3. Financial accounting (A Level)
A section of Accounting, 9706
Listing 10 of 734 questions
For Examiner's Use Amina and Nizam are in partnership sharing profits and losses in the ratio of 3:5. Their accounting year ended on 31 December 2011. The partnership agreement also states that: Amina receives a salary of $24 450 annually; Interest on drawings is charged at 5% on annual drawings; Interest on capital is payable at the rate of 4% per annum. The following balances were extracted from the books on 1 January 2011. Capital account Current account Amina $140 000 $8 400 Dr Nizam $240 000 $3 200 Dr On 1 July 2011, Amina paid an additional $20 000 capital into the business bank account. Drawings for the year were Amina $26 000, Nizam $35 000. Profit for the year before appropriations was $120 000. REQUIRED Prepare the appropriation account for Amina and Nizam for the year ended 31 December 2011. For Examiner's Use Prepare the current accounts for Amina and Nizam for the year ended 31 December 2011. For Examiner's Use On 1 January 2012, Amina and Nizam agree to admit Sarah as a partner. At that date goodwill was valued at $40 000. The following were also agreed about the new partnership: Goodwill would not remain in the books; Amina, Nizam and Sarah would share profits and losses in the ratio 3:5:2 respectively; Sarah would put $70 000 cash into the business; Sarah would bring into the partnership inventory at a value of $30 000 and a motor vehicle valued at $20 000. REQUIRED Prepare the capital accounts for Amina, Nizam and Sarah at 1 January 2012. For Examiner's Use In July 2012, Amina, Nizam and Sarah discovered several errors that had been made in their accounts. Their trial balance failed to agree and the difference was entered into a suspense account. The revenue account had been overcast by $18 200. Discounts received of $9 600 had been entered on the debit side of the discounts allowed account. Simon, a debtor, had paid a cheque for $9 400 to clear his account. His account had been credited for this amount but no entry had been made in the cash book. REQUIRED Prepare journal entries to correct each of the errors which had been discovered (narratives are not required). For Examiner's Use Prepare the suspense account, clearly showing the balance brought forward.
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THEORY
2012
Paper 2, Variant 2
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For Examiner's Use Maurice and Ravel had been in partnership for a number of years, sharing profits and losses equally. On 1 July 2011, they decided to admit Bach as a partner. Bach paid $39 000 capital into the partnership and also provided a motor van, valued at $8000, for partnership use. A new partnership agreement was drawn up, effective from 1 July 2011 which stated: Profits and losses will be shared by Maurice, Ravel, and Bach in the ratio 2:2:1. Interest on capital is payable at 10% per annum. Interest on drawings is charged at 5% on annual drawings. Ravel would receive an annual salary of $10 000 per annum. Goodwill in the business was valued at $40 000 and the partners agreed that this would not remain in the books. Capital accounts before goodwill – 1 July 2011 Maurice $120 000 Ravel $ 80 000 REQUIRED Prepare the capital accounts for all three partners at 1 July 2011. For Examiner's Use The following additional information relates to the year ended 30 June 2012 $ Revenue 2 600 000 Revenue returns 200 000 Purchases 1 625 000 Inventory: 1 July 2011 120 000 Inventory: 30 June 2012 145 000 General expenses 480 000 Current accounts – 1 July 2011 Maurice 17 000 Cr Ravel 12 000 Dr Drawings Maurice 96 000 Ravel 120 000 Bach 35 000 REQUIRED Prepare the income statement for the year ended 30 June 2012 For Examiner's Use Prepare the appropriation account for the year ended 30 June 2012. For Examiner's Use Prepare the current accounts for all three partners at 30 June 2012. For Examiner's Use The partners are now considering changing their business from a partnership to a limited company. Explain to the partners the meaning of the term ‘limited liability’.
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THEORY
2012
Paper 2, Variant 3
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Aiden and Beatrice are in partnership. They share profits and losses in the ratio 2:1 and prepare financial statements to 31 March. Their balances at 31 March 2013 were: Capital accounts Current accounts $ $ Aiden 38 500 4 250 Cr Beatrice 27 600 2 975 Cr On 1 April 2013 Charles was admitted to the partnership on the following terms. He introduced $100 000 capital in cash and it was agreed that he would receive the same level of profits as Beatrice. The profit sharing ratio between Aiden, Beatrice and Charles would be 2:1:1. Goodwill was valued at $120 000 and it was decided that goodwill was not to be retained in the books of account. Each partner was to receive an annual salary of $30 000. Interest on capital was to be paid at 8% per annum. No interest was to be charged on drawings up to $50 000. Interest at 6% per annum was to be charged on any additional drawings. For the year ended 31 March 2014: The partnership made a profit of $325 000 before adjusting for the following items: A debt of $5000 which had been written off as irrecoverable in the previous year was recovered. A cheque for $15 000 received from a debtor in January 2014 was dishonoured and the debt is to be written off. During the year Charles took a family holiday costing $2500. This was paid from the partnership bank account and shown as an expense. Total drawings for the year were Aiden $70 500; Beatrice $46 900; Charles $34 750. REQUIRED Prepare the partners’ capital accounts for the year ended 31 March 2014. Prepare the appropriation account for the year ended 31 March 2014. Prepare the partners’ current accounts for the year ended 31 March 2014.
9706_w14_qp_21
THEORY
2014
Paper 2, Variant 1
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Alex and Barry have been in partnership for many years. The terms of the partnership agreement are as follows. Interest is payable to the partners on their loan accounts at 10% per annum. Interest on capital is allowed at the rate of 5% per annum. Barry is entitled to a salary of $6000 per annum. Interest on drawings is charged at the rate of 4% on the annual drawings. 5 Profits and losses are shared in the ratio of 3:1. The following balances were taken from their books of account at 31 May 2014. Alex Barry $ $ Capital account 90 000 60 000 Current account 14 000 Cr 12 500 Dr Loan account 15 000 16 000 During the year ended 31 May 2015, drawings for Alex totalled $5000 and for Barry $12 000. After the deduction of loan interest, the draft profit for the year ended 31 May 2015 was $90 000. REQUIRED Prepare the partnership appropriation account for the year ended 31 May 2015. Prepare the current accounts of Alex and Barry for the year ended 31 May 2015. Current accounts Details Alex Barry Details Alex Barry $ $ $ $ «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « «« « « « «« « «« « Additional information The partners agreed that it would be beneficial to admit another partner and on 1 June 2015 Cesar joined the partnership. REQUIRED State two possible advantages to Alex and Barry of the admission of a new partner. Additional information Cesar joined the partnership on 1 June 2015 and paid $100 000 into the partnership bank account as his capital. It was agreed that the goodwill was to be valued at $60 000 and that no goodwill account would remain in the books of account. The new profit sharing ratio for Alex, Barry and Cesar from 1 June 2015 was to be 3:2:1. REQUIRED Prepare the capital accounts of Alex, Barry and Cesar to show the admission of Cesar on 1 June 2015. Capital accounts Details Alex Barry Cesar Details Alex Barry Cesar $ $ $ $ $ $ «« « «. «« « «« « «« « «« « «. «« « «« « «« « «« « «. «« « «« « «« « «« « «. «« « «« « «« « «« « «. «« « «« « «« « «« « «. «« « «« « «« « «« « «. «« « «« « «« « «« « «. «« « «« « «« « «« « «. «« « «« « «« « «« « «. «« « «« « «« « «« « «. «« « «« « «« « «« « «. «« « «« « «« « Additional information When the books of account were finally checked the following errors were discovered. The sales day book had been undercast by $20 000. Closing inventory valued at cost of $5000 had a net realisable value of $3000. Repairs to motor vehicles of $7000 had been wrongly debited to the motor vehicles at cost account. (Ignore any depreciation.) A purchase invoice of $4000 had been wrongly entered in the books as $400. REQUIRED Prepare a statement to show the corrected profit for the year ended 31 May 2015.
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THEORY
2015
Paper 2, Variant 1
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Alan and Jack have been in partnership for several years, sharing profits and losses equally. They prepare their financial statements annually to 30 September. On 30 September 2014 the balances on their capital accounts were Alan $139 800 and Jack $128 000. On 1 October 2014 the following took place: Max joined the partnership. He paid $27 000 into the partnership bank account and introduced inventory valued at $5000. Alan transferred $15 000 from his capital account into a loan account. Interest on the loan is to be paid at 10% per annum. The loan is repayable by 30 September 2020. The partners agreed a value for goodwill of $40 000. No goodwill is to be recorded in the books. Alan, Jack and Max are to share profits and losses in the ratio 2 : 2 : 1 respectively. REQUIRED Prepare the capital accounts of the partners at 1 October 2014 taking the above into account. Alan, Jack and Max Capital accounts at 1 October 2014 State what is meant by goodwill. State three factors which affect the value of goodwill. Additional information The terms of the new partnership agreement included the following: Interest on capital 7.5% per annum on capital account balances at the end of each financial year Interest on drawings 3% on total drawings for the year Salary to Max $10 000 per annum The following information is also available for the year ended 30 September 2015: Alan Jack Max $ $ $ Current account balances at 1 October 2014 9 500 Credit 7 500 Credit Nil Drawings for the year ended 30 September 2015 16 000 24 000 8 000 The residual profit to be shared by the partners in the profit sharing ratio is $90 000. REQUIRED Prepare the partners’ current accounts for the year ended 30 September 2015. Alan, Jack and Max Current accounts Calculate the profit for the year ended 30 September 2015 transferred from the income statement to the appropriation account. Additional information The partners have calculated the following ratios for the business: 30 September 2014 30 September 2015 Liquid (acid test) ratio 1.1 : 1 0.85 : 1 Trade receivables turnover 34 days 42 days REQUIRED Comment on the changes in liquidity of the partnership from 30 September 2014 to 30 September 2015. Suggest ways in which the partnership liquidity may be improved.
9706_w16_qp_21
THEORY
2016
Paper 2, Variant 1
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734