Preparation of financial statements

A business prepares its financial statements to 30 April each year. The ledger account balances on 1 May 2014 included insurance (debit) $800. On 31 October 2014, an insurance premium of $2100 was paid for the year ending 31 October 2015. Which amount was included as insurance expense in the income statement for the year ended 30 April 2015?

Feb/March 2016

Which option is not an appropriation of partnership profit?

Feb/March 2016

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

Feb/March 2016

A business gives the following figures: gross margin $20\%$; sales $275325$; opening inventory $25450$; closing inventory $55975$. What is the amount of purchases?

Feb/March 2016

The statement of financial position for a company lists the following items: tangible non-current assets: $20600 intangible non-current assets: $5700 trade receivables: $8600 trade payables: $3200 loan repayable in three years: $4000 bank balance: credit $5200 inventory: $6900 What is the total working capital?

Feb/March 2016

A bookkeeper with little experience worked out a draft profit for the year ended 31 December 2015 of $578500. He had omitted the following items: Provision for doubtful debts: $12800 on 1 January 2015 and $11300 on 31 December 2015. Provision for depreciation: $95000 on 1 January 2015 and $126200 on 31 December 2015. What was the adjusted profit for the year?

Feb/March 2016

A business’s draft financial statements report a profit for the year of $64000 before allowing for the following:

Feb/March 2017

The table summarizes transactions for a product in July. There was no inventory at the start. Purchased: 50 units at $4 per unit. Sold: 30 units at $10 per unit. Among the units left over, 8 are damaged and so have no value. Calculate the profit for July.

Feb/March 2017

For the year ending 31 December, a trader gives the financial details below. Gross margin: $20\%$ Cost of goods sold: $220000$ Drawings: $7000$ Profit for the year: $28000$ Calculate the expenses.

Feb/March 2017

The financial statements of a limited company provide the following details. Ordinary shares: $1200000$ General reserve: $120000$ Retained earnings: $710000$ $8\%$ debentures: $400000$ Calculate the value of total equity.

Feb/March 2017

The balances below are related to Ladha’s business. What profit did Ladha make for the year ended 31 March 2016?

Feb/March 2017

A trial balance reported a provision for doubtful debts of $1350. Trade receivables totalled $50320, including an irrecoverable debt of $500. Which entry was needed in the provision for doubtful debts account if the closing balance was to be 5% of trade receivables?

Feb/March 2017

A business shows a provisional profit for the year of $\$182750$. The adjustments below have not yet been taken into account. 1 a reduction of $\$2800$ in the provision for doubtful debts 2 rent of $\$3900$ paid by the tenant in advance at the year end What is the actual profit for the year?

Feb/March 2018

A company makes an issue of $50000$ ordinary shares of $\$5$ each at a premium of $\$15$. It also makes a $4\%$ debenture issue of $\$300000$. By what amount do the net assets of the company increase?

Feb/March 2018

Which statements are descriptions of a capital reserve?

Feb/March 2018

The excerpt below comes from a statement of changes in equity. In the year concerned, these events took place: (1) An interim dividend of $4875$ was paid. (2) A final dividend of $6000$ was proposed. (3) $2500$ was transferred to the general reserve. What was the balance of retained earnings at the end of the year?

Feb/March 2018

The company’s year-end is 31 December. On that date, its inventory records indicated 600 units of inventory at a cost of $\$10$ per unit. On 31 December, a fire completely destroyed 100 units and left another 50 units damaged. Repairing these would cost $\$7$ per unit. No adjustment had been made to the inventory records for the fire. The selling price is $\$15$ per unit. What inventory value should be shown in the financial statements at 31 December?

Feb/March 2018

By the year-end, a business holds some damaged goods in inventory. The information given is as follows: (1) The goods were bought for $8500. (2) If the goods are repaired, they may be sold for $10400. The business would need to pay $2000 for repairs and $300 to a salesman. (3) The same quantity of damaged goods may be bought from the supplier for $8200. What is the value of the damaged goods at the year-end?

Feb/March 2019

A company recorded the closing inventory for its current accounting period at too low a value. What effect did this have on gross profit?

Feb/March 2019

Over the year, a business issued $1 ordinary shares at $1.20$ per share. At the close of the year, the directors recommended a final dividend. Which balances in the statement of changes in equity were changed by these transactions?

Feb/March 2019

A business made an annual rent payment of $24000. On 1 January 2018, accrued rent was $4000. The rent payments were made as follows: 1 January 2018 $12000; 1 July 2018 $10000; 1 September 2018 $13000. How was rent shown in the financial statements at 31 December 2018?

Feb/March 2019

Noor, who traded on her own account, was getting her business’s financial statements ready for the year ending 31 December 2018. The information below is provided.

Feb/March 2019

On 1 May 2018 Trevor showed a debit balance of $3000 in his rent receivable account. Rent received over the year was: 28 May 2018: $18{,}000 30 November 2018: $16{,}000 By 30 April 2019, Trevor was owed $4000 in respect of rent for the period ending 30 April 2019. Which entry ought to be recorded in the income statement for rent receivable for the year ended 30 April 2019?

Feb/March 2020

A sole trader records a profit for the year of $31{,}000 after allowing for the following items: carriage inwards $2600 decrease in provision for doubtful debts $1500 discount received $2000 other expenses $28{,}000 profit on disposal of non-current asset $300 What was the gross profit for the year?

Feb/March 2020

L and M are partners, and their profits and losses are shared in proportion to the capital each has put into the business. The information below is given: capital: L $68{,}000, M $102{,}000 profit for the year before appropriation $28{,}900 drawings: L $8000, M $12{,}000 No interest is payable on drawings of up to $10{,}000 for each partner. Any drawings above $10{,}000 are charged interest at $5\%$. How much of the residual profit belonged to L?

Feb/March 2020

Which item is included in the statement of changes in equity?

Feb/March 2020

On 1 January 2019, the equity of P Limited stood at $668{,}000$. For the year ended 31 December 2019, profit amounted to $120{,}000$. The following events also occurred during the year ended 31 December 2019: 1 April: an interim dividend of $40{,}000$ was paid 1 July: $50{,}000$ was transferred from retained earnings into general reserve 1 October: $5\%$ debentures worth $200{,}000$ were issued 31 December: a final dividend of $30{,}000$ was proposed What total equity did P Limited have at 31 December 2019?

Feb/March 2020

A business sets up a provision for doubtful debts equal to 10% of trade receivables. The provision at 31 March 2018 stood at $8300. The trade receivables after deducting the provision on 31 March 2019 were $55800. By how much did the provision change over the year?

Feb/March 2020

The information below is provided for S Limited for the year ended 31 December 2019.

Feb/March 2020

A sole trader holds a provision for doubtful debts equal to $5\%$ of trade receivables. At the beginning of the year, the provision for doubtful debts stood at $2750. By the end of the year, the information given is as follows: trade receivables $37500; irrecoverable debts written off during the year $500. What is the effect on the profit for the year arising from the change in the provision for doubtful debts?

Feb/March 2021

At 31 December 2019, the total shareholders’ equity stood at $45500$. In the year ending 31 December 2020, these events occurred. 1 An issue of $10000$ ordinary shares of $1$ each at a premium of $0.25$ was made. 2 A bonus issue of $5000$ shares of $1$ each was made. 3 Buildings were revalued from $250000$ to $265000$. 4 The profit for the year was $20400$. 5 There was a transfer to the general reserve of $6000$. 6 The directors proposed a final dividend of $8000$. Calculate the balance of the shareholders’ equity at 31 December 2020?

Feb/March 2021

These figures apply to a limited company over a year. repayment of a debenture $200000$ receipt from issue of ordinary shares $500000$ non-current assets purchased by cheque $300000$ net book value of disposals $50000$ disposal proceeds $60000$ revaluation surplus $20000$ What was the total net cash inflow from these items?

Feb/March 2021

Which items are part of the reserves of a limited company?

Feb/March 2021

Faraz, Javed and Leah formed a partnership. Their partnership deed allowed for interest on drawings, interest on capital, a partner's salary, and the ratios for sharing profits and losses. The information for the year ended 31 December 2020 is shown, including the balances, drawings, and profit before appropriation.

Feb/March 2021

A business reported a provisional profit for the year of $250000$. The following errors were later found. 1. Depreciation charged amounted to $25000$. It ought to have been $40000$. 2. Closing inventory for the period was undervalued by $10000$. Calculate the correct profit for the year.

Feb/March 2022

During October, a retailer bought inventory as follows: 5 Oct: $50$ units costing $500$ each. 12 Oct: $50$ units costing $500$ each. 23 Oct: $150$ units costing $525$ each. At the start of October, there was no opening inventory. The business values inventory using the first-in first-out (FIFO) method. In October, $200$ units were sold at $900$ each. What gross profit was earned in October?

Feb/March 2022

The information below relates to a business at 31 December 2021. General expenses outstanding at 1 January: $420$ General expenses prepaid at 1 January: $240$ General expenses outstanding at 31 December: $720$ General expenses prepaid at 31 December: $120$ The total cash paid in the year ended 31 December 2021 was $11500$. What figure should be shown in the income statement for general expenses for the year ended 31 December 2021?

Feb/March 2022

When does the year end value of inventory have to be adjusted?

Feb/March 2022

In more recent times, Rafiq has been able to supply more detailed financial information.

Feb/March 2022

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?

Feb/March 2023

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

Feb/March 2023

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?

Feb/March 2023

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.

Feb/March 2023

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

Feb/March 2023

Deepak gave the following details. - allowance for irrecoverable debts: end of year 1 $\$600$, end of year 2 $\$800$ - rate of allowance: end of year 1 $3\%$, end of year 2 $5\%$ What was the difference in the total of trade receivables between the end of year 1 and the end of year 2?

Feb/March 2024

For what purpose is a statement of changes in equity prepared?

Feb/March 2024

The trial balance below was taken from the records of V Limited on 31 December 2023.

Feb/March 2024

Which items are included when inventory is valued?

Feb/March 2025

The financial details below are provided. Opening inventory $800$ Closing inventory $1010$ Purchases $9260$ Carriage inwards $130$ Revenue $18\,000$ Discount received $700$ Other expenses $3880$ What are the amounts of gross profit and profit for the year?

Feb/March 2025

X, Y and Z are partners in a partnership. What would be shown in the partnership appropriation account?

Feb/March 2025

Bella and Charlie are partners, and they divide profits and losses in the ratio $3\!:\!2$. Their capital contributions were made in that same ratio. For the financial year, the partners gave the following details. Interest on drawings charged: Bella $850$, Charlie $550$ Salary paid: Bella $16\,900$, Charlie $-$ Share of profit: Bella $6000$, Charlie $4000$ The profit earned during the year was $28\,000$. How much was Bella’s interest on capital?

Feb/March 2025

Sara and Viraj are partners in a wholesale business. On 1 January 2024, the partners had the balances below. Over the year ended 31 December 2024, drawings were entered and extra balances and adjustments were found. Before allowing for these items, the draft profit for the year ended 31 December 2024 was $9400.

Feb/March 2025

In the statement of financial position, inventories are shown at the lower figure of cost and net realisable value. Which accounting concept is being used?

May/June 2016

Once the company’s financial statements had been prepared, the trial balance at 31 December 2015 showed the balance below. Stationery: $8000$ debit What did this mean?

May/June 2016

On 31 December, the following information was available. The decision was made to lower the provision for doubtful debts to $800. What effects will this adjustment have on profit for the year and on net assets?

May/June 2016

The table presents details about closing inventory. What is the value of the closing inventory?

May/June 2016

A business gives the information shown below. What total amount should be shown under current liabilities?

May/June 2016

The statement of financial position set out the following balances at 31 December 2015. Net assets on 1 January 2015 were $14000. During the year ended 31 December 2015, property was revalued upwards by $12000. No drawings were taken out in the year. What profit was earned for the year ended 31 December 2015?

May/June 2016

Smith and Jones are in partnership and divide profits and losses in the ratio $3:2$ respectively. The profit for the year was $152000$. Smith was charged interest on drawings of $1650$, and Jones received a partnership salary of $40000$. What was Smith’s share of the residual profit?

May/June 2016

The financial statements of a limited company include the following items: 1 bonus issue of ordinary shares; 2 debenture interest; 3 profit for the year; 4 profit on disposal of non-current assets. Which of these items are included in the statement of changes in equity?

May/June 2016

A company issued 25000 ordinary shares of $0.50 each at a premium of $25\%$. The market price was $1.50 per share. What amount of ordinary share capital should appear in the statement of financial position?

May/June 2016

A company works out a draft profit for the year of $88000$. Included within this figure is a profit margin of $3000$ on goods sold on credit that have not yet been paid for. It also contains $500$ profit from goods sold to a customer under a sale or return arrangement. What is the correct gross profit?

May/June 2016

The draft profit for the year of a sole trader was $108000$ before the following items were considered. 1. The provision for doubtful debts carried forward was $1850$. The provision that should be carried forward is $2250$. 2. Depreciation of non-current assets had been undercharged by $2000$. 3. An accrual of $600$ for repairs had been recorded as a prepayment. What was the correct profit for the year?

May/June 2016

What could prevent financial statements from giving a true and fair view?

May/June 2016

Katrina started trading on 1 January 2015. For the year ending 31 December 2015, the information provided is: drawings $53500, profit for the year $62700, revenue $1500000, expenses $875000. What was the cost of sales for the year?

May/June 2016

A company has $1000000 ordinary shares of $1 that were issued at $2.50. It also holds a $5\%$ debenture worth $300000$. Profit from operations for the year was $465000$. During the year, the directors paid an $8\%$ ordinary share dividend. By what amount did retained earnings rise during the year?

May/June 2016

A company allocates $100000$ new $1 ordinary shares at a premium of $0.20 per share. What impact does this have on the statement of financial position?

May/June 2016

The trial balance at 31 December 2015 contained the following figures: ordinary share capital ($1 shares) $500000; retained earnings $300000. On 1 January 2016, the directors set up the general reserve of $70000. At the same time, $200000 ordinary shares were issued for $300000. By what amount did total reserves rise on 1 January 2016?

May/June 2016

A business began trading on 1 January. Its inventory purchases and sales during January were as follows. The business valued inventory using the first in first out (FIFO) method. What was the gross profit for January?

May/June 2016

A company received interest of $8800 during the financial year. At the start of the year, interest of $700 was due, and by the end of the year, $850 was due. Which entry would appear in the interest received account to transfer the figure to the income statement?

May/June 2016

The information available on 31 December was as follows: non-current assets with a net book value of $10000$, current assets of $5000$, provision for doubtful debts $(1500)$ and current liabilities of $(3000)$. It was then decided to lower the provision for doubtful debts to $800$. Which effects will this adjustment have on the profit for the year and on net assets?

May/June 2016

The table presents data for closing inventory: cost $50000$, realisable value $45000$, costs of realisation $5000$, replacement cost $35000$. What amount should the closing inventory be valued at?

May/June 2016

A business supplies the following figures: accrued expenses $9350$, accrued income $24750$, prepaid expenses $14250$, prepaid income $32650$. What is the total amount that should be shown under current liabilities?

May/June 2016

The statement of financial position listed these balances on 31 December 2015: capital accounts X $20000$, Y $10000$; current accounts X $1000$ debit and Y $2500$ credit. Net assets on 1 January 2015 were $14000$. During the year ended 31 December 2015, property was revalued upwards by $12000$. There were no drawings in the year. Calculate the profit for the year ended 31 December 2015.

May/June 2016

Smith and Jones are partners, dividing profits and losses in the ratio $3:2$ respectively. The profit for the year amounted to $152000$. Smith was charged interest on drawings of $1650$. Jones received a partnership salary of $40000$. What was Smith’s share of residual profit?

May/June 2016

A company holds a bank balance of $20000$. Its equity and reserves comprise: ordinary shares of $0.50$ each $10000$, capital reserves $5000$, revenue reserves $3000$. The directors want to pay the largest dividend that can be paid. How much of the bank balance will be used to fund the dividend?

May/June 2016

The financial statements of a limited company include the following items: 1 bonus issue of ordinary shares, 2 debenture interest, 3 profit for the year, 4 profit on disposal of non-current assets. Which of these items would appear in the statement of changes in equity?

May/June 2016

A company issued $25000$ ordinary shares of $0.50$ each with a premium of $25\%$. Their market value was $1.50$ per share. What is the ordinary share capital value in the statement of financial position?

May/June 2016

A company works out a draft profit for the year of $88000. This total includes a profit margin of $3000 on goods sold on credit that have not yet been paid for. It also contains $500 profit made on goods sold to a customer on a sale or return basis. What should the correct gross profit be?

May/June 2016

Before the items below were considered, the sole trader’s draft profit for the year was $108000. What should the profit for the year be?

May/June 2016

Bayliss Limited operates as a retailer of ladies’ fashion material. The trial balance that follows was taken from the accounting records on 31 December 2015.

May/June 2016

Jing operates as a sole trader. He does not keep complete accounting records. Every sale and purchase is made on credit. He supplied the information below for the year ended 30 April 2015.

May/June 2016

Bayliss Limited trades as a retailer of ladies’ fashion material. The trial balance shown below was taken from the books of account on 31 December 2015.

May/June 2016

The financial data provided is as follows: inventory at 1 January 2016: $800$ inventory at 31 December 2016: $1010$ purchases: $9260$ carriage inwards: $130$ revenue: $18000$ discount received: $700$ other costs: $3880$ What are the amounts of gross profit and profit for the year?

May/June 2017

A company carries out a $1$ for $4$ bonus issue of ordinary shares. What effect does this have on share capital and total equity?

May/June 2017

A company has these items: $12000$ ordinary shares of $1$ each. $10\%$ debenture $10000$. For the year ended 31 December 2016, it recorded a loss of $15000$. On 30 September 2016, an interim ordinary dividend of $0.20$ per ordinary share was paid. At 31 December 2016, an ordinary dividend of $0.40$ per ordinary share was proposed. The retained earnings figure in the statement of changes in equity at 31 December 2016 was $20000$. What was the retained earnings balance at 1 January 2016?

May/June 2017

At the beginning of the year, the provision for doubtful debts stood at $19600. Over the year, irrecoverable debts of $12300 were written off. By the end of the year, the provision for doubtful debts had fallen to $15500. What was the overall effect of these items on the profit for the year?

May/June 2017

The company’s equity is composed as follows. $100000$ ordinary shares of $\$0.25$ each: $25000$. Share premium: $3000$. Retained earnings: $8000$. These events then occurred: 1 A bonus issue of one ordinary share for every five held was made. 2 Six months later a rights issue of one ordinary share for every four held was made. The shares were issued at $\$0.30$ each. By what amount did the company’s equity rise as a result of these transactions?

May/June 2017

The data below have been taken from a business statement of financial position at 31 December 2016: bank loan (repayable 2025) $16200, other payables $1880, bank overdraft $11600, capital $20710, drawings $19100, inventory $14610, other receivables $1420, trade payables $14110, trade receivables $9050. Calculate the value of the net current liabilities.

May/June 2017

Finn gives these figures: capital at the beginning of the year $19800, profit for the year $24000, cash drawings $19500, drawings of goods for own use $1100, and a private vehicle transferred to business use $6000. What was Finn’s capital at the end of the year?

May/June 2017

The extract below is taken from a business’s trial balance as at 31 May 2017. trade receivables: $72000$ provision for doubtful debts: $3250$ One customer, who owes $5000$, has been made bankrupt. The provision for doubtful debts is to be kept at $5\%$ of trade receivables. Which figure should be shown in the financial statements at 31 May 2017?

May/June 2017

L and M are in a partnership. The figures below are taken from their profit and loss appropriation account. Interest on capital: L $1600$, M $1800$, giving a total of $3400$ Interest charged on drawings: L $500$, M $400$, making $900$ in all Partners’ salaries: L $2000$, M $3000$, giving a combined figure of $5000$ Share of profit: L $8000$, M $12000$, with a total of $20000$ What was the profit for the year prior to appropriations?

May/June 2017

A company holds a debenture (2020). Which statement about this is correct at 31 December 2016?

May/June 2017

Which item would not appear in the statement of changes in equity for a limited company?

May/June 2017

A trader recorded the following transactions in March 2017. cash sales for the month: $\$6900$ credit sales invoiced in March: $\$46200$ credit sales in March not yet invoiced: $\$800$ customer orders received on 31 March: $\$1200$ goods sent to a customer on 1 March on sale or return: $\$1400$ What revenue figure should be shown in the income statement for March 2017?

May/June 2017

A business applies a mark-up of $40\%$. The information for the year was as follows. revenue: $\$280000$ inventory at start: $\$44000$ purchases: $\$175000$ What was the closing inventory value?

May/June 2017

B Limited is a private limited company operating as a wholesaler of garden equipment. The draft trial balance dated 30 June 2016 has been taken from the books of account.

May/June 2017

The excerpt below is taken from the statement of financial position of WX Limited as at 1 March 2016.

May/June 2017

X and Y are partners and they reassess their assets as shown below. Freehold property: book value $50\,000$, revalued amount $71\,000$ Fixtures and fittings: book value $20\,000$, revalued amount $16\,000$ Inventory: book value $15\,000$, revalued amount $13\,000$ X and Y divide profits and losses in the ratio $2:1$. What is X’s share of the revaluation profit?

May/June 2018

A company shows the following capital and reserves. Ordinary shares of $1$ each, fully paid: $1\,250\,000$ Share premium account: $100\,000$ Revaluation reserve: $200\,000$ General reserve: $150\,000$ Retained earnings: $210\,000$ The company policy is to keep reserves in the form that is most flexible. The company carries out a $1$-for-$5$ bonus issue. What is the highest amount of distributable reserves remaining after the bonus issue?

May/June 2018