Question 1

Which of the following statements best describes how trade discounts are treated in the accounting records?

Accepted Answer

Trade discounts are not recorded in the double entry accounts; only the final selling price after discount is recorded.

Question 2

A business sells goods to a customer who pays immediately using a credit card. Which accounts are affected in the seller’s books at the time of sale?

Accepted Answer

Debit: Credit card company; Credit: Sales

Question 3

Which of the following is NOT included in the sales day book?

Accepted Answer

Details of goods sold

Question 4

At the end of the month, the total of the sales day book is posted to which account and on which side?

Accepted Answer

Credit side of the sales account in the general ledger

Question 5

A business receives a credit note from a supplier for goods returned. What is the correct double entry in the purchases ledger?

Accepted Answer

Debit the supplier’s account; Credit the returns outwards account

Question 6

Which of the following best explains the purpose of a statement of account sent to a debtor at month-end?

Accepted Answer

To remind the debtor of the amount owed and provide a summary of transactions for reconciliation

Question 7

A business purchases goods on credit. What is the correct posting in the purchases ledger and general ledger?

Accepted Answer

Credit each supplier’s account in the purchases ledger; Debit the purchases account in the general ledger

Question 8

Which document is issued by the buyer to the supplier when goods are returned, and what is its main purpose?

Accepted Answer

Debit note; to inform the supplier of the goods returned and request an allowance

Question 9

A retailer offers a 20% discount off the manufacturer’s recommended retail price of £1,200 for a TV. What is the final selling price, and how should it be recorded?

Accepted Answer

£960; record the sale at £960 in the sales account

Question 10

Which of the following is a key reason for businesses to implement credit control procedures?

Accepted Answer

To ensure debtors pay on time and prevent cash flow problems

Question 11

A business uses factoring to manage its trade receivables. Which of the following is NOT a service provided by a factor?

Accepted Answer

Preparation of purchase invoices for suppliers

Question 12

Which equation correctly calculates the price paid by a trader after a trade discount?

Accepted Answer

Price paid = Basic price $$- ($$Basic price $$	imes$$ Trade discount percentage)

Question 13

Which of the following is the correct double entry for commission charged by a credit card company to a seller?

Accepted Answer

Debit: Selling expenses; Credit: Credit card company

Question 14

Which book is used to record goods returned by customers, and what is its other common name?

Accepted Answer

Returns inwards day book; also known as sales returns day book

Question 15

A business posts the total of the returns inwards day book at period end. Which account and side is affected in the general ledger?

Accepted Answer

Debit side of the returns inwards account

Question 16

Which of the following is a plausible reason for a difference between a debtor’s statement of account and their own records?

Accepted Answer

A payment made by the debtor has not yet been received or recorded by the seller

Question 17

Which of the following best describes the process of posting credit sales from the sales day book?

Accepted Answer

Each credit sale is posted to the debit side of the customer’s account in the sales ledger; the total is posted to the credit side of the sales account in the general ledger.

Question 18

Which of the following is a key reason for businesses to check invoices at each stage before sending or paying them?

Accepted Answer

To prevent errors, fraud, and payment for goods not received

Question 19

A business returns goods to a supplier and receives a credit note. How is this transaction recorded in the returns outwards day book and posted?

Accepted Answer

Each item is debited to the supplier’s account in the purchases ledger; the total is credited to the returns outwards account in the general ledger.

Question 20

Which of the following is the correct formula for calculating the amount to be paid after a trade discount of 20% on a basic price of £700?

Accepted Answer

Amount paid = £700 $$-$$ (£700 $$	imes 0.20$$) = £560

Accounting for Sales, Purchases, and Returns: Books of Original Entry and Related Procedures

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