ALL 20 questions are compulsory and MUST be attempted State your reasons for choosing your answer, example:

1. Answer A, accounting involves recording of all financial transactions.

Each question is worth 2 marks.

1 Which of the following is an example of capital expenditure?

Paying for refurbishment as part of upgrading a building

Paying carriage outwards in respect of selling goods

Paying legal fees in order to recover customer debts

Paying bonuses to production operatives

2 Vics receivables ledger balances total $50,000, which does not agree with his trade receivables control account. The following errors were found:

A credit note for K750 was not recorded in the receivables ledger

Receipts from credit customers of K2, 000 were entered in the control account but not in the receivables ledgers

What should be the total of the balances on his receivables ledger after correcting the following errors?

K52, 750

K50, 000

K49, 250

K47, 250

3 Christa pays her mortgage by instructing her bank to make monthly payments of a fixed amount from her current account. When the mortgage rate changes she issues revised instructions to the bank.

Which method of payment is Christa using?

Standing Order

Payable Order

Direct Debit

Crossed cheque

4 A firm has a credit facility with a local trade supplier. An invoice for purchases has been credited to the suppliers account and debited to the sales account.

Which of the following journal entries will correct the error?

Dr Sales account Cr Supplier account

Dr Supplier account Cr Sales account

Dr Purchases account Cr Sales account

Dr Sales account Cr Bank account

5 Which of the following would be on the credit side of the receivables ledger control account?

Cash received

Irrecoverable debts

Sales returns

Sales

1, 2 and 3 only

2 and 4 only

1 and 4 only

1, 2, 3 and 4

6 The following is a summary of the petty cash transactions for a week:

Income and Expenditure

Opening balance 500 Travelling expenses 150

Sale of stamps 10 Subsistence expenses 250

Sale of paper 50

Petty cash is maintained using the imprest system.

What sum should be reclaimed by the cashier at the end of the week?

K160

K340

K400

K500

7 The balance on the payables ledger control account should be equal to which other figure in the accounting system?

The total of the balances on the individual customers accounts

The total of the balances on the individual suppliers accounts

The unreconciled balance on the receivables ledger control account

The balance on the receivables ledger control account reconciled for items in transit

8 Louise introduces her car into her business.

Which parts of the business accounting equation will change?

Assets and capital

Capital and profit

Liabilities and assets

Capital and liabilities

9 Freya started in business on 1 September. During September she made cash sales of K6,400 and issued credit sales invoices for K200 of which K8,600 had been paid.

What would be the balance of the sales account in the general ledger at the end of September?

K6, 400

K10, 200

K8, 000

K16, 600

10 Which of the following journal entries correctly records the credit purchase of plant and equipment?

Dr Purchase ledger control account Cr Plant and Equipment

Dr Cash Cr Plant and Equipment

Dr Plant and Equipment Cr Purchase ledger control account

Dr Plant and Equipment Cr Cash

11 Marvin has a balance of K3, 350 on his sales ledger control account but his list of customer balances totals K3, 500.

Which of the following would explain the difference?

The total of sales day book was overstated by K150

A sales return of K150 has been posted in the customers individual account but not the control account

A credit note of K150 has not been recorded in the sales day book

An irrecoverable debt has been accounted for in the control account but not the individual customer account

12 Albert sold 15 units of inventory with a list price of K40 per unit to Michael. He gives

Michael a 10% trade discount and a 5% settlement discount if Michael pays within 30 days. Michael is not expected to take advantage of the early settlement discount.

What will be the total of the invoice that Albert issues to Michael for this transaction?

K540

K600

K510

K513

13 Which of the following errors would be found by extracting a trial balance?

A transaction has been completely missed in the accounts

The double entries have been made the wrong way round

Different figures have been entered for the debit and credit entries D An expense item has been posted to a non-current asset account.

14 Dion performed a purchase ledger control account reconciliation and found the following errors:

The purchase day book was overstated by K720

A credit note for K380 was omitted from the day books altogether

Which of the following shows the necessary adjustments to ensure that the balances reconcile at the correct amount?

Dr Purchase ledger control account K380 from the list of supplier balances

Dr Purchase ledger control account K380 to the list of supplier balances

Cr Purchase ledger control account K1, 100, Subtract K380 from the list of supplier balances

Cr Purchase ledger control account K1, 100, Add K380 to the list of supplier balances 15 Which of the following are benefits of an effective document retention policy to a small business?

To ensure all documents are stored forever

To meet legal and tax requirements of the business

To mitigate risks arising from internal and external disputes of the business

To increase operational efficiency and maintain control over costs

1 and 3 only

2, 3 and 4 only

1, 2 and 4 only

1, 2, 3 and 4

16 Hywel purchases goods on credit with a list price of K100. The supplier gives Hywel a trade discount of 15% and also offers a cash discount of 10% for payment within 30 days.

What is the amount that Hywel will debit to his purchases account?

K11500

K8500

K7650

K7500

17 Which of the following are valid reasons for keeping a payables ledger control account?

To obtain a figure for payables to be included in the statement of financial position

To assist in the location of errors

To check the accuracy of entries made in personal accounts

1 and 2 only

2 and 3 only

1, 2 and 3

1 and 3 only

18 A credit sale of goods for $51 to J Davis was entered in the accounts as $15.

What type of error has occurred?

Compensating error

Error of omission

Error of principle

Error of transposition

19 Which of the following represents the correct imprest amount in an imprest petty cash system?

Notes and coins in the cash box vouchers for payments IOUs

Notes and coins in the cash box + vouchers for payments IOUs

Notes and coins in the cash box vouchers for payments + IOUs

Notes and coins in the cash box + vouchers for payments + IOUs

20 Which of the following statements are true about a good coding system for financial transactions?

It enables a company to easily extract data for management analysis

It provides a unique code for each item within the system

It provides codes that are uniform in format

It requires management authorisation before creation of new codes