IGCSE Accounting: Verification of Accounting Records — Practice Questions

These are original practice questions written in the style of Cambridge IGCSE Accounting (0452) assessment objectives. They are not taken from any past paper and are not endorsed by Cambridge International.

Use these questions alongside the Verification of Accounting Records study guide and revision notes. Accounting 0452 is not tiered, so every question below applies to all candidates.

Section A

1. State what a balancing trial balance proves, and what it does not prove. [2]

2. Name the six error types that do not disturb the trial balance’s totals. [3]

3. State when a suspense account is opened, and what happens to it once the cause of the imbalance is found. [2]

4. State two possible causes of a difference between a business’s cash book balance and its bank statement balance. [2]

5. Explain what a control account is built from, and what it checks. [2]

Section B

6. A business pays $320 for stationery but posts the full amount correctly to both the stationery (expense) account and the bank account, except that the amount is recorded as $230 in both accounts.

(a) Identify the type of error, giving a reason. [2] (b) State whether this error would cause the trial balance to be out of balance, and explain why. [2]

7. A business receives an insurance payment of $500 by cheque, but the bookkeeper debits the bank account and debits the insurance income account, rather than crediting the insurance income account.

(a) Identify the type of error. [1] (b) Explain why this error would cause the trial balance to be out of balance. [2] (c) State what the business should do in the meantime, before the error is found. [1]

8. A bank reconciliation statement shows an unpresented cheque of $180 and an outstanding lodgement of $260.

(a) Explain what each of these terms means. [2] (b) Explain why neither of these requires a correcting entry in the cash book. [2]

9. A business’s sales ledger control account total does not match the sum of the individual balances in the sales ledger.

(a) State what the control account total should have been built from. [1] (b) Suggest one type of error that could cause this mismatch. [2]

10. A student writes: “As long as my trial balance balances, I know my accounts are correct.” Explain, with reference to at least two named error types, why this statement is not always true. [4]

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Answers

1. A balancing trial balance proves that debits and credits are numerically equal overall, showing double entry has been applied consistently [1]. It does not prove the records are free of error, since several error types leave the totals balanced despite being factually wrong [1].

2. Omission, commission, principle, original entry, complete reversal, and compensating errors [3, allow 1 mark per 2 correctly named].

3. A suspense account is opened only when the trial balance actually fails to balance, to hold the difference between the two column totals temporarily [1]. Once the cause is found, a correcting journal entry clears the suspense account balance to zero [1].

4. Any two of: unpresented cheques (recorded in the cash book but not yet cleared by the bank); outstanding lodgements (deposits recorded in the cash book but not yet credited by the bank); bank charges or standing orders the business has not yet recorded [2].

5. A control account is built from totals in the books of prime entry (source-document totals), not by adding up individual personal-ledger balances [1]. It checks the accuracy of the more detailed sales or purchases ledger by providing an independent summary total to compare against it [1].

6. (a) Error of original entry [1] — the wrong amount ($230 instead of $320) was entered, but consistently on both sides of the double entry [1]. (b) No, this error would not cause the trial balance to be out of balance [1], because both the debit and credit entries were reduced by the same incorrect amount, so the two column totals remain equal to each other even though both are wrong [1].

7. (a) Complete reversal [1]. (b) Both entries were made on the debit side instead of one debit and one credit, so the total of the debit column increases while the credit column does not receive the entry it should have, causing the trial balance totals to disagree [2]. (c) The business should open a suspense account to hold the difference until the error is found and corrected [1].

8. (a) An unpresented cheque is a cheque the business has written and recorded in its cash book, but which has not yet been cleared (paid out) by the bank [1]. An outstanding lodgement is a deposit the business has recorded in its cash book, but which the bank has not yet credited to the account [1]. (b) Neither requires a correcting entry because they are timing differences, not errors — the cash book figure is correct and will match the bank statement once the bank has processed the transaction [1–2].

9. (a) Totals taken from the relevant books of prime entry (for example, the sales journal and sales returns journal), not from adding up the individual customer balances [1]. (b) Any reasonable suggestion, for example: an error of omission (a sale or return left out of one of the source records) [1], or an error of original entry (a transaction recorded with the wrong amount in one of the source records) [1].

10. This statement is not always true because several error types leave the trial balance balanced despite the records being wrong. For example, an error of principle — where a transaction is posted to the correct amount but the wrong type of account, such as an expense posted to a non-current asset account — does not disturb the trial balance totals, since both sides were still updated by the same correct amount [2]. Similarly, a compensating error — where two unrelated errors happen to cancel each other out — also leaves the trial balance balanced, even though two separate mistakes have been made [2].

A note on exam technique for this topic

Before attempting the correcting journal entry for any described error, classify it into its correct category first: ask whether the trial balance would actually be affected, and if not, which of the six named error types matches the scenario. This two-step habit — classify, then correct — is more reliable than jumping straight to a journal entry, because the specific correcting entries genuinely differ by error type, and misclassifying an error (commission for principle, or vice versa) usually costs the identification mark even when the correcting entry itself is numerically right. For bank reconciliation and control account questions, keep asking “is this actually an error, or just a timing difference / a totals check,” since a large share of marks on this topic are for correctly explaining what a technique does and does not detect, not just performing a calculation.