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AAT Level 3 FAPS study materials
AAT Level 3 FAPS study resources

AAT Level 3 FAPS practice questions

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Question 1Principles of double-entry bookkeeping and accounting systems

Under the dual aspect concept, what is recorded in the ledger for every transaction?

  1. One entry in the cash book and one in the bank statement
  2. Two credit entries in the general ledger
  3. A single entry in the account most affected
  4. Two entries of equal value, one debit and one credit Correct answer.

Explanation

The dual aspect concept means every transaction has two equal and opposite effects, so a debit entry of one amount is always matched by a credit entry of the same amount. This is the basis of the double-entry system and keeps the accounting equation in balance.

Question 2Principles of double-entry bookkeeping and accounting systems

A business pays £450 wages in cash. Which double entry records this transaction?

  1. Debit wages £450, credit cash £450 Correct answer.
  2. Debit wages £450, credit bank loan £450
  3. Debit cash £450, credit wages £450
  4. Debit purchases £450, credit cash £450

Explanation

Wages are an expense, and expenses increase on the debit side. Cash is an asset that is reduced, and assets decrease on the credit side, so wages are debited and cash is credited.

Question 3Principles of double-entry bookkeeping and accounting systems

A business buys a machine on credit from a supplier. What is the correct double entry?

  1. Debit machinery, credit trade payables Correct answer.
  2. Debit trade payables, credit machinery
  3. Debit purchases, credit trade payables
  4. Debit machinery, credit cash

Explanation

A machine is a non-current asset, so the machinery account is debited as the asset increases. Because the machine was bought on credit, the liability to the supplier increases and trade payables is credited.

Question 4Principles of double-entry bookkeeping and accounting systems

In which book of prime entry are credit sales to customers first recorded?

  1. The purchase day book
  2. The general journal
  3. The cash book
  4. The sales day book Correct answer.

Explanation

Credit sales are listed individually in the sales day book, which is the book of prime entry for sales made on credit. The total is then posted to the sales account and the individual amounts to the customers' accounts.

Question 5Principles of double-entry bookkeeping and accounting systems

What is the main purpose of preparing a trial balance?

  1. To value the closing inventory
  2. To calculate the profit for the period
  3. To confirm debit and credit totals agree Correct answer.
  4. To prove that no errors at all have been made

Explanation

The trial balance extracts every ledger balance and lists debits and credits in separate columns so that the two totals can be compared. If the totals agree, arithmetic posting errors are less likely, but many errors remain undetected.

Question 6Principles of double-entry bookkeeping and accounting systems

The owner takes £500 cash from the business for personal use. What is the correct double entry?

  1. Debit drawings, credit cash Correct answer.
  2. Debit cash, credit drawings
  3. Debit expenses, credit cash
  4. Debit drawings, credit capital

Explanation

Drawings are a reduction in the owner's capital, and a reduction in capital is recorded as a debit. Cash leaves the business, so the cash account is credited.

Question 7Principles of double-entry bookkeeping and accounting systems

Which document provides the information for recording a credit sale in the sales day book?

  1. A remittance advice from a customer
  2. A sales invoice issued to a customer Correct answer.
  3. A credit note issued to a customer
  4. A purchase invoice received from a supplier

Explanation

A sales invoice is raised by the seller and shows the goods sold, the price and the sales tax, so it is the source document for a credit sale. Credit notes, by contrast, record returns or reductions in amounts invoiced.

Question 8Principles of double-entry bookkeeping and accounting systems

Which ledger contains the individual accounts of credit customers?

  1. The purchases ledger
  2. The general ledger
  3. The cash book
  4. The sales ledger Correct answer.

Explanation

The sales ledger (receivables ledger) holds a separate account for each credit customer so that the amount owed by each one can be monitored. Its balances are summarised by the trade receivables control account in the general ledger.

Question 9Principles of double-entry bookkeeping and accounting systems

A customer returns goods that were previously sold on credit. What is the correct double entry?

  1. Debit trade receivables, credit sales returns
  2. Debit purchases returns, credit trade receivables
  3. Debit sales returns, credit trade receivables Correct answer.
  4. Debit sales, credit trade payables

Explanation

A sales return reduces the income of the business, and a reduction in income is a debit, recorded in the sales returns account. The customer now owes less, so trade receivables is credited.

Question 10Principles of double-entry bookkeeping and accounting systems

A business pays a supplier £950 in full settlement of a £1,000 invoice, receiving a 5% early settlement discount. Which entry records only the discount received?

  1. Debit trade payables £50, credit discount allowed £50
  2. Debit trade payables £50, credit discount received £50 Correct answer.
  3. Debit discount allowed £50, credit trade payables £50
  4. Debit discount received £50, credit trade payables £50

Explanation

Discount received is income to the buyer, and income increases on the credit side. The liability to the supplier is reduced, and a reduction in a liability is a debit, so trade payables is debited with £50.

Question 11Principles of double-entry bookkeeping and accounting systems

In what circumstances is a suspense account opened?

  1. When the trial balance totals do not agree Correct answer.
  2. When the trial balance totals agree but an account is missing
  3. When a customer's account becomes overdue
  4. When a contra entry is made between the two ledgers

Explanation

A suspense account is opened to hold the difference when the debit and credit columns of the trial balance do not agree. Once the errors are found, correcting entries are posted and the suspense balance is cleared.

Question 12Principles of double-entry bookkeeping and accounting systems

Which error would still allow the trial balance to balance?

  1. A debit of £90 entered in the trial balance as £9
  2. Only one side of a transaction posted to the ledger
  3. A credit sale posted to the wrong customer's account Correct answer.
  4. A payment of £80 debited to both cash and rent

Explanation

Posting a sale to the wrong personal account still puts the correct debit total into receivables and the correct credit into sales, so the trial balance agrees. Such errors are found by reconciling the sales ledger with its control account, not by the trial balance.

Question 13Principles of double-entry bookkeeping and accounting systems

Office stationery costing £200 was debited to the equipment account and credited to cash. Which journal entry corrects this error?

  1. Debit equipment account £200, credit stationery account £200
  2. Debit stationery £200, credit cash £200
  3. Debit cash £200, credit equipment £200
  4. Debit stationery £200, credit equipment £200 Correct answer.

Explanation

The cash credit was correct, so only the wrong debit needs moving. The stationery account must be debited with £200 and the equipment account credited with £200 to remove the incorrect debit.

Question 14Principles of double-entry bookkeeping and accounting systems

How is the petty cash imprest float restored at the end of each period?

  1. By recording the vouchers as drawings of the owner
  2. By transferring the whole float back to the bank each month
  3. By reimbursing the exact amount spent, rounded to the nearest £10
  4. By reimbursing the value of the vouchers to restore the float Correct answer.

Explanation

Under the imprest system the amount spent, supported by vouchers, is reimbursed from the bank so the float returns to its original fixed level. This makes the cash remaining plus the vouchers equal to the imprest at any time.

Question 15Principles of double-entry bookkeeping and accounting systems

At the year end £300 of electricity has been used but no invoice has yet been received. Which entry records the accrual?

  1. Debit electricity, credit accruals Correct answer.
  2. Debit electricity, credit bank
  3. Debit accruals, credit electricity
  4. Debit prepayments, credit electricity

Explanation

The accruals concept requires the expense to be recognised in the period in which it was incurred, so electricity is debited with £300. No payment has been made, so the matching credit is to accruals as a current liability.

Question 16Principles of double-entry bookkeeping and accounting systems

On 1 January a business pays £1,200 insurance for the twelve months to 31 December. At 31 March, £900 relates to future periods. Which entry records the prepayment at 31 March?

  1. Debit bank £900, credit prepayments £900
  2. Debit prepayments £1,200, credit insurance £1,200
  3. Debit prepayments £900, credit insurance £900 Correct answer.
  4. Debit insurance £900, credit prepayments £900

Explanation

The three months used, £300, belongs to this period and the remaining £900 is carried forward as an asset. The prepayments account is therefore debited and the insurance expense credited with £900.

Question 17Principles of double-entry bookkeeping and accounting systems

What does a credit balance on the trade payables control account represent?

  1. Cash received from customers during the period
  2. Amounts owed by the business to its suppliers Correct answer.
  3. Amounts owed to the business by its customers
  4. Discounts received from suppliers during the period

Explanation

Trade payables are a liability, and liabilities carry credit balances. The credit balance therefore shows the total amount the business still owes its credit suppliers at that date.

Question 18Principles of double-entry bookkeeping and accounting systems

In the cash book, what does a credit balance in the bank column indicate?

  1. Cash held in the bank at the period end
  2. An overdraft at the bank Correct answer.
  3. A bank loan received
  4. An error in the cash book

Explanation

The bank column follows the rule that a debit balance represents money held at the bank. A credit balance therefore means the business has withdrawn more than it holds, which is an overdraft.

Question 19Principles of double-entry bookkeeping and accounting systems

A business makes a credit sale of £400 plus sales tax at 20%. What is the correct double entry?

  1. Debit trade receivables £400, credit sales £400 and credit sales tax £80
  2. Debit sales £400, debit sales tax £80, credit trade receivables with £480
  3. Debit trade receivables £480, credit sales £480
  4. Debit trade receivables £480, credit sales £400, credit sales tax £80 Correct answer.

Explanation

The customer owes the invoice total of £480, so trade receivables is debited in full. Of that, £400 is the business's income, credited to sales, and £80 is output tax collected on behalf of the tax authority, credited to the sales tax account.

Question 20Principles of double-entry bookkeeping and accounting systems

The owner pays a personal mortgage instalment from the business bank account and it is recorded in the business's mortgage account. Which accounting concept has been breached?

  1. Business entity Correct answer.
  2. Prudence
  3. Consistency
  4. Accruals

Explanation

The business entity concept treats the owner and the business as separate for accounting purposes, so personal transactions must be recorded as drawings. Charging a private payment as a business expense mixes the two and breaches that concept.

Question 21Principles of double-entry bookkeeping and accounting systems

The sales day book was overcast by £90, and separately a payment of £45 to a supplier was recorded twice in the ledgers. What is the net effect on the trial balance?

  1. Debits exceed credits by £180
  2. Credits exceed debits by £90 Correct answer.
  3. Credits exceed debits by £135
  4. Debits exceed credits by £90

Explanation

Overcasting the sales day book inflates only the credit posting to sales, so credits exceed debits by £90. Duplicating a payment debits payables and credits cash by the same amount, so it adds equally to both columns and changes nothing.

Question 22Principles of double-entry bookkeeping and accounting systems

A trial balance difference of £250 was posted to the debit of a suspense account. It was then found that a purchase of £250 had been entered in the supplier's account but omitted from the purchases account. Which journal entry clears the suspense account?

  1. Debit trade payables £250, credit suspense £250
  2. Debit purchases £250, credit payables £250
  3. Debit purchases £250, credit suspense £250 Correct answer.
  4. Debit suspense account £250, credit purchases £250

Explanation

The missing debit to purchases is why debits were £250 short, so purchases must now be debited. The suspense account carried a debit balance, so crediting it with £250 clears that balance.

Question 23Principles of double-entry bookkeeping and accounting systems

Which item is recorded on the debit side of the trade payables control account?

  1. Interest charged by a supplier on overdue balances
  2. Opening balance of trade payables
  3. Payments made to suppliers Correct answer.
  4. Credit purchases made during the period

Explanation

Payments to suppliers reduce the amount owed, and a reduction in a liability is recorded as a debit. Credit purchases, supplier interest charges and the opening balance all increase what is owed and so appear on the credit side.

Question 24Principles of double-entry bookkeeping and accounting systems

A business has assets of £84,000 and liabilities of £31,000. It then buys equipment for £6,000 on credit. What is the capital after the purchase?

  1. £53,000 Correct answer.
  2. £47,000
  3. £59,000
  4. £37,000

Explanation

Capital equals assets less liabilities, which is £84,000 less £31,000, or £53,000. Buying equipment on credit raises assets and liabilities by the same amount, so capital is unchanged by the purchase.

Question 25Principles of double-entry bookkeeping and accounting systems

A business pays £2,000 for a delivery van and debits motor expenses. What type of error is this and what is its effect on profit?

  1. An error of principle; profit is unaffected
  2. An error of commission; profit is understated by £2,000
  3. An error of principle; profit is understated by £2,000 Correct answer.
  4. An error of original entry; profit is overstated by £2,000

Explanation

Recording capital expenditure as revenue expenditure is an error of principle because the wrong class of account is used. The £2,000 of expenses removes the asset from the statement of financial position and overstates expenses, understating profit by £2,000.

Question 26Principles of double-entry bookkeeping and accounting systems

Credit purchases of goods are recorded in which book of prime entry?

  1. The general journal
  2. The purchases day book Correct answer.
  3. The sales day book
  4. The cash book

Explanation

Credit purchases are listed in the purchases day book from suppliers' invoices, and the periodic total is later posted to the purchases account and to the payables control account. The sales day book lists credit sales, while the cash book deals only with cash and bank movements.

Question 27Principles of double-entry bookkeeping and accounting systems

A business sells goods for £450 and receives immediate payment by debit card. Which double entry records this transaction?

  1. Debit cash £450 and credit trade receivables £450
  2. Debit sales £450 and credit cash £450
  3. Debit trade receivables £450 and credit sales £450
  4. Debit cash £450 and credit sales £450 Correct answer.

Explanation

Money received increases the asset cash, which is debited, and the sale increases income, which is credited. The receivables account is only used where the customer has not paid at the time of the sale.

Question 28Principles of double-entry bookkeeping and accounting systems

What is the main purpose of the general journal?

  1. To summarise the amount owed by each credit customer
  2. To record the balances extracted from the ledger accounts
  3. To record non-routine transactions and corrections Correct answer.
  4. To list the daily total of cash sales

Explanation

The journal is used for entries that do not belong in any other book of prime entry, such as correction of errors, opening entries and purchases of non-current assets on credit, and each entry carries a narration. Routine credit sales and purchases are recorded in the day books instead.

Question 29Principles of double-entry bookkeeping and accounting systems

Goods bought on credit are returned to a supplier. Which double entry records the return?

  1. Debit trade payables and credit purchases
  2. Debit purchases and credit trade payables
  3. Debit purchases returns and credit trade payables
  4. Debit trade payables and credit purchases returns Correct answer.

Explanation

Returning goods reduces the amount owed to the supplier, so trade payables are debited, and the return is credited to the purchases returns account so that the cost of purchases is reduced. The original purchase entry is not reversed through the purchases account.

Question 30Principles of double-entry bookkeeping and accounting systems

Which of the following accounts would normally carry a debit balance in the trial balance?

  1. Loan from the bank
  2. Sales
  3. Purchases Correct answer.
  4. Capital

Explanation

Purchases are a cost of running the business, and expenses are recorded as debits, so the purchases account normally carries a debit balance. Capital, sales and loans are credit-balance items because they represent the owner's interest, income or liabilities.

Question 31Principles of double-entry bookkeeping and accounting systems

Which statement correctly describes the dual effect of double-entry bookkeeping?

  1. Only cash transactions need to be recorded in two accounts
  2. Every transaction is recorded twice in the same account
  3. Each transaction affects both the cash book and the bank account
  4. Each transaction is entered with equal debits and equal credits Correct answer.

Explanation

Every transaction is recorded in at least two different accounts so that total debits equal total credits, which keeps the accounting equation in balance. The two entries are made in separate accounts, not in the same account twice.

Question 32Principles of double-entry bookkeeping and accounting systems

What is a contra entry in a two-column cash book?

  1. A payment posted to the wrong side of an account
  2. An entry for a bank charge shown on the bank statement
  3. A transfer between the cash and bank columns only Correct answer.
  4. A correction to the cash book made through the general journal

Explanation

A contra arises when cash is banked or cash is withdrawn from the bank for business use, so the cash column and the bank column are simply offset against each other with no other ledger account involved. Both halves of the contra appear inside the cash book and are marked with a C.

Question 33Principles of double-entry bookkeeping and accounting systems

In which book of prime entry are credit notes issued to customers recorded?

  1. The sales returns day book Correct answer.
  2. The purchases returns day book
  3. The sales day book
  4. The general journal

Explanation

Credit notes issued to customers reduce amounts previously invoiced and are listed in the sales returns day book, whose total is posted to the credit of the sales returns account. Credit notes received from suppliers are recorded in the purchases returns day book.

Question 34Principles of double-entry bookkeeping and accounting systems

A business buys goods with a list price of £2,000 less 20% trade discount, on credit. What amount is entered in the purchases day book?

  1. £1,500
  2. £2,400
  3. £2,000
  4. £1,600 Correct answer.

Explanation

Trade discount is deducted on the supplier's invoice before the transaction is recorded, so only the net amount of £1,600 is entered in the books. Trade discount is never posted to a separate discount account.

Question 35Principles of double-entry bookkeeping and accounting systems

The sales day book total for the month is £12,400. Which double entry posts this total to the nominal ledger?

  1. Debit sales £12,400 and credit cash £12,400
  2. Debit trade receivables control £12,400 and credit sales £12,400 Correct answer.
  3. Debit cash £12,400 and credit sales £12,400
  4. Debit sales £12,400 and credit trade receivables control £12,400

Explanation

Credit sales increase the amount owed by customers, so the receivables control account is debited, and the income is credited to the sales account. Individual customer accounts in the sales ledger are updated separately from the day book total.

Question 36Principles of double-entry bookkeeping and accounting systems

Which of the following errors would cause the trial balance totals to disagree?

  1. A sale of £120 was recorded as £120 in both the sales account and the customer's account when it should have been £210
  2. A purchase of £500 was debited to equipment instead of purchases
  3. A payment of £80 was entered in the cash book only and not in the ledger account Correct answer.
  4. A credit sale of £250 was completely omitted from the books

Explanation

Entering only one side of a transaction leaves the ledger with an unmatched debit or credit, so the two trial balance totals will not agree. Errors that are made at the same value on both sides of the entry, such as complete omission, error of principle or a consistently wrong amount, leave the totals equal.

Question 37Principles of double-entry bookkeeping and accounting systems

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

  1. Cash received from credit customers Correct answer.
  2. Interest charged to a customer on an overdue account
  3. Credit sales for the period
  4. The opening balance of trade receivables

Explanation

The sales ledger control account is an asset account, and money received from customers reduces the balance owed, so receipts are credited. Credit sales, opening balances and interest charged to customers all increase the amount owed and are debits.

Question 38Principles of double-entry bookkeeping and accounting systems

A customer's debt is to be written off as irrecoverable. Which double entry is required?

  1. Trade receivables control debited, irrecoverable debts expense credited
  2. Irrecoverable debts expense debited, receivables control credited Correct answer.
  3. Sales debited, receivables control credited
  4. Irrecoverable debts expense debited, cash credited

Explanation

The customer no longer owes the money, so the receivable is removed with a credit, and the loss is charged as a debit to the irrecoverable debts expense account. Sales are not adjusted, because the original income was correctly recorded.

Question 39Principles of double-entry bookkeeping and accounting systems

The rent account was debited with £500 and the bank account credited with £500, but the correct amount was £50. Which journal entry corrects the error?

  1. Debit rent £450 and credit bank £450
  2. Debit bank £450 and credit suspense £450
  3. Debit bank £450 and credit rent £450 Correct answer.
  4. Debit rent £450 and credit suspense £450

Explanation

Both entries are £450 too large, so the excess is reversed: rent, an expense, is reduced by a credit and the bank account is increased by a debit. Because the same excess appears on both sides of the entry, the trial balance agreed and no suspense account is needed.

Question 40Principles of double-entry bookkeeping and accounting systems

A business pays a credit supplier £600 in cash. Which double entry records this?

  1. Debit cash £600 and credit trade payables £600
  2. Debit trade payables £600 and credit purchases £600
  3. Debit trade payables £600 and credit cash £600 Correct answer.
  4. Debit purchases £600 and credit cash £600

Explanation

Paying a supplier reduces the liability, so trade payables are debited, and the cash held by the business falls, so cash is credited. Purchases were recorded when the supplier's invoice was received, not when the invoice is settled.

Question 41Principles of double-entry bookkeeping and accounting systems

A contra of £250 is agreed between the sales and purchases ledgers. What is the effect on the two control accounts?

  1. Debit the sales ledger control account and credit the purchases ledger control account
  2. Credit the sales ledger control account and debit the purchases ledger control account Correct answer.
  3. Credit both control accounts
  4. Debit both control accounts

Explanation

A contra reduces both what a customer owes and what the business owes that same party, so the receivable balance is credited and the payable balance is debited. The same amounts are then entered in the individual ledger accounts so that both control accounts still agree with their lists of balances.

Question 42Principles of double-entry bookkeeping and accounting systems

A cheque for £310 issued to a supplier has not yet been presented at the bank. Which statement is correct?

  1. The bank statement balance is higher than the cash book by £310
  2. Both balances are equal until the cheque is presented
  3. The cash book balance is £310 higher than the statement Correct answer.
  4. The cash book must be corrected by crediting £310

Explanation

The payment has already been recorded in the cash book, but the bank has not yet reduced the account, so the statement still shows £310 more money than the cash book. This is a timing difference and is dealt with in the reconciliation, not by a correction to the cash book.

Question 43Principles of double-entry bookkeeping and accounting systems

Which of the following would be recorded as capital expenditure?

  1. Paying the annual insurance premium
  2. Buying a delivery van Correct answer.
  3. Replacing a broken window pane
  4. Repainting the office interior

Explanation

Capital expenditure is spending on a non-current asset that will provide benefit over several accounting periods, so the van is recorded in a non-current asset account. Repainting, insurance and window repairs are revenue expenditure and are charged to the profit or loss account.

Question 44Principles of double-entry bookkeeping and accounting systems

How are opening balances recorded at the start of a new accounting period?

  1. Opening balances are not carried forward into the new ledger
  2. Assets as credit balances, liabilities as debit balances, capital as the balance
  3. Assets as debit balances, liabilities as credit balances, capital as the balance Correct answer.
  4. All balances entered as debits so that the trial balance agrees

Explanation

Assets are brought down as debit balances and liabilities as credit balances, with the capital account carrying the owner's residual interest so that the opening trial balance agrees. Balances are carried forward rather than being lost at the period end.

Question 45Principles of double-entry bookkeeping and accounting systems

A supplier's invoice for goods bought on credit shows £400 net plus VAT at 20%. Which double entry records the invoice?

  1. Debit purchases £480, credit trade payables £480
  2. Debit trade payables £480, credit purchases £400, credit VAT £80
  3. Debit purchases £400, debit VAT £80, credit trade payables £480 Correct answer.
  4. Debit purchases £400, credit VAT £80, credit trade payables £320

Explanation

The net cost is charged to purchases, VAT paid on inputs is debited to the VAT account as recoverable, and the full invoice value is credited to trade payables. VAT is not treated as part of the cost of the goods.

Question 46Principles of double-entry bookkeeping and accounting systems

At 1 May the sales ledger control account had a debit balance of £18,400. During May credit sales were £42,700, cash received from credit customers £39,600, discounts allowed £1,300 and sales returns £900. What is the closing balance?

  1. £21,500 debit
  2. £20,600 debit
  3. £19,300 debit Correct answer.
  4. £19,300 credit

Explanation

The control account is debited with the opening balance and credit sales, giving £61,100, and credited with receipts, discounts allowed and returns, giving £41,800. The difference of £19,300 is a debit balance representing the amount customers still owe.

Question 47Principles of double-entry bookkeeping and accounting systems

The trial balance at 31 March showed total debits of £86,240 and total credits of £86,000, and the difference was entered in a suspense account. It was then found that a payment of £120 to a supplier had been entered in the cash book but not in the supplier's ledger account. Once this error has been corrected, what is the balance on the suspense account?

  1. £240 credit
  2. £360 credit
  3. £120 credit Correct answer.
  4. £120 debit

Explanation

Debits exceeded credits by £240, so the suspense account was opened with a credit balance of £240. Correcting the one-sided payment means debiting the supplier's account and crediting suspense with £120, which leaves £120 on the credit side of the suspense account.

Question 48Principles of double-entry bookkeeping and accounting systems

The purchases ledger control account had a credit balance of £14,600 at 1 June. During June credit purchases were £28,900, payments to suppliers £31,200, purchase returns £700 and discounts received £400. What is the closing balance?

  1. £11,200 credit Correct answer.
  2. £11,600 credit
  3. £11,200 debit
  4. £12,300 credit

Explanation

The payable balance increases with credit purchases and decreases with payments, purchase returns and discounts received, so £14,600 plus £28,900 less £31,200, £700 and £400 gives £11,200. A positive payables balance is always a credit balance.

Question 49Principles of double-entry bookkeeping and accounting systems

A credit sale of £650 was entered in the sales day book and posted to the customer's account as £560. What is the effect of this error?

  1. Net profit is unaffected and the trial balance still agrees
  2. Net profit is understated by £90 and the trial balance still agrees Correct answer.
  3. Net profit is understated by £90 and the trial balance is out by £90
  4. Net profit is overstated by £90 and the trial balance still agrees

Explanation

The same wrong amount of £560 was used for the debit and the credit, so the totals remain equal and the trial balance agrees. However, sales are understated by £90, which understates gross profit and therefore net profit by the same amount.

Question 50Principles of double-entry bookkeeping and accounting systems

The cash book shows a debit balance of £1,250 at 31 March. Cheques totalling £430 issued to suppliers have not yet been presented, and a customer's receipt of £160 appears on the bank statement but has not been entered in the cash book. What is the balance shown on the bank statement?

  1. £1,840
  2. £980 Correct answer.
  3. £1,520
  4. £660

Explanation

Unpresented cheques have not yet reduced the bank statement, so they are deducted from the cash book figure, while the receipt already on the statement but missing from the cash book is added. This gives £1,250 less £430 plus £160, a statement balance of £980.