Posting Transactions, Balancing Accounts & Trial Balance

Question 1

Account that supply non-current asset on credit

Answer 1

Sundry payable

Question 2

Purpose of trial balance

Answer 2

• Highlight certain errors
• Provide summary values
• Speed up the process of preparing the financial statements

Question 3

Why a journal include narrative explanation ?

Answer 3

For audit & control, show purpose & authority of transaction

Question 4

Possible outflow of resources

Answer 4

Contingent liability

Question 5

Probable inflow of resources

Answer 5

Contingent asset

Question 6

Probable outflow of resources

Answer 6

Provision

Question 7

Virtually certain inflow of resources

Answer 7

Asset

Question 8

Virtually certain outflow of resources

Answer 8

Provision

Question 9

When can profit be considered to be realised ?

Answer 9

When in the form of cash/another asset with a certain cash value

Question 10

Deciding whether an item is material or not is entirely objective

TRUE/FALSE

Answer 10

FALSE

It is a SUBJECTIVE exercise

Question 11

3 problems with historical cost convention

Answer 11

1) Wearing out of asset over time
2) Increase in value of property
3) Inflation

Question 12

Purchase system is integrated with the business’s computerised accounting system.

What account is updated when purchase transaction occurs ?

Answer 12

1) General ledger
- Trade payable
- Purchase

2) Individual Supplier Account

Question 13

How is settlement discount allowed accounted for ?

Answer 13

Reduction in the value of sales in SOPL

Question 14

How is settlement discount received accounted for ?

Answer 14

Shown as ‘Other Income’ in SOPL

Question 15

Obligation of a business to tax authorities

Answer 15

• Make payment for the correct amount at the correct time
• File the tax returns accurately and on time