Feb/March 2023

Why did Amitav choose to enter a partnership with Lennie instead of starting as a sole trader?

Types of business entity

At the end of the month, a business bank statement reported a credit balance of $12\,697. This did not match the balance in the cash book. The following discrepancies were identified. 1. A cheque received, $7\,170, was entered in the cash book as $7\,710. 2. A cheque paid in, $2\,400, had not yet been cleared by the bank. 3. A standing order, $450, was shown in the cash book but had not been processed by the bank. 4. Bank interest payable of $642 had not been recorded in the cash book. What was the cash book balance before the necessary corrections were made?

Reconciliation and verification

Which statements show the benefits of including a purchases ledger control account in the accounting system?

The accounting system

At the close of the financial period, a trader’s sales ledger control account recorded a debit balance of $28500. This was not in line with the combined balance of the separate trade receivables accounts in the sales ledger. The errors below were then found. 1 A dishonoured cheque for $300 received from a credit customer had been posted to the credit side of the sales ledger control account. 2 Contras amounting to $500, which had been posted correctly in the sales ledger, had been left out of the sales ledger control account. 3 Discounts allowed of $700 had not been recorded in the sales ledger control account. Which amount ought to be shown for trade receivables in the financial statements?

Reconciliation and verification

On 1 January, at the beginning of the year, the business held stationery inventory costing $3740. At that date, suppliers were still due $1200 for stationery. Throughout the financial year ending 31 December, $38800 in total was paid for stationery. A quantity of old stationery was sold to staff for $240. By 31 December, at the year end, the business’s stationery inventory, measured at cost, was $4200. On that date, the amount still payable to suppliers for stationery was $1800. Which amount should be entered in the statement of profit or loss for the year ended 31 December for stationery?

Preparation of financial statements

The information below is taken from the accounting records of a business for one financial year. at 1 January: rent paid in advance $4000 during the year ended 31 December: rent paid $41000 at 31 December: rent paid in advance $7000 What amount of rent should be recorded in the statement of profit or loss for the year ended 31 December?

The accounting system

Which items would have an effect on a sole trader’s gross profit?

Preparation of financial statements

John and Mary are partners in a business. Once the first year of trading had ended, both partners’ current accounts showed debit balances. What could have led to the debit balances?

The accounting system

At the close of the financial year, the partnership has the following details. residual loss $3000 total salaries to partners $5000 total interest on capital $27000 total drawings $14000 total interest on drawings $700 What profit was earned for the year?

Types of business entity

A limited company plans to issue shares at a price higher than the par value. Which items, other than the bank balance, will be affected by the share issue?

Preparation of financial statements

The following data relate to a limited company for the financial year ending on 31 December. total equity on 1 January $492000 profit for the year $70500 dividends paid $24000 dividends proposed $12000 On 30 June, a bonus issue of 20000 ordinary shares of $1 each was made. On 31 December, these decisions were taken. 1 The buildings are to be revalued to $250000. Their original cost was $200000 and accumulated depreciation stood at $50000. 2 A transfer of $5000 is to be made to the general reserve. Calculate the total equity on 31 December after these adjustments have been made.

Preparation of financial statements

A credit customer settled her debt of $600 after taking off a cash discount of $12. What would the customer account look like in the supplier's books once the payment has been recorded?

The accounting system

A business records an inventory turnover rate of 17 times. What is the numerator used in the calculation?

Analysis and communication of accounting information

At 31 December, the year-end statement of financial position for X Limited shows the following figures: non-current assets $1350000 current assets $140000 ordinary share capital $900000 general reserve $150000 long-term loan $200000 current liabilities $90000 retained earnings $150000 For the year, profit from operations was $65000 and finance costs were $20000. Calculate the return on capital employed for the year.

Analysis and communication of accounting information

Which of the following statements is correct?

Analysis and communication of accounting information

A manufacturer uses a bonus system. He gives the following details. output needed from each worker: 175 units time permitted to finish output: 10.5 hours actual time taken by Fred: 7 hours A bonus equal to 25% of the labour costs for time saved is paid, as well as the hourly rate of $8.75. What amount did Fred earn for producing 175 units?

Costs and cost behaviour

An estimated job cost sheet listed these figures: materials $\u00050680$, labour at $\u0005020$ per hour $\u00050200$, overheads at $\u0005010$ for each labour hour $\u00050100$, profit $\u00050280$, and price of job $\u000501260$. In reality, the job required $25\%$ more labour hours than had been estimated. What profit was actually made?

Traditional costing methods

Which basis would be the most appropriate for allocating power costs between two production centres?

Traditional costing methods

A manufacturing business produces only one type of product. It operates two production departments, machining and assembly. A maintenance department supplies services to the production departments. The budgeted data for these departments are listed as follows: machining overheads $\u00050800000$ with $200000$ production units; assembly overheads $\u00050400000$ with $50000$ production units; maintenance overheads $\u00050300000$. The business applies a cost per unit rate to absorb overheads. Maintenance department overheads are allocated to production departments according to output. Which figures are correct for the machining department?

Traditional costing methods

The budget for a job uses the following information: direct materials $04800$, direct labour $02200$, and machine hours $240$. Direct labour is paid at $011$ per hour. Production overheads are allocated at $025$ for each direct labour hour, and selling and distribution overhead is worked out as $20\%$ of factory cost. What is the total cost of the job?

Traditional costing methods

A company operates two production departments, manufacturing and assembly, together with a stores service department. Overheads are to be apportioned to each department by using the costing data provided: direct labour hours-manufacturing $8400$, assembly $33600$; machine hours-manufacturing $20160$, assembly $6720$; total cost of the stores department $032800$; number of store requisitions-manufacturing $3000$, assembly $2000$. Calculate the overhead absorption rates for the two production departments for the stores.

Traditional costing methods

What effect does a rise in a product’s marginal cost have?

Costs and cost behaviour

What advantage does keeping a complete set of double entry books of account give?

The accounting system

Which statements explain what cost-volume-profit analysis is useful for?

Costs and cost behaviour

At the beginning of a financial period, the balance on a business owner’s capital account was $85\,000. Over the period, the owner brought a private vehicle valued at $30\,000 into the business. Also, the owner withdrew cash drawings amounting to $15\,000. The business recorded a net loss of $22\,000 for the period. What is the balance on the capital account at the end of the period?

The accounting system

A business has recorded a vehicle purchase as a vehicle repair by mistake. In the year of purchase, the business does not charge depreciation on assets. What effect does this error have on the financial statements?

Accounting for non-current assets

At the close of Year 1, non-current assets were shown at cost, $500\,000, and carrying amount, $360\,000. In Year 2, some assets were disposed of. Their original cost was $100\,000 and accumulated depreciation was $40\,000. The depreciation expense for the other non-current assets in Year 2 amounted to $30\,000. What was the carrying value of non-current assets at the end of Year 2?

Accounting for non-current assets

The expense of repainting a property was entered on the debit side of the property account. What kind of error was made?

Reconciliation and verification

The trial balance fails to balance, and the mismatch has been posted to a suspense account. The mistakes below have been identified. 1. A rent payment of $630 made in cash has been credited in the cash book and debited to the irrecoverable debts account. 2. The provision for depreciation account has been overcast by $960. 3. The purchases ledger control account balance of $48\,300 has been treated as a debit balance. What debit amount should be entered in the suspense account to correct the error?

Reconciliation and verification

What advantages does preparing a bank reconciliation statement offer?

Reconciliation and verification

Nibras and Raif are partners. They run a car hire business. The balances shown below were available on 31 December 2022.

Preparation of financial statements

Jakoub runs a restaurant. Its financial year ends on 31 December. The business owns numerous small pieces of kitchen equipment.

Accounting for non-current assets

Haniya wanted to compare several ratios for her business. Information is given for the year ended 30 November 2021 and an extract from the statement of financial position at 30 November 2022, together with credit sales and credit purchases for the year ended 30 November 2022.

Analysis and communication of accounting information

At one of its factories, G Limited makes only one kind of product. The company applies marginal costing.

Costs and cost behaviour

Read Source A from the insert.

Preparation of financial statements

Look at Source B in the insert.

Analysis and communication of accounting information

Refer to Source C in the insert.

Preparation of financial statements

Study Source A in the insert.

Budgeting and budgetary control

Refer to Source B in the insert. Additional information: Simran was worried about the large number of units being returned. She thought that the workers were not paying enough attention when assembling the products. She considered fitting a system of surveillance cameras in the factory so that the workers could be watched. She believed that this would completely remove the returns. Simran would rent the camera system for a fixed period of three years. The cost of renting and monitoring the cameras would amount to $18000$ per annum. Simran decided that this would be added to the cost of the quality inspections. The higher total would then be allocated using the same basis as before.

Activity based costing (ABC)