AAT L2 Bookkeeping Controls 1 — Questions and Answers
Question 1: What is the main purpose of a bank reconciliation?
- To identify the profit for the period
- To verify that the cash book and bank statement can be reconciled, identifying timing differences and errors (Correct answer)
- To calculate the amount of VAT owed to HMRC
- To prepare the trial balance
Correct answer: To verify that the cash book and bank statement can be reconciled, identifying timing differences and errors
A bank reconciliation compares the cash book balance with the bank statement balance to identify timing differences (unpresented cheques, outstanding lodgements) and errors, ensuring the accuracy of the bank balance in the accounts.
Question 2: An unpresented cheque is one that has been:
- Received by the business but not yet paid into the bank
- Written by the business but not yet cleared through the bank (Correct answer)
- Cancelled by the bank
- Returned as dishonoured
Correct answer: Written by the business but not yet cleared through the bank
An unpresented cheque has been written and sent by the business (so it appears in the cash book) but has not yet been presented to and cleared by the bank (so it does not yet appear on the bank statement).
Question 3: A trial balance is prepared to:
- Calculate the profit of the business
- Check that the total debits equal total credits as an initial check on the accuracy of the double entry (Correct answer)
- List all the transactions for the period
- Prepare the VAT return
Correct answer: Check that the total debits equal total credits as an initial check on the accuracy of the double entry
The trial balance lists all ledger account balances to verify that total debits equal total credits. While it does not guarantee all entries are correct (some errors are not detected), it is a fundamental accuracy check.
Question 4: The sales ledger control account has a balance of £15,600. The total of the individual customer accounts in the sales ledger is £15,200. Which of the following could explain the difference?
- A sales invoice for £400 was not posted to the customer's individual account (Correct answer)
- A payment of £400 was posted twice to the control account
- A credit note for £400 was recorded in the control account but not the individual account
- A receipt of £200 was not entered in either record
Correct answer: A sales invoice for £400 was not posted to the customer's individual account
If a sales invoice of £400 was posted to the control account (increasing it) but missed from the individual customer account in the sales ledger, the control account would be £400 higher than the list of balances. The control account shows £15,600 and the ledger shows £15,200 — a £400 difference.
Question 5: Which of the following errors would NOT be detected by the trial balance?
- A debit entry of £500 posted as £550
- A transaction completely omitted from the books (Correct answer)
- A credit entry posted to the wrong side of an account
- An account balance incorrectly transferred to the trial balance
Correct answer: A transaction completely omitted from the books
An error of complete omission means the transaction was not recorded at all — neither the debit nor the credit was made. Since both sides are missing equally, the trial balance still balances and the error is not detected.
Question 6: A suspense account is used to:
- Record owner's drawings
- Temporarily hold the difference when the trial balance does not balance, until the errors are found and corrected (Correct answer)
- Record prepayments and accruals
- Store petty cash transactions
Correct answer: Temporarily hold the difference when the trial balance does not balance, until the errors are found and corrected
When the trial balance does not balance, a suspense account is opened for the difference. This allows the financial statements to be prepared while errors are investigated. Once errors are found and corrected, the suspense account balance should be cleared to zero.
AAT L2 Bookkeeping Controls 1
What is the main purpose of a bank reconciliation?