1. Financial accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 1775 questions
Ross, a sole trader, owns a business selling computer equipment. He prepared the following income statement for the year ended 31 March 2017, which contained errors. Ross Income Statement for the year ended 31 March 2017 $ $ Revenue 96 520 Add: Returns outwards 96 960 Cost of sales Inventory at 31 March 2017 23 400 Purchases 38 950 Carriage outwards 1 090 63 440 Inventory at 1 April 2016 (21 640) 41 800 Gross profit 55 160 Less expenses: Property rental paid 16 240 Returns inwards 1 240 Drawings 8 600 Heating and lighting 1 940 Travel expenses 2 060 General expenses 6 690 Shop fittings – accumulated depreciation at 31 March 2017 3 320 40 090 Profit for the year 15 070 Additional information The following notes also need to be taken into account when correcting the income statement. Revenue includes goods sent on a sale or return basis to a customer who has not yet accepted the goods. The goods cost $2500 and had been invoiced for $4000. Depreciation on shop fittings for the year ended 31 March 2017, $1490, had been entered in the books of account. A prepayment of $1160 for property rental paid at 31 March 2017 had been incorrectly entered in the books of account as an accrual. A customer owing Ross $1250 has been declared bankrupt. This debt should have been written off in these accounts, but no entry has yet been made. REQUIRED Prepare the corrected income statement for the year ended 31 March 2017. Ross Income Statement for the year ended 31 March 2017 Additional information Ross provided the following information about his assets and liabilities at 31 March 2017: $ Accruals 1 960 Bank loan 8 580 Bank overdraft 2 610 Capital at 1 April 2016 10 950 Shop fittings – cost at 31 March 2017 11 930 Prepayments 2 080 Trade payables 6 440 Trade receivables 12 870 No adjustment had been made to any of these balances in respect of errors discovered in the income statement or notes 1 to 4 on page 2. Ross introduced capital of $3000 into the business bank account on 31 March 2017. No entries for this have yet been made in the books of account. One half of the bank loan is repayable in the year ending 31 March 2018. The remainder is due for repayment after that date. REQUIRED Prepare the statement of financial position at 31 March 2017 taking account of all relevant information and information from part . Ross Statement of Financial Position at 31 March 2017 Additional information At present Ross does not make any provision for doubtful debts. REQUIRED Advise Ross whether or not he should create a provision for doubtful debts. Justify your answer.
9706_w17_qp_22
THEORY
2017
Paper 2, Variant 2
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Jacques is a sole trader. On 31 January 2019, the balance on the bank statement was $1875 debit. This did not agree with Jacques’s cash book balance of $4327 credit. The following transactions were included only on the bank statement. A payment for wages of $850. A transfer of $3500 from Smith, a credit customer. The following transactions were included only in the cash book. A cheque payment to a supplier for $340. A receipt of $560 from a customer. The following errors have also been identified. A direct debit payment for insurance of $180 had been incorrectly recorded on the bank statement as $108. A standing order for electricity of $175 had been incorrectly recorded in the cash book as $275. Bank interest paid of $75 had been recorded as interest received in the cash book. REQUIRED Prepare the updated cash book at 31January 2019. Dates are not required. Prepare the bank reconciliation statement at 31 January 2019. State two reasons why a business would prepare a bank reconciliation statement. Additional information Jacques calculated a draft profit for the year ended 31 January 2019 of $10 340. He has identified the following. An item of inventory had been included at cost, $800. It was found to be damaged. It could be sold for $900 if repairs costing $150 were carried out. On 25 January 2019 Jacques had sent goods to a customer on a sale or return basis. These had been invoiced to the customer at $2800. Jacques marks up his goods at 40%. The customer had not decided whether to keep the goods. On 4 February 2019 Jacques received an invoice for $3600 relating to rental of storage space for three months ending 31 March 2019. REQUIRED Prepare a statement to show the revised profit for the year ended 31 January 2019, after adjusting for items 1, 2 and 3.
9706_w19_qp_21
THEORY
2019
Paper 2, Variant 1
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Questions Discovered
1775