4. Accounting procedures
A section of Accounting, 7707
Listing 10 of 188 questions
Jules is a hairdresser. He bought some new energy-saving hairdrying equipment, $1900, on credit from YZH Limited on 30 April 2022. REQUIRED Prepare the journal entry to record the purchase of these hairdryers. A narrative is required. Jules Journal Date Details Debit $ Credit $ The new hairdryers will use less electricity than his old ones. There will be an additional insurance charge for the new hairdryers. The old hairdryers had been fully depreciated so that their net book value was nil. REQUIRED Complete the table by placing a tick (3) to show whether these changes in expenses increase or decrease the profit. Expense Increase in profit Decrease in profit Heat and light Depreciation Insurance Jules has discovered the following five errors in his accounting records for the year ended 30 April 2022. The total for general expenses, $28, in the petty cash book for April 2022 has not been posted to the general ledger. A direct debit to Isaac, a supplier, $195 had been recorded as $159 in the account for Isaac. A payment by credit transfer for wages, $144, has not been recorded in the accounting records. The discount received total for January 2022, $38, had been debited to the discount received account. The account for rent and the account for commission receivable had both been overcast by $200. REQUIRED Prepare the journal entries required to correct these five errors. Narratives are not required. Jules Journal Error number Details Debit $ Credit $ Prepare the suspense account. Include the original difference on the trial balance as a balancing figure. Jules Suspense account Date ………. ………. ………. ………. ………. ………. ………. Details .……………………… .……………………… .……………………… .……………………… .……………………… .……………………… .……………………… $ ……… ……… ……… ……… ……… ……… ……… Date ………. ………. ………. ………. ………. ………. ………. Details .……………………… .……………………… .……………………… .……………………… .……………………… .……………………… .……………………… $ ……… ……… ……… ……… ……… ……… ………
7707_s22_qp_21
THEORY
2022
Paper 2, Variant 1
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Nala is a trader who buys and sells stationery. She provided the following information about her inventory at 28 February 2022. Item Number of units Cost per unit $ Carriage inwards per unit $ Selling expenses per unit $ Selling price per unit $ Packs of paper 4.50 – – 8.00 Packs of envelopes 5.50 1.00 1.50 10.00 Notepads 4.00 2.00 – 5.00 Boxes of pencils 3.50 – – 6.00 REQUIRED Calculate the value of Nala’s inventory at 28 February 2022. State the accounting principle used to value inventory. Complete the table by placing a tick (✓) to show how Nala should treat each item of her expenditure. Capital expenditure Revenue expenditure Computer printer paper Computer equipment Installation of computer equipment Motor vehicle Insurance of motor vehicle Delivery of motor vehicle Explain how the materiality principle is applied to the treatment of non-current assets. Nala has treated the receipt of a bank loan as a revenue receipt. REQUIRED Complete the table by placing a tick (✓) to show the effect of the error on capital and on liabilities. overstated understated Effect on capital Effect on liabilities Nala has charged depreciation on her shop fittings at 25% per annum using the reducing balance method. This year she is considering changing this to 10% per annum using the straight-line method, as this would improve her profit for the year. REQUIRED Advise Nala whether or not she should change her depreciation method. Justify your answer.
7707_s22_qp_22
THEORY
2022
Paper 2, Variant 2
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The trial balance of M Limited at 30 November 2021 was as follows. M Limited Trial Balance at 30 November 2021 Debit Credit $ $ Revenue 203 600 Inventory at 1 December 2020 12 945 Purchases 143 750 Rent and rates 12 460 Operating expenses 12 920 Wages 24 380 Equipment at cost 40 000 Provision for depreciation of equipment 17 500 Trade receivables 9 800 Provision for irrecoverable debts Bank Trade payables 11 585 Ordinary share capital 20 000 General reserve 3 000 Retained earnings 2 037 Dividend paid on ordinary shares 1 600 258 017 258 017 Additional information Inventory at 30 November 2021 was valued at $12 830. Depreciation on equipment is to be charged at 25% per annum using the reducing balance method. Accrued operating expenses at 30 November 2021 were $415. Rent includes a payment of $2250 for the 3 months from 1 October 2021 to 31 December 2021. The provision for doubtful debts is to be set at 4% of trade receivables. No dividends were outstanding at 30 November 2021. $1000 is to be transferred to the general reserve at 30 November 2021. REQUIRED Prepare the income statement for M Limited for the year ended 30 November 2021. M Limited Income Statement for the year ended 30 November 2021 $ $ …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. …. Prepare the statement of changes in equity for M Limited for the year ended 30 November 2021. M Limited Statement of Changes in Equity for the year ended 30 November 2021 Details Ordinary Share capital $ General reserve $ Retained earnings $ Total $ On 1 December 2020 ……. ……. ……. On 30 November 2021 … … … … … … … … … … … … … … … … … … … … Calculate the liquid ratio for M Limited at 30 November 2021. The answer should be correct to two decimal places. Liquid (acid test) ratio workings answer The managing director, Emily, plans to buy new equipment to be used to improve the profitability of the company. She is considering whether to fund the equipment by issuing further ordinary shares or requesting a bank overdraft. REQUIRED Advise Emily whether to fund the purchase of the equipment by issuing further ordinary shares or by requesting a bank overdraft. Justify your answer.
7707_s22_qp_22
THEORY
2022
Paper 2, Variant 2
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Rashid provided the following balances at 31 December. $ machinery at cost 52 000 provision for depreciation of machinery 23 000 Depreciation for the year was calculated at 20% on cost and is included in the balance for the provision. After the balances had been extracted, it was found that machinery repairs costing $2000 had been debited in error to the machinery account. What is the correct balance on the provision for the depreciation of machinery account?
7707_s23_qp_11
MCQ
2023
Paper 1, Variant 1
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Questions Discovered
188