AAT L3 Advanced Bookkeeping

Question 1

Which accounting concept requires transactions to be recorded in the period to which they relate, not when cash is received or paid?

Accepted Answer

Accruals concept

Answer

The accruals concept (also called the matching concept) requires income and expenditure to be recognised in the accounting period to which they relate, irrespective of when cash is exchanged.

Question 2

A debit entry on a customer's account in the sales ledger indicates:

Accepted Answer

The customer owes money to the business

Answer

In the sales ledger, debit entries represent amounts owed by customers — sales invoices increase the debit balance, payments and credit notes reduce it.

Question 3

Which of the following would be recorded as a debit in the cash book?

Accepted Answer

A receipt from a customer

Answer

Receipts of cash increase the bank balance, which is an asset — assets increase with debit entries. Payments decrease the bank balance (credit entries).

Question 4

The trial balance checks the arithmetic accuracy of the ledger. Which error will NOT be revealed by a trial balance?

Accepted Answer

Posting the correct amount to the wrong account type

Answer

Posting the correct amount to the wrong class of account (e.g., debit to the wrong expense account) keeps debits equal to credits, so it does not cause a trial balance difference — this is an error of commission.

Question 5

Contra entries in the sales and purchase ledgers occur when:

Accepted Answer

A customer is also a supplier and the balances are set off

Answer

A contra entry reduces both the trade receivable balance (in the sales ledger) and the trade payable balance (in the purchase ledger) when the same entity is both a customer and a supplier.

AAT Level 3 Practice Test

AAT Level 3 Practice Test

AAT L3 Advanced Bookkeeping