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AAT POBC practice questions

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Question 1Payment methods and controls

A business runs a petty cash imprest system with a float of £250. At the end of the month, paid petty cash vouchers total £180. How much cash is needed to restore the float?

  1. £70
  2. £250
  3. £180 Correct answer.
  4. £430

Explanation

Under the imprest system the float is restored by reimbursing exactly the value of the vouchers paid since the last top-up, so that cash in hand plus vouchers always equals the float. Reimbursing £180 returns the cash in the box to £250.

Question 2Payment methods and controls

Which payment method is a bulk electronic clearing system typically used to pay many suppliers or employees, with funds usually arriving within about three working days?

  1. Standing order
  2. Faster Payments
  3. BACS Correct answer.
  4. CHAPS

Explanation

BACS is the bulk electronic system used for large numbers of credit transfers such as supplier payment runs and payroll, and it normally clears over about three working days.

Question 3Payment methods and controls

A business must complete a same-day high-value payment for a property deposit. Which method is designed for this?

  1. BACS
  2. Direct debit
  3. Business debit card
  4. CHAPS Correct answer.

Explanation

CHAPS is the same-day electronic clearing system used for large or urgent payments such as property transactions, where guaranteed same-day settlement is essential.

Question 4Payment methods and controls

A business instructs its bank to pay £600 office rent on the first working day of every month, with the amount and date fixed. Which payment method is this?

  1. Faster Payments
  2. Standing order Correct answer.
  3. Direct debit
  4. CHAPS

Explanation

A standing order is an instruction from the payer to its own bank to pay a fixed amount at fixed intervals. The payer controls both the amount and the date.

Question 5Payment methods and controls

Which payment method lets the supplier collect varying amounts from a customer's bank account on agreed dates, for example for utility bills?

  1. Cheque
  2. BACS credit
  3. Direct debit Correct answer.
  4. Standing order

Explanation

A direct debit is an authority given by the customer to the payee, allowing the payee to collect amounts that can change from one period to the next, provided the agreed notice is given.

Question 6Payment methods and controls

A cheque is crossed 'account payee only'. What does this mean?

  1. It must be paid into the named payee's account Correct answer.
  2. It can be endorsed to a third party
  3. It can only be paid in after the date written on it
  4. It can be cashed over the counter by anyone holding it

Explanation

An 'account payee' crossing restricts the cheque to the bank account of the person named on it, so it cannot be exchanged for cash or passed to someone else.

Question 7Payment methods and controls

A business pays a £90 stationery bill with its debit card. What is the immediate effect on the business bank account?

  1. The bank balance is unchanged until month end
  2. The bank balance rises by £90
  3. The business owes the card issuer £90
  4. The bank balance falls by £90 Correct answer.

Explanation

A debit card payment is taken directly from the business's bank account at the time of the transaction, so the balance falls straight away.

Question 8Payment methods and controls

How does payment by business credit card differ from payment by business debit card?

  1. A liability to the issuer arises, settled later Correct answer.
  2. Trade suppliers cannot be paid this way
  3. Only cash withdrawals are permitted
  4. Funds leave the bank account on the same day

Explanation

With a credit card the card issuer pays the supplier and the business then owes the issuer, settling when the statement falls due. A debit card, by contrast, takes the money from the bank account at once.

Question 9Payment methods and controls

Which control best reduces the risk of fraudulent payments in a small business?

  1. All payments are made in cash so they can be seen
  2. The authoriser and the ledger recorder are different people Correct answer.
  3. One long-serving, trusted employee handles all stages
  4. Bank statements are opened by the cashier who makes payments

Explanation

Segregation of duties means no single person controls a transaction from start to finish. Separating authorisation from record keeping makes it much harder to conceal a fraudulent payment.

Question 10Payment methods and controls

A business configures its online banking so that payments above £1,000 need approval from two different users. What is this control called?

  1. Dual authorisation Correct answer.
  2. Cash count
  3. Bank reconciliation
  4. Imprest control

Explanation

Dual authorisation requires two separate approvers before a payment is released, so a single member of staff cannot initiate and release a large payment alone.

Question 11Payment methods and controls

What is the main control over each individual petty cash payment?

  1. The payment is approved in advance by the bank
  2. A signed voucher supported by a receipt is authorised before payment Correct answer.
  3. The cashier keeps a private note of the amount
  4. The payment is recorded only when the float is next restored in full

Explanation

Every petty cash payment must be backed by a voucher signed by the recipient and supported by a receipt, and it must be authorised before the cash is handed over. This provides evidence of the payment and prevents unrecorded spending.

Question 12Payment methods and controls

A petty cash float is £150. Vouchers total £96 and cash in hand is £54. How much cash is needed to restore the imprest?

  1. £150
  2. £246
  3. £96 Correct answer.
  4. £54

Explanation

The amount required to restore the float equals the total of the vouchers paid since the last reimbursement, which is £96, bringing cash in hand back to £150.

Question 13Payment methods and controls

What is the purpose of a remittance advice sent to a supplier with a payment?

  1. To request a credit note for goods returned
  2. To show the supplier which invoices are being paid Correct answer.
  3. To confirm that the supplier's bank details have changed
  4. To order further goods from the supplier

Explanation

A remittance advice lists the invoices and amounts covered by a payment so the supplier can allocate the money to the correct accounts and avoid chasing a debt that has already been settled.

Question 14Payment methods and controls

Why does a business check a supplier statement against its own purchase ledger account?

  1. To spot items missing from its own records Correct answer.
  2. To calculate the petty cash float for the month
  3. To set a credit limit for each customer
  4. To prepare the monthly payroll

Explanation

Comparing the supplier statement with the business's own records highlights invoices not yet received, duplicate invoices and payments not yet shown by the supplier, so the balance owed can be confirmed.

Question 15Payment methods and controls

A cheque is spoiled while being written out. What should be done with it?

  1. Keep it and use it later for a different payment
  2. Send it to the supplier with a covering note
  3. Throw it away and write out a replacement cheque
  4. Retain it, marked cancelled, with the cheque book Correct answer.

Explanation

A spoiled cheque should be marked 'cancelled' and kept with the cheque book so that the sequence of cheque numbers remains complete and the cancelled cheque cannot be misused.

Question 16Payment methods and controls

A customer's cheque for £320 is returned by the bank marked 'refer to drawer'. What should the business record?

  1. Reinstate the £320 as owed by the customer and reduce the bank balance Correct answer.
  2. Increase the bank balance by £320
  3. Write the £320 off immediately as a bad debt in the profit and loss account
  4. Reduce the amount owed by the customer by £320

Explanation

A dishonoured cheque means the original payment has failed. The bank balance must be reduced by £320 and the customer's account reinstated as a receivable, because the debt is still owed.

Question 17Payment methods and controls

Which statement describes the Faster Payments Service?

  1. A paper-based system that clears in three working days
  2. A bulk system used only for paying wages
  3. A same-day service only for payments above £100,000
  4. Funds usually arrive within minutes, 24 hours a day Correct answer.

Explanation

Faster Payments is an electronic service available around the clock that normally moves money between accounts within minutes, which makes it suitable for one-off urgent transfers.

Question 18Payment methods and controls

Under the Direct Debit Guarantee, what is a customer entitled to if an incorrect direct debit is taken from the account?

  1. An immediate refund from their bank of the amount taken Correct answer.
  2. No refund, because the customer signed the mandate
  3. A refund only after 30 days' written notice to the bank
  4. A refund only if the supplier agrees to it first

Explanation

The Direct Debit Guarantee requires the customer's bank to refund the amount of any incorrect direct debit immediately, and the customer can also cancel the mandate at any time.

Question 19Payment methods and controls

A company changes the people allowed to sign cheques on its bank account. Which document authorises the bank to act on the new signatures?

  1. A remittance advice
  2. An updated bank mandate Correct answer.
  3. A signed petty cash voucher
  4. A purchase order

Explanation

The bank mandate records who may operate the account and in what circumstances. It must be formally updated and accepted by the bank before new signatories can be used.

Question 20Payment methods and controls

A cheque is presented to a bank more than six months after the date written on it. What is the usual outcome?

  1. Paid automatically as long as the account holds enough funds
  2. Returned because it has been crossed
  3. Rejected as stale unless the drawer confirms payment Correct answer.
  4. Treated as a post-dated cheque by the bank

Explanation

Cheques are treated as stale after six months, and banks will normally refuse to pay them unless the drawer confirms that the payment should still go ahead.

Question 21Payment methods and controls

Which control should a business apply when cash is received over the counter?

  1. Allow the cashier to keep the cash in a drawer until the end of the month
  2. Issue a receipt, and have a second person bank the cash Correct answer.
  3. Record receipts only in the cashier's own notebook
  4. Bank the cash only when the petty cash float runs out

Explanation

Issuing a receipt gives the customer and the business a record of the amount received, and having someone else count and bank the cash provides a check that all cash taken is lodged.

Question 22Payment methods and controls

A supplier emails asking the business to change its bank details urgently. What is the best control to apply?

  1. Reply to the email asking the supplier to confirm the new details
  2. Phone the supplier on a number held in existing records to verify Correct answer.
  3. Send the payment to both the old and the new bank account
  4. Make the change at once to avoid delaying the supplier's payment

Explanation

Requests to change bank details are a common fraud, so the change must be verified through an independent route such as a telephone number already held on file, never through the contact details given in the request.

Question 23Payment methods and controls

What is the petty cash float?

  1. The total of all petty cash vouchers paid during the month
  2. The fixed amount of cash held for small payments Correct answer.
  3. The profit made on petty cash sales
  4. The amount reimbursed by the bank at each top-up

Explanation

The float is the fixed sum of cash set aside to make small day-to-day payments. Under the imprest system it is restored to the same amount each time it is reimbursed.

Question 24Payment methods and controls

Which is the strongest control reason for a business to pay suppliers by BACS rather than in cash?

  1. BACS payments are always cheaper than cash
  2. A traceable audit trail is created at the bank Correct answer.
  3. BACS payments do not need to be recorded in the ledger
  4. BACS payments can be made without authorisation

Explanation

Electronic payments pass through the banking system, creating an independent record of who was paid, how much and when. This makes the payment far easier to verify than an equivalent cash payment.

Question 25Payment methods and controls

Why is it a control weakness for one employee to open the post, record customer receipts and prepare the paying-in slip?

  1. The employee could steal a cheque and hide the shortfall in the records Correct answer.
  2. The employee would need two signatures to bank it
  3. The employee might bank the money too quickly
  4. The bank would be unwilling to accept a paying-in slip prepared this way

Explanation

If the same person receives the money and also keeps the records, a receipt can be omitted or understated so that the missing money is never noticed. Splitting these tasks between staff gives an independent check.

Question 26Payment methods and controls

A business instructs its bank to pay a fixed rent of £450 on the first working day of each month until the business cancels the arrangement. Which payment method is this?

  1. A Faster Payment
  2. A CHAPS payment
  3. A direct debit
  4. A standing order Correct answer.

Explanation

A standing order is an instruction given by the payer to its own bank to pay a fixed amount at fixed intervals, and only the payer can change or cancel it. Because the amount and date are set by the payer and do not vary, it fits a fixed monthly rent.

Question 27Payment methods and controls

Which service is used mainly for same-day, high-value sterling payments that are settled individually and carry a charge to the payer?

  1. Standing order
  2. Faster Payments
  3. BACS
  4. CHAPS Correct answer.

Explanation

CHAPS is a same-day sterling system used for high-value or time-critical payments, with each payment settled individually and charged for. BACS by contrast is a bulk, three-day cycle used for routine lower-value payments such as salaries and supplier runs.

Question 28Payment methods and controls

A cheque carries a crossing marked 'not negotiable'. What is the effect of this crossing?

  1. The cheque can be cashed only at the branch where the account is held.
  2. Anyone who later takes the cheque cannot obtain a better legal title to it than the person who passed it on. Correct answer.
  3. The cheque becomes payable only after seven days have passed.
  4. The cheque cannot be paid into any bank account.

Explanation

A 'not negotiable' crossing still allows the cheque to be transferred, but it removes the protection given to a transferee, so a person who takes the cheque does so subject to any defect in the previous holder's title. The cheque therefore remains valid and is normally paid into the named payee's account.

Question 29Payment methods and controls

A cheque was written on 3 March and entered in the cash book, but it had not appeared on the bank statement by 31 March. What is this cheque called in a bank reconciliation?

  1. A dishonoured cheque
  2. An uncleared lodgement
  3. A stale cheque
  4. An unpresented cheque Correct answer.

Explanation

An unpresented cheque has been written and recorded in the cash book but has not yet been through the banking system, so the bank statement does not show it. It is therefore used to reconcile the cash book balance with the statement balance.

Question 30Payment methods and controls

A business's electricity bill changes in amount every quarter. Which method lets the electricity supplier collect the amount due directly from the business's bank account?

  1. Banker's draft
  2. Direct debit Correct answer.
  3. CHAPS
  4. Standing order

Explanation

A direct debit is set up by the payee, who can then collect varying amounts on the due dates, which suits bills that change each period. The payer's protection comes from the Direct Debit Guarantee rather than from fixing the amount in advance.

Question 31Payment methods and controls

A BACS payment is submitted on a Monday, and there are no bank holidays that week. On which day would the funds normally reach the supplier's account?

  1. Wednesday Correct answer.
  2. Friday
  3. Monday of the same week
  4. Tuesday

Explanation

A BACS payment runs over a three-working-day cycle: the input day, the processing day and the entry day when funds are credited. Submitted on Monday, it is processed on Tuesday and credited on Wednesday.

Question 32Payment methods and controls

At 31 May a bank statement shows a credit balance of £1,860. Cheques totalling £240 issued before that date had not been presented by 31 May, and there are no other differences. What is the cash book bank balance at 31 May?

  1. £1,620 overdrawn
  2. £2,100 credit
  3. £1,620 credit Correct answer.
  4. £1,860 credit

Explanation

Unpresented cheques have already been recorded in the cash book but not yet on the statement, so the cash book balance is lower than the statement balance by that amount. £1,860 less £240 gives £1,620 credit.

Question 33Payment methods and controls

A petty cash imprest float is £200. Vouchers total £132 and the cash counted is £62. What does this indicate?

  1. The float should be increased by £6.
  2. The petty cash is over by £6.
  3. The petty cash is short by £6. Correct answer.
  4. The float has been correctly maintained.

Explanation

Under the imprest system cash on hand plus vouchers should equal the float: vouchers of £132 mean cash of £68 should remain. As only £62 is counted, £6 is missing and must be investigated before the float is restored.

Question 34Payment methods and controls

Before releasing payment of a supplier's invoice, an accounts assistant matches it to the purchase order and the goods received note. Which control is being applied?

  1. A bank reconciliation
  2. A credit check
  3. A supplier statement reconciliation
  4. A three-way match Correct answer.

Explanation

A three-way match confirms that the invoice agrees with what was ordered and what was actually received before payment is authorised. This stops the business paying for goods it never ordered or never received, and helps reveal duplicate invoices.

Question 35Payment methods and controls

A bank statement shows a standing order payment of £200 that has not yet been entered in the business's cash book. What entry is required in the cash book?

  1. Debit bank £200, credit expense £200
  2. Debit suspense £200, credit bank £200
  3. Debit the expense account £200, credit bank £200 Correct answer.
  4. No entry is needed until the following statement is received

Explanation

The payment has left the bank but is not yet in the cash book, so the cash book bank balance is overstated. The expense is increased with a debit and the bank is reduced with a credit.

Question 36Payment methods and controls

A business settles a trade payable of £950 by BACS. Which double entry records this in the business's books?

  1. Debit trade payables £950, credit bank £950 Correct answer.
  2. Debit bank £950, credit trade payables £950
  3. Debit bank £950, credit purchases £950
  4. Debit purchases £950, credit bank £950

Explanation

Payment reduces the amount owed to the supplier, so the trade payable is debited, and it reduces the money in the bank, so the bank account is credited. The purchase itself was recorded when the invoice was received, not when it was paid.

Question 37Payment methods and controls

A cash book shows a debit bank balance of £1,200. The bank statement reveals bank charges of £45 and a customer's cheque for £150 that was dishonoured, neither of which has been entered in the cash book. What is the corrected cash book balance?

  1. £1,395 credit
  2. £1,005 debit Correct answer.
  3. £1,395 debit
  4. £1,005 credit

Explanation

Both items reduce the money in the bank: the charges are a cost to the business and the dishonoured cheque reverses a receipt. £1,200 less £45 less £150 leaves £1,005, which remains a debit balance.

Question 38Payment methods and controls

An employee resubmits a copy of a supplier invoice that has already been settled, and the duplicate is processed for payment. Which control is most likely to stop the duplicate before the payment is made?

  1. Requiring two signatories on all cheques over £500
  2. Checking the invoice against the purchase ledger payment history and the supplier statement before the payment run Correct answer.
  3. Preparing a bank reconciliation at the end of each month
  4. Sending a remittance advice to the supplier with each payment

Explanation

Comparing each invoice with the payments already made to that supplier, and with the supplier statement, shows whether the invoice has already been settled. This check happens before the payment run, so it prevents the duplicate payment rather than detecting it afterwards.

Question 39Payment methods and controls

A bank statement shows an overdrawn balance of £110, while the cash book shows an overdrawn balance of £340. Which single difference would explain the gap?

  1. A dishonoured cheque of £230 not entered in the cash book
  2. Unpresented cheques of £230
  3. Bank charges of £230 not entered in the cash book
  4. Lodgements not yet credited of £230 Correct answer.

Explanation

Cash received and banked has been recorded in the cash book but not yet credited by the bank, so the statement is more overdrawn than the cash book. Adding the £230 lodgement to the statement's £110 overdraft gives the cash book figure of £340 overdrawn.

Question 40Payment methods and controls

Which control best reduces the risk of blank cheques being misused in a business?

  1. Keeping the cheque book in an unlocked drawer in the accounts office
  2. Keeping cheque books locked away, with access limited to the authorised cheque signatories Correct answer.
  3. Allowing only the accounts assistant to hold the cheque book at all times
  4. Writing cheques in pencil so that errors can be corrected later

Explanation

Blank cheques are as good as cash, so they must be physically secured and their custody restricted to staff with authority to sign. Locking them away with access limited to authorised signatories prevents unauthorised cheques being written and concealed.

Question 41Reconciling bank statements

What is the main purpose of preparing a bank reconciliation?

  1. To calculate the gross profit for the period
  2. To check the totals of the sales day book
  3. To value the closing inventory of the business
  4. To agree the cash book bank balance with the bank statement Correct answer.

Explanation

A bank reconciliation compares the balance in the bank column of the cash book with the balance shown on the bank statement and explains why the two figures differ. The differences arise from timing items and from entries made by one party but not the other.

Question 42Reconciling bank statements

Which item would be dealt with in the bank reconciliation statement rather than by an entry in the cash book?

  1. A direct debit paid by the bank but not in the cash book
  2. Interest credited by the bank but not in the cash book
  3. Bank charges that appear only on the statement
  4. A cheque paid in that the bank has not yet credited Correct answer.

Explanation

Timing differences are items already entered in the cash book that the bank has not yet processed, so they appear in the reconciliation statement until they clear. Items that appear only on the statement must instead be entered in the cash book.

Question 43Reconciling bank statements

Which of the following describes an unpresented cheque?

  1. A cheque recorded twice in the cash book
  2. A cheque the bank has returned unpaid
  3. A cheque paid in but not yet credited by the bank
  4. A cheque issued but not yet presented for payment Correct answer.

Explanation

An unpresented cheque has already been entered in the cash book, reducing the cash book balance, but the bank statement balance falls only when the payee presents it. Until then it is a timing difference in the reconciliation statement.

Question 44Reconciling bank statements

A lodgement of £450 made on 30 June does not appear on the bank statement. How is it treated in the reconciliation?

  1. Add it to the cash book balance
  2. Deduct it from the cash book balance
  3. Add it to the bank statement balance Correct answer.
  4. Deduct it from the bank statement balance

Explanation

The lodgement has already increased the cash book balance but has not yet increased the bank statement balance, so the statement balance is the lower figure. It is therefore added back to the bank statement balance in the reconciliation statement.

Question 45Reconciling bank statements

Which of the following requires an entry to be made in the cash book?

  1. Bank charges shown on the statement only Correct answer.
  2. A lodgement not yet credited by the bank
  3. A cheque paid in that has not yet cleared
  4. A cheque issued but not yet presented

Explanation

Items that the bank has recorded but the business has not must be entered in the cash book so that it shows the true bank balance. Timing differences are left in the reconciliation statement instead.

Question 46Reconciling bank statements

The bank column of the cash book shows a debit balance of £1,240. Bank charges of £40 appear on the statement but have not been entered in the cash book. What is the updated cash book balance?

  1. £1,160
  2. £1,280
  3. £1,240
  4. £1,200 Correct answer.

Explanation

Bank charges reduce the money held at the bank but have been recorded only by the bank. The cash book balance must therefore be reduced by £40 to £1,200.

Question 47Reconciling bank statements

A standing order of £250 appears on the bank statement but not in the cash book. What is the correct treatment?

  1. Deduct £250 from the bank statement balance
  2. Add £250 to the bank statement balance
  3. Add £250 to the cash book balance
  4. Deduct £250 from the cash book balance Correct answer.

Explanation

A standing order is a payment the bank makes on the customer's behalf, so it reduces the money held at the bank. Because the business has not recorded it, the cash book balance must be reduced by £250.

Question 48Reconciling bank statements

A customer's cheque for £180 is returned by the bank marked 'refer to drawer'. How is this recorded?

  1. Deduct it from the bank statement balance in the reconciliation
  2. Credit the bank column of the cash book with £180 Correct answer.
  3. Ignore it until the customer pays
  4. Add it to the bank statement balance in the reconciliation

Explanation

A dishonoured cheque cancels the original receipt, so the business no longer has the money at the bank. The bank column of the cash book is credited with £180 and the customer's account is debited to restore the debt.

Question 49Reconciling bank statements

The bank has wrongly debited the business's account with a £90 cheque drawn by another customer. The cash book is correct. What is the treatment?

  1. Credit the cash book with £90
  2. Add £90 to the bank statement balance in the reconciliation Correct answer.
  3. Deduct £90 from the bank statement balance in the reconciliation
  4. Debit the cash book with £90

Explanation

The error was made by the bank, not by the business, so the cash book is not altered. The bank statement balance is increased by £90 in the reconciliation statement to remove the effect of the bank's mistake.

Question 50Reconciling bank statements

A bank statement shows a credit balance of £3,150. Unpresented cheques total £420 and lodgements not yet credited total £610. What is the cash book balance?

  1. £3,340 Correct answer.
  2. £2,540
  3. £4,180
  4. £2,960

Explanation

The reconciliation runs: statement balance plus lodgements not credited less unpresented cheques equals the cash book balance. So £3,150 + £610 − £420 = £3,340.