4.1. Capital and revenue expenditure and receipts
A subsection of Accounting, 7707, through 4. Accounting procedures
Listing 10 of 85 questions
A trader prepared a draft income statement which showed a profit for the year of $36 000. A check of the books revealed the following information. Drawings made by the owner of $900 had been debited to the wages account. The provision for doubtful debts was increased by $20 at the year-end. The income statement was charged with the total provision of $260. The total of the discount allowed column in the cash book, $140, for one month had not been debited to the discount allowed account. What was the correct profit for the year?
7707_w23_qp_13
MCQ
2023
Paper 1, Variant 3
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Asia is a trader. She prepared her trial balance at 31 August 2023. The credit side totalled $273 more than the debit side. Asia placed the difference in a suspense account. Asia later discovered the following errors. A credit purchase, $112, from Jacques, had been entered twice in the purchases journal. The wages account had been overcast by $300. Cash received, $75, from Savanah, a trade receivable, had only been entered in the cash book. The total of the sales returns journal for August 2023 of $198, had been credited to both the sales returns account and the purchases returns account. A payment to Sophie, $93, had been recorded as $39 in Sophie’s account. REQUIRED Prepare the journal entries to correct errors 1–5. Narratives are not required. Prepare the suspense account, including the original difference on the trial balance. Asia Suspense account Date Details $ Date Details $ REQUIRED Complete the following table by placing a tick (3) to show the effect of each error. The first one has been completed as an example. Error number Error Gross profit Profit for the year No effect + – + – A credit purchase, $112, from Jacques, had been debited twice to the purchases account. The wages account had been overcast by $300. Cash received, $75 from Savanah, a trade receivable, had only been entered in the cash book. The total of the sales returns journal for August 2023, $198, had been credited to both the sales returns account and the purchases returns account. A payment to Sophie, $93, had been recorded as $39 in Sophie’s account.
7707_w23_qp_23
THEORY
2023
Paper 2, Variant 3
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B Limited provides cleaning services to client offices and factories. The clients provide their own cleaning materials. The trial balance of B Limited at 30 June 2023 was as follows. B Limited Trial Balance at 30 June 2023 Debit Credit $ $ Revenue 135 040 Wages and salaries 72 000 Motor expenses 9 820 Insurance 11 040 General expenses 12 780 Motor vehicles at cost 42 000 Provision for depreciation of motor vehicles 16 500 Equipment at cost 5 000 Provision for depreciation of equipment 2 000 Trade receivables 1 640 Bank 19 950 Ordinary share capital 10 000 General reserve 2 000 Retained earnings 13 490 Dividend paid on ordinary shares 4 800 179 030 179 030 Additional information Revenue of $9240 was received in advance. The insurance charge for the 12 months to 31 December 2022 was $7200 and for the 12 months to 31 December 2023 it is $7440. On 1 January 2023 insurance was paid in full for the 12 months to 31 December 2023. Accrued general expenses at 30 June 2023 were $186. Depreciation is to be charged on motor vehicles at 25% per annum using the reducing balance method. Depreciation on equipment is to be charged at 20% per annum using the straight line method. No dividends were outstanding at 30 June 2023. $1000 is to be transferred to the general reserve at 30 June 2023. REQUIRED Prepare the income statement for B Limited for the year ended 30 June 2023. B Limited Income Statement for the year ended 30 June 2023 $ $ Prepare the statement of changes in equity for B Limited for the year ended 30 June 2023. B Limited Statement of Changes in Equity for the year ended 30 June 2023 Details Ordinary Share capital $ General reserve $ Retained earnings $ Total $ On 1 July 2022 On 30 June 2023 Explain why: B Limited has no inventory B Limited does not require a provision for doubtful debts The directors of B Limited are also the shareholders. They plan to expand the company. They are considering whether to issue debentures or ordinary shares. REQUIRED Advise the directors whether they should issue debentures or ordinary shares. Justify your answer.
7707_w23_qp_23
THEORY
2023
Paper 2, Variant 3
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Questions Discovered
85