Oct/Nov 2023

Which action does not decrease the owner’s capital?

Sole traders

Which statement gives the correct description of a suspense account?

The trial balance

A trader drew up a draft income statement that reported a profit for the year of $\$36\,000$. An examination of the records disclosed the following information.

Correction of errors

Alicia’s cash book showed a debit balance of $100 on her bank account. She checked the cash book against the bank statement and then brought the cash book up to date for the following entries. credit transfer to a credit supplier $80 credit transfer from a credit customer $112 bank interest paid $19 What debit balance was shown on the bank account after the cash book had been updated?

Bank reconciliation

The cash book records a bank balance of $1200. On the same date, the bank statement gives a balance of $1440. What might account for the difference?

Bank reconciliation

Jane intended to record a contra entry between a sales ledger account and a purchases ledger account. The credit side was recorded correctly, but the debit side was posted to the sales returns account by mistake. What effect did this error have?

Correction of errors

Which transaction counts as capital expenditure?

Capital and revenue expenditure and receipts

Sales returns were entered incorrectly as purchase returns in an income statement. What effect did this error have?

Correction of errors

Give one reason why depreciation is charged on a non-current asset?

Accounting for depreciation and disposal of non-current assets

Under the revaluation method, which non-current asset ought to be depreciated?

Accounting for depreciation and disposal of non-current assets

The original cost of a motor van was $11500, and it had accumulated depreciation of $9000. The van was then sold for $2750. How ought the profit or loss on disposal of the van to be recorded in the disposal account?

Accounting for depreciation and disposal of non-current assets

Which statement gives the correct description of the accounting equation?

Accounting principles

Joseph sells goods on credit and keeps a provision for doubtful debts. He wishes to raise his provision for doubtful debts by $400. Which journal entry is used to show this increase in the provision for doubtful debts?

Irrecoverable debts and provision for doubtful debts

State one benefit of trading as a sole trader.

Sole traders

At the close of her financial year, Emma gave the following figures. fees receivable from clients amounted to $78000 rent receivable was $11000 office expenses came to $20000 motor expenses totalled $9000 drawings were $2000 What profit did she make for the year?

Sole traders

A trader gave the data below. total purchases $25301 purchase returns $1945 carriage inwards $748 goods taken for own use $1425 What was the net amount for purchases in the income statement?

Sole traders

Pari and Ira operate as partners, with profits and losses divided equally. Interest is credited on the capital account balances at $6\%$ each year. Pari receives a salary of $5000 a year. At the beginning of the year, the capital account balances stood at $60000 for Pari and $40000 for Ira. The profit made during the year was $27500. What amount of the remaining profit was posted to Pari’s current account at the year end?

Partnerships

Which item is directly influenced by the dividend policy of a limited company?

Limited companies

What characteristics does a debenture have?

Limited companies

In a receipts and payments account, how is the recording of subscriptions received and subscriptions written off carried out?

Clubs and societies

Par Golf Club operated a shop that sold golfing equipment to its members. The treasurer supplied the following figures for the shop for the year ending 31 December. Sales of golfing equipment: 5300 Opening inventory of golfing equipment: 400 Closing inventory of golfing equipment: 450 Purchases of golfing equipment: 2700 Returns from customers: 200 Carriage on purchases: 100 What was the shop’s gross profit for the year?

Clubs and societies

Which option includes only indirect costs?

Manufacturing accounts

What might a credit balance in a ledger account indicate?

The trial balance

The business’s capital is greater at the end of year 2 than it was at the end of year 1. No extra capital was added during year 2. What does this indicate?

Sole traders

Rahat has not kept a complete set of double entry records. She has the details of her assets and liabilities at the beginning and at the end of the year. Which further information does Rahat need so that she can prepare her income statement for the year?

Incomplete records

During the year, Toby bought goods costing $13000. His closing inventory exceeded his opening inventory by $1000. Toby’s gross margin is 20%. What was Toby’s revenue for the year?

Valuation of inventory

CD Limited obtained a long-term bank loan and used part of the money to settle some of its suppliers on credit before the due date. What effect did this have on trade payables turnover (days) and on return on capital employed (ROCE)?

Interpretation of accounting ratios

Jimmy recorded credit sales of $98550 in both 2021 and 2022. During 2022, his trade receivables turnover was exactly two days less than it had been in 2021. What was the difference in his total trade receivables in 2022?

Calculation and understanding of accounting ratios

Which characteristic of financial information means that financial statements must be set out clearly and is based on the assumption that users of the financial statements have a reasonable knowledge of accounting?

Accounting principles

Aiden bought goods from Jai and paid for them by bank transfer after he got a statement of account. Jai claims that he has not received the payment. Which document would enable Aiden to check that he had made the payment?

Business documents

At the end of the month, in what way is the total from the sales journal entered in the ledger?

Books of prime entry

After a trade discount of $20\%$ and a cash discount of $2\frac{1}{2}\%$ had been deducted, a customer paid $\$15\,600$ to a supplier. What was the invoice amount entered in the purchases journal?

Books of prime entry

A trader keeps a petty cash book under the imprest system. The imprest amount is $\$120$. The petty cash transactions for June were: receipt from a customer $\$21$; payments: stationery $\$25$, postage $\$10$, cleaning $\$20$, payment to a supplier $\$40$. What amount was handed to the petty cashier on 1 July to bring the imprest back to its original level?

Books of prime entry

Paula’s trial balance includes errors. What is the total of the corrected trial balance?

Correction of errors

A journal entry was entered to amend an error. Debit: Wasim $\$320$ Credit: bank $\$320$ Which error was corrected?

Correction of errors

Which actions count as examples of book-keeping?

Books of prime entry

A trial balance fails to balance, so a suspense account is opened. It is then discovered that a sale of $250 was posted to the sales account as $2500. Which entry will rectify this error?

Correction of errors

A cheque from D Pawson, who is a trade receivable, was entered correctly on the debit side of the bank account but was credited to the account of P Dawson, a trade payable. What effect did correcting this error have?

Correction of errors

The bank column balance in a trader’s cash book stood at a debit balance of $520. The trader subsequently realised that the following items were absent from his bank statement. cheque not yet presented $80 cheque not yet credited $470 What balance appeared on the trader’s bank statement?

Bank reconciliation

Why would a trader draw up a sales ledger control account?

Control accounts

When a sales ledger control account is being prepared, where do the figures for amounts received from credit customers come from?

Control accounts

Plant and machinery, $2000, had been entered on the credit side of the purchases account incorrectly. The draft profit for the year stood at $63 000. Do not take depreciation into account. What amount was the revised profit for the year once this error had been corrected?

Correction of errors

Why is depreciation applied to non-current assets?

Accounting for depreciation and disposal of non-current assets

On 1 January, Raheem bought equipment for $850. It was expected to last for $5$ years and to have a scrap value of $50$. The asset was depreciated by the straight-line method. After $3$ years, the machine was sold for $100. What was the profit or loss on disposal?

Accounting for depreciation and disposal of non-current assets

Imran keeps a provision for doubtful debts equal to $5\%$ of trade receivables at each financial year-end. The opening balance on his provision for doubtful debts account on 1 January 2022 was $700. Trade receivables on 31 December 2022 were $2000 higher than the amount owed on 31 December 2021. What effect did the alteration in the provision for doubtful debts have on the profit for the year ended 31 December 2022?

Irrecoverable debts and provision for doubtful debts

Ariadne draws up her financial statements up to 31 December every year. On 31 December 2021, she recorded all of her inventory at cost, although some inventory that cost $500$ had a net realisable value of $350$. What impact did this mistake have?

Valuation of inventory

At her year end, a trader provided the information below. What was the trader’s capital?

Sole traders

A trader's capital is $24\,400$. His non-current assets amount to $16\,100$, and his current liabilities are $4500$. He has no non-current liabilities. What is the value of his current assets?

Sole traders

On 1 January 2022, the electricity account showed a credit balance of $800. Total payments during the year were $4900. By 31 December 2022, an additional $1800 of electricity had been consumed since the most recent invoice was settled. What is the charge to the income statement for electricity for the year 2022?

Other payables and other receivables

Josh and Karen run a partnership and divide profits and losses in the ratio $3:2$. Interest on capital is paid at $5\%$. Josh is to receive a salary of $10\,000$ per annum. After salary and interest on capital had been deducted, the residual profit was $20,000$. The capital account balances at the start of the year were: Josh $60\,000$ and Karen $40\,000$. How much in total was credited to Josh’s current account at the end of the year?

Partnerships

A partner is debited with interest on the drawings they withdrew during a financial year. How is this entered in the partner’s accounts?

Partnerships

Which type of organisation is the hardest to set up and must follow many legal formalities?

Limited companies

Z Limited has the following forms of equity and liabilities. 1 debentures 2 general reserves 3 long-term bank loan 4 ordinary share capital 5 preference share capital (non-redeemable) 6 retained earnings Which of these are part of the company’s shareholders’ equity?

Limited companies

A sports club runs a shop that sells running shoes to its members. The shoes are bought from suppliers on credit terms. Which item would be entered in the receipts and payments account?

Clubs and societies

Which cost counts as a direct factory cost?

Manufacturing accounts

A manufacturing company gave the information below: closing work in progress: $840$ factory overheads: $20945$ opening work in progress: $910$ prime cost: $40750$ What was the factory cost of production?

Manufacturing accounts

Elaine is setting up a business. She wants to ensure that she does not fail to take advantage of any cash discount available to her. Which action would help her to do this?

Business documents

A trader, Karim, buys a new vehicle and pays by cheque. He will use the vehicle to deliver goods to his customers. In what way should Karim enter this transaction in his books?

Capital and revenue expenditure and receipts

Ahmed supplied the information below: trade receivables at $1$ January $2022$: $15000$ for the year ended $31$ December $2022$: credit sales: $85000$ cash sales: $12000$ cheques received from trade receivables: $65000$ irrecoverable debts: $2000$ By what amount had trade receivables risen by the close of the financial year?

Irrecoverable debts and provision for doubtful debts

A business shared the following information: revenue: $20000$ gross margin: $25\%$ profit margin: $10\%$ There was no other income. What were the expenses?

Calculation and understanding of accounting ratios

The business shows the following assets and liabilities: inventory: $2000$ trade receivables: $4000$ trade payables: $1100$ bank overdraft: $3100$ The owner intends to inject some of his own money into the business bank account in order to raise the current ratio to $2 : 1$. What amount must he deposit into the business bank account to make this happen?

Calculation and understanding of accounting ratios

Lynne supplied the details below for her trading business: for the year ending $31$ August $2023$: revenue: cash sales: $250000$ credit sales: $230000$ on $31$ August $2023$: trade receivables: $19530$ other receivables: $2100$ What was Lynne’s trade receivables turnover?

Calculation and understanding of accounting ratios

A trader measures his inventory using the same method at the close of every financial year. Which accounting principle is the trader following?

Accounting principles

Jack is a shareholder in a company. He was given the company’s financial statements. Why did he consider the financial statements relevant?

Interested parties

The ledger account shown below appeared in Meena’s sales ledger. Which statement is correct about the balance in Meena’s books of account on 1 February?

Control accounts

What document would a supplier send to a credit customer if the credit customer had sent back goods or had been charged too much?

Business documents

Andy purchased from Khalid on a regular basis. The goods had a list price of $1000, and after a 5% discount for prompt payment he later paid $760 as the final amount due. What trade discount was given to Andy?

Business documents

The debit and credit totals in a trial balance are equal. What does this indicate?

The trial balance

A cheque that had been received from Joe was credited to Joanna’s account. Which type of error was made?

Correction of errors

A trader’s journal contains the entry below. Both John and Jane are the trader’s credit customers. Which mistake is this journal entry putting right?

Correction of errors

Which action does not lower the owner’s capital?

Sole traders

Which statement gives the correct description of a suspense account?

The trial balance

A trader drew up a draft income statement that showed a profit for the year of $36\,000. A review of the books uncovered the following facts. 1. The owner’s drawings of $900 had been entered in the wages account on the debit side. 2. At the year end, the provision for doubtful debts was raised by $20. The income statement had been charged with the full provision amount of $260. 3. In the cash book, the total for the discount allowed column, $140, for one month had not been posted to the discount allowed account. What was the correct profit for the year?

Correction of errors

Alicia’s cash book had a debit balance of $100 in her bank account. She reconciled the cash book with the bank statement and then adjusted the cash book for these items: credit transfer to a credit supplier $80; credit transfer from a credit customer $112; bank interest paid $19. What was the debit balance on the bank account after the cash book had been updated?

Bank reconciliation

The cash book records a bank balance of $1200. On the same date, the bank statement shows a balance of $1440. What might account for this discrepancy?

Bank reconciliation

Jane wanted to record a contra entry between a sales ledger account and a purchases ledger account. The credit entry was posted correctly, but the debit entry was entered wrongly in the sales returns account. What effect did this error have?

Correction of errors

Which transaction counts as capital expenditure?

Capital and revenue expenditure and receipts

An income statement showed sales returns as purchases returns by mistake. What effect did this error have?

Correction of errors

What is one reason for charging depreciation on a non-current asset?

Accounting for depreciation and disposal of non-current assets

Which non-current asset is to be depreciated by means of the revaluation method?

Accounting for depreciation and disposal of non-current assets

A motor van first cost $11500 and had been depreciated by $9000. The van was then sold for $2750. How should the profit or loss arising from the sale of the van be shown in the disposal account?

Accounting for depreciation and disposal of non-current assets

Which statement gives the correct description of the accounting equation?

Accounting principles

Joseph sells goods on credit and keeps a provision for doubtful debts. He intends to raise his provision for doubtful debts by $400. Which journal entry records this increase in the provision for doubtful debts?

Irrecoverable debts and provision for doubtful debts

What is one advantage of running a sole trader business?

Sole traders

At the close of her financial year, Emma gave this information: fees receivable from clients $78000; rent receivable $11000; office expenses $20000; motor expenses $9000; drawings $2000. What was her profit for the year?

Sole traders

A trader gave the following information: total purchases $25301; purchase returns $1945; carriage inwards $748; goods taken for own use $1425. What was the net figure for purchases in the income statement?

Sole traders

Pari and Ira are partners, with profits and losses divided equally. Interest on the balances in the capital account is payable at 6% per annum. Pari is to receive a salary of $5000 per annum. At the beginning of the year, the capital account balances stood at $60000 for Pari and $40000 for Ira. The profit for the year was $27500. What amount of residual profit was credited to Pari’s current account at the end of the year?

Partnerships

Which item is directly influenced by the dividend policy of a limited company?

Limited companies

What features does a debenture have?

Limited companies

In a receipts and payments account, in what way are subscriptions received and subscriptions written off shown?

Clubs and societies

Par Golf Club operated a shop retailing golfing equipment to its members. The treasurer gave the following details for the shop for the year ended 31 December: sales of golfing equipment $5300$ opening inventory of golfing equipment $400$ closing inventory of golfing equipment $450$ purchases of golfing equipment $2700$ returns from customers $200$ carriage on purchases $100$ What was the shop’s gross profit for the year?

Clubs and societies

Which option includes only indirect costs?

Manufacturing accounts

What might a credit balance in a ledger account indicate?

The trial balance

A business has a greater amount of capital at the end of year 2 than it had at the end of year 1. No further capital was added during year 2. What does this indicate?

Sole traders

Rahat has not kept a complete set of double entry records. She knows the details of her assets and liabilities at the beginning and at the end of the year. Which extra information does Rahat need so that she can prepare her income statement for the year?

Incomplete records

Toby spent $13000$ on purchases during the year. His closing inventory was $1000$ greater than his opening inventory. Toby’s gross margin is $20\%$. Find Toby’s revenue for the year.

Valuation of inventory

CD Limited obtained a long-term bank loan and used some of the money to settle part of what it owed to its credit suppliers ahead of time. How would this affect the trade payables turnover (days) and the return on capital employed (ROCE)?

Interpretation of accounting ratios

Jimmy recorded credit sales of $98550$ in both $2021$ and $2022$. In $2022$, his trade receivables turnover period was precisely two days less than in $2021$. By how much did his total trade receivables change in $2022$?

Calculation and understanding of accounting ratios

Which characteristic of financial information means that financial statements must be shown clearly and assumes that users of the financial statements have a reasonable knowledge of accounting?

Accounting principles

Aiden bought goods from Jai and settled the bill by bank transfer after he got a statement of account. Jai claims that he has not received the money. Which document would help Aiden confirm that he had made the payment?

Business documents

At the end of the month, how is the sales journal total entered in the ledger?

Books of prime entry

After a $2\frac{1}{2}\%$ cash discount and a trade discount of $20\%$ had been deducted, a customer paid $15\,600$ to a supplier. What was the invoice amount recorded in the purchases journal?

Books of prime entry

A trader keeps a petty cash book under the imprest system. The imprest amount is $120. The petty cash transactions recorded during June were: receipt from a customer $21 payments: stationery $25 postage $10 cleaning $20 payment to a supplier $40 What amount should be handed to the petty cashier on 1 July to bring the imprest back to its original level?

Books of prime entry

Paula’s trial balance includes errors. What is the adjusted total for the trial balance?

Correction of errors

The journal entry below was recorded to correct an mistake. Debit: Wasim $320 Credit: bank $320 Which error was corrected?

Correction of errors

Shakir started trading in the year ended 31 August 2023 but did not keep proper books of account. His assets and liabilities on 1 September 2023 were as follows. Motor vehicle $9500 Inventory $1240 Cash at bank $1682 Trade payables: Latif $200 Harrison $237

Incomplete records

Hilary runs a manufacturing business and has supplied the information below. Inventory on 1 August 2022 Raw materials inventory $9100 Work in progress inventory $21357 Finished goods inventory $24235 For the year ended 31 July 2023 Revenue $457250 Raw material purchases $110000 Raw material purchase returns $2200 Finished goods purchases $23500 Finished goods purchase returns $4700 Factory operatives’ wages $91665 Factory supervisor’s wages $29000 Office supervisor’s wages $28000 Heat, light and power $11600 Rates and insurance $8250 Factory repairs and renewals $5125 Factory equipment - at cost $124000 Factory equipment - provision for depreciation $35500 Additional information 1 Inventory on 31 July 2023 Raw materials $9980 Work in progress $22446 Finished goods $25110 2 Heat, light and power is to be apportioned 4/5 to the factory and 1/5 to the office. 3 Rates and insurance is to be apportioned 3/5 to the factory and 2/5 to the office. Insurance of $4440 has been paid for the year to 31 December 2023. 4 At 31 July 2023, a factory repair of $644 was unpaid and no adjustment had been made. 5 Factory equipment is depreciated at 25% per annum using the reducing balance method.

Manufacturing accounts

Logan trades in goods sold on credit. His year end falls on 30 September. The following details are available. At 1 October 2022 Inventory $8400 Trade receivables $7500 Other receivables (rent prepaid) $820 For the year ended 30 September 2023 Rent charge for the year $4940 Bank payments for rent 1 December 2022 $2460 1 June 2023 $2490 At 30 September 2023 Inventory $8675 Trade receivables $8700 Other receivables $? Irrecoverable debts to be written off $325 The provision for doubtful debts is to be kept at 4% of trade receivables.

Irrecoverable debts and provision for doubtful debts

Asia runs a trading business. She prepared a trial balance on 31 August 2023. The credit total was $273 higher than the debit total, so Asia put the difference into a suspense account. Asia later found the following errors. 1 A credit purchase of $112 from Jacques had been entered twice in the purchases journal. 2 The wages account had been overcast by $300. 3 Cash received of $75 from Savanah, a trade receivable, had been entered only in the cash book. 4 The total of the sales returns journal for August 2023, $198, had been credited to both the sales returns account and the purchases returns account. 5 A payment to Sophie of $93 had been entered as $39 in Sophie’s account.

Correction of errors

B Limited carries out cleaning services for client offices and factories. The clients supply their own cleaning materials. B Limited's trial balance at 30 June 2023 was as follows. Trial balance dated 30 June 2023 Revenue Credit $135040 Wages and salaries Debit $72000 Motor expenses Debit $9820 Insurance Debit $11040 General expenses Debit $12780 Motor vehicles at cost Debit $42000 Provision for depreciation of motor vehicles Credit $16500 Equipment at cost Debit $5000 Provision for depreciation of equipment Credit $2000 Trade receivables Debit $1640 Bank Debit $19950 Ordinary share capital Credit $10000 General reserve Credit $2000 Retained earnings Credit $13490 Dividend paid on ordinary shares Debit $4800 Totals $179030 $179030 Additional information 1 Revenue of $9240 was received in advance. 2 The insurance charge for the 12 months to 31 December 2022 was $7200 and for the 12 months to 31 December 2023 it is $7440. On 1 January 2023 insurance was paid in full for the 12 months to 31 December 2023. 3 Accrued general expenses at 30 June 2023 were $186. 4 Depreciation is to be charged on motor vehicles at 25% per annum using the reducing balance method. 5 Depreciation on equipment is to be charged at 20% per annum using the straight line method. 6 No dividends were outstanding at 30 June 2023. 7 $1000 is to be transferred to the general reserve at 30 June 2023.

Other payables and other receivables

Seok deals in goods on credit, both purchasing and selling them. He has three credit customers and gives Naomi a trade discount of 10%. Each customer pays Seok by bank transfer. The balances listed below were taken from Seok’s sales ledger on 1 August 2023. Naomi $450 Siena $155 Bwana $386 Total $991 The following transactions happened in August 2023. Aug 3 Credit sale to Naomi, list price $410 Aug 5 Credit sale to Bwana for $89 Aug 10 Naomi sent back goods, list price $20 Aug 11 Naomi paid $423 to settle in full the amount she owed at 1 August Aug 19 Credit sale to Bwana for $180 Aug 22 Credit sale to Naomi, list price $230 Aug 27 Bwana sent back goods, $19 Aug 29 Bwana paid $400

Books of prime entry

Sara runs a clothing factory. She supplies the clothing to a small number of nearby shops. She gives 30 days credit. As at 30 September 2023, the balances in Sara’s ledger accounts were as follows. Inventory at 1 October 2022: Raw materials $4875, Work in progress $8125, Finished goods $12890 Purchases of raw materials $56400 Wages: Machine operators $43300, Factory supervisor $25000, Delivery vehicle driver $14250 Rates and insurance $29600 General factory expenses $9650 Factory machinery - at cost $80000 Factory machinery - provision for depreciation $35000 Trade receivables $27000 Cash at bank $1050 Additional information 1. Inventory at 30 September 2023: Raw material $5110, Work in progress $7365, Finished goods $13725 2. At 30 September 2023 general factory expenses of $335 were unpaid. 3. Insurance of $8000 had been paid for the year July 2023 to June 2024. 4. Rates and insurance are to be split equally between the factory and the office. 5. Factory machinery is depreciated at 25% per annum using the reducing balance method.

Manufacturing accounts

Lionel began trading on 1 July 2022. He introduced $15000 of his own money into the business bank account. He did not maintain complete accounting records, but he has supplied the following details at 30 June 2023. 1. Cash sales totalled $90000 and were banked. Nothing else was received. Lionel adds 50% to the cost of his goods. 2. Payments from the bank: Purchase of motor vehicle (van) $8000; Payments to credit suppliers $55000; Wages $8060; General expenses $1140; Rent and insurance $5585; Motor expenses $4992; Cash drawn from bank $14600 3. Purchases returns were $3000. 4. Inventory at 30 June 2023 was $4175. 5. One third of the motor expenses paid related to Lionel’s private car. 6. A full year’s depreciation at 25% is to be charged on the van using the reducing balance method. 7. Lionel took $1000 each month from business cash for personal use. The rest of the cash drawn from the bank was used to pay wages.

Incomplete records

Rachel works as a trader. When Rachel prepared the trial balance on 30 September 2023, the totals failed to agree, so the difference was entered into a suspense account. Rachel then found the errors listed in the table below.

Correction of errors

Nala runs a business retailing toys and games. Every sale is for cash, whereas every purchase is made on credit. She has supplied the following details. At 31 August 2023: Inventory $6265; Cash at bank $992; Trade payables $4880; Capital $125000 For the year to 31 August 2023: Revenue $98420; Purchases $78130; Expenses $11325 Inventory on 1 September 2022 was recorded at $6175.

Sole traders

Shakir began trading in the year ended 31 August 2023, but proper books of account were not kept. On 1 September 2023, his assets and liabilities were: Motor vehicle $9500 Inventory $1240 Cash at bank $1682 Trade payables: Latif $200 Harrison $237

Incomplete records

Hilary operates a manufacturing business and has supplied the information below. Opening inventory at 1 August 2022: Raw materials $9100 Work in progress $21357 Finished goods $24235 For the year ending 31 July 2023: Revenue $457250 Purchases of raw materials $110000 Purchases returns of raw materials $2200 Purchases of finished goods $23500 Purchases returns of finished goods $4700 Wages of factory operatives $91665 Wages of factory supervisor $29000 Wages of office supervisor $28000 Heat, light and power $11600 Rates and insurance $8250 Factory repairs and renewals $5125 Factory equipment - at cost $124000 Factory equipment - provision for depreciation $35500 Additional information: 1 Inventory at 31 July 2023: Raw material $9980 Work in progress $22446 Finished goods $25110 2 Heat, light and power is to be divided 4/5 to the factory and 1/5 to the office. 3 Rates and insurance is to be divided 3/5 to the factory and 2/5 to the office. Insurance of $4440 has been paid for the year to 31 December 2023. 4 At 31 July 2023, a factory repair costing $644 had not been paid, and no adjustment had been recorded. 5 Factory equipment is depreciated at 25% per annum using the reducing balance method.

Manufacturing accounts

Logan is a trader selling goods on credit, and his year end falls on 30 September. Logan has given the following details. At 1 October 2022: Inventory $8400 Trade receivables $7500 Other receivables (rent prepaid) $820 For the year ended 30 September 2023: Rent charge for the year $4940 Bank payments for rent: 1 December 2022 $2460; 1 June 2023 $2490 At 30 September 2023: Inventory $8675 Trade receivables $8700 Other receivables ? Irrecoverable debts to be written off $325 The provision for doubtful debts is to be kept at 4% of trade receivables.

Irrecoverable debts and provision for doubtful debts

Asia is a trader. On 31 August 2023, she drew up her trial balance. The credit side was $273 higher than the debit side, so she entered the difference in a suspense account. Asia later found these mistakes. 1 A credit purchase of $112 from Jacques had been entered twice in the purchases journal. 2 The wages account had been overcast by $300. 3 Cash received of $75 from Savanah, a trade receivable, had been recorded only in the cash book. 4 The August 2023 total from the sales returns journal, $198, had been credited to both the sales returns account and the purchases returns account. 5 A payment of $93 to Sophie had been entered in Sophie’s account as $39.

Correction of errors

B Limited supplies cleaning services to client offices and factories. The clients supply their own cleaning materials. The trial balance of B Limited at 30 June 2023 appears below.

Limited companies