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Q1.
The draft financial statements have been prepared for T, a limited liability company. It is now found that trade discounts totalling $2,550 have not been taken and T suppliers agree that these should have been allowed.
The necessary amendment will:
A Increase gross profit and reduce net profit.
B Have no effect on gross profit but increase net profit.
C Increase both gross profit and net profit.
D Increase net profit and reduce gross profit.Q2.
What is the correct double entry for a cash refund to a customer?
A DR Bank / CR Receivables.
B DR Receivables / CR Bank.
C DR Receivables / CR Refunds given.
D DR Refunds given / CR Bank.What are the correct answers?
It seems very strange that you should be asking such questions about double-entry bookkeeping (topics in FA) when you have earlier posts that suggest you are studying FR – you might find it helpful to download the FA notes and refer to relevant lectures if there are gaps in your assumed knowledge https://opentuition.com/acca/fa
I will answer your questions here but note that this is the general forum – “technical” queries about bookkeeping topics are more appropriate to the FA forum.
Q1 – Answer D
Q2 – Answer DQ1 – assuming the discounts are from suppliers of purchases (for raw materials or goods for resale) – the cost of purchases will be reduced. This reduces cost of goods of sold, so gross profit increases – net profit increases by the same amount.
Q2 – Any cash payment is Cr Cash/Bank. The Debit is most likely refunds given which would be netted off against revenue for financial reporting purposes. It is highly unlikely to be debit receivables – would you give cash to someone who owed you money? For a credit customer, a refund would be given as a credit note (i.e. reducing what they owe) rather than cash.
They are revision questions as I’ve forgotten earlier material.
I had to take a break from my ACCA studies due to health problems.Thank you for replying. This was helpful.
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