Podcast
Questions and Answers
A sole trader purchases goods on credit. Which element(s) of the accounting equation will change due to this transaction?
A sole trader purchases goods on credit. Which element(s) of the accounting equation will change due to this transaction?
- Assets only
- Assets and capital
- Assets and liabilities (correct)
- Capital and liabilities
A sole trader borrows £10,000 from a bank. Which element(s) of the accounting equation will change due to this transaction?
A sole trader borrows £10,000 from a bank. Which element(s) of the accounting equation will change due to this transaction?
- Assets only
- Capital and liabilities
- Assets and liabilities (correct)
- Assets and capital
A sole trader sells goods for cash for £500 which had cost £300. Which element(s) of the accounting equation will change due to this transaction?
A sole trader sells goods for cash for £500 which had cost £300. Which element(s) of the accounting equation will change due to this transaction?
- Assets and liabilities
- Capital and liabilities
- Assets and capital (correct)
- Assets only
A sole trader increases the business's number of motor vehicles by adding his own car to the business's fleet. Which element(s) of the accounting equation will change due to this transaction?
A sole trader increases the business's number of motor vehicles by adding his own car to the business's fleet. Which element(s) of the accounting equation will change due to this transaction?
Which three of the following are elements of financial statements as identified by the IASB’s Conceptual Framework?
Which three of the following are elements of financial statements as identified by the IASB’s Conceptual Framework?
A business paid out £12,450 in net wages to its employees. Which of the following journal entries accurately reflects this transaction, assuming wages were directly paid from the bank?
A business paid out £12,450 in net wages to its employees. Which of the following journal entries accurately reflects this transaction, assuming wages were directly paid from the bank?
Which of the following describes the purpose of a trial balance?
Which of the following describes the purpose of a trial balance?
Identify the correct equation that represents the basic accounting equation.
Identify the correct equation that represents the basic accounting equation.
A company discovers that a payment of $5,000 for office supplies was correctly recorded in the cash account but was incorrectly debited to the equipment account. Which of the following correcting entries is required?
A company discovers that a payment of $5,000 for office supplies was correctly recorded in the cash account but was incorrectly debited to the equipment account. Which of the following correcting entries is required?
A transaction where $25,000 was correctly recorded in the cash at bank account, but there was no corresponding entry, necessitates the use of a suspense account. Which journal entry correctly records the purchase of machinery and removes the suspense account?
A transaction where $25,000 was correctly recorded in the cash at bank account, but there was no corresponding entry, necessitates the use of a suspense account. Which journal entry correctly records the purchase of machinery and removes the suspense account?
In preparing a bank reconciliation, how are unpresented checks treated?
In preparing a bank reconciliation, how are unpresented checks treated?
A check from a customer that was deposited but later dishonored by the bank requires which of the following actions?
A check from a customer that was deposited but later dishonored by the bank requires which of the following actions?
How should bank charges that appear only on the bank statement be treated in the company's accounting records?
How should bank charges that appear only on the bank statement be treated in the company's accounting records?
Alpha's payable ledger shows a balance of $4,140 due to Beta. Beta's statement shows $8,950. A $4,080 payment was unrecorded by Beta, and Alpha took an unallowed $40 cash discount. After these adjustments, what is the remaining discrepancy between Alpha's and Beta's records?
Alpha's payable ledger shows a balance of $4,140 due to Beta. Beta's statement shows $8,950. A $4,080 payment was unrecorded by Beta, and Alpha took an unallowed $40 cash discount. After these adjustments, what is the remaining discrepancy between Alpha's and Beta's records?
Goods costing $380 were returned by Alpha but not recorded by Beta. How does this affect the reconciliation between Alpha's and Beta's records?
Goods costing $380 were returned by Alpha but not recorded by Beta. How does this affect the reconciliation between Alpha's and Beta's records?
Which of the following errors would cause a trial balance to be out of balance?
Which of the following errors would cause a trial balance to be out of balance?
Which of the following items would cause a difference between the cash balance per the bank statement and the cash balance per the company's accounting records?
Which of the following items would cause a difference between the cash balance per the bank statement and the cash balance per the company's accounting records?
If plant and machinery purchased is debited to the purchases account, what type of accounting error has occurred?
If plant and machinery purchased is debited to the purchases account, what type of accounting error has occurred?
Olivia's exception report showed 265 received, correctly recorded in cash at bank, but posted to a suspense account. It relates to a sales invoice for 295 where the customer took a 30 prompt payment discount. What journal entry is required to clear the suspense account?
Olivia's exception report showed 265 received, correctly recorded in cash at bank, but posted to a suspense account. It relates to a sales invoice for 295 where the customer took a 30 prompt payment discount. What journal entry is required to clear the suspense account?
A company's trial balance includes a debit balance of $5,000 for salaries and a credit balance of $200 for rent. After preparing the financial statements, it is discovered that the salaries should have been $5,200 and the rent should have been $300. What is the net effect of the correction on the company's profit?
A company's trial balance includes a debit balance of $5,000 for salaries and a credit balance of $200 for rent. After preparing the financial statements, it is discovered that the salaries should have been $5,200 and the rent should have been $300. What is the net effect of the correction on the company's profit?
A business purchased office supplies for $500 but mistakenly recorded it as $50. Which of the following is the correct journal entry to correct this error?
A business purchased office supplies for $500 but mistakenly recorded it as $50. Which of the following is the correct journal entry to correct this error?
A company paid $1,000 for advertising expenses but accidentally debited the utility expenses account. How would this error affect the trial balance and how can it be corrected?
A company paid $1,000 for advertising expenses but accidentally debited the utility expenses account. How would this error affect the trial balance and how can it be corrected?
Which of the following errors would not be discovered by preparing a trial balance?
Which of the following errors would not be discovered by preparing a trial balance?
Flashcards
Accounting Equation Elements
Accounting Equation Elements
Assets, liabilities, and capital are all affected.
Goods Purchased on Credit
Goods Purchased on Credit
Both assets and liabilities increase since the business now owes money for the goods.
Bank Loan Impact
Bank Loan Impact
Assets increase (cash from the bank) and liabilities increase (loan to the bank).
Cash Sale Effect
Cash Sale Effect
Signup and view all the flashcards
Adding Personal Car
Adding Personal Car
Signup and view all the flashcards
Financial Statement Elements
Financial Statement Elements
Signup and view all the flashcards
Wages Impact
Wages Impact
Signup and view all the flashcards
Accounting Records
Accounting Records
Signup and view all the flashcards
Suspense Account
Suspense Account
Signup and view all the flashcards
Correcting entry for machinery purchase when suspense account is involved
Correcting entry for machinery purchase when suspense account is involved
Signup and view all the flashcards
Bank Reconciliation
Bank Reconciliation
Signup and view all the flashcards
Unpresented Cheques
Unpresented Cheques
Signup and view all the flashcards
How to treat Unpresented Cheques in bank reconciliation?
How to treat Unpresented Cheques in bank reconciliation?
Signup and view all the flashcards
Dishonoured Cheque
Dishonoured Cheque
Signup and view all the flashcards
Cash Discount
Cash Discount
Signup and view all the flashcards
Goods Returned but Unrecorded by Supplier
Goods Returned but Unrecorded by Supplier
Signup and view all the flashcards
Bank Statement Adjustments
Bank Statement Adjustments
Signup and view all the flashcards
Lodgements Credited After Date
Lodgements Credited After Date
Signup and view all the flashcards
Outstanding Cheques
Outstanding Cheques
Signup and view all the flashcards
Error: Unrecorded Set-Off
Error: Unrecorded Set-Off
Signup and view all the flashcards
Error: Incorrect Write-Off
Error: Incorrect Write-Off
Signup and view all the flashcards
Error of Principle
Error of Principle
Signup and view all the flashcards
Unexpected Prompt Payment Discount
Unexpected Prompt Payment Discount
Signup and view all the flashcards
Study Notes
- The fundamental accounting equation is Assets = Liabilities + Capital.
Accounting Equation Changes
- Purchasing goods on credit increases both assets (goods) and liabilities (accounts payable).
- Borrowing money from a bank increases both assets (cash) and liabilities (loan payable).
- Selling goods for cash at a profit increases assets (cash) and capital (retained earnings).
- Adding a personal car to the business increases assets (motor vehicles) and capital (owner's equity).
Elements of Financial Statements (IASB's Conceptual Framework)
- Income.
- Expenses.
- Equity.
- Assets (referred to as Resources).
- Liabilities (referred to as Obligations).
Journal Entries
- To correct an error where net wages were correctly recorded in cash at bank, debit wages expense and credit the suspense account.
- To correct an unmatched £25,000 purchase of plant and machinery recorded in the cash at bank, debit Plant and Machinery and credit Suspense Account.
Bank Reconciliations
- Bank charges that appear only on the bank statement must be debited to the cash at bank account.
- A cheque from a customer that was paid into the bank but later dishonored requires a debit entry in the cash at bank account.
Reconciliation Discrepancies
- Discrepancies between supplier statements and payables ledgers can arise from items not yet recorded by either party.
Error Correction
- To correct errors: Debit Trade payables £420, Debit Irrecoverable debts expense £240, Credit Trade receivables £660.
Error of Principle
- An error of principle occurs when plant and machinery purchased is debited to the purchases account instead of an asset account.
Suspense Account
- To correct an unmatched receipt recorded in the bank, debit the suspense account, credit sales revenue (for the invoice amount), and debit discount allowed (for the prompt payment discount).
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
Explanation of the fundamental accounting equation, its changes, and elements of financial statements according to the IASB Conceptual Framework. Elaboration of journal entries and bank reconciliation processes.
