AAT L2 Bookkeeping Controls 2

Question 1

A direct debit appearing on the bank statement but not in the cash book is an example of:

Accepted Answer

An item requiring adjustment to the cash book

Answer

Direct debits are set up with the bank and appear on the statement when paid. If they have not been recorded in the cash book, the cash book needs to be updated. This is a cash book adjustment, not a timing difference.

Question 2

A purchase ledger control account reconciliation revealed that a contra entry of £250 was recorded in the purchase ledger control account but not in the individual supplier account. To correct this, the entry required is:

Accepted Answer

Debit the supplier's account with £250

Answer

A contra entry reduces the balance owed to a supplier (debit in the control account). Since it was recorded in the control account but not the individual supplier account, the supplier's account needs to be debited with £250 to match.

Question 3

Which of the following is the correct journal entry to write off an irrecoverable debt of £600 (net of VAT) where VAT at 20% was charged on the original sale?

Accepted Answer

Debit Irrecoverable Debts £600, Debit VAT £120, Credit Trade Receivables £720

Answer

When writing off an irrecoverable debt for a VAT-registered business, the net amount goes to irrecoverable debts expense, the VAT is reclaimed by debiting the VAT control account, and the full amount is removed from trade receivables.

Question 4

The purpose of a journal is to:

Accepted Answer

Record non-regular transactions and provide a narrative explanation

Answer

The journal is a book of prime entry used to record non-routine transactions such as opening entries, correction of errors, irrecoverable debt write-offs, and year-end adjustments. Each journal entry includes a narrative explaining the reason.

Question 5

After completing a bank reconciliation, the adjusted cash book balance should agree with:

Accepted Answer

The bank statement balance after accounting for timing differences

Answer

After adjusting the cash book for items on the bank statement not yet in the cash book, and accounting for timing differences (unpresented cheques, outstanding lodgements), the two balances should agree. The reconciliation statement shows how they are reconciled.

AAT Level 2 Practice Test

AAT Level 2 Practice Test

AAT L2 Bookkeeping Controls 2