Oct/Nov 2024

Why is business profit and loss measured?

Interested parties

Jane withdrew cash drawings from the business. The amount was entered as a debit in the purchases account and as a credit in cash. In the financial statements, how would this error affect the profit for the year and the current assets?

Correction of errors

Which statement about a bank statement is correct?

Bank reconciliation

At 30 June, the bank column in Farad’s cash book indicated an overdrawn balance of $2000. These items had not yet been recorded in the cash book. - standing order for rent: $200 - interest on bank overdraft: $50 - credit transfer from X Limited: $2900 What would the adjusted balance of the bank column in the cash book be at 1 July?

Bank reconciliation

What is one benefit of keeping a purchases ledger control account?

Control accounts

Raj acts as both a customer for Balbir and a supplier to Balbir. In Balbir’s sales ledger, Raj’s account had a debit balance of $300. In Balbir’s purchases ledger, Raj’s account showed a credit balance of $100. The two balances were agreed to be set off by a contra entry. Which entry would Balbir record in his purchases ledger control account?

Control accounts

A limited company trades in office equipment. The amounts below were entered in the company’s books of account. What was the total of the company’s capital receipts?

Capital and revenue expenditure and receipts

On 1 January 2023, Kate spent $400 on a two-year maintenance contract that began on that date. By mistake, this sum was posted to the machinery account. Kate charges depreciation on machinery at $20\%$ per annum. What was the effect of the error on Kate’s profit for the year ended 31 December 2023?

Capital and revenue expenditure and receipts

For what reason ought a business to depreciate its non-current assets?

Accounting for depreciation and disposal of non-current assets

At the beginning of the financial year, a trader had a credit balance on his heat and light account. What does this balance indicate?

Other payables and other receivables

Which of the following statements about irrecoverable debts are correct?

Irrecoverable debts and provision for doubtful debts

By the close of her first year of trading, Zoe had $6500 in her business bank account. She then introduced $5000 of her own money into that account. From this sum, she used $2000 to pay back a business loan. What impact would these transactions have on her assets, capital and liabilities?

Sole traders

At the close of his financial year, Raminder recorded an adjustment for rent that a tenant still owed him. What effect did this have on Raminder’s financial statements?

Other payables and other receivables

What is one drawback of operating as a sole trader?

Sole traders

John and Mark operate as partners. Profits and losses are divided in the ratio $3:2$. John receives an annual salary of $12000. For the year ending 31 August 2023, the profit was $52000. What amount should be credited to the partners’ current accounts on 31 August 2023?

Partnerships

Which statement correctly explains the effect of limited liability when a business fails?

Limited companies

At the beginning of the year, V Limited’s total equity stood at $45750, including $10750$ in retained earnings. By the end of the year, the company had moved $1000$ into general reserve, distributed a dividend of $2800$ and recorded a profit for the year of $4995$. What was the total equity at the end of the year?

Limited companies

The treasurer of a sports club supplied the details below. clubhouse and sports fields were valued at $250\,000$ sports equipment was valued at $80\,000$ cash at bank amounted to $12\,000$ bank loan stood at $14\,000$ subscriptions accrued totalled $2\,800$ What was the amount of the accumulated fund?

Clubs and societies

What would be shown in a receipts and payments account of a social club?

Clubs and societies

Thatô is a manufacturer. In the manufacturing account for the year ended 31 December, his work in progress showed an increase. What effect did this have on the cost of production and the cost of sales?

Manufacturing accounts

A factory produces uniforms for school pupils. Which item is excluded when calculating prime cost in the factory’s manufacturing account?

Manufacturing accounts

A business recorded an average inventory of $40\,000$. Its inventory turnover rate was $5$ times per year. Mark-up was $20\%$. What was the revenue earned during the year?

Calculation and understanding of accounting ratios

Which business document does a trader use to record the amounts paid into the bank account?

Business documents

Shelley does not keep a complete set of accounting records, but she was able to supply the information below. sales for the year ended 31 August 2023 (80% of which were on credit): $97\,500$ amounts received from trade receivables during the year ended 31 August 2023: $71\,500$ amount owing by trade receivables on 31 August 2023: $14\,000$ How much was owed by the trade receivables on 1 September 2022?

Incomplete records

Wayne gave the details below. non-current assets: $110\,000$ current assets: $25\,000$ current liabilities: $15\,000$ profit for the year: $23\,000$ What was the return on capital employed?

Calculation and understanding of accounting ratios

A business has a trade payables turnover of $36$ days. What do these $36$ days mean?

Interpretation of accounting ratios

Paul’s gross margin rose from $16.5\%$ in year $1$ to $17.5\%$ in year $2$. Explain what could have caused the improvement in gross margin.

Interpretation of accounting ratios

M Limited has ensured that its financial statements can be compared with those from earlier years. How would this affect interested parties?

Interested parties

Which accounting principle says that profit should be recorded when ownership of the goods transfers to the customer?

Accounting principles

A trader maintained a petty cash book under the imprest system. He was given the details below. What amount was required to replenish the imprest on 1 April?

Books of prime entry

Sahil removed goods from the business for personal use. The cost of these goods was $60 and their selling price was $100. Which entry was made in the drawings account to record this taking of goods?

Sole traders

What is one benefit of using a sales journal?

Books of prime entry

The account shown below was entered in Eli’s ledger. Which statement is correct?

The trial balance

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

Correction of errors

Mandy’s trial balance did not balance. The $620 difference was entered into a suspense account. In the trial balance, the suspense account’s balance appeared on the debit side. Which error had led to the difference?

Correction of errors

A trader draws up financial statements every year. What do these enable the trader to do?

Interested parties

On 31 October, a business bank statement showed a credit balance of $2690. By that date, cheques that had been issued but had not yet been presented amounted to $850. Calculate the bank balance in the cash book on 31 October.

Bank reconciliation

In the bank column of a trader’s cash book, the balance was overdrawn by $1200. After checking the cash book against the bank statement, the trader discovered that the following items had not been entered in the cash book: • bank charges $100$ • credit transfer $400$ • direct debit $60$ What balance was carried down in the bank column of the cash book once it had been brought up to date?

Bank reconciliation

What is one benefit of preparing a monthly sales ledger control account?

Control accounts

Jim’s cash book was summarised for the year as follows: • total cheques paid to suppliers $3750$ • total discount received $65$ Which entries are made in his purchases ledger control account?

Control accounts

Hamid owns a grocery store. He purchased a motor vehicle, $2000, and fuel, $50. These two amounts were both entered in the purchases account by mistake. What impact did this error have on the income statement for the year?

Capital and revenue expenditure and receipts

Which of the following statements about depreciation are correct?

Accounting for depreciation and disposal of non-current assets

A machine that originally cost $10000$ was depreciated over two years at $10\%$ per annum by the straight-line method. It was later sold for cash, and the loss on disposal was $700$. On the same day, a replacement machine was purchased for $12400$ cash. What was the net decrease in the cash balance?

Accounting for depreciation and disposal of non-current assets

Abdul works as a trader. He lets out part of his warehouse to other businesses. As Abdul gets ready to prepare his financial statements for the year ended 31 December, the rental income account shows: • the rent received over the year came to $2750$ • the rental income transferred to the income statement was $3000$ What is shown by the closing balance in the rental income account?

Other payables and other receivables

Which journal entry should be made to close the irrecoverable debts account at the end of the year?

Irrecoverable debts and provision for doubtful debts

Once Lucy had completed the draft financial statements at the end of her first year of trading, she found two mistakes. 1. Damaged inventory had been recorded at cost price of $340$. It was expected to be sold for $180$. 2. $100$ items that were expected to be sold for $12$ each had been valued at cost price of $7$ each. Carriage inwards of $1$ for each item had not been included in the cost. What impact did these errors have on the gross profit?

Valuation of inventory

A trader bought new fixtures. He paid half of the purchase price in cash and arranged to settle the remaining amount later. What effect does this purchase have on the accounting equation?

Accounting principles

Which items are recorded in the income statement for an accountancy business?

Sole traders

A business gave the following details: • long-term loan $20000$ • trade receivables $12000$ • trade payables $9700$ • bank overdraft $2000$ • prepaid insurance $400$ • accrued wages $1000$ • rental income prepaid $500$ What was the total of the current liabilities?

Other payables and other receivables

What benefit does a trader gain from forming a partnership?

Partnerships

What items are included in the appropriation account of a partnership?

Partnerships

X Limited gave the details below: ordinary share capital $300\,000$ general reserve $50\,000$ retained earnings $35\,000$ $8\%$ debenture $60\,000$ What was the amount of equity in total?

Limited companies

Which item is included in both the income statement and the statement of changes in equity of a limited company?

Limited companies

The Daylee Sports Club was established in January. In its first year, the club bought equipment costing $5000$, and payment was made by cheque. Which financial statements of the club are affected by this equipment purchase?

Clubs and societies

The ledger account below was recorded in the club’s books for the year ending $31$ December. Which statement is correct?

Clubs and societies

After a manufacturing account had been prepared, it was found that the wages paid to factory cleaners had been omitted. Which items in the manufacturing account would be altered when this error was corrected?

Manufacturing accounts

W Limited produces motorbikes. The information below refers to its first year of trading: motorbike parts purchased $40\,000$ factory workers' wages $25\,000$ production overhead costs $8\,000$ motorbike parts inventory at the end of the year $3000$ inventory of partially completed motorbikes at the end of the year $7000$ What was the production cost of the motorbikes finished during the year?

Manufacturing accounts

Which account is not recorded in the nominal ledger?

Control accounts

Anya had not maintained a complete set of double entry records, but the information below was given. On $1$ February $2022$: capital $10\,000$. On $31$ January $2023$: bank overdraft $1500$, equipment $20\,000$, inventory $2000$, trade receivables $15\,000$, trade payables $10\,500$. Anya’s drawings for the year ended $31$ January $2023$ amounted to $8500$. What profit did she make for the year ended $31$ January $2023$?

Incomplete records

A jewellery retailer adds a $100\%$ mark-up to his goods. He gave the following figures: revenue $68\,200$, discount received $1080$, profit for the year $18\,395$. What were his total expenses?

Sole traders

Omar’s gross profit margin increased. What might have led to this?

Interpretation of accounting ratios

Who might be interested in the value of the non-current assets that a business can offer as security?

Interested parties

What accounting principle underpins the accounting equation?

Accounting principles

Which qualitative factor means financial information is supplied promptly enough for it to be used in decision making?

Accounting principles

On 15 February, Kalou recorded these entries in his accounts. Debit: bank $228, discount allowed $12. Credit: Droghba $240. What transaction was this entry recording?

Books of prime entry

Ranjit is a credit customer of Balbir. During April, the following events occurred: Balbir supplied goods to Ranjit on credit. Ranjit informed Balbir that some of the goods had been damaged. Balbir informed Ranjit that the amount owed had been reduced. Which documents were used to record these events?

Business documents

What advantage does a business gain from keeping books of prime entry?

Books of prime entry

Which items are listed on the debit side of a trial balance?

The trial balance

Once a trader had finished her year-end financial statements, she realised that an adjustment to decrease the provision for doubtful debts by $100 had been omitted. What effect did this mistake have on the trader’s statement of financial position?

Irrecoverable debts and provision for doubtful debts

A trader’s draft income statement indicated a profit for the year of $2400. Later, these errors were identified: (1) No adjustment was entered for accrued income of $8000. (2) Carriage inwards costing $250 had been entered as carriage outwards. (3) An increase in provision for doubtful debts of $120 had been added to the gross profit for the year. What is the corrected profit for the year?

Correction of errors

What is the aim of measuring business profit and loss?

Interested parties

Jane withdrew cash drawings from the business. The amount was recorded on the debit side of the purchases account and on the credit side of cash. What effect did this mistake have on profit for the year and on current assets in the financial statements?

Correction of errors

Which statement is correct about a bank statement?

Bank reconciliation

On 30 June, the bank column in Farad’s cash book recorded an overdraft balance of $2000. The following items had not yet been entered in the cash book: - rent standing order $200 - bank overdraft interest $50 - a credit transfer from X Limited $2900 What was the adjusted balance in the bank column of the cash book on 1 July?

Bank reconciliation

What benefit comes from keeping a purchases ledger control account?

Control accounts

Raj is a customer of Balbir and, at the same time, supplies goods to Balbir. In Balbir’s sales ledger, Raj’s account showed a debit balance of $300. In Balbir’s purchases ledger, Raj’s account had a credit balance of $100. It was agreed that a contra entry would be made between the two accounts. What entry should Balbir record in his purchases ledger control account?

Control accounts

A limited company trades in office equipment. The amounts below were entered in the company’s accounting records. 1. cash received from disposal of motor vehicle $6000 2. cash received from issue of shares $9000 3. discount received $8000 4. rent received $5000 What was the total value of the capital receipts of the company?

Capital and revenue expenditure and receipts

On 1 January 2023, Kate paid $400 for a two-year maintenance contract for her machinery, with cover beginning on that date. By mistake, this sum was posted to the machinery account. Kate charges depreciation on her machinery at $20\%$ per annum. What effect did this error have on Kate’s profit for the year ended 31 December 2023?

Capital and revenue expenditure and receipts

Why does a business need to depreciate its non-current assets?

Accounting for depreciation and disposal of non-current assets

At the beginning of the financial year, a trader had a credit balance on his heat and light account. What does this balance indicate?

Other payables and other receivables

Which of these statements about irrecoverable debts are correct?

Irrecoverable debts and provision for doubtful debts

By the close of her first year of trading, Zoe had $6500 in her business bank account. She then added $5000 of her own cash to the business bank account. From this sum, she used $2000 to pay back a business loan. What impact would these transactions have on her assets, capital and liabilities?

Sole traders

At the close of his financial year, Raminder recorded an adjustment for rent that a tenant still owed him. What effect did this have on Raminder’s financial statements?

Other payables and other receivables

What is one drawback of operating as a sole trader?

Sole traders

John and Mark operate a partnership. Profits and losses are divided in the ratio $3:2$. John receives an annual salary of $12000$. The profit for the year ended 31 August 2023 amounted to $52000$. How much would be credited to the partners’ current accounts on 31 August 2023?

Partnerships

Which statement accurately explains the effect of limited liability when a business fails?

Limited companies

At the beginning of the year, V Limited had $45750$ total equity, with $10750$ of this being retained earnings. By the end of the year, the company had moved $1000$ into general reserve, paid a dividend of $2800$ and recorded a profit for the year of $4995$. What was the total equity at the end of the year?

Limited companies

The treasurer of a sports club gave the information shown below. Clubhouse and sports fields: $250\,000$ Sports equipment: $80\,000$ Cash at bank: $12\,000$ Bank loan: $14\,000$ Subscriptions accrued: $2\,800$ What was the value of the accumulated fund?

Clubs and societies

Which items would appear in a receipts and payments account for a social club? 1. cash paid for new furniture for the clubhouse 2. depreciation charged on the clubhouse furniture 3. subscriptions from the previous year received during the current year 4. subscriptions still owing by members at the end of the current year

Clubs and societies

Thato runs a manufacturing business. In his manufacturing account for the year ended $31$ December, the amount of work in progress had risen. What effect did this have on the cost of production and the cost of sales?

Manufacturing accounts

A factory produces schoolchildren’s uniforms. What is excluded from the calculation of prime cost in the factory’s manufacturing account?

Manufacturing accounts

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

Calculation and understanding of accounting ratios

Which business document does a trader use to record sums paid into the bank account?

Business documents

Shelley does not keep a complete set of accounting records, but she was able to give the information below. Sales for the year ended $31$ August $2023$ (80% of which were made on credit): $97\,500$ Amounts received from trade receivables during the year ended $31$ August $2023$: $71\,500$ Amount owing by trade receivables on $31$ August $2023$: $14\,000$ What amount was due from the trade receivables on $1$ September $2022$?

Incomplete records

Wayne supplied the details shown below. Non-current assets: $110\,000$ Current assets: $25\,000$ Current liabilities: $15\,000$ Profit for the year: $23\,000$ What was the return on capital employed?

Calculation and understanding of accounting ratios

A business has a trade payables turnover of $36$ days. What do these $36$ days indicate?

Calculation and understanding of accounting ratios

Paul’s gross margin rose from $16.5\%$ in year $1$ to $17.5\%$ in year $2$. What could account for the rise in the gross margin?

Interpretation of accounting ratios

M Limited has ensured that its financial statements can be compared with those from previous years. In what way does this influence interested parties?

Interested parties

Which accounting principle says that profit should be recognised when ownership of the goods passes to the customer?

Accounting principles

A trader maintained a petty cash book under the imprest system. He was given the information below. On 1 March the petty cash balance was $80$. A transfer from the bank account to replenish the imprest was $170$. On 31 March petty cash payments totalled $195$ and petty cash expense refunded amounted to $10$. What amount was required to replenish the imprest on 1 April?

Books of prime entry

Sahil removed goods from the business for his own personal use. The cost of these goods was $60$ and their selling price was $100$. Which entry would have been made in the drawings account to record this withdrawal of goods?

Sole traders

What is one benefit of using a sales journal?

Books of prime entry

The account below was shown in Eli’s ledger. Which statement is correct?

The trial balance

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 occurred?

Correction of errors

Mandy’s trial balance did not balance. A $620$ discrepancy was entered into a suspense account, and this account balance appeared on the debit side of the trial balance. Which error had led to the discrepancy?

Correction of errors

Jenny operates a small trading business. On 29 February 2024, Jenny received her bank statement, which showed a credit balance of $1367. On that same date, the bank column in her cash book showed an overdraft balance of $1933. While checking the bank statement against the cash book, she noticed these entries on the bank statement but not in the cash book: February 26 M Stores, a credit customer, had paid by bank transfer $1900 26 Interest received $358 27 A cheque previously received from C Stores had been dishonoured $1121 28 Bank charges $125 28 A direct debit for electricity had been taken $290 These items were in her cash book, but they did not appear on her bank statement: February 23 A cheque paid to B Properties $1025 27 A payment by credit transfer to pay for rent and insurance $2300 28 A cheque received from a credit customer Y Traders was paid into the bank $792 After checking further, she found this mistake: A cheque made payable to D Sports $45 had been entered in the bank column of her cash book. The cheque had actually been drawn from her personal account to pay for her gym membership.

Bank reconciliation

Ali and Sai are in partnership, and their financial year finishes on 30 June. The partnership agreement contains these terms. Interest on capital is allowed at 6% per annum. Interest on drawings is charged at 5%. Sai receives a partnership salary of $10050 per annum. Ali and Sai divide residual profits and losses in the ratio 3:2. Ali and Sai have given the following details: Drawings for the year ended 30 June 2024: Ali $11000, Sai $16000 Capital at 1 July 2023: Ali $60000, Sai $40000 Current account at 1 July 2023: Ali $1800 debit, Sai $250 credit Profit for the year before interest on loan was $42700. Ali lent $10000 to the partnership at an interest rate of 5% per annum. The interest for the year ended 30 June 2024 has already been paid. No other loans are held by the partnership.

Partnerships

At the end of the year on 31 March 2024, Natalie drew up her trial balance. The totals did not match, so she opened a suspense account. The debit total was $357 more than the credit total. Natalie then uncovered these errors: 1 A bank transfer, $420, received from a credit customer Sarah had been entered correctly in the bank account, but no double-entry posting had been made. 2 Natalie introduced a personal vehicle into the business, valued at $7000. This had been debited to the capital account and credited to the vehicle maintenance account. 3 Purchases of $270 had been posted correctly to the suppliers account, but only $207 had been debited to the purchases account. 4 No entry had been recorded for general expenses, $126, paid by bank transfer. 5 Cash drawings of $200 had been debited to the cash account and credited to the drawings account.

Correction of errors

A business operates a fleet of delivery vehicles. The statement of financial position at 31 December 2022 shows that the vehicles had an original cost of $440000, and accumulated depreciation was $270000. On 1 April 2023, the business bought two more vehicles for a combined $70000 on credit from L Autos. One of the vehicles was sold on 30 November 2023. Its original cost was $28000 and accumulated depreciation stood at $16800. The vehicle was disposed of for $10500 to a local garage, and payment was received by bank transfer. Depreciation is charged on the straight-line method at 20% per annum. Depreciation for a full year is taken in the year of purchase. No depreciation is charged in the year of disposal.

Accounting for depreciation and disposal of non-current assets

The year ended 31 March 2024 information below was given for G Limited, a manufacturing business. Purchases: Raw materials $68000 Finished goods $32413 Wages: Factory operatives $183700 Factory supervisors $47200 Administration salaries $34925 Factory machinery at cost $247000 Provision for depreciation of factory machinery $51500 Factory general expenses $20250 Rates & insurance $7100 Administration expenses $5470 Carriage on purchases of finished goods $2180 Royalties $3240 Inventory: 1 April 2023 / 31 March 2024 Raw materials $18200 / $19820 Work in progress $23400 / $22650 Finished goods $6820 / $9350 Additional information: 1 Factory machinery is to be depreciated at 15% per annum using the reducing balance method. 2 On 31 March 2024 rates, $620, were owing. 3 Rates and insurance are to be apportioned 60% to the factory and 40% to the office.

Manufacturing accounts

Kalima is a trader. At the beginning of September 2024, Kalima had $240 cash in hand, a bank balance showing a $890 credit and a credit customer, Elizah, who owed Kalima $520. The following transactions occurred during the month: September 2 Stationery paid for in cash, $82 3 Cash sales, $478 A $30 cheque received at the end of August from Badr, a credit customer, was dishonoured 5 Wages paid by credit transfer, $1390 7 Goods bought from Gulnar on credit, $200 10 Kalima took $150 from the business bank account for personal use 14 A cheque was received from Elizah in full settlement of the amount owed after 2.5% cash discount 16 $120 cash was paid into the business bank account 21 Gulnar was paid the full amount due by credit transfer after a cash discount of 2% 23 Goods sold to Elizah on credit, $1450 29 A credit note for $325 was issued to Elizah for goods returned

Books of prime entry

Ben runs a small business, but he does not keep a complete set of accounting records. He has supplied the details below: 31 March 2024 / 1 April 2023 Premises at cost $140000 / $140000 Machinery at cost $106000 / $92000 Accumulated depreciation on machinery $36000 / $10000 Inventory $42000 / $24600 Trade receivables $43400 / $39600 Trade payables $19700 / $24750 Bank $13000 debit / $3200 credit Other receivables $1200 / $1650

Incomplete records

Sports T is a club that provides sporting facilities for its members. The club hires all sporting equipment. The club also operates a small café that sells food and refreshments for use by members and guests. All café sales are made on a cash basis. The club treasurer has supplied the following details for the year ending 31 December 2023: Receipts during the year: Café sales $27000; Members’ subscriptions $162000; Bank interest $720. Payments made during the year: Sports coaches’ salaries $58220; Administration salaries $31720; Café assistant’s wages $14352; Rent of premises $16250; Hiring costs - sports equipment $31900; Rates and insurance $3200; Purchases of food and drink for resale $8220; Accountancy fees $2400. Balances at 1 January 2023: Inventory of food & drink $1290; Subscriptions owing from previous year $1520; Receipts and payments account $3300 debit. Balances at 31 December 2023: Inventory of food & drink $1340; Subscriptions received in advance $2800; Subscriptions outstanding $1280. Additional information: 1. The agreement for hiring the sports equipment is $34 800 per annum and payment is made monthly. 2. Rent of premises is paid for the period from 1 January 2023 up to 31 January 2024.

Clubs and societies

Y Limited is incorporated as a public limited company.

Limited companies

Azim operates as a wholesaler. He sells goods for both cash and on credit. The credit-sale terms for all customers are 30 days. For the year ended 31 December 2023, Azim has supplied the following data: Cash sales $18 170; Credit sales $392 600; Credit purchases $278 429; Inventory at 31 December 2022 $24 074; Inventory at 31 December 2023 $25 600; Money owed by credit customers at 31 December 2023 $42 375; Money owed to credit suppliers at 31 December 2023 $21 603.

Interpretation of accounting ratios

Jenny operates a small trading business. On 29 February 2024, Jenny received a bank statement showing a credit balance of $1367. In her cash book, the bank column on the same date showed an overdraft of $1933. When she compared the two records, she found the following items on the bank statement but not in her cash book: February 26 M Stores, a credit customer, paid by bank transfer $1900 February 26 Interest received $358 February 27 A cheque that had already been received from C Stores was dishonoured $1121 February 28 Bank charges $125 February 28 A direct debit for electricity was taken $290 The following items were in her cash book but not on her bank statement: February 23 A cheque paid to B Properties $1025 February 27 A payment by credit transfer to cover rent and insurance $2300 February 28 A cheque received from a credit customer Y Traders was paid into the bank $792 During her checking, she identified the following error: A cheque payable to D Sports $45 had been entered in the bank column of her cash book. That cheque had actually been written from her personal account to pay for her gym membership.

Bank reconciliation

Ali and Sai are partners, and their financial year finishes on 30 June. Their partnership agreement contains the following provisions. Interest on capital is to be allowed at 6% per annum. Interest on drawings is to be charged at 5%. Sai is to receive a partnership salary of $10050 per annum. Ali and Sai divide residual profits and losses in the ratio 3:2. Ali and Sai have supplied the following details: Ali: Drawings for the year ended 30 June 2024 $11000; Capital at 1 July 2023 $60000; Current account at 1 July 2023 $1800 debit. Sai: Drawings for the year ended 30 June 2024 $16000; Capital at 1 July 2023 $40000; Current account at 1 July 2023 $250 credit. Profit for the year before interest on loan was $42700. Ali advanced a loan of $10000 to the partnership at an interest rate of 5% per annum. The interest for the year ended 30 June 2024 has already been paid. There are no other loans in the partnership.

Partnerships

Natalie drew up her trial balance at the end of the year on 31 March 2024. The totals did not match, so she needed to open a suspense account. The debit total of the trial balance was $357 more than the credit total. Natalie then found the following errors: 1 A bank transfer of $420 received from a credit customer, Sarah, had been entered correctly in the bank account, but no further posting had been made. 2 Natalie introduced her personal vehicle to the business, valued at $7000. This had been debited to the capital account and credited to the vehicle maintenance account. 3 Purchases of $270 had been correctly posted to the suppliers account, but only $207 had been debited in the purchases account. 4 No posting had been made for general expenses of $126 paid by bank transfer. 5 Cash drawings of $200 had been debited to the cash account and credited to the drawings account.

Correction of errors

A firm operates a fleet of delivery vehicles. Figures taken from the statement of financial position at 31 December 2022 show that the vehicles had an original cost of $440000 and accumulated depreciation of $270000. On 1 April 2023, the business acquired two extra vehicles on credit from L Autos for a combined cost of $70000. The business sold one vehicle on 30 November 2023. This vehicle had originally cost $28000 and had accumulated depreciation of $16800. It was sold to a local garage for $10500, paid by bank transfer. Depreciation is provided for using the straight-line method at 20% per annum. A full year’s depreciation is charged in the year of purchase. No depreciation is charged in the year of disposal.

Accounting for depreciation and disposal of non-current assets

The following details were supplied by G Limited, a manufacturing company, for the year ended 31 March 2024. Purchases: Raw materials $68000; Finished goods $32413. Wages: Factory operatives $183700; Factory supervisors $47200. Administration salaries $34925. Factory machinery at cost $247000. Provision for depreciation of factory machinery $51500. Factory general expenses $20250. Rates & insurance $7100. Administration expenses $5470. Carriage on purchases of finished goods $2180. Royalties $3240. Inventory: 1 April 2023 - Raw materials $18200; Work in progress $23400; Finished goods $6820. 31 March 2024 - Raw materials $19820; Work in progress $22650; Finished goods $9350. Additional information: 1 Factory machinery is to be depreciated at 15% per annum using the reducing balance method. 2 On 31 March 2024 rates, $620, were owing. 3 Rates and insurance are to be apportioned 60% to the factory and 40% to the office.

Manufacturing accounts