AAT L2 Bookkeeping Transactions 1 — Questions and Answers
Question 1: Which document is issued by a seller to a buyer to confirm the details and price of goods or services to be provided?
- Credit note
- Quotation (Correct answer)
- Purchase order
- Remittance advice
Correct answer: Quotation
A quotation is issued by the seller to the buyer setting out the price and terms for goods or services offered. It is the first formal document in many sales transactions.
Question 2: A business purchases goods on credit for £2,400 plus VAT at 20%. What is the correct double entry to record this transaction?
- Debit Purchases £2,400, Debit VAT £480, Credit Trade Payables £2,880 (Correct answer)
- Debit Trade Payables £2,880, Credit Purchases £2,400, Credit VAT £480
- Debit Purchases £2,880, Credit Trade Payables £2,880
- Debit Purchases £2,400, Credit Trade Payables £2,400
Correct answer: Debit Purchases £2,400, Debit VAT £480, Credit Trade Payables £2,880
Under UK VAT rules, the purchase is recorded net of VAT in the purchases account (£2,400), VAT is debited to the VAT control account (£480), and the full amount including VAT (£2,880) is credited to trade payables.
Question 3: What is the purpose of a sales day book?
- To record cash sales only
- To record all credit sales from sales invoices (Correct answer)
- To record all purchase returns
- To record bank transactions
Correct answer: To record all credit sales from sales invoices
The sales day book (also called the sales journal) is a book of prime entry used to record credit sales invoices. Cash sales are recorded separately in the cash book.
Question 4: A trade discount of 10% is offered on goods with a list price of £500. What amount appears on the invoice before VAT?
- £500
- £450 (Correct answer)
- £550
- £400
Correct answer: £450
A trade discount is deducted from the list price before the invoice is prepared. £500 less 10% = £500 - £50 = £450. VAT is then calculated on the discounted price.
Question 5: Which of the following is classified as capital expenditure?
- Purchase of stationery for the office
- Payment of staff wages
- Purchase of a delivery van (Correct answer)
- Payment of electricity bill
Correct answer: Purchase of a delivery van
Capital expenditure is spending on non-current assets that will be used in the business over more than one accounting period. A delivery van is a non-current asset. The other options are revenue expenditure — day-to-day running costs.
Question 6: In the accounting equation, if assets are £50,000 and liabilities are £18,000, what is the capital?
- £68,000
- £32,000 (Correct answer)
- £18,000
- £50,000
Correct answer: £32,000
The accounting equation states: Assets = Liabilities + Capital. Therefore Capital = Assets - Liabilities = £50,000 - £18,000 = £32,000.
AAT L2 Bookkeeping Transactions 1
Which document is issued by a seller to a buyer to confirm the details and price of goods or services to be provided?