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FA Chapter 17 Questions Adjustments to Profit and Suspense Accounts

 

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  2. the answer for question 4 says including goods received on 29 june in the closing inventory is correct. I don’t understand why? Do we record assets as and when we receive them regardless of whether or not we received the invoice?

    • If we have received the goods then we should include them in inventory. If we haven’t yet received the invoice we should record the amount owing (as an accrual) because we do owe for them whether or not we have yet received the invoice.

    • because that entry has been omitted from the trial balance, not from the T A/C. If the entry is omitted from the T A/C than it doesn’t affect the trail balance being balanced, although that entry should be also be corrected.

    • first step:200,640+43,200=243,840 because when you record expense, this expense can be effect in total statement of profit or loss , make negative effect in SOPL
      then i should added 43,200 because i found error about motor van account between expense motor van account
      second step:after this one , i should calculate Depreciation about motor van
      43,200/25%=10,800 per years (straight line)
      then 243,840-10,800=233,040 its correct answer

  9. This practise test was really good
    It helped me figure out that I’m still weak in this section of the syllabus but I still have a doubt with some of the questions here

    I have a doubt thats conflicting with question 1 and question 3
    In question 1 my original answer was actually the correct answer which was about the discount allowed and discount recieved but I switched my answer to the wrong answer because I thought an omission of the petty cash balance from the trial balance will create an imbalance so a suspense account should be created to balance the Trial Balance

    Now in question 3 on the other hand I selected the option of the petty cash book balance was omitted from the trial balance and it was apparently correct

    Now I was wondering how these two could be the answers like this when it says that in question 1 the omission is not relevant but for question 3 the omission was relevant

    Thank you very much again

  10. Q1) If the Dr of trial balance was $1920 more than Cr, wouldn’t an omission of dr of petty cash $1920, bring the overstated back to balance with the Cr and solve the problem ? This is what I thought, I don’t understand how I am wrong.

    Q3) Please help me understand the last point – Cash2800. I dont at all understand what is being said. Please generously help with break down.

    Q5) Why is the last point wrong. Also what did it mean by “the Cash Entry was correctly made”

    Q) By cash book you mean the Prime Book ?

    This test was very difficult

  11. I am confused with Q2, if the cost of the motor van was erroneously recorded as expense, obviously we would add it back to profit amount as it was originally a deduction. But how about the depreciation expense, wasn’t it originally deducted so it is just proper to add it back?

    A further clarification is appreciated.

    Thank you.

    • No (apart obviously from the mock exam that we provide).

      The tests are only supposed to be short checks after each chapter. As I say in the introductory lecture, it is essential that you buy a Revision Kit from one of the ACCA approved publishers (BPP and Kaplan) because they are full of exam standard questions for practice and practice is vital to passing the exam.

      (If you use the link on most pages of our website you can buy books from BPP at a special discount of 20% 🙂 )

  13. for question 1 : Would it be correct if i chose option B (the petty cash balance of $1920 had been omitted from the trial balance) If not, Please explain why as I am not confident enough with the actual answer given.

    • No, it would not be correct.
      Petty cash is an asset and is therefore a debit balance.
      If it is omitted from the trial balance, then the total debits will be too small (and be lower than the total credits).

  14. Question 4
    the inventory on 29 june was it closing inventory for 20X6? , What is i am gonna do with this inventory?
    Suppose that inventory that received on 29 was value of $500
    what is the effect on gross profit?

    • The goods were received on 29 June 2006 and were included in the inventory at 30 June 2006 – the question says so. It was quite correct for it to be included.

      The problem is that the invoice for them was not recorded until July, which is after the year end. The invoice should have been accrued for, but it had not been. So the profit for 2006 would be higher than it should have been.

      • Can you tell me the T balance entries when we get inventory while don`t receive invoice?
        I thought it will be Dr Inventory and Cr supplier because when we pay money Dr supplier Cr Cash, and there is no mention for profit. How does the buying inventory affect to profit?
        Thank you in advance

      • The entry is as you have written.

        It is only at the end of the accounting period that the inventory appears in the SOPL. The entries for this are explained in my free lectures on inventory.

  17. In question 3 the petty cash book balance $500 had been omitted from the trial balance.
    Why did this affect the trial balance, we forgot to record it in the TB. There is no credit or debit of $500 in TB.

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