FA: Accounting system
14 free practice questions on accounting system, Section B of the ACCA Financial Accounting (FA) question bank. Topics include Double entry, The ledger and T-accounts, Books of prime entry, The trial balance, Errors and suspense accounts, Capital and revenue expenditure. Each question carries its syllabus reference and a worked explanation. Practise them in the quiz with instant feedback, or read every question with its answer further down this page.
→ Full FA question bank and timed mock exam
→ FA Common Mistakes
→ FA Formula Sheet
Loading questions…
All 14 accounting system questions
The same questions the quiz above draws on, in syllabus order, each with its answer and worked explanation. 11 are multiple choice and 3 are numerical, where you work the answer out before choosing it.
A company purchases equipment for £15,000 on credit. Which journal entry correctly records this transaction?
- Debit Payables £15,000; Credit Equipment £15,000
- Debit Equipment £15,000; Credit Cash £15,000
- Debit Equipment £15,000; Credit Payables £15,000
- Debit Expenses £15,000; Credit Payables £15,000
Show answer and explanation
Answer: C. The purchase of equipment on credit increases a non-current asset (debit Equipment) and creates a liability (credit Payables). The double entry rule: assets increase with a debit; liabilities increase with a credit. Option A reverses the entries. Option B assumes cash payment, not credit. Option D incorrectly treats equipment as an expense — it is a capital asset.
At the start of the month, the trade receivables balance was £28,000 debit. During the month, credit sales of £45,000 were made and cash receipts from customers totalled £38,000. What is the closing trade receivables balance?
- £35,000 credit
- £11,000 debit
- £73,000 debit
- £35,000 debit
Show answer and explanation
Answer: D. Trade receivables T-account: Opening balance £28,000 (Dr) + Credit sales £45,000 (Dr) − Cash receipts £38,000 (Cr) = Closing balance £35,000 (Dr). Receivables are assets — a debit balance is correct. Option A (credit) would indicate the company owes customers money. Option B subtracts receipts from sales only. Option C ignores receipts.
When a business makes a credit sale, in which book of prime entry is this first recorded?
- The sales day book
- The cash book
- The purchase day book
- The journal
Show answer and explanation
Answer: A. The sales day book (also called the sales journal) records all credit sales transactions in date order before they are posted to the ledger. The cash book (B) records cash and bank transactions — credit sales do not involve immediate cash. The purchase day book (C) records credit purchases, not sales. The journal (D) records one-off or unusual entries — routine credit sales go to the sales day book.
A trial balance balances (total debits equal total credits). Which of the following errors would NOT be detected by the trial balance?
- A debit entry posted without a corresponding credit entry
- A transaction posted to the correct side but the wrong account (error of commission)
- A debit balance incorrectly listed as a credit balance in the trial balance
- An entry where both the debit and credit have been posted for the wrong amount
Show answer and explanation
Answer: B. The trial balance checks that total debits equal total credits — it cannot detect compensating errors or errors where both sides of a transaction are wrong in the same way. An error of commission (B) — posting to the correct side but wrong account — keeps the trial balance in balance, so it is NOT detected. A single-sided entry (A) would cause an imbalance. Listing a balance on the wrong side (C) would cause an imbalance of double the balance. Wrong amounts on both sides (D) would cause an imbalance unless both are wrong by the same amount in the same direction.
A company's trial balance did not balance, and the difference was posted to a suspense account, which now shows a debit balance of £400. Investigation reveals that a £400 payment for office expenses was correctly credited to the cash account, but the corresponding debit to office expenses was never recorded. Which journal entry clears the suspense account?
- Debit suspense £400; Credit office expenses £400
- Debit office expenses £400; Credit cash £400
- Debit office expenses £400; Credit suspense £400
- Credit office expenses £400; Credit suspense £400
Show answer and explanation
Answer: C. The missing debit to office expenses left total debits £400 short of total credits, so a suspense debit balance of £400 was created to make the trial balance agree. To correct it: post the missing debit (Debit office expenses £400) and remove the suspense balance (Credit suspense £400) — a balanced entry that clears suspense to nil. Option A reverses the correct entry, doubling the error rather than fixing it. Option B is wrong because cash was already correctly credited — crediting it again double-counts the payment. Option D is not a valid journal at all: two credits and no debit, so it cannot balance. The rule to remember: a suspense debit balance is cleared with a matching credit to suspense.
A company spends £8,000 repainting the exterior of its factory and £45,000 adding a new extension to increase capacity. How should these costs be classified?
- Both: capital expenditure — both relate to the physical property
- Both: revenue expenditure — both are maintenance costs for the property
- Repainting: capital expenditure; Extension: revenue expenditure
- Repainting: revenue expenditure (income statement); Extension: capital expenditure (non-current asset)
Show answer and explanation
Answer: D. Capital expenditure acquires or enhances a non-current asset — the extension adds new capacity and increases the asset's value: capital expenditure. Revenue expenditure maintains the existing asset in working order — repainting restores appearance without enhancing the asset: revenue expenditure charged to the income statement in the period. Treating maintenance as capital (A, C) would overstate assets. Treating the extension as revenue (B, C) would understate assets and reduce profit unfairly.
The accounting equation states that Assets = Liabilities + Equity. A business makes a profit of £20,000 during the year and pays dividends of £8,000. What is the net effect on equity?
- Equity increases by £12,000
- Equity increases by £20,000
- Equity decreases by £8,000
- Equity is unchanged as profit and dividends cancel out
Show answer and explanation
Answer: A. Profit increases retained earnings (equity) by £20,000. Dividends reduce retained earnings (equity) by £8,000. Net effect: equity increases by £12,000. Option B ignores the dividend. Option C ignores the profit. Option D incorrectly treats them as cancelling — they are different amounts.
A company has the following inventory movements: Opening: 100 units @ £10. Purchase: 200 units @ £12. Sale: 150 units. Under FIFO, what is the cost of the 150 units sold?
- £1,650
- £1,600
- £1,800
- £1,500
Show answer and explanation
Answer: B. FIFO (First In First Out) — oldest inventory is sold first. First 100 units from opening inventory @ £10 = £1,000. Remaining 50 units from purchase @ £12 = £600. Total COGS = £1,000 + £600 = £1,600. Closing inventory = 150 units @ £12 = £1,800. Option A (£1,650) does not follow from FIFO (AVCO would give 150 × £11.33 = £1,700, which is not an option either). Option C is 150 × £12 (all at new price). Option D is 150 × £10 (all at old price).
At the year end, a company has paid electricity bills totalling £9,600. The final quarter's bill of £2,400 has not yet been received. What should appear in the financial statements?
- Income statement charge: £9,600; No adjustment needed
- Income statement charge: £12,000; No balance sheet entry
- Income statement charge: £12,000; Statement of financial position liability: £2,400
- Income statement charge: £9,600; Statement of financial position asset: £2,400
Show answer and explanation
Answer: C. The accruals concept requires the full year's electricity cost to be recognised: £9,600 paid + £2,400 accrued = £12,000 income statement charge. The unpaid £2,400 is an accrual — a current liability (amount owed but not yet invoiced). Option A charges only the cash paid — ignores the accrual. Option B recognises the expense correctly but omits the balance sheet liability. Option D treats the accrual as an asset (prepayment) — wrong direction.
At the year end, trade receivables are £80,000. A specific debt of £3,000 is to be written off and an allowance of 2% is required on the remaining balance. What is the net receivables figure in the statement of financial position?
- £78,400
- £75,400
- £77,000
- £75,460
Show answer and explanation
Answer: D. Write off the specific debt first: £80,000 − £3,000 = £77,000 remaining. Then apply the 2% allowance to the remaining balance: 2% × £77,000 = £1,540. Net receivables = £77,000 − £1,540 = £75,460. Option A (£78,400) forgets the write-off and applies 2% to the full £80,000 (£80,000 × 98%). Option B (£75,400) applies the 2% allowance to the original £80,000 (£1,600) rather than to the £77,000 net balance — a common sequencing error. Option C (£77,000) writes off the debt but omits the general allowance entirely. Always write off specific irrecoverable debts before calculating the allowance — the allowance is applied only to what remains.
Which of the following transactions would typically be recorded using the journal rather than a book of prime entry?
- Recording a credit sale to a customer
- Recording a cash payment to a supplier
- Recording a credit purchase from a supplier
- Correcting an accounting error discovered after the trial balance has been extracted
Show answer and explanation
Answer: D. The journal is used for transactions that do not fit into the specialist books of prime entry (cash book, sales day book, purchase day book) — including corrections of errors, year-end adjustments (depreciation, accruals), opening entries, and transfers between accounts. Credit sales (A) go to the sales day book. Cash payments (B) go to the cash book. Credit purchases (C) go to the purchase day book.
What is the primary purpose of maintaining a sales ledger control account?
- To record all cash transactions relating to customers in a single account
- To provide a cross-check on the accuracy of the individual customer accounts in the sales ledger by reconciling the total to the control account balance
- To replace the need for individual customer accounts in the subsidiary ledger
- To record bad debts only — other receivables transactions are recorded elsewhere
Show answer and explanation
Answer: B. The control account aggregates all transactions affecting trade receivables and provides a check against the total of individual customer balances. If they disagree, an error exists somewhere. This internal control function is the primary purpose. The control account includes all customer transactions (A is too narrow). Individual accounts are still maintained — the control account summarises them (C). The control account includes all transactions affecting receivables (D is too narrow).
Which of the following is an example of an error of omission?
- A sale of £3,000 to a customer has not been recorded in the accounting system at all
- A purchase of goods has been debited to purchases but credited to the wrong supplier's account
- A payment has been posted as a debit when it should have been a credit
- Both the debit and credit of a transaction have been recorded at £1,200 instead of £2,100
Show answer and explanation
Answer: A. An error of omission is when a transaction is completely omitted from the books — neither side is recorded. The trial balance still balances (both debit and credit are missing). Option B is an error of commission (correct side, wrong account). Option C is a single-sided error that would cause a trial balance difference. Option D is an error of original entry (wrong amount on both sides) — the trial balance still balances as both sides are equal.
In a three-column cash book, what do the three columns on each side represent?
- Discount, cash, and bank — recording settlement discounts, cash transactions, and bank transactions simultaneously
- Debit, credit, and balance — showing running balances after each transaction
- Revenue, capital, and VAT — separating different types of transaction
- Sales, purchases, and expenses — analysing the nature of cash flows
Show answer and explanation
Answer: A. A three-column cash book has: discount column (memorandum — discounts allowed on the debit side, discounts received on the credit side), cash column (cash transactions), and bank column (bank/cheque transactions). It is a combined cash, bank, and discount record. The discount columns are memorandum only — the actual discount entries go to the discount accounts. Options B, C, D all misidentify the columns.
Other FA topics
- Context and purpose of financial reporting (14 questions)
- Recording transactions (27 questions)
- Preparing accounts (34 questions)
- Financial statements (17 questions)
- Consolidations (13 questions)
- Interpretation (14 questions)
- All FA sections, with the timed mock exam
- Spotted a mistake? Report it and it will be corrected.