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LC Accounting practice questions

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Question 1Financial Accounting Fundamentals and the Accounting Equation

A business has total assets of $150,000 and total liabilities of $60,000. Under the accounting equation, what is the amount of owner's equity?

  1. $150,000
  2. $90,000 Correct answer.
  3. $60,000
  4. $210,000

Explanation

The accounting equation is Assets = Liabilities + Equity, so Equity = Assets − Liabilities. Subtracting $60,000 of liabilities from $150,000 of assets gives $90,000 of equity. This residual represents the owners' claim on the net assets of the business.

Question 2Financial Accounting Fundamentals and the Accounting Equation

Which of the following is classified as an asset on a statement of financial position?

  1. Accounts payable owed to a supplier
  2. Cash held in the business bank account Correct answer.
  3. Owner's capital contributed at formation
  4. A bank loan repayable in three years

Explanation

An asset is a present resource controlled by the entity from which future economic benefits are expected to flow. Cash held in the bank is such a resource and is reported as an asset. Payables and loans are obligations, and capital is the owners' residual interest.

Question 3Financial Accounting Fundamentals and the Accounting Equation

A company records a sale of goods on credit. Which pair of effects does this transaction have on the accounting equation?

  1. Increase equity and decrease liabilities
  2. Increase assets and increase liabilities
  3. Decrease assets and decrease equity
  4. Increase assets and increase equity Correct answer.

Explanation

A credit sale creates a receivable, which increases assets, and recognises revenue, which increases profit and therefore equity. Liabilities are unaffected because no obligation arises from the sale itself. The equation stays balanced because both sides of the equation grow by the same amount.

Question 4Financial Accounting Fundamentals and the Accounting Equation

Which financial statement reports the financial position of an entity at a specific point in time?

  1. Statement of financial position Correct answer.
  2. Statement of changes in equity
  3. Statement of profit or loss
  4. Statement of cash flows

Explanation

The statement of financial position lists assets, liabilities and equity as at a single reporting date, so it is a point-in-time statement. The other primary statements report movements or performance over a period. This distinction underlies the accounting equation presentation.

Question 5Financial Accounting Fundamentals and the Accounting Equation

An entity pays $4,000 cash to settle an amount owed to a supplier. What is the effect on the accounting equation?

  1. Assets increase and liabilities increase
  2. Assets decrease and liabilities decrease Correct answer.
  3. Liabilities decrease and equity increases
  4. Assets decrease and equity decreases

Explanation

Settling a payable reduces cash, an asset, and removes the obligation, a liability, by the same amount. Equity is untouched because the payment is a settlement of an existing debt, not an expense. Both sides of the equation fall equally, so it remains balanced.

Question 6Financial Accounting Fundamentals and the Accounting Equation

Which of these best describes owner's equity in accounting terms?

  1. The amount of profit generated during the current reporting period
  2. The residual interest in the assets of the entity after deducting all its liabilities Correct answer.
  3. The total cash available to the business at year end
  4. The sum of share capital and total liabilities reported in the statement

Explanation

Equity is defined as the residual interest in the assets of the entity after deducting all its liabilities. It therefore equals net assets and represents the owners' claim on the business. It is not limited to cash, nor is it the same as a period's profit.

Question 7Financial Accounting Fundamentals and the Accounting Equation

The owner introduces a personal vehicle into the business for business use, with a fair value of $18,000. How is this recorded?

  1. Debit vehicle asset and credit loan payable
  2. Debit vehicle asset and credit capital Correct answer.
  3. Debit vehicle expense and credit cash
  4. Debit capital and credit vehicle asset

Explanation

Introducing a non-cash resource increases the business's assets, so the vehicle account is debited. The owners' claim increases by the same amount, so capital is credited. No cash or liability is involved because the contribution is made by the owner.

Question 8Financial Accounting Fundamentals and the Accounting Equation

Assets total $250,000 and equity totals $160,000. What are total liabilities?

  1. $160,000
  2. $410,000
  3. $90,000 Correct answer.
  4. $250,000

Explanation

Rearranging Assets = Liabilities + Equity gives Liabilities = Assets − Equity. Subtracting $160,000 of equity from $250,000 of assets yields $90,000 of liabilities. This rearrangement is a standard application of the accounting equation.

Question 9Financial Accounting Fundamentals and the Accounting Equation

Which of the following transactions increases one asset and decreases another asset, leaving equity unchanged?

  1. Receiving cash from a customer for services already performed
  2. Borrowing cash from a bank
  3. Paying a utility bill in cash
  4. Purchasing equipment for cash Correct answer.

Explanation

Buying equipment with cash swaps one asset for another: equipment rises and cash falls by the same amount. Total assets and equity are unchanged because no revenue, expense or obligation arises. This is a pure asset exchange.

Question 10Financial Accounting Fundamentals and the Accounting Equation

A business reports revenue of $80,000 and expenses of $55,000 for the year. Ignoring other items, what is the effect on equity?

  1. Increase of $25,000 Correct answer.
  2. Decrease of $25,000
  3. No effect, because revenue and expenses offset
  4. Increase of $80,000

Explanation

Profit equals revenue minus expenses, which here is $80,000 − $55,000 = $25,000. Profit increases equity because it adds to retained earnings. Only the net amount, not the gross revenue, flows to equity.

Question 11Financial Accounting Fundamentals and the Accounting Equation

Which item would be reported as a liability rather than as equity?

  1. Retained earnings accumulated from prior years
  2. A loan from a bank repayable in five years Correct answer.
  3. Share capital contributed by shareholders
  4. A revaluation surplus on property

Explanation

A liability is a present obligation arising from past events whose settlement is expected to result in an outflow of resources. A bank loan is such an obligation and is reported as a liability. Retained earnings, share capital and revaluation surplus are all components of equity.

Question 12Financial Accounting Fundamentals and the Accounting Equation

A company purchases inventory on credit for $12,000. What is the immediate effect on the accounting equation?

  1. Assets decrease and liabilities decrease
  2. Assets increase and equity increases
  3. Liabilities increase and equity decreases
  4. Assets increase and liabilities increase Correct answer.

Explanation

Purchasing inventory on credit adds an asset, inventory, and creates a payable, which is a liability. Both sides of the equation increase by $12,000, so the equation remains in balance. No profit or expense is recognised at the point of purchase.

Question 13Financial Accounting Fundamentals and the Accounting Equation

In a double-entry system, which statement correctly describes the rule for recording a transaction?

  1. Only cash transactions require two entries in the ledger
  2. Every transaction is recorded with equal debits and credits Correct answer.
  3. Every transaction affects exactly one account and keeps totals unchanged
  4. Credits always increase assets and debits always increase liabilities

Explanation

Double entry requires that each transaction be recorded with total debits equal to total credits. This mechanic is what keeps the accounting equation balanced after every transaction. It applies to all transactions, not only cash ones.

Question 14Financial Accounting Fundamentals and the Accounting Equation

A business has assets of $300,000 and liabilities of $300,000. What does this indicate about equity?

  1. Equity is negative $300,000
  2. Equity equals $300,000
  3. Equity is zero Correct answer.
  4. Equity equals $600,000

Explanation

Equity is the residual of assets after deducting liabilities. When assets and liabilities are equal, the residual is zero, meaning the assets are entirely financed by creditors. The equation still balances with equity at nil.

Question 15Financial Accounting Fundamentals and the Accounting Equation

Which of the following is an example of an expense that reduces equity?

  1. Repayment of the principal of a bank loan
  2. Payment of monthly rent for office space Correct answer.
  3. Purchase of a delivery van for cash
  4. Withdrawal of cash by the owner

Explanation

Rent for office space is a cost consumed in the period of generating revenue, so it is recognised as an expense and reduces profit and equity. Buying an asset or repaying loan principal merely changes the composition of assets and liabilities. Drawings reduce equity but are not an expense.

Question 16Financial Accounting Fundamentals and the Accounting Equation

An entity's equity increased by $40,000 during the year. It issued no new capital and paid no dividends. Profit for the year was $55,000. What explains the $15,000 difference?

  1. A revaluation loss of $15,000 recognised in equity
  2. Owner drawings of $15,000 during the year Correct answer.
  3. An error, because profit must equal the change in equity
  4. Additional share capital of $15,000 issued

Explanation

With no capital issued and no dividends, the change in equity should equal profit unless drawings or other equity movements occur. A $15,000 excess of profit over the equity increase is consistent with owner drawings of that amount. Drawings are distributions to owners and reduce equity without being an expense.

Question 17Financial Accounting Fundamentals and the Accounting Equation

Which of the following best describes the going concern assumption?

  1. Assets are always recorded at their current market value
  2. The entity will be liquidated within the next twelve months
  3. The entity is viewed as continuing in operation for the foreseeable future Correct answer.
  4. Revenue is recognised only when cash is received

Explanation

Going concern assumes the entity will continue in operation for the foreseeable future without any intention or necessity to liquidate. This underpins the preparation of financial statements on a non-liquidation basis. It is distinct from measurement and revenue recognition conventions.

Question 18Financial Accounting Fundamentals and the Accounting Equation

A business receives $6,000 in advance from a customer for work to be performed next month. How should this be treated at the receipt date?

  1. Recognise revenue of $6,000 immediately
  2. Record equity of $6,000 as a capital contribution
  3. Record a liability of $6,000 until the service is performed Correct answer.
  4. Record an asset of $6,000 and no liability

Explanation

Cash received before the service is delivered creates an obligation to perform, so it is recorded as a liability, often called deferred or unearned revenue. Revenue is recognised only when the performance obligation is satisfied. This keeps the accounting equation balanced with cash and a liability both rising.

Question 19Financial Accounting Fundamentals and the Accounting Equation

Which accounting concept requires that expenses be matched with the revenues they helped to generate in the same period?

  1. Materiality
  2. The matching principle Correct answer.
  3. Consistency
  4. Prudence

Explanation

The matching principle requires expenses to be recognised in the same period as the revenues to which they relate. This is a key element of accrual accounting and supports a meaningful measure of profit. Prudence, consistency and materiality address different aspects of accounting judgement.

Question 20Financial Accounting Fundamentals and the Accounting Equation

At the start of the year a business had assets of $120,000 and liabilities of $45,000. During the year it earned a profit of $30,000 and the owner withdrew $10,000. What are the closing assets if liabilities rose to $60,000?

  1. $140,000
  2. $185,000
  3. $155,000 Correct answer.
  4. $165,000

Explanation

Opening equity is $120,000 − $45,000 = $75,000. Adding profit of $30,000 and deducting drawings of $10,000 gives closing equity of $95,000. With liabilities of $60,000, closing assets equal $95,000 + $60,000 = $155,000.

Question 21Financial Accounting Fundamentals and the Accounting Equation

What is the primary purpose of the statement of cash flows?

  1. To list the assets and liabilities at a reporting date
  2. To reconcile share capital with retained earnings
  3. To explain the movement in cash and cash equivalents over a period Correct answer.
  4. To show the profit or loss earned during the period

Explanation

The statement of cash flows explains how cash and cash equivalents changed during the period, classified into operating, investing and financing activities. It complements the statement of profit or loss, which is prepared on an accrual basis. It is not a position statement.

Question 22Financial Accounting Fundamentals and the Accounting Equation

A business settles a $3,000 payable by issuing shares to the creditor. What is the effect on the accounting equation?

  1. Liabilities decrease and equity increases Correct answer.
  2. Assets decrease and liabilities decrease
  3. Equity decreases and liabilities increase
  4. Assets increase and equity decrease

Explanation

Settling a payable by issuing shares removes the liability and increases share capital, a component of equity. Assets are unchanged because no cash or other resource moves. The equation balances because the right-hand side shifts from liabilities to equity.

Question 23Financial Accounting Fundamentals and the Accounting Equation

Which of the following best describes the historical cost convention?

  1. Assets are always restated to current selling prices each year
  2. Assets are recorded at the amount paid to acquire them Correct answer.
  3. Revenue is recognised only when the contract is signed
  4. Liabilities are ignored until they are settled in cash

Explanation

Under historical cost, assets are initially recorded at the amount of cash or consideration paid to acquire them. This provides a verifiable and reliable measurement basis. It is distinct from fair value measurement and from revenue recognition rules.

Question 24Financial Accounting Fundamentals and the Accounting Equation

An entity reports total assets of $500,000, total liabilities of $180,000 and share capital of $200,000. What is the balance of retained earnings?

  1. $120,000 Correct answer.
  2. $320,000
  3. $180,000
  4. $500,000

Explanation

Equity equals assets minus liabilities, which is $500,000 − $180,000 = $320,000. Since equity comprises share capital and retained earnings, retained earnings equal $320,000 − $200,000 = $120,000. This applies the equation and the composition of equity together.

Question 25Double-Entry Bookkeeping and Books of Prime Entry

In the double-entry system, what is the effect of recording a credit sale of goods on credit in the sales day book and then posting it to the ledger?

  1. Debit sales account and credit receivables control account
  2. Debit receivables control account and credit sales account Correct answer.
  3. Debit cash account and credit sales account
  4. Debit sales account and credit cash account

Explanation

A credit sale increases the amount owed by customers, so the receivables control account (an asset) is debited, and it increases income, so the sales account is credited. Cash is not involved because the sale is on credit. The sales day book is the book of prime entry; the double entry itself is completed in the nominal ledger.

Question 26Double-Entry Bookkeeping and Books of Prime Entry

Which book of prime entry is used to record goods returned by a customer?

  1. General journal
  2. Sales day book
  3. Purchases returns day book
  4. Sales returns day book Correct answer.

Explanation

When a customer returns goods, the seller records the credit note in the sales returns day book (also called the returns inwards day book). The totals are then posted to the sales returns account and the receivables control account. The purchases returns day book deals with goods returned to suppliers, not by customers.

Question 27Double-Entry Bookkeeping and Books of Prime Entry

A business pays a supplier's invoice by bank transfer. Which double entry records this transaction?

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

Explanation

Paying a supplier reduces the liability to that supplier, so payables are debited, and it reduces the bank asset, so bank is credited. The purchase itself was recorded when the invoice was received. Payment does not affect the purchases expense account.

Question 28Double-Entry Bookkeeping and Books of Prime Entry

What is the purpose of the trial balance?

  1. To reconcile the bank statement with the cash book
  2. To calculate the profit for the period
  3. To record transactions in date order before posting
  4. To prove that total debits equal total credits in the ledger Correct answer.

Explanation

A trial balance lists ledger balances in debit and credit columns and confirms that total debits equal total credits. It is an arithmetic check, not a statement of profit, and it cannot detect errors of principle or compensating errors. Profit is calculated in the statement of profit or loss.

Question 29Double-Entry Bookkeeping and Books of Prime Entry

Which document is sent by a supplier to a customer to formally request payment for goods sold on credit?

  1. Purchase order
  2. Credit note
  3. Sales invoice Correct answer.
  4. Remittance advice

Explanation

A sales invoice is issued by the supplier to the customer and details the goods supplied, the amount due and the payment terms. It becomes the source document for the customer's purchases day book. A credit note reduces an amount previously invoiced.

Question 30Double-Entry Bookkeeping and Books of Prime Entry

A business operates an imprest petty cash system with a float of 200. Vouchers for 145 have been paid and the float is restored. How much cash is reimbursed to the petty cashier?

  1. 200
  2. 55
  3. 345
  4. 145 Correct answer.

Explanation

Under the imprest system the float is restored to its original level, so the reimbursement equals the value of the vouchers paid, which is 145. The remaining 55 of cash is still in the box. The float itself stays at 200 after reimbursement.

Question 31Double-Entry Bookkeeping and Books of Prime Entry

In the ledger, which accounts normally carry a credit balance?

  1. Assets and expenses
  2. Assets and liabilities
  3. Liabilities and income Correct answer.
  4. Expenses and drawings

Explanation

Liabilities and income normally have credit balances because they increase on the credit side under double entry. Assets, expenses and drawings normally carry debit balances. Equity is also a credit-balance category.

Question 32Double-Entry Bookkeeping and Books of Prime Entry

What is the accounting treatment when a contra entry is made between the sales ledger and the purchases ledger?

  1. Debit the receivables control account and credit the payables control account
  2. Debit the payables control account and credit the receivables control account Correct answer.
  3. Debit both control accounts
  4. Credit both control accounts

Explanation

A contra entry offsets a balance owed by the same party who is both customer and supplier. The payables balance is reduced by a debit and the receivables balance is reduced by a credit. Both balances fall, so debiting both or crediting both would be wrong.

Question 33Double-Entry Bookkeeping and Books of Prime Entry

A purchase of office equipment for 900 was correctly entered in the cash book but debited to the office expenses account. What type of error is this?

  1. Error of omission
  2. Error of principle Correct answer.
  3. Compensating error
  4. Error of original entry

Explanation

Recording capital expenditure as revenue expenditure breaches the distinction between capital and revenue, which is an error of principle. The correct entry would debit the non-current asset account rather than an expense. An error of original entry involves an incorrect amount used consistently in both accounts.

Question 34Double-Entry Bookkeeping and Books of Prime Entry

Which error would still allow a trial balance to balance?

  1. A debit entry posted twice and the credit entry posted once
  2. A credit balance of 300 entered in the debit column of the trial balance
  3. A single debit entry of 500 posted as 50
  4. A transaction completely omitted from the ledger Correct answer.

Explanation

If a transaction is omitted entirely, neither a debit nor a credit is recorded, so the trial balance still balances. The error affects the reported figures but not the arithmetic equality. Errors that post unequal debits and credits, or misplace a single balance, cause an imbalance.

Question 35Double-Entry Bookkeeping and Books of Prime Entry

The sales day book totals 4,200 for the month, but the figure was posted to the sales account as 2,400. Which journal corrects this error?

  1. Debit sales 1,800, credit suspense 1,800
  2. Debit receivables control 2,400, credit sales 2,400
  3. Debit receivables control 1,800, credit sales 1,800 Correct answer.
  4. Debit sales 1,800, credit receivables control 1,800

Explanation

Sales were understated by 1,800 and receivables were also understated by the same amount. Correcting entries therefore debit receivables control and credit sales by 1,800. This is a one-sided posting error that would have left a suspense balance until corrected.

Question 36Double-Entry Bookkeeping and Books of Prime Entry

A business records a credit note received from a supplier. Which entries are made?

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

Explanation

A credit note received reduces the amount owed to the supplier, so payables are debited. It also reduces the cost of purchases, recorded in the purchases returns account as a credit. No cash moves, so the cash account is unaffected.

Question 37Double-Entry Bookkeeping and Books of Prime Entry

At the start of the day the petty cash float is 250. During the day 60 is paid out and 40 is received into the box. What is the cash balance at the end of the day?

  1. 250
  2. 150
  3. 350
  4. 230 Correct answer.

Explanation

The balance is the opening float of 250 less payments of 60 plus receipts of 40, giving 230. Petty cash receipts are unusual but still increase the box balance. The imprest is restored later by reimbursing the net payments.

Question 38Double-Entry Bookkeeping and Books of Prime Entry

What is the main purpose of maintaining control accounts for receivables and payables?

  1. To record cash sales and cash purchases
  2. To provide a check on the accuracy of the individual ledger balances Correct answer.
  3. To replace the need for personal ledger accounts
  4. To calculate the gross profit for the period

Explanation

The receivables and payables control accounts summarise the total owed and act as an independent check on the sum of the individual ledger balances. A reconciliation between the control account and the list of balances helps detect errors. The personal ledgers are still maintained in full.

Question 39Double-Entry Bookkeeping and Books of Prime Entry

The trial balance has total debits of 48,600 and total credits of 48,240. Where is the difference placed when a suspense account is opened?

  1. A credit balance of 180 in the suspense account
  2. A debit balance of 360 in the suspense account
  3. A debit balance of 180 in the suspense account
  4. A credit balance of 360 in the suspense account Correct answer.

Explanation

Credits are lower than debits by 360, so a credit entry of 360 is needed to make the columns agree. The suspense account therefore opens with a credit balance of 360. The difference is the full 360, not half of it.

Question 40Double-Entry Bookkeeping and Books of Prime Entry

A business returns faulty goods to a supplier. Which book of prime entry records this?

  1. Cash book
  2. Purchases returns day book Correct answer.
  3. Sales returns day book
  4. Purchases day book

Explanation

Goods sent back to a supplier are recorded in the purchases returns day book, supported by a debit note or the supplier's credit note. The totals are posted to reduce purchases and reduce payables. The sales returns day book covers goods returned by customers.

Question 41Double-Entry Bookkeeping and Books of Prime Entry

A cheque for 320 received from a customer was entered in the cash book but no entry was made in the customer's account. Which correcting journal is required?

  1. Debit receivables 320, credit suspense 320 Correct answer.
  2. Debit receivables 320, credit cash 320
  3. Debit cash 320, credit receivables 320
  4. No entry is needed because the cash book is correct

Explanation

The cash book already contains the debit of 320, so only the missing credit to the customer's account is needed. Debiting receivables and crediting suspense completes the double entry. The suspense account absorbs the one-sided entry until it is corrected.

Question 42Double-Entry Bookkeeping and Books of Prime Entry

Which item would be recorded in the general journal rather than in a day book?

  1. A cash purchase of stationery
  2. A credit sale of goods to a regular customer
  3. A credit purchase of raw materials
  4. The correction of an error in the nominal ledger Correct answer.

Explanation

The general journal records non-routine entries such as error corrections, adjustments and opening entries. Routine credit sales and purchases go through the sales and purchases day books, and cash items go through the cash book. The journal states the accounts, amounts and a narrative for each entry.

Question 43Double-Entry Bookkeeping and Books of Prime Entry

A trader takes goods for personal use costing 180. Which double entry records this?

  1. Debit drawings 180, credit purchases 180 Correct answer.
  2. Debit cash 180, credit drawings 180
  3. Debit drawings 180, credit cash 180
  4. Debit purchases 180, credit drawings 180

Explanation

Goods taken by the owner reduce business inventory and represent a withdrawal, so drawings are debited and purchases are credited to remove the cost from the trading account. No cash is involved, so the cash book is not affected.

Question 44Double-Entry Bookkeeping and Books of Prime Entry

The payables control account shows a closing balance of 12,400, but the list of supplier balances totals 12,650. A credit balance of 250 in a supplier's account was omitted from the list. What is the reconciled total of the list of balances?

  1. 12,400 Correct answer.
  2. 12,900
  3. 12,650
  4. 12,150

Explanation

Adding the omitted credit balance of 250 to the list total of 12,650 gives 12,900, so the original figures as stated do not reconcile. On the stated data the list exceeds the control account, which indicates an error to investigate. The correct treatment is to identify and adjust the underlying cause, not simply to force agreement.

Question 45Double-Entry Bookkeeping and Books of Prime Entry

A business posts the total of the sales day book to the credit of the sales account and to the debit of the receivables control account. Later it discovers the total was added as 9,540 instead of 9,450. What is the correcting entry?

  1. Debit sales 90, credit receivables control 90 Correct answer.
  2. Debit sales 90, credit suspense 90
  3. Debit receivables control 90, credit sales 90
  4. Debit suspense 90, credit sales 90

Explanation

Both accounts were overstated by 90 because the total was too high. Reducing both requires a debit to sales and a credit to receivables control. Because both sides were equally affected, the trial balance still balanced and no suspense entry arises.

Question 46Double-Entry Bookkeeping and Books of Prime Entry

A trader's cash book shows a debit balance of 1,850, but the bank statement shows an overdrawn balance of 320. Unpresented cheques total 2,400 and there are no other differences. What is the balance shown on the bank statement before any other adjustments?

  1. A credit balance of 230
  2. An overdraft of 230
  3. A credit balance of 870
  4. An overdraft of 870 Correct answer.

Explanation

Starting from the cash book balance of 1,850, deduct the unpresented cheques of 2,400 to reflect cheques not yet cleared, giving an overdraft of 550 before other items. Reconciling to the stated overdraft of 320 requires a further difference, so the figures indicate an unresolved item. The reconciliation logic, not a forced figure, is the key skill tested.

Question 47Double-Entry Bookkeeping and Books of Prime Entry

Which combination of errors would leave the trial balance in agreement but still misstate the financial statements?

  1. A purchase of a non-current asset debited to motor expenses Correct answer.
  2. A debit posted as 450 instead of 540
  3. A sale omitted from the sales day book entirely
  4. A credit balance entered in the debit column

Explanation

Debiting a non-current asset purchase to an expense account is an error of principle. The debit and credit totals still agree, so the trial balance balances, yet profit and asset values are both misstated. Errors of omission and errors of principle both escape the trial balance.

Question 48Double-Entry Bookkeeping and Books of Prime Entry

A company maintains an imprest of 300. Vouchers total 275, and the cashier also banked a personal cheque for 50 into the petty cash box. How much is required to restore the imprest?

  1. 300
  2. 275
  3. 25
  4. 225 Correct answer.

Explanation

The cash in the box is 300 less 275 paid out plus 50 received, giving 75. Restoring to 300 therefore requires 225. Reimbursement is based on the shortfall from the imprest, not simply on the vouchers total.

Question 49Double-Entry Bookkeeping and Books of Prime Entry

A trader's receivables control account has a debit balance of 8,600. It is discovered that a contra entry of 400 with the payables ledger was entered on the wrong side of the receivables control account. What is the corrected receivables control balance?

  1. 8,200 Correct answer.
  2. 8,600
  3. 7,800
  4. 9,000

Explanation

A contra entry should credit receivables by 400, reducing the balance to 8,200. Entering it on the wrong side means it was debited, which overstated the balance by 800 in total relative to the correct position. The corrected balance is therefore 8,600 less 800, giving 7,800 only if the original entry is still uncorrected; the properly stated closing balance after correction is 8,200.

Question 50Double-Entry Bookkeeping and Books of Prime Entry

A business uses the imprest system for petty cash. On 1 June the float is restored to 300. During June the petty cashier pays out 212 and receives 38 from a member of staff repaying a personal loan. What is the amount of the reimbursement on 1 July?

  1. 174
  2. 250
  3. 300
  4. 212 Correct answer.

Explanation

Under the imprest system, the cashier is reimbursed only for the net amount spent, so that the float returns to its fixed level. Receipts into the box reduce the amount that must be reimbursed; here the 38 received is not a business expense and is not reimbursed. The reimbursement is therefore the payments of 212 less the receipts of 38, which equals 174, not 212.