Month: December 2019

A firm records all transactions relating to the expense of both postage and stationery in a single ledger account.

At the beginning of a financial year. there is both a debit balance brought down of £50 and a credit balance brought down of £100 on the account.

Which of the following alternatives could explain this situation?

Select ONE answer:

1. The firm has a stock of stationery worth £50.
2. Postage is prepaid to the extent of £100.
3. The firm has a stock of stationery worth £100.
4. Postage payable amounts to £50.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – In any ledger account, a debit balance brought down represents either an asset or an expense and a credit balance brought down represents either a liability or income. Since the balance on an expense account is either an accrual or a prepayment, the £50 balance has to be a prepayment (asset) and the £100 balance has to be an accrual (liability). This rules out options B (£100 asset), C (£100 asset) and D (£50 liability). When the stationery expense is prepaid, there is a stock of stationery remaining at the end of the year.
2. Not correct
3. Not correct
4. Not correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

A firm records all transactions relating to the expense for both rent and rates in a single ledger account.

At the start of the year there was an accrual in respect of rent of £2,500 and a prepayment in respect of rates of £3,000.

At the end of the year there was rent due of £4,500 and rates prepaid of £3,500. The total expense for both rent and rates for the year was £36,000.

The total amount paid during the year. in respect of both rent and rates, was:

Select ONE answer:

1. £34,500
2. £35,500
3. £36,500
4. £37,500

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct
   Rent & Rates Expense
   Dr Balance b/d (Rates prepaid) £3,000
   Dr Bank £34,500
   Dr Balance c/d (Rent due) £4,500
   Cr Balance b/d (Rent accrued) £2,500
   Cr Profit & Loss (Expense for the year) £36,000
   Cr Balance c/d (Rates prepaid) £3,500
   Totals £42,000
2. Not correct
3. Not correct
4. Not correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

A firm records all transactions relating to the expense for both rent and rates in a single ledger account.

On 1 January there was an accrual of £900 in respect of rent and a prepayment of £600 in respect of rates.

On 31 December there was a rent accrual of £1,100 and rates prepaid of £700.

During the year, £4,800 was paid in respect of rent and £3,100 in respect of rates.

The total expense for both rent and rates for the year is:

Select ONE answer:

1. £7,800
2. £8,000
3. £8,100
4. £8,200

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
   Rent & Rates Expense
   Dr Balance b/d (Rates prepaid) £600
   Dr Bank (Rent paid) £4,800
   Dr Bank (Rates paid) £3,100
   Dr Balance c/d (Rent accrued) £1,100
   Cr Balance b/d (Rent accrued) £900
   Cr Profit and Loss £8,000
   Cr Balance c/d (Rates prepaid) £700
   Totals £9,600
3. Not correct
4. Not correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

If rent receivable has been prepaid to the extent of £75 at the end of a firm’s first financial year, the amount of rental income shown in its profit and loss account, relative to the amount of rent it received during the year, will be . . .

Select ONE answer:

1. the same.
2. £75 more.
3. £75 less.
4. None of the above.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct
   For example, if the rent receivable applicable to the year is £100 and £175 has been received, then, in accordance with the accruals concept, the amount to be shown in the profit and loss account is £100, £75 less than the amount received. This would be shown as follows:
   Rent Receivable Income (B/S)
   Dr Profit and Loss £100
   Dr Balance c/d £75
   Cr Bank £175
   Totals £175
4. Not correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

During its first financial year, ended on 31 December 1995. a firm paid £3,000 in respect of insurance premiums.

All premiums were paid in advance and, except for the following related to policies with renewal dates similar to the firm’s accounting year-end date.

Policy X                               Policy Y

Annual premium                        £240                                     £1,200
Renewal date                               30 June 1996                      30 April 1996
Premium paid                             1 July 1995                          1 May 1995

The firm’s insurance expense for 1995 was:

Select ONE answer:

1. £2,280
2. £2,480
3. £2,580
4. £3,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
   Year-end Prepayment
   Policy X = January to June 1996 = 6 months @ £240 pa. = £120
   Policy Y = January to April 1996 = 4 months @ £1,200 pa. = £400
   Total = £520
   Insurance Expense:
   Dr Bank £3,000
   Cr Profit and Loss £2,480
   Cr Balance c/d (above) £520
   Cr Totals £3000
3. Not correct
4. Not correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.