Page 1 CAT T 1

CAT Paper 1 : Recording Financial Transactions

Mock Test : 1
Prepared by : Mr Issac Panneer
Time allowed : 2 hours
Passing mark : 28 out of 50 ( 56 marks )
1. Beta Ltd, a credit customer of Alpha Ltd, returns faulty goods to Alpha Ltd.
Which document will Alpha raise to reduce Beta s debt in respect of these goods?
A. Credit note
B. Purchase order
C. Debit note
D. Remittance advice ( )
2. During December 2002, your firm had sales of $200,000, which made a mark up o
f 25% on cost. Purchase amounted to $161,000 while opening stock was $17,000, wh
at was the value of the closing stock?
A $25,000
B $21,000
C $18,000
D $27,000 ( )
3. Which of the following would be a credit entry in the ledger account?
A Salary expenses
B Plant and machinery
C Interest income
D Debtor ( )
4. A __________________ is prepared by the buyer to the seller to request for a
_________________ to be issued for overstating the amount due on an invoice.
A Credit note, debit note
B Debit note, credit note
C reminder letter, correction notice
D formal request, official receipt ( )
5. An official receipt is a document:
A Acknowledging a purchase on credit.
B Giving a reference from an agency detailing the creditworthiness of a new cust
omer.
C Issued when a deposit is paid on goods.
D Which cancels out all or part of a sales invoice. ( )
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6. Which of the following assets of the business is most prone to theft and misa
ppropriation?
A Stock
B Cash
C Machine
D Debtors ( )
7. Which of the following items is not usually included on a quotation issued by
a company?
A The details of the items and their price and trade discount
B Settlement term
C Expiry date of the quotation.
D How to handle a subsequent dispute or disagreement ( )
8. Which of the following transactions need not processed on a daily basis in a
business organisation?
A Credit sales B Banking in cheques C Processing the payroll D Preparing quotati
ons for customers ( )
9. Which of the following is not a means of making a payment from a bank account
?
A. By debit card
B. By BACS
C. By credit card
D. By direct debit ( )
10. Which of the following is a balance sheet item?
A Retained profit
B Sales
C Purchases
D Commission expenses ( )
11. The total of the Purchases Ledger Control account should equal the total of:
A. The Sales Ledger Control account
B. The individual trade creditors balances
C. The individual trade debtors balances
D. Credit purchases ( )
12. Which of the following is not true?
A Cash sales is preferred over credit sales
B Credit sales might result in bad debts for the business
C It is poor strategy to try to increase sales by granting higher credits to all
customers
D Credit control is only important for big companies. ( )
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13. Fred is drawing up his accounts and the total amount owing to him from custo
mers before allowing for bad debts and potential bad debts is £95,000. Fred decide
s to create a provision for bad debts of 10% of debtors.
What will be the final figure for trade debtors included within current assets i
n the accounts?
A. £85,500
B. £95,500
C. £104,500
D. £95,000 ( )
14. Which of the following is the least preferred mode of receipt for a business
?
A Personal cheque of the customers with guarantee card
B Personal cheque without guarantee card
C Credit card
D EFTPOS ( )
15. Which of the following is false?
A Business should try to keep business documents to a minimum
B Business document is not necessary in e-commerce environment
C Document is necessary as record and proof of transactions
D A contract is a business document ( )
16. Which of the following need not be considered while approving credit
sales to customer?
A History of trading with the debtor
B Financial strength of the debtor
C Prospect of future sales
D The product bought by the debtor ( )
17. While making payments to the supplier, the cheque should be posted
together with
A Invoice
B Statement of accounts
C Remittance advises
D All of the above ( )
18. Which of the following is least important when we consider buying the same i
tem from amongst a group of suppliers
A The net price quoted by the suppliers
B The terms of payments and the cash discount for early settlement
C The trade discount given by them
D The guarantee and whether the price quoted includes delivery charges. ( )
19. Which of the following statements regarding the trading account of a busines
s is true?
A It is calculated by deducting the expenses from the gross profit.
B It increases the liability of the business to its owner.
C It shows the amount of sales and the related cost of sales to arrive at the gr
oss profit
D It tells the owner the financial position of a business at a particular point
in time. ( )
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20. A salary expenses had been recorded as:
Debit Entertainment
Credit Bank
This form of error is known as:
A Error of commission
B Error of omission
C Error of principle
D Compensating error ( )
21. A credit sales must be approved by the __________________________
A Purchasing manager
B Sales manager and credit controller
C Administration manager
D Executive director ( )
22. When a business had a return inwards from ABC Ltd , the accounting
entries are:
Debit Credit
A Purchase Creditor- ABC
B Creditor-ABC Sales
C Debtor- ABC Sales
D Sales Debtor- ABC ( )
23. When the trial balance failed to balance, a/an ___________ had to be
opened prior to correction.
A Correction account
B Error account
C Suspense account
D Trial account ( )
24. Bank overdraft should be presented in the:
A Profit and loss as an expenses
B Balance sheet as a current assets, but negative balance
C Balance sheet as a current liability
D None of the above ( )
25. A business has the following assets and liabilities:
Creditors $10,000
Debtors $20,000
Stock $5,000
Bank loan $6,000
Delivery Van $11,000
The capital is:
A $25,000
B $20,000
C $19,000
D $52,000 ( )
26. Which of the following statement is false?
A Capital can be increase by introducing more capital
B Capital can be increased by making profit
C Capital can be increasing by drawing
D Capital will be decreased if the business incurred losses ( )
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27. Net worth of a business is equal to:
A All assets less all liabilities
B All assets les current liabilities
C Current assets less current liabilities
D The profit earned for the period. ( )
28. Which of the following is not an expenses?
A drawing
B Commission to salesman
C Salary
D Overdraft interest ( )
29. Which of the following is not an advantages of petty cash?
A It allows petty claims to be processed quickly B There is more security in the
management of petty claims C It minimize the amount of entries in the general l
edger D It allows the accountant to delegate the task to non accounts
personnel ( )
30. Which of the following are not appropriate in ensuring the security of cash?
A Keeping cash in the drawer
B Employing security guards while depositing big sum of cash
C maintaining a policy of not keeping big sum of cash in the office
D Cash and cheques should be deposited into the bank as soon as possible ( )
31. Armin & Co make the following sales during June: June 5 £306 net price of zero
rated goods June 16 £242 net price of standard rated goods June 23 £610 net price o
f standard rated goods and £164 of zero rated
goods
The standard rate of VAT (sales tax) is 17.5%. How much output VAT will Armin &
Co have charged its customers?
A £82.25
B £149.10
C £193.60
D £231.35 ( )
32. Beta Lid, a credit customer of Alpha Lid, returns faulty goods to Alpha Ltd.
Which document will Alpha raise to reduce Beta s debt in respect of these goods?
A. Credit note
B. Purchase order
C. Debit note
D. Remittance advice ( )
33. Which of the following is not a means of making a payment from a bank accoun
t?
A. By debit card
B. By BACS
C. By credit card
D. By direct debit ( )
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34. Which of the following do not belong to the same categories?
A.
Bank Loan
B.
Creditor
C.
Capital
D.
Rental ( )
35. Fred is drawing up his accounts and the total amount owing to him from custo
mers before allowing for bad debts and potential bad debts is £95,000. Fred decide
s to create a provision for bad debts of 10% of debtors.
What will be the final figure for trade debtors included within current assets i
n the accounts?
A. £85,500
B. £95,500
C. £104,500
D. £95,000 ( )
36. The debtor, ABC s account showed total individual balances of £3,600 whereas doc
uments supported a balance of £3,000.
Which of the following errors would account for this difference?
A. A credit sale of £600 being totally omitted
B. Goods being returned to us costing £600 and not recorded
C. Goods being returned by us to suppliers costing £600 and not correctly recorded
D. A credit sale of £300 being correctly recorded but posted twice in error ( )
37. Which of the following is one of the functions of an aged debtors analysis?
A To calculate the gross profit made on sales
B To provide a control total for total creditors
C To help in making bad debts provisions
D To estimate total sales in the period ( )
38. Malstron Limited has the following creditor control account entries for Nove
mber:
£
Credit balances on 1 November
16,420
Total credit purchases for the month
49,680
Payments to creditors
13,300
Returns outwards in the month
1,460
What is the correct closing balance on the control account at the end of Novembe
r?
A £18,500
B £51,340
C £54,620
D £80,860 ( )
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39. Which of the following would be included in a company s wages and
salary expense account?
1.
Employees NIC
2.
Employers NIC
3.
PAYE deductions
4.
Company pension contributions
A)
1 and 2
B)
2 and 3
C)
1 and 3
D)
2 and 4 ( )
40. Giles is a trainee Chartered Certified Accountant and is preparing accountin
g records for a local sports shop. The existing provision for bad debts is £900 an
d total debtors are £10,000. Giles has been told to write off a bad debt of £500 and
to change the provision for bad debts to 10% of the remaining debtors. What dou
ble entry will Giles post?
A Dr Bad debts £1,000 Cr Debtors £1,000
B Dr Bad debts £950 Cr Debtors £50 Cr Provision for bad debts £900
C Dr Bad debts £550 Cr Debtors £500 Cr Provision for bad debts £50
D Dr Bad debts £550 Cr Debtors £50 Cr Provision for bad debts £500 ( )
41. Kew Ltd has an overdraft of £4,400 at the start of June. The following four tr
ansactions occurred during June. Kew allows its customers up to 60 days to pay t
heir invoices.
3 June Kew sells goods worth £10,000 on credit to a customer who always takes the
full credit period
10 June Kew pays a supplier £8000
20 June Kew sells goods worth £12,000 for cash and allows a 5% discount.
23 June Cash is received from a customer who has been in dispute with Kew. The o
riginal invoice was for £6,000, but Kew has agreed to accept half the invoice valu
e to settle the dispute.
How much does Kew have in the bank at the end of June?
A £2,000
B £2,600
C £10,800
D £12,000 ( )
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42. Victoria & Co wishes to buy goods from Paddington Ltd. Which of the followin
g is the most likely flow of documents to complete the purchase?
A Purchase order, delivery note, goods received note, cheque requisition, invoic
e.
B Purchase order, delivery note, goods received note, invoice, cheque requisitio
n.
C Goods received note, purchase order, delivery note, invoice, cheque requisitio
n.
D Purchase order, goods received note, delivery note, cheque requisition, invoic
e. ( )
43. Which of the following is least likely to be an obligation of a bank towards
its customer?
A To use a professional level of care and skill.
B To provide confirmation of the balance on the account at any time at the reque
st of the customer
C To provide a statement covering a period showing the transactions which have o
ccurred during that period
D To provide a statement detailing the profits the bank has made with the money
the customer has deposited ( )
44 Which of the following is not an effective security procedure?
A A key must be inserted in to the cash register before it will operate. Keys ar
e held by authorised personnel
B Cash is counted by a responsible person who works on the cash register
C The cash reconciliation should be performed by a responsible person who neithe
r operates the cash register nor counts the cash
D Cash should be banked as promptly as possible ( )
45. Nonnan works in a manufacturing company and is preparing his first set of ac
counts. He is confused about the distinction between various items in the balanc
e sheet.
Advise Nonnan as to which of the following he should classify as current assets.
(i) stock
(ii) creditors
(iii) debtors
(iv) motor vehicles
A All four
B (i), (ii) and (iii)
C (ii), (iii) and (iv)
D (i) and (iii) ( )
46. Pimlico & Co owe Vauxhall Ltd for some goods it recently bought. Pimlico & C
o are settling the invoice early and are getting a discount.
What is the correct double entry for this in Vauxhall Ltd s books?
A Debit Vauxhall Ltd, Credit Bank, Credit Discount received
B Debit Vauxhall Ltd, Debit Discount received, Credit Bank
C Debit Bank. Credit Discount allowed, Credit Pimlico & Co
D Debit Bank. Debit Discount allowed, Credit Pimlico & Co ( )
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47. The opening balance at 1 June on Northolt Ltd s debtors ledger showed total am
ounts owed as £6,478. During June Northolt made sales of £53,998, half of these sale
s were for cash. At the end of June Northolt s customers owed £10,492.
How much cash did Northolt receive from its customers during June?
A £58,012
B £49,984
C £31,013
D £22,985 ( )
48. Sally calculates her bank balance to be £160 positive, however her bank statem
ent shows a different amount. Having considered the following items, calculate t
he balance on Sally s bank statement.
(i) A cheque that Sally paid into the bank for £40 is still outstanding
(ii) A cheque for £60 paid by Sally to Molly has not yet been presented
(iii) Sally has forgotten to record a cash withdrawal of £30
(iv) When Sally inspects her bank statement she sees that the bank has deducted
charges of £15 from her account.
A £95
B £135
C £185
D £225 ( )
49. John is the accountant in a firm which has a large fleet of motor vehicles.
He is unsure of the distinction between capital and revenue expenditure. Advise
John as to which of the following would be classified as revenue rather than cap
ital expenditure.
(i) Purchase of a new delivery van
(ii) Redecorating the transport managers office
(iii) Paying the road fund licenses for the fleet of vehicles
(iv) Purchase for a new exhaust for a van.
A all four expenses
B (ii), (iii) and (iv)
C (i) and (ii)
D (iii) only ( )
50. The accounting treatment of capital expenditure is to
A Charge it to current period expenses
B Capitalise as fixed asset and depreciate in subsequent years
C Capitalise as fixed asset and remain in the balance sheet at its cost
D Treat it as a liability ( )