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1. Financial accounting (AS Level)
A section of Accounting, 9706
Listing 10 of 1775 questions
Ismail opened a retail business on 1 January 2019 with the following assets and liabilities. $ Bank 7 500 Debit Non-current assets 18 500 Bank loan (repayable 2022) 4 200 Ismail prepared a draft income statement for the year ended 31 December 2019. However, this contained errors. Draft income statement for the year ended 31 December 2019 $ $ Revenue 274 500 Cost of sales (182 360) 92 140 Add discounts received Gross profit 92 960 Add bank loan 4 200 97 160 Less expenses Carriage inwards 1 020 Drawings 18 740 General expenses 22 280 Insurance 1 730 Rent 20 250 Loan interest (64 230) Profit for the year 32 930 The following had not been accounted for. Ismail had taken goods for his own use. These goods cost $420 and had a selling price of $630. Carriage inwards included capital expenditure of $400 on non-current assets which had been paid on 18 January 2019. Depreciation on all non-current assets is to be provided at 20% per annum on cost. A full year’s depreciation is charged in the year of purchase. The amount shown for insurance included $720 for the six-month period ending 30 April 2020. At 31 December 2019 trade receivables totalled $14 800. A customer who owed $600 had been declared bankrupt. Ismail decided to write off this account. He also decided to create a provision for doubtful debts of 5% of trade receivables at the year end. Interest on the bank loan is charged at 10% per annum. REQUIRED Prepare the corrected income statement for the year ended 31 December 2019. Ismail Income statement for the year ended 31 December 2019 Workings: Calculate the balance on Ismail’s capital account at 31 December 2019. Additional information Ismail would like to expand his business. He will need additional finance of $25 000. He is considering two options to raise this amount: option 1: apply for a bank loan option 2: form a partnership with Seema, a friend. Seema would expect profits and losses to be shared equally. REQUIRED Advise Ismail which of these options he should choose. Justify your answer. Additional information Ismail sees benefits in keeping a full set of accounting records. REQUIRED State four benefits to a business of keeping a full set of accounting records.
9706_w20_qp_21
THEORY
2020
Paper 2, Variant 1
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Questions Discovered
1775