Bookkeeping 1

A company sells goods to a customer for $5,000 at the beginning of the month. The customer immediately returns half of the goods as faulty and pays half of the remaining balance within 7 days. What is the balance outstanding on the statement of account issued by the company to the customer at the end of the month?

$1,250 The statement of account shows what is outstanding at the end of the month. Initial sales are $5,000 less half returned worth $2,500 leaving $2,500, half of which is paid, leaving an amount of $1,250.

A business sells 20 items with a list price of $10 each to a customer. The customer receives a trade discount of 5% and a settlement discount of 2% is offered for payment within 30 days, which the customer is expected to take up. How much should the business record in the sales day book for the sale?

$186.20 The trade discount is a reduction of the selling price which the customer has been granted, therefore sales value is 20 x $10 x 95% = $190. However, since the customer is expected to take up the settlement discount, revenue recorded at the time of sale should be reduced by the settlement discount i.e. $190 - ($190 x 2%) = $186.20.

A company sells goods with a list price excluding tax of $20,000. Sales tax is 20%. They offer a trade discount of 3%. How much should the company record in the sales day book for the sale?

$19,400 Sales are recorded net of trade discounts. Sales tax is collected on behalf of a tax authority and is not included as part of a company's sales.

A company issues a statement of account to a customer showing an amount outstanding of $45,000. This does not include credit notes issued of $2,000 and payments received of $22,000. What is the current total that should be shown on the statement of account?

$21,000 The remittance advice payments received reflect amounts paid and credit notes issued reduce the balance outstanding.

A company is owed $50,000 by its customers. This includes $20,000 that is overdue past the agreed credit terms. What total amount will appear on the company's aged receivables analysis?

$50,000 The aged receivables analysis shows all outstanding amounts due from customers and not just amounts that are overdue. The balances are grouped by the number of days outstanding.

A business buys goods from a supplier for a list price of $10,000. The business negotiates a trade discount of 10% and a settlement discount of 2% if payment is within 20 days. How much will the business pay if they pay in 10 days?

$8,820 The business gets an immediate trade discount plus a discount for settlement within 20 days. List price of $10,000 less trade discount of 10% is $9,000. Settlement discount is $180 (2% x $9,000), leaving $8,820 to pay.

A business records the following transactions during March for a customer: credit sales (excluding sales tax) $10,000 cash received $2,000 If sales tax is 10% and the customer account opening balance was $0, what amount will appear as the balance of the customer account statement issued to the customer at the end of March?

$9,0000 Payments by the customer must include sales tax. The statement of account shows what the customer owes including sales tax. Total sales including tax are $10,000 x 1.1 = $11,000 less amounts paid inclusive of tax of $2,000.

Alison is a second-hand car dealer. She uses a coding system to record her business transactions. First number: 100 Sales 200 Assets Second number: 300 Payables 400 Receivables 500 Cash She needs to know how to code the invoice she has received for a computer bought on credit. What code will be used?

200300 The computer is an asset (200) and the amount is payable by Alison (300).

Which of the following statements is/are true of data handled by an organization? i. Data from the accounting software system should be backed up regularly and stored securely and separately from the system itself ii. Employee records must be kept in accordance with data protection procedures iii. Access to the accounting software system should only be given to authorized employees

All of the statements are true. Keeping records in accordance with the data protection procedures is required by data protection law which covers data held by companies about individuals. The rest of the statements demonstrate best practice in ensuring data security.

Which of the following items will typically appear on a sales invoice? i. The sales price excluding sales tax ii. The date of the sale iii. Credit terms iv. The sales amount including sales tax

All of these items would typically appear on a sales invoice.

Which of the following procedures should be taken to ensure the accuracy of data entered from the sales invoices to the sales day book? i. Check the total of the total column equals the total of the net column plus the sales tax column ii. Check the figures entered agree with those on the sales invoices iii. Check the customer accounts entered agree with those on the sales invoices

All of these procedures are used to ensure accuracy of data entry.

Which of the following statements is true about an effective document retention policy? i. It enables management to analyze past trends ii. It facilitates preparation of the annual financial statements iii. It enables customer complaints to be investigated iv. It helps to meet legal and regulatory requirements

All of these statements are true of an effective document retention policy.

Which of the following reports is/are generated from the receivables ledger module within a computerized system? i. Sales day book ii. Aged receivables analysis iii. Statements of account iv. Cash sales

Cash sales are not part of receivables. They would be entered in the cash book module of an accounting system. In a computerized system, there is no sales day book as such to enter sales invoices before they are posted to the ledger; they are entered directly on the system, and then at the click of a button are automatically posted to the ledgers accounts. However, the system can usually generate a report called the sales day book which contains the same information as a manual sales day book.

A bookshop owner buys a computer on credit. What is the effect of this transaction?

Increase assets, increase liabilities The computer is an addition to assets (non-current) and the bookshop owner has created a liability until they pay for it.

Which of the following types of documents are business required to retain? i. Invoices ii. Bank statements iii. Records of employees' pay and deductions iv. Employee emails

Invoices, bank statements and records of employees' pay and deductions are part of accounting records that are required by company law and tax law to be retained for a certain number of years. There is no similar requirement for emails, although it is beneficial for businesses to retail emails containing important information.

Which of the following is/are shown on a statement of profit or loss? i. Liabilities ii. Capital iii. Sales revenue iv. Profit

Liabilities and capital are shown on the statement of financial position. Sales revenue and profit are shown on the statement of profit or loss.

A company carries out the following transactions during one day: cash sales $100, credit sales $250, credit notes issued $50. What amounts are recorded in the sales day book and the sales returns day book?

Sales day book $250 Sales returns day book $50 The sales day book records credit sales and the sales returns day book records credit notes issued. Cash sales are not recorded in the sales day book. They are recorded in the cash book.

A company's transactions for a day are: Credit sales $5,000 Cash sales $1,000 Cash received from credit customers $2,000 Credit notes issued $500 What amounts should be recorded in the sales day book and sales returns day book?

Sales day book $5,000 Sales returns day book $500 The sales day book records credit sales and the sales returns day book records credit notes. Cash sales and cash received from credit customers are not recorded in the sales day book. They are recorded in the cash book.

Which of the following statements is true about an aged receivables analysis? i. It shows all amounts outstanding ii. It shows amounts overdue past the credit terms iii. It shows the outstanding amounts grouped by number of days outstanding for each customer

The aged receivables analysis includes all amounts outstanding including overdue amounts and lists the amounts by number of days outstanding.

Which of the following are features of an effective coding system? i. Only management can introduce new codes ii. All items have a unique code iii. It facilitates production of data used to prepare the financial statements iv. All codes have a uniform format

These present the key features of a coding system.

Which of the following will cause the sales day book to fail to cross cast? a) Incorrectly adding up the total of sales tax b) Omitting an invoice c) Duplicating an invoice d) Entering a purchase invoice

a) Incorrectly adding up the total of sales tax Gross sales, tax and net sales will have separate columns. The columns will be totaled and the totals should cross cast.

Julio buys goods from Narnia for $1,000. Which of the following documents would be issued by Narnia to Julio for the sale of the goods? a) Invoice b) Credit note c) Debit note d) Remittance advice

a) Invoice

What is the purpose of a remittance advice? a) It details what is being paid. b) It lists purchases being returned. c) It lists invoiced amounts still outstanding. d) It summarizes daily sales.

a) It details what is being paid. Customers send a remittance advice with payments to show which invoices they are paying. Answer b describes a purchase returns day book. Answer c describes a customer statement of account. Answer d describes a sales day book.

Which of the following is NOT a book of prime entry? a) Receivables ledger b) Sales day book c) Sales returns day book d) Petty cash book

a) Receivables ledger Entries are posted from the books of prime entry into ledgers, so the receivables ledger is not itself a book of prime entry.

Which of the following statements is false? a) Sales returns can be recorded in the sales day book b) The sales day book is a ledger account c) The petty cash book is a book of prime entry d) Sales tax is recorded in a separate column in the sales day book

b) The sales day book is a ledger account Information from the sales day books is transferred into the ledger accounts but it is not a ledger account itself. Sales returns may be recorded in the sales day book if a separate sales returns day book is not maintained.

Which of the following sources of accounting information would most likely be used by the business to decide which customers should be chased for payment? a) Sales day book b) Cash book c) Aged receivables analysis d) Statements of account

c) Aged receivables analysis The aged receivables analysis is used to chase payment. It is a single report that shows the balances owed by each customer, the items that make up the balances and how long they have been outstanding. The sales day book lists credit sales only. The cash book lists cash receipts and cash payments. While a statement of account shows balances for each individual customer, it is more practical to see balances for all customers on a single report.

A business sells goods to a customer for $3,000. The customer returns half of the goods as faulty. What document does the business issue to the customer for the returns? a) Debit note b) Remittance advice c) Credit note d) Goods received note

c) Credit note A credit note shows an amount that a customer no longer owes. A goods received note is a record that goods purchased have been received by the business. A remittance advice is a notification of payment, identifying the invoice being paid, sent by a customer to a supplier. A debit note contains similar details to the credit note but is issued by the customer.

Which of the following statements is true about a sales day book? a) It is used to record amounts due to suppliers b) It records cash and credit sales c) It records credit sales d) It records credit sales less amounts received by customers

c) It records credit sales. The sales day book is a book of prime entry which is only used to record credit sales. Cash sales and cash received from credit customers are not recorded in the sales day book. They are recorded in the cash book.

Customers' purchase order numbers are often included on sales invoices from large organizations. What is the benefit of doing this? a) It prevents fraud b) It will be used as a unique code in the large organization's coding system c) It is required for tax purposes d) It facilitates swift verification by the customer of the validity of sales invoices

d) It facilitates swift verification by the customer of the validity of sales invoices By incorporating the purchase order number it makes it easier for the customer to verify the invoice against a valid purchase order.

Which of the following accounting records shows the assets, liabilities and capital of a business at the end of an accounting period? a) Statement of profit or loss and other comprehensive income b) Aged receivables analysis c) Cash book d) Statement of financial position

d) Statement of financial position The statement of profit or loss shows the profit or loss and other gains and losses that a business has made over the accounting period. The aged receivables analysis is a list of a business's receivables balances for each customer, grouped by number of days outstanding. The cash book is a record of the cash payments and receipts that go through the business's bank account.