Ledger accounting and double entry: All Peter's sales attract VAT at the standard rate of 20%
Ledger accounting and double entry
1 All Peter's sales attract VAT at the standard rate of 20%. Peter sells goods to a customer on credit for
£2,400 exclusive of VAT. The double entry to record this transaction is:
A Dr Trade receivables £2,880; Cr Sales £2,400; Cr VAT £480
B Dr Sales £2,400; Dr VAT £480; Cr Trade receivables £2,880
C Dr Trade receivables £2,400; Dr VAT £480; Cr Sales £2,880
D Dr Sales £2,880; Cr Trade receivables £2,400; Cr VAT £480
2 What transaction is represented by the entries: debit non-current assets account, credit trade
payables?
A The receipt of money from sale of a non-current asset
B The issue of an invoice for the sale of a non-current asset
C Receipt of an invoice for the purchase of a non-current asset
D Payment for a non-current asset
3 In double-entry bookkeeping, which of the following statements is true?
A Credit entries decrease expenses and increase assets
B Debit entries decrease expenses and increase assets
C Credit entries decrease liabilities and increase income
D Debit entries decrease income and increase assets
4 Identify whether the following statements are true or false.
Statement 1: A credit balance of £100 brought down on George's receivables ledger in Guy's
accounting records means that George owes money to Guy.
Statement 2: A debit balance of £500 on Guy's drawings account means that Guy has withdrawn
£500 in the period.
A Statement 1 is true and Statement 2 is false
B Statement 1 is false and Statement 2 is true
C Both statements are true
D Both statements are false 5 Reece has opening trade receivables of £42,100 and closing trade receivables of £38,600. Sales for the
period totalled £186,190 (£13,400 of which were cash sales).
What is the total of receipts recorded in trade receivables for the period?
A £169,290
B £176,290
C £182,690
D £189,690
6 Kirsty purchased goods on credit from her supplier for £1,500 inclusive of VAT at the standard rate of
20%.
What is the double entry to record this transaction?
A Dr Trade payables £1,500; Cr Purchases £1,200; Cr VAT £300
B Dr Purchases £1,200; Dr VAT £300; Cr Trade payables £1,500
C Dr Trade payables £1,500; Cr Purchases £1,250; Cr VAT £250
D Dr Purchases £1,250; Dr VAT £250; Cr Trade payables £1,500
7 Destiny plc offers a 5% early settlement discount to any customers who pay within 10 days of receiving
an invoice. It sold goods totalling £1,240 on credit to a customer which is expected to take advantage
of the early settlement discount. You should ignore the effects of VAT.
What is the correct double entry to record the sale?
A Dr Trade receivables £1,240; Cr Revenue £1,240
B Dr Trade receivables £1,178; Cr Revenue £1,178
C Dr Revenue £1,240; Cr Trade receivables £1,240
D Dr Revenue £1,178; Cr Trade receivables £1,178
8 Which of the following could be a credit entry in trade receivables?
A Credit sales
B Cash sales
C Cash received from credit customers
D Early settlement discounts received from suppliers that were not expected to be taken at the
date of purchase
9 Millwood purchased goods on credit from Horwich. At the point of recording the invoice from Horwich,
Millwood did not intend to take the early settlement discount offered, however, Millwood later decided
that it would take the discount and so paid within the required timeframe.
What is the correct double entry to record the payment to Horwich in Millwood's accounts?
A Dr Cash at bank; Cr Purchases; Cr Trade payables B Dr Purchases; Dr Trade payables; Cr Cash at bank
C Dr Trade payables; Cr Purchases; Cr Cash at bank
D Dr Cash at bank; Dr Purchases; Cr Trade payables
10 A business received the following invoice from one of its suppliers:
Invoice: 4015
Date: 15 May 20X9
£
Goods 200 @ £20 4,000
Less Trade discount (1,000)
3,000
What entries will be made in the nominal ledger to record this invoice? (Ignore VAT)
A Dr Purchases £4,000; Cr Trade payables £4,000
B Dr Purchases £3,000; Cr Trade payables £3,000
C Dr Trade payables £3,000; Cr Purchases £3,000
D Dr Trade payables £4,000; Cr Purchases £4,000
11 Apricot plc makes sales of £37,800 excluding VAT and purchases of £37,800 including VAT. All sales
and purchases are on credit and are liable to VAT at 20%.
What amount is recorded in Apricot plc's sales account?
A £7,560
B £31,500
C £37,800
D £45,360
12 Apricot plc makes sales of £37,800 excluding VAT and purchases of £37,800 including VAT. All sales
and purchases are on credit and are liable to VAT at 20%.
What amount is recorded in Apricot plc's purchases account?
A £7,560
B £31,500
C £37,800
D £45,360
13 Apricot plc makes sales of £37,800 excluding VAT and purchases of £37,800 including VAT. All sales
and purchases are on credit and are liable to VAT at 20%.
What amount is recorded in Apricot plc's trade receivables?
A £7,560
B £31,500 C £37,800
D £45,360
14 Apricot plc makes sales of £37,800 excluding VAT and purchases of £37,800 including VAT. All sales
and purchases are on credit and are liable to VAT at 20%.
What amount is recorded in Apricot plc's trade payables?
A £7,560
B £31,500
C £37,800
D £45,360
15 Milo is a trader and is registered for VAT. During the quarter to 30 June 20X8 he entered into the
following transactions.
£
Purchase of inventory 25,200
Purchase of new car for use in the business 14,400
Payments to HMRC 9,420
Sales 100,800
All the above purchases and sales are inclusive of VAT at 20%.
At 1 April 20X8 Milo owed HMRC £2,000.
What was Milo's liability at 30 June 20X8 in respect of VAT?
A £2,780
B £4,820
C £5,180
D £7,700
16 Anthony pays his one assistant a monthly gross salary of £1,500. He has calculated for the month of
March that £300 should be deducted as PAYE and that National Insurance amounts to £150 for
employees' NIC and £160 for employer's NIC.
What accounting entry should Anthony make in the salaries expense account?
A Credit £1,050
B Debit £1,500
C Debit £1,660
D Credit £610
17 Anthony pays his one assistant a monthly gross salary of £1,500. He has calculated for the month of
March that £300 should be deducted as PAYE and that National Insurance amounts to £150 for
employees' NIC and £160 for employer's NIC.
What accounting entry should Anthony make to the HMRC payable account?
A Credit £1,050 B Debit £1,500
C Debit £1,660
D Credit £610
18 Which of the following statements is correct?
A A debit entry increases a liability; A debit entry decreases an asset
B A debit entry increases a liability; A credit entry decreases an asset
C A credit entry increases a liability; A debit entry decreases an asset
D A credit entry increases a liability; A credit entry decreases an asset
19 Which of the following statements is correct?
A A debit entry increases an asset; A debit entry decreases capital
B A debit entry increases an asset; A credit entry decreases capital
C A credit entry increases an asset; A debit entry decreases capital
D A credit entry increases an asset; A credit entry decreases capital