AP2 Question Query

mattwilkes85

Can anyone explain how to get the answer for Task 1.2 d on the AP2 online practice paper. I think I have looked at it for so long that I've completely confused myself.

The cash book is showing a large credit balance.

You enter a low value bank transaction in to the records. When entered, the assests, liabilities and capital of the business all remain unchanged. Which transaction has been entered?

The answer then is 'a bank payment to a credit supplier is made'

Wouldn't a payment to a credit supplier reduce the liability as now less is owed?

Thanks for your help!

uknitty

The DE to record a bank payment to a credit customer would be

Dr Creditors
Cr Bank

If the cash book is not part of the DE system it would be unaffected by this transaction.

mattwilkes85

I'm still really confussed, I have copied the full question below with answers but I cannot work out why A is correct and the others are wrong?

You are now working on the books of a different business where the cash book is showing a large credit balance

The accountant enters a low value bank transaction into the records. When the transaction is entered, the assests, liabilites and capital of the business all remain unchanged.

Which of the following transactions has the accountant entered? Choose ONE answer

a) A bank payment to a credit supplier

b) A bank receipt from a credit customer

c) a bank payment for proprietors drawings

d) A bank receipt for a cash sale

di 77

I think the bank is using an overdrafit so as the account has a credit balance it is a liability,when paying supplier it is reducing liability but at the same time increasing its own liability. hope this helps

MarkT

DI has came up with the right answer - we went over this question a few months back and many people overlooked the fact that the back account is in overdraft - effectively all you are doing is shifting the liability

mattwilkes85

Yep, makes sense now, cheers! Just AP2 next week and Level 2 done!

omega man

Ap2 is level 3,don't you mean level 2 and 3 done next week?

mattwilkes85

omega man wrote: »

Ap2 is level 3,don't you mean level 2 and 3 done next week?

It had been a long day of revision - yes, level 3 I meant!