Day: March 27, 2024

The bookkeeper of Alex plc has been attempting to reconcile its list of non-current assets held to the non-current assets accounts in the nominal ledger.

The list of non-current assets shows a carrying amount of £300,070, but the net balance of the non-current assets cost and accumulated depreciation accounts in the nominal ledger shows a figure of £351,080.

On investigation the bookkeeper has discovered the only error made during the year was that the disposal of one asset has not yet been recorded in the nominal ledger.

Which TWO of the following scenarios would, individually, explain this difference?

• 1  An asset was disposed of for £40,950 resulting in a profit on disposal of £10,060
• 2  An asset was disposed of for £40,950 resulting in a loss on disposal of £10,060
• 3  An asset was disposed of for £61,070 resulting in a profit on disposal of £10,060
• 4  An asset was disposed of for £61,070 resulting in a loss on disposal of £10,060

Select ONE answer:

1. 1 & 2
2. 1 & 3
3. 2 & 4
4. 2 & 3

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 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – 2 & 3 – The error in the cost and accumulated depreciation nominal ledger accounts means that an asset with a carrying amount of (£351,080 – £300,070) = £S1,010 must be credited to these accounts and debited to the disposal account. This is balanced in the disposal account by disposal proceeds of £40,950 and a loss on disposal of £10,060 both being credited (2), and also by disposal proceeds of £61,070 being credited and a profit on disposal of £10,060 being debited (3).

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