Feb/March 2020

Which duty would be performed by a book-keeper but not by an accountant?

Books of prime entry

At the point when Mark set up a car repair business, he bought premises and equipment. Two years later, he paid $5000$ to construct an extension, $600$ for additional equipment and $750$ to repaint the original premises. By what amount will the non-current assets rise as a result of these transactions?

Capital and revenue expenditure and receipts

A farmer disposed of a plot of land for its market value. How ought the money received from this sale to be recorded?

Accounting for depreciation and disposal of non-current assets

Why does a trader need to account for depreciation of a non-current asset?

Accounting for depreciation and disposal of non-current assets

An item of equipment costing $20000 was bought on 1 January 2019. Its estimated useful life is 5 years and its residual value is $3000. The straight-line method of depreciation was charged in the income statement for the year ended 31 December 2019. It was later discovered that the reducing balance method at 30% per annum ought to have been applied. What effect did this error have on the profit for the year ended 31 December 2019?

Accounting for depreciation and disposal of non-current assets

A business supplied the information below about two expenses. Which amounts will be recorded in the income statement for the year ended 31 December 2019?

Capital and revenue expenditure and receipts

Anjum lets part of her premises to Ajay at $6120 each year. At the start of the year, Ajay had already paid rent for two months in advance. By the end of the year, Ajay had paid rent for three months in advance. How much rent was received from Ajay during the year?

Other payables and other receivables

A business keeps a provision for doubtful debts equal to 5% of trade receivables. The balance in the provision for doubtful debts account on 31 December 2018 was $2700. By 31 December 2019, trade receivables had risen to $50000. How is the provision for doubtful debts to be recorded on 31 December 2019?

Irrecoverable debts and provision for doubtful debts

At the close of the financial year, Cindy recorded her inventory at cost. This figure wrongly included damaged goods with a cost of $300. Cindy thought that these goods would only be able to sell for $100. What effect will correcting the inventory valuation have?

Valuation of inventory

On 31 January 2020, Hassan possessed the following assets. No liabilities existed on 31 January 2020. Which entries will appear in Hassan’s statement of financial position on 31 January 2020?

Sole traders

AB Stores carried out the following transactions. By what amount would working capital rise after these transactions?

Other payables and other receivables

On 1 February 2019, a business gave the information below. non-current assets $75\,000$ current assets $40\,000$ current liabilities $25\,000$ For the year ending 31 January 2020, the business earned a profit of $10\,000$. During that year, the owner took no drawings. What amount of capital was there on 31 January 2020?

Sole traders

The records of a business showed the following balances. Calculate the capital employed.

Calculation and understanding of accounting ratios

What is one drawback of running a business as a partnership?

Partnerships

Which item does not change the total equity of a limited company?

Limited companies

What does the term called-up share capital mean?

Limited companies

A limited company gave the information below. - Issued share capital (50 000 ordinary shares of $\$1$ each): $\$50\,000$ - Profit for the year ending 31 December 2019: $\$13\,000$ - Transfer to general reserve on 31 December 2019: $\$6\,000$ - Interim ordinary share dividend paid during the year: $\$3\,000$ On 31 December 2019, it was agreed that the profit left over would be used to pay a final ordinary share dividend. What percentage final dividend would the ordinary shareholders receive?

Limited companies

A cricket club established a snack bar on 1 January 2019. The information below is given. - Sales receipts for snacks for the year ending 31 December 2019: $\$3\,250$ - Purchase cost of snacks: $\$2\,500$ - Wage paid to the snack bar assistant: $\$250$ - Value of snacks remaining unsold at 31 December 2019: $\$520$ What profit was earned by the snack bar?

Clubs and societies

A social club had these assets and liabilities. - Non-current assets: $\$6\,550$ - Cafe expenses owing: $\$25$ - Subscriptions owing by members: $\$50$ - Balance at bank: $\$500$ debit - Owing to credit suppliers: $\$300$ - Cafe inventory: $\$500$ What was the accumulated fund?

Clubs and societies

A manufacturing business gave the information below for the year ending 30 November 2019. - Factory supervisor’s salary: $\$25\,000$ - Factory power: $\$5\,000$ - Machinery depreciation: $\$11\,000$ - Machinery operators’ wages: $\$29\,000$ - Raw materials consumed: $\$82\,000$ What is the total of the direct costs?

Manufacturing accounts

Which items would appear in the statement of financial position of a manufacturing business that would not be shown for a wholesale business?

Manufacturing accounts

A business had an average inventory of $\$40\,000$. Its inventory turnover rate was $5$ times a year. Mark-up stood at $20\%$. Calculate the revenue for the year.

Calculation and understanding of accounting ratios

Dilip is a manufacturer. He acquired a machine on credit from Sachin. In what way did Dilip enter this in his records?

Books of prime entry

Sumit does not keep a complete set of accounting records. What does Sumit not need in order to work out his credit sales?

Incomplete records

Jake’s current liabilities consisted of trade payables, while his current assets were inventory, trade receivables and cash at bank. Which action would improve his current ratio?

Calculation and understanding of accounting ratios

Flo and Mo trade in goods that are alike and are sold at comparable prices. They supplied the information below. - Gross margin: Flo $50\%$, Mo $40\%$ - Profit margin: Flo $10\%$, Mo $8\%$ Which trader demonstrates better control of cost of sales and expenses?

Interpretation of accounting ratios

Which example shows the materiality principle being applied?

Accounting principles

Which accounting principle says that revenue must not be recognised until it has been earned?

Accounting principles

Which accounting objective means that financial statements should be unbiased and contain no errors?

Accounting principles

Mui runs a household appliance store. For his own personal use, he took a washing machine from the business. Mui recorded the transaction in this way. account debited: drawings account credited: sales Were these the correct entries to record this transaction?

Sole traders

The account below was entered in Abdul's books. Hanif account for 2020, with balance b/d $400$, purchases $250$, returns $100$, bank $392$, discount $8$, and balance c/d $150$. Which of the following statements is correct?

The trial balance

Which business document records purchases, returns and payments made during a trading period?

Business documents

Rashida sells goods on credit and gives her customers a trade discount. Which statements are correct?

Business documents

The totals in a trial balance matched, but it was discovered that the purchase of office equipment had been entered on the debit side of the office expenses account. What kind of error has been made?

Correction of errors

On 31 January, Somraj's bank statement showed a credit balance of $740$. After he compared the bank statement with the cash book, he identified the following. bank charges not recorded in the cash book $30$ cheque paid but not presented to the bank $150$ Somraj amended his cash book as required. What was the revised cash book balance on 31 January?

Bank reconciliation

Amara keeps a petty cash book under the imprest system. The imprest float of $200 is topped up on the first day of every month. On 1 January 2020, Amara had $65 in petty cash. Any payment below $100 is settled from petty cash. On 1 January 2020, Amara owed $85 to Razvan, who is a credit supplier. Amara gave the following details for January 2020. January 1 The petty cash imprest was replenished from the business bank account. 3 Bought stationery for cash, $24 7 Paid travelling expenses, $49 14 Paid Razvan the outstanding amount on his account 19 Bought goods on credit from Razvan, $200 less 10% trade discount 22 Paid taxi fare, $18 28 Returned goods to Razvan that had been bought on 19 January, list price $40 29 Paid postage, $11

Books of prime entry

GHB Limited keeps a complete set of accounting records and draws up monthly control accounts. The information below relates to November 2019. Purchases ledger control account balance at 1 November $ ? Totals for November: Purchases journal $14 200 Purchases returns journal $1 160 Cash purchases $5 390 Commission receivable $2 110 Cash discount received $650 Cash discount allowed $710 Cheques paid to trade payables $11 420 Sales ledger contras $250 Interest charged by trade payables $95 Cheque refunds from trade payables $330 Purchases ledger control account balance at 30 November $13 195

Control accounts

Tia and Sarna are partners in a trading enterprise. Their trial balance on 31 December 2019 is shown below: Tia and Sarna - Trial Balance at 31 December 2019 (the debit and credit figures appear in the exam paper) Additional information: 1 Inventory at 31 December 2019 was valued at $5 165. 2 Depreciation on furniture is to be charged at 20% per annum using the straight-line method. 3 The insurance figure includes a payment of $2 160 for the 12 months from 1 July 2019 to 30 June 2020. 4 The partnership agreement states that interest on capital is 5% per annum, Tia is to receive a salary of $6 000 per annum and the remaining profits and losses are to be shared equally.

Partnerships

Arjun is a sole trader. Arjun drew up a trial balance on 31 January 2020. The debit and credit totals did not match, and the resulting difference was entered in a suspense account. Arjun then found the following errors: 1 The January total of the discount received column in the cash book, $135, had been credited to the commission receivable account. 2 $200 received from the sale of fittings (net book value $150) had been entered on the correct debit side but had been credited to the purchases and fittings account. 3 Cash drawings, $40, had been debited correctly but had been credited to the purchases account. 4 The $73 total in the cleaning analysis column of the petty cash book had been posted to both the cleaning account and the office expenses account. 5 The purchase of equipment, $575, had been credited to the equipment repairs account. The bank account had been credited correctly. 6 A cheque payment for office expenses, $90, had not been recorded at all. 7 A cheque for $69 sent to Simone had been posted to Simon’s account.

Correction of errors

Adit supplied the following information. For the financial year ended 31 January 2020: Profit for the year $27 900 Revenue $186 000 Credit purchases $93 075 As at 31 January 2020: Non-current assets at book value $43 700 Inventory $9 340 Trade receivables $14 010 Trade payables $9 435 Bank overdraft $2 240 Bank loan (repayable 2023) $6 000 Every item is sold on credit.

Calculation and understanding of accounting ratios