162 Câu Trắc Nghiệm_2023

In double-entry bookkeeping, which of the following statements is true?
ACredit entries decrease expenses and increase assets.

1
B. Debit entries decrease expenses and increase assets.
C. Credit entries decrease liabilities and increase income.
D. Debit entries decrease income and increase assets. D
Anna's business has rented out premises at a cost of £12,000 per annum. However, on 1 July 20X4 the rent was increased by
10%.
At 1 January 20X4 Anna had a prepaid expense of £750 in respect of rent and during the year ended 31 December 20X4 Anna
had paid a total of £12,850 to her landlord.
2 What amounts will appear in the statement of profit or loss for the year ended 31 December 20X4 and in the statement of
financial position as at 31 December 20X4 in respect of rent?
Statement of profit or loss: £12,600, Statement of financial position: £1,000 prepayment

Statement of profit or loss: £12,600, Statement of financial position: £1,000 accrual
Statement of profit or loss: £13,200, Statement of financial position: £400 prepayment
Statement of profit or loss: £13,200, Statement of financial position: £400 accrual a
Helen buys and sells mobile phones. She has been trading for many years. On 1 January 20X7, her opening inventory is 3,000
mobile phones which cost £25 each. She purchased 9,000 phones in the year amounting to £250,000 and on 31 December 20X7
she has mobile phones left in inventory with a cost of £57,500. Helen has sold phones with a sales value of £525,000 in the year.
3 What is the gross profit for the year ended 31 December 20X7?
a. £222,500
b. £275,000
c. £257,500
d. £200,000 c
How would the following transaction affect the accounting equation in terms of increase or decrease in asset, capital or liability?
Making a cash sale to a customer of £850.

4
Increase in Asset, Increase in Liability
Increase in Asset, Increase in Capital
Decrease in Capital, Decrease in Asset
Increase in Liability, Decrease in Capital b
Ruth keeps no accounting records. The following information is available about the year ended 30 June 20X5:
Opening assets £300,210

Opening liabilities £245,100
Closing assets £405,750
Closing liabilities £230,080
Drawings for the year £50,000
5
What is the profit figure for the period?
£170,560
£140,520
£40,520
£70,560
a
A business has made the following payments for rent:
For Quarter ending 31 January 20X6 Paid 3 Nov 20X5 £1,050

For Quarter ending 30 April 20X6 Paid 3 Feb 20X6 £1,200
For Quarter ending 31 July 20X6 Paid 2 May 20X6 £1,200
For Quarter ending 31 October 20X6 Paid 3 August 20X6 £1,500
For Quarter ending 31 January 20X7 Paid 3 Nov 20X6 £1,500
6
What amount would have appeared in the statement of financial position as at 30 November 20X5 for rent?
Prepayment £700
Prepayment £1,000
Accrual £700
Accrual £1,000 a
At 1 April 20X4 Iman had accrued £450 for light and heat. During the year ended 31 March 20X5 she paid light and heat bills that
amounted to £1,900 and at 31 March 20X5 estimated that she owed £500 in respect of light and heat.
What is the charge to the statement of profit or loss in respect of light and heat for the year ended 31 March 20X5?
7
£1,900
£1,950
£1,850
£1,800 b
Which of the following is the Accounting Equation?
Assets + Liabilities = Capital + Profit - Drawings

8
Assets - Liabilities = Capital + Profit + Drawings
Assets - Liabilities = Capital + Profit - Drawings
Assets + Liabilities = Capital - Profit + Drawings c
You are given the following information:
Opening inventory at cost £3,506

Opening inventory at net realisable value £3,760
Closing inventory at cost £5,274
Closing inventory at net realisable value £5,111
Purchases before discount £63,790
Trade discount £6,264
Carriage inwards £2,603
Carriage outwards £3,193
9
What is the figure for cost of sales?
Note that inventory is always valued at the lower of cost and net realisable value.
58,778
58,524
59,114
61,717 b
10
a. 1,300
b. 1,500
c. 1,700
d. 3,000 c
Henry started business on 1 January 20X4. He purchased the following assets from Fred.
£
Van 1,000
Inventory 500
Receivables 250
Prepaid insurance for inventory 50
He also opened a business bank account and paid in £2,000.
At the end of his first six months of trading he had the following.
£
11
Van 900
Fixtures 250
Inventory 420
Receivables 300
Payables 200
Cash 1,700
He had drawn £500 in cash during the period. What was Henry's trading profit for this period?
a. £70 loss
b. £70 profit
c. £430 loss
d. £430 profit b
The net assets of the business of a sole trader at 31 December 20X6 totalled £68,700. This total had increased to £71,200 by 31
December 20X7. During the year the business had made a profit of £15,400 and the proprietor had invested a further £10,000 of
capital.
What was the amount of the proprietor's drawings for the year?
12
£22,900
£2,900
£7,900
£27,900 a
A debit entry would not result in which of the following?
Increase in an asset
13
Decrease in a liability
Decrease in an expense
Decrease in capital c
Consider the following statements:
The balances on asset and liability accounts are carried down at the end of the accounting period to be brought forward to the
next accounting period
The balances on income and expense accounts are summarised in an additional ledger account known as the profit and loss
ledger account
14
In terms of the accuracy of these statements:
Only (1) is correct.

Only (2) is correct.
Both (1) and (2) are correct.
Neither (1) nor (2) is correct. c
When a business counts its inventory it discovers that it has 5,000 items of product X, and 1,000 of product Y; these cost £12 and
£6 respectively. You also discover the following information:
Product X – 600 of these were found to be defective and would be sold at a cut price of £9 each.
Product Y – 100 of these were to be sold for £5.00 with selling expenses of £1.00 each.
15
What figure should appear in the business's statement of financial position for inventory?
£66,000
£58,200
£64,000
£64,200 c
During the last year purchases of one of a business's products have been as follows:
Date Quantity - units Price per unit Total price

£ £
23 Jan 100 13.40 1,340
4 Mar 120 13.80 1,656
23 Apr 80 14.00 1,120
25 July 130 14.20 1,846
23 Sept 100 14.25 1,425
30 Nov 60 14.80 888
16
There were 180 units in inventory at the end of the year and of these 30 units had been damaged and could now only be sold for
£16.00 per unit after incurring rectification costs of £2.00 per unit. These damaged inventories were part of the last purchase in
November. Inventory is valued on a FIFO basis.
What is the closing inventory valuation for the 180 units?
2,573
2,344
2,450
2,597 a
Given below are the purchases and sales of a particular inventory item for the month of September. There were 80 units in
inventory at 1 September which had cost £10.00 each.
5/9 Purchase 100 units @ £10.40

7/9 Sale 75 units @ £15.00
22/9 Sale 100 units @ £15.00
28/9 Sale 80 units @ £15.00
17
What is the unit cost of closing inventory using the weighted average cost method (when calculating the average cost per unit
work to two decimal places)?
10.57
10.67
10.75
10.90 b
While carrying out the year-end inventory take a business discovered some of its inventory was damaged.
The inventory had originally cost £1,000. It would normally sell for £1,500. However, it is now thought that the inventory will sell
for £1,200 after some repair work has been carried out which will cost £300.
18
At what value should this inventory be recorded in the financial statements?
£1,500
£1,200
£1,000
£900 d
Your firm values inventory using the AVCO method. At 1 June 20X7 there were 100 units in inventory valued at £10 each. On 12
June, 50 units were purchased for £12 each, and a further 50 units were purchased for £15 each on 20 June. On 21 June, 160
units were sold for £20.00 each.
19
The value of closing inventory at 30 June 20X7 was:
£470
£2,350
£493
£1,880 a
Wacko had a allowance for receivables at 1 January 20X0 of £1,000. He calculates that at 31 December 20X0 an allowance of
£1,500 is required. In addition £2,000 of debts were written off during the year, which includes £50 previously allowed for.
How much should be included in Wacko's statement of profit or loss in relation to irrecoverable debt expense for the year ended
20 31 December 20X0?
£1,500
£2,450
£2,500
£3,500 c
At 31 March 20X3 Penelope Ltd had receivables of £800,000. On analysing the list of receivables, it is decided to write off debts
of £8,000 and to create an allowance of 100% against specific debts amounting to £12,000.
At 31 March 20X2 there had been an allowance of £16,600.
21 What is the charge for irrecoverable debts expense in the company’s statement of profit and loss?
£3,400
£3,000
£12,000
£8,000 a
At the beginning of the year a business had an allowance of £350.
During the year a debt previously allowed of £150 had been received. Another debt of £100, which had been written off in a
previous period, had been received.
At the year-end an allowance of £500 was required.

22
What is the charge or credit in the Statement of Profit or Loss in relation to the irrecoverable debt expense?
£50 Dr
£50 Cr
£200 Cr
£150 Dr a
At the beginning of the year a business had an allowance of £1,000.
During the year a debt previously allowed of £200 had been written off. Another debt of £300, which had been written off in a
previous period, had been received.
At the year-end an allowance of £1,250 was required.

23
What is the charge or credit in the Statement of Profit or Loss in relation to the irrecoverable debt expense?
150 Dr
450 Dr
250 Dr
350 Dr
a
A business acquired new premises at a cost of £250,000 on 1 January 20X1. In the period to the year end of 31 March 20X1 the
following further costs were incurred.
£
Costs of initial adaptation of the building 8,500
Legal costs relating to the purchase 1,200
Monthly cleaning contract 9,600
Cost of air conditioning unit necessary for premises to be used 5,400
24 Cost of machinery 8,700
What amount should appear as the cost of premises in the company's statement of financial position at 31 March 20X1?
£259,700
£263,900
£265,100
£273,800 c
A business part-exchanges an old motor vehicle for a new vehicle. The old vehicle originally cost £12,000 and had a carrying
amount of £7,000 when it was disposed of. A part-exchange allowance of £6,000 was given against the cost of the new vehicle
of £18,000.
What profit or loss was made on the disposal of the old motor vehicle?
25
£1,000 loss
£1,000 profit
£6,000 loss
£6,000 profit a
Mario bought a van for his business on 30 June 20X1 for £13,750, including £150 for a road fund licence.
Mario depreciates motor vehicles at 20% per annum on cost, charging depreciation on a monthly basis. His year end is 31
December. On 1 January 20X4 Mario traded in the van for a new one, receiving a part-exchange allowance of £7,250.
26 What was the profit on disposal of the van?
£375
£450
£1,750
£1,810 b
At 1 January 20X4 a business owned motor vehicles which had cost a total of £40,000.
On 1 April 20X4 the business disposed of a motor vehicle which had cost £10,000 and on 1 September 20X4 the business
acquired a motor vehicle which cost £15,000.
The business charges depreciation on motor vehicles at the rate of 25% per annum on the straight line basis with proportionate
amounts being charged in the year of acquisition or disposal based on the number of months ownership.
27
What is the depreciation charge in respect of motor vehicles for the year ended 31 December 20X4?
£9,375
£10,000
£11,250
£13,750 a
A piece of machinery, which had cost £14,000 on 1 January 20X1, was sold on 01 January 20X5 for £4,000. Machinery is
depreciated at 20% per annum straight line. The business's year-end is 30 September 20X5.
What is the profit on the sale of this machinery?

28
1,200
1,900
4,000
10,000 a
AK Ltd sold goods on 30 days credit to BN Ltd for £300. Included in the terms and conditions of sale is the opportunity for BN Ltd
to take advantage of 5% early settlement discount if the invoice is paid within 10 days of invoice date. At the point of raising the
invoice, AK Ltd expected BN Ltd to take advantage of the early settlement discount terms offered.
BN Ltd subsequently paid the amount due within 30 days of invoice date, but not within the time period eligible for the early
settlement discount.
29
What accounting entries are required to be made by AK Ltd to properly account for the amount received from BN Ltd?
Debit Cash £285, Credit Revenue £285

Debit Cash £300, Credit Receivables £285, Credit Revenue £15
Debit:Cash £300, Credit Receivables £300
Debit Cash £285, Debit Revenue £15, Credit Receivables £300 b
Which of the following items should be treated as capital expenditure in the accounts of a sole trader?
£1,000 drawings made by the proprietor to buy himself a new kitchen at home.
30
£1,000 spent on purchasing a new computer for his secretary in order to deal with business administration.
£1,000 on purchasing a motorbike for resale.
£1,000 paid to a painter for redecorating his office. b
Nigel has received the following telephone bills during his year end 31st December 20X7.
Bill period Amount Paid

£
Nov 20X6 - Jan 20X7 450 Feb 20X7
Feb 7 - Apr 20X7 480 May 20X7
May 20X7 - Jul 20X7 410 Aug 20X7
Aug 20X7 - Oct 20X7 460 Nov 20X7
31 Nov 20X7 - Jan 20X8 465 Jan 20X8
How much should be included for the 20X7 telephone expense?
£1,810
£1,815
£1,800
£1,820 a
Helen buys and sells mobile phones. She has been trading for many years. On 1 January 20X7, her opening inventory is 3,000
mobile phones which cost £25 each. She purchased 9,000 phones in the year amounting to £250,000 and on 31 December 20X7
she has mobile phones left in inventory with a cost of £57,500. Helen has sold phones with a sales value of £525,000 in the year.
32 What is the gross profit for the year ended 31 December 20X7?
£222,500
£275,000
£257,500
£200,000 c
Lee received the following rent bills during the year (year end is the 31 Dec X7):
Bill period Amount Paid

£
Nov 20X6 – Jan 20X7 2,100 Oct 20X6
Feb 20X7 – Apr 20X7 2,100 Feb 20X7
May 20X7 – Jul 20X7 2,400 Jun 20X7
Aug 20X7 – Oct 20X7 2,400 Oct 20X7
33 Nov 20X7 – Jan 20X8 2,400 Feb 20X8
What will be the opening and closing balances on the prepayments account?
Opening Balance: £2,100, Closing Balance: £800

Opening Balance: £700, Closing Balance: £0
Opening Balance: £1,400, Closing Balance: £2,400
Opening Balance: £0, Closing Balance: £1,600 b
Clare runs a florist and pays an annual premium to be part of the Interflora group. Her year end is 31st July.
On 1st January 20X6 she paid her annual fee to Interflora of £1,600. On the 1st January 20X7 the fee for the year to Interflora
had risen to £1,900.
34 How much should be included in her accounts for 20X7 for the Interflora expense?
£1,750
£950
£800
£1,775
d
Zhu received a bill for insurance for his new business. The business was set up on 1st March 20X7 and it was decided that the
first year end for accounting purposes would be 30th November 20X7. The bill for insurance totalled £1,950. It was for the
period running from the start of the business to the end of March 20X8.
But Zhu didn't pay it until 30th September 20X7.

35
How much should be included as a prepayment for the first set of accounts?
£325
£600
£650
£1,300 b
An amount of £750 is received from a bad debt previously allowed for within the accounts.
What is the double entry required to record this?
36
Debit Allowance for receivables, Credit Receivables
Debit Cash, Credit Receivables
Debit Cash, Credit Irrecoverable debt expense
Debit Allowance for receivables, Credit Irrecoverable debt expense b
Robinson Ltd. has the following inventory movements in the month of September:
Units £ per unit

Opening stock 10 20
1 Sep goods in 8 22
2 Sep sales (9)
3 Sep goods in 6 24
4 Sep sales (11)
37 5 Sep goods in 4 26
Assuming the business values inventory on a weighted average basis what will be the value of closing inventory?
£178
£193
£160
£140 b
In 20X6, Dani Ltd made a net profit of £50,000 after accounting for irrecoverable debts. During 20X6 Dani increased its
allowance for receivables by £1,500 and also recovered a debt previously written off amounting to £3,500.
What would the net profit have been prior to accounting for these items?
38
£52,000
£51,500
£48,000
£55,000 c
Rossi had the following balances in its trial balance at 30 July 20X6:
£
Total receivables 81,000
Irrecoverable debts expense 2,500
Allowance for receivables as at 1 August 20X5 3,700
39
The company wishes to carry forward an allowance of £2,500.
What is the irrecoverable debts expense in the statement of profit or loss?
£1,300
£1,700
£2,500
£4,200 a
An asset is purchased on 1 Jan 20X4 for £90,000 and is depreciated on a reducing balance basis at 15% per annum. The asset is
sold on the 1 Jan 20X7 for £45,000.
What is the profit/loss on disposal?

40
£1,619 loss
£4,500 loss
£10,271 loss
£19,525 loss c
Alan has a closing receivables balance of £180,000. Against this he wants to make an allowance against two receivables: he
wants to create an allowance against the full balance of £6,000 on Zhiang's account, and he wants to provide for 25% of the
balance (£12,000) on Helena's account.
Calculate the closing allowance for receivables for the year.

41
£9,000
£17,100
£17,550
£18,000 a
Which of the following items should be treated as revenue items in an entity's financial statements?
Payment of local property tax
Purchase of premises
Alteration of premises to configure them to be ready for use in the business
42
External audit fee
1 and 2 only
2 and 3 only
3 and 4 only
1 and 4 only d
On 1 Jan 20X1 Fleet Ltd. bought a non-current asset for £225,000 which had an estimated useful life of 20 years and a residual
value of £25,000. Assets are depreciated on a straight line basis. Fleet's year end is 31 December. On 1 January 20X4 the asset's
total useful life is revised to 15 years in total with no residual value.
What is the total deprecation charge in 20X4?

43
£10,000
£12,750
£13,000
£16,250 d
John owns an antiques store and at the end of the year gathers the following information about his inventory:
Item Quantity Cost per item NRV per item

££
Chippendale chair 8 80 100
Van Gogh painting 1 50 200,000
18th century dressers 3 350 400
44 1920's lamps 4 250 20
Calculate the value of John's inventory.
£730
£1,820
£500
£2,740
£201,770 b
Lisa has a brought forward balance on her allowance for receivables of £12,000 from 20X6.
At the end of 20X7 her receivables balance stands at £240,000. She wants to write off £20,000 at the end of the year and have
an allowance for receivables against Gill's full balance of £6,000.
45 How much will be charged for the year to the statement of profit or loss from the irrecoverable debts expense account?
-£6,000
£14,000
£20,000
£32,000 b
A business which trades entirely on cash terms had takings for the year of £26,850 and paid a total of £18,648 to suppliers. At
the beginning of the year HMRC were owed £349 and during the year payments of £1,164 were made to them.
What was the credit balance on the VAT control account at the end of the year assuming that all receipts and expenditure are
46
subject to VAT and the amounts given are VAT inclusive (working to the nearest £, assuming VAT is 20%)?
£552
£1,367
£3,282
£2,880 a
Which of the following is the correct accounting treatment of a trade discount received from a supplier?
It is recorded as income in the statement of profit or loss.

47
It is deducted by the supplier from the list price and the net invoice amount is recorded as an expense and as a payable.
It is recorded in the cash payments.
It is recorded in the journal. b
At 1 January 20X5 a business owed £6,500 in respect of VAT. During the quarter ending 31 March 20X5 a business made sales of
£45,000 (excluding VAT) and made purchases amounting to £35,250 (including VAT).
Assuming that VAT is charged at the standard rate of 20%, what is the balance on the VAT account at 31 March 20X5?
48
£9,625 debit
£9,625 credit
£3,375 debit
£3,375 credit b
The following was extracted from the ledger accounts of a business:
£
Net pay to employees 150,000
PAYE 50,000
Employer’s NIC 20,500
Employees’ NIC 17,500
49
What was the wages expense for the month?
£200,000
£150,000
£238,000
£188,000 c
Which transaction is represented by the following accounting entries?
Debit: Payables, and Credit: Cash at bank
50
Payment made to a supplier who supplied goods on credit.
Receipt of a long-term bank loan.
Payment of a long-term bank loan.
Receipt of goods purchased on credit from a supplier. a
In double-entry bookkeeping, which of the following statements is true?
Debit entries either decrease assets or increase income.

51
Credit entries either increase income or decrease liabilities.
Credit entries either decrease liabilities or increase assets.
Debit entries either increase expenses or decrease liabilities. d
Riga Ltd offers a 4% early settlement discount to any customer who pay within 7 days of receiving an invoice. Riga Ltd sold goods
priced at £1,500 on credit to a customer who is expected to take advantage of the early settlement discount.
What is the double-entry to record this transaction (ignore VAT)?

52
Debit: Trade receivables: £1,500, Credit: Revenue: £1,500
Debit: Trade receivables: £1,440, Credit: Revenue: £1,440
Debit: Revenue: £1,440, Credit: Trade receivables: £1,440
Debit: Revenue: £1,500, Credit: Trade receivables: £1,500 b
Tallinn Ltd purchased goods on credit from Oslo Ltd. When Tallinn Ltd recorded the purchase invoice in its ledgers, it did not
expect to take advantage of the early settlement discount terms.However, Tallinn Ltd has now decided to take advantage of the
early settlement discount terms and make early payment to Oslo Ltd.
What double-entry should Tallinn Ltd use to record the payment made to Oslo Ltd (ignore VAT)?
53
Debit: Cash at bank, Debit: Purchases, Credit: Trade payables
Debit: Trade payables, Debit: Purchases, Credit: Cash at bank
Debit: Trade payables, Credit: Cash at bank, Credit: Purchases
Debit: Trade payables, Credit: Cash at bank c
Virgil made a sale on credit at a list price of £10,000, an amount which was then subject to trade discount of 10%. In addition,
settlement discount of 5% was available to the customer if they paid within 14 days of receipt of invoice. At the point the sale,
Virgil did not believe that the customer would take advantage of the early settlement discount terms.
54
What accounting entries would Virgil make in the nominal ledger to record this transaction (Ignore VAT)?
Debit Receivables £8,640, Credit Revenue £8,640

Debit Receivables £9,600, Credit Revenue £9,600
Debit Receivables £9,000, Credit Revenue £9,000 c
Joe made sales of £33,300, excluding VAT and purchases of £33,300 including VAT. All sales and purchases are on credit and
subject to VAT at 20%
What amount was recorded for receivables?

55
£33,300
£39,960
£27,750
£6,660 b
Which of the following would, on their own, be the cause of a debit balance of £100 on the suspense account?
i. A £100 telephone bill being debited to the electricity account.

ii. The exception report showed £100 paid from the business bank account and correctly recorded in cash at bank, could not be
matched by the accounting system and so had been posted to a suspense account.
56
(i) only
(ii) only
Both (i) and (ii)
None of the options b
Jordan purchased goods on credit from Alex at a cost of £2,400 including VAT at the standard rate of 20%. Both Jordan and Alex
are required to account for VAT.
What double-entry should Jordan use to record the purchase of goods from Alex?
57
Debit: Payables £1,920, Debit: VAT £480, Credit: Purchases £2,400
Debit: Purchases £2,880, Credit: Payables £2,400, VAT £480
Debit: Purchases £1,920, Debit: VAT £480, Credit: Payables £2,400
Debit: Purchases £2,000, Debit:VAT £400, Credit: Payables £2,400 d
Ike and Tina have been in partnership since 1.1.20X5, sharing profits equally.
At the start of 20X5, Ike has a balance on his capital account of £100,000 and Tina has a balance of £200,000. Interest on capital
is to be paid at 5% p.a. Ike draws an annual salary of £40,000 and Tina £60,000. During the year 20X5, net profits were £450,000.
During the year Ike had drawings of £35,000 and Tina had drawings of £40,000.
58
Calculate (to the nearest pound) the balance on Tina's current account at 31.12.X5.
197,375
197,500
397,375
397,500
b
Madelaine, Mary and Anna are in partnership, sharing profits equally. Each partner has contributed capital of £20,000, and Mary
has made a loan of £105,000 to the partnership. Interest of 5% is payable on all capital and loan balances outstanding at the end
of each year. Net profit for the year after loan interest is £90,000.
Which TWO of the following make up Mary's total appropriation of profit for the year?
59
✓Interest on capital of £1,000
✓Interest on capital of £6,250
✓Profit share of £29,000
✓Profit share of £31,750 a,c
Which of the following would appear as a debit to a partner's current account?
Capital withdrawn
60
Interest on capital
Share of net loss
Interest on loan from fellow partner c
The following information has been extracted from the payroll of Radley & Co, a partnership, for June.
£
Gross wages and salaries 127,600
PAYE 31,900
Employee NIC 11,484
Employer NIC 14,036
61
What is the total wages and salaries expense to be included in the profit and loss account for June?
£113,564
£185,020
£141,636
£127,600 c
D and I are in partnership, sharing profits equally. D: £163,500, I:
£149,100, C: £47,400 (1
On 1 July 20X7 C joins the partnership. Under the new partnership agreement profits will be shared by D, I and C in the ratio of 5: Mark)
3: 2 respectively with the following salaries: DIC
I £30,000 pa £££
C £36,000 pa 1 Jan to 30 June
Profit accrues evenly over the year. The partnership profit for the year ended 31 December 20X7 was £360,000. £180,000 90,000
62 90,000
At 31 December 20X7 how should the profits for the year be appropriated? 1 July to 31 Dec
Salaries 15,000 18,000
D: £147,000, I: £154,200, C: £58,800 Profit (£180,000 -
D: £147,000, I: £124,200, C: £22,800 £15,000 - £18,000)
D: £163,500, I: £131,100, C: £29,400 73,500 44,100 29,400
D: £163,500, I: £149,100, C: £47,400 d ______ ______
Partnership salaries are
appropriations of
profit. They affect
neither the
partnership’s net profit
available for
appropriation nor the
cash position, so
Statement 1 is true.
Interest on partners’
drawings is also a
appropriation of
available profit. It does
63 not affect the amount
The following statements have been made by a colleague about accounting for partnerships: of profit available for
appropriation, so while
Statement 1 - Partners' salaries affect neither the amount of net profit available for appropriation, nor the partnership's cash it does not affect the
position. cash position
Statement 2 - Interest on partners' drawings affects the amount of net profit available for appropriation but not the Statement 2 is false
partnership’s cash position. therefore. Salaries to
employees, and
interest on partners’
Identify whether these statements are true. loans, affect net profit
available for
Statement 1 is true but Statement 2 is false. appropriation while
Statement 1 is false but Statement 2 is true. drawings, rather than
Both Statement 1 and 2 are true. interest on them, affect
Neither Statement 1 nor Statement 2 are true. a the cash position.
Simon, Paula and Randy are in partnership, sharing profits in the ratio 3:2:1.
The partnership agreement provides that Simon is to draw an annual salary of £20,000 and Paula £10,000.
64
Capital introduced was £50,000, £40,000 and £30,000 respectively, and interest on capital is to be paid at 10% per annum. Net
profit for 20X5 was £200,000.
Calculate the amount of profit that will be appropriated to Simon.
£25,000
£79,000
£100,000
£104,000
Arthur and Bernie are in partnership, sharing profits and losses in the ratio 2:1. Their year end is 30 June.
On 1 January 20X4 Charlie joined the partnership and the new profit sharing ratio became 5:3:2 to Arthur, Bernie and Charlie
respectively.
The profit for the year ended 30 June 20X4 was £380,000, after charging an expense of £20,000 which related to the first 6
months of the year. The remainder of the profit accrued evenly over the year.
65
What is Bernie's total profit share for the year ended 30 June 20X4?
£117,333
£114,000
£120,333
£120,000 c
Jonquil and Fred went into business together on 1 January 20X4 without a formal partnership agreement. At that date Jonquil
contributed £60,000 fixed capital to the business and Fred contributed £80,000 fixed capital. On 1 October 20X4 Fred made a
loan to the partnership of £50,000.
To how much, if any, interest are the partners together entitled in respect of their capital and loan for the year ended 31
66 December 20X4?
£Nil
£625
£2,500
£7,625 b
F, G and H are partners sharing residual profits in the ratio 3:2:1. The partnership agreement provides for interest on capital at
the rate of 6% per annum and for a salary for G of £10,000 per annum. Net profit for 20X7 was £100,000 and the balances on
partners' capital accounts during the year were: F £40,000; G £30,000; H £20,000.
What is H’s share of residual profits for 20X7?

67
£14,100
£15,300
£28,200
£42,300 a
Vinnie and Matilda have been in partnership for many years, sharing profits equally.
The partnership agreement provides that Vinnie is to draw an annual salary of £10,000 and Matilda £20,000. There is no interest
on capital. On 1 July 20X5, Drus was promoted to become a partner. Drus will draw an annual salary of £5,000, and the new
profit sharing ratio is 2:2:1, Drus receiving the smallest share. Net profit for y/e 31.12.20X5 was £600,000.
68
Calculate the amount of profit that will be appropriated to Drus.
£56,500
£59,000
£113,000
£113,500 b
Given below is an extract from a company's statement of financial position:
£
Ordinary shares of £0.50 each 500,000
Share premium account 100,000
Retained earnings 300,000
_______
900,000
69
The day after this statement of financial position was drawn up the company made a 1 for 4 rights issue at a price that was at a
25% discount to the current market price of the shares of £1.20.
What would be the balance on the share premium account be after the rights issue?
50,000
100,000
150,000
200,000 d
A company is preparing its financial statements for the year ending 31 March 20X4. The initial trial balance has the following
figures relating to tax:
£
Tax payable at 1 April 20X3 21,200
Tax agreed with HMRC and paid during the year ended 31 March 20X4 19,500
70
The estimated tax liability for the year ended 31 March 20X4 is £26,700.
The figure for tax expense in the company’s statement of profit or loss will be:
£19,500
£25,000
£26,700
£28,400 b
Which of the following transactions would initially be recorded in a company's journal?
Bonus issue of shares.

71
Purchase of goods for cash from a supplier.
Redemption of preference shares.
Sale proceeds of non-current assets. a
Walt plc's statement of profit or loss for the year to 31 August 20X4 shows tax expense of £67,920. In its statement of financial
position at that date tax payable is £54,740. During the reporting period Walt plc paid HMRC £50,000 in respect of tax for the
year ended 31 August 20X3, but subsequently received a refund from HMRC for £3,000.
At 31 August 20X3 Walt plc's tax payable balance in its statement of financial position was:
72
£33,820
£36,820
£47,000
£60,180 a
The cost of a business's non-current assets is £24,000. The directors have to choose between charging depreciation at 10% per
annum by the straight line method and charging depreciation at 10% per annum by the reducing balance method.
How much greater will the profits of the business be over three years if the reducing balance rather than the straight line
73 method is adopted?
£669
£696
£966
£969 b
School plc is a large company with a share capital of 4 million 25p equity shares. To raise funds it has made a 1 for 5 rights issue
of its equity shares at £2 per share. The rights issue was fully taken up but only £1.5 million had been paid up at the end of the
reporting period, 30 June 20X4. The only entry has been to debit cash at bank with £1.5 million with the other side taken to the
suspense account.
74
On its adjusted trial balance School plc should:
Debit Other receivables £100,000, Credit Share capital £200,000, Credit Share premium £1,400,000
Debit Suspense £1,500,000, Debit Other receivables £100,000, Credit Share capital £200,000, Credit Share premium £1,400,000
Debit Suspense £1,500,000, Debit Other receivables £100,000, Credit Share capital £800,000, Credit Share premium £800,000
Credit Share capital £200,000, Credit Share premium £1,300,000 b
As at 1 June 20X8 Fara plc had 200,000 25p equity shares, which it issued in 20X2 at 80p each fully paid. It also had 100,000 £1
5% irredeemable preference shares issued at par in 20X3. On 31 January 20X9 Fara plc made a further issue of 50,000 £1
irredeemable 5% preference shares at £1.20 fully paid. On the same date Fara plc made a 1 for 5 bonus issue of equity shares.
Fara plc wishes to use the share premium account in respect of the bonus issue.
75 In its statement of financial position as at 31 May 20X9 Fara plc will have share premium of:
£100,000
£110,000
£120,000
£150,000 b
In the year ended 31 December 20X8 Vulcan plc, a retailer, had sales totalling £4,200,000. The mark-up was 25% of cost.
Inventories at 1 January 20X8 had a cost of £600,000 and at 31 December 20X8 of £680,000.
What was the total of the company's purchases during the year ended 31 December 20X8?
76
£3,280,000
£3,360,000
£3,440,000
£3,830,000 c
Which THREE of the following would be included in current liabilities in a company's financial statements?
✓Allowance for receivables

77 ✓Bank overdraft
✓Tax payable
✓Share capital
✓Accrued interest charges b,c
The bookkeeper at Boris Ltd has identified the following information, but is seeking assistance in preparing the statement of cash
flow:
£
Profit before tax 100,000
Depreciation 10,000
Interest paid 12,000
Finance cost 11,000
Tax paid 4,000
Increase in payables 15,000
78
Decrease in inventory 2,000
Increase in receivables 5,000
What is the cash generated from operations figure for Boris Ltd in its statement of cash flow?
117,000
109,000
93,000
133,000 d
The Partnership Act of 1890 says:
i. No interest on capital should be allowed

ii. Profits should be shared equally between partners
iii. Interest on a loan is allocated at a rate of 8%
iv. Partners should receive a salary
79
Which of the above statements are correct?
All of the above

i and ii
i, ii and iii
i and iii
b
All companies must prepare their Financial statements under International Accounting Standards.
80 True
False
b
Posh and Becks have been in partnership since 1/1/X6. They agree to share profits equally.
At the start of X6, Posh has a credit balance on her capital account of £200,000, Becks has a credit balance on his capital account
of £300,000. Interest on capital is paid at a rate of 5%.
Posh has a salary of £40,000 per annum; Becks has a salary of £30,000 per annum. In X6 profits were £250,000. During the year
Posh made drawings of £45,000; Becks made drawings of £50,000.
81
Calculate the balance on Posh's current account at 31/12/X6.
£72,500 Credit balance

£72,500 Debit balance
£82,500 Credit balance
£82,500 Debit balance c
A company receives rent from a large number of properties. The total received in the year ended 31 October 20X7 was
£325,600.
The following are the amounts of rent in advance and in arrears at 31 October 20X6 and 20X7.
31 October 31 October
20X6 20X7
£ £
82 Rent received in advance 18,300 19,200
Rent in arrears (all subsequently received) 28,700 23,400
What amount of rental income should appear in the company's statement of profit or loss for the year ended 31 October 20X7?
£340,200
£331,800
£325,600
£319,400 d
You have extracted the following information from the accounting records of Boferak plc:
£
Property plant and equipment carrying amount B/F 54,000
Property plant and equipment carrying amount C/F 59,000
Depreciation 12,000
Profit on disposals 1,000
Proceeds on disposal 10,000
83
Included in year end payables is an accrual of £5,000 for PPE acquired during the year but still to be paid.
What is the figure for 'Cash paid to acquire PPE', contained in the Investing section of the statement of cash flow?
26,000
21,000
28,000
23,000 b
Michael purchases goods for resale on credit from Julie at a cost of £3,240, inclusive of VAT at 20%. Both Michael and Julie are
required to account for VAT.
What accounting entries are required for Michael to record this transaction?
84
Debit Purchases £3,340, Debit VAT £648, Credit Payables £3,888
Debit Purchases £2,700, Debit VAT £540, Credit Payables £3,240
Debit Payables £3,240, Credit Purchases £2,700, Credit VAT £540
Debit Payables £3,888, Credit Purchases £3,340, Credit VAT £648 b
At the end of its first year of trading on 30 September 20X4 Sage Ltd's net assets are £185,621. Equity is made up of, Share
Capital, Share Premium Account, Retained Earnings, and General Reserve. It has share capital of £30,000 made up of 50p equity
shares issued at £1 each, and a retained earnings reserve of £105,621. There have been no other entries in the share premium
account other than those in relation to the original share issue.
85 In relation to Sage Ltd's statement of financial position at 30 September 20X4 which of the following statements is true?
It has a general reserve of £50,000.

It has share premium of £20,000.
It has a general reserve of £20,000.
It has share premium of £50,000. c
Vargo plc is finalising its financial statements as at 30 June 20X4. In its initial trial balance at that date Vargo plc has a figure for
tax payable as at 1 July 20X3 of £32,810. The total tax charge in the statement of profit or loss for the year to 30 June 20X4 is
£35,450, and tax paid in the year was £31,960.
The tax payable balance that will appear in Vargo plc’s statement of financial position as at 30 June 20X4 is:
86
£29,320
£34,600
£35,450
£36,300
d
Astral Ltd sold goods to Cosmic Ltd priced at £900. Astral Ltd offered Cosmic Ltd a discount of 4% for early settlement within 7
days of invoice date. At the point of sale, Astral Ltd did not expect Cosmic Ltd to take advantage of the early settlement discount
terms. However, Cosmic Ltd did subsequently pay within 7 days of invoice date to take advantage of the early settlement
discount terms.
87
What accounting entries should Astral Ltd post to account for the settlement of the amount due from Cosmic Ltd (Ignore VAT)?
Debit Cash £900, Debit Revenue £37.50, Credit Receivables £937.50

Debit Cash £900, Debit Receivables £900
Debit Cash £864, Debit Revenue £36, Credit Receivables £900
Debit Cash £864, Credit Receivables £864 c
Which of the following best explains the imprest system of petty cash control?
The system ensures that there is always sufficient petty cash available.
88
The amount of petty cash in total must never fall below the imprest amount.
Each month an equal amount of cash is transferred into petty cash.
At any time petty cash in the box plus petty cash vouchers equal the imprest amount. d
Meteor Ltd purchased goods from Comet Ltd at a cost of £1,200. Meteor Ltd was offered an early settlement discount of 4% for
early settlement within 7 days of invoice date. At the point of purchase, Meteor Ltd expected to take advantage of the early
settlement discount terms. However, Meteor Ltd did not pay within 7 days of invoice date, instead, paying after 30 days.
89
What accounting entries should Meteor Ltd post to account for the settlement of the amount due to Comet Ltd (Ignore VAT)?
Debit Payables £1,152, Debit Revenue £48, Credit Cash £1,200

Debit Payables £1,200, Debit Purchases £50, Credit Cash £1,250
Debit Payables £1,200, Credit Cash £1,200
Debit Payables £1,152, Debit Purchases £48, Credit Cash £1,200 d
At 31 January 20X5 Watchet Ltd had an issued share capital of £250,000 in 25p shares. All were issued at par several years ago.
During the year the following transactions took place.
1 May 20X5 500,000 shares issued at 75p

30 September 20X5 1 for 25 bonus issue
25 January 20X6 Dividend of 3.5p per share paid
90
What is the balance on the share premium account after these transactions, assuming that the share premium account is used
wherever possible?
£182,500
£220,000
£235,000
£360,000 c
School plc is a large company with a share capital of 4 million 25p equity shares. To raise funds it has made a 1 for 5 rights issue
of its equity shares at £2 per share. The rights issue was fully taken up but only £1.5 million had been paid up at the end of the
reporting period, 30 June 20X4. The only entries made, were to debit cash at bank and credit suspense account with £1.5m.
91
On its adjusted trial balance School plc should:
Debit Other receivables £100,000, Credit Share capital £200,000, Credit Share premium £1,400,000
Debit Suspense £1,500,000, Debit Other receivables £100,000, Credit Share capital £200,000, Credit Share premium £1,400,000
Debit Suspense £1,500,000, Debit Other receivables £100,000, Credit Share capital £800,000, Credit Share premium £800,000
Credit Share capital £200,000, Credit Share premium £1,300,000 b
In the absence of a partnership agreeement the provisions of the Partnership Act 1890 apply.
Which THREE of the following are provided for by the Act?
92 ✓Interest on capital
✓No salaries
✓Equal profit shares
✓Interest on loans
✓Interest on drawings b,c,d
The accountant at Kingston Ltd is struggling to prepare the financing activities section of the statement of cash flow. In
particular, she is having trouble identifying the cash raised from share issues.
You are given the following information:
£
Share Capital B/f (£1 shares) 100,000
Share Capital C/f (£1 shares) 160,000
Share Premium account B/F 40,000
Share Premium account C/F 60,000
93
The company made a 1 for 2 bonus issue, utilising the share premium account as far as possible. This was then followed by a
share issue for cash.
What are the proceeds from the share issue recognised in the financing section of the statement of cash flow?
70,000
80,000
60,000
10,000 a
The following information is extracted from the accounting records of Spangle Ltd for the month of July 20X4:
PAYE £35,000
Employer’s NIC £17,100
Employees’ NIC £14,700
Net amount paid to employees £125,000
94
What was Spangle Ltd’s wages expense for the month of July 20X4?
£191,800
£160,000
£174,700
£142,100 a
Peardrop Ltd is a VAT-registered business. During the three months’ ended 30 September 20X4 it entered into the following
transaction:
Purchase of goods for resale £28,000

Purchase of new car for use in the business £16,500
Payments to HMRC £2,300
Sales £55,000
95
All purchases and sales are inclusive of VAT at 20%.
At 1 July 20X4, Peardrop Ltd owed HMRC £2,200. What was Peardrop Ltd’s VAT liability at 30 September 20X4 (work to nearest
£)?
£1,650
£4,500
£6,700
£4,400 d
Carbel Ltd made a profit for the year of £18,750, after accounting for depreciation of £1,250. During the year, non-current assets
were purchased for £8,000, receivables increased by £1,000, inventories decreased by £1,800 and payables increased by £350.
What was Carbel Ltd’s increase in cash and equivalents during the year?
96
£10,650
£12,450
£13,150
£22,350 c
Churro plc recognised a provision of £25,000 in respect of a legal claim for the year ended 30 June 20X5. In the following year
the company settled the claim at a cost of £23,300.
What amount should Churro plc charge or credit to the statement of profit or loss for the year ended 30 June 20X5 in respect of
the legal claim?
97
£1,700 credit
£1,700 charge
£23,300 credit
£23,300 charge a
Mr. Bliss owns a business.
Although most of the business expenses are paid by cash, Mr. Bliss on certain occasions uses his own personal cheque book to
pay some business expenses.
His accountant has asked to see his personal cheque book stubs so that some of these amounts may be included as expenses in
the statement of profit or loss.
Mr. Bliss is confused about this and asks, "If you are going to use my personal cheque book to prepare the financial statements,
98 why don't you include all of the cheques as expenses instead of only some of them?"
The main reason why the accountant does not include all of the cheques is because:
Mr. Bliss has not entered the full details of some of the expenditure on the cheque stubs and, because of this uncertainty, it is
more prudent not to include them in the financial statements.
There are a large number of immaterial cheque payments which would take a long time to examine.
The personal expenses of the owner are separate from those of the business and are not relevant to the statement of profit or
loss. c
Goods invoiced at £36 had been returned by Crabby Ltd to the supplier for a full refund. The only accounting entries made for
the return were to debit the purchases account with £63 and credit the suspense account with £63.
Which of the following journal entries should be made to correctly record the return in the nominal ledger?
99
Dr Suspense £63, Cr Purchases £63
Dr Suspense £63, Cr Trade Payables £63
Dr Suspense £63, Dr Trade payables £36, Cr Purchases £99
Dr Trade payables £27, Cr Purchases £27 c
The following information relates to a business's year-end inventory of finished goods:
Direct costs of materials and labour Production overheads incurred Expected selling and distribution
overheads Expected selling price
Inventories category 1 2,964 2,520 576
6,960
14,450
100 3,072
15,936 6,816 984
24,482
At what amount should finished goods inventory be stated in the company's statement of financial position?
£15,936
£22,752
£22,514
£21,768 c
The following information has been extracted from the payroll of Radley & Co, a partnership, for June.
£
Gross wages and salaries 127,600
PAYE 31,900
Employee NIC 11,484
Employer NIC 14,036
101
What is the total wages and salaries expense to be included in the profit and loss account for June?
£113,564
£185,020
£141,636
£127,600 c
Eiris plc has the following information in its financial statements relating to machinery as at 31 July:
20X4 20X3
£ £
Cost 320,000 260,000
Accumulated depreciation 97,500 90,000
Carrying amount 222,500 170,000
During the year to 31 July 20X4, the following transactions occurred in relation to machinery:
102
Additions £142,000
Sales proceeds from disposals £94,000
Depreciation charge £31,400
What is Eiris plc's profit or loss on disposals of machinery in the year ended 31 July 20X4?
£35,900 loss
£35,900 profit
£4,500 profit
£4,500 loss b
Harry posts a debit for wages to the rent account in error.
What type of error is this?
103
Commission
Omission
Error of principle
Compensating error a
Kieran has an allowance for receivables of £3,000 at 31 December 20X7. During the year £50 had been received in respect of a
debt previously written off, and an allowance for receivables of £3,100 is to be carried down at 31 December 20X8.
What is the irrecoverable debts figure for the year to 31 December 20X8?
104
£50 charge
£150 charge
£50 credit
£150 credit a
After settling its tax liability on profits for the year ended 30 June 20X3, Spiral Ltd has a debit balance of £500 relating to tax
payable included in its trial balance extracted at 30 June 20X4. Spiral Ltd estimated that its income tax liability for the year ended
30 June 20X4 was £8,000.
What amounts of tax should Spiral be showing in its financial statements?

105
Statement of profit or loss: £8,000 / Statement of financial position: £8,000
Statement of profit or loss: £8,000 / Statement of financial position: £7,500 b
Marie’s draft accounts show a loss of £25,000 for the year. Upon investigation, you discover the following:
1. A purchase of plant and equipment on the last day of the year costing £3,000 had had been incorrectly recorded as a repair
expense.
2. Cash of £800, received in respect of a debt written off last year had been credited to receivables.
106 3. Closing inventory includes items costing £2,000 which were sold and delivered to the customer on the year end date.
What is the adjusted loss for the year?
£25,200
£23,200
£30,800
£26,800 b
A plc's share capital consists of 400,000 25p equity shares all of which were issued at a premium of 25%. The company made a 2
for 5 rights issue at £1.50 per share. A plc correctly debited cash at bank but recorded the other side of the transaction in the
suspense account.
107
What adjustment should A plc make to correctly record the rights issue?
Debit Suspense £240,000, Credit Share capital £160,000, Credit Share premium £80,000
Debit Suspense £60,000 Credit Share capital £40,000, Credit Share premium £20,000 b
A company buys a machine for £10,000. It has an estimated residual value of £500, a useful life of ten years and the company
depreciates the asset using the straight line method.
After four years the company decides that the asset has no residual value.
The depreciation charge for the fifth year will be

108
£1,033
£1,000
£967
£950
a
Lemon plc draws up financial statements to 31 December in each year. It pays telephone line rental charges for each year ending
30 April in two equal instalments, on 1 May and 1 November, in advance. It also pays telephone call charges quarterly in arrears
at the end of February, April, July and November. The total telephone line rental for the year to 30 April 20X4 was £6,300.
Telephone call charges for the year commencing 1 July 20X3 were £5,820.
What were Lemon plc's prepayment for line rental and accrual for call charges in its statement of financial position at 31
109
December 20X3?
Prepayment for line rental £2,100, Accrual for call charges £485
Prepayment for line rental £2,100, Accrual for call charges £970 a
On 1 April 20X7 a sole trader paid £6,380 in local property taxes for the year ending 31 March 20X8. This was an increase of 10%
on the charge for the previous year.
What is the correct charge for local property taxes in her profit and loss account for the year ended 31 December 20X7?
110
£4,640
£6,220
£6,235
£6,540 c
Paul and Pete are in partnership, sharing profits in the ratio 3 : 2. On 1 July 20X7 they admitted Paul’s son Rob as a partner. Paul
guaranteed that Rob’s profit share would not be less than £30,000 for the six months to 31 December 20X7. The profit sharing
arrangements after Rob’s admission were 5:3:2 for Paul, Pete and Rob respectively. The profit for the year ended 31 December
20X7 is £280,000, accruing evenly over the year.
111 What should Paul’s final profit share be for the year ended 31 December 20X7?
£30,000
£98,000
£152,000
£154,000 c
Fred and George are in partnership sharing profits and losses in the ratio Fred 60%, George 40%.
Their bookkeeper has by mistake entered the current year's profits in the books as shared equally between them.
What entry needs to be made to correct this error?

112
Debit: George's current account Credit: Fred's current account
Debit: Fred's current account Credit: George's current account
Debit: Fred's appropriation account Credit: George's current account
Debit: George's current account Credit: Fred's appropriation account a
For many years Meadows plc has experienced falling prices for raw material M, and has kept constant inventory levels. It uses
the AVCO inventory valuation method.
If Meadows plc had used the FIFO valuation method, in the financial statements this would result in:
113
Lower cost of sales and higher closing inventory value
Lower cost of sales and lower closing inventory value
Higher cost of sales and lower closing inventory value
Higher cost of sales and higher closing inventory value c
The following information is available about Celine’s business at 31 October 20X4:
£
Motor van 14,000
Loan (repayable in 4 equal annual instalments starting 1 January 20X5) 100,000
Trade receivables 23,800
Bank balance (a debit on the bank statement) 3,250
Accumulated depreciation 7,000
Trade payables 31,050
Inventory 12,560
Petty cash 150
114
Rent payable 1,200
Allowance for receivables 1,500
What are the correct totals for current liabilities and current assets in Celine’s statement of financial position as at 31 October
20X4?
Current assets: £35,010 / Current liabilities: £34,300

Current assets: £35,010 / Current liabilities: £60,500 d
The Companies Act in the UK requires the following documents in the financial statements:
a profit and loss account, a balance sheet, a directors report, an auditors report.
115 a profit and loss, statement of financial position, directors report and an auditors report.
a statement of financial position, an income statement, a statement showing changes in equity, a statement of cash flow,
accounting policies and explanatory notes.
a profit and loss account, a balance sheet, a cash flow statement, a directors report and an auditors report. b
The VAT account in Britney Ltd's nominal ledger currently shows output tax and input tax for the quarter at £232,618 and
£142,319 respectively. A review of the account highlights the following:
1. £5608 of VAT on invoices received has been posted to output tax
2. VAT of £4201 on sales has been posted to the debit of the VAT account
116
3. VAT on a purchase invoice with a total invoice value (including VAT) of £126 has not been recorded at all.
The correct balance on the VAT account is:
£93,092 receivable
£87,464 payable
£84,464 receivable
£93,092 payable c b
At 30 September 20X3 Jeff plc’s equity contained the following balances:
Equity shares of £1 each: £40m
Share premium account: £20m
During the year ended 30 September 20X4, the following transactions took place:
1 - 1 December 20X3 - A one-for-four bonus issue, using the share premium account
117
2 - A fully subscribed one-for-two rights issue at £1.80 per share.
What are the balances on each account at 30 September 20X4?
Equity share capital: £75m / Share premium: £21m

Equity share capital: £70m / Share premium: £35m c
Extracts from the financial statements of Double Ltd showed balances at 31 December as follows:
20X9 20X8
£ £
£1 Share capital 300,000 120,000
Share premium 260,000 100,000
Bank loan 350,000 50,000
118
A bonus issue of 1 share for every 12 held at 1 January 20X9 was made. An issue of shares for cash was made on 1 October 20X9.
Interest on the bank loan of £12,000 was paid in 20X9.
What was the net cash inflow from financing activities for the year ended 31 December 20X9?
£605,000
£480,000
£640,000
£617,000 c
Which two of the following are fundamental principles of the IESBA Code of Ethics for Professional Accountants?
A Independence
B Confidentiality
C Professional courtesy
119 D Objectivity
E Honesty
A and D
C and E
B and D
A and B c
On 1 August 20X4, Neptune Ltd had inventory of £380,000. During August 20X4, sales totalled £650,000 and purchases
£480,000. On 31 August 20X4 a fire destroyed some of the inventory. The undamaged goods were valued at £220,000. The
business makes all sales with a standard gross profit margin of 30%.
Based upon this information, what was the cost of the inventory destroyed in the fire?
120
£185,000
£130,000
£405,000
£260,000 a
Banana Ltd paid £12,150 against an invoice, taking advantage of an early settlement discount of £150. When Banana Ltd had
originally received and recorded the invoice they had not expect to have sufficient funds to allow them to take the discount.
121
What is the journal entry to record the payment of the invoice?
Debit Cash at bank £12,300, Credit Payables £12,300

Debit Payables £12,300 Credit Cash at bank £12,300
Debit Cash at bank £12,150, Debit Purchases £150, Credit Payables £12,300
Debit Payables £12,300, Credit Cash at bank £12,150, Credit Purchases £150 d
A firm's cash at bank account at 30 June 20X1 shows a balance at the bank of £5600. Comparison with the bank statement at the
same date reveals the following differences:
Unpresented cheques 540

Bank charges 75
Dishonoured cheque 1006
Uncleared lodgements 1060
122
The correct cash at bank account balance at 30 June 20X1 is:
6531
4985
5525
4519 d
A business compiling its financial statements for the year to 31 October each year pays rent quarterly in advance on 1 January, 1
April, 1 July and 1 October each year. The annual rent was increased from £96,000 to £120,000 per year from 1 March 20X7.
What figure should appear for rent in the statement of profit or loss for the year ended 31 October 20X7 and in the statement of
123 financial position at that date?
Statement of profit or loss: £112,000 Statement of financial position: £20,000

Statement of profit or loss: £110,000 Statement of financial position: £20,000 c a
Pluto Ltd’s trial balance at 31 December 20X5 included a credit balance of £3,400 on its tax liability account, having already
settled the tax liability for the year ended 31 December 20X4 during the year. Pluto Ltd estimated that its income tax charge
arising on its profits for the year ended 31 December 20X5 at £67,900.
124
What amounts should be included in Pluto Ltd's financial statements for the year ended 31 December 20X5 in respect of tax?
Statement of profit or loss: £67,900 tax charge / Statement of financial position: £67,900 tax payable
Statement of profit or loss: £71,300 tax charge / Statement of financial position: £67,900 c
Brooker paid £130,000 to trade payables during the year ended 31 December 20X5.
At the beginning of the year payables totalled £11,750 and at the end they totalled £13,550. The value of closing inventory was
£8,200. Cash purchases were £2,800. The cost of sales for the year was £148,000.
125 What was the value of opening inventory?
£21,600
£24,400
£18,800
£25,200 a
The inventory value for the financial statements of a business for the year ended 31 December 20X7 was based on an inventory
count on 4 January 20X8, which gave a total inventory value of £314,400. Between 31 December and 4 January 20X8, the
following transactions took place:
£
Purchases of goods 8,400
Sales of goods (profit margin 40% on sales) 16,000
126
Goods returned to supplier 1,000
What adjusted figure should be included in the financial statements for inventories at 31 December 20X7?
£316,600
£314,400
£314,200
£307,800 a
On 1 January 20X4 a company receives news that a major customer has been declared bankrupt. The amount he owed was
£25,000 and this had been allowed for as doubtful at 31 October 20X3, the end of the previous reporting period.
Also on 1 January 20X4 a company receives £12,000 from another customer whose debt was written off in the previous period
as they had left the country and were not expected to return.
127
What entries are required as at 1 January 20X4?
Debit Allowance for receivables 25,000, Credit Receivables account 13,000

Debit Irrecoverable debts written off 13,000, Credit Receivables account 25,000
Debit Irrecoverable debts written off 25,000, Credit Allowance for receivables 25,000
Debit Allowance for receivables 13,000, Credit Irrecoverable debts written off 13,000 b
A business statement of profit or loss for the year ended 31 December 20X4 showed a net profit of £101,400. It was later found
that £20,000 paid for the purchase of a motor van on 1 January 20X4 had been debited to the motor expenses account. It is the
company's policy to depreciate motor vans at 25% per year.
What would the net profit be after adjusting for this error?
128
£86,400
£121,400
£116,400
£96,400 c
A company purchases a machine for £64,000. It has no residual value and an expected useful life of 8 years. It is depreciated
using the straight line method for two years when the company decides to change the depreciation method to reducing balance
at 30%.
The annual depreciation for the first year under the new method will be:
129
£8,000
£14,400
£19,200
£9,408 b
At 30 June 20X6 Ollie plc’s equity contained the following balances:
£
Share capital
Ordinary shares of £1 each 80m
Share premium account 40m
During the year ended 30 June 20X7, the following transactions took place:
130
1 September 20X6 A 1 for 2 bonus issue, using the share premium account.
1 January 20X7 A fully subscribed 1 for 3 rights issue at £1.80 per share.
What are the balances on each account at 30 June 20X7?
Share capital: 160,000,000, Share premium account: 72,000,000

Share capital: 192,000,000, Share premium account: 32,000,000 b
During March 20X9 a business paid out £23,550 in net wages to its employees. In respect of these wages, the following amounts
were shown in the statement of financial position at 31 March X9:
£
PAYE payable 4,620
131
National Insurance payable – employees' 2,830
– employer's 2,640
What were the employees' gross wages BEFORE deductions?
£28,170
£30,810
£31,000
£33,640 c
The VAT account in Salvador’s nominal ledger currently shows output tax and input tax for the quarter at £64,515 and £38,222
respectively. A detailed review of the account highlights the following:
£350 of VAT included on credit notes received has been debited to the VAT account
132 VAT of £1,750 on purchases has been posted to the credit of the VAT account
The correct amount payable to HM Revenue and Customs is:
£29,093
£24,893
£23,493
£22,093 c
Gardentime imports garden furniture. The furniture is transported by ship to Portsmouth and then taken by truck to a
warehouse in Bristol. The company is unsure whether the following expenses should be included in the cost of inventory:
Shipping costs to Portsmouth

Purchase price of furniture
133
Breakdown costs of a delivery truck which broke down between Portsmouth and Bristol while transporting furniture
Import duties
Which of the costs should be included in the cost of inventory in Gardentime's statement of financial position?
1, 2 and 3 only
2, 3 and 4 only
1, 2 and 4 only
1, 3 and 4 only c
At 30 September 20X7 a company has receivables totalling £128,000 and a specific allowance for receivables of £4,800 brought
forward from the previous year.
It has been decided to write off receivables totalling £10,500 and to adjust the allowance for receivables to £3,000.
134 The net receivables in the statement of financial position as at the year end of 30 September 20X7 will be:
£114,500
£120,500
£135,500
£141,500 a
Norman plc purchased a van on 1 October 20X7 for a total cost of £20,000 by paying £16,000 cash and trading in an old van. The
old van had cost £18,000 and the related accumulated depreciation was £12,200. The entry made in the accounting records for
this transaction was to debit the suspense account £16,000 and credit cash £16,000.
Which of the following journal entries is required to correctly reflect the purchase and disposal in Norman plc’s accounting
135
records?
Debit Van - cost £2,000, Debit Van – accumulated depreciation £5,800, Debit Disposal £8,200, Credit suspense £16,000
Debit Van - cost £20,000, Debit Van – accumulated depreciation £12,200, Credit Disposal £16,200, Credit suspense £16,000
Debit Van - cost £2,000, Debit Van – accumulated depreciation £12,200, Debit Disposal £1,800, Credit suspense £16,000
Debit Van - cost £20,000, Debit Van – accumulated depreciation £5,800, Credit Disposal £9,800, Credit suspense £16,000 c
Orange plc has a balance of £3,500 overdrawn in the cash at bank account at 30 September 20X1. The accountant is in the
process of reconciling this to the transaction report downloaded from the electronic banking system and has discovered the
following:
A cheque for £99 received from a credit customer, which was paid into the bank on the 27 September, has been dishonoured on
30 September.
136
Orange has been charged interest of £31 for the month of September.
A cheque for £200 which was sent to a supplier on 28 September has not yet been presented for payment.
What is the correct balance in Orange plc’s cash at bank account as at 30 September 20X1?
£3,370 debit
£3,432 credit
£3,630 credit
£3,830 credit c
Rory, Imogen and Charlotte are in partnership with fixed capital of £7,000, £3,000 and £2,000 respectively. Interest of 5% per
annum is given on capital. They share profits in the ratio 50:35:15.
In addition, Charlotte has a salary of £2,500 per annum, with Rory personally guaranteeing that Charlotte's total share of profits
will not be less than £6,600 per annum.
137
How will the profit of £25,000 for the year ended 31 July 20X3 be appropriated between the partners?
Rory: £11,300, Imogen: £7,815 Charlotte: £5,885

b
Tariq has been unable to calculate his business' profit or loss for the year ended 31 December 20X7 as fire destroyed most of his
accounting records. He has, however, been able to provide the following information.
Net assets at 31 December 20X6 were £31,600 and £42,900 at 31 December 20X7.
He introduced capital during the year of £6,000 cash.
He took cash drawings of £8,000 and goods with a selling price of £1,000. The cost of the goods was £700.
138
What was Tariq's profit for the year ended 31 December 20X7?
£3,400
£13,300
£14,000
£26,000 c
Your firm values inventory using the AVCO method. At 1 June 20X7 there were 100 units in inventory valued at £10 each. On 12
June, 50 units were purchased for £12 each, and a further 50 units were purchased for £15 each on 20 June. On 21 June, 160
units were sold for £20.00 each.
139
The value of closing inventory at 30 June 20X7 was:
£470
£2,350
£493
£1,880 a
The directors of Paphos plc wish to omit an item from the company’s financial statements on the grounds that it is commercially
sensitive. Information on the item would influence the users of the information when making economic decisions.
140 According to IAS 1 Presentation of Financial Statements the item is said to be:
Neutral
Prudent
Material
Substantial
c
Picasso Ltd sells digital cameras and has a year-end date of 30 November 20X8. Picasso accepted an order for 50 digital cameras
on 27 November at a selling price of £200 each. Picasso dispatched 20 cameras on 28 November, which were then received by
the customer on 30 November. The remaining 30 cameras were dispatched on the 29 November and received by the customer
141 on the 2 December. Picasso Ltd remains responsible for the goods until they are delivered to the customer.
How much revenue should Picasso Ltd recognise in the year ended 30 November 20X8 for the sale of the digital cameras?
£10,000
£6,000
£4,000
Nil c
Taylor Ltd has issued equity share capital of 250,000 shares with a nominal value of £0.50 each and a share premium account
balance of £100,000.
142 What accounting entries are required if Taylor Ltd was to make a bonus issue of one share for four held?
Debit: Share premium £31,250 / Credit: Share capital £31,250

Debit: Share capital £31,250 / Credit: Share premium £31,250
Debit: Share capital £62,500 / Credit: Share premium £62,500
Debit: Share premium £62,500 / Credit: Share capital £62,500 a
Asha, a trainee accountant, has prepared the extract below for a statement of cash flows. She is concerned she has made some
errors but is unsure which adjustments are incorrect.
Cash flows from operating activities £’000

Profit before tax: 560
Depreciation: (55)
Profit on disposal of a non-current asset: (36)
143 Increase in inventories: 9
Decrease in trade receivables: 15
Decrease in trade payables: (22)
Cash generated from operations: 471
What should the figure for cash generated from operations be once the errors have been corrected?
£513,000
£525,000
£551,000
£563,000 d
During 20X2, Harry received £500 rent in respect of the 12 months ended 31 March 20X2. During 20X2, Harry increased rent to
£800 and received payment in full for the 12 months ended 31 March 20X3.
The rental income for the financial year ended 31 December 20X2 and the closing balance in the Statement of Financial Position
144
at that date will be:
Rental Income £1,475 Accrual £200

Rental Income £1,475 Deferred income £200
Rental Income £725 Accrual £200
Rental Income £725 Deferred income £200 d
Bill, a sole trader from Harringey, has the following information:
Opening capital £22,000

Capital introduced £10,000
Cash taken for personal use £5,000
Closing capital £56,000
145
What profit did the business make in the year?
£24,000
£34,000
£29,000
£10,800 c
Bailey Ltd purchased a motor vehicle on 1st July 20X1. The motor vehicle was then depreciated in accordance with the
company’s normal accounting policy. A full year’s charge for depreciation is made in the year of acquisition, with none made in
the year of disposal.
The company traded in this vehicle for a new and improved model on 1st April 20X3. The carrying amount at the date of
exchange of the original vehicle was £18,750. Against the purchase of the new vehicle Bailey Ltd received a part exchange
146 allowance of £12,000. The cash price to purchase the new vehicle was £21,550.
The company consistently applies a 25% reducing balance policy to all its motor vehicles.
What was the profit or loss on disposal of the old motor vehicle?
Loss £6,750
Profit £6,328
Profit £422
Loss £7,000 a
Alan has a year end receivables balance of £860,000 after writing off irrecoverable debts in the year of £46,000. At the year end
he wants to make a specific allowance against a debt of £60,000. There was an opening allowance balance of £10,000.
What is the total charge in the Statement of Profit or Loss for irrecoverable debts?
147
£96,000
£136,000
£146,000
£149,000 a
Paul Ltd rents an office on 1 May 20X1. His rent is £600 per month, increasing to £650 after his first six rental payments. He paid
a deposit of £600 on 1 May and sets up a standing order for £600 to be paid on the last day of every month. He has debited the
rent expense with the cash payments but made no further entries.
148
What is the journal entry to adjust Paul Ltd’s rental expense for the year ended 31 December 20X1?
Debit Rent expense £100, Credit Accruals £100

Debit Prepayments £100, Credit Rent expense £100
Debit Rent expense £500, Credit Accruals £500
Debit Prepayments £500, Credit Rent expense £500 d
Which of the following reflect the concept of matching?
Valuing inventory at the lower of cost and NRV.

149 Depreciation.
Adding the profit for the year into the capital balance on the Statement of Financial Position.
Showing net assets and owners capital on the face of the Statement of Financial Position.
b
Ceri trades in CDs. At the beginning of the year, she had unsold CDs valued at £5,700. During the year she purchased CDs at
£9,500 of which £460 were returned to her supplier. At the year-end, £5,900 remained in stock.
150 At what value should cost of sales be stated?
£9,240
£9,300
£8,840
£9,760 c
Joey received and paid a business electricity bill for £1,200 on 1 November 20X0 in respect of 12 months to 30 September 20X0.
His account for the year ended 31 December 20W9 showed an accrual of £70.
151 What are the entries for the financial year ended 31 December 20X0?
Statement of Profit or Loss: Expense £1,200 / Statement of Financial Position: Accrual £100
Statement of Profit or Loss: Expense £1,200 / Statement of Financial Position: Prepayment £100
Statement of Profit or Loss: Expense £1,430 / Statement of Financial Position: Accrual £300
Statement of Profit or Loss: Expense £1,430 / Statement of Financial Position: Prepayment £300 c
While preparing the accounts for Odysseus’s business for the year ended 31 December 20X6, you discover that adjustments
need to be made in respect of the following.
(1) Odysseus had drawn goods from stock with a sales value of £300; the only entry made in the books had been to debit
drawings. The business has a consistent mark-up of 25%.
152 (2) At 1 January 20X6 there had been an allowance for receivables of £1,000. Odysseus wishes to create an allowance for 20X6 in
relation to a customer owing £1,000, making a 40% specific allowance.
What is the effect of these adjustments on the business’s net profit for the year ended 31 December 20X6?
Increase of £500
Increase of £840
Decrease of £840
Decrease of £250 b
A bank reconciliation is being prepared. Information is given below:
(1) The closing balance shown by the cash at bank account is £670 overdrawn.
(2) The bank has made a mistake in crediting the account with £110 belonging to another customer – an error not yet rectified.
(3) £120 received by the bank under a standing order arrangement has not been entered in the cash at bank account.
(4) Cheques totalling £5,629 have been drawn, entered in the cash at bank account and sent out to suppliers but not presented
153 for payment.
(5) Cheques totalling £5,577 have been received and entered in the cash at bank account but not yet credited to the bank
statements.
What is the closing balance as shown by the bank statement?
£848 overdrawn
£498 overdrawn
£492 overdrawn
£388 overdrawn d
What is the double entry to record drawings from stock made by a proprietor?
Debit: Wages / Credit: Purchases

154
Debit: Inventory / Credit: Drawings
Debit: Drawings / Credit: Inventory
Debit: Drawings / Credit: Purchases d
According to the Conceptual Framework the enhancing qualitative characteristics are: timeliness, comparability, verifiability and:
155 Understandability
Completeness
Reliability
Fully represented a
The accountant of Robinson Plc is preparing the statement of changes in equity for the year ended 30 September 20X8. The
company had an opening retained earnings balance at 1 October 20X7 of £172,300. The following balances and transactions
arose during the year:
Robinson Ltd issued 12,000 50p equity shares at a premium of £0.10 per share on 1 October 20X7
It paid a dividend totalling £2,400 on 31 January 20X8
156 Robinson Ltd made a bonus issue on 1 March 20X8 of 3,000 £0.50 equity shares utilising retained earnings
It made a loss for the year of £25,000
What is the closing balance of Robinson Plc’s retained earnings at 30 September 20X8?
£141,900
£143,400
£150,600
£193,400 b
The opening balance in Derek's 20X7 accounts for Motor Vehicle cost was £80,000. The accumulated depreciation account had
an opening balance of £38,000.
A car which was bought in 20X5 for £25,000 was traded-in during the year for a new car which would have cost £44,000 but an
allowance of £10,000 was given for the old car.
157 The company's depreciation policy is to charge 20% on cost at the year end. A full year's depreciation is charged in the year of
acquisition and none in the year of disposal.
Calculate the depreciation charge for 20X7.
£12,200
£21,800
£17,800
£19,800 d
Jordanhill Ltd is a manufacturing company and has been experiencing trading difficulties for some time. The directors have
concluded that the company is no longer a going concern and will prepare the financial statements on the break-up basis. The
company has a machine with a carrying value of £23,000 in the statement of financial position. If the machine were to be sold
the business has estimated that it would only get £14,000 for it. They had anticipated being able to use the machine for a
158 number of years and had expected it to generate revenues valued at £16,000.
How much should the machine be valued at in the statement of financial position?
£14,000
£16,000
£23,000
£Nil a
Accrued income of £1,750 at the year end was treated as deferred income in a business’s statement of profit or loss:
As a result, the profits were:
159
understated by £1,750
overstated by £1,750
understated by £3,500
overstated by £3,500 c
Clare runs a florist and pays an annual premium to be part of the Interflora group. Her year end is 31st July. On 1st January 20X6
she paid her annual fee to Interflora of £1,600. On the 1st January 20X7 the fee for the year to Interflora had risen to £1,900.
160 How much should be included in her accounts for 20X7 for the Interflora expense?
£1,750
£950
£800
£1,775 d
The following balances were extracted from the ledger accounts of Jupiter Ltd as at 30 April 20X8:
£
Property, plant and equipment 209,000
Inventory 4,600
Receivables 5,900
Bank loan 50,000
Capital 100,000
Drawings 23,000
Sales 334,500
Purchases 168,200
Sales returns 7,000
161 Bank overdraft 790
Sundry expenses 73,890
The ledger account balance for trade payables was omitted in error. When this is included, the totals of the trial balance will
agree.
What was the balance on the trade payables account?
£7,880
£5,500
£6,300
£1,320 c
Pluto Ltd’s trial balance at 31 December 20X5 included a credit balance of £3,400 on its tax liability account, having already
settled the tax liability for the year ended 31 December 20X4 during the year. Pluto Ltd estimated that its income tax charge
arising on its profits for the year ended 31 December 20X5 at £67,900.
162
What amounts should be included in Pluto Ltd’s financial statements for the year ended 31 December 20X5 in respect of tax?
Statement of profit or loss: £71,300 tax charge / Statement of financial position: £67,900 tax payable c
Galaxy Ltd had non-current assets with a carrying amount of £50,000 at the start of the financial year. During the year, Galaxy
Ltd sold assets that had cost £4,000 and had been depreciated by £1,500. Depreciation for the year was £9,000. The carrying
amount of assets at the end of the financial year was £46,000.
163 What was the cash paid for additions to non-current assets during the year?
£4,000
£7,500
£9,000
£10,000 b
At 1 November 20X7, Mercury Ltd’s capital structure was as follows:
£
Ordinary shares of 25p 100,000
Share premium 30,000
164
On 10 January 20X8, in order to raise finance for expansion, Mercury Ltd made a 1 for 4 rights issue at £1.15. The issue was fully
taken up. This was followed by a 1-for-10 bonus issue on 1 June 20X8.
What was the balance on the share premium account after these transactions?
£17,500
£21,250
£107,500
£120,000 c

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In double-entry bookkeeping, which of the following statements is true?

ACredit entries decrease expenses and increase assets.

Statement of profit or loss: £12,600, Statement of financial position: £1,000 prepayment

Making a cash sale to a customer of £850.

Opening assets £300,210

For Quarter ending 31 January 20X6 Paid 3 Nov 20X5 £1,050

Assets + Liabilities = Capital + Profit - Drawings

Opening inventory at cost £3,506

What is the figure for cost of sales?

Only (1) is correct.

Date Quantity - units Price per unit Total price

What is the closing inventory valuation for the 180 units?

5/9 Purchase 100 units @ £10.40

At 31 March 20X2 there had been an allowance of £16,600.

At the year-end an allowance of £500 was required.

At the year-end an allowance of £1,250 was required.

26 What was the profit on disposal of the van?

What is the profit on the sale of this machinery?

Debit Cash £285, Credit Revenue £285

Bill period Amount Paid

How much should be included for the 20X7 telephone expense?

Bill period Amount Paid

Opening Balance: £2,100, Closing Balance: £800

But Zhu didn't pay it until 30th September 20X7.

What is the double entry required to record this?

Units £ per unit

What is the irrecoverable debts expense in the statement of profit or loss?

What is the profit/loss on disposal?

Calculate the closing allowance for receivables for the year.

Payment of local property tax

Alteration of premises to configure them to be ready for use in the business

What is the total deprecation charge in 20X4?

Item Quantity Cost per item NRV per item

Calculate the value of John's inventory.

It is recorded as income in the statement of profit or loss.

What was the wages expense for the month?

Debit: Payables, and Credit: Cash at bank

Debit entries either decrease assets or increase income.

What is the double-entry to record this transaction (ignore VAT)?

Debit Receivables £8,640, Credit Revenue £8,640

What amount was recorded for receivables?

i. A £100 telephone bill being debited to the electricity account.

Calculate the amount of profit that will be appropriated to Simon.

What is H’s share of residual profits for 20X7?

Bonus issue of shares.

✓Allowance for receivables

i. No interest on capital should be allowed

All of the above

£72,500 Credit balance

It has a general reserve of £50,000.

Debit Cash £900, Debit Revenue £37.50, Credit Receivables £937.50

Debit Payables £1,152, Debit Revenue £48, Credit Cash £1,200

1 May 20X5 500,000 shares issued at 75p

Which THREE of the following are provided for by the Act?

You are given the following information:

Purchase of goods for resale £28,000

What type of error is this?

What amounts of tax should Spiral be showing in its financial statements?

What is the adjusted loss for the year?

The depreciation charge for the fifth year will be

What entry needs to be made to correct this error?

Current assets: £35,010 / Current liabilities: £34,300

1. £5608 of VAT on invoices received has been posted to output tax

The correct balance on the VAT account is: