AAT L3 Advanced Bookkeeping 3

Question 1

Which of the following errors would be corrected using a suspense account?

Accepted Answer

A single-sided entry that causes a trial balance difference

Answer

A suspense account temporarily holds the difference when a trial balance disagrees, caused by single-sided or unequal postings. Once the error is found and corrected, the suspense account is cleared.

Question 2

Bank reconciliation is performed to:

Accepted Answer

Agree the cash book balance with the bank statement balance by identifying differences

Answer

Bank reconciliation identifies and explains differences between the cash book balance and the bank statement balance, such as outstanding lodgements, unpresented cheques, and bank errors.

Question 3

An outstanding lodgement on a bank reconciliation means:

Accepted Answer

A receipt has been recorded in the cash book but not yet credited by the bank

Answer

An outstanding lodgement (also called a deposit in transit) is a receipt that the business has recorded in its cash book but which has not yet been credited on the bank statement.

Question 4

What is the double entry when a business receives a cash refund from a supplier?

Accepted Answer

Debit Bank, Credit Purchase Ledger Control Account

Answer

A refund from a supplier increases the bank balance (debit Bank) and reduces the amount owed to suppliers — either clearing a credit balance or recording the refund against the purchases ledger control account (credit PLCA reduces with a debit, so a credit reduces the liability — wait: debit Bank means cash received, credit PLCA reduces the supplier balance/increases it if they owe us now).

Question 5

Irrecoverable debts (bad debts) written off are recorded as:

Accepted Answer

Debit Irrecoverable Debt Expense, Credit Trade Receivables

Answer

When a debt is written off, the asset (trade receivables) is reduced (credit) and the expense (irrecoverable debt) is increased (debit) in the income statement.

AAT Level 3 Practice Test

AAT Level 3 Practice Test

AAT L3 Advanced Bookkeeping 3