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1

Why does a trader calculate the profit of his business?

5. Preparation of financial statements  →  5.1. Sole traders

1. The fundamentals of accounting  →  1.1. The purpose of accounting

4. Accounting procedures  →  4.1. Capital and revenue expenditure and receipts

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2

Hassan is a trader. During the financial year he took goods from the business for his own use. How should he record this?

5. Preparation of financial statements  →  5.1. Sole traders

4. Accounting procedures  →  4.5. Valuation of inventory

5. Preparation of financial statements  →  5.5. Manufacturing accounts

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3

Where are the accounts of credit suppliers maintained?

3. Verification of accounting records  →  3.4. Control accounts

2. Sources and recording of data  →  2.1. The double entry system of book-keeping

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4

Which document does a trader issue to remind a credit customer that payment is due?

2. Sources and recording of data  →  2.2. Business documents

4. Accounting procedures  →  4.3. Other payables and other receivables

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5

What is a cheque counterfoil used for?

2. Sources and recording of data  →  2.3. Books of prime entry

2. Sources and recording of data  →  2.2. Business documents

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6

Farouk sells goods on credit. A cheque from Khalid, a credit customer, was dishonoured by the bank. How should Farouk record this?

4. Accounting procedures  →  4.4. Irrecoverable debts and provision for doubtful debts

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7

Tumelo sells on credit. The terms of trade are listed. list price: $200 per unit credit period: 60 days trade discount 15% if 10 units or more are purchased cash discount 3% if the debt is paid within one month A credit customer purchased 20 units and paid the debt within 15 days. What was the total of the invoice?

2. Sources and recording of data  →  2.3. Books of prime entry

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8

Jane purchased goods and paid by credit transfer. How should this be recorded in Jane’s accounting records?

4. Accounting procedures  →  4.3. Other payables and other receivables

3. Verification of accounting records  →  3.4. Control accounts

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9

What is shown...

3. Verification of accounting records  →  3.1. The trial balance

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10

At the end of each year, PT Limited transfers 20% of the profit for the year to the general reserve. Draft financial statements were prepared for the year ended 30 September 2021. It was then discovered that the inventory at 30 September 2021 had been overstated by $1500. Which effects did the correction of this error have on retained earnings and general reserve at 30 September 2021?

4. Accounting procedures  →  4.1. Capital and revenue expenditure and receipts

3. Verification of accounting records  →  3.2. Correction of errors

4. Accounting procedures  →  4.5. Valuation of inventory

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11

The bank columns in a trader’s cash book and the bank statement both showed positive balances. A comparison revealed the following differences. $ uncredited cheque bank charges not included in cash book What was the difference between the balance shown...

3. Verification of accounting records  →  3.3. Bank reconciliation

2. Sources and recording of data  →  2.3. Books of prime entry

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12

What is a reason for preparing a sales ledger control account?

3. Verification of accounting records  →  3.4. Control accounts

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13

Two companies each purchased a motor vehicle for $10 000 at the beginning of year 1. Company G used the straight-line method of depreciation at a rate of 15% per annum, while Company H used the reducing balance method at a rate of 20% per annum. What was the difference in the depreciation charge between the two companies for year 2?

4. Accounting procedures  →  4.2. Accounting for depreciation and disposal of non-current assets

5. Preparation of financial statements  →  5.1. Sole traders

6. Analysis and interpretation  →  6.2. Interpretation of accounting ratios

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14

Amit’s financial year ends on 31 December. The following account appeared in his sales ledger. Dipak account $ $ Jan 7 sales Jun 3 bank Oct 30 cash Nov 21 ?

2. Sources and recording of data  →  2.1. The double entry system of book-keeping

4. Accounting procedures  →  4.4. Irrecoverable debts and provision for doubtful debts

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15

Sally wished to increase the balance on the provision for doubtful debts account at the end of the financial year. How should this increase be recorded?

4. Accounting procedures  →  4.4. Irrecoverable debts and provision for doubtful debts

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16

The following errors were found after a statement of financial position had been prepared. A loan repayable in two year’s time had been included as a current liability. A provision for doubtful debts should have been created. What is the effect of correcting these errors?

3. Verification of accounting records  →  3.2. Correction of errors

4. Accounting procedures  →  4.1. Capital and revenue expenditure and receipts

5. Preparation of financial statements  →  5.1. Sole traders

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17

John maintains a full set of accounting records. Why does he also prepare a statement of financial position?

5. Preparation of financial statements  →  5.1. Sole traders

5. Preparation of financial statements  →  5.6. Incomplete records

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18

What are advantages of operating as a sole trader?

5. Preparation of financial statements  →  5.1. Sole traders

5. Preparation of financial statements  →  5.3. Limited companies

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19

Anwar is a sole trader making annual profits of $24 000. He decides to admit Dilip as a partner. They agree that Anwar would receive a salary, and profits and losses would be shared equally. The forecast appropriation account for the partnership’s first year of trading is: $ profit for the year 50 000 salary Anwar 10 000 profit available for distribution 40 000 By how much will Anwar’s total income increase?

5. Preparation of financial statements  →  5.2. Partnerships

4. Accounting procedures  →  4.1. Capital and revenue expenditure and receipts

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20

Kasi and Ravi are in partnership. The financial statements for the year ended 31 August 2021 showed that Ravi was entitled to interest on capital and interest on loan and was charged interest on drawings. Which entries would be made in Ravi’s current account?

5. Preparation of financial statements  →  5.2. Partnerships

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21

BCD Limited provided the following information. $ ordinary shares 300 000 retained earnings 200 000 debentures 170 000 How much was the equity and the capital employed?

5. Preparation of financial statements  →  5.3. Limited companies

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22

The issued share capital of CD Limited consists of ordinary shares. Retained earnings were $86 000 on 1 September 2020 and $88 500 on 31 August 2021. The company made a profit during the year of $26 000 and made a transfer to general reserve of $5000. What was the total ordinary share dividend paid during the year?

5. Preparation of financial statements  →  5.3. Limited companies

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23

A sports club was formed on 1 August 2020. During the year ended 31 July 2021 the club purchased equipment costing $5000, paying by cheque. In which of the club’s financial statements did this appear?

5. Preparation of financial statements  →  5.4. Clubs and societies

4. Accounting procedures  →  4.1. Capital and revenue expenditure and receipts

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24

What is not part of the prime cost of a manufacturing business?

5. Preparation of financial statements  →  5.5. Manufacturing accounts

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25

The value of Thato’s work in progress increased during the year. This was recorded in his financial statements. How did this affect the cost of production and the cost of sales?

5. Preparation of financial statements  →  5.5. Manufacturing accounts

4. Accounting procedures  →  4.1. Capital and revenue expenditure and receipts

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26

What are advantages of keeping a full set of accounting records?

5. Preparation of financial statements  →  5.6. Incomplete records

1. The fundamentals of accounting  →  1.1. The purpose of accounting

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27

Beth provided the following information. 1 January 31 December net assets $28 000 $24 000 Her drawings during the year amounted to $3000. What was Beth’s profit or loss for the year?

5. Preparation of financial statements  →  5.6. Incomplete records

1. The fundamentals of accounting  →  1.1. The purpose of accounting

4. Accounting procedures  →  4.1. Capital and revenue expenditure and receipts

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28

Roshan’s sales for his first year of trading were $55 000. His gross profit margin was 20%. The closing inventory was $3200. What were the purchases for the year?

4. Accounting procedures  →  4.5. Valuation of inventory

5. Preparation of financial statements  →  5.6. Incomplete records

6. Analysis and interpretation  →  6.2. Interpretation of accounting ratios

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29

Which information is required to calculate the return on capital employed for a sole trader?

5. Preparation of financial statements  →  5.1. Sole traders

5. Preparation of financial statements  →  5.6. Incomplete records

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30

What is the best indicator of the liquidity of a business?

6. Analysis and interpretation  →  6.1. Calculation and understanding of accounting ratios

6. Analysis and interpretation  →  6.2. Interpretation of accounting ratios

5. Preparation of financial statements  →  5.1. Sole traders

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31

A trader provided the following information for the year ended 31 May 2021. $ trade payables on 1 June 2020 12 250 trade payables on 31 May 2021 42 000 credit purchases for the year 319 375 What was the trade payables turnover for the year ended 31 May 2021?

5. Preparation of financial statements  →  5.6. Incomplete records

6. Analysis and interpretation  →  6.2. Interpretation of accounting ratios

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32

A business provided the following information about its gross margin. Year 1 40% Year 2 38% Year 3 35% What could explain the changes in the gross margin?

6. Analysis and interpretation  →  6.2. Interpretation of accounting ratios

5. Preparation of financial statements  →  5.6. Incomplete records

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33

What is not a limitation of inter-firm comparison?

6. Analysis and interpretation  →  6.3. Inter-firm comparison

6. Analysis and interpretation  →  6.5. Limitations of accounting statements

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34

Why would a supplier be interested in the financial statements of a credit customer?

5. Preparation of financial statements  →  5.1. Sole traders

6. Analysis and interpretation  →  6.2. Interpretation of accounting ratios

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35

What does the objective of understandability assume users of financial statements will possess?

1. The fundamentals of accounting  →  1.1. The purpose of accounting

7. Accounting principles and policies  →  7.2. Accounting policies

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