Feb/March 2023

What is accounting intended to achieve?

Accounting principles

Mona paid $32 000 for a new motor vehicle. That total included $100 for fuel and $250 for road tax. She debited the purchases account and credited the bank account with $32 000. Which journal entry would amend this error?

Correction of errors

Shazia’s trial balance did not balance, so the discrepancy was recorded in a suspense account. Shazia then found the following mistakes. 1. A cheque received, $280, had been posted to the bank account as a credit. 2. A cheque paid to Nunu, $50, had not been recorded in Nunu’s account. What was the suspense account balance before these mistakes were corrected?

Correction of errors

At 31 July, the bank column in Jay’s cash book indicated a balance at bank of $312. On that same day, the bank statement showed an overdraft of $53. It was discovered that bank charges of $47 had not been entered in the cash book and that a cheque for $318 received from a customer had not yet been credited by the bank. What bank balance ought to appear in Jay’s statement of financial position at 31 July?

Bank reconciliation

For what reason is a sales ledger control account prepared?

Control accounts

Jason gave the following details. 1 March: sales ledger control account had a debit balance of $400 31 March: credit sales $520; cheques received from trade receivables $300; bad debts written off $45; a cheque received from a credit customer was dishonoured $10. What debit balance was shown on the sales ledger control account at 31 March?

Control accounts

When a new machine was bought, the following payments were made: Price of the machine $32 000; delivery charge for the machine $1 800; insurance for the machine $2 000; wages paid to employees installing the machine $1 300. What was the capital expenditure?

Capital and revenue expenditure and receipts

Why ought a manufacturer to include depreciation for her factory equipment?

Accounting for depreciation and disposal of non-current assets

A manufacturer supplied the information below. On 1 January 2022: machinery recorded at cost $20 000; provision for depreciation of machinery $7 200; loose tools shown at valuation $2 100. Machinery is depreciated at $20\%$ per annum by the reducing balance method. Extra loose tools were bought in August 2022 for $300. No depreciation is charged on loose tools purchased in the financial year. On 31 December 2022, loose tools that were more than 12 months old were valued at $1 850. What was the depreciation charge for the year ended 31 December 2022?

Accounting for depreciation and disposal of non-current assets

A trader entered the following in his ledger. Account debited: irrecoverable debts Account credited: Peter What transaction was being recorded?

Irrecoverable debts and provision for doubtful debts

Julie’s books showed these balances on 1 July 2021: Trade receivables $64 200; provision for doubtful debts $1 284. On 30 June 2022, trade receivables were $58 500, and $500 of this amount needed to be written off as irrecoverable. Julie plans to keep her provision for doubtful debts at $2\%$ of trade receivables. What was the movement in the provision for doubtful debts at 30 June 2022?

Irrecoverable debts and provision for doubtful debts

How could a business owner tell that he is earning a return on his investment?

Calculation and understanding of accounting ratios

In calculating the value of his closing inventory, Asim left out goods with a cost of $990. What effect will this error have?

Valuation of inventory

The restaurant owner is worried that operating costs are too high. Which statement will display the operating costs for the year?

Sole traders

At the end of the year, a service business gave the following information. non-current assets $16\,000$ trade receivables $150$ capital $14\,100$ trade payables $800$ What was the balance at the bank?

Sole traders

In the partnership accounts, how is interest on drawings entered?

Partnerships

Javed and Yani operated as a partnership and divided profits and losses equally. After appropriation, the remaining profit for the year was $47\,000$. Yani supplied the following figures. interest on capital $2400$ interest on drawings $600$ salary $3000$ drawings $18\,000$ At the beginning of the year, Yani’s current account showed a credit balance of $1500$. What was Yani’s current account balance at the end of the year?

Partnerships

A limited liability company is created. Who holds limited liability?

Limited companies

Which of the following statements are correct about the financial statements of a limited company? 1 An ordinary dividend paid appears in the income statement. 2 A transfer into the general reserve is shown in the statement of changes in equity. 3 Debentures issued are shown in the statement of changes in equity. 4 A proposed dividend is not included in the income statement.

Limited companies

A golf club provides refreshments for its members. Amounts owing to suppliers for refreshments were $250$ on 1 January 2022 and $400$ on 31 December 2022. The payments made to suppliers in the year totalled $7200$. Closing inventory was $100$ below opening inventory. What was the cost of sales of refreshments for the year ended 31 December 2022?

Clubs and societies

The following details were given by a social club. subscriptions paid in advance at 31 December 2021 $40$ subscriptions paid in advance at 31 December 2022 $50$ subscriptions received during the year 2022 $660$ What amount should be shown for subscriptions in the income and expenditure account for the year ended 31 December 2022?

Clubs and societies

A manufacturing business gave the following details for the year ending 30 November 2022. salary of the factory supervisor $25\,000$ factory heat and light $5000$ machinery depreciation $11\,000$ wages of machinery operators $29\,000$ raw materials used up $82\,000$ What was the total amount of the direct costs?

Manufacturing accounts

What is the correct sequence for processing accounting data by using the double entry system?

Books of prime entry

In the statement of financial position of a manufacturing business, where is work-in-progress recorded?

Valuation of inventory

How is profit worked out from incomplete records?

Incomplete records

At 30 September 2022, a company gave the balances shown below. cash held in hand $150$ bank loan - due for repayment on 31 December 2022 $2000$ bank loan - due for repayment on 1 May 2024 $3000$ bank overdraft $400$ trade receivables total $8000$ other receivables total $275$ inventory valued at $24\,000$ trade payables total $6000$ other payables total $95$ What was the value of the current ratio?

Calculation and understanding of accounting ratios

The following details about Alan's business were given. liquid (acid test) ratio $2.5:1$ current liabilities $12\,000$ inventory $6000$ What was the total value of his current assets?

Calculation and understanding of accounting ratios

A trader is aiming to increase her gross margin. What could she do to achieve this?

Interpretation of accounting ratios

To help finance further expansion, the business owner deposited $10000$ into the business bank account. In the ledger, the bank account was debited and the capital account was credited. Which accounting principles were being followed?

Accounting principles

Ada purchased goods on credit from Zuri. Later, she sent back some of those goods to Zuri. How did Ada record the return in her books?

Books of prime entry

Samir runs a shop. To set his selling price, he increases the cost of his stock by 50%. He took stock for personal use costing $100 but did not pay for it. How ought this to be recorded in the accounts?

Sole traders

During April, Meena issued Ralph with invoices amounting to $170, $240 and $125, together with a credit note for $63. In that same month, Ralph issued Meena with a debit note for $70 and a cheque for $107. Meena’s account had no opening balance at the beginning of April. What was the balance on Meena’s account in Ralph’s books on 1 May?

Books of prime entry

On 1 May, Bashir buys goods on credit with a list price of $200. A trade discount of $20 is allowed. If payment is made within 28 days, a cash discount of $10 will be allowed. Which amount is entered on the credit side of the supplier’s account on 1 May?

Books of prime entry

The following mistakes were discovered after the trial balance had been prepared. The sales account total had been overstated by $25. The wages account total had been overstated by $25. Which statement is correct about the trial balance that had been completed?

Correction of errors

The trial balance shown below does not balance. Which items were recorded on the incorrect side of the trial balance?

Correction of errors

Saira is a trader. The transactions below occurred in January 2023. Jan 2 Rent received, $360, was paid straight into the bank account. Jan 4 $343 was paid to Jai by telephone transfer after deducting 2% cash discount from the amount owed. Jan 7 Cash of $33 was paid for motor expenses. Jan 13 Cash sales of $395 were paid directly into the bank account. Jan 17 $194 was paid to David by electronic transfer after deducting 3% cash discount from the amount owed. Jan 20 A cheque for $388 was received from Ivan, settling a debt of $400 in full. Jan 27 Cash of $150 was withdrawn from the bank for business use. Jan 29 Wages of $124 were paid in cash.

Bank reconciliation

Rai works as a trader and had completed his trial balance on 31 January 2023. The credit column total was $152 higher than the debit column total, so he entered the difference in a suspense account. Rai then found the following mistakes. 1 Wages, $200, had been entered in the cash book but left out of the wages account. 2 A credit purchase of $247 from Stella had been debited to Stella’s account and credited to the purchases account. 3 Both the rent payable account and the sales account had been overstated by $100. 4 A cheque for motor expenses, $75, had been posted twice to the motor expenses account. 5 A payment to Jasper of $196 had been recorded in Jasper’s account as $169.

Correction of errors

Lucas is a trader. He has supplied the following details. Balances at 1 January 2023: Sales ledger control account: $14 940 debit Purchases ledger control account: $8450 credit Totals for January 2023: Credit sales 12 736 Cash sales 3992 Credit purchases 7325 Returns to credit suppliers 463 Returns from credit customers 920 Cash received from credit customers 685 Bank transfers received from credit customers 10 620 Bank payments to credit suppliers 6675 Irrecoverable debts written off 140 Discount received 210 Contra entries 180 Interest charged on overdue purchases ledger accounts 166

Control accounts

Adya trades in goods. She deals in only one type of good and buys and sells it. She has given the information below. For the year ended 31 October 2022: Revenue $98000 Purchases $62305 Expenses $31188 Other income $4630 At 31 October 2022: Inventory $7500 Trade receivables $9240 Trade payables $5365 Bank overdraft $5135 The quantity of inventory and its valuation at 31 October 2022 are both twice the amount at 31 October 2021.

Interpretation of accounting ratios

Samir and Punita operate as partners. Their partnership agreement sets out the following: interest on drawings of 5% interest on capital of 3% per annum a salary to Punita of $11000 per annum any remaining profits and losses are shared 60% to Samir and 40% to Punita. The partners gave this information. Profit for the year ended 31 December 2022 $24600 Capital account balances at 1 January 2022: Samir $80000 Punita $75000 Current account balances at 1 January 2022: Samir $6450 credit Punita $8335 credit Drawings for the year ended 31 December 2022: Samir $16000 Punita $12400

Partnerships