SS2 Financial Accounting Questions and Answers – Bank Reconciliation, Errors, Subsidiary Books

Complete answers to SS2 Financial Accounting objective and theory questions covering bank reconciliation statements, errors in accounting, subsidiary books, double entry bookkeeping, and suspense accounts with detailed explanations.

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SS2 Financial Accounting Questions and Answers – Bank Reconciliation

INSTRUCTION: Answer all questions

What is the primary purpose of a Bank Reconciliation statement? A. to reconcile bank balance with cash book balance B. to reconcile bank balance with ledger balance C. to reconcile cash book balance D. to reconcile bank statement

Which of the following would cause a difference between the bank balance and cash book balance? A. cheque deposited but not cleared B. cash deposited directly into bank C. bank charges D. all of the above

What happened when a cheque is issued but not presented for payment? A. bank balance is reduced B. cash book balance is increased C. bank balance is increased. D. no effect on bank balance until presented.

Which of the following would be added to the bank balance in a bank reconciliation statement? A. cheque issued but not presented B. cheque deposited but not cleared C. bank charges D. direct deposit by customer

Why is a bank reconciliation statement prepare? A. to detect errors in cash book B. to detect errors in bank statement C. to reconcile the differences between bank balance and cash book balance D. all of the above

When a transaction is completely left out from the book of account, the error is called A. Error of commission B. Error of omissionC. Error of complete reversal D. Error of principle

7. Which of the following is not a subsidiary book? A. sales day book/journal B. purchase day book/journal C. cash book D. Trial balance.

8. Which of the following errors will affect the totals of a trial balance? A. compensating error B. complete reversal of entry C. error in addition D. error of original entry.

9. Which of the following is a subsidiary book? A. cash book B. bank statement C. control account D. trial balance

10. Goods work N 230 returned by Ajayi has been entered in Ajala account. This is an error of _________. A. omission B. commission C. original entry D. compensation error.

11. Sales of motor vans have been entered into motor expenses. This is an error _________. A. complete reversal B. commission C. principle D. original entry

12. Goods returned by the buyer is recorded in the seller’s book as A. carriage inwards B. carriage outwards C. return inwards D. return outward

13. A petty cashier operates with an import of N1000 per week. At the end of the week he had disbursed N 920. How much is needed to restore the imprest? A. N 1920 B. N 1000 C. N 920 D. N 80

14. Payment of cash N 320 to Mubarak has been entered twice in the two accounts A. error of compensation B. error of commission C. error of original entry D. error of duplication

15._________ is used to record differences in the trial balance temporarily until error are detected. A. control account B. debtor account C. suspense account D. trial balance

16. The document from which entries are transferred to the purchases day book is the _________. A. way bill B. credit note C. receipts D. invoice

17. Purchases from Olaiya N 290 have been entered in the account as N 920. A. error of original entry B. mistake error C. error of commission D. error of judgement

18. Cash paid to James N 1500 was entered on the credit side of his account and debit to cash account. A. error of compensation B. error of complete reversal C. error of original entry D. error of omission

19. Sales of goods were over cast by N 950 so also were motor expenses A. error of duplication B. error of compensation C. error of principle D. error of complete reversal

20. The first calculating machine in data processing was ___________. A. Abacus B. Pascal C. Punch card D. main frame computer

 

THEORY

What are suspense accounts?

b. List three processes involved in correction of errors.

What is financial accounting?

b. State six differences between single and double entry.

c. What is double entry book keeping?

Define subsidiary books.

b. List six classification of subsidiary books.

c. Mention five reasons for granting a discount.

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SS2 FINANCIAL ACCOUNTING ANSWERS

OBJECTIVE ANSWERS

1. A – to reconcile bank balance with cash book balance
2. D – all of the above
3. D – no effect on bank balance until presented
4. A – cheque issued but not presented
5. D – all of the above
6. B – Error of omission
7. D – Trial balance
8. C – error in addition
9. A – cash book
10. B – commission
11. C – principle
12. C – return inwards
13. C – N 920
14. D – error of duplication
15. C – suspense account
16. D – invoice
17. A – error of original entry
18. B – error of complete reversal
19. B – error of compensation
20. A – Abacus

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THEORY ANSWERS

Question 1

a. What are suspense accounts?

A suspense account is a temporary account used in the general ledger to record differences in the trial balance when errors are detected but their exact nature or location is unknown. It holds these differences temporarily until the errors are identified and corrected.

b. Three processes involved in correction of errors:

1. Identification of the error through trial balance disagreement or other detection methods
2. Determination of the nature and location of the error
3. Making correcting journal entries to rectify the error and clear the suspense account

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Question 2

a. What is financial accounting?

Financial accounting is the systematic process of recording, classifying, summarizing, and reporting financial transactions of a business organization to provide useful financial information to external users such as investors, creditors, regulatory authorities, and other stakeholders for decision-making purposes.

b. Six differences between single and double entry:

1. Single entry records only one aspect of a transaction, while double entry records both debit and credit aspects
2. Single entry is incomplete and unsystematic, while double entry is complete and systematic
3. Single entry does not facilitate preparation of trial balance, while double entry does
4. Single entry makes error detection difficult, while double entry facilitates easy error detection
5. Single entry is suitable for small businesses only, while double entry is suitable for all sizes of businesses
6. Single entry does not provide complete financial information, while double entry provides comprehensive financial information

c. What is double entry book keeping?

Double entry bookkeeping is a system of recording financial transactions where every transaction affects at least two accounts, with one account debited and another account credited by equal amounts, maintaining the accounting equation that Assets = Liabilities + Capital.

Question 3

a. Define subsidiary books

Subsidiary books are books of original entry used to record specific types of similar transactions separately before posting them to the ledger. They are also called books of prime entry or special journals.

b. Six classifications of subsidiary books:

1. Sales Day Book/Sales Journal – records credit sales
2. Purchases Day Book/Purchases Journal – records credit purchases
3. Returns Inwards Book/Sales Returns Journal – records goods returned by customers
4. Returns Outwards Book/Purchases Returns Journal – records goods returned to suppliers
5. Cash Book – records all cash and bank transactions
6. General Journal/Journal Proper – records transactions not covered by other subsidiary books

c. Five reasons for granting a discount:

1. To encourage prompt payment of debts (cash discount)
2. To encourage bulk purchases by customers (trade discount)
3. To reward customer loyalty and maintain good business relationships
4. To increase sales volume and market share
5. To dispose of old stock or slow-moving inventory quickly