7707_s22_qp_21
A paper of Accounting, 7707
Questions:
5
Year:
2022
Paper:
2
Variant:
1
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1
Nakul is a trader. He buys and sells goods on credit. He buys most of his supplies from one supplier, Nadia, who allows Nakul a trade discount of 20%. The following transactions took place in January 2022. Jan Paid $441 by cheque to Nadia, in full settlement of $450 owed to her at 1 January 2022. Bought goods on credit from Nadia, list price $350 Returned faulty goods to Nadia, list price $80 Bought goods on credit from Nadia, list price $400 Sold goods on credit, $800 Bought goods on credit, $60, from Sophie Returned goods to Sophie, $9 REQUIRED Prepare the purchases journal for January 2022. Total the journal and indicate the ledger account to which the total would be posted. Nakul Purchases journal Date Details $ $ Prepare the purchases returns journal for January 2022. Total the journal and indicate the ledger account to which the total would be posted. Nakul Purchases returns journal Date Details $ $ Prepare the account for Nadia, for January 2022, as it would appear in the books of Nakul. Balance the account and bring down the balance on 1 February 2022. Nakul Nadia account Date Details $ Date Details $ Complete the table by placing a tick (3) to show where each item is shown on the statement of financial position. Current liabilities Non-current liabilities Trade payables Bank overdraft Nakul has a bank overdraft and would like to reduce it. He is considering paying his suppliers later than he currently does in order to help him reduce his bank overdraft. REQUIRED Advise Nakul whether or not he should take longer to pay his suppliers. Justify your answer by providing two advantages and two disadvantages.
2. Sources and recording of data  →  2.1. The double entry system of book-keeping
5. Preparation of financial statements  →  5.1. Sole traders
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2
Fatima is a sole trader. She prepares her financial statements to the end of March each year. At 31 March 2022, Fatima’s ledger account balances included the following. $ Revenue 79 400 Sales returns 3 970 Purchases 36 500 Rent and rates 9 000 Wages 10 100 General expenses 1 287 Insurance 1 800 Discount received 1 095 Inventory at 1 April 2021 3 000 Fixtures and equipment at cost 80 000 Fixtures and equipment – provision for depreciation 39 040 Trade receivables 6 400 Trade payables 4 995 Provision for doubtful debts Cash drawings 8 580 Capital at 1 April 2021 59 000 The following information is also available. Inventory at 31 March 2022 was $3120. Fatima took goods for her own use from the business during the year ended 31 March 2022. These goods cost $1300. Depreciation on fixtures and equipment is to be charged at 20% per annum using the reducing balance method. Accrued wages at 31 March 2022 were $800. Rent includes a payment of $1500 for the 3 months from 1 March 2022 to 31 May 2022. An irrecoverable trade receivable of $200 is to be written off. The provision for doubtful debts is to be set at 3% of trade receivables. REQUIRED Prepare Fatima’s income statement for the year ended 31 March 2022. Fatima Income Statement for the year ended 31 March 2022 $ $ Prepare Fatima’s capital account for the year ended 31 March 2022. Balance the account and bring down the balance on 1 April 2022. Fatima Capital account Date Details $ Date Details $ Fatima would like to expand the business. She thinks that additional finance of $20 000 would be required for the equipment which she would need. Fatima’s bank have offered to lend her $20 000, to be repaid after four years at interest of 6% per annum. REQUIRED Advise Fatima whether or not to agree to the bank loan. Justify your answer.
5. Preparation of financial statements  →  5.1. Sole traders
4. Accounting procedures  →  4.4. Irrecoverable debts and provision for doubtful debts
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3
Jules is a hairdresser. He bought some new energy-saving hairdrying equipment, $1900, on credit from YZH Limited on 30 April 2022. REQUIRED Prepare the journal entry to record the purchase of these hairdryers. A narrative is required. Jules Journal Date Details Debit $ Credit $ The new hairdryers will use less electricity than his old ones. There will be an additional insurance charge for the new hairdryers. The old hairdryers had been fully depreciated so that their net book value was nil. REQUIRED Complete the table by placing a tick (3) to show whether these changes in expenses increase or decrease the profit. Expense Increase in profit Decrease in profit Heat and light Depreciation Insurance Jules has discovered the following five errors in his accounting records for the year ended 30 April 2022. The total for general expenses, $28, in the petty cash book for April 2022 has not been posted to the general ledger. A direct debit to Isaac, a supplier, $195 had been recorded as $159 in the account for Isaac. A payment by credit transfer for wages, $144, has not been recorded in the accounting records. The discount received total for January 2022, $38, had been debited to the discount received account. The account for rent and the account for commission receivable had both been overcast by $200. REQUIRED Prepare the journal entries required to correct these five errors. Narratives are not required. Jules Journal Error number Details Debit $ Credit $ Prepare the suspense account. Include the original difference on the trial balance as a balancing figure. Jules Suspense account Date ………. ………. ………. ………. ………. ………. ………. Details .……………………… .……………………… .……………………… .……………………… .……………………… .……………………… .……………………… $ ……… ……… ……… ……… ……… ……… ……… Date ………. ………. ………. ………. ………. ………. ………. Details .……………………… .……………………… .……………………… .……………………… .……………………… .……………………… .……………………… $ ……… ……… ……… ……… ……… ……… ………
4. Accounting procedures  →  4.1. Capital and revenue expenditure and receipts
5. Preparation of financial statements  →  5.6. Incomplete records
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4
Ekua is a trader who sells household furnishings. She has provided the following information. $ At 30 April 2022: Inventory 14 650 Trade receivables 12 700 Bank overdraft 5 375 Trade payables 7 125 For the year to 30 April 2022: Revenue 112 300 Purchases 72 250 Expenses 19 820 All sales and purchases are on credit. Inventory at 1 May 2021 was valued at $12 800. REQUIRED Complete the following tables. Gross margin workings answer (to two decimal places) Profit margin workings answer (to two decimal places) One of Ekua’s suppliers has offered to sell her a large quantity of inventory at a reduced price. Ekua is considering accepting this offer and increasing her expenditure on advertising in order to sell more inventory. REQUIRED Advise Ekua whether she should purchase the additional inventory. Justify your answer by providing two advantages and two disadvantages. Explain the meaning and importance of the principle of consistency in the preparation of financial statements. State two non-financial factors which may affect Ekua’s trading results.
4. Accounting procedures  →  4.5. Valuation of inventory
6. Analysis and interpretation  →  6.2. Interpretation of accounting ratios
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5
The Sew and Soup Club offers membership to people who are interested in sharing sewing and knitting patterns. It runs a refreshment café for members. The club had the following assets and liabilities at 31 December. $ $ Subscriptions in advance 2 260 1 745 Subscriptions in arrears 1 820 2 115 Inventory of refreshments 1 070 1 130 Rent paid in advance Trade payables for refreshment supplies 1 940 1 580 Bank balance 4 628 7 743 The following totals are for the year ended 31 December 2021. $ Receipts Subscriptions received (all by cheque) 13 900 Cash sales from refreshments 17 650 Payments Rent 6 000 Wages 7 000 Other expenses 5 000 Trade payables for refreshment supplies 10 435 REQUIRED Prepare the subscriptions account for the year ended 31 December 2021. Balance the account and bring down the balances on 1 January 2022. Sew and Soup Club Subscriptions account Date Details $ Date Details $ Explain whether the treasurer should be satisfied with the amount of cash received from member subscriptions during the year ended 31 December 2021. Calculate the profit on refreshments for the year ended 31 December 2021. $ $ Prepare the current assets section of the club’s statement of financial position at 31 December 2021. Sew and Soup Club Statement of financial position at 31 December 2021 $ $ Current Assets
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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