AAT L3 Advanced Bookkeeping 6

Question 1

Capital introduced by the owner of a business is recorded as:

Accepted Answer

Debit Bank, Credit Capital

Answer

When the owner introduces capital, the bank account increases (debit Bank) and the capital/equity account increases (credit Capital), reflecting the owner's investment in the business.

Question 2

A credit balance on a trade payable account means:

Accepted Answer

The business owes money to the supplier

Answer

Trade payable accounts are liability accounts; a credit balance indicates the business still owes that amount to the supplier — the normal balance for a payable is credit.

Question 3

Which of the following is NOT a book of prime entry?

Accepted Answer

The general ledger

Answer

Books of prime entry (daybooks) are where transactions are first recorded: sales day book, purchases day book, returns day books, cash book, and petty cash book. The general ledger is the main ledger, not a daybook.

Question 4

Under the consistency concept, an entity should:

Accepted Answer

Use the same accounting policies year on year unless there is good reason to change

Answer

The consistency concept requires the same accounting policies and methods to be applied consistently from one period to the next, ensuring comparability of financial statements over time.

Question 5

Goods taken by the owner for personal use (drawings in kind) are recorded as:

Accepted Answer

Debit Drawings, Credit Purchases

Answer

When the owner takes goods for personal use, the drawings account is debited (reducing equity) and the purchases account is credited (reducing the cost of goods available for sale), removing the goods from business expenses.

AAT Level 3 Practice Test

AAT Level 3 Practice Test

AAT L3 Advanced Bookkeeping 6