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Secondary 4 Principles of Accounts Bookkeeping Quiz
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Questions
Secondary 4 Principles of Accounts Quiz - Bookkeeping
Name: ___________________________
Class: ___________________________
Date: ___________________________
Score: ________ / 40
Duration: 50 minutes
Total Marks: 40
Instructions
- Answer all questions in the spaces provided.
- Show all workings clearly. Marks are awarded for correct method even if the final answer is incorrect.
- Write your answers in blue or black ink. Pencil may be used for diagrams or tables.
- The number of marks for each question is shown in brackets [ ].
- Non-programmable calculators may be used.
Section A: Short-Answer Questions (Questions 1–8)
Each question carries 2 marks. Answer all questions.
1. State two reasons why a business maintains a systematic bookkeeping system.
(a) _______________________________________________________________
(b) _______________________________________________________________
[2]
2. Define the term double-entry bookkeeping.
[2]
3. Identify the source document for each of the following transactions:
(a) Goods sold on credit to a customer: _______________________________
(b) Cash received from a debtor: _____________________________________
[2]
4. State the accounting equation and explain what each component represents.
[2]
5. Name the book of original entry used to record each of the following:
(a) Credit purchases of inventory: ____________________________________
(b) Returns of goods to a supplier: ___________________________________
[2]
6. Distinguish between a trade discount and a cash discount.
[2]
7. What is the purpose of a trial balance?
[2]
8. State two types of errors that would not be revealed by a trial balance.
(a) _______________________________________________________________
(b) _______________________________________________________________
[2]
Section B: Structured / Calculation Questions (Questions 9–16)
Answer all questions. Show all workings clearly.
9. On 1 March 2025, Rajesh had the following balances in his ledger:
| Account | Amount ($) |
|---|---|
| Cash at bank | 12,400 |
| Trade receivables | 8,600 |
| Inventory | 5,200 |
| Trade payables | 6,800 |
| Equipment | 20,000 |
During March 2025, the following transactions took place:
- Mar 5: Sold goods on credit for $3,400.
- Mar 10: Received $5,200 from trade receivables by cheque.
- Mar 15: Purchased goods on credit for $4,100.
- Mar 20: Paid $3,600 to trade payables by cheque.
- Mar 25: Rajesh took $800 cash from the bank for personal use.
(a) Prepare the Trade Receivables account for the month of March 2025. Balance the account and bring down the balance.
Trade Receivables Account
| Date | Particulars | $ | Date | Particulars | $ |
|---|---|---|---|---|---|
[4]
(b) Prepare the Trade Payables account for the month of March 2025. Balance the account and bring down the balance.
Trade Payables Account
| Date | Particulars | $ | Date | Particulars | $ |
|---|---|---|---|---|---|
[4]
10. The following balances were extracted from the books of Mei Ling Trading on 30 April 2025:
| Account | $ |
|---|---|
| Sales | 95,000 |
| Sales returns | 3,200 |
| Purchases | 52,000 |
| Purchases returns | 2,800 |
| Carriage inwards | 1,500 |
| Inventory (1 May 2024) | 7,400 |
| Inventory (30 April 2025) | 9,100 |
(a) Calculate the cost of sales for the year ended 30 April 2025. Show your workings.
Working:
Cost of sales = $____________
[3]
(b) Calculate the gross profit for the year ended 30 April 2025.
Working:
Gross profit = $____________
[2]
11. The following transactions relate to David's business for the week ended 14 June 2025:
- Jun 8: Bought goods on credit from Supplier A: $2,500 less 10% trade discount.
- Jun 10: Returned goods to Supplier A: $400 (list price) less 10% trade discount.
- Jun 12: Bought goods on credit from Supplier B: $1,800.
- Jun 14: Paid Supplier A by cheque in full settlement, less 3% cash discount.
(a) Calculate the amount owed to Supplier A before the cash discount.
Amount owed = $____________
[2]
(b) Calculate the amount of cash discount received from Supplier A.
Cash discount = $____________
[1]
(c) Calculate the amount paid to Supplier A by cheque.
Amount paid = $____________
[1]
12. Prepare the journal entries (narrations are not required) for the following transactions of Khoo Enterprises:
(a) Bought a delivery van for $45,000, paying by cheque.
| Account | Debit ($) | Credit ($) |
|---|---|---|
[1]
(b) Sold old office furniture for $2,300 on credit to Tan Trading.
| Account | Debit ($) | Credit ($) |
|---|---|---|
[1]
(c) The owner took inventory costing $500 for personal use.
| Account | Debit ($) | Credit ($) |
|---|---|---|
[1]
(d) Wages of $3,200 were paid in cash.
| Account | Debit ($) | Credit ($) |
|---|---|---|
[1]
13. The following trial balance was prepared for Ahmad Trading on 31 December 2025, but it does not balance:
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Capital | 40,000 | |
| Drawings | 5,000 | |
| Sales | 78,000 | |
| Purchases | 42,000 | |
| Inventory (1 Jan 2025) | 6,500 | |
| Trade receivables | 9,200 | |
| Trade payables | 7,400 | |
| Equipment | 25,000 | |
| Cash at bank | 3,800 | |
| Rent expense | 4,500 | |
| Totals | 96,000 | 125,400 |
(a) Calculate the difference in the trial balance totals.
Difference = $____________
[1]
(b) Identify the error that could cause this difference. The Sales account was undercast by 29,400. Explain whether these errors account for the difference.
[2]
(c) State the correct total for each side of the trial balance after corrections.
Correct total = $____________
[1]
14. On 1 January 2025, Priya's cash book showed a debit balance of $4,200. During January 2025, the following transactions occurred:
- Jan 5: Received a cheque from a debtor, Lim Trading: 200.
- Jan 12: Paid a creditor, Supplier X, by cheque: 150.
- Jan 18: Cash sales banked: $6,400.
- Jan 25: Paid wages in cash: $1,800.
- Jan 28: Drew a cheque for office rent: $2,200.
(a) Prepare the Cash at Bank account for January 2025. Balance the account.
Cash at Bank Account
| Date | Particulars | $ | Date | Particulars | $ |
|---|---|---|---|---|---|
[5]
(b) State the balance of the Cash at Bank account and explain what it means.
[1]
15. The following errors were discovered in the books of Wei Chen Trading after the trial balance was prepared:
(i) A payment of $1,500 for rent was correctly entered in the cash book but debited to the Rates account.
(ii) A credit sale of $2,300 to Customer B was completely omitted from the books.
(iii) The Purchases account was overcast (over-added) by $1,000.
(iv) A purchase of equipment for $5,000 was debited to the Purchases account.
For each error, state whether the trial balance would still balance or not balance, and explain why.
(i) ________________________________________________________________________
[2]
(ii) ________________________________________________________________________
[2]
(iii) ________________________________________________________________________
[2]
(iv) ________________________________________________________________________
[2]
16. The following information relates to Siti's business for the year ended 31 March 2025:
| Item | $ |
|---|---|
| Sales | 120,000 |
| Sales returns | 4,000 |
| Purchases | 68,000 |
| Purchases returns | 3,000 |
| Carriage inwards | 2,000 |
| Inventory (1 April 2024) | 10,000 |
| Inventory (31 March 2025) | 12,500 |
| Rent expense | 9,600 |
| Wages | 18,000 |
| General expenses | 4,200 |
(a) Prepare the Income Statement (Trading and Profit & Loss Account) for the year ended 31 March 2025.
Siti Trading Income Statement for the year ended 31 March 2025
| $ | $ | |
|---|---|---|
| Sales | ||
| Less: Sales returns | ||
| Net sales / Revenue | ||
| Cost of sales: | ||
| Inventory (1 April 2024) | ||
| Add: Purchases | ||
| Less: Purchases returns | ||
| Add: Carriage inwards | ||
| Less: Inventory (31 March 2025) | ||
| Cost of sales | ||
| Gross profit | ||
| Less: Expenses | ||
| Rent expense | ||
| Wages | ||
| General expenses | ||
| Total expenses | ||
| Net profit |
[8]
(b) Calculate the gross profit margin (to one decimal place). Show your workings.
Working:
Gross profit margin = ____________%
[2]
Section C: Application & Analysis Questions (Questions 17–20)
Answer all questions. Show all workings and reasoning.
17. A new student, Farhan, recorded the following transaction in his books:
"Bought goods on credit from Supplier Z for $3,000."
He made the following entry:
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Trade payables | 3,000 | |
| Purchases | 3,000 |
(a) Identify the error in Farhan's entry.
[2]
(b) State the correct journal entry (narrations not required).
| Account | Debit ($) | Credit ($) |
|---|---|---|
[2]
(c) Explain the double-entry principle that applies to this transaction.
[2]
18. The following is an extract from the trial balance of Greenleaf Trading as at 30 June 2025:
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Capital | 55,000 | |
| Sales | 92,000 | |
| Purchases | 48,000 | |
| Inventory (1 July 2024) | 8,000 | |
| Trade receivables | 11,500 | |
| Trade payables | 9,200 | |
| Equipment | 30,000 | |
| Cash at bank | 5,700 | |
| Drawings | 6,000 | |
| Rent expense | 7,200 | |
| Wages | 15,000 | |
| Discount allowed | 800 | |
| Discount received | 600 |
Additional information:
- Inventory on 30 June 2025 was valued at $10,500.
- Rent expense of $1,200 was prepaid as at 30 June 2025.
- Wages of $2,000 were accrued (unpaid) as at 30 June 2025.
(a) Calculate the adjusted rent expense to be shown in the Income Statement.
Adjusted rent expense = $____________
[1]
(b) Calculate the adjusted wages expense to be shown in the Income Statement.
Adjusted wages expense = $____________
[1]
(c) Prepare the Income Statement for the year ended 30 June 2025.
Greenleaf Trading Income Statement for the year ended 30 June 2025
| $ | $ | |
|---|---|---|
| Sales | ||
| Less: Cost of sales | ||
| Inventory (1 July 2024) | ||
| Add: Purchases | ||
| Less: Inventory (30 June 2025) | ||
| Cost of sales | ||
| Gross profit | ||
| Add: Discount received | ||
| Less: Expenses | ||
| Rent expense | ||
| Wages | ||
| Discount allowed | ||
| Total expenses | ||
| Net profit |
[6]
19. Amirah runs a small trading business. She does not maintain a full set of double-entry records. The following information is available for the year ended 31 December 2025:
| Item | 1 Jan 2025 ($) | 31 Dec 2025 ($) |
|---|---|---|
| Trade receivables | 4,500 | 6,200 |
| Trade payables | 3,800 | 5,100 |
| Inventory | 7,000 | 8,500 |
| Cash at bank | 2,300 | 4,100 |
During the year:
- Cash received from trade receivables: $52,000
- Cash paid to trade payables: $38,000
- Discount allowed to customers: $500
- Discount received from suppliers: $300
- Goods returned by customers: $1,200
- Goods returned to suppliers: $800
- Drawings (goods taken for personal use): $600
(a) Calculate total sales for the year ended 31 December 2025.
Working:
Total sales = $____________
[3]
(b) Calculate total purchases for the year ended 31 December 2025.
Working:
Total purchases = $____________
[3]
20. The following transactions occurred in the business of Zara Trading during the week of 3–9 August 2025:
- Aug 3: Sold goods on credit to Customer M: 2,800).
- Aug 5: Customer M returned goods with a selling price of 420).
- Aug 7: Received a cheque from Customer M for the balance due, after allowing a 2% cash discount.
- Aug 9: Deposited the cheque into the bank.
(a) Prepare the journal entries for the above transactions (narrations not required).
Aug 3:
| Account | Debit ($) | Credit ($) |
|---|---|---|
Aug 5:
| Account | Debit ($) | Credit ($) |
|---|---|---|
Aug 7:
| Account | Debit ($) | Credit ($) |
|---|---|---|
Aug 9:
| Account | Debit ($) | Credit ($) |
|---|---|---|
[6]
(b) Calculate the amount of cash discount allowed to Customer M.
Cash discount = $____________
[1]
(c) Explain why Zara Trading offers cash discounts to customers.
[1]
End of Quiz
Answers
Secondary 4 Principles of Accounts Quiz - Bookkeeping
Answer Key
Section A: Short-Answer Questions
1. Two reasons why a business maintains a systematic bookkeeping system:
(a) To keep accurate and complete records of all financial transactions.
(b) To provide information for decision-making / to prepare financial statements / to monitor financial performance / to meet legal/regulatory requirements.
[2 marks — 1 mark each for any two valid reasons]
2. Double-entry bookkeeping is the system of recording financial transactions where every transaction has a dual effect — for every debit entry there must be a corresponding credit entry, and the total debits must equal total credits.
[2 marks — 1 for "dual effect / debit and credit," 1 for "total debits = total credits"]
3. Source documents:
(a) Credit note / Sales invoice (sent to customer) — accept "invoice"
(b) Receipt
[2 marks — 1 mark each]
4. Accounting equation: Assets = Capital + Liabilities
- Assets are resources owned by the business (e.g., cash, inventory, equipment).
- Capital is the owner's investment / claim on the business.
- Liabilities are amounts owed by the business to outsiders (e.g., trade payables, loans).
[2 marks — 1 for correct equation, 1 for explaining any two components]
5. Books of original entry:
(a) Purchases journal / Purchases day book
(b) Purchases returns journal / Returns outwards journal
[2 marks — 1 mark each]
6. A trade discount is a reduction in the list price of goods, usually given to encourage bulk buying or to regular customers. It is deducted before recording the transaction and does not appear in the books.
A cash discount is a reduction in the amount payable, given as an incentive for early payment. It is recorded in the books (as discount allowed or discount received).
[2 marks — 1 for each clear distinction]
7. The purpose of a trial balance is to check the arithmetical accuracy of the double-entry bookkeeping system by verifying that total debits equal total credits.
[2 marks — 1 for "check arithmetical accuracy," 1 for "total debits = total credits"]
8. Two types of errors not revealed by a trial balance:
(a) Error of omission (transaction completely left out)
(b) Error of commission (wrong account but correct type) / Error of original entry / Error of principle / Error of reversal / Compensating error
[2 marks — 1 mark each; accept any two from the standard list of errors not affecting trial balance]
Section B: Structured / Calculation Questions
9.(a) Trade Receivables Account
| Date | Particulars | $ | Date | Particulars | $ |
|---|---|---|---|---|---|
| Mar 1 | Balance b/d | 8,600 | Mar 10 | Bank | 5,200 |
| Mar 5 | Sales | 3,400 | Mar 31 | Balance c/d | 6,800 |
| 12,000 | 12,000 | ||||
| Apr 1 | Balance b/d | 6,800 |
[4 marks — 1 for opening balance, 1 for sales entry, 1 for bank receipt, 1 for balancing]
Common mistakes: Forgetting the opening balance; not balancing the account.
9.(b) Trade Payables Account
| Date | Particulars | $ | Date | Particulars | $ |
|---|---|---|---|---|---|
| Mar 20 | Bank | 3,600 | Mar 1 | Balance b/d | 6,800 |
| Mar 31 | Balance c/d | 7,300 | Mar 15 | Purchases | 4,100 |
| 10,900 | 10,900 | ||||
| Apr 1 | Balance b/d | 7,300 |
[4 marks — 1 for opening balance, 1 for purchases entry, 1 for bank payment, 1 for balancing]
Common mistakes: Reversing debit/credit sides; arithmetic errors.
10.(a) Cost of sales calculation:
| $ | |
|---|---|
| Inventory (1 May 2024) | 7,400 |
| Add: Purchases | 52,000 |
| Less: Purchases returns | (2,800) |
| Net purchases | 49,200 |
| Add: Carriage inwards | 1,500 |
| 50,700 | |
| Cost of goods available for sale | 58,100 |
| Less: Inventory (30 April 2025) | (9,100) |
| Cost of sales | 49,000 |
Cost of sales = $49,000
[3 marks — 1 for opening inventory + net purchases, 1 for carriage inwards, 1 for deducting closing inventory]
10.(b) Gross profit:
| $ | |
|---|---|
| Sales | 95,000 |
| Less: Sales returns | (3,200) |
| Net sales | 91,800 |
| Less: Cost of sales | (49,000) |
| Gross profit | 42,800 |
Gross profit = $42,800
[2 marks — 1 for net sales, 1 for correct gross profit]
11.(a) Amount owed to Supplier A before cash discount:
| $ | |
|---|---|
| Purchases (Jun 8): $2,500 × 90% | 2,250 |
| Less: Returns (Jun 10): $400 × 90% | (360) |
| Amount owed | 1,890 |
Amount owed = $1,890
[2 marks — 1 for trade discount calculation, 1 for deducting returns]
11.(b) Cash discount = 56.70**
[1 mark]
11.(c) Amount paid = 56.70 = $1,833.30
[1 mark]
Common mistakes: Applying trade discount after cash discount; forgetting to deduct returns before calculating cash discount.
12. Journal entries:
(a)
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Equipment / Delivery van | 45,000 | |
| Cash at bank | 45,000 |
[1]
(b)
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Trade receivables – Tan Trading | 2,300 | |
| Office furniture | 2,300 |
[1]
(c)
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Drawings | 500 | |
| Purchases / Inventory | 500 |
[1]
(d)
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Wages expense | 3,200 | |
| Cash | 3,200 |
[1]
[4 marks — 1 mark each]
Common mistakes: Debiting "Inventory" instead of "Drawings" in (c); crediting "Sales" instead of the asset account in (b).
13.(a) Difference = 96,000 = $29,400
[1 mark]
13.(b) If Sales was undercast by 1,000. If Purchases was overcast by 29,400. The combined effect on the difference = 1,000 = 29,400 difference. The errors do not exactly account for the difference — there may be additional errors.
[2 marks — 1 for identifying the effect of each error, 1 for concluding they don't match]
13.(c) Correct total = 29,400 (remove overcast) = 125,400 + 126,400 on credit side. After all corrections are made, both sides should equal. Assuming only these two errors: Correct total = 1,000 + 96,000 + 96,000** on debit after removing 66,600; credit = $126,400. These don't match, confirming additional errors exist. Accept: The trial balance totals should be equal after all errors are corrected; the correct total cannot be determined from the information given alone.
[1 mark — accept any reasonable answer showing understanding]
14.(a) Cash at Bank Account
| Date | Particulars | $ | Date | Particulars | $ |
|---|---|---|---|---|---|
| Jan 1 | Balance b/d | 4,200 | Jan 12 | Trade payables (Supplier X) | 2,500 |
| Jan 5 | Trade receivables (Lim Trading) | 3,800 | Jan 25 | Wages | 1,800 |
| Jan 18 | Sales | 6,400 | Jan 28 | Rent expense | 2,200 |
| Jan 31 | Balance c/d | 7,900 | |||
| 14,400 | 14,400 | ||||
| Feb 1 | Balance b/d | 7,900 |
[5 marks — 1 for opening balance, 1 for receipts (Jan 5 and 18), 1 for payments (Jan 12, 25, 28), 1 for balancing, 1 for correct balance c/d and b/d]
Note: The discount allowed (150) are recorded in separate accounts, not in the Cash at Bank account.
14.(b) Balance = **7,900 in its bank account (a positive/favourable bank balance).
[1 mark — 1 for correct balance and meaning]
15. Error analysis:
(i) Trial balance would still balance. This is an error of commission — the debit entry was made to the wrong account (Rates instead of Rent), but the total debits still equal total credits.
[2 marks — 1 for "still balance," 1 for explanation]
(ii) Trial balance would not balance. A complete omission means neither the debit (Trade receivables) nor the credit (Sales) was recorded, so both sides are understated by the same amount — actually, the trial balance would still balance because both sides are equally understated. Correction: The trial balance would still balance because the omission affects both debit and credit equally.
[2 marks — 1 for "still balance," 1 for explanation that both sides are equally affected]
(iii) Trial balance would not balance. Overcasting the Purchases account means the debit total is $1,000 too high, while the credit side is unaffected.
[2 marks — 1 for "not balance," 1 for explanation]
(iv) Trial balance would still balance. This is an error of principle — the debit was made to Purchases (an expense) instead of Equipment (an asset), but the total debits still equal total credits.
[2 marks — 1 for "still balance," 1 for explanation]
16.(a) Siti Trading — Income Statement for the year ended 31 March 2025
| $ | $ | |
|---|---|---|
| Sales | 120,000 | |
| Less: Sales returns | (4,000) | |
| Net sales / Revenue | 116,000 | |
| Cost of sales: | ||
| Inventory (1 April 2024) | 10,000 | |
| Add: Purchases | 68,000 | |
| Less: Purchases returns | (3,000) | |
| Net purchases | 65,000 | |
| Add: Carriage inwards | 2,000 | |
| Cost of goods available | 77,000 | |
| Less: Inventory (31 March 2025) | (12,500) | |
| Cost of sales | (64,500) | |
| Gross profit | 51,500 | |
| Less: Expenses | ||
| Rent expense | 9,600 | |
| Wages | 18,000 | |
| General expenses | 4,200 | |
| Total expenses | (31,800) | |
| Net profit | 19,700 |
[8 marks — 1 for net sales, 1 for opening inventory + net purchases, 1 for carriage inwards, 1 for closing inventory/cost of sales, 1 for gross profit, 1 for listing expenses, 1 for total expenses, 1 for net profit]
16.(b) Gross profit margin = (Gross profit ÷ Net sales) × 100
= (116,000) × 100
= 44.4%
[2 marks — 1 for correct formula/working, 1 for correct answer to 1 d.p.]
Section C: Application & Analysis Questions
17.(a) The error is that Farhan debited Trade Payables and credited Purchases. The correct entry should debit Purchases (expense increase) and credit Trade Payables (liability increase). He reversed the debit and credit entries.
[2 marks — 1 for identifying the reversal, 1 for stating the correct accounts]
17.(b) Correct journal entry:
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Purchases | 3,000 | |
| Trade payables – Supplier Z | 3,000 |
[2 marks — 1 for correct debit, 1 for correct credit]
17.(c) The double-entry principle states that every transaction has two effects: a debit and a corresponding credit of equal value. When goods are purchased on credit, the Purchases account (expense) increases and is debited, while Trade Payables (liability) increases and is credited. This ensures the accounting equation (Assets = Capital + Liabilities) remains balanced.
[2 marks — 1 for stating the principle, 1 for applying it to this transaction]
18.(a) Adjusted rent expense = 1,200 (prepaid) = $6,000
[1 mark]
18.(b) Adjusted wages expense = 2,000 (accrued) = $17,000
[1 mark]
18.(c) Greenleaf Trading — Income Statement for the year ended 30 June 2025
| $ | $ | |
|---|---|---|
| Sales | 92,000 | |
| Less: Cost of sales | ||
| Inventory (1 July 2024) | 8,000 | |
| Add: Purchases | 48,000 | |
| Less: Inventory (30 June 2025) | (10,500) | |
| Cost of sales | (45,500) | |
| Gross profit | 46,500 | |
| Add: Discount received | 600 | |
| 47,100 | ||
| Less: Expenses | ||
| Rent expense | 6,000 | |
| Wages | 17,000 | |
| Discount allowed | 800 | |
| Total expenses | (23,800) | |
| Net profit | 23,300 |
[6 marks — 1 for cost of sales calculation, 1 for gross profit, 1 for discount received, 1 for adjusted rent, 1 for adjusted wages, 1 for net profit]
19.(a) Total sales calculation:
| $ | |
|---|---|
| Closing trade receivables | 6,200 |
| Add: Cash received from receivables | 52,000 |
| Add: Discount allowed | 500 |
| Add: Sales returns | 1,200 |
| Less: Opening trade receivables | (4,500) |
| Total sales | 55,400 |
Total sales = $55,400
[3 marks — 1 for correct formula structure, 1 for correct values, 1 for correct answer]
19.(b) Total purchases calculation:
| $ | |
|---|---|
| Closing trade payables | 5,100 |
| Add: Cash paid to payables | 38,000 |
| Add: Discount received | 300 |
| Add: Purchases returns | 800 |
| Less: Opening trade payables | (3,800) |
| Total purchases | 40,400 |
Total purchases = $40,400
[3 marks — 1 for correct formula structure, 1 for correct values, 1 for correct answer]
Note: Drawings of goods ($600) are not included in the purchases calculation as they are a separate adjustment.
20.(a) Journal entries:
Aug 3:
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Trade receivables – Customer M | 4,000 | |
| Sales | 4,000 |
Aug 5:
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Sales returns | 600 | |
| Trade receivables – Customer M | 600 |
Aug 7:
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Cash at bank | 3,332 | |
| Discount allowed | 68 | |
| Trade receivables – Customer M | 3,400 |
Aug 9: No entry needed — the cheque was already recorded in the bank account on Aug 7. (If the question intends a bank transfer entry:)
| Account | Debit ($) | Credit ($) |
|---|---|---|
| Cash at bank | 3,332 | |
| Cash | 3,332 |
[6 marks — 1 mark for each correct entry (Aug 3, 5, 7) with correct accounts and amounts; Aug 9 = 3 marks for correct treatment or recognition that no further entry is needed]
Working for Aug 7: Amount due from Customer M = 600 = 3,400 × 2% = 3,400 − 3,332.
20.(b) Cash discount = 68**
[1 mark]
20.(c) Zara Trading offers cash discounts to encourage customers to pay their debts earlier, which improves the business's cash flow and reduces the risk of bad debts.
[1 mark — 1 for any valid reason: improve cash flow / reduce bad debts / encourage early payment]
End of Answer Key