1.5. Preparation of financial statements
A subsection of Accounting, 9706, through 1. Financial accounting (AS Level)
Listing 10 of 637 questions
A book-keeper makes the following adjustments to ledger accounts before making transfers to the statement of profit or loss for the period. The insurance expense account is debited for a prepaid amount. The account for rent received is debited for an amount received in advance. The allowance for irrecoverable debts account is debited for the reduction in the allowance. The provision for depreciation on machinery account is debited for the annual depreciation charge. Which entries are correct?
9706_w24_qp_13
MCQ
2024
Paper 1, Variant 3
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The financial year end of T Limited was 30 June 2024. On that date the following balances were extracted from the books of account. Debit $ Credit $ 8% Bank loan (2024) 54 000 Administrative expenses 131 310 Bank overdraft 12 380 Cash Carriage inwards Distribution costs 114 870 Finance costs 5 180 Fixtures and fittings Cost Provision for depreciation at 1 July 2023 16 200 9 560 Inventory at 1 July 2023 93 400 Land and buildings Cost Provision for depreciation at 1 July 2023 165 000 6 300 Motor vehicles Cost Provision for depreciation at 1 July 2023 82 000 34 590 Purchases 293 780 Retained earnings 38 450 Revenue 705 100 Share capital 80 000 Trade payables 32 160 Trade receivables 69 740 The following information is also available. On 15 June 2024, goods were delivered and invoiced to a credit customer on a sale or return basis. The goods had a selling price of $12 000 including a mark-up of 25%. On 30 June 2024, inventory was counted and valued at cost, $86 400. On the same date, the customer informed T Limited that he had not yet decided whether to keep the goods. Distribution costs include a charge of $3120 for motor insurance for the year ending 30 November 2024. An irrecoverable debt of $540 is to be written off to administrative expenses. The directors have decided to create an allowance for irrecoverable debts of 5% of trade receivables to be charged to administrative expenses. Prepare the statement of profit or loss for the year ended 30 June 2024. Use the space provided on page 5 to show your workings. T Limited Statement of profit or loss for the year ended 30 June 2024 $ Revenue Cost of sales Gross profit Distribution costs Administrative expenses Profit from operations Finance costs Profit before Taxation Taxation Profit for the year Workings: Cost of sales Allowance for irrecoverable debts Depreciation Distribution costs Administrative expenses Finance costs Calculate the balance of cash and cash equivalents at 30 June 2024. Prepare an extract from the statement of financial position at 30 June 2024 to show the equity and liabilities section only. T Limited Statement of financial position at 30 June 2024 $ Equity Total equity Liabilities Non-current liabilities Current liabilities Total liabilities Total equity and liabilities Workings: Assess the directors’ decision on 30 June 2024 to take out the 5% debenture (2028–2029). Justify your assessment by considering both advantages and disadvantages of the decision to the company.
9706_w24_qp_21
THEORY
2024
Paper 2, Variant 1
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Ahmed is a sole trader. He does not maintain full accounting records. He provided the following information for the year ended 30 June 2024. Payments and receipts during the year included the following: $ Carriage outwards 1 040 Cash sales 5 200 Electricity charges paid 1 920 General expenses paid 3 600 Motor expenses paid 4 250 Payments to credit suppliers 61 240 Receipts from credit customers 102 600 Rent paid 16 800 All purchases are made on credit. Assets and liabilities included the following: At 30 June $ $ 8% bank loan – 3 000 Allowance for irrecoverable debts 1 055 ? Inventory 12 640 ? Other payables: Rent accrued Electricity – Other receivables: Rent prepaid – 1 800 Trade payables 8 800 6 300 Trade receivables 21 100 18 500 Inventory at 30 June 2024 was valued at $15 880. This included damaged items costing $960 that will be sold for $1100 after repairs costing $340. During the year Ahmed took goods costing $420 for his own use. An irrecoverable debt of $300 is to be written off. Ahmed wished to maintain the allowance for irrecoverable debts at the same rate as in the previous year. The 8% bank loan was taken out on 1 April 2024. No interest has yet been paid. Ahmed started the business on 1 July 2022. On that date he purchased a motor vehicle for $24 000 and fixtures and fittings for $3200. No other non-current assets have been purchased since that date. 10 Depreciation is to be provided as follows: Motor vehicle: 20% per annum reducing balance method Fixtures and fittings: 10% per annum straight-line method. 11 Motor expenses paid included $1140 for motor insurance for the twelve months to 31 August 2024. Prepare the statement of profit or loss for the year ended 30 June 2024. Use the space provided on page 4 to show your workings. Ahmed Statement of profit or loss for the year ended 30 June 2024 Explain, with reference to an accounting concept, why adjustments 5, 6 and 11 on page 2 were to be made to the financial statements. Adjustment 5 Goods for own use Concept Explanation 6 Irrecoverable debt Concept Explanation 11 Motor insurance Concept Explanation Additional information Ahmed has been offered the opportunity to purchase larger premises for $85 000 which would allow him to increase the sales revenue of the business. As he does not have sufficient personal funds to make the purchase, he is considering two options. Option 1 Apply for a bank loan to cover the whole purchase price. The bank loan would be repayable over ten years and interest would be payable at 8% per annum. Option 2 Ahmed’s brother has offered to join the business as an equal sharing partner. He would introduce all of the cash required to complete the purchase in exchange for a 50% share of future profits. Advise Ahmed whether he should go ahead with either of these options. Justify your advice by discussing both financial and non-financial factors.
9706_w24_qp_22
THEORY
2024
Paper 2, Variant 2
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Questions Discovered
637