Source Documents and Journals

28 Grade 10 Business Studies questions on Source Documents and Journals, with worked marking schemes. 28 questions are available on this topic in full.

1. Question 1

   1 mark

   Bidii Traders returned to their supplier 10 cartons of cooking fat that had leaked, and later received a credit note from that supplier. The credit note is entered in the:

   A. Returns inwards journal

   B. Purchases journal

   C. General journal

   D. Returns outwards journal

   (1 mark)

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2. Question 2

   1 mark

   A restaurant in Nakuru prepares a document instructing a supplier to deliver 20 cartons of cooking oil at an agreed price. The document prepared by the restaurant is a:

   A. Invoice

   B. Purchase order

   C. Delivery note

   D. Quotation

   (1 mark)

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3. Question 3

   1 mark

   A hotel in Naivasha wrote to three suppliers asking for the price and terms of supplying rice. One supplier replied stating the price per bag, the trade discount and the delivery period, but the hotel was under no obligation to buy. The reply is a:

   A. Proforma invoice

   B. Quotation

   C. Purchase order

   D. Invoice

   (1 mark)

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4. Question 4

   1 mark

   A school canteen runs its petty cash on an imprest of Sh 5,000. During the month the petty cashier paid out Sh 3,650 supported by vouchers. The amount reimbursed to restore the imprest at the end of the month is:

   A. Sh 3,650

   B. Sh 8,650

   C. Sh 1,350

   D. Sh 5,000

   (1 mark)

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5. Question 5

   4 marks

   Name the book of original entry in which each of the following transactions of Bidii Traders is first recorded: (a) goods bought on credit from a supplier; (b) a debt owed by a customer written off as bad; (c) goods returned by a credit customer; (d) payment of the electricity bill by cheque.

   (4 marks)

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6. Question 6

   3 marks

   State three reasons why a business keeps a petty cash book in addition to the main cash book.

   (3 marks)

   Marking scheme

   Award 1 mark for each reason, maximum 3. Accept any three of: - It relieves the main cashier of the many small payments, leaving that cashier free for larger transactions. - It keeps the main cash book free of bulky small entries, so the cash book stays neat and easy to balance. - Its analysis columns group small expenses by type, so totals are posted to the ledger in one figure instead of many. - It gives a junior clerk responsibility and training in keeping records. - It makes small payments easier to control, since every payment must be supported by an authorised voucher.

7. Question 7

   6 marks

   Explain three reasons why a shopkeeper should issue a receipt to every customer who pays in cash.

   (6 marks)

   Marking scheme

   Award 1 mark for each reason named and 1 mark for its explanation, maximum 6. Accept any three of: - Evidence of payment (1) - the receipt protects the customer from being asked to pay the same amount again and settles any dispute over whether the debt was cleared (1). - Source document for the books (1) - the counterfoil is used to write up the receipts side of the cash book, so every shilling received is recorded (1). - Control against theft by employees (1) - receipts are serially numbered, so the owner can compare the receipts issued with the cash banked and detect any shortfall (1). - Updating the customer's account (1) - the receipt enables the debtor's account to be credited promptly, so the statement of account sent later shows the correct balance (1). - Legal and tax requirement (1) - the receipt supports the trader's records when the accounts are audited or tax returns are checked (1).

8. Question 8

   1 mark

   An importer in Mombasa is a new customer who has not been allowed credit. The supplier sends him a document showing what the goods will cost so that he can pay before the goods are released to him. The document sent is a:

   A. Statement of account

   B. Proforma invoice

   C. Delivery note

   D. Debit note

   (1 mark)

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9. Question 9

   2 marks

   Explain why the cash book is regarded as both a book of original entry and a ledger account.

   (2 marks)

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10. Question 10

    1 mark

    Which document travels with the goods from the seller's store to the buyer's premises and is signed by the buyer to show that the goods have been received?

    A. Invoice

    B. Purchase order

    C. Delivery note

    D. Receipt

    (1 mark)

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11. Question 11

    1 mark

    A Meru agrovet sold fertiliser on credit to a farmer. The transaction is first recorded in the:

    A. General journal

    B. Sales account in the ledger

    C. Sales journal

    D. Cash book

    (1 mark)

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12. Question 12

    1 mark

    State the meaning of the term 'book of original entry'.

    (1 mark)

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13. Question 13

    1 mark

    At the end of the month, the total of the sales journal of Bidii Traders is posted to the:

    A. Debit side of the purchases account

    B. Debit side of the sales account in the general ledger

    C. Credit side of each credit customer's account

    D. Credit side of the sales account in the general ledger

    (1 mark)

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14. Question 14

    3 marks

    State three uses of a delivery note to the buyer of goods.

    (3 marks)

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15. Question 15

    1 mark

    A hardware dealer in Thika discovered that an invoice he had sent to a customer showed Sh 400 per bag of cement instead of Sh 450 per bag. To correct the undercharge, the dealer should send the customer a:

    A. Statement of account

    B. Credit note

    C. Fresh receipt

    D. Debit note

    (1 mark)

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16. Question 16

    4 marks

    Identify four source documents that Chebet's wholesale shop in Kericho would use in its day-to-day trading.

    (4 marks)

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17. Question 17

    1 mark

    A shopkeeper removed Sh 20,000 from the till and deposited it in the business bank account. In a three-column cash book this is recorded as:

    A. An entry in the general journal, because no outsider is involved

    B. A contra entry, debiting the cash column and crediting the bank column

    C. An entry in the bank column only, since the money is now in the bank

    D. A contra entry, debiting the bank column and crediting the cash column

    (1 mark)

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18. Question 18

    1 mark

    A bakery in Eldoret bought a delivery van on credit from a motor dealer. The transaction is first recorded in the:

    A. Purchases journal

    B. Cash book

    C. General journal

    D. Sales journal

    (1 mark)

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19. Question 19

    4 marks

    Outline four uses of a local purchase order to a school that buys foodstuffs from a supplier.

    (4 marks)

    Marking scheme

    Award 1 mark for each correct use, maximum 4. Accept any four of: - It states exactly the items, quantities and agreed prices required, so the supplier does not deliver the wrong goods. - It authorises the purchase, so no member of staff can commit the school to buying without approval. - It is evidence of the school's commitment to buy, on which the supplier relies when releasing the goods. - The retained copy is used to check the delivery note and the invoice when the goods arrive, so the school pays only for what it ordered. - It helps the school follow up a supplier who delays or short-delivers, since the agreed terms are in writing. - Its serial number provides a reference for the transaction in the school's records.

20. Question 20

    3 marks

    State three circumstances under which a supplier would issue a credit note to a customer.

    (3 marks)

    Marking scheme

    Award 1 mark for each circumstance correctly stated, maximum 3. Accept any three of: - Goods returned by the customer because they are damaged, defective, of the wrong type or not as ordered. - An overcharge on the invoice, caused by a wrong price, wrong quantity or an arithmetical error. - Return of empty returnable containers, such as crates or gas cylinders, for which the customer had been charged. - An allowance granted for goods charged but short-delivered. - An agreed allowance for goods of inferior quality that the customer keeps rather than returns.

21. Question 21

    4 marks

    Describe how the imprest system of handling petty cash operates.

    (4 marks)

    Marking scheme

    Award 1 mark for each stage, maximum 4. - At the start of the period the main cashier gives the petty cashier a fixed sum of money called the float or imprest. - The petty cashier meets small expenses out of this float, and every payment is supported by a petty cash voucher authorised by a responsible officer. - At the end of the period the petty cashier presents the vouchers and the petty cash book, and the total spent is checked against them. - The main cashier reimburses the petty cashier with exactly the amount spent, so that the float is restored to the original imprest at the beginning of the next period.

22. Question 22

    4 marks

    State four advantages a trader gains by subdividing the journal into several books of original entry.

    (4 marks)

    Marking scheme

    Award 1 mark each, maximum 4. Accept any four of: - The recording work can be shared among several clerks, so the books are written up faster. - Similar transactions are kept together, which makes it easier to trace and locate errors. - Only periodic totals are posted to some ledger accounts, which reduces the number of entries in the ledger. - Each clerk becomes skilled in one book, so fewer mistakes are made. - It provides an internal check, since one person's work can be cross-checked against another's, which discourages fraud. - Useful information, such as total credit sales or total credit purchases for the month, is available at a glance.

23. Question 23

    1 mark

    At the end of every month a Kisumu fish supplier sends each credit customer a document listing the invoices, credit notes and payments for that month and the balance still owing. This document is a:

    A. Statement of account

    B. Credit note

    C. Invoice

    D. Receipt

    (1 mark)

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24. Question 24

    4 marks

    Outline four details that appear on a sales invoice.

    (4 marks)

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25. Question 25

    4 marks

    Distinguish between a debit note and a credit note as used by a supplier.

    (4 marks)

    Marking scheme

    Award 2 marks for each document. Debit note: (i) issued by the seller to the buyer to increase the amount already charged on the invoice (1). (ii) Issued when the buyer has been undercharged, for example a wrong lower price or fewer units billed than delivered (1). Credit note: (i) issued by the seller to the buyer to reduce the amount the buyer owes (1). (ii) Issued when goods are returned, when the buyer has been overcharged, or when returnable containers are sent back (1). Accept the point that a credit note is commonly printed in red while a debit note is printed like an invoice, in place of one of the above points.

26. Question 26

    1 mark

    Entries in the purchases journal of Bidii Traders are written up from:

    A. Cheque counterfoils

    B. Invoices received from suppliers

    C. Copies of invoices sent out by the business

    D. Receipts issued to customers

    (1 mark)

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27. Question 27

    1 mark

    Wanjiku Stores in Nyeri supplied 30 bags of potatoes on credit to a lodge and sent a document showing the quantity, the unit price and the total amount now owed. The document sent is a:

    A. Delivery note

    B. Receipt

    C. Quotation

    D. Invoice

    (1 mark)

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28. Question 28

    4 marks

    Distinguish between trade discount and cash discount.

    (4 marks)

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