AAT L2 Bookkeeping Transactions 2 — Questions and Answers
Question 1: A credit note is issued when:
- A customer places a new order
- Goods are returned by the customer or an error on the invoice needs correcting (Correct answer)
- A supplier delivers goods
- The bank charges interest
Correct answer: Goods are returned by the customer or an error on the invoice needs correcting
A credit note is issued by the seller to the buyer to reduce the amount owed, typically because goods have been returned, were damaged, or there was an overcharge on the original invoice.
Question 2: The purchases returns day book is used to record:
- Invoices sent to customers
- Credit notes received from suppliers (Correct answer)
- Cash refunds to customers
- Petty cash vouchers
Correct answer: Credit notes received from suppliers
The purchases returns day book records credit notes received from suppliers when goods are returned to them. It is a book of prime entry that feeds into the general ledger.
Question 3: A sole trader receives a prompt payment discount of 2% on an invoice of £1,000 plus 20% VAT. If the discount is taken, how much does the trader pay?
- £1,176.00 (Correct answer)
- £1,200.00
- £980.00
- £1,176.00
Correct answer: £1,176.00
Under current UK rules, VAT is calculated on the discounted price when a prompt payment discount is offered. Net amount: £1,000 × 98% = £980. VAT: £980 × 20% = £196. Total: £980 + £196 = £1,176.
Question 4: What does the term 'footing' mean in bookkeeping?
- Entering a transaction in the wrong account
- Adding up a column of figures (Correct answer)
- Transferring totals from day books to ledger accounts
- Checking the bank statement against the cash book
Correct answer: Adding up a column of figures
Footing means totalling a column of figures in an account or day book. It is a basic bookkeeping procedure to ensure columns are correctly added up before posting.
Question 5: Which of the following best describes a remittance advice?
- A document requesting payment from a customer
- A document sent with payment to inform the supplier which invoices are being paid (Correct answer)
- A receipt for cash sales
- A document from HMRC confirming VAT registration
Correct answer: A document sent with payment to inform the supplier which invoices are being paid
A remittance advice is sent by the buyer to the seller alongside payment. It details which invoices and credit notes the payment covers, helping the supplier allocate the payment correctly.
Question 6: A business buys office furniture for £3,600 plus VAT at 20% on credit. The correct entry in the purchases ledger is:
- Credit supplier account with £3,600
- Credit supplier account with £4,320 (Correct answer)
- Debit supplier account with £4,320
- Credit supplier account with £720
Correct answer: Credit supplier account with £4,320
The supplier account in the purchases ledger is credited with the full amount including VAT: £3,600 + (£3,600 × 20%) = £3,600 + £720 = £4,320. The supplier is owed the total inclusive of VAT.
AAT L2 Bookkeeping Transactions 2
A credit note is issued when: