Accounting 9706 · AS & A Level · Preparation of financial statements

Preparation of financial statements — practice question

Read Source A from the insert.
(a)[4]

Explain two reasons why a business might apply a rate of factory profit.

(b)[2]

Prepare the provision for unrealised profit account covering the year ended 31 December 2022.

(c)[6]

Prepare the manufacturing account covering the year ended 31 December 2022.

(d)[8]

Prepare the statement of profit or loss for the year ended 31 December 2022.

(e)[5]

Advise the sales manager on whether J Limited should accept the sales order. Justify your response and support it with relevant calculations.

Worked solution & mark scheme

This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: The transfer price can be compared with the price at which goods could be bought from external suppliers

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