CAT Programme

T1 Recording Financial Transactions

ONLINE Mock Test

1. Which book of original entry will the transaction of irrecoverable debts written off be recorded in?
a) The sales day book
b) The cash book
c) The journal
d) The purchase day book ( )

2. What is the purpose of a Bank Reconciliation Statement?

a) Controlling total debtors accounts
b) Checking that customer’s cheques have cleared
c) Checking the petty cash balance
d) Agreeing day book totals to control accounts ( )

3. Which of the following is an asset?

a) Credit bank balance
b) Land owned by the firm
c) Money owed by the firm to one of its suppliers in respect of goods purchased on credit
d) The capital of the firm ( )

4. Will buys goods from Wayne for cash. The correct double entry for this transaction in Will’s
books is:
a) DR Purchases CR Waynes
b) DR Cash CR Purchases
c) DR Purchases CR Cash
d) DR Wayne CR Purchases ( )

5. Daisy has to pay $740 monthly to her finance company for a car loan and she has instructed
her bank to electronically transmit this monthly. Which method of payment is she using?
a) Direct debit
b) Banker’s draft
c) Standing order
d) Cheque ( )

6. Which of the following describes an error of commission?

a) An error of commission arises when either the debit entry or the credit entry for a particular
transaction is recorded in the wrong class of ledger account
b) An error of commission arises when a transaction is not recorded in the double entry
accounting records.
c) An error of commission arises when a correct figure is entered in the double-entry
accounting records, once in the correct ledger account and once in the wrong person’s
account.
d) None of the above. ( )

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7. Sue is paid on a piece rate scheme of $1 per 1,000 cherries picked. If she works more than 7
hours, she will be entitled to an allowance of $2. The law required that all workers are
guaranteed a minimum wage of $12. What will be her wage if she works 6 hours in a day and
picked 13,000 cherries?
a) $12
b) $13
c) $14
d) $15 ( )

8. Which of the following is not a reason for giving trade discount?

a) Bulk purchase
b) Customer loyalty
c) Prompt payment
d) Stock clearance ( )

9. Which of the following does not belong to the same category?

a) Paying rental of $2,000 for the month
b) Paying $1,500 for the purchase of a printer
c) Paying $300 for the repair of the photocopying machine
d) Paying $600 for the cleaner for the cleaning of the office ( )

10. A cheque received from Benny was wrongly posted to Ben’s account. What is the correcting
entry?
a) Debit cash and credit Benny
b) Debit Benny and credit Ben
c) Debit Ben and credit Benny
d) Debit cash and credit Ben ( )

11. Which of the fooling is the liability of a firm?

a) A building owed by the firm
b) Cash in the firm’s safe
c) Money owed to the firm by its debtors
d) Money which the firm has borrowed and has not yet repaid ( )

12. What is the main purpose of a statement of financial position?

a) To calculate the profit made in the period
b) To measure the net cash flow during the period
c) To illustrate the net book worth at the end of the period
d) To compare performance against budget in the period ( )

13. Gabriel commenced business with $25,000 cash. During the first year of trading, he withdrew
$23,000 for his own use and, at the end of the accounting year, he had capital of $31,000. If he
did not introduce any new capital during the year, what was his net profit for the year?
a) $17,000
b) $23,000
c) $29,000
d) $32,000 ( )

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14. At 31 December, Janice owed Atlas Trading, one of its suppliers, $1,518. Janice received a
statement of accounts from Atlas Trading, but the balance shown on the statement did not
match the balance in her books. A purchase by Janice costing $520 was recorded on Atlas’s
statement but not in Janice’s ledger. A cheque for $250 paid to Atlas was correctly recorded in
Janice’s ledger but was not shown on the statement from Atlas. The balance on the statement
from Atlas was:
a) $748
b) $1,248
c) $1,788
d) $2,288 ( )

15. Which of the following describes the effect of $700 cash drawings being debited to the
purchases account?
a) Gross profit would be overstated.
b) The total expenses would be understated.
c) Net profit would be understated.
d) Capital would be understated. ( )

16. A firm’s list of debtors’ balances, which totaled $39,150, did not agree with its debtors ledger
control account. Upon investigation, the following errors were discovered.
• A credit balance of $70 on one debtor’s account in the sales ledger had been listed as a
debit balance.
• A debit balance of $40 on another debtor’s account in the sales ledger had been listed
as a credit balance.
• The list of balances had been overcast by $60.
The correct debit balance on the sales ledger control account is:
a) $39,030
b) $39,060
c) $39,150
d) $39,210 ( )

17. A cheque
a) Is the form which must be completed when lodging money into a bank account.
b) Must always be “crossed”
c) Is an instruction to your bank to pay money out of your current account.
d) None of the above. ( )

18. Which of the following source document is issued by the purchasing company for a credit
purchase?
a) Remittance note
b) Purchase order
c) Invoice
d) Delivery order ( )

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19. What is the closing balance on the control account at 31 March after taking into account the
following:
Credit balance on 1 March $13,480
Total credit purchases for the month $61,580
Payments to creditors $11,600
Returns outwards in the month $ 1,030
a) $87,690
b) $62,430
c) $8,950
d) $64,490 ( )

20. From which document is the Sales Returns Day Book written up?
a) Credit note
b) Remittance advice
c) Debit note
d) Goods received note ( )

21. What is the effect of a bank loan being granted and the amount of the loan being transferred
into the bank current account?
Effects upon Assets Effect upon Liabilities
a) Decrease bank Decrease loan
b) Decrease bank Increase loan
c) Increase bank Increase loan
d) None of the above ( )

22. Which of the following errors will become apparent when drawing up a trial balance?
a) Cash received from a customer being debited to purchases
b) The completed omission of a transaction
c) A sale being credited to the sales account twice
d) A sale of $1,000 was stated in the invoice as a sale of $100 and recorded as such in the
accounting system. ( )

23. A bank statement shows an overdrawn balance of $300. The cash book shows a balance in
hand of $25, interest charged of $30 which has not been recorded in the cash book. There are
no unpresented cheques. How much is the total of lodgement yet to credited by the bank?
a) $245
b) $325
c) $295
d) $355 ( )

24. Which of the following are costs to an employer?

(I) Employee’s personal pension contribution
(II) Give As You Earn contribution to an animal charity
(III) Pay As You Earn
(IV) Employee’s National Insurance Contribution
a) All of the above
b) (I) and (IV)
c) (II) and (III)
d) (II) and (IV) ( )

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25. Which of the following is an error of principle?
a) The cost of purchasing a printer on credit is entered on the debit side of the purchases
account and on the credit side of the creditor’s account.
b) A sale is not recorded in the double-entry accounting records.
c) A credit sale to James is entered on the credit side of the sales account and on the debit
side of James account.
d) None of the above. ( )

26. The payee of a cheque is

a) The bank in which the person writing the cheque has his/her account.
b) The person to whom the cheque is written.
c) The person who writes the cheque or on whose account the cheque is written.
d) None of the above. ( )

27. If the cost of air-conditioning maintenance was debited to an asset account instead of being
debited to the expenses account,
a) Gross profit would be overstated.
b) Net profit would be understated.
c) Expenses would be understated.
d) Net assets and profit would be overstated. ( )

28. Which of the following is true about a $200 credit balance brought down in the cash columns of
a firm’s cash book?
a) The firm has spent $200 more cash than it has received.
b) The firm has $200 cash in hand.
c) A mistake has been made in the recording of cash.
d) Someone has stolen $200 cash. ( )

29. During the year 20X7, purchases totaled $950,000, of which 80% were on credit. The amount
owed to its creditors has decreased by $20,000. The firm did not receive any discount from its
suppliers during the period. What is the amount the firm paid to its creditors during the year?
a) $740,000
b) $760,000
c) $780,000
d) $930,000 ( )

30. Which of the following is not proper with regards to authorisation?

a) The use of material is requested by the production manager to the warehouse manager,
and purchase requisition is made by the warehouse manager, and the purchase is made by
the purchasing manager.
b) The installation of air conditioner at the office is requisited by the administration manager,
together with three quotations, the supplier with the lowest quote is selected.
c) A highly specialized equipment is bought by the research and development department.
The research scientist had submitted three quotations, and the Board of Directors decided
to accept the research scientist’s recommendation to buy the most expensive equipment
d) The purchase of stationery from a new supplier was approved by the production manager,
while the administration manager is on holiday. ( )

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31. Which of the following describes the effect of the accrual accounting concept?
a) Net profit is the difference between revenues and expenses rather than the difference
between receipts and payments.
b) Losses should be provided for as soon as they are foreseen and profit should not be
recorded prematurely
c) Similar items should be treated in a consistently way from one accounting period to the next.
d) None of the above. ( )

32. When preparing a firm’s balance sheet, which of the following should be classified as a non-
current liability?
a) An amount payable by the firm within six month of the date of the balance sheet.
b) An amount payable by the firm within nine month of the date of the balance sheet.
c) An amount payable by the firm after more than one year from the balance sheet date.
d) None of the above. ( )

33. Which of the following is revenue expenditure?

a) The transfer of surplus funds from a bank current account to a bank deposit account.
b) The cost of acquiring machinery for continuing use in the business.
c) The introduction of additional capital by a proprietor.
d) The cost of advertising a mid-season sale. ( )

34. Walter’s business is registered for sales tax. This week his purchases were $2,350 inclusive of
VAT and his sales were $1,000 exclusive of VAT. Assume the rate of VAT is 17.5%. At the end
of the week, what will the sales tax account in his ledger account show?
a) $350 debit
b) $350 credit
c) $175 debit
d) $175 credit ( )

35. A café buys and sells in cash. Which of the following books of prime entry are not required?
(I) Cashbook
(II) Sales daybook
(III) Purchase daybook
(IV) Sales return daybook
(V) Purchase return daybook
(VI) Petty cashbook
a) (I), (II), (III) and (IV)
b) (II), (III), (IV) and (V)
c) (I) and (VI)
d) (II) and (III) ( )

36. Which of the following best describes the term “purchases” in accounting?
a) All items bought.
b) Only goods bought on credit.
c) Only goods bought for resale.
d) Only goods bought and paid for. ( )

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37. Howard Ltd has an overdraft of $4,400 at the start of June. Howard allows its customers up to
60 days to pay their invoices. The following transactions took place:
3 June Howard sells goods worth $10,000 on credit to a customer who always takes the
full credit period
10 June Howard pays a supplier $8,000
20 June Howard sells goods worth $12,000 for cash and allows a 5% discount.
23 June Cash is received from a customer who has been in dispute with Howard. The
original invoice was for $6,000, but Kew has agreed to accept half the invoice
value to settle the dispute.
How much does Howard have in the bank at the end of June?
a) $2,000
b) $2,600
c) $10,800
d) $12,000 ( )

38. Which of the following statements about the balance sheet are true?
(I) A balance sheet is a statement of the assets, liabilities and capital of a business at a
given moment in time.
(II) The total value of assets must be equal to the value of liabilities and capital in the
balance sheet
(III) We can find out the gross profit from the balance sheet.
(IV) A complete balance sheet can be prepared without a profit and loss statement.
a) (I) and (II) only
b) (I), (II) and (III) only
c) (II), (III) and (IV) only
d) All of the above ( )

39. At the end of the accounting period, the balance on a firm’s bank statement was $1,000 in debit.
At the same date, outstanding cheques amounted to $3,000, outstanding lodgements
amounted to $5,000 and there was a dishonoured cheque from a customer of $500 entered on
the firm’s bank statement but not yet entered in the bank account in the firm’s ledger. The
balance brought down on the bank account in the firm’s ledger was:
a) $500 debit
b) $500 credit
c) $1000 credit
d) $1500 debit ( )

40. Which of the following is the most likely flow of documents to complete a purchase?
a) Purchase order, delivery note, goods received note, cheque requisition, invoice.
b) Purchase order, delivery note, goods received note, invoice, cheque requisition.
c) Goods received note, purchase order, delivery order, invoice, cheque requisition.
d) Purchase order, goods received note, delivery order, cheque requisition, invoice. ( )

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41. Using the information below, calculate the balance on the receivables control account at the
end of the accounting period:
Debtors at 1 January $8,000
Transactions for the year:
Discount allowed 1,000
Credit sales 89,000
Receipts from debtors 80,000
Cash sales 6,000
Return inwards 6,000

a) $3,000
b) $10,000
c) $11,000
d) $17,000 ( )

42. The balance on petty cash imprest float should always equal to:
a) Cash in hand plus payment vouchers
b) Payment vouchers
c) Cash in hand less payment voucher
d) Amount reimbursed last period ( )

43. The entity concept means that:

a) Because a firm is separate and distinct from its owners, those owners cannot have access
to its assets unless the firm ceases to trade.
b) Accounts must be prepared for every firm.
c) The financial affairs of a firm and its owners are always kept separate for the purpose of
preparing accounts.
d) None of the above. ( )

44. Which error will affect the Sales Ledger as well as the Sales Ledger Control Account?
a) The sales day book was undercast
b) A return was not posted to a customer’s account
c) Discount allowed of $180 was recorded as $80 in the personal account
d) An invoice was overlooked and completely omitted from the books ( )

45. Which of the following item(s) is unlikely to be paid out of petty cash?
(I) Payment to a local garage for a new van
(II) Hire purchase payment of for a piece of machinery
(III) Van cleaning charge at the car wash
(IV) A payment to a trade creditor of $765
a) All of the above
b) (I), (II) and (IV)
c) (I) only
d) (I) and (III) ( )

46. Which of the following is not an effective control measure?

a) All payments should be authorized.
b) Cash float in the till should be minimized.
c) All receipts should be banked as soon as possible.
d) Anyone of the three director’s signature is required for the company’s cheque. ( )

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47. If the input tax exceeds the output tax for a period, how should the sales tax be reported for
that period?
a) An expense
b) A current asset
c) A current liability
d) Within turnover ( )

48. Given the following information, what is the balance on the creditors control account at 31
December?
Credit balance on the creditors control account at 1 January $4,600
Transactions for the period ending 31 December:
Discount received 1,000
Credit purchases 54,000
Credit purchases returns 6,000
Refunds received from suppliers 2,000
Payments to suppliers 39,000
Balance in creditors ledger set off against debtors ledger 1,000

a) $8,600
b) $9,600
c) $12,600
d) $13,600 ( )

49. The purchases day book shows total purchases including VAT of $2,350. What double entry to
be posted at the end of the day?
a) DR Bank $2,350 CR Purchases $2,350
b) DR Purchases $2,350 CR Creditors $2,350
c) DR Purchases $2,000 and VAT $350 CR Creditors $2,350
d) DR Creditors $2,000 and VAT $350 CR Bank $2,350 ( )

50. At the start of January, May had a bank overdraft of $10,000.

1 Jan Purchase goods on credit for $340 from Alpha Ltd
2 Jan Receives credit note for $2,800 from Delta Ltd
15 Jan Sells goods for $600 and allows 10% discount for immediate payment by
cheque
20 Jan Sells goods for $100 on credit to Gamma Ltd
What is the final bank balance after the above transactions?
a) $9,400 credit
b) $10,000 credit
c) $6,840 credit
d) $9,460 credit ( )

- END OF PAPER -

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