AAT L2 Using Accounting Software 4 — Questions and Answers
Question 1: An audit trail in accounting software:
- Is used to calculate depreciation
- Provides a chronological record of all transactions entered, showing who entered them and when (Correct answer)
- Is only available in manual accounting systems
- Is the same as the trial balance
Correct answer: Provides a chronological record of all transactions entered, showing who entered them and when
The audit trail is a sequential, chronological record of every transaction processed in the accounting software. It shows the date, user, transaction type, accounts affected, and amounts, providing a complete record for audit and investigation purposes.
Question 2: The bank reconciliation function in accounting software allows you to:
- Automatically pay all outstanding invoices
- Match transactions in the cash book with items on the bank statement to identify discrepancies (Correct answer)
- Create new bank accounts
- Delete incorrect bank transactions
Correct answer: Match transactions in the cash book with items on the bank statement to identify discrepancies
The bank reconciliation module in accounting software allows you to compare the software's bank account entries with the actual bank statement. You match corresponding items, and the software highlights unmatched items (timing differences) and calculates any discrepancy.
Question 3: If a transaction has been posted to the wrong nominal code, the best way to correct it in accounting software is to:
- Delete the transaction and start again
- Use a journal to transfer the amount from the wrong code to the correct code (Correct answer)
- Ignore it as it will not affect the accounts
- Create a new nominal code
Correct answer: Use a journal to transfer the amount from the wrong code to the correct code
A journal entry is the correct way to correct a misposted transaction. It debits the correct nominal code and credits the wrong nominal code (or vice versa), transferring the amount without affecting the bank, customer, or supplier records.
Question 4: A pro-forma invoice entered in accounting software:
- Updates the ledger accounts immediately
- Is a request for payment that does not update the ledger until converted to a full invoice (Correct answer)
- Automatically triggers a bank payment
- Cannot be used in UK accounting software
Correct answer: Is a request for payment that does not update the ledger until converted to a full invoice
A pro-forma invoice is a preliminary invoice sent before goods are dispatched or services provided. In accounting software, it does not update the ledger accounts. It is converted to a regular invoice once the transaction is confirmed, at which point the ledgers are updated.
Question 5: When closing the financial year in accounting software, the system typically:
- Deletes all transactions from the previous year
- Transfers the profit or loss to retained earnings and carries forward the statement of financial position balances (Correct answer)
- Requires all transactions to be re-entered
- Stops working until a new licence is purchased
Correct answer: Transfers the profit or loss to retained earnings and carries forward the statement of financial position balances
Year-end closure transfers the net profit or loss to the retained earnings (capital) account and carries forward all statement of financial position balances as opening balances for the new year. Income and expense accounts are reset to zero.
Question 6: Which of the following is a benefit of using accounting software compared to manual bookkeeping?
- It eliminates the need to understand double entry bookkeeping
- It automates calculations, reduces errors, and enables faster report generation (Correct answer)
- It means a business does not need to keep source documents
- It removes the need for a VAT return
Correct answer: It automates calculations, reduces errors, and enables faster report generation
Accounting software automates the double entry process, calculates VAT, reduces arithmetic errors, and generates financial reports quickly. However, users still need to understand bookkeeping principles, keep source documents, and file VAT returns.
AAT L2 Using Accounting Software 4
An audit trail in accounting software: