Grade 12

Chapter 4
Prime Entry Books

Name: ………………………………………………………

A/L Year: ………………………………………………………

Contact details: 0778759158

Maryam Ali Mohamed (ACCA Lecturer @ PPIM)
 Chapter 4 – Posts transactions to the ledger using prime entry books

1. An entity deposits all cash collections daily in the bank and makes all payments by cheques. The following
information for a month is provided.
 Balances at the beginning of the month as per the bank statement and cash book were Rs. 10 000
and Rs. 25 000 respectively. The difference was due to unrealized cheques.
 Total of cash receipt journal - Rs. 150 000
 Total of cash payment journal - Rs. 90 000
 Discounts allowed at the time of collecting money from debtors - Rs. 5 000
 The only reason for the difference between the balances as per the bank statement and the cash
book at the month-end was the bank charges of Rs. 10 000 which appeared in the bank statement.

What was the month-end balance as per the bank statement?

(1) Rs. 55 000
(2) Rs. 60 000
(3) Rs. 65 000
(4) Rs. 70 000
(5) Rs. 75 000 (……)

2. Which of the following is understated if sales commission is erroneously debited to the sales account?
(1) Gross profit
(2) Profit for the year
(3) Cash collected from debtors
(4) Equity
(5) Cost of sales (……)

3. Total assets and total liabilities of an entity for the year ended 31.03.2011 were Rs. 1 000 000 and Rs. 300
000 respectively. The following errors has been found after arriving at the above figures.
- An advance of Rs. 20 000 received from a customer to sell goods in April 2011 has been
recognized as revenue.
- The electricity bill for the month of March 2011 amounting to Rs. 5 000 had been omitted from
the records.
- A sales invoice of Rs. 10 000 had been recorded twice in the sales journal.
What are the amounts of total assets and total liabilities respectively after making corrections for the
above errors?
(1) Rs. 990 000 and Rs. 325 000
(2) Rs. 990 000 and Rs. 310 000
(3) Rs. 1 025 000 and Rs. 310 000
(4) Rs. 1 020 000 and Rs. 300 000
(5) Rs. 1 000 000 and Rs. 325 000 (……)

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4. The balance of the debtors control account of ABC Ltd. As at 31.03.2011 has been reconciled with the
debtors’ ledger as follows.
(Rs.‘000)
Debtors control account balance 8 000
Add: Overstatement of bad debts 50
Less: Overstatement of sales (150)
Balance of debtors’ ledger 7 900

Draft financial statements have been prepared without considering the information revealed in the above
reconciliation. The profit for the year and current assets as at 31.03.2011 were Rs. 2 000 000 and Rs. 15
000 000 respectively.
Compute the following after considering the information provided in the reconciliation.

(a) Profit for the year - Rs. …………………………………………………………………………………….

(b) Current assets as at 31.03.2011 Rs. ………………………………………………………………….

5. Which of the following transactions is recorded in the purchase journal of an entity?

(1) All assets purchased on credit.
(2) All purchases made with the intention of resale.
(3) All credit purchases made with the intention of resale.
(4) All purchases made with the intention of resale on credit.
(5) All property, plant and equipment purchased on credit. (……)

6. A firm sold goods for Rs. 500 000 on credit. Of this, customers returned Rs. 50 000 worth of goods stating
that these did not match the given specifications. Later, customers paid cash to settle the remaining
balance. The order of source documents to record these transactions is:
(1) Invoice, debit note and payment voucher
(2) Invoice, credit note and payment voucher
(3) Invoice, journal voucher and receipt
(4) Invoice, debit note and receipt
(5) Invoice, credit note and receipt (……)

7. An entity carries out all its cash transactions through a bank account. Its monthly bank statement showed
a credit balance of Rs. 270 000 as at 31.01.2012. On this date, cheques deposited but not realized and
cheques issued but not presented for payment were Rs. 85 000 and Rs. 45 000 respectively. The bank
balance (debit) in the books of the entity as at 31.01.2012 is
(1) Rs. 225 000
(2) Rs. 230 000
(3) Rs. 270 000
(4) Rs. 310 000
(5) Rs. 355 000 (…….)

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8. The following errors were revealed after preparing the draft financial statements of a business entity.
(i) Cash received Rs. 18 500 from a debtor has been recorded as Rs. 15 800 in the debtors account.
(ii) Credit sales of Rs. 25 000 has been credited to the sales account as Rs. 2 500.
(iii) Sales returns of Rs. 3 000 has been debited to the sales account.
Due to these errors, the profit of the entity is understated by
(1) Rs. 18 500
(2) Rs. 22 500
(3) Rs. 25 200
(4) Rs. 25 500
(5) Rs. 28 200 (……)

9. Office expenses amounting to Rs. 60 000 incurred by an entity in March 2012 has been posted as Rs. 600
000 to office equipment account. The office equipment is depreciated at 10% per annum on cost on
straight line method and depreciation for this month has also been provided.
What is the net impact of this error on the profit for the year ending 31.03.2012?
………………………………………………………………………………………………………………………………………….

10. Amal started a business on 01.04.2012 using his personal savings of Rs. 500 000 and his motor vehicle
worth Rs. 2 000 000. During the first month of operations, the business purchased goods for Rs. 300 000
on credit, of which Rs. 50 000 worth of items were returned due to defects. The order of source
documents to record these transactions is:
(1) Journal voucher, Invoice, Debit note
(2) Journal voucher, Invoice, Credit note
(3) Receipt, Invoice, Credit note
(4) Vehicle registration book, Invoice, Credit note
(5) Vehicle registration book, Invoice, debit note (……)

11. Which of the following statements is correct in relation to the creditors control account?
(1) A control account is maintained for every creditor.
(2) All purchases are recorded in the creditors control account.
(3) The total of the purchase journal is recorded in the creditors control account.
(4) Discounts received from creditors are not recorded in the creditors control account.
(5) The creditors control account is maintained in the creditors’ ledger. (……)

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 Use the following information related to a firm to answer questions No. 12 and 13.
The summary of cheques deposited and issued during the months of March and February 2013 is as
follows.
Description March 2013 (Rs’000) February 2013 (Rs’000)
Cheques deposited in the bank 1 000 900
Cheques issued 750 600

Following information is also given:

Description As at 31.03.2013 (Rs’000) As at 28.02.2013 (Rs’000)
Deposited cheques realized 750 900
Cheques presented for payment 600 500
Interest income received by the bank - 50
directly
Bank charges 10 5
Bank account balance (before 395 100
adjusting for interest income and
bank charges)
Balance as per bank statement ? 245

Cheques unpresented for payment during the month of February have been presented in March.

12. What is the adjusted balance of the bank account as at 28.02.2013?

(1) Rs. 145 000
(2) Rs. 190 000
(3) Rs. 200 000
(4) Rs. 290 000
(5) Rs. 345 000 (…….)
13. What is the balance of the bank statement as at 31.03.2013?
(1) Rs. 245 000
(2) Rs. 285 000
(3) Rs. 295 000
(4) Rs. 385 000
(5) Rs. 395 000 (……)
14. State the source document and the appropriate prime entry book to record each of the following
transactions.
Transactions Source document Prime entry book
A- Sale of inventories on credit ……………………………… …………………………………….
B- Return of goods by a debtor ……………………………… …………………………………….
C- Receiving cash from debtors …………………………….. .……………………………………
D- Writing off of bad debts ……………………………… …………………………………….

15. The petty cashier of a business is provided with Rs. 10 000 as the petty cash imprest at the beginning of a
month. At the end of the month, he requested for reimbursement of Rs. 8000. State the following:
(a) Petty cash expenses for the month (Rs.) ………………………………………………………………..
(b) Journal entry to record the reimbursement (Narration is not required) :…………………………………………….

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16. The order of prime entry books to record the following transactions of a shoe manufacturing business is:
A- Purchase of a lorry on credit.
B- Purchase of leather on credit.
C- Provision of income tax for the year.
D- Return to the supplier, part of the leather purchased.

(1) General journal, Purchase journal, General journal, Purchase journal.

(2) General journal, Purchase journal, General journal, Purchase Returns journal.
(3) General journal, Purchase journal, Cash book, Purchase Returns journal.
(4) Purchase journal, Purchase journal, General journal, Purchase journal.
(5) Purchase journal, Purchase journal, General journal, Purchase Returns journal. (……)

17. The trial balance of Roshan PLC as at 31.03.2014 did not balance and the difference was transferred to a
suspense account. A subsequent investigation revealed the following:
 A payment of Rs. 100 000 for salary has been recorded only in the cash book.
 A payment of Rs. 25 000 to a creditor has been recorded in the debtors’ control account as a cash
receipt.
 The sales journal has been undercast by Rs. 30 000.
 Bad debts written off Rs. 20 000 has been recorded as an income.
The balance of the suspense account before rectifying the above errors:
(1) Rs. 145 000 debit
(2) Rs. 145 000 credit
(3) Rs. 190 000 debit
(4) Rs. 190 000 credit
(5) Rs. 220 000 credit (……)

18. As at 31.03.2014 the balance of debtors control account of Ama PLC was Rs. 460 000 while the total of
debtors’ balance as per the debtors ledger was Rs. 450 000. The subsequent investigation revealed the
following.
 A debtor’s balance of Rs. 10 000 written off as bad debts has not been posted to the debtors
control account.
 A sales invoice of Rs. 21 000 has been recorded as Rs. 12 000 in the sales journal.
 A remittance of Rs. 31 000 made by a debtor direct to the bank has not been recorded in both
debtors ledger and debtors control account.
The correct balance in the debtors control account as at 31.03.2014:
(1) Rs. 410 000
(2) Rs. 428 000
(3) Rs. 448 000
(4) Rs. 459 000
(5) Rs. 490 000 (……)

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19. The bank account balance of a firm as at 31.03.2014 was Rs. 680 000. However, it did not agree with the
balance of the bank statement on the same date. The following are the reasons for this difference.
 A standing order payment of Rs. 10 000 has not been recorded in the books.
 A cheque of Rs. 40 000 deposited in the bank has not been realized.
(a) What is the balance as per bank statement as at 31.03.2014? Rs. ………………………………….
(b) What is the bank balance to be stated in the statement of financial position as at 31.03.2014? Rs.
…………………………………………………………………………………

20. State two types of transactions recorded in the general journal of a firm.
………………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………………

21. As at 31.03.2015 the balance of the creditors control account of Thanuja PLC was Rs. 360 000. The total of
the creditors balances as per the creditors ledger was Rs. 406 000 on this date. The subsequent
investigation revealed the following:
 An interest of Rs. 10 000 charged by a supplier on an overdue balance has been recorded only in
the creditors ledger.
 The total of the purchase journal Rs. 62 000 has been recorded in the creditors control account as
Rs. 26 000.
 Rs. 28 000 paid to a creditor has not been recorded in the creditors control account as well as in
the creditors ledger.
The correct balance in the creditors control account as at 31.03.2015:
(1) Rs. 358 000
(2) Rs. 368 000
(3) Rs. 378 000
(4) Rs. 404 000
(5) Rs. 406 000 (……)

22. The trial balance of Chathura PLC as at 31.03.2015 did not balance. The subsequent investigation revealed
the following:
 A cash sale of Rs. 100 000 has been recorded only in the cash book.
 The purchase journal has been undercast by Rs. 60 000.
 Bad debts recovery of Rs. 30 000 has been recorded as an expense.
 An interest income of Rs. 10 000 has been credited twice into the interest income account.
The balance of the suspense account before rectifying the above errors:
(1) Rs. 90 000 debit
(2) Rs. 90 000 credit
(3) Rs. 130 000 credit
(4) Rs. 150 000 debit
(5) Rs. 150 000 credit (……)

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23. State the source document applicable to the following prime entry books.
Prime entry book Source document
A- Sales journal ………………………………………………….
B- General journal ………………………………………………….
C- Cash payments journal ……………………………………………………
D- Purchase returns journal …………………………………………………..

24. State four types of transactions or events relating to property, plant and equipment that would be
recorded in the general journal of a business.
………………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………

25. The balance of the bank account of a business as at 31.03.2015 was higher than the balance that appeared
in its bank statement. (Assume there were no errors either in the bank account of the business or in the
bank statement.)
State two possible reasons for this difference.
………………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………

26. The trial balance of Renu PLC as at 31.03.2016 did not agree and the difference was transferred to a
suspense account. The subsequent investigation revealed the following:
 Rs. 200 000 paid for electricity expenses have been recorded only in the cash account.
 The purchase journal has been overcast by Rs. 60 000.
 Rs. 50 000 received from a debtor has been recorded as a cash payment in the creditors control
account.
 A sales invoice of Rs. 40 000 has been recorded only in the debtors’ ledger.
Which of the above errors have contributed to the balance in the suspense account?

(1) A and C only

(2) B and D only
(3) A, B and C only
(4) B, C and D only
(5) All A, B, C and D (……)

27. State whether the following transactions would lead to an increase, decrease or no change in the balance
of debtors control account of a manufacturing firm.
Transaction Increase/ Decrease/ No change
A- Sale of used machinery on credit ………………………………………………
B- Return of goods sold on credit ………………………………………………
C- Writing off of bad debts during the year ……………………………………………….
D- Making a provision for doubtful debts at the year-end ……………………………………………….

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28. A bank balance of a company as at 31.03.2016 was Rs. 450 000. It did not agree with the bank statement
balance on this date. The following were revealed in reconciling these balances.
 A debtor has directly deposited a cheque of Rs. 80 000 in the bank.
 Standing order payments made by the bank was Rs. 40 000.
 A cheque of Rs. 60 000 deposited in the bank has been dishonoured.
 A cheque of Rs. 20 000 deposited in the bank has not yet been realized.
 Cheques issued for Rs. 30 000 have not yet been presented for payment.
Calculate the following as at 31.03.2016:

(a) Adjusted bank balance Rs. …………………………………………………………………..

(b) Bank statement balance Rs. …………………………………………………………………

 Use the following information to answer questions No. 29, 30 and 31.
Kumara sold goods with a list price of Rs. 100 000 on credit to Amal on 10.03.2017 after allowing a 10%
trade discount. The cost of these goods was Rs. 60 000. Goods with a sales value of Rs. 30 000 (cost Rs. 20
000) was returned by Amal on 15.03.2017 Amal settled the balance due on 31.03.2017 after receiving a 5%
cash discount.
29. The sequence of source documents used to record these transactions in Kumara’s business:
(1) Invoice, Debit note, Receipt
(2) Invoice, Credit note, Receipt
(3) Invoice, Journal voucher, Receipt
(4) Invoice, Debit note, Journal voucher
(5) Invoice, Credit note, Journal voucher (……)

30. The net increase in net profit for the year ending 31.03.2017 of Kumara’s business due to these
transactions:
(1) Rs. 6 500
(2) Rs. 7 000
(3) Rs. 17 000
(4) Rs. 20 000
(5) Rs. 26 500 (……)

31. The sequence of prime entry books used to record these transactions in Amal’s business:
(1) Purchase journal, Purchase Returns Journal, Cash Payments Journal
(2) Purchase journal, General Journal, Cash Payments Journal
(3) Purchase journal, Purchase Journal, Cash Payments Journal
(4) Purchase journal, Purchase Returns Journal, General Journal
(5) Purchase journal, General Journal, General Journal (……)

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 Use the following information to answer questions No.32 and 33.
A business carries out all its cash transactions through a bank current account.
A summary of the cash transactions as per books of account for the month of march 2017:
Description Rs.000
Cash balance as at 01.03.2017 100
Total of cash receipts journal as at 31.03.2017 1 200
Total of cash payments journal as at 31.03.2017 900

A summary of the bank statement for the month of March 2017 received on 04.04.2017:
Description Rs.000
Balance as at 01.03.2017 100
Cheques realized 1 000
Cheques paid 750
Fixed deposit interest credited directly 200
Standing order payments 50

Fixed deposit interest and standing order payments are recorded in the books after receiving the bank
statement. There were no unrealized or unpresented cheques as at 01.03.2017.

32. What is the adjusted balance of the cash account of the business as at 31.03.2017?
(1) Rs. 300 000
(2) Rs. 350 000
(3) Rs. 400 000
(4) Rs. 500 000
(5) Rs. 550 000 (……)

33. Which of the following statements are correct with respect to cash transactions of this business for the
month of March 2017?
A- The total cash receipts for the month of March 2017 were Rs. 1 400 000.
B- The total cash payments for the month of March 2017 were Rs. 950 000.
C- The unrealized cheques as at 31.03.2017 were Rs. 200 000.
D- The unpresented cheques as at 31.03.2017 were Rs. 150 000.

(1) A and B only

(2) A and C only
(3) B and D only
(4) C and D only
(5) All A, B, C and D (……)

34. State the prime entry books used to record the following transactions.
Transactions Prime Entry Book
A- Sale of goods on credit basis …………………………………………………….
B- Receipt of a cheque from a debtor …………………………………………………….
C- Dishonour of a cheque received from a debtor ……………………………………………………
D- Writing off a debtor’s balance as a bad debt ……………………………………………………
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 Use the following information to answer questions No. 35 and 36.
The following transactions took place in Nihal’s business.
01.03.2018 – Purchase of goods costing Rs. 150 000 from Upasena on credit.
05.03.2018 – Return of goods costing Rs. 30 000 to Upasena.
20.03.2018 – Sale of gods costing Rs. 100 000 for Rs. 160 000 on credit.
20.03.2018 – Payment of sales commission of Rs. 10 000.
02.04.2018 – Settlement of the full amount due to Upasena.

35. Owing to the above transactions the increase in the balances of creditors control account and debtors
control account of Nihal’s business as at 31.03.2018:
Creditors control account (Rs.) Debtors Control account (Rs.)
(1) 20 000 150 000
(2) 20 000 160 000
(3) 120 000 150 000
(4) 120 000 160 000
(5) 150 000 160 000 (……)

36. The source documents used to record transactions with Upasena in the books of Nihal’s business in the
order of their occurrence:
(1) Invoice, Credit Note, Payment Voucher
(2) Invoice, Debit Note, Payment Voucher
(3) Invoice, Debit Note, Journal Voucher
(4) Invoice, Credit Note, Journal Voucher
(5) Invoice, Journal Voucher, Payment Voucher (……)

37. Which of the following statement/s is/are correct in relation to the general ledger?
A- The transactions of an entity are initially recorded in the general ledger.
B- The general ledger is the collection of accounts maintained by an entity based on the double entry
system.
C- The transactions of an entity are posted to the general ledger after recording in the prime entry
books.
D- Closing entries are passed for all accounts in the general ledger of an entity at the end of the
accounting period.

(1) A only
(2) B and C only
(3) A, B and C only
(4) B, C and D only
(5) All A, B, C and D (……)

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 Use the following information to answer questions No. 38 and 39.
The balance of the debtors control account in the general ledger of an entity as at 31.03.2018 was Rs. 500
000. However, this balance did not agree with the total of balances extracted from the debtors’ ledger on
that date. The following were revealed in the subsequent investigation.
(i) Cheques of Rs. 180 000 received from debtors during March 2018 have been recorded only in the
cash receipts journal and the respective accounts in the debtors’ ledger. However, this has not
been posted to the general ledger.
(ii) Credit sales of Rs. 520 000 has been recorded in the sales journal as Rs. 250 000. However, this
has been correctly recorded in the debtors’ ledger.
(iii) A bad debt written off amounting to Rs. 50 000 has been correctly recorded in the general
ledger. However, this has not been recorded in the respective debtor’s account in the debtors’
ledger.
(iv) A balance of Rs. 80 000 has been omitted in extracting balances from the debtors; ledger.

38. The total of debtors’ balances extracted from the debtors’ ledger before correcting the above errors;
(1) Rs. 440 000
(2) Rs. 470 000
(3) Rs. 560 000
(4) Rs. 590 000
(5) Rs. 620 000 (……)

39. The correct balance of debtors’ control account as at 31.03.2018:

(1) Rs. 440 000
(2) Rs. 470 000
(3) Rs. 560 000
(4) Rs. 590 000
(5) Rs. 620 000 (……)

40. The following transactions took place in Gemunu PLC during the month of March 2018. The accounting
year of the company ends on 31st March.
(i) Received cash Rs. 500 000 by issuing ordinary shares.
(ii) Purchased goods for Rs. 1 000 000 on credit.
(iii) Revalued the land for the first time, which resulted in a deficit of Rs. 300 000.
(iv) Incurred advertising expenses of Rs. 60 000, and it Is payable in May 2018.
State the prime entry book in which each of the above transactions are recorded.

Transaction Prime entry book

(1) …………………………………………………………………
(2) …………………………………………………………………
(3) …………………………………………………………………
(4) …………………………………………………………………

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 Use the following information to answer questions No. 41, 42 and 43.
Sadun commenced a trading business on 01.01.2019 by investing Rs. 750 000 in cash and the following
transactions took place during the month of January 2019.
Date Description
10.01.2019 Purchased goods for Rs. 500 000 on credit from Jayamal Traders.
12.01.2019 Returned Rs. 50 000 of the goods purchased from Jayamal Traders.
15.01.2019 Sold goods costing Rs. 400 000 for Rs. 600 000 to Sirimal on cash.
24.01.2019 Settled the balance due to Jayamal traders subject to a discount of Rs. 5 000.

41. The source documents used to record the above transactions with Jayaml traders in the books of Sadun’s
business in the order of their occurrence:
(1) Invoice, debit note, payment voucher
(2) Invoice, credit note, payment voucher
(3) Invoice, journal voucher, payment voucher
(4) Invoice, debit note, receipt, payment voucher
(5) Invoice, credit note, receipt, journal voucher (……)

42. The order of the prime entry books used to record the transactions that took place in Sadun’s business
from 12.01.2019 to 24.01.2019:
(1) Purchase returns journal, sales journal, cash payments journal
(2) Purchase returns journal, cash receipts journal, cash payments journal
(3) General journal, cash receipts journal, cash payments journal
(4) Purchase journal, sales journal, cash payments journal
(5) Purchase journal, cash receipts journal, cash payments journal (……)

43. What is the profit for the month of January 2019 and cash balance as at 31.01.2019 of Sadun’s business?
Profit for the month (Rs.000) Cash balance (Rs.000)
(1) 200 155
(2) 200 905
(3) 205 155
(4) 205 900
(5) 205 905 (……)

 Use the following information to answer questions No. 44 and 45.

Following information was extracted from the draft financial statements of Chaturika Traders for the year
ending 31.03.2019.
Rs.000
Gross profit 850
Administrative expenses 275
Distribution expenses 200
Finance and other expenses 100
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 However, following were revealed after the preparation of draft financial statements.
 Office-staff salaries Rs. 30 000 and sales commission Rs. 20 000 payable as at 31.03.2019 have not
been accounted.
 Prepaid building rent of Rs. 40 000 has been included as administrative expenses.
 Depreciation on motor vehicles of Rs. 50 000 has been included in distribution expenses. However,
these vehicles are used to provide transport facilities to the office staff.

44. The correct administrative and distribution expenses for the year ending 31.03.2019, after making the
relevant adjustments:
Administrative expenses Distribution expenses
(1) 265 000 170 000
(2) 265 000 220 000
(3) 285 000 170 000
(4) 315 000 170 000
(5) 315 000 220 000 (……)

45. Profit for the year ending 31.03.2019 after making the relevant adjustments:
(1) Rs. 215 000
(2) Rs. 225 000
(3) Rs. 265 000
(4) Rs. 275 000
(5) Rs. 285 000 (……)
46. State the most appropriate accounting record that is described by each of the following statements.
Statement Accounting Record
A- The full list of accounts with their balances on a specified date ………………………………..
B- The record that contains the collection of accounts of an entity ………………………………..
C- The document that record the movement of the balance of
an inventory item. ………………………………...
D- The book of account that records a particular category of
transactions in the chronological order …………………………………

47. Indicate the prime entry book used to record each of the following transactions of a motor vehicle trading
company.

Transaction Prime Entry Book

A. Purchase of motor vehicles on credit ………………………………
B. Purchase of a truck on credit to be used in the delivery of
motor vehicles ………………………………
C. Sale of motor vehicles on credit ………………………………
D. Payment of sales commission ……………………………

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 Use the following information to answer questions No. 48, 49 and 50.
Nuwan opened a stationery trading shop on 01.01.2020. His brother, Sujith is the sole employee of this
business.
The following transactions took place during the month of January 2020.
No. Transaction Amount (Rs.‘000)
1. Invested cash by Nuwan to commence the business 300
2. Purchased stationery on cash 200
3. Purchased stationery on credit 550
4. Returned a part of stationery purchased on credit due to defects 50
5. Sold stationery on credit - This includes Rs. 64 000 Value Added Tax (VAT) 864
6. Paid the salary to Sujith 40

The cost of stationery sold during the month was Rs. 500 000. The electricity charges payable by the
business as at 31.01.2020 was Rs.30 000. Assume that there is no VAT on purchases and other expenses.

48. The order of source documents used to record the transactions Nos.2,3,4 and 5;
(1) Invoice, Good Received Note, Debit Note, Invoice
(2) Invoice, Good Received Note, Credit Note, Invoice
(3) Payment Voucher, Invoice, Debit Note, Invoice
(4) Payment Voucher, Invoice, Credit Note, Invoice
(5) Payment Voucher, Invoice, Credit Note, Journal Voucher (…...)

49. If this business maintains a debtors control account; what is the correct double entry to record the
transaction No. 5?
Dr. (Rs. ‘000) Cr. (Rs. ‘000)
(1) Debtors Control Account 800
Sales Account 800
(2) Debtors Control Account 864
Sales Account 864
(3) Debtors Control Account 800
VAT Expense Account 64
Sales Account 864
(4) Debtors Control Account 864
Sales Account 800
VAT Control Account 64
(5) Debtors Control Account 800
VAT expense Account 64
Sales Account 800
VAT Control Account 64 (……)
50. What is the gross profit and net profit of the business for the month ending 31.01.2020?
Gross Profit (Rs. '000) Net Profit (Rs. '000)
(1) 300 230
(2) 300 260
(3) 300 270
(4) 364 294
(5) 364 324 (……)

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 Use the following information to answer questions No. 51 and 52.
A business carries out all its cash transactions through a bank current account. There was no difference in
the closing balance of the cash account and bank statement of the month February 2020 of this business.
However, the cash account balance of Rs. 500 000 as at 31.03.2020 did not agree with the bank statement
balance on this date. The bank Statement for the month of March was received on 03.04.2020 and the
following were revealed when it was examined.

A - A cheque of Rs. 100 000 deposited on 29.03.2020 has not been realized.
B - The loan installment for month of March was paid on a standing order Rs. 30 000.
(This includes an interest expense of Rs. 12 000.)
C - A cheque of Rs. 80 000 deposited in the bank on 30.03.2020 has been dishonoured on 31.03.2020.
D - An investment income of Rs.120 000 has been credited directly to the bank account.

Direct remittances, standing order payments and dishonoured cheques are recorded in the books only
after the bank statement was received.

Above items 'A' and 'C' denote the cheque received from two debtors of the business to settle their
outstanding balances.

51. The revised balance of the cash account and the balance of the bank statement as at 31.03.2020:
Revised Balance of Cash Account (Rs. '000) Bank Statement Balance (Rs. '000)
(1) 410 510
(2) 510 410
(3) 510 510
(4) 590 410
(5) 590 510 (……)

52. What is the net effect of items A. B, C and D on the profit for the month of March 2020 and the debtors
control account balance as at 31 03.2020?
Increase in Profit (Rs. '000) Increase/(Decrease) in Debtors Control
Account Balance (Rs. '000)
(1) 90 (100)
(2) 90 (20)
(3) 108 (20)
(4) 108 80
(5) 120 80 (……)

53. Calculate the impact of the following transactions on the creditors control account balance and indicate
whether the balance would Increase (+) or Decrease (-) in front of the value.

Transaction Impact ( '000)

A - Purchase of goods with a list price of Rs, 100 000 on credit subject
to a 10% trade discount. ………………………………….
B - Payment of cash to settle a balance of Rs. 50 000 due to a creditor
subject to a 5% cash discount ..…………………………………

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