ACCA AK Financial Accounting (FA) Double Entry 2

Question 1

An error of principle occurs when:

Accepted Answer

A transaction is recorded in an account of the wrong class or type

Answer

A transaction is recorded in the wrong account of the correct type

Answer

A transaction is completely omitted from the books

Answer

The wrong amount is entered on both sides of the correct accounts

Question 2

A business receives a telephone bill for £350 but has not yet paid it. What is the correct double entry?

Accepted Answer

Debit Telephone Expense £350, Credit Accruals £350

Answer

Debit Cash £350, Credit Telephone Expense £350

Answer

Debit Prepayments £350, Credit Cash £350

Answer

Debit Accruals £350, Credit Telephone Expense £350

Question 3

Which of the following errors would be revealed by a trial balance?

Accepted Answer

A single-sided entry where only the debit has been recorded

Answer

An error of omission where a transaction is completely left out

Answer

An error of commission where a debit is posted to the wrong personal account

Answer

A compensating error where two errors of equal and opposite amount cancel out

Question 4

A business pays £1,200 for insurance covering the next 12 months. At the end of the first month, what adjusting entry is needed?

Accepted Answer

Debit Insurance Expense £100, Credit Prepayments £100

Answer

Debit Insurance Expense £1,200, Credit Prepayments £1,200

Answer

Debit Prepayments £100, Credit Insurance Expense £100

Answer

Debit Cash £1,200, Credit Insurance Expense £1,200

Question 5

The sales day book is used to record:

Accepted Answer

All credit sales invoices issued during the period

Answer

All cash sales made during the period

Answer

Payments received from credit customers

Answer

Returns from customers

Question 6

A suspense account is used when:

Accepted Answer

The bookkeeper cannot determine the correct account for a transaction or the trial balance does not balance

Answer

The business wants to hide transactions from auditors

Answer

The business has excess cash that needs to be invested

Answer

Trade receivables become irrecoverable