Oct/Nov 2022

Which of these items are recorded in the cash book as a book of prime entry? 1 money paid to suppliers 2 buying a non-current asset on credit 3 money received from customers 4 goods returned to suppliers

The accounting system

In the financial statements of a sole trader, how are closing inventory and loss for the year dealt with?

Preparation of financial statements

A trader recorded the following closing trade receivables. Year 1: $64\,000 Year 2: $80\,000 Year 3: $90\,000 He normally makes a provision for doubtful debts at the rate of $5\%$. At the end of year 2, he failed to update the provision. What was the effect on profit in year 3 of failing to update the provision in year 2?

Reconciliation and verification

For the year ending 31 December 2021, the information below is provided. Revenue: $1\,400\,000 Inventory at 1 January 2021: $140\,000 Inventory at 31 December 2021: $148\,000 The trader applies a mark-up of $60\%$ to all purchases. What was the value of purchases during the year?

Costs and cost behaviour

The business has the following data for the year ending 31 March 2022. Non-current assets at cost on 1 April 2021: $62\,000 Provision for depreciation on non-current assets on 1 April 2021: $12\,000 Expenses settled by cash and cheques during the year: $42\,200 Expenses prepaid on 31 March 2022: $4\,600 Trade receivables on 31 March 2022: $25\,000 A provision for doubtful debts is to be made at $2\%$ of trade receivables. Depreciation on non-current assets is to be charged at $20\%$ by the reducing balance method. What was the total amount of expenses for the year?

Preparation of financial statements

X and Y are partners, but they have no partnership agreement. X contributed twice the amount of capital that Y did and also advanced a loan to the partnership. X claims that he is entitled to the following:

Types of business entity

L, M and N divide profits equally. N is leaving the partnership and net assets at net book value of $27\,000 are reassessed at $36\,000. Goodwill has a value of $18\,000 but it will not be entered in the books of account. Once N has retired, L and M will divide profits in the ratio $3:2$. What change will there be in L’s capital account?

Types of business entity

Dele and Iyabo work as partners and divide profits in the ratio $3:1$. The profit earned for the year is $80\,000. The information below is given. For interest on capital, Dele receives $3000 and Iyabo receives $2500 For interest on drawings, Dele pays $500 and Iyabo pays $1000 In what way will the residual profit be divided?

Types of business entity

W Limited recorded a loss for the year. The directors want to raise the balance on the retained earnings account. How could they achieve this?

Preparation of financial statements

The items below were extracted from the financial statements of a limited company for a period. Rise in trade receivables: $6\,000 Rise in trade payables: $4\,000 Loan repaid: $10\,000 What impact did these items have on the net cash inflow or outflow for the period?

Preparation of financial statements

The information below relates to a limited company. On 1 April 2021, the retained earnings account showed a balance of $858\,000. For the year ending 31 March 2022: Profit from operations: $978\,000 Debenture interest paid for the year: $100\,000 Ordinary share dividends paid: $150\,000 On 31 March 2022, the directors moved $280\,000 into a general reserve. In addition, they issued 250,000 bonus shares of $1 each from the general reserve. What was the retained earnings account balance on 31 March 2022?

Preparation of financial statements

Which of the following statements about the reducing balance method of depreciation are correct? 1 The yearly percentage depreciation rate varies each year. 2 The yearly depreciation charge stays unchanged each year. 3 The yearly percentage depreciation rate stays unchanged each year. 4 The yearly depreciation charge decreases each year.

Accounting for non-current assets

What does return on capital employed show for a business?

Analysis and communication of accounting information

At the close of a financial year, a business had the following information available. sales $300\,000$ opening inventory $33\,000$ closing inventory $27\,000$ The business uses a mark-up of $20\%$ on all goods purchased. What was the inventory turnover in days?

Analysis and communication of accounting information

A business hires machine operators. Each machine operator works $36$ hours per week. Making one unit of output requires four hours of labour. It also has supervisors, and each supervisor can oversee ten machine operators. Output is now $1140$ units per week. How many extra units can be made each week before the company must hire an additional supervisor?

Costs and cost behaviour

Which description best fits a fixed cost?

Costs and cost behaviour

What would lead to the under-absorption of overheads?

Traditional costing methods

A company has been given an order to provide $3000$ pairs of safety glasses. The production costs are listed below. raw materials $975$ packaging for $50$ pairs $4.20$ direct labour at $\$8.00$ per direct labour hour $800$ order setting up costs $100$ overhead absorption rate per direct labour hour $6.25$ What does the manufacturing cost of this order amount to?

Traditional costing methods

By what method is break-even point in units calculated?

Costs and cost behaviour

A company produces and sells one product only. The details below relate to one unit of the product. selling price $105$ direct materials $45$ direct labour $30$ The supplier of direct materials has agreed to raise the trade discount from $10\%$ to $20\%$. Calculate the new contribution per unit.

Costs and cost behaviour

The fixed costs of a business rise, whereas all other revenues and costs stay unchanged. What happens if output does not change?

Costs and cost behaviour

A business produces three kinds of products, and each one requires the same material. The information below is provided. Selling price: X $160$, Y $190$, Z $240$ Direct material: X $56$, Y $68$, Z $90$ Direct labour: X $35$, Y $32$, Z $50$ Variable overhead: X $28$, Y $34$, Z $45$ Contribution: X $41$, Y $56$, Z $55$ Direct material is scarce. What sequence should the products be made in to achieve maximum profit?

Costs and cost behaviour

On 1 April 2021 a business bought a machine for $120000 with an estimated residual value of $12000. On 1 July 2022 the machine was disposed of for $100000. Machinery is depreciated at the rate of $20\%$ per annum by means of the straight-line method. Depreciation is worked out for each month of ownership. What entry should be recorded in the provision for depreciation of machinery account for the disposal of the machine?

Accounting for non-current assets

Which of the following statements about a budgetary control system are correct?

The accounting system

Sue bought a new machine. She wrote off its value at $40\%$ each year by using the reducing balance method. At the end of two years, its net book value had fallen to $3600. What was the machine's purchase price?

Accounting for non-current assets

Which of these items would appear in the sales ledger control account? 1 sums owed by credit customers at the end of the previous month 2 provision against doubtful debts 3 overall total of invoices issued to credit customers 4 total shown in the sales returns journal

The accounting system

Which type of error would cause a trial balance not to balance?

Reconciliation and verification

At 1 March, the balance in a purchases ledger control account stood at $71300. Over the month ending 31 March, these transactions occurred. Cheque payments to trade payables $133200 Credit purchases $149000 Purchases returns $3000 Cash purchases $2000 Contra with sales ledger $1600 What was the trade payables balance on 31 March?

The accounting system

Which of the following statements about accruals and prepayments are correct? 1 Accrued revenue at the end of an accounting period is shown as a current asset. 2 Accrued revenue at the end of an accounting period is shown as a current liability. 3 Prepaid expenses at the end of an accounting period are shown as a current asset. 4 Prepaid expenses at the end of an accounting period are shown as a current liability.

Preparation of financial statements

A business is already overdrawn at the bank by $4800. It pays for materials on an invoice of $3000, after a trade discount of $20\%$ and a settlement discount of $5\%$. A cheque for $500 is received from a credit customer. What is the bank balance after these transactions?

The accounting system

Which of these entries would appear in the General Journal? 1. goods the owner withdrew for personal use 2. goods bought for resale 3. buying a non-current asset on credit 4. buying office stationery

The accounting system

On 1 November 2021, a trader obtained a $6\%$ bank loan of $30000$, which is to be settled in full after 10 years. Interest is payable annually. By 30 April 2022, no interest had been paid. How should this appear in the statement of financial position at 30 April 2022?

Preparation of financial statements

While preparing the financial statements, an accrual for rent payable was recorded as a prepayment. How does this affect profit and current liabilities?

Preparation of financial statements

A sole trader is getting ready to prepare his income statement for the year ended 31 December 2021, which was his first year in business. The details below are given. Takings banked: 16400 Payments made to trade payables: 8500 Expenses incurred during the year: 2900 Closing balance of trade payables: 1200 Closing balance of trade receivables: 700 During the year, he withdrew goods for his own use, $1000. There was no closing inventory. What profit did he make for the year?

Preparation of financial statements

For the year ended 31 December 2021, the following information is given. Trade payables on 1 January 2021: 18000 Trade payables as at 31 December 2021: 14000 Discount received amounted to: 6000 Payments made to credit suppliers: 158000 Returns outwards total: 3000 Contra entries to the sales ledger control account: 2000 What was the amount of credit purchases for the year?

Reconciliation and verification

Which item is shown in both the appropriation account and the current accounts of a partnership?

The accounting system

R, S and T were partners, with profits divided equally. T then retired from the partnership. At that point, the combined balance on his capital and current accounts was $320000. Goodwill was valued at $60000. The partnership assets were then revalued upwards by $30000. On retirement, T agreed to leave $90000 in the partnership as a loan. The amount owing to him was settled from the partnership bank account. What amount was paid to T when he retired?

Types of business entity

As a result of a problem with Question 16, it has been removed from the question paper.

Analysis and communication of accounting information

In a company’s financial statements, where is dividend received recorded?

Preparation of financial statements

At 1 January, a company possessed 300000 ordinary shares of $1 each and a 10% bank loan of $100000. On 1 July, the company issued a 6% debenture of $800000. For the year ending 31 December, profit from operations was $120000. During the year, the company paid a dividend of $0.05 per ordinary share. What was the profit for the year ended 31 December?

Preparation of financial statements

X Limited reported the following items in its accounting records. 1 the issue of 10000 ordinary shares of $1 each at a price of $1.80 2 dividend payments, $6200 3 transfer to general reserve, $7500 How would total revenue reserves be affected?

Preparation of financial statements

Why must a trader tell capital expenditure apart from revenue expenditure? 1. to make use of the realisation concept 2. to determine which depreciation method should be used 3. to arrive at a more accurate profit figure

Accounting for non-current assets

H Limited makes use of ratio analysis to assess its financial performance. On 31 January 2021, the company drew up draft financial statements before it revalued its premises upwards. How did this revaluation affect the company's ratios?

Accounting for non-current assets

A company acquires its inventory on credit. The information below is available. Sales revenue: 440000 Purchases: 270000 Trade payables: 90000 Trade receivables: 110000 Calculate the trade payables turnover in days.

Analysis and communication of accounting information

A business applies the following wages policy for its direct workers. Usual weekly hours: 40 Basic hourly pay: $16 Overtime pay: basic rate + 25% Usual output per worker each week: 100 units Bonus payment: $4 for each unit above usual output In the previous week, Ben made 115 units and was paid $860. How many hours did Ben work last week?

Costs and cost behaviour

Which statements are correct about the first in first out (FIFO) method of inventory valuation?

Traditional costing methods

A manufacturing business operates with two production departments, assembly and painting. The information given is as follows. Assembly department: - machinery at net book value: $\$150\,000$ - machinery repair costs: $\$14\,000$ - machine operating hours: $60\,000$ - number of machines: $30$ Painting department: - machinery at net book value: $\$100\,000$ - machinery repair costs: $\$6\,000$ - machine operating hours: $15\,000$ - number of machines: $10$ For the year, the total machinery insurance cost was $\$5000$. What amount of insurance should be apportioned to the assembly department?

Traditional costing methods

Which statement regarding absorption costing is accurate?

Traditional costing methods

At the break-even point, what matches total revenue?

Costs and cost behaviour

A business produces and sells one product. It is sold at $\$10$ per batch. The variable cost is $\$4$ per batch. Fixed costs are absorbed using a normal activity level of $5000$ batches at $\$1$ per batch. What is the profit, using marginal costing, if the company produces and sells $6000$ batches?

Costs and cost behaviour

A company gives the information below for one year: - sales: $\$400\,000$ - total variable costs: $\$240\,000$ - total contribution: $\$160\,000$ - total fixed costs: $\$100\,000$ - profit for the year: $\$60\,000$ The company intends to raise the sales volume by $20\%$ by cutting the selling price by $10\%$. Total fixed costs and variable cost per unit will stay the same. What will be the change in profit for the year?

Costs and cost behaviour

A business produces and sells just one product. The sales budget for $5000$ units is shown below: Per-unit amounts: - selling price: $\$75.00$ - variable production cost: $\$25.00$ - fixed production cost: $\$18.90$ - variable selling expenses: $\$5.00$ The company intends to lower the selling price to $\$60$ per unit. How many additional units must be sold to reach break even?

Costs and cost behaviour

A company acquired a new vehicle for $30000. It part-exchanged an existing vehicle at a value of $6500, and the remaining amount was settled by cheque. The part-exchanged vehicle had originally cost $12000 and had a net book value of $4800 on disposal. Which entries will be recorded in the accounts?

Accounting for non-current assets

Which of these statements about a budgetary control system are correct?

Costs and cost behaviour

On 31 December 2021, a business recorded a non-current asset with a net book value of $18000. The asset had been bought in the year ending 31 December 2020. Depreciation is applied at $25\%$ per annum by the reducing balance method. In the year the asset is purchased, depreciation is charged for a full year. What was the asset’s original cost?

Accounting for non-current assets

Which item is a principle error?

Reconciliation and verification

A business’s sales ledger control account showed a balance of $17640. This figure did not match the combined balances of the separate customer accounts in the sales ledger. These mistakes were then found. 1. An invoice worth $460 in the sales journal was posted incorrectly to the sales ledger as $640. 2. Credit balances in the sales ledger, amounting to $470, were left out of the sales ledger control account. 3. Discounts allowed were totalled wrongly as $310 rather than $325. 4. Goods sold to Harry for $690 were posted to Barry’s account by mistake. What should the correct balance on the sales ledger control account be?

Reconciliation and verification

The totals in a trial balance were: debit $500150 credit $500000 Which error might have produced the discrepancy?

Reconciliation and verification

A business's draft statement of financial position reported total net assets of $600000. The following errors were then found. 1. A $10000 long-term loan had not been entered in the records. It was borrowed on the final day of the financial year. 2. Closing inventory had been recorded at $20000 too high. 3. Depreciation had been recorded at $15000 too low. What is the correct total net assets value?

Preparation of financial statements

A company has prepared draft financial statements for the year. It is then found that some inventory is damaged, so its value has to be written down. What effect will this have?

Preparation of financial statements

A batch of goods worth $1200 was sent to a customer on a sale or return basis, but this transaction was not entered in the sales journal. Which accounting concept has been applied?

The accounting system

A business sets up a provision for doubtful debts of $4\%$. On 31 March 2021, the trade receivables value after the provision had been deducted was $153600$. During the year ended 31 March 2022, the provision for doubtful debts rose by $960$. What was the value of trade receivables at 31 March 2022 after deducting the provision for doubtful debts?

Preparation of financial statements

While preparing the financial statements of a sole trader, no adjustment was recorded for a prepayment at the year end. What effect does this omission have?

Preparation of financial statements

A sole trader did not maintain proper accounting records during the first year of trading. The information below is given: cash received from customers $70000 trade receivables $4000 cash paid to suppliers $65000 trade payables $2000 closing inventory $20000 expenses paid $3000 Calculate the profit for the year.

Preparation of financial statements

At 1 January 2022, the inventory of a sole trader was worth $4500. A fire broke out in his business premises on 14 April 2022. By 14 April 2022, his sales had reached $24600 and his purchases totalled $16700. He used a mark-up of $33\frac{1}{3}\%$. Goods with a cost of $1485 were rescued from the fire. Included in these were some items that had cost $800 but, because of the fire damage, can now be sold only for $650. Calculate the business's total inventory loss.

Preparation of financial statements

Which items would be shown on the debit side of a partnership dissolution account? 1 expenses of dissolution 2 net book value of the assets 3 sale proceeds of assets 4 profit arising on dissolution

Preparation of financial statements

L and M were in a partnership and shared profits and losses in equal proportions. They took in a new partner, P. There is no partnership agreement. The conditions for P’s admission were: 1 Assets were reduced in value by $60000. 2 Goodwill had a value of $30000, but it was not kept in the books of account. What effect will this have on the balance of L’s capital account when P is admitted?

Preparation of financial statements

J and K are partners and divide residual profits and losses in the ratio $7:3$. Their fixed capital account balances are J $40000, K $60000. Interest is credited on these at $10\%$ per year. J receives a salary of $40000 per year. The profit for the year amounted to $200000. What was the total profit share of each partner for the year?

Types of business entity

X, Y and Z were partners and divided profits and losses in equal proportions. Z left the partnership on 31 March 2022. His capital account and current account balances were $85000 and $7000 debit respectively. Following Z’s retirement, X and Y would share profits and losses equally. Goodwill was valued at $24000 and was not to stay in the books of accounts. As part of the amount owing to him, Z took a motor vehicle at an agreed value of $4000. The other non-current assets were written down by $15000. The balance still due to Z would be settled equally by X and Y. What amount would X pay to Z?

The accounting system

Draft financial statements for a company indicated a retained earnings balance of $170000 at the year end. The following information was then uncovered. 1 An irrecoverable debt of $25000 ought to have been written off. 2 An ordinary share dividend, $30000, had been paid but left unrecorded. 3 Closing inventory had been undervalued by $15000. What should the correct balance of retained earnings be at the year end?

Preparation of financial statements

A company gave the information below. On 1 January: $100000 ordinary shares of $1 each $95000 retained earnings In the year ended 31 December, the following transactions took place. 1 A bonus issue was made, giving one ordinary share for every two ordinary shares owned on 1 January. 2 A rights issue of $50000 ordinary shares at $1.25 each was made. The issue was fully subscribed. 3 $25000 was transferred to establish a general reserve. 4 A dividend of $11250 was paid. Profit for the year ended 31 December amounted to $68500. Calculate the total shareholders’ equity at 31 December.

Preparation of financial statements

A business disposed of a non-current asset and made a profit. Which entries should be recorded in the disposal account?

Accounting for non-current assets

A business purchases goods intended for resale and settles the payment by cheque instead of purchasing them on credit. How will this change the current ratio and the liquid (acid test) ratio?

Analysis and communication of accounting information

The data below are provided. non-current assets at cost at 31 December 2021 $400000 provision for depreciation at 31 December 2021 $280000 sales revenue for the year 2021 $980000 cost of sales for the year 2021 $410000 What is the non-current asset turnover in times?

Analysis and communication of accounting information

A cost accountant is working out the budgeted production overheads for a company that manufactures and sells only a single product. Which row shows the correct total of production overheads?

Traditional costing methods

Employees receive a basic wage of $\$10$ per hour. The overtime wage is paid at time and a half. A bonus is paid at a rate of $10\%$ of basic pay if production is above target. For one month, the data are: total hours worked = $1500$, hours paid at the basic rate = $1000$, target production = $12\,500$ units, actual production = $15\,000$ units. What was the total factory labour cost for the month?

Costs and cost behaviour

For what reason are service department costs allocated to production departments?

Traditional costing methods

Using marginal costing, a company made a profit of $\$100\,000$. Its opening inventory stood at $2000$ units, while its closing inventory stood at $3000$ units. The fixed production overhead absorption rate is $\$30$ per unit. What profit would be obtained using absorption costing?

Traditional costing methods

A business draws up its income statement under marginal costing. When it switches from marginal costing to absorption costing, profit falls. Which statement is correct?

Traditional costing methods

A company plans to sell $50\,000$ units and make a profit of $\$600\,000$. Its variable cost is $\$60$ per unit, and its total fixed overheads are $\$400\,000$. What selling price per unit must it charge in order to obtain the profit needed?

Costs and cost behaviour

For one month, the data given are: sales revenue = $\$160\,000$, total costs = $\$105\,000$, and variable overheads (which are included within total costs) = $\$26\,000$. In working out the contribution to sales ratio, the book-keeper incorrectly classified the variable overheads as fixed costs. What impact did this have on the contribution to sales ratio?

Costs and cost behaviour

In April and May, a business recorded the following figures. Units made and sold: April $1000$, May $1200$. Total revenue: April $\$50\,000$, May unknown. Total contribution: April $\$22\,000$, May unknown. Total profit: April $\$8000$, May $\$10\,500$. The selling price per unit and total fixed costs stayed unchanged. What was the change in the variable cost per unit?

Costs and cost behaviour

On 1 January 2020, a business acquired new delivery vehicles. The information provided is as follows. • total purchase cost: $300\,000$ • cost of painting the delivery vehicles in the company’s colours: $4\,000$ • total annual maintenance cost: $16\,000$ The company uses the reducing balance method to depreciate delivery vehicles at a rate of $40\%$ per annum. What is the depreciation charge for the delivery vehicles for the year ended 31 December 2021?

Accounting for non-current assets

Which of the following statements about budgeting are correct?

Costs and cost behaviour

The details below concern a trader’s non-current assets. • accumulated depreciation at 31 May 2020: $40\,000$ • depreciation charge for the year ended 31 May 2021: $9\,000$ • accumulated depreciation at 31 May 2021: $46\,000$ In the year ended 31 May 2021, a non-current asset costing $10\,000$ was sold. The loss on disposal amounted to $1\,200$. What were the sale proceeds?

Accounting for non-current assets

Which error would cause an entry to appear in the suspense account?

Reconciliation and verification

The balance shown on a purchases ledger control account was $7\,270$, whereas the combined total of the trade payables accounts was $6\,860$. The following mistakes were found. 1 A credit note from a supplier worth $100$ had not been entered in the book of prime entry. 2 The discounts received column in the cash book had been recorded $50$ too low. After these mistakes had been put right, the balance on the purchases ledger control account still did not agree with the total of the trade payables accounts. What were the revised amounts after the corrections?

Reconciliation and verification

Which category would be shown only on the credit side of a sales ledger control account?

The accounting system

Because of a problem with Question 8, it has been removed from the question paper.

Analysis and communication of accounting information

A business has worked out its draft profit for the year. The following matters were then found. 1 Closing inventory had been valued too highly. 2 Irrecoverable debts had to be written off. 3 Depreciation on non-current assets had to be lowered. What effect will adjusting these items have on the profit for the year?

Preparation of financial statements

The directors of Y Limited supplied balances together with extra information as at 30 June 2022.

Preparation of financial statements

Bharti is the proprietor of a small business. The following details were taken from her accounting records.

Accounting for non-current assets

The directors of H Limited supplied details taken from the statement of financial position at 30 September 2021, together with transactions for the year ended 30 September 2022.

Types of business entity

Mandeep runs two manufacturing businesses.

Costs and cost behaviour

The balances below were taken from the draft financial statements of H Limited at 30 September 2022.

Preparation of financial statements

Usman has taken figures from his books of account so that he can bring the sales ledger control account up to date for August 2022.

Reconciliation and verification

N Limited supplied the following information for the year ending 31 August 2022.

Analysis and communication of accounting information

Brady produces a single product, and agents sell it for him in return for a commission of 10% of the selling price.

Costs and cost behaviour

Reece is a sole trader and does not keep a complete set of accounting records. He has supplied the information below for the year ended 30 June 2022.

The accounting system

Darius and Ewan are partners who share profits and losses in the ratio $5:3$. The balances set out below were taken from the partnership books of account at 31 July 2022. On 1 August 2022, the partners agreed to bring Karim into the partnership on the terms given.

Preparation of financial statements

R Limited is a retail business.

Preparation of financial statements

X Limited is a manufacturing business that runs two production departments, Machining and Finishing, together with two service departments, Stores and Maintenance.

Traditional costing methods

Refer to Source A1 in the insert.

Preparation of financial statements

Refer to Source A2 in the insert.

Preparation of financial statements

Look at Source A3 in the insert.

Analysis and communication of accounting information

Source A4 is contained in the insert; read it.

Preparation of financial statements

Read Source B1 in the insert supplied.

Investment appraisal

Read Source B2 in the insert carefully.

Standard costing

Consult Source A1 in the insert.

Preparation of financial statements

Read Source A2 from the insert.

Business acquisition and merger

Study Source A3 in the insert.

Preparation of financial statements

Study Source A4 in the insert.

Preparation of financial statements

Use Source B1 in the insert.

Budgeting and budgetary control

Please read Source B2 in the insert.

Activity based costing (ABC)

Look at Source A1 in the insert.

Preparation of financial statements

Refer to Source A2 in the insert.

Analysis and communication of accounting information

Read Source A3 in the insert supplied.

Business acquisition and merger

Use Source A4 in the insert.

Preparation of financial statements

Section B: Cost and Management Accounting. Use Source B1 from the insert.

Standard costing

Refer to Source B2 in the insert.

Activity based costing (ABC)