Chapter 4: Preparing Financial Statements - Other Considerations

Question 1

What would the double entry be for a sales return which was originally a credit transaction?

Answer 1

Dr Sales
Cr Trade Receivables

Question 2

What would be the double entry for a sales return which was originally a cash transaction?

Answer 2

Dr Sales
Cr Cash

Question 3

What would be the double entry for a purchase return which was originally a credit transaction?

Answer 3

Dr Trade Payables
Cr Purchases

Question 4

What would be the double entry for a purchase return which was originally a cash transaction

Answer 4

Dr Cash
Cr Purchases

Question 5

Double Entry for:
Aya invests £10,000 of her life savings into her business account

Answer 5

Dr Cash
Cr Capital

Question 6

Double Entry for:
Buys goods from supplier for £1,000 and pays via cheque

Answer 6

Dr Purchases
Cr Cash

Question 7

Double Entry for:
A sale made for £400 - customer pays on debit

Answer 7

Dr Cash
Cr Sales

Question 8

Double Entry for:
Makes a sale for £600 and the customer promises to pay in the future

Answer 8

Dr Trade Receivables
Cr Sales

Question 9

Double Entry for:
Purchasing goods off your supplier for £500 on credit

Answer 9

Dr Purchases
Cr Trade Payables

Question 10

Double Entry for:
Payment of a telephone bill of £150 by electronic bank transfer

Answer 10

Dr Telephone Expense
Cr Cash

Question 11

Double Entry for:
Bank Interest of £130 is received

Answer 11

Dr Cash
Cr Interest Income

Question 12

Double Entry for:
A cash customer returned £20 of goods for a refund

Answer 12

Dr Sales
Cr Cash

Question 13

What is the double entry for a prompt payment when it is not expected that customer to take advantage and ultimately does not?
Goods purchased for £30,000 with a 5% prompt payment discount if the balance is settled within 7 days.

Answer 13

On Purchase:
Dr Purchases 30,000
Cr Trade Receivables 30,000

On Settlement:
Dr Payables 30,000
Cr Cash 30,000

Question 14

What is the double entry for a prompt payment when its expected that customer to take advantage and ultimately does not?
Goods purchased for £30,000 with a 5% prompt payment discount if the balance is settled within 7 days.

Answer 14

On Purchase:
Dr Purchases 28,500
Cr Payables 28,500

On Settlement:
Dr Payables 28,500
Dr Purchases 1,500
Cr Cash 30,000

Question 15

What is the double entry for a prompt payment when it is not expected that customer to take advantage and ultimately does?
Goods purchased for £30,000 with a 5% prompt payment discount if the balance is settled within 7 days.

Answer 15

On Purchase:
Dr Purchases 30,000
Cr Payables 30,000

On Settlement:
Cr Purchases 1,500
Cr Cash 28,500
Dr Payables 30,000

Question 16

What is the double entry for a prompt payment when it is expected that customer to take advantage and ultimately does?
Goods purchased for £30,000 with a 5% prompt payment discount if the balance is settled within 7 days.

Answer 16

On Purchases:
Dr Purchases 28,500
Cr Payables 28,500

On Settlement:
Cr Cash
Dr Payables

Question 17

Payroll: What does the employer pay?

Answer 17

Employer Pays = Gross Salary + Employers NIC

Question 18

Payroll: What is included in the gross salary?

Answer 18

Gross Salary = Net Salary + Income Tax + Employee’s NIC