AAT L3 Advanced Bookkeeping 4

Question 1

The purchase ledger control account is used to:

Accepted Answer

Provide a total of all amounts owed to suppliers, cross-checking the purchase ledger

Answer

The purchase ledger control account (PLCA) provides a totals check: the closing balance should equal the sum of all individual supplier account balances in the purchase ledger.

Question 2

Which of the following is a capital expenditure?

Accepted Answer

Buying a new delivery vehicle

Answer

Capital expenditure creates a new non-current asset or increases the capacity or economic benefits of an existing one. Buying a new vehicle is a capital item; routine maintenance and repainting are revenue expenses.

Question 3

If closing inventory is understated, the effect on profit for the year is:

Accepted Answer

Profit is understated

Answer

Closing inventory appears in the cost of sales calculation: COGS = opening inventory + purchases − closing inventory. Understating closing inventory increases COGS and therefore understates profit.

Question 4

The accounting equation is:

Accepted Answer

Assets = Capital + Liabilities

Answer

The fundamental accounting equation is Assets = Capital + Liabilities (or Assets = Equity + Liabilities). Every transaction maintains this balance.

Question 5

Which of the following is an example of a revenue expense?

Accepted Answer

Annual subscription for accounting software

Answer

Revenue expenditure is incurred for the ongoing operation of the business and is charged to the income statement. An annual software subscription is a revenue expense consumed within a short period.

AAT Level 3 Practice Test

AAT Level 3 Practice Test

AAT L3 Advanced Bookkeeping 4