Question 1

Kleen Windows received $770 (including GST) from its customer John Jones for services previously supplied to him on credit. Which of the following entries correctly records this receipt?

Accepted Answer

The correct entry for receiving payment from a customer is to debit the bank account because the company's bank balance increases with the receipt of cash. The credit goes to the debtors (accounts receivable) because the amount owed by the customer decreases with the payment.

Question 2

An entity repays $2000 of an existing bank loan. The transaction is recorded as:

Accepted Answer

When an entity repays a bank loan, the liability (bank loan) is decreased (debited) and the cash account is decreased (credited) to reflect the outflow of cash.

Question 3

A __________________ provides a complete record, in one place, of each transaction in date order.

Accepted Answer

The general journal is a chronological record of all transactions with dates, amounts, and accounts involved. It provides a complete record, in one place, of each transaction in date order, making it easier to see the history of each account.

Question 4

A sole proprietor who owns a newsagency takes home stationery and exercise books for
His children to use at school. This would be considered to be:

Accepted Answer

Taking stationery items for personal use is considered a "drawing" from the business, which decreases both assets and equity. It is not an expense because no payment was made to purchase the items.

Question 5

Which of the following represents the accounting entry when expenses are incurred on
Credit?

Accepted Answer

When expenses are incurred on credit, it means that the payment is not made immediately but will be paid at a later date. In this case, the accounting entry would be to debit the expense account (as an increase in expenses) and credit the accounts payable account (as an increase in liabilities). Option A is incorrect because cash is not involved in this transaction. Option B is incorrect because accounts receivable is an asset account and does not relate to an expense. Option D is incorrect because accounts payable is a liability account and does not relate to income.

Question 6

Which statement relating to the general journal is incorrect?

Accepted Answer

The general journal is the book of original entry where transactions are recorded in chronological order. The information is then transferred to the general ledger, which provides the balances for each account. Therefore, statement C is incorrect as the information for the general ledger comes from the journal and not vice versa.

Question 7

A trial balance will disclose which of the following errors?

Accepted Answer

A trial balance will disclose errors where debits and credits are not equal, such as recording a credit as a debit, which will cause an imbalance.

Question 8

A list of ledger accounts and their balances is called a:

Accepted Answer

A trial balance is a list of all the ledger accounts of a business and their balances (either debit or credit), used to ensure that the sum of debits equals the sum of credits, indicating that the ledger is balanced.

Question 9

The GST is a tax that is levied at the rate of ______ on the sale of most goods and services. It was introduced in Australia on July 1 2000.

Accepted Answer

The GST is levied at the rate of 10% on the sale of most goods and services in Australia. This tax was introduced on July 1 2000 and has been in place since then.

Question 10

Jones Cleaning Services purchased 12 months' worth of cleaning supplies from Focus on Cleaning. The purchase is for cash and the invoiced amount is $1200. Ignoring GST, the entry that correctly records this transaction is:

Accepted Answer

Since Jones Cleaning Services has purchased 12 months' worth of cleaning supplies on cash, the correct entry to record this transaction is to debit the Cleaning Supplies asset account for $1200 and credit the Bank account for $1200. Therefore, the entry that correctly records this transaction is option C. Option A is incorrect because cleaning supplies are an asset, not an expense. Option B is incorrect because bank is debited implying that the business paid cash for the supplies, but the entry should have a credit to Bank account. Option D is incorrect because cleaning supplies are an asset, so a debit to an expense account is not appropriate.

Question 11

James Wright performed handyman services for $2500. He received cash of $1500 with
The balance to be received within 28 days. Ignoring GST, the transaction is recorded as:

Accepted Answer

This transaction represents a partial payment of the total amount due for handyman services. Therefore, we would record the $1500 cash received as a debit to Cash, and the remaining amount of $1000 as a debit to Accounts Receivable (since the customer still owes that amount). The total amount of the handyman services provided ($2500) would be recorded as a credit to Services Revenue. Option B is incorrect because it records the transaction as if the handyman owed money to a supplier or vendor (Accounts Payable), when in fact he is the service provider. Option C is incorrect because it only records the cash received, and does not account for the remaining amount due. Option D is incorrect because it records the transaction as a decrease in equity, which is not appropriate for this type of transaction.

Question 12

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

Accepted Answer

The trial balance checks for the equality of debits and credits in the ledger accounts. Error C, a transposition error, would be detected because it affects the balance of the sales account and the bank account differently, causing an imbalance in the trial balance. Errors A, B, and D would not be detected by a trial balance because they do not affect the overall balance of debits and credits.

Question 13

The payroll officer recorded wages for the month as a debit to the Sales account rather
Than as a debit to wages expense. This error will result in:

Accepted Answer

The answer of The payroll officer recorded wages for the...

Question 14

Ignoring GST, which of the following entries correctly records the receipt by Swift Garden Maintenance of $500 in cash for gardening services?

Accepted Answer

The correct entry for receiving cash for services is to debit the Bank account, increasing the asset, and credit the Services (revenue) account, increasing income.

Question 15

Which statement relating to a trial balance is incorrect?

Accepted Answer

A trial balance is used to test the equality of debits and credits in the ledger and to identify errors, omissions or duplications of entries. It does not report the financial performance of an entity, as it only lists the current balances of accounts, not their transaction activity.

Question 16

Charming Pete requires his customers to pay for their orders two weeks before shipping the goods. Pete will record the cash receipts as:

Accepted Answer

Since the customers are paying in advance, it creates a liability for Charming Pete. The payment received will be recorded as a credit to the liability account, since the company still owes the customers the goods. The debit aspect of the transaction will be recorded in the company's bank account. Therefore, the correct entry will be DR Bank, CR liability account.

Question 17

Johanna's Hair Studio paid $300 for advertising during the month using Cheque No. 100558. Ignore GST. Which of the following reflects the effect on the accounting equation?

Accepted Answer

Paying for advertising with a cheque decreases the business's bank account (an asset) by $300 and also decreases equity because it's an expense, reducing the owner's claim on the assets.

Question 18

A trial balance is prepared to:

Accepted Answer

A trial balance is prepared to verify the equality of debit and credit postings in the ledger. It lists all the accounts with their debit or credit balances to ensure that the total of the debit balances equals the total of the credit balances, which helps to identify any errors in the accounting records.

Question 19

O'Brien paid $880, including GST, for advertising. The entry to record this transaction is:

Accepted Answer

The correct entry accounts for both the cost of advertising ($800) and the GST paid ($80), totaling $880, which is paid in cash. This reflects the separation of the expense and the recoverable GST amount.

Question 20

Ignoring GST, which of the following entries correctly records the purchase of land for $300 000 financed by a $100 000 cash deposit with the balance payable via a 20-year, 6% loan?

Accepted Answer

Option A is incorrect as it only records the cash deposit and not the entire purchase amount. 
Option B is incorrect as it records the entire purchase amount as a cash payment, which is not the case since part of it is financed by a loan. 
Option D is incorrect as it only records the loan without taking into account the cash deposit. 
Option C is the correct entry as it records the full purchase price of $300,000 and acknowledges the $100,000 cash deposit and the $200,000 loan.

Quiz 3: Recording Transactions