These seven original questions cross the stages of the cycle covered in tracing a transaction through the whole accounting cycle. All amounts are in RM and every name is invented.
Write your own answer before you open each block. A timed run is available through the timed practice session builder.
Questions
1. Bunga Supplies invoices a shop RM3 000 for goods. The shop pays RM1 200 before the year end. State the ledger entries and the creditor at the year end.
Answer
Purchase: debit Purchases 3 000, credit Bunga Supplies 3 000. Payment: debit Bunga Supplies 1 200, credit Bank 1 200.
Creditor = 3 000 − 1 200 = RM1 800, a current liability.
2. In question 1, closing stock is RM700 and sales are RM4 500. Find gross profit.
Answer
Cost of sales = 3 000 − 700 = 2 300. Gross profit = 4 500 − 2 300 = RM2 200. The RM1 200 payment plays no part in the calculation.
3. An owner pays her son’s tuition RM300 from the business account. Write the entry and say whether net profit changes.
Answer
Debit Drawings 300, credit Bank 300. Net profit does not change, because drawings is not an expense. Capital falls by 300 when it is updated.
4. A trader has cash 4 000 and capital 4 000. She buys goods for 1 500 cash, then sells half of them for 1 200 cash. Show the effect on cash, stock and capital after both steps.
Answer
After buying: cash 2 500, stock 1 500, capital 4 000.
Half the goods cost 750. After selling: cash 2 500 + 1 200 = 3 700, stock 750, capital 4 000 + (1 200 − 750) = 4 450. Check: assets 3 700 + 750 = 4 450, which equals capital.
5. A shop sells 10 units to Hana for RM25 each on credit. Hana returns 2 units. Write the two entries and Hana’s balance.
Answer
Sale: 10 × 25 = 250. Debit Hana 250, credit Sales 250. Return: 2 × 25 = 50. Debit Sales returns 50, credit Hana 50.
Balance = 250 − 50 = RM200 owed by Hana.
6. A student says: “Hana returned 2 units, so I debit Sales 250 and credit Hana 250.” Explain the error.
Answer
That reverses the whole sale, although Hana kept 8 units. Only the 50 returned should be reversed. The student’s entry would show Hana owing nothing, and net sales of nil.
7. A trader buys equipment for RM900 on credit. State the effect on the accounting equation and explain why capital is unchanged.
Answer
Equipment (asset) rises by 900 and creditors (liability) rise by 900. Both sides of the equation rise by the same amount. Capital is unchanged because no profit has been earned and no owner’s money has been invested.
If you got these wrong
- Questions 1 and 2: read following a credit purchase from source document to ledger and statement.
- Question 3: read separating business spending from drawings.
- Questions 4 and 7: read the two-sided effect using the accounting equation.
- Questions 5 and 6: read tracing a returned item.
Log your misses in the mistake log. For a teacher who works through your attempts, see online one-to-one Accounting tuition.