AAT L3 Accounts Payable & Receivable Advanced 5

Question 1

When reconciling the purchase ledger control account to the list of supplier balances, a difference may arise from:

Accepted Answer

Posting an invoice to the correct supplier account but with the wrong amount

Answer

Errors such as posting an invoice at the wrong amount, omitting a transaction from either the control account or a supplier's individual account, or transposition errors will cause the PLCA balance to differ from the sum of supplier balances.

Question 2

Invoice discounting differs from factoring in that:

Accepted Answer

The business retains control of credit collection under invoice discounting (confidential)

Answer

With invoice discounting, the business borrows against its receivables but continues to manage credit control itself (customers are unaware of the arrangement). With factoring, the factor takes over collection and customers are notified.

Question 3

Which of the following would reduce the balance on the purchase ledger control account?

Accepted Answer

Purchase returns to suppliers

Answer

Purchase returns reduce the amount owed to suppliers — they are credited to the individual supplier account and debited to purchase returns, reducing the PLCA balance.

Question 4

The cash discount available to a customer for payment within 10 days on a £5,000 invoice at 2% is:

Accepted Answer

£100

Answer

2% of £5,000 = £100. If the customer pays within 10 days, they can deduct £100 from the invoice, paying only £4,900.

Question 5

Under UK company law, what is the maximum interest rate a creditor can charge on overdue commercial debts under the Late Payment of Commercial Debts (Interest) Act 1998?

Accepted Answer

Bank of England base rate plus 8%

Answer

The Late Payment of Commercial Debts Act 1998 entitles creditors to charge statutory interest at 8% above the Bank of England base rate on overdue business-to-business debts where no contract rate is specified.

AAT Level 3 Practice Test

AAT Level 3 Practice Test

AAT L3 Accounts Payable & Receivable Advanced 5