Double Entry Model

State two purposes of source documents in the accounting system. (2 marks)

Identify the book of prime entry that would be used to record each of the following transactions. (a) A credit purchase of inventory from a supplier. (b) The return of goods to a supplier following a credit purchase. (2 marks)

State one difference between a trade discount and a cash discount. (2 marks)

Name the three types of ledger used in a business's double entry bookkeeping system and state the purpose of each. (3 marks)

Explain why the cash column of a cash book cannot show a credit balance, but the bank column can. (3 marks)

Explain the difference between a standing order and a direct debit as they appear on a bank statement. (3 marks)

Explain the difference between discount allowed and discount received. State which side of a three-column cash book each appears on and explain why the discount columns are described as 'memorandum only'. (4 marks)

Norfield Traders has a trade receivable balance of £1,200 for a customer, M. Carr, who has been declared bankrupt. The debt is to be written off as irrecoverable. State the double entry to write off this irrecoverable debt and explain the effect on the income statement and the statement of financial position. (4 marks)

Alderton Ltd sold a machine on 31 December for £3,500 cash. The machine had originally cost £10,000. Accumulated depreciation at the date of disposal was £6,000. Prepare the disposal account for this asset, clearly showing the profit or loss on disposal. (4 marks)

Explain the difference between revenue income and capital income. Give one example of each and state the effect on profit if capital income is incorrectly treated as revenue income. (4 marks)

Meviston Traders had the following transactions during May. Prepare the two-column cash book for May, balancing the cash and bank columns at 10 May. (6 marks)

Sternfield Ltd had the following transactions during June. Prepare the three-column cash book for June, showing the discount allowed and discount received totals, and balance the cash and bank columns at 9 June. (6 marks)

For each of the following six transactions made by Lawton Electrical during March, state the account to be debited and the account to be credited. (6 marks — 1 mark per correct debit and credit pair) 1. The owner introduced £15,000 of their own savings as capital, paid into the business bank account. 2. The business purchased equipment for £6,200 by cheque. 3. Credit sales of £3,800 were made to Hargreaves Ltd. 4. The business paid wages of £1,400 by bank transfer. 5. The business received a cheque from Hargreaves Ltd for £3,610 in full settlement of the debt; the business had allowed a discount of £190. 6. The business paid £2,100 to a supplier, Dunmore Ltd, by cheque, after receiving a £150 discount.

Harston Supplies Ltd both buys from and sells to Fieldway Ltd. At 30 June the following balances are outstanding. - Harston owes Fieldway Ltd £800 (in Harston's purchases ledger) - Fieldway Ltd owes Harston £300 (in Harston's sales ledger) The two businesses agree to set off the common debt. (a) State the double entry in Harston's books to record the contra (set-off) entry. (2 marks) (b) State the balance remaining after the set-off and identify which ledger account it appears in. (2 marks) (c) Explain why a contra entry is recorded in the general journal rather than any book of prime entry. (2 marks)

Explain the complete flow of a credit sale transaction through the accounting system, from source document to ledger accounts. For each stage, state what happens and, where applicable, state the double entry bookkeeping entries that would be made. (8 marks)

Dalbury Engineering purchased a new milling machine for £32,000, paying by cheque. The bookkeeper incorrectly debited the full amount to motor expenses. Identify the error and assess its impact on the income statement and the statement of financial position for the year ended 31 March. (8 marks)

Bramley & Sons is a family-run manufacturing business with 12 employees. It currently uses a manual bookkeeping system. The owner is considering switching to a computerised accounting package. The following information is available. - The accounting software licence costs £2,400 per year - Two full-time bookkeepers are currently employed at a combined salary of £45,000 per year - Staff would require two weeks of training at a cost of £1,800 - The business suffered three instances of arithmetic error in its manual accounts last year - The owner wants to produce monthly management accounts and cash flow forecasts Evaluate the advantages and disadvantages of introducing a computerised accounting system for Bramley & Sons. (10 marks)

A sole trader currently records all business activity in a simple receipts and payments account (listing all cash received and cash paid). A local accountant has advised them to switch to a full double entry bookkeeping system. Assess the usefulness of the double entry bookkeeping system compared with keeping only a receipts and payments record. (10 marks)