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

An error of principle occurs when a transaction is posted to the wrong class of account — for example, recording capital expenditure (an asset) as revenue expenditure (an expense). The account type is wrong, not just the specific account within a type.

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

The expense has been incurred (debit Telephone Expense) but not yet paid, creating a liability (credit Accruals). This applies the accruals concept — matching the expense to the period in which it was incurred regardless of payment timing.

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

A single-sided entry means only one side of the double entry has been recorded, causing total debits to not equal total credits. The trial balance will not balance, revealing the error. The other three errors maintain equal debits and credits.

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

The £1,200 covers 12 months, so £100 per month. After one month, £100 has been used (debit Insurance Expense) and the prepaid asset reduces by £100 (credit Prepayments). The remaining £1,100 stays as a prepayment.

Question 5

The sales day book is used to record:

Accepted Answer

All credit sales invoices issued during the period

Answer

The sales day book (or sales journal) is a book of prime entry used to record credit sales invoices before they are posted to the sales ledger and general ledger. Cash sales are recorded in the cash book, and returns go in the sales returns day book.

ACCA Applied Knowledge Practice Test

ACCA Applied Knowledge Practice Test

ACCA AK Financial Accounting (FA) Double Entry 2