Feb/March 2025

A business has both a book-keeper and an accountant. Which task is carried out by the accountant?

Sole traders

Arnaud’s provisional profit for the year was $\$17\,000$. His actual correct profit was $\$17\,400$. What mistake had been made?

Correction of errors

Paul worked out his profit for the year as $\$40\,000$. He later found these errors: • The expenses included rates prepaid, $\$1000$, for the next year. • Electricity owed of $\$600$ had been left out. • Sales returns worth $\$10\,000$ were not recorded. What was the correct profit for the year?

Capital and revenue expenditure and receipts

Simon’s trial balance totals failed to balance, so he opened a suspense account. He later discovered that, when replenishing the imprest by $\$70$, he had entered it correctly in the petty cash book but on the wrong side of the main cash book. No other mistakes had been made. What was the first entry in the suspense account?

Correction of errors

Jamal’s bank statement on 1 May displayed a bank overdraft of $1460$. On that date, there were cheques not yet presented of $385$ and deposits not yet credited of $255$. What was the cash book balance at 1 May?

Bank reconciliation

Which items are recorded in a sales ledger control account?

Control accounts

Once Jonty had completed his financial statements, he found that two mistakes had been recorded in his accounting records. error 1: Vehicle repair costs of $1500$ had been entered on the debit side of the vehicles account. error 2: Legal fees of $2100$, which related to the purchase of new premises, had been treated as expenses. Ignoring depreciation, what effect did these errors have on Jonty’s profit for the year?

Correction of errors

Which item would be classed as a revenue receipt?

Capital and revenue expenditure and receipts

Samuel launched his business on 1 January 2023 and purchased two delivery vans at $12000$ each. He charges depreciation on all vehicles at $10\%$ per annum, worked out monthly, by the straight-line method. On 1 April 2024, he disposed of one van and substituted it with a larger model that cost $24000$. What was the balance on the provision for depreciation of delivery vehicles account on 31 December 2024?

Accounting for depreciation and disposal of non-current assets

A carpenter applies the revaluation method of depreciation to the hand tools used in the business. At the end of the financial year, every hand tool in use, including any bought during the year, is revalued. Fresh hand tools were bought during the year, but none of the hand tools were sold or otherwise disposed of. Which value of hand tools is used to show the calculation of depreciation for the year?

Accounting for depreciation and disposal of non-current assets

At the close of year 1, a trader set up a provision for doubtful debts equal to $5\%$ of trade receivables. By the close of year 2, she chose to raise the provision to $6\%$. The trader gave the following figures: trade receivables at the end of year 1: $4800$ trade receivables at the end of year 2: $7500$ What amount for the provision for doubtful debts ought to be shown in the income statement for year 2?

Irrecoverable debts and provision for doubtful debts

The following effects have occurred from a transaction: assets: fall liabilities: fall capital: rise The business does not have a bank overdraft. Which transaction took place?

Sole traders

The table lists the sports shop’s inventories at the year end. football kits: cost $250$, net realisable value $230$ tracksuits: cost $210$, net realisable value $240$ football boots: cost $160$, net realisable value $200$ Which value for inventories appears in the statement of financial position?

Valuation of inventory

What is one drawback of operating a business as a sole trader?

Sole traders

What appears in the capital and liabilities section of a business's statement of financial position?

Sole traders

Ann and Ben are partners, and they divide profits and losses in equal shares. The following figures relate to the year ending 30 April. profit for the year: $20000$ interest on capital - Ann: $5000$, Ben: $4000$ drawings - Ann: $8000$, Ben: $7000$ How much of the residual profit was Ben’s share?

Partnerships

Frankie is one of the partners. He maintains both a capital account and a current account. Which of the statements below is correct?

Partnerships

Which item forms part of the equity of a limited company?

Limited companies

What information is presented in the receipts and payments account of a music club?

Clubs and societies

Medway social club operates a café for its members. For the year ended 31 December, sales amounted to $15000$ and the cost of goods sold totalled $12000$. The closing inventory of coffee was recorded at a cost value of $1000$ but had deteriorated so that its worth was $500$. What profit from the café should be transferred to the income and expenditure account?

Valuation of inventory

Which statement regarding work in progress is correct?

Manufacturing accounts

A manufacturer worked out the production cost for the year as $57\,000. It was discovered that $2000 spent on lighting and heating had been left out of the financial statements. $75\%$ of lighting and heating is assigned to the factory, and $25\%$ of lighting and heating is assigned to the offices. What was the correct cost of production?

Manufacturing accounts

The double entry system of book-keeping involves handling accounting data in a specific sequence. What is the right sequence?

Books of prime entry

Farred did not maintain a complete set of accounting records. He bought goods on credit, and every sale was for cash. Farred compared his assets and liabilities at the beginning and at the end of his financial year. He noted these changes at the end of the financial year: - non-current assets rose by $11\,000$ - inventory fell by $6100$ - trade payables increased by $3000$ The bank balance moved from a debit balance of $4200$ to an overdraft of $7100$. What was the change in Farred’s capital?

Incomplete records

A business gave the following data: - revenue $100\,000$ - gross profit $20\,000$ What percentage mark-up was achieved?

Calculation and understanding of accounting ratios

Why would a trader want to raise the number of days for his trade payables turnover?

Interpretation of accounting ratios

Uzoma gave the following figures for her first year of trading: - sales $46\,000$ - gross profit $21\,850$ - advertising $2700$ - other expenses $11\,350$ - profit for the year $7800$ Uzoma hopes to raise her profit in future and is looking at four possible options. Which option would result in the greatest increase in her profit for the year?

Sole traders

Sally’s business has now used up its bank overdraft limit of $1500. Sally is thinking about the actions below. Which actions would improve the working capital of the business?

Calculation and understanding of accounting ratios

At what stage does a business recognise the income from a sale of goods on credit?

Accounting principles

Imran recorded an item on the debit side of the cash book in the bank column. What might the matching credit entry stand for?

Books of prime entry

Dave sells goods to Peter on credit. On 1 April, Peter owed Dave $\$440$. Over the course of April, Dave handled the following documents: April 7: invoice raised $\$360$ April 12: cheque received (after Peter took off $\$11$ cash discount) $\$429$ April 13: debit note received $\$50$ April 15: credit note issued $\$50$ What closing balance was shown on the statement of account that Dave sent to Peter on 30 April?

Business documents

Alisha recorded the credit notes she received during March in the appropriate returns journal. How was the total from this journal entered in the ledger at the end of March?

Books of prime entry

Which of the following statements about trade discount are correct? 1. It is entered on the supplier’s account as a debit. 2. It is granted only when the invoice is settled within the time allowed by the supplier. 3. It appears on an invoice as a reduction from the price of the goods. 4. It is intended to encourage buying in large quantities.

Business documents

For what reason is a trial balance prepared?

The trial balance

Which category of account balances would be listed in the credit column of a trial balance?

The trial balance

Ria began trading on 1 August 2024. The balances in Ria’s purchases ledger on 1 January 2025 were: Darena $465 Jadu $170 Ottie $275 Nakir $600 Total $1510 Ottie gives Ria trade discount of 5%. These transactions occurred in January 2025. Jan 2 Paid Darena $300 by bank transfer 8 Sold goods for $520 cash 13 Bought goods, list price $180, on credit from Ottie 17 Paid Nakir the amount owing on 1 January 2025, after allowing 3% cash discount 18 Bought goods, $528, on credit from Nakir 20 Bought goods, $73, paying immediately by bank transfer 23 Bought goods, $310, on credit from Darena 29 Sold goods for cash, $640 30 Returned goods, $24, to Darena

Books of prime entry

Viraj is a retailer. He purchases on credit and sells for cash. He also lets part of the shop to another business for $172 per month. Viraj’s trial balance on 31 January 2025 was as follows: Viraj Trial balance at 31 January 2025 Debit / Credit Revenue (Credit) $89600 Rental income (Credit) $2580 Sales returns (Debit) $2195 Inventory at 1 February 2024 $4500 Purchases $53700 Rent and insurance $8760 General expenses $2945 Wages $7350 Stationery and advertising $710 Bank charges $143 Fixtures and fittings at cost $12500 Provision for depreciation of fixtures and fittings (Credit) $3750 Trade payables (Credit) $3125 Bank overdraft (Credit) $1260 Capital (Credit) $7793 Drawings $15305 Totals $108108 Further information 1 Inventory at 31 January 2025 was valued at $5900. 2 Depreciation on fixtures and fittings is to be charged at 15% per annum using the straight-line method. 3 Rental income included the amount due for the period from 1 February 2025 to 30 April 2025. 4 At 31 January 2025, Viraj owed $282 for wages and $55 for advertising. 5 Once the trial balance had been prepared, Viraj received a bank statement showing that bank charges of $13 had been paid in January 2025.

Sole traders

Samira has been trading for several years and has a debit bank balance. She drew up her trial balance on 31 January 2025. The credit side total was greater than the debit side total. Samira recorded the difference in a suspense account. Samira later found the following errors: 1 A repair to equipment, $175$, had been debited to the equipment account. 2 A credit transfer, $132$, from David, a trade receivable, had been debited to David’s account and credited to the bank account. 3 A repayment of a bank loan, $2500$, had been debited to bank charges. 4 A bank payment for stationery, $21$, had been recorded as $12$. 5 Sales returns, $40$, had been recorded as purchases returns.

Correction of errors

Raj is a trader who both buys and sells on credit. The information below has been given. Inventory on 1 January 2024 $5500 For the year ended 31 December 2024: Revenue $112000 Purchases $68200 Expenses $21500 On 31 December 2024: Inventory $5700 Trade receivables $16000 Trade payables $5100 Bank overdraft $6890 Capital $285000

Interpretation of accounting ratios

The ABC Piano Club offers amenities for its members. It also operates a coffee shop where members may purchase hot drinks and snacks. The club’s assets and liabilities are shown below: 31 December 2023 / 31 December 2024 Pianos at cost $12000 / $12000 Pianos - Provision for depreciation $4800 / $6000 Subscriptions received in advance $650 / $715 Subscriptions received in arrears $390 / $325 Club insurance paid in advance $140 / $155 Club rent paid in arrears $435 / - Coffee shop inventory $320 / $382 Trade payables for coffee shop supplies $200 / $186 Cash at bank (debit balances) $2045 / $4675

Clubs and societies