

“C” option is correct, "A”, “B” and “D” transactions are respectively entered in the sales journal, general journal and in the cash book.

10

For X this transaction is sales return so it will result in crediting Y’s account in X’s books by issuing Y a credit note.

Accounting O Level P-1 Topical

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Ch-2: Books of Original Entry

11

"A" option is correct, as it has both debit and credit sides whereas trial balance (“D” option) is a list of balances and is not an account.

12

"A" option is correct. Credit sales (“B” option) are recorded in sales journal. Discount received (“C” option) is shown in cash book. Return to suppliers (“D” option) is entered in purchases return journal.

13

As for Y this is purchase returns, so to record this transaction Y will debit X account and issue him a debit note.

14

As Y is selling gods to X, so he will record this transaction in sales book. He will debit X (being an asset) and credit sales account (being an income).

15

Cheque will be used to make payment by X to settle his liability to Y.

16

"A" option is correct. Return to supplier (“B” option) is recorded in purchase returns journal. Cash sales (“C” option) are recorded in cash book. Trade discounts (“D” option) are not recorded anywhere in the books.

17

Sales ledger is the book in which accounts of individual trade receivables are kept. Cheque received from a trade receivable (“C” option) is the only transaction relating to trade receivables so is recorded in the sales ledger.

18

“B” option is correct; as used to record credit note received. In Purchase journal ("A" option), purchase invoices are entered. In Sales journal (“C” option) sales invoices are entered. In Sales return journal (“D” option) debit notes received are entered.

19

“C” Option is correct. Items in “A” and “B” options are recorded in cash book and item in “D” option is recorded in purchase journal.

20

Purchases are recorded in purchase journal when invoices are received. As invoice was not received by the year-end but goods have been bought and amount of purchases is given so complete entry for purchases should be made.

21

Ledger is the book in which accounts are kept, so sales account can only appear in the ledger (i.e. “A” and “C” options are incorrect). Moreover, sales ledger keeps individual accounts of all customers whereas all impersonal accounts appear in the general ledger so “B” option is correct.

22 Oct 05 Oct 10 Oct 22

Invoice Invoice Invoice

24

Oct 12 Oct 31

Credit note Balance c/d

David Account $ Discount received Purchase returns Cash paid Balance c/d (Cr.)

25

X’s account $ 650 120 230 1 000

18 Purchases 90 1 200 292 1 600

$ 150 850 ____ 1 000 $ 1 600

____ 1 600

“B” option is correct. Items in “A” and “D” options are examples recorded in cash book whereas item in “C” option is shown in sales journal.

Accounting O Level P-1 Topical

-37Read & Write Publications

Ch-2: Books of Original Entry

26

“C” option is correct. “A” and “B” options are examples of accounting transactions and not showing position of the account (as balances show). “D” option represents a liability for Shula whereas balance given in question is debit.

28

When goods sold are returned by a customer then the seller or supplier issues his customer a credit note to tell him that his account has been credited an account of the sales return.

29

Purchases returns (returns outwards) to a supplier will be returns inwards for him (supplier). So he will pass the following entry to record this transaction.

Dr: Cr:

Returns inwards Trade receivable’s account

30

“A” option is incorrect as cash is not involved in the transaction “C” option is wrong as “purchase journal” only records purchases of goods for resale purposes “D” option is also not correct as “purchase ledger” is the book of second entry. So “B’ option is correct as general journal is used to record all the transactions not recorded in special journals.

31

“D” option is correct because credit note is issued to reduce the amount on an invoice as this involves the following entry.

Sales Returns Trade receivable’s account

xx xx

32

“B” option is correct as receipt of credit note indicates that our suppliers have credited our account due to return of goods to them.

33

“A” and “C” options are incorrect as ledger accounts are not kept in Journals. “D” option is also wrong as “purchases ledger” is used to keep individual accounts of trade payables. “B” option is correct as all accounts with the exception of individual accounts of trade receivables and trade payables are kept in “General ledger”.

34

“A” option is incorrect as credit note is issued by a business for sales returns whereas invoices given in “C” and “D” options are used to record credit sales and credit purchases respectively.

35

“A” option is correct. Invoices in “B” option are entered in the sales journal whereas items in “C” and “D” options are entered in the cash book.

37

“A” option is correct. Item in “B” option is entered in “Returns inward journal”; whereas items in “C” and “D” are recorded in cash book.

38

All adjusting entries including reduction in provision for doubtful debts are entered in “general journal” so “B” option is correct.

41

As Powell is returning goods to Wilson so for Wilson this is sales returns and will be recorded as Dr. Sales Returns Cr. Powell Moreover the first book in which this transaction is recorded is “Sales Journal”.

42

“Purchase ledger” is the book in which individual accounts of trade payables are kept. In view of this “B” option is correct as this is the only option which contains a transaction relating to trade payables.

43

“A” option is correct, Items in “B” and “C” options are recorded in the cashbook whereas purchase returns (“D” option) are recorded in purchases returns journal.

47

“C” option is correct as goods sold to Leroy on credit should be recorded as Debit Credit

Leroy Sales

Accounting O Level P-1 Topical

-38Read & Write Publications

Ch-2: Books of Original Entry

Leroy’s account would be debited in the “sales ledger” in which all individual trade receivables’ accounts including “Leroy” are kept whereas sales would be credited in “general ledger” where all impersonal accounts including sales account are kept.

48

“C” option is correct as receipt of credit note indicates that Omar has credited Miriam’s account due to return of goods to him. However for Miriam this is purchases returns. Miriam therefore would pass the following entry on receipt of credit note from Omar.

Debit Omar Credit Purchases returns

49

The first and last two transactions should be recorded in the “general journal” whereas the second transaction is entered in the “sales journal”.

50

Trade discount is not recoded in ledger accounts so “A” and “B” options are incorrect. As Julia’s account is credited (written off) in the question on account of bad debts so “D” option is correct.

51

“C” option is correct as first a business receives or issues invoice on trade of goods then a credit note may be sent or received on account of return of goods; afterwards a cheque is issued or received to settle the account and then receipt is used in the last to account for receipt or payment of cash on settlement.

52

“B” option is correct. Item in “A” option is recorded in the cashbook, credit purchase of goods for resale in “C” option is recorded in purchase journal whereas sales returns (“D” option) are recorded in returns inwards journal.

53

David Account $ 350 Bank ___ Balance c/d 350

Balance b/f

55

$ 75 275 350

“D” option is correct. As purchases have debit nature so total of the purchases journal is posted to the debit side of purchases account.

56 Jan 01 Jan 12 Jan 18

Len’s account $ 250 Jan 14 370 Jan 31 480 1 100

Invoice Invoice Invoice

58 2011 Apr 02 Apr 30

Return outwards Balance c/d

Cindy’s account $ 2011 30 Apr 01 490 520

Credit note Bank (balancing figure)

Balance b/f

$ 90 1 010 ____ 1 100 $ 520 ___ 520

Transaction on 14 April will not be recorded in Cindy’s account as it has been paid in cash by Ann. 59

“D” option is correct as goods purchased from Mona on credit should be recorded as Debit Credit

Purchases Mona

Purchases would be debited in “general ledger” where all impersonal accounts including purchases account are kept whereas Mona’s account would be credited in the “purchases ledger” in which all individual trade payables’ accounts including “Mona” are kept.

Accounting O Level P-1 Topical

-39Read & Write Publications

Ch-2: Books of Original Entry

60

Credit and debit notes in “A” and “B” options are used for return inwards and return outwards whereas statement is a document which is sent to a credit customer to summarise the transactions for a period. In the light of above discussion “C” option is correct as invoices are issued for sales and purchases which happens before returns.

61

“A” option is correct. “B” and “C” options are examples of accounting transactions and not showing position of the account (as balances show). “D” option represents an asset for Shula whereas balance given in question is credit.

62 Apr 01 Apr 05

Balance b/f Invoice

Peter’s account $ 440 Apr 12 360 Apr 12 Apr 15 ____ Apr 30 800

$ 429 11 50 310 800

Bank Discount allowed Credit note Balance c/d

63

As Sukesh account is credited so it means that bank and discount account are debited. As we know that bank account is debited on receipt of cash whereas discount is debited when it is allowed to customers so it means that “D’: option is correct.

65

“D” option is correct. For transaction in ”A” option, pay-in slip or receipt voucher is used. For item in “B” option, credit or debit note would be used. For transaction in ”C” option, statement of account is used.

66

"B" option is correct as customer will issue the supplier a debit note to reduce the amount owing to him.

67

Ann account 2013 Jan 04 11 30 30

Sales Sales returns Bank Discount allowed

debit $ 21 500

credit $ 500 10 000 200

balance $ 21 500 21 000 11 000 10 800

69

For Martha this is purchases returns as she is returning goods to Jane (the supplier). In addition, as the transactions should be recorded net of trade discount so purchases returns will be recorded at $150 i.e. [$200  ($200 × 25%)].

70

‘C’ option is correct as for Sue this is discount allowed to be credited to Tony’s account. ‘A’ option is incorrect as for Sue this is purchases from Tony. ‘B’ option is incorrect as for Sue this is purchases returns and should appear on the debit side of Tony’s account. ‘D’ option is incorrect as this is Tony who owes Sue the amount of $679.

73

A credit note is issued by the seller when goods are returned. The seller would enter this in the sales returns journal.

74

At the end of each month a supplier may issue a statement of account to the customer. As well as notifying the customer of the amount due, this also provides a summary of the transactions in the month.

The customer’s credit limit is already established before trading takes place.

75

Sales are recorded in the books net of trade discount so sales should be debited to J Sango account in the sales ledger at $80

76

Item in ‘B’ option is correct as this was the only transaction which would not be recorded in another book of prime (original) entry. Items in ‘A’ and ‘C’ options will be entered in the cash book whereas item in ‘D’ option will be entered in sales journal.

Accounting O Level P-1 Topical

78 Balance b/d Sales

Balance b/d 82 April Credit note received Bank Balance c/d

-40Read & Write Publications

Ch-2: Books of Original Entry

Chan Account $ 570 Sales returns 380 Bank (payment) ___ Balance c/d (Cr.) 950 300 Meena’s account $ April 63 107 365 535

Invoice Invoice Invoice

$ 150 500 300 950

$ 170 240 125 535

No entry should be made for a debit note in the books of either the supplier or the customer. At the end of the month the balance of Meena’s $365 (the total of the invoices issued less the credit note and less the cheque paid). This was an amount owed by Meena to Ralph, so it would be a credit balance.

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