The accounting system

A business is held in high regard. The owner wants goodwill shown in the financial statements. An accountant recommends that this should not be done. Which accounting concept is the accountant applying?

Feb/March 2016

A company sells one million ordinary shares of $1$ each at $1.30$ per share. It also issues a debenture for $500000$. By how much does the company's equity increase?

Feb/March 2016

Which accounting treatments show the application of the matching concept?

Feb/March 2017

For what reason is a sales ledger control account used?

Feb/March 2017

The following details are given for a business. Items are sold at cost plus 25%. The owner has taken some items for personal use, but these have not been entered as drawings. What is the value of the items taken for personal use?

Feb/March 2017

Sturgess has supplied details about provisions for doubtful debts and telephone expenses.

Feb/March 2017

Which of the following would not count as a purpose of ledger accounts?

Feb/March 2018

Adam keeps his inventory records using AVCO (perpetual inventory) in order to determine its value. Which statement is correct?

Feb/March 2018

The table gives data from a purchases ledger control account at the end of the year. payments made to suppliers $\$36000$ purchases made on credit $\$55000$ discounts received $\$7800$ closing balance carried down (balancing figure) $\$35000$ What was the credit balance brought down at the start of the year?

Feb/March 2018

A sole trader takes goods out for personal use. In what way does this change his financial statements?

Feb/March 2018

The extract below comes from the statement of financial position of X Limited at 31 December 2016.

Feb/March 2018

An item is shown in the financial statements because it affects the way they are interpreted. Which accounting concept is being used?

Feb/March 2019

A company has ordinary share capital of $250000$. Each ordinary share has a nominal value of $0.25$. The rights issue is offered on the basis of 2 shares for every 5 shares held, at a premium of $0.15$. What total amount of capital is raised by the rights issue?

Feb/March 2019

What disadvantages are associated with budgetary control systems?

Feb/March 2019

In June, a business noted the following figures: payments made to credit suppliers in June $16380; credit purchases for June $21650; discount received $850; purchases ledger balances at the beginning of June $5730; purchases returns in June $1200. What was the balance on the purchases ledger control account at the end of June?

Feb/March 2019

Mira, Sasha and Peta were operating as a partnership. Profits and losses were divided among them in the ratio $2:2:1$ respectively. The partnership stopped trading on 31 January 2019.

Feb/March 2019

A trader sells goods for $6600 to a customer on 31 March 2019, which is the final day of his financial year. An invoice is not issued until three days afterwards. He is told that the sales of $6600 ought to be recorded in the financial statements for the year ended 31 March 2019. Which accounting concepts are being applied?

Feb/March 2020

X and Y are partners and divide profits and losses equally. Y began with a current account balance of $1350 debit. The profit remaining for the year was $23{,}500. Y was entitled to: interest on capital $1200 salary $14{,}500 Y withdrew $25{,}000 during the year. What was the closing balance on Y’s current account at the end of the year?

Feb/March 2020

The sales ledger control account contained the following entries. Which of these entries should be amended?

Feb/March 2020

A business measures its inventory at whichever is lower: cost or net realisable value. Which accounting concept is being used?

Feb/March 2021

Esarba’s financial year ends on 31 December. On 31 March 2020, she introduced her private vehicle into the business at a value of $12000. Her profit for the year ended 31 December 2020 was $7800 and her cash drawings came to $8000. A depreciation charge of $900 had been made on the vehicle. She also withdrew goods for her own use, with a cost price of $1000 and a selling price of $2000. By how much did Esarba’s capital account balance rise in the year ended 31 December 2020?

Feb/March 2021

Annie and Bernie have been partners for several years, dividing profits and losses in the ratio $2:1$. From 1 January 2020, they agreed to add interest on drawings. For the year ending 31 December 2020, the annual interest on drawings was $1300$ for Annie and $800$ for Bernie. What effect did this have on Annie’s current account balance at 31 December 2020?

Feb/March 2021

What is done to the totals of a three-column cash book at the close of an accounting period?

Feb/March 2022

A sole trader’s capital account included three postings, as well as the opening balance and the closing balance. What did those postings show?

Feb/March 2022

Before the following transactions, the bank balance of a limited company was $390\,000$: 1. 500,000 new shares of $0.50$ each were issued at a premium of $0.25$ per share. 2. A debenture of $100\,000$ was repaid. 3. A bonus issue involving $100\,000$ shares of $0.50$ each was made. What was the balance in the bank after all these transactions?

Feb/March 2022

What possible limitations can a budgetary control system have?

Feb/March 2022

What entries are made in the sales ledger control account?

Feb/March 2022

Rafiq owns a retail business. When the business was launched a few years ago, Rafiq kept only very limited accounting records.

Feb/March 2022

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

Feb/March 2023

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?

Feb/March 2023

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?

Feb/March 2023

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?

Feb/March 2023

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

Feb/March 2023

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?

Feb/March 2023

A sole trader set up a business on 1 January with capital of $\$50\,000$. As the year progressed, she brought into the business her own private vehicle. It had originally cost $\$22\,000$, but when it was introduced into the business its value was $\$16\,000$. Drawings made throughout the year were $\$20\,000$. By 31 December, the closing balance on the capital account stood at $\$105\,000$. Calculate the profit for the year.

Feb/March 2024

At 31 December, at the close of year 1, the company’s trial balance showed these figures: - ordinary share capital ($\$0.50$ shares) of $\$800\,000$ - share premium of $\$200\,000$ - retained earnings of $\$1\,000\,000$ On 1 January in year 2, the company carried out a rights issue of $400\,000$ shares at a premium of $\$0.70$ per share. All of the issue was subscribed. On 1 July in year 2, the company issued bonus shares at the rate of one new share for every four held. The policy is to keep reserves in their most flexible form possible. What balance remains in the share premium account after these transactions?

Feb/March 2024

Which items are posted on the debit side of accounts in the purchases ledger?

Feb/March 2024

Tom purchased goods on credit from Sam for $100. He sent back faulty goods worth $20. After taking off a cash discount, he settled the balance by cheque for $76 in full. Which amounts were entered in Tom’s books of prime entry?

Feb/March 2024

Rahul runs a retail business and has not kept complete accounting records. He can provide the following details for the financial year finishing on 31 January 2024.

Feb/March 2024

Which statement sets out the realisation concept?

Feb/March 2025

Which statement is incorrect regarding the advantage to a business of keeping control accounts?

Feb/March 2025

A company uses a revenue reserve in order to carry out a bonus issue of ordinary shares. Which accounts should be debited and which should be credited to record this?

Feb/March 2025

At the beginning of a financial period, before trading had started, a business owner brought her personal items into the business, made up of goods costing $5000. Which entries should have been made to record this transaction?

Feb/March 2025

Why might a business choose to use a computerised accounting system?

Feb/March 2025

The profit for a company for the year is $20000. Capital income of $5000 has been classified as revenue income. Capital expenditure of $4000 has been classified as revenue expenditure. What should the correct profit for the year be?

Feb/March 2025

The balances below were extracted from the books of W Limited on 1 January 2024, together with details of transactions for the year ended 31 December 2024.

Feb/March 2025

X and Y were partners and divided profit and losses equally. They then brought Z into the partnership, and the profit and loss sharing remained equal. The following transactions occurred: 1 Z contributed capital of $50000. 2 Goodwill had a valuation of $30000. No goodwill account is maintained in the books of account. 3 X withdrew a computer from the business valued at $3000. After these transactions had been completed, X’s capital account had a balance of $60000. What was the original balance on X’s capital account?

May/June 2016

Who ought to be included on the budget committee?

May/June 2016

Which statement concerning the sales ledger control account is correct?

May/June 2016

In which book of prime entry is the contra entry between the sales ledger control account and the purchase ledger control account entered?

May/June 2016

In the statement of financial position, inventories are measured at whichever is lower: cost or net realisable value. Which accounting concept is being applied here?

May/June 2016

The balance shown below was included in a trial balance at 31 December 2015, following the preparation of the company’s financial statements. What did this show?

May/June 2016

Wang and Yuan, who divide profits and losses in the ratio $2:1$, agreed to end their partnership. Their condensed statement of financial position on $30$ September $2015$ was as follows:

May/June 2016

A business has a year end of 31 March. On 31 March 2016, the business took an order from a credit customer. The goods were not delivered to the customer until 5 April 2016. This sale was left out of the financial statements for the year ended 31 March 2016. Which accounting concept(s) are being used?

May/June 2017

The information below has been taken from a business’s records: At 1 January 2016, rent paid in advance: $4000$. Over the year ended 31 December 2016, rent paid: $41000$. At 31 December 2016, rent paid in advance: $7000$. What amount of rent will be shown in the income statement for the year ended 31 December 2016?

May/June 2017

At the beginning of a period, trade receivable balances stood at $30000 and by the end they had reached $38000. Over the same period: credit sales: $60000 irrecoverable debt written off: $1000 customer discounts allowed: $2000 What amount did the company collect from its customers during the period?

May/June 2017

When a businessman contributes capital to his business, the entry is debited in the cash book and credited to his capital account. This is an example of which accounting concept?

May/June 2017

A partnership keeps both capital accounts and current accounts for its partners. Which accounting entry is correct for recording interest on capital for partner X?

May/June 2017

Which people count as internal users of accounting information?

May/June 2017

Which of the following is an example of the accounting equation?

May/June 2017

Which statement is not a reason why a business creates budgets?

May/June 2017

Which entries are recorded in a sales ledger control account?

May/June 2017

A company chose not to capitalise the purchase of a stapler intended for use in its office. Which accounting concept was the company using?

May/June 2017

If a business leaves out a prepayment for rent receivables from its financial statements at the year end, what effects does this have?

May/June 2017

In which account should a partner’s drawings be entered?

May/June 2017

Which of the following is not a purpose of a budget?

May/June 2017

Meena did not maintain complete accounting records. She was told to keep her books of account by using the double entry system.

May/June 2017

A book-keeper records a sales order in the sales journal. Which accounting concept is being ignored?

May/June 2018

Which item remains unchanged when shares are issued at a premium?

May/June 2018

P Limited possesses an ordinary share capital of $100\,000$ shares of $1$ each. The market value for each share is $\$1.20$. Which journal entries could be used to record a $1$-for-$10$ bonus issue of ordinary shares?

May/June 2018

Why would a business draw up budgets?

May/June 2018

What purpose does a sales ledger control account serve?

May/June 2018

A business begins on 1 January with $\$800$ prepaid for four months’ motor insurance. It also has fuel payable on an unpaid invoice of $\$140$. In January, the business settles the fuel invoice and pays another $\$600$ for fuel. By 31 January, there is still an unpaid fuel invoice of $\$160$. What amount should be shown for motor expenses in the income statement for January?

May/June 2018

The owner of a business has been informed that work done for a customer ought to be entered in the books of account even though the invoice has not yet been issued to the customer. Which accounting concepts are being applied?

May/June 2018

A company allotted $50000$ ordinary shares, each with a nominal value of $0.50$, at an issue price of $0.60$ per share. What accounting entries should be made for this issue?

May/June 2018

Why would a business draw up a budget?

May/June 2018

A company has an accounting year-end of 31 October. The table below gives the telephone invoice that the company received on 2 December for the 3 months ending 30 November. telephone calls to 30 November: $1041 rental of equipment for the period from 1 September to 30 November: $156 Which accrual should the company recognise in the financial statements for the financial year ending 31 October?

May/June 2018

A business set up a provision for doubtful debts on 31 December 2016. The provision was worked out as a percentage of trade receivables at each year end, as shown below. 31 December 2016: trade receivables $32500, provision for doubtful debts 10% 31 December 2017: trade receivables $34300, provision for doubtful debts 5% Which entry was needed in the provision for doubtful debts account for the year ended 31 December 2017?

May/June 2018

Across the financial year, a business settled $295000 with its trade payables, after receiving a cash discount of $15000. The opening balance for trade payables was $25000, and at the close of the year $32000 remained owing to trade payables. What amount of credit purchases were made during the year?

May/June 2018

X and Y were partners and shared profit and loss equally. Z joined the partnership, and it was agreed that profit and loss would still be shared equally. Goodwill was to be assessed on the date of admission, but it was not kept in the books of account. In what way did the goodwill adjustment affect the partners’ capital accounts?

May/June 2018

What is not a reason for carrying out business planning?

May/June 2018

What type of error would lead to the creation of a suspense account?

May/June 2018

David, who is a sole trader, had drawn up a trial balance at 31 December 2017 that was out of balance. He placed the difference in a suspense account.

May/June 2018

At the end of the year, a business does not carry out a physical count of stationery that has not been used. Which accounting concept has been used for this practice?

May/June 2019

A company sold $1$ ordinary shares at $1.20$ each. The total cash received was entered in the ordinary share capital account. Which journal entry completes the records for the share issue?

May/June 2019

An extract taken from a company’s statement of financial position gave the details below. issued share capital: $2$ million ordinary shares of $0.50$ each: $1000$ share premium balance: $600$ retained earnings balance: $2400$ The directors have decided to make a bonus issue of $3$ ordinary shares for $4$ shares held. They want the reserves to remain in their most flexible form. Which debit entry ought to be recorded in the retained earnings account?

May/June 2019

A sales invoice issued to Jane has not been entered in the books of prime entry. Which ledger accounts are impacted by this error?

May/June 2019

A business’s suspense account is shown below. Discount allowed: $150 Opening balance: $100 Sales: $50 Which statements are correct?

May/June 2019

Brian dispatched goods to Ravi on a sale or return basis with a selling price of $5000. This selling price was calculated using a 25% mark-up. Ravi sent back goods with a selling price of $1000 and bought the rest. What was the net effect on Brian’s inventory value?

May/June 2019

Which accounting concept is represented by the equation assets = capital + liabilities?

May/June 2019

At 1 January, the company’s equity consisted of 100000 $1 ordinary shares. The directors then carried out these actions: 1 March: A rights issue of 20000 ordinary shares was made at $1.25 per share. The rights issue was fully subscribed. 1 June: A bonus issue of 5000 ordinary shares was made. 1 July: An interim dividend of $0.10 was paid on every share in issue on that date. Calculate the amount by which the bank account increased because of these transactions.

May/June 2019

The balances below have been taken from J Limited’s records. Ordinary shares of $0.50 each stood at $700000 on 30 April 2019 and at $500000 on 30 April 2018. Share premium was $90000 on 30 April 2019 and $50000 on 30 April 2018. How many ordinary shares were issued during the year ended 30 April 2019?

May/June 2019

Why do businesses draw up budgets?

May/June 2019

A sole trader worked out a draft profit for the year of $56\,750. He later found that discounts received of $580 and discounts allowed of $665 had been entered on the wrong sides of their own accounts. What should the correct profit for the year be?

May/June 2019

When inventory is valued for inclusion in the financial statements, any selling price above its cost price is disregarded. Which concept is being used in this case?

May/June 2019

Which of the following statements about a budget are correct?

May/June 2019

At 31 December 2018, Sofia has given the following details about her trade receivables.

May/June 2019

In a sales ledger control account, what is represented by the debit-side closing balance carried down and the credit-side opening balance brought down?

May/June 2020

Which one is capital income?

May/June 2020

At the close of the financial period, a trader’s trial balance failed to balance, so a suspense account was opened. The errors below were then found. 1. A purchase of inventory costing $650 had not been entered in the accounting records. 2. A vehicle bought by cheque had been credited to bank, but debited to motor expenses. 3. The discount received of $300 had been correctly posted to the purchases ledger control account and was debited to discount allowed account. 4. The purchases account for the year had been totalled incorrectly. Which errors would have an effect on the suspense account?

May/June 2020