2022 May/June · Paper 12 · Q51 markControl accounts
2022 May/June · Paper 12 · Q61 markBank reconciliation
2022 May/June · Paper 12 · Q71 markControl accounts
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school. “Paper 42” means Paper 4, variant 2.
Practice questions
Original questions written by HomiLabs in the style of the exam, with answers and mark schemes. They are not
Cambridge past paper questions and have not been reviewed by Cambridge. Try each one before opening the answer.
Q1Control accounts · Core · Paper 1 style · 1 mark
(a)Which item is recorded on the credit side of a sales ledger control account?[1]
Show answer
(a) C an irrecoverable debt written off
Irrecoverable debts reduce the amount owed by customers, so they are credited. A dishonoured cheque (B) is debited because the customer owes the money again.
Q2Control accounts · Core · Paper 2 style · 6 marks
Rehman Hardware, Sialkot, provides the following information for the year ended 30 September 2026. $Purchases ledger balance 1 October 2025 (credit) 21,500Purchases ledger balance 30 September 2026 (credit) 24,800Payments to credit suppliers 143,200Discounts received 2,600Returns outwards 3,900Contra with sales ledger 1,100
(a)Prepare the purchases ledger control account for the year ended 30 September 2026, showing the credit purchases as the balancing figure.[4]
(b)Explain what is meant by a contra entry between the sales ledger and the purchases ledger.[2]
B1 each side's items correctly placed (payments, discounts, returns, contra on the debit side; opening balance on the credit side) ×3; A1 credit purchases $154,100.
(b) A business that both buys from and sells to the same firm sets off the amount it owes against the amount owed to it, so only the net balance is settled in cash.
1 mark: same firm is both customer and supplier. 1 mark: balances are set off/cancelled; recorded Dr purchases ledger control, Cr sales ledger control.
Q3Control accounts · Core · Paper 2 style · 5 marks
(a)Explain two benefits to a business of keeping a sales ledger control account.[4]
(b)State why agreement between the control account and the list of sales ledger balances does not prove that the sales ledger is free from errors.[1]
Show answer
(a) Any two explained: it gives a quick total of trade receivables for the statement of financial position; it helps to locate errors to the sales ledger; it acts as a check on the work of the sales ledger clerk / helps detect fraud; it allows a trial balance to be drawn up without listing every customer.
1 mark for each benefit identified, 1 mark for each development (2 × 2).
(b) Some errors, such as posting an invoice to the wrong customer's account (error of commission) or omitting a transaction completely, affect neither total.
1 mark for a valid reason with an example.
Q4Control accounts · Core · Paper 2 style · 8 marks
Al-Noor Textiles, Faisalabad, provides the following information for March 2026. $Sales ledger balances 1 March: debit 56,300Sales ledger balances 1 March: credit 740Credit sales 148,900Cash sales 32,000Cheques received from credit customers 131,250Discounts allowed 2,980Sales returns 4,460Irrecoverable debts written off 1,370Customer's cheque dishonoured 2,100Set off against purchases ledger 1,850Refund paid to customer with a credit balance 740Sales ledger credit balances 31 March 520
(a)Prepare the sales ledger control account for March 2026. Balance the account and bring down the balances on 1 April 2026.[6]
(b)Explain why the cash sales are not recorded in the sales ledger control account.[2]
Closing debit balance $65,910 = (56,300 + 148,900 + 2,100 + 740 + 520) − (740 + 131,250 + 2,980 + 4,460 + 1,370 + 1,850). 1 mark each: opening balances both sides; sales and dishonoured cheque; refund; receipts, discounts and returns; irrecoverable debts and contra; closing balances c/d and b/d.
(b) The control account records only amounts owed by credit customers. Cash sales are paid for immediately, so no receivable is created.
1 mark: control account summarises credit customers/receivables. 1 mark: cash sales create no debt.
Q5Control accounts · Core · Paper 2 style · 6 marks
Chenab Rice Mills provides the following for May 2026: sales ledger control account balance 1 May $18,250 debit; credit sales $64,300; sales returns $2,150; cheques received from credit customers $59,800; irrecoverable debts written off $900.
(a)State the book of prime entry from which each of the following totals in the sales ledger control account is taken:(1) credit sales(2) sales returns(3) cheques received from credit customers(4) irrecoverable debts written off[4]
(b)Calculate the closing balance on the sales ledger control account on 31 May 2026.[2]
Show answer
(a) (1) sales journal (sales day book); (2) sales returns journal; (3) cash book; (4) general journal (the journal)
Q6Control accounts · Standard · Paper 1 style · 1 mark
(a)The following information is available for the sales ledger of Pak Fasteners for April. $Balance 1 April (debit) 38,400Credit sales 212,600Cheques received from credit customers 196,300Discounts allowed 4,100Sales returns 5,800Irrecoverable debts written off 1,900Contra with purchases ledger 2,300Customer's cheque dishonoured 1,250What is the closing debit balance on the sales ledger control account on 30 April?[1]
Show answer
(a) B $41,850
38,400 + 212,600 + 1,250 − 196,300 − 4,100 − 5,800 − 1,900 − 2,300 = 41,850. A treats the dishonoured cheque as a credit; C leaves out the contra; D debits the contra instead of crediting it.
Q7Control accounts · Standard · Paper 2 style · 8 marks
Asante Cocoa Traders, Kumasi, Ghana, provides the following information for the year ended 31 December 2025. $Purchases ledger balances 1 January 2025: credit 47,200Purchases ledger balances 1 January 2025: debit 390Credit purchases 186,400Returns outwards 5,120Payments to suppliers 171,600Discounts received 3,240Contra with sales ledger 2,750Interest charged by a supplier on an overdue account 180Purchases ledger debit balances 31 December 2025 460
(a)Prepare the purchases ledger control account for the year ended 31 December 2025. Balance the account and bring down the balances.[6]
(b)Explain how a supplier's account in the purchases ledger can have a debit balance.[2]
(b) The business has paid the supplier more than it owes, for example by paying an invoice twice or returning goods after paying for them, so the supplier owes the business money.
1 mark: overpayment/returns after payment; 1 mark: supplier now owes the business (shown as a receivable).
Q8Control accounts · Standard · Paper 2 style · 8 marks
At 31 August 2026 the sales ledger control account of Margalla Office Supplies showed a debit balance of $84,620. The total of the list of balances extracted from the sales ledger was $82,585. The following errors were found.1 The sales journal was undercast by $900.2 A credit note for $340 was entered in the customer's account but was omitted from the sales returns journal.3 A discount allowed of $125 was credited to a customer's account twice.4 An irrecoverable debt of $760 was written off in the customer's account but not in the control account.5 A customer's balance of $1,280 was omitted from the list of balances.6 A contra of $430 was recorded in the customer's account but not in the control account.
(a)Prepare a statement showing the corrected sales ledger control account balance.[4]
(b)Prepare a statement showing the corrected total of the list of sales ledger balances.[3]
(c)State one type of error that would not be revealed by comparing the control account with the list of balances.[1]
Show answer
(a)Balance per control account 84,620Add (1) sales journal undercast 900Less (2) credit note omitted from returns journal (340)Less (4) irrecoverable debt not entered (760)Less (6) contra not entered (430)Corrected balance 83,990
1 mark each for items 1, 2, 4 and 6 correctly adjusted; own figure total.
(b)Total of list 82,585Add (3) discount credited twice 125Add (5) balance omitted 1,280Corrected total 83,990The corrected totals agree.
1 mark each for items 3 and 5; 1 mark corrected total $83,990 agreeing with (a).
(c) For example an error of commission: an invoice posted to the wrong customer's account.
1 mark for any valid error.
Q9Control accounts · Challenge · Paper 2 style · 8 marks
At 30 June 2026 the purchases ledger control account of Lagos Fresh Foods showed a credit balance of $63,410. The total of the list of purchases ledger balances was $65,435. The following errors were discovered.1 The purchases journal was overcast by $1,000.2 Goods returned to a supplier, $560, were debited to the supplier's account as $650.3 Discounts received of $215 were recorded in the suppliers' accounts but not in the control account.4 A supplier's credit balance of $2,140 was entered in the list as $1,240.5 A payment of $1,780 to a supplier was entered on the credit side of the supplier's account.6 A contra of $670 was entered in the control account twice.
(a)Prepare a statement showing the corrected purchases ledger control account balance.[4]
(b)Prepare a statement showing the corrected total of the list of purchases ledger balances.[4]
Show answer
(a)Balance per control account (credit) 63,410Less (1) purchases journal overcast (1,000)Less (3) discounts received not entered (215)Add (6) contra debited twice 670Corrected balance 62,865
1 mark each for items 1, 3 and 6 (direction must be right: a credit balance is reduced by debits); 1 mark own figure total. Items 2, 4 and 5 do not affect the control account.
(b)Total of list 65,435Add (2) returns overstated by $90 90Add (4) balance listed as $1,240 instead of $2,140 900Less (5) payment credited instead of debited (2 × $1,780) (3,560)Corrected total 62,865
1 mark each for items 2, 4 and 5 (item 5 must be doubled); 1 mark total agreeing with (a).
Q10Control accounts · Challenge · Paper 1 style · 1 mark
(a)[1]
Show answer
(a) A control account: decrease $500; list: increase $240
The overcast journal total is posted only to the control account, so its debit balance is $500 too high. The individual invoices were posted correctly except the $120 invoice, which was credited instead of debited, so the customer's balance is understated by 2 × $120 = $240. B forgets to double the reversal.
Q11Control accounts · Challenge · Paper 2 style · 8 marks
Kilimanjaro Coffee Exporters, Mombasa, Kenya, provides the following for the year ended 31 March 2026. $Sales ledger balances 1 April 2025: debit 92,400Sales ledger balances 1 April 2025: credit 1,150Credit sales 418,700Receipts from credit customers 389,600Discounts allowed 6,240Sales returns 9,830Irrecoverable debts written off 3,560Interest charged on overdue accounts 420Dishonoured cheques 2,890Contra with purchases ledger 4,150Sales ledger credit balances 31 March 2026 980The business keeps an allowance for doubtful debts of 5% of the closing debit balances.
(a)Prepare the sales ledger control account for the year ended 31 March 2026, bringing down the balances on 1 April 2026.[5]
(b)Calculate the trade receivables figure to be shown in the statement of financial position at 31 March 2026.[2]
(c)Explain why the allowance for doubtful debts is not recorded in the sales ledger control account.[1]
Debit balance c/d $100,860. 1 mark each: opening balances; sales, interest and dishonoured cheques; receipts, discounts, returns; irrecoverable debts and contra; both closing balances. The allowance for doubtful debts is not entered.
(b) $100,860 − allowance $5,043.00 = $95,817.00
M1 5% × 100,860 = 5,043.00; A1 95,817.00. (The $980 credit balances are shown separately as a current liability.)
(c) The control account must agree with the total of the individual customer accounts. The allowance is only an estimate and is not posted to any customer's account, so it is kept in a separate account.
1 mark: the control account must agree with the customer accounts, and the allowance is an estimate not posted to any customer's account.
Q12Bank reconciliation · Core · Paper 1 style · 1 mark
(a)[1]
Show answer
(a) B $3,750 debit
Cash book = bank statement − unpresented cheques + outstanding lodgement = 4,200 − 1,350 + 900 = 3,750. C adds the cheques and deducts the lodgement, reversing both adjustments.
Q13Bank reconciliation · Core · Paper 2 style · 7 marks
The bank columns of the cash book of Swat Valley Honey showed a debit balance of $6,820 on 30 June 2026. A comparison with the bank statement showed:1 bank charges of $64 and a standing order for insurance of $350 had not been entered in the cash book2 a credit transfer of $1,200 from a customer and a dividend of $275 paid directly into the bank had not been entered in the cash book3 cheques no. 1043 for $1,180 and no. 1045 for $1,235 had not been presented4 cash and cheques of $1,960 paid in on 30 June did not appear on the bank statement.
(a)Prepare the updated cash book (bank columns) at 30 June 2026.[4]
(b)Prepare the bank reconciliation statement at 30 June 2026, starting with the balance shown on the bank statement.[3]
1 mark: bank charges and standing order; 1 mark: credit transfer; 1 mark: dividend; 1 mark: balance $7,881.
(b)Balance per bank statement 8,336Less unpresented cheques (1,180 + 1,235) (2,415)Add lodgement not yet credited 1,960Balance per updated cash book 7,881
1 mark unpresented cheques deducted; 1 mark lodgement added; 1 mark bank statement balance $8,336.
Q14Bank reconciliation · Core · Paper 2 style · 6 marks
Farah runs a dressmaking business in Multan. She records all receipts and payments in a cash book.
(a)Explain two reasons why the balance on the bank statement may differ from the bank balance in the cash book.[4]
(b)State two benefits of preparing a bank reconciliation statement regularly.[2]
Show answer
(a) Any two explained: timing differences such as unpresented cheques (entered in the cash book but not yet paid by the bank) or lodgements not yet credited; items the bank has entered that the business does not yet know about, such as bank charges, interest, standing orders, direct debits, credit transfers or dishonoured cheques; errors in the cash book or by the bank.
1 mark for each reason, 1 mark for each explanation (2 × 2).
(b) Any two: errors in the cash book or by the bank are found quickly; the cash book is brought up to date; fraud is more likely to be detected; stale (old unpresented) cheques can be identified; it confirms the bank balance shown in the statement of financial position.
1 mark each.
Q15Bank reconciliation · Standard · Paper 1 style · 1 mark
(a)[1]
Show answer
(a) C $3,695
Updated cash book = 2,640 − 85 + 410 = 2,965. Bank statement = 2,965 + unpresented cheques 730 = 3,695. B forgets to update the cash book for the charges and the credit transfer.
Q16Bank reconciliation · Standard · Paper 2 style · 8 marks
On 31 October 2025 the cash book of Delta Tyres, Hyderabad, showed a bank overdraft of $3,145. The bank statement on that date showed:1 bank charges of $120 and overdraft interest of $95, not in the cash book2 a direct debit of $430 for electricity, not in the cash book3 a cheque for $780 from a customer, returned unpaid (dishonoured)4 a credit transfer of $1,650 received from a customer, not in the cash book.Cheques of $2,960 had not yet been presented, and a lodgement of $1,540 had not yet been credited by the bank.
(a)Calculate the updated cash book balance at 31 October 2025.[4]
(b)Prepare a bank reconciliation statement at 31 October 2025, starting with the updated cash book balance.[3]
(c)State where the bank balance will appear in the statement of financial position at 31 October 2025.[1]
Show answer
(a) Overdraft $2,920
−3,145 − 120 − 95 − 430 − 780 + 1,650 = (2,920). 1 mark charges and interest; 1 mark direct debit; 1 mark dishonoured cheque and credit transfer; 1 mark overdraft 2,920.
(b)Balance per updated cash book (overdraft) (2,920)Add unpresented cheques 2,960Less lodgement not yet credited (1,540)Balance per bank statement (overdraft) (1,500)
1 mark each for the two adjustments; 1 mark overdrawn $1,500.
(c) Under current liabilities (bank overdraft).
1 mark.
Q17Bank reconciliation · Standard · Paper 2 style · 8 marks
The cash book of Blue Lagoon Dive Centre, Langkawi, Malaysia showed a debit balance of $4,215 on 31 January 2026. The following were found.1 A cheque payment of $1,650 to a supplier had been entered in the cash book as $1,560.2 A receipt of $2,340 from a customer had been entered on the credit side of the cash book.3 A standing order of $600 for rent had not been entered in the cash book.4 The bank had debited the business's account with a cheque for $450 drawn by another customer of the bank.5 Unpresented cheques totalled $3,080 and a lodgement of $2,110 had not been credited by the bank.
(a)Calculate the updated cash book balance at 31 January 2026.[4]
(b)Prepare the bank reconciliation statement at 31 January 2026, starting with the updated cash book balance. Show clearly how you deal with the bank's error.[4]
Show answer
(a) $8,205 debit
4,215 − 90 − 600 + (2 × 2,340) = 8,205. 1 mark: −90 for the cheque recorded as $1,560 instead of $1,650; 1 mark: +4,680 for the receipt entered on the wrong side; 1 mark: −600 standing order; 1 mark: answer.
(b)Balance per updated cash book 8,205Add unpresented cheques 3,080Less lodgement not yet credited (2,110)Less cheque wrongly debited by the bank (450)Balance per bank statement 8,725
1 mark each adjustment (the bank's error is not entered in the cash book; the bank will correct it); 1 mark balance $8,725.
Q18Bank reconciliation · Standard · Paper 2 style · 8 marks
The cash book of Riverside Bicycle Hire, Galway, Ireland, shows a debit balance of $5,310 on 30 November 2025. The following items are found.1 Unpresented cheques $1,8402 Bank interest charged $763 Direct debit for telephone $2904 Lodgement of $2,500 not yet credited by the bank5 Credit transfer from a customer $1,1306 A cheque received for $640 was entered in the cash book as $460
(a)For each item 1–6 state whether it requires an entry in the cash book or appears in the bank reconciliation statement.[3]
(b)Calculate the updated cash book balance.[3]
(c)Calculate the balance shown on the bank statement.[2]
Award 1 mark for every two items correctly placed (6 items, max 3 marks).
(b) $6,254 debit
5,310 − 76 − 290 + 1,130 + 180 = 6,254. M1 deductions; M1 credit transfer and +180 for the cheque recorded as $460 instead of $640; A1.
(c) $5,594 credit
6,254 + 1,840 − 2,500 = 5,594. M1 A1.
Q19Bank reconciliation · Challenge · Paper 2 style · 8 marks
On 31 January 2026 the bank statement of Tamarind Catering, Chennai, showed an overdraft of $2,380. The following items explain the difference from the cash book.1 Cheques of $4,120 paid to suppliers had not been presented.2 A lodgement of $3,560 had not been credited by the bank.3 Bank charges of $140 had not been entered in the cash book.4 A credit transfer of $920 from a customer had not been entered in the cash book.5 A cheque payment of $715 had been recorded in the cash book as $175.
(a)Calculate the updated (correct) cash book balance at 31 January 2026.[3]
(b)Calculate the cash book balance before the corrections were made.[3]
(c)Explain why an overdraft is shown as a debit balance on the bank statement but as a credit balance in the cash book.[2]
Show answer
(a) Overdraft $2,940
Work back from the bank statement: −2,380 − 4,120 + 3,560 = (2,940). M1 unpresented cheques deducted; M1 lodgement added; A1 overdraft 2,940.
(b) Overdraft $3,180
Updated = original − 140 + 920 − 540, so original = −2,940 + 140 − 920 + 540 = (3,180). M1 reversing the three items; M1 the error of $540 (715 − 175) treated correctly; A1 overdraft 3,180.
(c) The bank statement is prepared from the bank's point of view: the customer owes the bank, so the customer is a debtor (debit). In the business's cash book the overdraft is money owed to the bank, a liability (credit).
1 mark each point.
Q20Bank reconciliation · Challenge · Paper 2 style · 8 marks
Sindh Solar Installers' cash book (bank columns) and bank statement for May 2026 are shown.Cash book (bank columns), May 2026Dr $ | Cr $1 May Balance b/d 3,460 | 4 May Rent (chq 501) 1,2009 May Hamid Traders 2,150 | 12 May Kareem Supplies (502) 1,94518 May Sales 1,870 | 21 May Wages (chq 503) 86030 May Zainab Ltd 2,640 | 28 May Lucky Motors (504) 1,310Bank statement, May 2026 Debit Credit Balance1 May Balance 3,460 Cr7 May Cheque 501 1,20010 May Lodgement 2,15015 May Cheque 502 1,94519 May Lodgement 1,87022 May Standing order: insurance 41025 May Credit transfer: Saleem 73527 May Cheque 503 86031 May Bank charges 5831 May Returned cheque: Hamid Traders 2,150 1,592 Cr
(a)Update the cash book and bring down the corrected balance on 31 May 2026.[5]
(b)Prepare the bank reconciliation statement at 31 May 2026, starting with the balance on the bank statement.[3]
(b)Balance per bank statement 1,592Add lodgement not credited (Zainab Ltd) 2,640Less unpresented cheque 504 (1,310)Balance per updated cash book 2,922
1 mark lodgement; 1 mark cheque 504; 1 mark agreeing balance.
Q21Bank reconciliation · Challenge · Paper 2 style · 7 marks
The cash book of Andes Alpaca Wool, Cusco, Peru, showed an overdraft of $1,775 on 31 March 2026 before bank charges of $95 were entered. A trainee prepared this statement.Balance per cash book 1,775Less bank charges (95)Add unpresented cheques 2,450Less lodgement not credited (1,230)Balance per bank statement (credit) 2,900
(a)Identify two errors in the trainee's statement.[2]
(b)Calculate the updated cash book balance.[2]
(c)Prepare a corrected bank reconciliation statement, starting with the updated cash book balance.[3]
Show answer
(a) The cash book overdraft was treated as a positive (debit) balance; bank charges were put in the reconciliation instead of being entered in the cash book.
1 mark each.
(b) Overdraft $1,870
−1,775 − 95 = −1,870. M1 A1.
(c)Balance per updated cash book (overdraft) (1,870)Add unpresented cheques 2,450Less lodgement not credited (1,230)Balance per bank statement (overdraft) (650)
1 mark each adjustment; 1 mark overdrawn $650.
Q22Correction of errors and suspense account · Core · Paper 1 style · 1 mark
(a)Which error would cause the totals of a trial balance to disagree?[1]
Show answer
(a) C discount allowed of $95 was debited to both the discount allowed account and the customer's account
Two debits and no credit make the debit total $190 higher than the credit total. A (commission), B (principle) and D (omission) all keep debits equal to credits.
Q23Correction of errors and suspense account · Core · Paper 2 style · 8 marks
Shaheen Stationers, Peshawar, found the following errors after preparing its trial balance.1 A computer for office use costing $1,800 was debited to the purchases account.2 A cash sale of $640 was not recorded at all.3 A payment of $350 to Mehran Traders was debited to the account of Mehdi Traders.4 Rent received of $900 was debited to the rent received account and credited to the bank account.
(a)Prepare the journal entry to correct error 1. A narrative is not required.[2]
(b)Prepare the journal entry to correct error 2.[2]
(c)Prepare the journal entry to correct error 3.[2]
(d)Prepare the journal entry to correct error 4.[2]
Show answer
(a) Dr $ Cr $Office equipment 1,800 Purchases 1,800
1 mark each side (error of principle).
(b) Dr $ Cr $Cash 640 Sales 640
1 mark each side (error of omission).
(c) Dr $ Cr $Mehran Traders 350 Mehdi Traders 350
1 mark each side (error of commission).
(d) Dr $ Cr $Bank 1,800 Rent received 1,800
1 mark each side. Error 4 is a complete reversal, so twice $900 is needed.
Q24Correction of errors and suspense account · Core · Paper 2 style · 6 marks
Lin Mei runs a tea shop in Kuala Lumpur.
(a)Name the type of error in each case.(i) Repairs to a motor vehicle were debited to the motor vehicles account.(ii) A credit sale to A. Khan was debited to the account of A. Khanum.(iii) A purchase invoice for $1,290 was entered in the purchases journal as $1,920 and posted from there.(iv) Cash received from a customer was debited to the customer's account and credited to the cash account.[4]
(b)Explain why none of these errors is revealed by the trial balance.[2]
Show answer
(a) (i) error of principle; (ii) error of commission; (iii) error of original entry; (iv) complete reversal of entries
1 mark each.
(b) In each case the debit entry equals the credit entry, so the totals of the trial balance still agree.
1 mark: equal debits and credits; 1 mark: totals still agree / no suspense account needed.
Q25Correction of errors and suspense account · Standard · Paper 1 style · 1 mark
(a)The trial balance of a business had debit totals of $186,450 and credit totals of $185,610. A suspense account was opened. Which single error would explain the whole difference?[1]
Show answer
(a) A the sales account was undercast by $840
The credit side is $840 short (186,450 − 185,610 = 840). An undercast sales account reduces the credit total by exactly $840. B creates a difference of only $420; C and D do not affect the agreement of the trial balance.
Q26Correction of errors and suspense account · Standard · Paper 2 style · 8 marks
The trial balance of Gulf Marine Spares, Dubai, did not agree on 31 December 2025 and the difference was entered in a suspense account. The following errors were then found.1 The sales journal total of $14,250 was posted to the sales account as $12,450.2 Discount allowed of $385 was posted to the credit side of the discount allowed account.3 A cheque payment of $520 for repairs was entered in the cash book but not posted to the repairs account.4 The purchase of fixtures costing $2,000 was debited to the purchases account.5 Rent paid of $1,150 was posted to the rent account as $1,510.
(a)Prepare journal entries to correct errors 1–5. Narratives are not required.[5]
(b)Prepare the suspense account, showing the balance that arose when the trial balance was drawn up.[3]
1 mark debit entries; 1 mark credit entries; 1 mark opening credit balance $870.
Q27Correction of errors and suspense account · Standard · Paper 2 style · 8 marks
Kamran owns an electrical goods shop in Quetta. His draft profit for the year ended 30 April 2026 was $48,360. The following errors and omissions were then found.1 Closing inventory had been overvalued by $1,250.2 A delivery van bought for $9,500 on 1 May 2025 had been debited to motor expenses. Vans are depreciated at 20% per annum on cost.3 Discount received of $430 was credited to the discount allowed account.4 An electricity bill of $680 for April 2026 had not been accrued.5 Goods costing $1,100 taken by Kamran for his own use had not been recorded.6 Insurance of $360 paid in advance had not been adjusted.
(a)Prepare a statement showing the corrected profit for the year ended 30 April 2026.[6]
(b)Explain the effect on profit of error 3.[2]
Show answer
(a)Draft profit for the year 48,360Less inventory overvalued (1,250)Add van wrongly charged to motor expenses 9,500Less depreciation on van (20% × 9,500) (1,900)Discount error 0Less electricity accrued (680)Add goods taken by owner 1,100Add insurance prepaid 360Corrected profit for the year 55,490
1 mark each: inventory; van; depreciation; accrual; drawings of goods (reduce cost of sales); prepayment. Own figure total.
(b) None. Discount allowed (an expense) was reduced by $430 instead of discount received (an income) being increased by $430; either way profit is $430 higher, so the profit figure is correct even though both accounts are wrong.
1 mark: no effect on profit; 1 mark: explanation.
Q28Correction of errors and suspense account · Challenge · Paper 2 style · 8 marks
The draft profit of Coral Reef Electronics, Colombo, Sri Lanka, for the year ended 31 July 2026 was $72,900. The trial balance did not agree, and a suspense account was opened with a debit balance of $1,340. The following errors were found.1 Returns inwards of $680 were posted to the credit side of the returns outwards account.2 Commission received of $450 was entered in the bank account but not posted to the commission received account.3 Machinery bought for $3,200 was debited to the machinery repairs account. (No depreciation is charged in the year of purchase.)4 The wages account was undercast by $430.
(a)Prepare the suspense account.[3]
(b)Prepare a statement showing the corrected profit for the year ended 31 July 2026.[4]
(c)State the effect of correcting error 3 on the non-current assets in the statement of financial position.[1]
1 mark returns (−1,360 in total); 1 mark commission; 1 mark machinery; 1 mark wages and total $74,760.
(c) Non-current assets (machinery) increase by $3,200.
1 mark.
Q29Correction of errors and suspense account · Challenge · Paper 2 style · 7 marks
The trial balance of Hunza Apricot Traders at 31 December 2025 did not agree, and a suspense account was opened with a credit balance of $2,460. The draft profit was $31,250. Three errors were found, after which the suspense account was closed.1 Insurance paid of $760 was credited to the insurance account.2 Interest received of $290 was entered in the bank account but not posted to the interest received account.3 The sales account was undercast by an amount not yet known.
(a)Prepare the suspense account, showing the amount by which the sales account was undercast as the balancing figure.[4]
(b)Calculate the corrected profit for the year.[3]
1 mark opening credit balance; 1 mark insurance 2 × 760 = 1,520 credit; 1 mark interest 290 debit; 1 mark sales undercast $3,690.
(b) $33,710
31,250 − 1,520 + 290 + 3,690 = 33,710. 1 mark insurance; 1 mark interest and sales; 1 mark answer.
Q30Purpose and limitations of verification · Standard · Paper 2 style · 5 marks
Ayesha has just started work as an accounts assistant at a pharmacy chain in Islamabad. She believes that because her trial balance agrees, her ledger accounts must be correct.
(a)State two purposes of preparing a trial balance.[2]
(b)Explain three types of error that a trial balance will not reveal. Give an example of each.[3]
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(a) Any two: to check the arithmetical accuracy of double entry (debits = credits); to provide a summary of balances from which the financial statements are prepared; to help locate errors.
1 mark each.
(b) Any three with an example: omission (a transaction not recorded at all); commission (posted to the wrong account of the same type); principle (posted to the wrong class of account, e.g. capital expenditure as revenue); original entry (wrong amount in the book of prime entry); complete reversal; compensating errors.
1 mark per error type with a correct example.
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