Workbook

CONTENTS
Page NO:
1. Fundamentals of accounting 2
A. Double entry 2
B. Accounting equations 4
C. Prime books 5
D. Source documents 15
2. Control procedures 16
A. Correction of errors 16
B. Bank reconciliation statements 22
C. Control accounts 27
D. Trial balance 30
3. Adjustments to financial statements 32

A. Other receivables and payables 32
B. Allowance for irrecoverable debts 37
C. Irrecoverable debts 39
D. Disposal of NCA 39
E. Depreciation 42
F. Accounting concepts 44
G. Capital and revenue expenditure 45
4. Financial statements for sole traders 46
5. Manufacturing accounts 55
6. Financial statements for partnerships 62
7. Incomplete records 69
8. Ratio analysis 76
9. Multiple choice questions 79
1|A CC OUN TING W OR KB OOK ©SANDARU HARSHANA

Question 1
Write up the following transactions in the books of P Hewitt: 2018
March
1 Started in business with cash £8,500.
2 Bought goods on credit from W Young £420.
3 Paid rent by cash £210.
4 Paid £6,000 of the cash of the business into a bank account.
5 Sold goods on credit to D Unbar £192.
7 Bought stationery £25 paying by cheque.
11 Cash sales £81.
14 Goods returned by us to W Young £54.
17 Sold goods on credit to J Harper £212.
20 Paid for repairs to the building by cash £78.
22 D Unbar returned goods to us £22.
27 Paid W Young by cheque £366.
28 Cash purchases £470.
29 Bought a van paying by cheque £3,850.
30 Paid motor expenses in cash £62.
31 Bought fixtures £840 on credit from B Coal.
Question 2
Enter the following transactions of an antiques shop in the accounts and extract a trial balance as at 31
March 2016.
March
1 Started in business with 8,000 in the bank.
2 Bought goods on credit from the following persons: L Frank RS 550; G Byers RS 290; P Lee RS 610.
5 Cash sales 510.
6 Paid wages in cash 110.
7 Sold goods on credit to: J Snow RS 295; K Park RS 360; B Tyler 640.
9 Bought goods for cash Rs 120.
10 Bought goods on credit from: G Byers RS 410; P Lee RS1,240.
12 Paid wages in cash RS 110.
13 Sold goods on credit to: K Park RS 610; B Tyler RS 205.
15 Bought shop fixtures on credit from Stop Ltd RS 740.
17 Paid G Byers by cheque RS 700.
18 We returned goods to P Lee RS 83.
21 Paid Stop Ltd a cheque for RS 740.
24 B Tyler paid us his account by cheque £845.
27 We returned goods to L Frank £18.
30 G Prince lent us £1,000 by cash.
31 Bought a van paying by cheque £6,250

Question 3
Enter the following transactions in the accounts: 2019
May
1 Started in business with RS 18,000 in the bank.
2 Bought goods on credit from Jamal RS 1,455.
3 Bought goods on credit from Perera RS 472.
5 Sold goods for cash RS 210.
6 We returned goods to Jamal RS 82.
8 Bought goods on credit from Perera RS 370.
10 Sold goods on credit to Verona RS 483.
12 Sold goods for cash RS 305.
18 Took RS 250 of the cash and paid it into the bank.
21 Bought a printer by cheque RS 620.
22 Sold goods on credit to H Buchan RS 394.
23 Verona returned goods to us RS 160.
25 H Buchan returned goods to us RS 18.
28 We returned goods to Perera RS 47.
29 We paid Jamal by cheque RS 1,373.
31 Bought machinery on credit from A Cobb RS 419.
Question 4
You are required to open the asset and liability and capital accounts and record the following transactions
for June 2018 in the records of P Bernard. 20X8
June
1 Started business with RS 12,000 in cash.
2 Paid RS 11,700 of the opening cash into a bank account for the business.
5 Bought office furniture on credit from My Home Ltd for RS 1,900.
8 Bought a van paying by cheque RS 5,250.
12 Bought equipment from Pearce & Sons on credit RS 2,300.
18 Returned faulty office furniture costing RS 120 to Dream Ltd.
25 Sold some of the equipment for RS 200 cash.
26 Paid amount owing to My Home Ltd RS 1,780 by cheque.
28 Took RS 130 out of the bank and added to cash.
30 F Brown lent us RS 4,000 – giving us the money by cheque.
Question 5
Write up the accounts to record the following transactions: 2017
March
1 Started business with RS 750 cash and RS 9,000 in the bank.
2 Received a loan of RS 2,000 from Poop by cheque.
3 Bought a computer for cash RS 600.
5 Bought display equipment on credit from Homes Ltd RS 420.
8 Took RS 200 out of the bank and put it in the cash till.
15 Repaid part of Poop’s loan by cheque Rs 500.
17 Paid amount owing to Homes Ltd RS 420 by cheque.
24 Repaid part of Poop’s loan by cash Rs 250.
31 Bought a printer on credit from F Jones for RS 200.
Question 6
Following transactions were provided by jimson and uncles for the month April.
1. Owner started the business by having $35000 in the business bank account
2. Business bought a motor vehicle for $10000 paying by cheque
3. Business bought goods for $30000 on credit
4. Took a bank loan for $15000
5. Sold goods for $16000 on credit and these goods had cost value of $10000
6. Paid creditors $9500 by cheque after receiving a cash discount of $500
7. Received $4600 from debtors by cheque after allowing cash discount of $400
8. Bank loan installment paid $2000 and it includes an interest expense of $500
9. Owner took $2000 value of stock for personal use
10. Bad debts written off $1000
Show the effect of above transactions on the following accounting equation.
Transaction Motor Bank Stock Debtors Creditors Bank loan Capital

vehicle
Question 7
Following transactions were provided by Sandy and Bundy for the month April.
1. Owner started the business by having $50000 in the business bank account
2. Took a bank loan for $20000
3. Business bought an equipment for $10000 paying by cheque
4. Business bought goods for $30000 on credit
5. Sold goods for $20000 on credit and these goods had cost value of $15000
6. Paid creditors $18000 by cheque after receiving a cash discount of 10%
7. Received $9500 from debtors by cheque after allowing cash discount of 5%
8. Bank loan installment paid $3000 and it includes an interest expense of $1000
9. Owner took $2000 from business bank account
10. Equipment depreciated by $2000
Show the effect of above transactions on the following accounting equation.
Transaction equipment Bank Stock Debtors Creditors Bank loan Capital

Question 8
The following transactions are written up in the form of a Cash Book.
2018 £
Sept 1 Proprietor puts capital into a bank account for the business. 10,940
== 2 Received cheque from M Boon. 315
== 4 Cash sales. 802
== 6 Paid rent by cash. 135
== 7 Banked £50 of the cash held by the business. 50
== 15 Cash sales paid direct into the bank. 490
== 23 Paid cheque to S Wills. 277
== 29 Withdrew cash from bank for business use. 120
== 30 Paid wages in cash. 518
Question 9
Write up a two-column cash book for a pine furniture shop from the following details, and balance it off as
at the end of the month:
2018
May 1 Started in business with capital in cash £1,000.
== 2 Paid rent by cash £230.
== 3 G Broad lent us £2,000, paid by cheque.
== 4 We paid J Fine by cheque £860.
== 5 Cash sales £190.
== 7 F Love paid us by cheque £34.
== 9 We paid A Moore in cash £92.
== 11 Cash sales paid direct into the bank £151.
== 15 P Hood paid us in cash £96.
== 16 We took £100 out of the cash till and paid it into the bank account.
== 19 We repaid R Onions £500 by cheque.
== 26 Paid motor expenses by cheque £75.
== 30 Withdrew £200 cash from the bank for business use.
== 31 Paid wages in cash £320.
Question 10
Write up a two-column cash book for a second-hand bookshop from the following:
2019
Nov 1 Balance brought forward from last month: Cash £295; Bank £4,240.
== 3 Took £200 out of the cash till and paid it into the bank.
== 4 F Bell paid us by cheque £194.
== 5 We paid for postage stamps in cash £80.
== 6 Bought office equipment by cheque £310.
== 7 We paid L Root by cheque £94.
== 9 Received business rates refund by cheque £115.
== 11 Withdrew £150 from the bank for business use.
== 12 Paid wages in cash £400.
== 14 Paid motor expenses by cheque £81.
== 16 J Bull lent us £1,500 in cash.
== 20 K Brown paid us by cheque £174.
== 28 We paid general expenses in cash £35.
== 30 Paid insurance by cheque £320
Question 11
Enter the following in the three-column cash book of an office supply shop. Balance off the cash book at
the end of the month and show the discount accounts in the general ledger.
2018
June 1 Balances brought forward: Cash £2420; Bank £4,940.
== 2 The following paid us by cheque, in each case deducting a 5 per cent cash discount: S Ball £800; L
Pipe £420; G Hide £240; M Rat £1,240.
== 5 Paid general expenses by cash £440.
== 6 We paid the following accounts by cheque, in each case deducting 5 per cent cash discount: M
Peters £460; G Grap £860; F Tell £400.
== 8 Withdrew cash from the bank for business use £500.
== 10 Cash sales £1,200.
== 12 B Tall paid us their account of £276 by cheque less £4 cash discount.
== 14 Paid wages by cash £540.
== 16 We paid the following accounts by cheque: R Toddy £295 less cash discount £15; F Fury £312 less
cash discount £12.
== 20 Bought Equipment by cheque £3,320.
== 24 Bought lorry paying by cheque £10,300.
== 29 Received £424 cheque from A Pine.
== 30 Cash purchases £980.
== 30 Bought stationery paying by cash £156.
Question 12
A three-column cash book for a wine wholesaler is to be written up from the following details, balanced
off, and the relevant discount accounts in the general ledger shown.
2018
Mar 1- Balances brought forward: Cash £620; Bank £7,142.
2- The following paid their accounts by cheque, in each case deducting 5 per cent
cash discounts: G Slick £260; P Fish £320; T Old £420 (all amounts are pre-discount).
4- Paid rent by cheque £430.
6- F Black lent us £5,000 paying by cheque.
8- We paid the following accounts by cheque in each case deducting a 2 1/2 per cent
cash discount: R White £720; G Green £960; L Flip £1,600 (all amounts are pre-discount).
10- Paid motor expenses in cash £81.
11- Paid W Pits his account of £190 by cash after deducting 5% cash discount.
12- J Pie pays his account of £90, by cheque £88, deducting £2 cash discount.
15- Paid wages in cash £580.
18- The following paid their accounts by cheque, in each case deducting 5 per cent
cash discount: A Pony £540; B Line & Son £700; T Owen £520 (all amounts are pre-discount).
21- Cash withdrawn from the bank £400 for business use.
24- Cash Drawings £200.
24- Received £225 from W Tonga a cheque after deducting 10% cash discount
25- Paid W Peat his account of £160, by cash £155, having deducted £5 cash
discount.
29- Bought fixtures paying by cheque £720.
31- Received commission by cheque £120.
Question 13
Rule up a petty cash book with analysis columns for office expenses, motor expenses, cleaning expenses,
and casual labour. The cash float is £600 and the amount spent is reimbursed on 30 June.
2017 £
June 1 F Black – casual labour 18
== 2 Letterheadings 41
== 2 Abel Motors – motor repairs 67
== 3 Cleaning materials 4
== 6 Envelopes 11
== 8 Petrol 22
== 11 P Lyon – casual labour 16
== 12 T Upton – cleaner 8
== 12 Paper clips 3
== 14 Petrol 19
== 16 Adhesive tape 2
== 16 Petrol 25
== 21 Motor taxation 95
== 22 F Luck – casual labour 19
== 23 T Upton – cleaner 14
== 24 J Lamb – casual labour 27
== 25 Copy paper 8
== 26 Lively Cars – motor repairs 83
== 29 Petrol 24
== 30 F Tred – casual labour 21

Question 14
Oakhill Printing Cost Ltd operates its petty cash account on the imprest system. It is maintained at a figure
of £80, with the balance being restored to that amount on the first day of each month. At 30 April 20X6 the
petty cash box held £19.37 in cash. During May 20X6, the following petty cash transactions arose:
£
May 1 Cash received to restore imprest (to be derived) ?
== 1 Bus fares 0.41
== 2 Stationery 2.35
== 4 Bus fares 0.30
== 7 Postage stamps 1.70
== 7 Trade journal 0.95
== 8 Bus fares 0.64
== 11 Tippex 1.29
== 12 Typewriter ribbons 5.42
== 14 Parcel postage 3.45
== 15 Paper clips 0.42
== 15 Newspapers 2.00
== 16 Photocopier repair 16.80
== 19 Postage stamps 1.50
== 20 Drawing pins 0.38
== 21 Train fare 5.40
== 22 Photocopier paper 5.63
== 23 Display decorations 3.07
== 23 Tippex 1.14
== 25 Wrapping paper 0.78
== 27 String 0.61
== 27 Sellotape 0.75
== 27 Biro pens 0.46
28 Typewriter repair 13.66
== 30 Bus fares 2.09
June 1 Cash received to restore imprest (to be derived) ?
Question 15
Q7-The following is a summary of the petty cash transactions of Jock field Ltd for
May 20X8.
May 1 Received from Cashier £300 as petty cash float £
o 2 -Postage 18
o 3- Traveling 12
o 4- Cleaning 15
o 7- Petrol for delivery van 22
o 8- Traveling 25
o 9 -Stationery 17
o 11- Cleaning 18
o 14- Postage 5
o 15- Traveling 8
o 18- Stationery 9
o 18 -Cleaning 23
o 20- Postage 13
o 24- Delivery van 5,000 mile service 43
o 26 -Petrol 18
o 27- Cleaning 21
o 29- Postage 5
o 30- Petrol 14
You are required to:
(A) Rule up a suitable petty cash book with analysis columns for expenditure on cleaning, motor
expenses, postage, stationery, travelling
Question 16
Gal Bada ltd had the following information for month of April 2015.
Balances at 1/4/2015
$
Sales 20000
Sales returns 5000
Sales ledger control account 3000
Debtors balance as at 1/4/2015

$
Babanis 800
Amanis 700
Savaris 300
Nonis 200
Sales day book

Date Details Amount
05/4 Babanis 1100
10/4 Amanis 880
12/4 Babanis 550
15/4 Savaris 770
18/4 Babanis 2200
20/4 Savaris 1100
28/4 Nonis 550

Total of the month 7150
Sales return day book

Date Details Amount
05/4 Babanis 165
10/4 Amanis 275
Cash book (debit side)

Details Discount Balance
Babanis 20 280
Cash sales 500
Nonis
Babanis 50 200
Cash sales 2300
Amanis 150
Savaris 30 250
Rent received 1000
General journal
Details Debit Credit
Purchase ledger(Babanis) 190
Sale ledger(Babanis) 190
Set off a receivable with a payable
Required
I. Babanis’s Account (in Sale ledger)
II. Amansis’s account (in sales ledger)
III. Sales ledger control account
10 | A C C O U N T I N G W O R K B O O K ©SANDARU HARSHANA
IV. Sales account
V. Sales returns account
Question 17
Family ltd had the following information for month of April 2015.
Balances at 1/4/2015
$
Sales 15000
Sales returns 3000
Sales ledger control account 4000
Debtors balance as at 1/4/2015

$
Akko 1000
Singh Thumbi 2000
Thangachi 400
Aiya 600
Sales day book

Date Details Amount
05/4 Singh Thumbi 2200
10/4 Akko 1100
15/4 Akko 440
18/4 Thangachi 220
20/4 Aiya 880
28/4 Thangachi 1100
Sales return day book

Date Details Amount
10/4 Aiya 165
Cash book (debit side)

Details Discount Balance
Singh Thumbi 60 240
Cash sales 2200
Commission received 1000
Singh Thumbi 40 360
Cash sales 4400
Aiya 300
Thangachi 20 180
Aiya 10 190
General journal
Purchase ledger (Singh Thumbi) 110
Sale ledger(Singh Thumbi) 110
Set off a receivable with a payable
Required
I. Singh Thumbi (in Sale ledger)
II. Sales ledger control account
III. Sales account
IV. Sales returns account
Question 18
Following transactions were provided by PS traders for month ended May 2016.
1.5.16. Bought goods on credit from Turner for a list price of £1000
6.5.16. Sold goods on credit to Sherlock for a list price of £4000
7.5.16. Sold goods on credit to Jeffrey for a list price of £4000
8.5.16. We returned goods to Turner for list price of £200
9.5.16. Bought goods on credit from Wick for a list price of £2000
10.5.16. Cash purchases £2200
12.5.16. We returned goods to Wick for list price of £300
13.5.16. Bought goods on credit from Turner for a list price of £1500
14.5.16. Sherlock returned goods to us for list price of £250
16.5.16. Sold goods on credit to Mary for a list price of £3200
17.5.16. Cash sales £6600
18.5.16. Mary returned goods to us for list price of £200
19.5.16. Sold goods on credit to Mycroft for a list price of £2500
21.5.16. We paid Turner’s and Wick’s closing by cash.
23.5.16. Sherlock and Mary paid us their closing balance by cash.
25.5.16 Bought a motor vehicle on credit from NO WHEELS LTD for £5000.
• PS trader receives a trade discount 30% from its suppliers and allows a trade discount of 20% for
its customers.
Prepare the following:
1. Sales day book

2. Purchase day book
3. Sales returns and purchases returns day book
4. Cash book (only cash column)
5. General journal including the narration
6. Turner’s account, Wick’s account, Sherlock’s account, Mary’s account, sales account, purchases
account.
Question 19
Following transactions were provided by QS traders for month ended March 2016.
1.3.16. Sold goods on credit to Mormount for a list price of £4400

4.3.16. Bought goods on credit from Jon Sand for a list price of £1600
7.3.16. Sold goods on credit to Jeffrey for a list price of £8000
8.3.16. We returned goods to Jon Sand for list price of £1200
9.3.16. Bought goods on credit from Ronaldo for a list price of £1500
12.3.16. We returned goods to Ronaldo for list price of £300
13.3.16. Bought goods on credit from Jon Sand for a list price of £1900
14.3.16. Mormount returned goods to us for list price of £200
15.3.16. Sold goods on credit to Manny for a list price of £6200
16.3.16 Sold a motor vehicle on credit to Lisa for£3000.
17.3.16. Cash sales £9900
18.3.16. Manny returned goods to us for list price of £200
19.3.16. Sold goods on credit to Sterlin for a list price of £2500
21.3.16. We paid Jon Sand’s and Ronaldo’s closing by cash.
23.3.16. Mormount and Manny paid us their closing balance by cash.
• QS trader receives a trade discount 30% from its suppliers and allows a trade discount of 20% for
its customers.
1. Sales day book

6. Jon Sand’s account, Ronaldo’s account, Mormount’s account, Manny’s account, sales account,
purchases account.
Question 20
Following transactions were provided by SH traders for month ended May 2016.

3.5.16. Bought goods on credit from Thomas for a list price of £1900
4.5.16. Cash sales £2750
6.5.16. Sold goods on credit to Newton for a list price of £5000
7.5.16. Sold goods on credit to Newton for a list price of £4500
8.5.16. We returned goods to Thomas for list price of £200
9.5.16. Bought goods on credit from Bell for a list price of £2000
12.5.16. We returned goods to Bell for list price of £300
13.5.16. Bought goods on credit from Thomas for a list price of £1500
14.5.16. Newton returned goods to us for list price of £250
16.5.16. Sold goods on credit to Smith for a list price of £3200
18.5.16. Smith returned goods to us for list price of £200
19.5.16. Sold goods on credit to Lora for a list price of £2500
21.5.16. We paid Thomas’s and Bell’s closing by cash.
23.5.16. Newton and Smith paid us their closing balance by cash.
25.5.16 Closing balance of Lora is written as a bad debt since she has become bankrupted.
• SH trader receives a trade discount 20% from its suppliers and allows a trade discount of 10% for
its customers.
1. Sales day book

6. Thomas’s account, Bell’s account, Newton’s account, Smith’s account, Lora’s account, sales
account, purchases account.
Question 21
Comic is a sole trader who maintains a full set of accounts.
Following transactions were provided for the month of June 2016

June Detail
5 Sanders purchased goods on credit for $300
9 Putin purchased goods on credit for $100
14 Sanders returned goods for $40
21 Sanders purchased goods on credit for $260
26 Sanders paid his balance as at 1/6/2016 by cheque and received 5% cash discount
29 Putin returned goods for $20
On 1st of June 2015 Sanders owes Comic $200
a. Prepare the account of Sanders in the books of Comic.
Question 22
Rocky is a sole trader who maintains a full set of accounts.
Following transactions were provided for the month of June 2016
June Detail
5 Bought goods on credit from Sanchez for $500
9 Bought goods on credit from Giggs for $400
14 Returned goods to Sanchez for $50
21 Bought goods on credit from Sanchez $1500
26 We paid Sanchez his balance as at 1/6/2016 and received 5% cash discount
29 Bought goods on credit from Zidan for $400
On 1st of June 2015 Rocky owes Sanchez $300
a. Prepare the account of Sanchez in the books of Rocky.

b. Prepare the statement of account that Sanchez would send to Rocky for month of June 2015
Question 23
Name the documents used for following
• Sold goods on credit to Walison for $1500…………………………………
• Purchase goods on credit from chukka for $2000…………………………………….
• Return goods to chukka for $200…………………………………..
• Walison return goods to us for $100………………………………..
• Paid for stamps by cash for $10………………………………………….
• Paid for stationary by cash for $5………………………………………………….
• Bought a motor vehicle on credit for $10000……………………………………….
• Paid chukka by cheque $300………………………………………..
• Credit transfer from Walison by $200…………………………………….
• Bank charges $50…………………………………..
Question 24
Name the documents used for following
• Purchase goods on credit from Jam for $2900…………………………………….
• Sold goods on credit to Cheese for $1500…………………………………
• Return goods to Jam for $250…………………………………..
• Cheese return goods to us for $150………………………………..
• Paid for postages by cash for $1………………………………………….
• Deposit $100 in business bank account…………………..
• Bought an equipment on credit for $10000……………………………………….
• Paid for bus tickets by cash for $5………………………………………………….
• Paid jam by cheque $300………………………………………..
• Credit transfer from Cheese by $30…………………………………….
• Dishonored cheque $50…………………………………..
Question 25
Your bookkeeper extracted a trial balance on 31 December 2015 which failed to agree by £210, a shortage
on the credit side of the trial balance. A suspense account was opened for the difference.
In January 2016 the following errors made in 2015 were found:
1. Sales day book had been undercast by £200.
2. Sales of £610 to T Venture had been debited in error to T Ventura’s account.
3. Rent account had been undercast by £90.
4. Discounts Allowed account had been overcast by £100.
5. The sale of a computer at net book value had been credited in error to the Sales account £230.
6. In November, Begum sold a motor vehicle by cheque for £4 900. The vehicle had cost £12 000 in
September 2015. At the date of the disposal the accumulated depreciation was £5 250. No entries
had been recorded in the books
a) Prepare the journal entries

b) Explain the difference between errors of commission and errors of principle
Question 26
1. Sales under casted by $1200

2. Discount allowed $50 have been credited to discount received account
3. Sold to goods Rabada for $2000 this has been mistakenly recorded under Cabana’s account.
4. Cash paid for rent $1200 have correctly recorded in cash account incorrectly credited in rent
account as $1000
5. Rosholt a debtor who owes $500 was bankrupted and no entries have been recorded
6. Salaries were outstanding by $300 and no entries have been recorded.
a) Correct the above errors using a journal
Question 27
The following trial balance is prepared by an inexperienced junior accounting staff employee for month
ended 31.1.17.
Sales 150000
Purchases 78000
Operating expenses 4500
Travelling expenses 5600
Motor vehicles 100000
Provision for depreciation (MV) 40000
Cash and bank 3200
Debtors 15600
Creditors 14300
Drawings 20000
Discount received 600
Discount allowed 400
Capital 20400
After investigating, the following errors were revealed.

1. Sales over casted by $200
2. Operating expenses over casted by $500
3. Sold goods to Smith for $400 but mistakenly recorded under Smoke’s account instead under Smith.
4. Payment for operating expenses (motor repairs) $2000 have been incorrectly recorded under
motor vehicle account instead under operating expenses.
5. Discount received $200 have been posted to debit side of discount allowed account.
6. Payment for travelling expenses $1000 by cheque is only recorded under travelling expenses
account.
7. Payment to creditors $1200 has been recorded correctly under creditors account but it’s been
credited in bank account as $100.
8. Owner bought additional cash of $2000 but no entries been recorded.
Required
a) Rewrite the correct trial balance
b) Correct the above errors using a general journal (narrations are not required)
c) Prepare the suspense account
d) Prepare the corrected trial balance
e) Explain the usefulness of preparing a trial balance.
Question 28
Miranda prepared her draft final accounts for the year ended 30 April 2009 and calculated a net profit for
the year of $14 670. After the preparation of the draft final accounts the following errors were discovered,
which had not been revealed by the trial balance.
1. Goods, $2000, purchased on credit from A Moriston had not been entered in the accounting
records.
2. Goods, $650, sold on credit to T Clay had been correctly entered in the sales account but had been
entered into the account of C Tilley.
3. A motor vehicle expense, $500, for the year had been posted to the motor vehicles account.
4. A discount received from L Stones of $190 had been entered in the discount allowed column in the
cash book and credited to the account of L Stones.
REQUIRED
a) Name the type of error in (i) to (iv) above.
b) Prepare the journal entries to correct the errors
c) Calculate the revised net profit for the year ended 30 April 2009
Question 29
Haunt’s income statement showed a draft profit for the year of $15 500. After completion of the income
statement the following errors were discovered:
1. Purchases of goods on credit from Takas, $4000, had been omitted from the books.
2. Goods sold on credit to Nolan, $380, had been posted to the account of North.
3. Discount received, $3050, had been debited to the discount received account.
4. A debt of $375, owing by Long, was considered irrecoverable. No entries had been made in the
books
a) Prepare the journal entries to correct the errors

b) Prepare a statement showing the corrected profit for the year.
c) Explain the usefulness of preparing a suspense account
Question 30
The following trial balance was extracted from the books of Mr. Smith as at 31st December 2012.This trial
balance was prepared by a junior accounting staff member.
Details Debit $ Credit $
Capital 110000
Drawings 16000
Premises 210000
Fixtures and fittings 50000
Trade receivables 34000
Trade payables 28700
Operating expenses 43500
Inventory 1/1/2012 47200
Inventory 31/12/2012 44900
Purchases 87000
Sales 364000
Provision for doubtful debts 2500
Cash in hand 12120
The book keeper extracted a trial balance on 31st December 2012 which failed to agree. A suspense
account was opened for the difference.
In January 2013 the following errors made in 2012 were found:
1. Sales day book been under cast by $2200

2. Operating expenses account had been under cast by $3810
3. Discount received account had been overcast by $620
4. A purchase of a furniture $2750 had been included in error in the purchase account.
5. Purchase account had been under cast by $4340
6. Discount allowed $1250 credited to the discount received account.
7. Bank charges $670 entered in the cash book have not been posted to the bank charges account.
8. A sale of goods to C Bayar $1820 was correctly entered in the personal account as $5280

b) Prepare the suspense account
c) Prepare a corrected trial balance
d) Explain two errors that will affect trial balance agreement using examples
Question 31
On 31 March 2015 Jingo’s trial balance did not agree and the difference was entered in the suspense
account. Following errors were discovered.
1. A stock valued for £400, taken by Jingo, had been credited in both accounts of drawings and
purchase account.
2. An invoice from a supplier for £400 had not been recorded in the books.
3. Return outwards for £68 had been incorrectly entered on the debit of returns inwards account.
4. A Purchase of goods, £245, had been correctly entered in the bank account but no other entries
have been made in the books.
5. Brought an equipment for £4000 but it has been incorrectly debited in purchase account as £1000
instead of equipment account.
6. Discount allowed account had been overcast by £250
7. Sold goods on credit to pek for £200 entered correctly in sales account but incorrectly entered in
pat’s account.
8. General expenses were prepaid by £350 on 31 March 2015. No adjustment had been made for this
in the accounts.
9. Owner gave $300 to the business no entry have been recorded.
10. Interest received owed by £150 on 31 March 2015. No adjustment had been made for this in the
accounts.
Required:

b) Explain how we should treat a suspense account balance in financial statements
Question 32
On 31 March 2015 Mali’s trial balance did not agree and the difference was entered in the suspense
account. Following errors were discovered.
1. An invoice from a supplier for £500 had not been recorded in the books.
2. A stock valued for £350, taken by Mali, had been debited in both accounts of drawings and
purchase account.
3. A sale of goods, £245, had been correctly entered in the bank account but no other entries have
been made in the books.
4. Discount received for £68 had been incorrectly entered on the debit of discount allowed account.
5. Brought an equipment for £4000 but it has been incorrectly debited in purchase account as £400
instead of equipment account.
6. Sold goods on credit to kopek for £200 entered correctly in sales account but incorrectly entered in
Topaz’s account.
7. Purchase of furniture for £4000 had been incorrectly entered in purchase account.
8. Discount received account had been overcast by £250
9. General expenses were prepaid by £250 on 31 March 2015. No adjustment had been made for this
in the accounts.
10. Interest received was prepaid by £150 on 31 March 2015. No adjustment had been made for this in
the accounts.
Required:
Question 33
Ali BaBa Ltd prepared the trial balance for 30 November 2015 and it did not agree on that particular date.
The accountant revealed the following errors.
1. Drawings, £660, had been posted to the wages and salaries account.
2. A water bill for £175 was outstanding on 30 November 2015. No adjustment had been made for
this in the accounts.
3. A payment to a creditor, £460, had been incorrectly credited to the creditor and debited to the
bank.
4. Sales account undercast by £500.
5. Ali brought a motor vehicle for £10000 1/12/2014 but it was incorrectly recorded under motor
vehicle expense account. Depreciation should be charged at 10% on cost.
6. Rates were prepaid by £200 on 30 November 2015. No adjustment had been made for this in the
accounts.
7. Motor vehicle repairs paid £1000 was incorrectly entered on motor vehicle account rather than
motor vehicle repairs.
8. Discount allowed £250 is incorrectly credited in discount received.
9. General expenses for £200 owed on 30 November 2015. No adjustment had been made for this in
the accounts.
10. The owner brought equipment which cost for £1000 to the business. No entries have been
recorded in the books
Required:
Question 34
The trainee accountant of Mozart and Son produced a draft profit and loss account which showed a net
profit for the year ended 31 November 2011 of £56 900. During the following month several errors and
omissions were identified. These were:
1. The cost of repairs to a delivery van of £680 had been debited to the motor vehicles account.
2. The sales day book had been undercast by £250.
3. A payment of £500 for insurance had been completely omitted from the accounts.
4. A cheque for £300 received from T Jones, a debtor, had been credited to the account of T Bones.
5. Discount received of £850 had been charged as an expense in the profit and loss account.
6. A payment of £890 for rates had been debited to the rent account
Required:
Question 35
The bank columns in the cash book for June 2017 and the bank statement for that month for D Hogan are
as follows:
Cash Book
2017 Dr £ 2017 Cr £
Jun 1 Balance b/d 1,410 Jun 5 L Holmes 180
== 7 J May 62 == 12 J Rebus 519
== 16 T Wilson 75 == 16 T Silver 41
== 28 F Slack 224 == 29 Blister Disco 22
== 30 G Baker 582 == 30 Balance c/d 1,591
2,353 2,353
Bank Statement
2017 Dr Cr Balance
£ £ £
Jun 1 Balance b/d 1,410
== 7 Cheque 62 1,472
== 8 F Lane 180 1,292
== 16 Cheque 75 1,367
== 17 J Rebus 519 848
== 18 T Silver 41 807
== 28 Cheque 224 1,031
== 29 SLM standing order 52 979
== 30 Flynn: trader’s credit 64 1,043
== 30 Bank charges 43 1,000
a) Prepare update cash book for month ended June 2017.
b) Prepare bank reconciliation statement showing the bank statement balance at the end
c) Give 2 benefits of bank reconciliation statements
Question 36
The bank statement for R Hood for the month of March 2016 is:
2016 Dr Cr Balance
£ £ £
Mar 1 Balance 4,200 O/D
== 8 T MacLeod 184 4,384 O/D
== 16 Cheque 292 4,092 O/D
== 20 W Milne 160 4,252 O/D
== 21 Cheque 369 3,883 O/D
== 31 G Frank: trader’s credit 88 3,795 O/D
== 31 TYF: standing order 32 3,827 O/D
== 31 Bank charges 19 3,846 O/D
The cash book for March 2016 is:

2016 Dr £ 2016 Cr £
Mar 16 G Philip 292 Mar 1 Balance b/d 4,200
== 21 J Forker 369 == 6 T MacLeod 184
== 31 S O’Hare 192 == 30 W Milne 160
== 31 Balance c/d 4,195 == 30 S Porter 504
5,048 5,048
a) Prepare update cash book for month ended March 2017.

b) Prepare bank reconciliation statement showing the bank statement balance at the end.
c) Give 3 reasons for dishonored cheque
Question 37
On 31 August 2011 Mr Wong received his bank statement, which stated that he owed his bank £650 on
that date. He checked this against his cash book which showed a balance on his bank account of £1 003 Dr.
On comparing the bank statement with his cash book, he identified several differences.
His bank statement showed a direct debit on 10 August for £125 in favour of the local council and a credit
transfer from a customer for £200 on 21 August, neither of which had been entered in the cash book.
He also discovered that his bank had not taken account of monies which he had paid in the previous day
totalling some £1 926 and that a cheque for £198 had not yet been presented to the bank for payment.
Both these items had been entered in his cash book.
a) State three other items that could be recorded in the bank statement before they are entered in
the cash book
b) Starting with the balance in the cash book on 31 August 2011 update the cash book with the
outstanding items. Balance the cash book at that date and bring the balance down on 1 September
2011.
c) Draw up the bank reconciliation statement at 31 August 2011
Question 38
Read the following and answer the questions below. On 31 December 2018 the bank column of Chanda
kumara’s cash book showed a debit balance of £1,500. The monthly bank statement written up to 31
December 2018 showed a credit balance of £2,950.
On checking the cash book with the bank statement it was discovered that the following transactions had
not been entered in the cash book:
• Dividends of £240 had been paid directly to the bank. A credit transfer
• Customs and Excise VAT refund of £260 had been collected by the bank.
• Bank charges £30. A direct debit of £70 for the RAC subscription had been paid by the bank.
• A standing order of £200 for Chanda kumara’s loan repayment had been paid by the bank.
• Chanda kumara’s deposit account balance of £1,400 was transferred into his bank current account.
A further check revealed the following items:
• Two cheques drawn in favour of T Cod £250 and F Haddock £290 had been entered in the cash
book but had not been presented for payment.
• Cash and cheques amounting to £690 had been paid into the bank on 31 December 2018 but were
not credited by the bank until 2 January 2019.
a) Starting with the debit balance of £1,500, bring the cash book (bank columns) up to date and then
balance the bank account.
b) Prepare a bank reconciliation statement as at 31 December 2018
c) What is the bank balance that will be recorded under balance sheet?
Question 39
The following are extracts from the cash book and the bank statement of Big Boss. You are required to:
Cash Book
2019 Dr £ 2019 Cr £
Dec 1 Balance b/d 3,419 Dec 8 B Young 462
== 7 F Lamb 101 == 15 F Gray 21
== 22 G Brock 44 == 28 T Errant 209
== 31 W Terry 319 == 31 Balance c/d 3,437
== 31 S Miller 246
4,129 4,129
Bank Statement
2019 Dr Cr Balance
£ £ £
Dec 1 Balance b/d 3,419
== 7 Cheque 101 3,520
== 11 B Young 462 3,058
== 20 F Gray 21 3,037
== 22 Cheque 44 3,081
== 31 Credit transfer: T Morris 93 3,174
== 31 Bank charges 47 3,127
a) Write the cash book up to date, and state the new balance as on 31 December 2019
b) Draw up a bank reconciliation statement as on 31 December 2019.
Question 40
The following is a summary of a cash book as presented by Gus Banda Ltd for the month of October:
£ £
Receipts 1,469 Balance b/d 761
Balance c/d 554 Payments 1,262
2,023 2,023
All receipts are banked and all payments are made by cheque On investigation you discover:
1. Bank charges of £136 entered on the bank statement have not been entered in the cash book.
2. Cheques drawn amounting to £267 had not been presented to the bank for payment.
3. Cheques received totalling £762 had been entered in the cash book and paid into the bank, but had
not been credited by the bank until 3 November.
4. A cheque for £22 for sundries had been entered in the cash book as a receipt instead of as
payment.
5. A cheque received from K Jones for £80 had been returned by the bank and marked ‘No funds
available’. No adjustment has been made in the cash book.
6. A standing order for a business rates installment of £150 on 30 October had not been entered in
the cash book.
7. All dividends received are credited directly to the bank account. During October amounts totalling
£62 were credited by the bank but no entries were made in the cash book.
8. A cheque drawn for £66 for stationery had been incorrectly entered in the cash book as £60.
9. The balance brought forward in the cash book should have been £711, not £761.
Required:
a) Show the adjustments required in the cash book.
b) Prepare a bank reconciliation statement as at 31 October
c) Explain the meaning of a debit balance in bank statement
Question 41
Mohan is a trader. On 24 April 2011 he had a bank overdraft of $150.

The following transactions took place during the week ended 30 April 2011.
1. April 25 withdrew $200, by cheque, for personal use.
2. April 26 Paid by cheque the balances on the accounts owed to:
• Kara, $400, less 3% cash discount
• Susan, $750, less 4% cash discount.
3. April 27 Cash sales, $630, paid into the bank.
4. April 28 Received a cheque from Lola for the balance of her account, $2000, less 4% cash discount.
April 30 Cashed cheque to pay wages, $430.
REQUIRED
a) Prepare the bank columns of Mohan’s cash book for the week ended 30 April 2011. Show the
balance brought down on 1 May 2011.
On 1 May 2011 Mohan received the following bank statement:

Bank Statement
Dr Cr Balance
$ $ $
April 24 Balance 150 Dr
April 25 Cheque 200 350 Dr
April 28 Cheque 388 738 Dr
April 29 Cheque 720 1 458 Dr
April 29 Credit Transfer (Dividend) 24 1 434 Dr
April 29 Credit 630 804 Dr
b) Starting with the closing balance from (a) update the bank columns in the cash book. Bring down
the amended balance
c) Prepare the bank reconciliation statement at 1 May 2011
Question 42
Time LTD provided the following balances for year ended 31/12/15
Balance as per bank account was Rs. 1000 on debit side while bank statement disclosed a credit balance of
Rs.600
After an investigation following items were revealed.
1. Following items were missing in the bank account

• Standing order in favor of a gas company Rs.120
• Bank charges Rs.30
• Dishonored cheques Rs.50
• Credit transfer (direct remittance) from Jamal Rs.100
2. These errors were revealed
• Cash paid for rent Rs.400 have been only recorded under rent account
• Cash book balance have been over casted by Rs.300
3. Cheques which are not presented for payments is Rs.500 while cheques which are not yet credited
is Rs.100
a) Prepare updated Bank account

b) Prepare Bank reconciliation statement
c) Explain the process of preparing a bank reconciliation statement
Question 43
Johnson provided the following information from its purchase ledger for month of May 2016.
Name of the Balance on Credit Purchase Payment to Cash discount
supplier 1.5.16 purchases returns credit suppliers
$ $ $ $ $
Mark 640 6420 740 4100 40
Nippon 890 9460 2600 90
Knight 463 10640 1400 120
Bishop 1670 7940 240 4000 240
Rock 740 6840 270 2300 70
Johnson sold goods on credit $300 to Rock on 13.5.16.Rock agreed to set this off against the amount owed
to him by Johnson.
a) Prepare the Purchase ledger control account for month ended 31.5.16.
Question 44
Michel provided the following information from its purchase ledger for month of May 2016.
Name of the Balance on Credit Purchase Payment to Cash discount
supplier 1.5.16 purchases returns credit suppliers
$ $ $ $ $
Scholes 1420 6780 560 3250 140
Gibson 790 7600 1600 200
Martin 786 8900 140 5200 100
Jackson 142 6540 3489 50
Ramsey 743 8750 70 1908 170
Michel sold goods on credit for $300 to Martin on 13.5.16. Martin agreed to set this off against the amount
owed to him by Michel.
a) Prepare the Purchase ledger control account for month ended 31.5.16.
Question 45
J. Ramos provided following data for year 2016.
Debtors balance as at 1st January 2016
$
Debit balance 19000
Credit balance 1200
Additional information:
$
Cash sales 15000
Credit sales 79000
Cash and cheques received from customers 45000
Return inwards 2500
Return outwards 1500
Bad debts written off 1800
Refunds from credit customers 1200
Set against purchase ledger 1600
Dishonored cheques from debtors 1000
There is no credit balance at 31st December 2016
a) Prepare debtors control account for year ended 31/12/2016

b) Given reasons for a credit balance in a debtors’ control account
c) Explain the meaning of set off
Question 46
From the following figures, compile debtors ledger and creditors ledger control accounts for the month,
and ascertain what the net balances of the respective ledgers should be on 31 January 2016. Balances on 1
January 2016
£
Debtors’ ledger – Dr 46,462
Cr 245
Creditor’s ledger – Dr 1,472
Cr 25,465
Total for the month to 31 January 2016
£
Purchases 76,474
Sales 126,024
Purchase returns 2,154
Debtors accounts settled by contra accounts with creditors 455
Bad debt written off 1,253
Discounts and allowances to customers 746
Cash received from customers 120,464
Cash discount received 1,942
Cash paid to creditors 70,476
Cash paid to customers 52
Required
a) Prepare creditors control a/c and show the closing balance for 31/1/16
b) Prepare debtors control a/c and show the closing balance for 31/1/16
Question 47
PEPAL ltd had the following balances for year ended 31/12/14
I. Balances at 1/1/14
• Debtors balances: Debit balance $265000
Credit balance $15500
II. Other information

• Sales: Credit $566000
Cash $144000
• Cash discount allowed to debtors $15000
• Trade discount allowed to debtors $25000
• Credit note issued $30000
• Credit note received $20000
• Set off against purchase ledger $5050
• Provision for doubtful debts $1500
• Bad debts written off $2525
• Cash and cheques received from all customers $494000
• Dishonored cheques $11000
III. At 31/12/14 PEPAL ltd owed $1560 to debtors
Required
a) Prepare debtors control a/c and show the closing balance for 31/12/14
b) Evaluate the usefulness of control accounts.
Question 48
Blue Bee ltd had the following balances for year ended 31/12/14
I. Balances at 1/1/14
• Creditors balances: Debit balance $3650
Credit balance $155000
II. Other information

• Purchases: Credit $466000
Cash $150000
• Cash discount received from creditor $15000
• Trade discount received from creditors $25093
• Credit note issued $30000
• Credit note received $20260
• Set off against sales ledger $7050
• Provision for doubtful debts $1500
• Bad debts recovered $2525
• Cash and cheques paid to suppliers $300000
• Cash refund by creditors $1100
III. At 31/12/14 Creditors owed $2060 to Blue Bee ltd
Required
a) Prepare creditors control a/c and show the closing balance for 31/12/14
b) Explain the meaning of a set off against sales ledger
Question 49
Following balances were provided after preparing all the ledger accounts
Buildings $100000
Motor vehicles $80000
Provision for depreciation: motor vehicle $20000
Stock $4000
Debtors $30000
Salaries $20000
Discount received $3000
Sales $40000
Purchases $28000
Return inwards $2000
Return outwards $1000
Drawings $12000
Provision for doubtful debts $1000
Capital $201000
Rent $12000
Creditors $22000
a) Prepare a trial balance
b) Explain two errors not affected to the trial balance
Question 50
Jason Moore had the following balances in his books on 31 October 2008:
$
Capital 16 550
Drawings 8 000
Plant and equipment 18 000
Provision for depreciation of plant and equipment 3 000
Stock 4 000
Debtors 3 000
Creditors 2 000
Cash 1 500
Sales 40 000
Purchases 21 000
Sundry expenses 6 200
REQUIRED
a) Extract the trial balance for Jason Moore at 31 October 2008.
Question 51
On 31 May 2010, Leung extracted the following balances from his books.
$
Gross profit 6 650
Inventory (stock) 4 600
Bank loan 3 500
Trade Receivables (debtors) 1 200
Trade Payables (creditors) 2 100
Office equipment 4 000
Bank 1 750 Dr
Rent and expenses 3 850
Capital ?
REQUIRED
a) Prepare the trial balance at 31 May 2010
Question 52
Mary started business on 1 January 2012, renting premises at $16 000 per annum, paid by installments on
the first day of January, April, July, and October.
On 1 August 2012 Mary let part of the premises to another business for $6000 per annum, to be paid by
installments on the first day of August, November, February, and May.
Mary paid the rent on 1 January, 1 April, and 1 July 2012.
The tenant paid rent to Mary on 1 August and 1 November 2012.
REQUIRED
(a) Prepare the rent payable account for the year ended 31 December 2012. Balance the account and
bring the balance down on 1 January 2013.
A. Rent Payable account

B. Rent Received account
Question 53
On 1 January 2016, Motor Traders had the following entries in its ledger accounts.
• Insurance £400 owing
• Commission receivable £300 owing to Motor Traders
• Provision for doubtful debts £1250
The following information is available for the financial year ended 31 December 2016.
(i) Insurance was paid as follows:
• 26 February 2006 £1800
• 15 October 2006 £1500
The payment on 15 October 2006 related to the period 1 October 2016 to 31 March 2017.
(ii) Commission receivable was as follows:

• 10 January 2016 £300
• 18 January 2016 £100
• 13 November 2016 £2800
On 31 December 2016, £500 owed commission to Motor Traders.
(iii) The trade debtors’ balance at 31 December 2016 was £40000. The provision for doubtful debts is to be
provided at 2% on the remainder of debtors.
A. Insurance account
B. Commission account
C. Provision for doubtful debts
Question 54
The following balances have been taken from the books of Wong Limited.
1 April 2005 31 March 2006

£ £
Insurance 700 prepaid 850 prepaid
Wages 4 300 owing 4 700 owing
Commission receivable 600 owing 920 owing
The following transactions relate to the year ended 31 March 2006. All the transactions were through the
bank account.
£
Insurance paid 5 300
Insurance refund 400
Wages 78 700
Commission receivable 6 200
A. Insurance account
B. Wages account
C. Commission receivable account
Question 55
The following balances were in the ledger of Archi on 1 January 2016:
£
Sundry expenses 500 Dr
Premises repairs 150 Dr
Rent receivable 200 Dr
The following were the transactions for the year ended 31 December 2016. All payments and receipts were
made by cheque:
1. Sundry expense payments:
£
14 May Paid 1500
30 October Paid 1200 for the six months to 31 March 2016
2. Premises repairs payments:
£
8 January Paid 550
1 April Paid 1000
18 August Paid 875
On 31 December 2016 it was estimated that £440 owed for premises repairs.
3. Rent receivable:
£
6 February Received 1200
26 June Received 900
The rent receivable for the year was £1600.
(a) Explain the meaning of the debit balance on the Rent receivable account on 1 January 2016. (2)
(b) Prepare the following accounts for the year ended 31 December 2016, including the appropriate
transfer to the financial statements:
(i) Sundry expenses account

(ii) Premises repairs account
(iii) Rent receivable account.
Question 56
The following information is also available from the books of Amirtha.
1 January 2011 31 December 2011

$ $
Wages 2 040 accrued 2 130 accrued
Insurance 130 accrued 610 prepaid
Rent received 1 490 prepaid 1 320 prepaid
During the year ended 31 December 2011 the following transactions took place.
$
Wages paid 24 100
Insurance paid 1 400
Rent received 14 000
All transactions are through the bank account.
A. Wages account
B. Insurance account
C. Rent received account
Question 57
Jon snow is a trader. His financial year ends on 31 March.
He provided the following information about stationery for the year ended 31 March 2016.
2013 $
April 1 Inventory of stationery 120
June 30 Purchased stationery and paid by cheque 360
Aug 1 Took stationery for personal use 50
2014
Mar 31 Inventory of stationery 90
REQUIRED
Write up the stationery account as it would appear in Jon snow’s ledger for the year ended 31 March 2016.
Balance the account and bring down the balance on 1 April 2016.
A. Jon snow Stationery account
B. Explain how the business entity principle has been applied in the preparation of the stationery
account.
Jon snow maintains one combined account for rent and rates. He provided the following information for
the year ended 31 March 2016.
On 1 April 2013 two months’ rates, totalling $380, were prepaid and one month’s rent, $260, was accrued.
During the year ended 31 March 2016 the following payments were made by cheque:
Rates 13 months to 30 June 2014 2470
Rent 13 months to 31 March 2014 3380
A. Rates and rent account

B. Explain how the accruals (matching) principle has been applied in the preparation of the rent and
rates account.
Question 58
The following information is also available from the books of Amirtha.
1 January 2017 31 December 2017

$ $
Salaries 2040 accrued 2130 accrued
Insurance 230 accrued 610 prepaid
Rent received 1490 prepaid 1320 prepaid
During the year ended 31 December 2017 the following transactions took place.
$
Salaries paid 41000
Insurance paid 1400
Rent received 12000
All transactions are through the bank account.
A. Salaries account
B. Insurance account
C. Rent received account
Question 59
On 1 January 2008 the following balances remained in the books of Gibbs Wholesalers:
• Electricity 164 Cr
• Buildings insurance 160 Dr
• Rent receivable 200 Cr
During the year ended 31 December 2008 the following bank transactions were recorded:
i. Electricity
• 2 April Payment £462

• 1 May Receipt for refund £38
• 9 October Payment £365
• On 31 December 2008 it was estimated that £175 was due for electricity used.
ii. On 1 April 2008 a payment of £360 was made for 12 months buildings insurance to 31 March 2009.
iii. Ten monthly payments of £200 were received from the tenant. The rent of the premises is £200 per
month.
Required:
Prepare the following ledger accounts for the year ended 31 December 2008, showing the transfers to the
profit and loss account and the balances brought down.
A. Electricity account
B. Buildings insurance account
C. Rent receivable account.
Question 60
Maxis’ Limited has prepared the following aged debtors schedule as at 31 December 2015.
Age of debt Debtors £
Up to 35 days 12800
35 to 60 days 14600
61 to 90 days 5100
Over 90 days 300
Maxis Limited maintains a provision for doubtful debts account. On 1 January 2015, the account had a
balance of £800. The bad debts for the year ended 31 December 2014 amounted to £1550.
On 2 October 2015, Joy Limited, a debtor, ceased trading and Maxis Limited received payment of £0.40 for
every one pound of the debt of £600. The remainder of the debt was written off in full at that date.
Other bad debts written off during the year totaled £400
The policy applied by Maxis Limited for the provision for doubtful debts is on a sliding scale basis as
follows.
Age of debt %
Up to 35 days 1
35 to 60 days 2
61 to 90 days 4
Over 90 days 10
Prepare the following ledger accounts for the year ended 31 December 2005, showing the closing entry to
the final accounts at the end of the year.
A. Provision for doubtful debts

B. Bad debts.
C. Joy Limited.
D. Explain the difference between provision for doubtful debts and bad debts
Question 61
Nottu Mottu Limited has prepared the following aged debtors schedule as at 31 December 2005.
Age of debt Debtors £
Up to 30 days 15 800
31 to 60 days 14 600
61 to 90 days 6 100
Over 90 days 800
Nottu Mottu Limited maintains a provision for doubtful debts account. On 1 January 2005, the account had
a balance of £1000. The bad debts for the year ended 31 December 2004 amounted to £1520.
The policy applied by Nottu Mottu Limited for the provision for doubtful debts is on a sliding scale basis as
follows.
Age of debt %
Up to 30 days 1
31 to 60 days 2
61 to 90 days 3
Over 90 days 10
Prepare the following ledger accounts for the year ended 31 December 2005, showing the closing entry to
the final accounts at the end of the year.
A. Provision for doubtful debts
Question 62
The following extract was taken from the Trial Balance of Chilver Traders as at 31 December 2004.
Dr Cr
£ £
Debtors 38,000
Provision for doubtful debts 2,600
Mike Dee, a debtor, included in the debtors balance above, has recently been declared bankrupt and will
not be paying his account of £600. This amount is to be treated as a bad debt.
The provision for doubtful debts is then to be adjusted to provide for a specific debt of £400 owed by Katie
Flynn, plus a general provision of 5% on the remaining debtors.
REQUIRED
(a) Journal entries to record the following. (Narratives are not required.)
(i) The debt owed by Mike Dee being treated as a bad debt.
(ii) The adjustment to the new provision for doubtful debts.
Question 63
Following balances were provided by Jumbos puppy ltd
• Debtors Balance as at 1/1/16 :$16900

Provision doubtful debts is maintained at 5% of debtors
A. Prepare provision for doubtful debts account.
Question 64
Following balances were provided by Boson ltd

Provision doubtful debts is maintained at 4% of debtors
A. Prepare provision for doubtful debts account.
Question 65
During the year ended 31 December 2015, Marisa, a trader, wrote off the sum of £750 in bad debts. At this
date she was also advised that a debtor, Joint bolt, who owed £800 on 1 January 2015 had been declared
bankrupt. Marisa received £350 in full settlement of this debt and the remainder was to be written off.
A. Prepare the bad debts account in the books of Marisa for the year ended 31 December 2015.
B. Prepare the account of Joint Bolt’s for the year ended 31 December 2012
Questions 66
On 30 November Amir Khan owed the business £5 500. Owner (Rania) was advised that Amir Khan was
unable to pay his outstanding debt and it was agreed to write this off as a bad debt.
A. Prepare the account of Amir Khan and the bad debts account for the month of November, clearly
showing any transfers to the profit and loss account.
B. Explain which accounting Rania concept has applied
Question 67
During the year ended 31 December 2016, Sammy, a trader, wrote off the sum of £850 in bad debts. At
this date she was also advised that a debtor, Pointy, who owed £1000 on 1 January 2016 had been
declared bankrupt. Sammy received $0.30 every $1 in full settlement of this debt and the remainder was
to be written off.
(a) Prepare the bad debts account in the books of Sammy for the year ended 31 December 2016.
(b) Prepare the account of Pointy’s for the year ended 31 December 2016
Question 68
The following information relates to PAP Holding; fixed assets of computer equipment
a) Account balances at 1st January 2015:
• Computer equipment account $240000

• Computer equipment provision for depreciation account $90000
b) Purchases and sales of computer equipment :

• On 31st April 2015 computer equipment purchased on 1st may 2013 for $30000 was sold on
credit for $18500
• On 1st January 2015 new computer purchased credit at a cost $100000
c) The policy of PAP holdings is to charge depreciation at the rate of 20% on cost using straight line
method. In the year of sale, depreciation will be charged on the proportion of the year for which the
Asset had been owned. In the year of purchase a full year’s depreciation will be charged.
Required:
A. Prepare, for the year ended 31st December 2015, the:
I. Computer equipment account
II. Computer equipment provision for depreciation account
III. Disposal account
B. Explain the term depreciation indicating accounting concepts used for depreciation
Question 69
The following information relates to MOM holding; fixed assets of motor vehicles
a) Account balances at 1st January 2015:
• Motor vehicles account $300000

• Motor vehicles provision for depreciation account $120000
b) Purchases and sales of Motor vehicles:
• On 31st July 2015 Motor vehicle purchased on 1st may 2013 for $50000 was sold on credit
for $30000
• On 1st January 2015 new Motor vehicle purchased credit at a cost $120000
c) The policy of MOM holdings is to charge depreciation at the rate of 20% on cost using reducing
balance method. In the year of sale, no depreciation will be charged for the Asset. In the year of
purchase a full year’s depreciation will be charged.
Required:
Prepare, for the year ended 31st December 2015, the:
I. Computer equipment account
II. Computer equipment provision for depreciation account
III. Disposal account
Question 70
The following Balance Sheet extract has been taken from the accounts of Kothamalli Ltd as at 31 December
2015.
Fixed Assets Cost Depreciation Net Book To Date Value

£ £ £
Office equipment 160 000 80 000 80000
During the year ended 31 December 2016 the following transactions took place for office equipment.
Disposals
Disposal Date Purchase Date Original Cost Disposal Proceeds
£ £
30 April 2016 1 January 2013 20 000 4000
Depreciation for office equipment is charged by the reducing balance method at 20%.
A full year’s depreciation is charged in the year of purchase, but no depreciation is charged in the year of
sale
All transactions were by cheque.
The following ledger accounts for the year ended 31 December 2016. Dates are not required (15M)
i. Office equipment
ii. Provision for depreciation
iii. Disposal account
Question 71
The following Balance Sheet extract has been taken from the accounts of Watakka Ltd as at 31 December
2014.
Fixed Assets Cost Depreciation Net Book To Date Value

£ £ £
Office equipment 160 400 99 100 74 300
During the year ended 31 December 2016 the following transactions took place for office equipment.
Disposals
Disposal Date Purchase Date Original Cost Disposal Proceeds

£ £
30 April 2015 1 January 2013 18 000 3 800
Additions
Date Cost
£
1 October 2015 20 000
Depreciation for office equipment is charged by the straight line method at 20%.
A full year’s depreciation is charged in the year of purchase, but no depreciation is charged in the year of
sale
All transactions were by cheque.
The following ledger accounts for the year ended 31 December 2016. Dates are not required
i. Office equipment
ii. Provision for doubtful debts
iv. Explain the difference between straight line method and reducing balance method
Question 72
Polson provided following information relating to motor vehicles
• On 11/4/12 a delivery vehicle was purchased for $16000 paying by cheque

• On 31/5/14 the delivery vehicle was sold for $9000
• On 13/7/14 another delivery vehicle was purchased for $10000 on credit from AB ltd
Additional information
• All motor vehicles are depreciated at 20% on straight line method and full year depreciation is
charged in the year of purchase and none in the year of sale.
• Year is ended on 31st December
Prepare following accounts from 2012 to 31/12/2014.
i. Motor vehicle account

ii. Provision for depreciation account
Question 73
Bolly provided following information relating to equipment
• On 1/1/15 a photocopy machine was purchased for $15000 paying by cheque

• On 31/9/17 photocopy machine purchased on 1/1/14 was sold for $8000
• On 1/7/17 another photocopy machine was purchased for $4000 on credit from C ltd
• All equipments are depreciated at 20% on reducing balance method and depreciation is charged
according into months of ownership.
i. Equipment account
Question 74
Polson provided following information relating to motor vehicles

• On 1/7/16 a salesmen car was purchased for $8000 on credit from A ltd
• On 31/7/18 the delivery vehicle was sold for $8500
• All motor vehicles are depreciated at 20% on straight line method and full year depreciation is
charged in the year of purchase and none in the year of sale.
• Year is ended on 31st March
iv. Motor vehicle account

v. Provision for depreciation account
vi. Disposal account
Question 75
Abbas provided following information relating to motor vehicles

• On 1/7/18 another delivery vehicle was purchased for $10000 on credit from A ltd
• All motor vehicles are depreciated at 20% on straight line method and depreciation is charged
according into months of ownership
i. Motor vehicle account

Question 76
Jimmy provided following information relating to equipment
• On 1/5/17 a photocopy machine was purchased for $18000 paying by cheque

• On 1/8/18 another photocopy machine was purchased for $14000 on credit from A ltd
• All equipments are depreciated at 20% on reducing balance method and depreciation is charged
according into months of ownership.
• Year is ended on 30th April
i. Equipment
Question 77
Mark is a sole trade who have limited amount of accounting knowledge so he have failed apply correct
accounting concept for the transactions.
• The owner taken goods costing $1000 for personal use but no adjustment is made.
• 10% of debtors it expected to be bad debts in future but no adjustment is made
• Until current financial period motor vehicles are depreciated at straight line method but during
2017 they changed to reducing balance method.
• Two door mats costing $4 have been recorded as a fixed asset.
• Office expenses accrued by $200 but it have not been adjusted in financial statements.
A. State the concept that mark has failed to apply from 1-5 above
B. Explain how each could be corrected using correct accounting concept
Question 78
Rumson has limited knowledge on accounting so he failed to apply correct accounting concept for
following transactions.
• Rumson charges provision for doubtful debts at 5% of debtors but current year he have changed
this to 4%.
• Rumson has taken business cash of $1000 to pay her private expenses and this have been recorded
under profit and loss account.
• A debtor who owes $100 has been bankrupted but no adjustment is made.
• Rumson’s business is located in popular place in so they have accounted for goodwill of $10000 in
balance sheet.
• Rumson has rented out a warehouse for $12000 per annum but during 2017 he have recorded in
profit and loss account as income $10000 which is amount he received.
A. State the concept that mark has failed to apply from 1-5 above
B. Explain how each could be corrected using correct accounting concept
Question 79
Expenditure Type of Expenditure
1 Buying van …………………..
2 Petrol costs for van …………………..
3 Repairs to van …………………..
4 Putting extra headlights on van …………………..
5 Buying machinery …………………..
6 Electricity costs of using machinery …………………..
7 We spent £1,500 on machinery: £1,000
was for an item added to the machine; …………………..
and £500 was for repairs
8 Painting outside of new building …………………..
9 Three years later – repainting outside of building in (8) …………………..
Question 80
Indicate which of the following would be revenue items and which would be capital items in a wholesale
bakery:
(a) Purchase of a new van. …………………..
(b) Purchase of replacement engine for existing van. …………………..
(c) Cost of altering interior of new van to increase carrying capacity. …………………..
(d) Cost of motor tax for new van. …………………..
(e) Cost of motor tax for existing van. …………………..
(f) Cost of painting business’s name on new van. …………………..
(g) Repair and maintenance of existing van. …………………..
Explain the difference in between capital revenue expenditure
Question 81
For the business of J Charles, wholesale chemist, classify the following between ‘capital’ and ‘revenue’
expenditure:
(a) Purchase of an extra van. …………………..
(b) Cost of rebuilding warehouse wall which had fallen down. …………………..
(c) Building extension to the warehouse. …………………..
(d) Painting extension to warehouse when it is first built. …………………..
(e) Repainting extension to warehouse three years later than that done in (d). …………………..
(f) Carriage costs on bricks for new warehouse extension. …………………..
(g) Carriage costs on purchases. …………………..
(h) Carriage costs on sales. …………………..
(i) Legal costs of collecting debts. …………………..
(j) Legal charges on acquiring new premises for office. …………………..
(k) Fire insurance premium…………………..
Explain the effects of incorrect capital and revenue expenditure
Question 82
On 31 December 2015 the following balances were extracted from the books of M.Toz, a sole trader.
Account Balance
£
Bad debts 3 200

Salaries 20000
Business rates 4 650
Carriage inwards 14 318
Charities 2000
Carriage outwards 28 663
Fixtures and fittings – cost 20 000
Commission received 2500
Audit fees 1200
General expenses 23 897
Purchase returns 1000
Insurance 4 322
Motor expenses 27 690
Motor vehicles – cost 30 000
Opening stock 45 000
Premises – cost 250 000
Provision for depreciation –
Fixtures and fittings 5 000
Motor vehicles 10 000
Purchases 344 897
Returns inwards 12 579
Sales 497 600
The following additional information at 31 December 2015 should be taken into account.
1. Stock was valued at £66 346.
2. The purchase of a new motor vehicle, £5 000, has been included in the motor expenses account.
3. Depreciation on fixed assets is to be provided for as follows: fixtures and fittings 10% per annum using
the straight line method motor vehicles 20% using the reducing balance method it is company policy to
provide a full year’s depreciation on all assets held at the year end.
4. On 31 December 2015 business rates, £500, were accrued and insurance, £122, was prepaid.
5. During the year Toz had withdrawn stock to the value of £2 190 for his own personal use.
6. Provision for doubtful has increase by £300
A. Prepare the trading and profit and loss account for the year ending 31 December 2016.
B. Making appropriate reference to the accounting concepts that you have used, explain your treatment of
additional information
Question 83
On 31 December 2015 the following balances were extracted from the books of B.Lara, a sole trader.
Account Balance
£
Communication costs 200
Bad debts 3 200
Salaries and wages 15000
Interest received 500
Debtors 30000
Business rates 4 650
Heating and lighting 14 318
Carriage 30000
Equipment – cost 20 000
Rent and rates 1500
Insurance 4 322
Motor vehicles – cost 40 000
Opening stock 35 000
Premises – cost 250 000
Equipment 5 000
Motor vehicles 10 000
Purchases 244 897
Administration expenses 1500
Marketing expenses 2000
Returns inwards 12 579
Sales 397 600
The following additional information at 31 December 2016 should be taken into account.
1. Stock was valued at £46 346.
2. The purchase of a new motor vehicle, £10 000, has been included in the motor expenses account.
3. Depreciation on fixed assets is to be provided for as follows: equipment 10% per annum using the
straight line method motor vehicles 25% using the reducing balance method it is company policy to
provide a full year’s depreciation on all assets held at the year end.
4. On 31 December 2015 wages, £600, were accrued and general expenses, £522, was prepaid.
5. During the year B.Lara had withdrawn stock to the value of £1 290 for his own personal use.
6. Provision for doubtful is maintained is to be increased to £2000
7. Carriage expenses are apportioned between carriage inwards and carriage outwards at 40% and 60%
respectively.
A. Prepare the income statement for the year ending 31 December 2015.
B. Explain the importance of preparing balance sheet for a business
Question 84
The following trial balance was extracted from the books of F Buck on 30 April 2016. From it, and the note
about stock, prepare his trading and profit and loss account for the year ended 30 April 2016, and a
balance sheet as at that date.
Dr Cr
£ £
Sales 210,420
Purchases 108,680
Stock 1 May 2015 9,410
Carriage outwards 1,115
Carriage inwards 840
Returns inwards 4,900
Returns outwards 3,720
Salaries and wages 41,800
Motor expenses 912
Rent 6,800
Sundry expenses 318
Motor vehicles 14,400
Fixtures and fittings 912
Debtors 23,200
Creditors 14,100
Cash at bank 4,100
Cash in hand 240
Drawings 29,440
Capital 18,827
247,067 247,067
The following additional information at 30 April 2016 should be taken into account
1. Stock at 30 April 20X7 was £11,290

2. Goods drawing £200
3. Salaries and wages accrued £1200
4. Depreciation policy
• Motor vehicles at 10% on cost value
• Fixtures and fittings at 20% on straight line method
A. Prepare the income statement for the year ended.

B. Prepare statement of financial position for year ended 31/4/16
C. Explain the concept applied for (II)adjustment
Question 85
From the following trial balance of A Muji, extracted after one year’s trading, prepare a trading and profit
and loss account and balance sheet for the year ended 31 December 2015.
Trial Balance as at 31 December 2015
Dr Cr
£ £
Sales 190,576
Purchases 119,832
Salaries 56,527
Motor expenses 2,416
Rent 1,894
Insurance 372
General expenses 85
Premises 95,420
Motor vehicles 16,594
Debtors 26,740
Creditors 16,524
Cash at bank 16,519
Cash in hand 342
Drawings 8,425
Loan 10000
Capital 128,066
345,166 345,166
• Stock at 31 December 2015 was £12,408.
• General expenses prepaid by £25
• Salaries Accrued by £477
• One half of the motor expenses are incurred for carriage inwards and rest for carriage outwards
• Loan interest payable £1000
A. Prepare the income statement for the year ended

B. Prepare statement of financial position for year ended 31/12/15
C. Explain the concept applied for (III) adjustment.
Question 86
The following trial balance was extracted from the books of Amir Sadiq as at 31 March 2003.
$ $
Capital 33000
Drawings 2500
Buildings at cost 20000
Fixtures and equipment at valuation 3400
Motor vehicles at cost 8000
Provision for depreciation of motor vehicles 3250
Debtors 7500
Creditors 6700
Bank overdraft 2880
Motor vehicle expenses 1240
General expenses 2030
Wages 11940
Insurance 1470
Sales 92100
Purchases 68500
Sales returns 1200
Stock 1 April 2002 9900
138380 138380
• At 31 March 2003: Stock was valued at $10200. Wages outstanding amounted to $1080. Insurance
prepaid amounted to $210.
• During the year ended 31 March 2003 Amir took goods costing $300 for his own use. No entries
had been made in the accounting records.
• A debtor who owed $500 was written off as a bad debt. The provision for doubtful debts is to be
maintained at 2% of the debtors.
• Motor vehicles are to be depreciated at 20% per annum using the reducing balance method.
• Fixtures and equipment were valued at $2800 on 31 March 2003. No fixtures and equipment were
bought or sold during the year ended 31 March 2003.
A. Prepare the income statement for the year ended.

B. Prepare statement of financial position
Question 87
Jasmine is a retailer of fashion goods. The following balances were extracted from her books on 30
September 2011.
$
Revenue (sales) 210 000
Purchases 113 500
Goods returned by customers 8 120
Goods returned to suppliers 3 400
Inventory at 1 October 2010 9 430
Carriage 1 700
Insurance 5 600
Light and heat 6 300
Staff wages 27 000
Advertising 10 600
Discount received 1 750
Building costs 20 100
Land and buildings at cost 100 000
Fixtures and fittings at cost 18 000
Computer equipment at cost 12 000
Provisions for depreciation: Fixtures and fittings 7 200
Computer equipment 3 600
Disposal account 200 Cr
7% Bank loan repayable 30 March 2014 20 000
Bank overdraft 18 500
Trade receivables 8 200
Trade payables 26 750
Drawings 15 500
Capital at 1 October 2010 80 000
I. Inventory at 30 September 2011 was valued at $11 780.
II. The cost of carriage from suppliers was $500, the remainder of the cost related to the delivery of
goods to customers.
III. At 30 September 2011:
• Heating expenses, $375, were accrued.
• Insurance, $1120, is prepaid.
IV. The 7% bank loan was received on 1 April 2011. Interest is payable on each anniversary of the loan.
V. Buildings costs consists of $16 000 to build an extension to the building and $4100 to repair the
heating system.
VI. Depreciation is charged on:
• Fixtures and fittings at the rate of 20% per annum on cost using the straight line method.
•Computer equipment at the rate of 30% per annum using the diminishing (reducing) balance
method.
VII. A provision for doubtful debts is to be maintained at 5% of trade receivables.
REQUIRED
A. Prepare the income statement for Jasmine for the year ended 30 September 2011.
B. Prepare statement of financial position at 30 September 2011.
C. Explain the concept applied for VII adjustment
Question 89
Following information relates to Miss. Donki
Details Dr Cr.
Buildings at cost 1000000
Motor vehicles at cost 200000
Stock at cost 10000
Debtors 35000
Land at cost 500000
Telephone expense 2000
Salaries 5000
Bank 30000
Cash in hand 2000
Drawings 30000
Net profit 250000
Creditors 50000
10% bank loan 600000
Loan interest 15000
Capital 674000
Goodwill 100000
Provision for depreciation:
Motor vehicles 50000
Buildings 200000
1879000 1879000
A. Prepare statement of financial position for year ended 31/12/16(15m)
Question 90
The following trial balance was extracted from the accounts of Mutha after the preparation of the trading,
profit and loss account for the year Mutha
Trial Balance as at 31 March 2015
Debit Credit
£ £
Accruals 875
Bank 8560
Bank loan – payable 2017 16 000
Capital 64 500
Closing stock 6 000
Creditors 15 680
Debtors 4 980
Drawings 21 000
Fixtures and fittings (cost) 40 000
Motor vehicles (cost) 55 000
Net profit 14 366
Prepayments 1 430
Provision for depreciation – fixtures and fittings 5 000
Provision for depreciation – motor vehicles 19 800
A. Prepare the capital account of Mutha for the year ended 31 March 2015. Balance the account on
that date and bring the balance down to 1 April 2015.
B. Prepare statement of financial position as at 31 March 2015
Question 91
The following is the trial balance of T ROLLO as at 31 March 2019. Draw up a set of financial statements for
the year ended 31 March 2019.
£
Sales 276,400
Commissions paid 1,930
Insurance 1,830
Bad debts 1500
Purchases 141,300
Carriage inwards 1,350
Wages and salaries 63,400
Business rates 3,800
Fixtures 1,106
Stock 1 April 2018 52,800
Cash at bank 31,420
Communication expenses 714
Sundry expenses 208
Provision for depreciation; fixtures 500
Buildings 125,000
Debtors 45,900
Creditors 24,870
Cash in hand 276
Drawings 37,320
Capital 210,516
• Stock at 31 March 2019 was £58,440.

• Provision for doubtful debts are maintained at 5% of debtors
• Business rates prepaid by $100 while wages accrued by $200
• Fixtures depreciated at 10% on book value while buildings are depreciated at 5% of cost
• A previously written off bad debt of 200 was recovered at 30.3.2019.
A. Prepare the trading and profit and loss account for the year ending 31 December 2015. (20
B. Prepare the balance sheet for year ended 31/4/16
Question 92
Brown drew up the following trial balance as at 30 September 2018. You are to draft the trading and profit
and loss account for the year ended 30 September 2018 and a balance sheet as at that date.
Dr £ Cr £
Capital 49,675
Drawings 28,600
Cash at bank 4,420
Cash in hand 112
Debtors 38,100
Creditors 26,300
Stock 30 September 2017 72,410
Van 5,650
Office equipment 7,470
Sales 391,400
Purchases 254,810
Returns inwards 2,110
Motor expenses 1,490
Rent 8,200
Telephone charges 680
Wages and salaries 39,600
Insurance 745
Office expenses 392
Sundry expenses 216
468,615 468,615
• Stock at 30 September 2018 £34500

• Office prepaid by £12
• Wages and salaries accrued £150
• On 1/7/2018 telephone expenses of £360 are paid until 30.8.2018.
Question 93
MCQ Limited manufactures footwear. It provided the following information for the year ended 31 October
2014.
£
Inventory 1 November 2013:
Raw materials 35 000
Work in progress 14 650
Finished goods 68 000
Purchases of raw materials 262 000
Carriage 12 000
Factory wages 78 600
Factory salaries 38 930
Factory machinery – cost 450 000
Factory machinery – provision for depreciation 200 000
Factory power 22 379
Sales 800000
Heat and light 26 000
Insurance 1 500
Rent and rates 8 000
Inventory 31 October 2014:

• On 31 October 2014 insurance paid in advance amounted to £1500 and factory salaries owing were
£4 400.
• Heat and light, insurance, and rent and rates are to be apportioned ¾ to the factory and ¼ to the
administration building.
• Factory machinery is depreciated at the rate of 20% on the reducing balance basis.
• Carriage cost is apportioned ¾ for transportation of raw materials and ¼ of finished goods.
(a) Prepare the manufacturing account for the year ended 31 October 2014. (10m)
(b) Prepare the income statement. (8m)
(c) Explain the difference between direct labour and indirect labour.(2m)
Question 94
Marko Limited manufactures T-shirts. It provided the following information for the year ended 31 October
2015.
£
Carriage 15 000
Marketing 2000
Office equipment - cost 100000
Office equipment – provision for depreciation 50000
Sales 700000
Returns inwards 15000
Sundry expenses 10000
Insurance 1 500

• On 31 October 2015 insurance paid in advance amounted to £1200 and factory wages owing were
£2 200.
• Heat and light, Sundry expenses, insurance, and rent and rates are to be apportioned ¾ to the
factory and ¼ to the administration building.
• Factory machinery is depreciated at the rate of 25% on the reducing balance basis and equipment is
depreciated at 10% on cost value method.
• Owner withdraws 2000 valid finished goods.
(c)Explain the uses of preparing a manufacturing account (2m)
Question 95
Super Limited manufactures T-shirts. It provided the following information for the year ended 31 October
2015.
£
Office equipment - cost 100000
Carriage 15 000
Factory supervisors salary 10000
Marketing 12000
Administration salaries 10000
Office equipment – provision for depreciation 50000
Sales 650000
Returns inwards 15000
Sundry expenses 10000
Insurance 1 500

• On 31 October 2015 Marketing paid in advance amounted to £1200 and direct factory wages owing
were £4 200.
• Heat and light, Sundry expenses, insurance, and rent and rates are to be apportioned ¾ to the
factory and ¼ to the administration building.
• Factory machinery is depreciated at the rate of 25% on the reducing balance basis and equipment is
depreciated at 10% on cost value method.
• Owner withdraws 3000 valid raw materials goods.
(c) Explain the difference between three inventories in manufacturing businesses. (3m)
Question 96
The following balances were extracted from the books of Paul Lee, a manufacturer, on 31 May 2013.
$
Capital 220 000
Drawings 10 800
Factory machinery (cost) 210 000
Office equipment (cost) 60 000
Provision for depreciation: Factory machinery 75 600
Office equipment 21 600
Inventory at 1 June 2012: Raw materials 33 000
Revenue 426 088
Transport costs 29 400
Wages and salaries 140 600
Indirect factory expenses 18 423
Lighting and heating 23 140
Selling and administration expenses 10 742
Bad debts 1 000
Loan interest paid 2 000
Bank 658 Cr
6% Loan (repayable on 23 June 2018) 50 000
1 Inventory values at 31 May 2013: $
2 Transport costs are allocated 65% to raw materials and 35% to delivery of finished goods.
3 Wages and salaries include $56 000 for production managers’ salaries. The remaining balance is split
40% direct labour, 35% indirect labour and 25% office salaries.
4 Rent and rates are apportioned factory 80% and office 20%.
5 Lighting and heating are apportioned factory 70% and office 30%. On 31 May 2013 these were in arrears
by $860.
6 On 31 May 2013 selling and administration expenses had been prepaid by $230.
7 A provision for doubtful debts, representing 4% of trade receivables, is to be created.
8 Factory machinery is depreciated at 20% per annum using the diminishing (reducing) balance method.
Office equipment is depreciated at 12% per annum on cost.
(b) Prepare the trading and profit and loss account. (10m)
(c) Prepare the balance sheet
Question 97
Samson, a manufacturer of footwear, provided the following information for the year ended 31 March
2018.
At 1 April 2017 At 31 March 2018
£ £
Work-in-progress 6800 6100
In addition the following information was provided for the year ended 31 March 2018.
£
Direct wages 130 000
Salary of factory supervisor 45 000
Carriage on raw materials 9 800
Sales and administration costs 109 000
Depreciation of factory machinery 33 000
Rent 30 000
Power 15 000
Insurance 18 000
Sales(revenue) 850000
The costs of rent, power and insurance are apportioned 60% to the factory and 40% to the office.
1. Prepare the manufacturing account for the year ended 31 March 2018.
2. Prepare the trading account
Question 98
The following information was extracted from the books of Mohali Manufacturing on 31 December 2017.
At 1 January 2017 At 31 December 2017

£ £
Production cost 236 112

Purchases of finished goods 14028
Mohali Manufacturing marks up its cost of sales by 50%.
(a) Prepare the trading account for the year ended 31 December 2017.
Question 99
The following information was extracted from the books of SUNNY Manufacturing on 31 December 2017.
At 1 January 2017 At 31 December 2017

£ £
Production cost 136 112

Purchases of finished goods 14028
SUNNY Manufacturing charges a margin of 20%
(a) Prepare the trading account for the year ended 31 December 2017.
Question 100
Saul runs a manufacturing business.
The following information was provided for the year ended 31 December 2012.
£
Stock of raw materials – 1 January 2012 24 000
Stock of raw materials – 31 December 2012 34 000
Work in progress – 1 January 2012 9 760
Work in progress – 31 December 2012 10 380
Stock of finished goods – 1 January 2012 42 000
Stock of finished goods – 31 December 2012 53 000
Carriage on raw materials 6 000
Direct factory wages 110 000
Indirect factory expenses 185 000
Royalties 60 000
(A) Select the relevant figures and prepare a manufacturing account for the year ended 31 December 2012.
(11)
Question 101
The information below relates to the partnership of Jonti and Bunti .
Capital 1 May 2016 Jonti 40 000

Bunti 20 000
Current accounts 1 May 2016 Jonti Nil
Bunti 1 500 Dr
Drawings for the year ended 30 April 2017 Jonti 6 000
Bunti 20 000
The partnership agreement includes the following terms:
1 Interest on capital is allowed at 6 % per annum.
2 Bunti receives a salary of $15 000.
3 Interest on drawings is charged at 4 % per annum on total drawings for the year.
4 Profits and losses are shared equally.
Additional capital, $20 000, was introduced by Jonti on 1 August 2008.
Net profit for the year ended 30 April 2017 was $20 500.
REQUIRED
(a) State two differences between a partnership and a limited company

(b) Prepare the appropriation account for the year ended 30 April 2017.
(c) Prepare the current account of Bunti for the year ended 30 April 2017. Bring down the balance on 1
May 2009.
Question 102
Hachi and Bachi are in partnership sharing profits and losses in the ratio 2:1. Their partnership agreement
allows for interest on capital at 5% per annum and a partnership salary to Hachi of £10000 per annum. The
following trial balance was extracted from the books of the partnership on 31 December 2015.
Dr Cr
£ £
Bank 9 400
Capital accounts: Hachi 200 000
Bachi 70 000
Current accounts: Hachi 13 750
Bachi 1 500
Creditors 14 700
Debtors 29 000
Drawings: Hachi 14 000
Bachi 17 500
Motor vehicles at cost 36 000
Provision for depreciation – Motor vehicles 6 000
Purchases 196 000
Rent, rates and insurance 16 800
Sales 320 000
Stock at 1 January 2015 13 900
624 450 624 450
The following additional information at 31 December 2015 should be taken into account:
1. Stock at 31 December 2015 was valued at £16 200.
2. Wages and salaries of £3 500 were accrued at 31 December 2011.
3. A provision for doubtful debts of 3% of debtors at 31 December 2011 is to be created.
4. Motor vehicles are to be depreciated by 20% per annum using the diminishing (reducing) balance
method. No depreciation is to be charged on land and buildings.
1. Prepare the trading, profit and loss and appropriation accounts of Hachi and Bachi for the year
ended 31 December 2015.
2. Prepare the current accounts of Hachi and Bachi for the year ended 31 December 2015. Balance the
accounts and bring the balance down on 1 January 2016
Question 103
East and West are in partnership sharing profits in the ratio 2 : 1 respectively. The following trial balance
was extracted from the books on 31 May 2008.
East and West Trial Balance at 31 May 2008
$ $
Purchases 207 620
Carriage on purchases 2 160
Purchases returns 1 470
Sales 411 320
Sales returns 7 340
Provision for depreciation of fixtures and fittings 14 000
Provision for depreciation of motor vehicles 15 750
Debtors 38 500
Creditors 19 240
Stock at 1 June 2007 15 200
Cash at bank 1 420
Capital accounts 1 June 2007 East 60 000
West 30 000
Current accounts 1 June 2007 East 10 600
West 6 900
Drawings East 9 050
West 7 050
569 280 569 280
1 Stock at 31 May 2008 was valued at $16 100.
2 At 31 May 2008:
• Wages and salaries, $7835, were accrued.

• Motor expenses, $800, were prepaid.
3 Repairs, $2000, which have not added value to property, have been recorded in the land and buildings
account in error.
4 Fixtures and fittings are to be depreciated using the straight line method over five years. The residual
value is estimated at $3000.
5 Motor vehicles are depreciated using the diminishing (reducing) balance method at 50 % per annum.
6 A provision for doubtful debts of 2 % of debtors at 31 May 2008 is to be created.
7 Interest is allowed on capital at 5 % per annum. West is entitled to a partnership salary of $3500.
REQUIRED
1. Prepare the trading, profit and loss and appropriation accounts of East and West for the year
ended 31 May 2008.
2. Prepare the balance sheet of East and West at 31 May 2008. The partners’ current accounts may
be shown in account format or within the balance sheet
Question 104
Paul and Judi are partners in a retail business. The partnership agreement states that they share profits
and losses in the ratio 3 : 2, after allowing interest on capital at the rate of 4 % per annum. The following
balances were extracted from the books on 30 September 2009.
Capital accounts Paul 30 000

Judi 20 000
Current accounts Paul 2 300 Cr
Judi 650 Dr
Drawings Paul 11 000
Judi 10 000
Purchases 139 750
Sales 210 000
Returns inward 4 500
Stock at 1 October 2008 12 650
Staff wages 18 000
Rent receivable 6 000
Advertising expenses 10 000
Rent 17 500
Fixtures and fittings (cost) 24 000
Creditors 8 900
Debtors 16 000
Bank 16 650 Dr
1 Stock at 30 September 2009 was valued at $15 400.
2 Paul withdrew goods costing $4000 from the partnership business during the year. This had not been
recorded in the books.
3 At 30 September 2009:
• Advertising expenses, $2850, were prepaid.

• Rent receivable, $2000, was due.
4 Depreciation is charged on fixtures and fittings at 15 % per annum on cost using the straight-line
method.
5 Additional fixtures and fittings, $4000, were purchased on 31 January 2009. These are included in the
balance at 30 September 2009. No other changes in fixed assets occurred during the year. Depreciation is
calculated from the date of purchase.
6 The provision for doubtful debts is to be maintained at 5 % of debtors.
REQUIRED
1. Prepare the trading and profit and loss and appropriation accounts of Paul and Judi for the year
ended 30 September 2009.
2. Prepare the balance sheet of Paul and Judi at 30 September 2009.
Question 105
Vera and Sara are in partnership sharing profits and losses equally.
• Their partnership agreement also provides for the following:

• interest on capital at 5% per annum
• Sara to have a salary of £5 000 per annum.
(a) State two differences between a partnership and a limited liability company
On 31 October 2016 the following information was extracted from the books of account.
Vera Sara
£ £
Capital account balance 1 November 2015 60 000 20 000
Current account balance 1 November 2015 6 450 (Cr) 12 500 (Dr)
Drawings for the year 7 575 12 300
Net profit for the year (before appropriations) £ 47 900
(b) Prepare the partnership appropriation account for the year ended 31 October 2016.
(c) Prepare Vera current account for the year ended 31 October 2016. Balance the account on that date
and bring down the balance on 1 November 2016.
Question 106
Bunny and Manny are in partnership sharing profits and losses equally after paying the partners' interest
on capital at 10% per annum and paying Manny an annual salary of £14 000. On 1 October 2015 the
balances on the partners’ capital accounts and current accounts were as follows:
Capital account Current account
Bunny £40 000 £12 200
Manny £25 000 £8 300 (Dr)
The profit for the year ended 30 September 2012 was £47 250.
(a) Prepare the appropriation account of the partnership for the year ended 30 September 2016
During the year ended 30 September 2015 the partners withdrew the following monies:
Bunny 16 200
Manny 21 000
(b) Prepare Bunny 's current account for the year ended 30 September 2015. Balance the account and
bring the balance down to 1 October 2015
Question 107
Daddy and Mommy are in partnership sharing profits and losses equally after paying the partners' interest
on capital at 5% per annum and paying Mommy an annual salary of £12 000. On 1 October 2015 the
balances on the partners’ capital accounts and current accounts were as follows:
Capital account Current account
Daddy £50 000 £13 200
Mommy £35 000 £8 700 (Dr)
The profit for the year ended 30 September 2016 was £77 250.
(a) Prepare the appropriation account of the partnership for the year ended 30 September 2016
During the year ended 30 September 2016 the partners withdrew the following monies:
Daddy 16 200
Mommy 21 000
(b) Prepare Daddy 's current account for the year ended 30 September 2016. Balance the account and
bring the balance down to 1 October 2016
Question 108
South and North are in partnership sharing profits in the ratio 2 : 1 respectively. The following trial balance
was extracted from the books on 31 May 2008.
South and North Trial Balance at 31 May 2008
$ $
Purchases 207 620
Carriage on purchases 2 160
Purchases returns 1 470
Sales 411 320
Sales returns 7 340
Provision for depreciation of motor vehicles 15 750
Debtors 38 500
Creditors 19 240
Stock at 1 June 2007 15 200
Cash at bank 1 420
Capital accounts 1 June 2007 South 60 000
North 30 000
Current accounts 1 June 2007 South 10 600
North 6 900
Drawings South 9 050
North 7 050
569 280 569 280
1 Stock at 31 May 2008 was valued at $16 100.
2 At 31 May 2008:
• Wages and salaries, $7835, were accrued.

• Motor expenses, $800, were prepaid.
3 Repairs, $2000, which have not added value to property, have been recorded in the land and buildings
account in error.
4 Fixtures and fittings are to be depreciated using the straight line method over five years. The residual
value is estimated at $3000.
5 Motor vehicles are depreciated using the diminishing (reducing) balance method at 50 % per annum.
6 A provision for doubtful debts of 2 % of debtors at 31 May 2008 is to be created.
7 Interest is allowed on capital at 5 % per annum. North is entitled to a partnership salary of $3500.
REQUIRED
1. Prepare the trading, profit and loss and appropriation accounts of South and North for the year
ended 31 May 2008. [21]
2. Prepare the balance sheet of South and North at 31 May 2008. The partners’ current accounts
may be shown in account format or within the balance sheet.
Question 109
Benton is sole trader who sells goods for cash and credit. He provided the following information for year
ended 31/12/15
1/1/15 31/12/15
$ $
Debtors 16000 14000
Creditors 10500 9500
Stock 15000 12000
His summarized bank account for year ended 31/12/15 revealed the following
$
Opening bank balance at 1/1/15 13000dr
Receipts from cash and credit customers 85000
Payments for cash and credit suppliers 55000
Closing bank balance at 31/12/15 39000dr
During the year ended 31/12/15

$
Cash sales banked during the year 15500
Cash purchases during the year 15250
Discount received from credit suppliers 1700
Discount allowed to credit customers 2300
Bad debts 1200
Goods drawings 400
Sales return 500
Carriage outwards 1600
Required
1. Calculate total purchases value for year ended 31/12/15(5m)
2. Calculate total sales value for year ended 31/12/15(5m)
3. Prepare Benton’s trading account for the year ended 31 December 2015. (8)
Question 110
Joe is sole trader who sells goods for cash and credit. He provided the following information for year ended
31/12/15
1/1/15 31/12/15
$ $
Debtors 18000 32000
Stock 27000 16000
$
Receipts from cash and credit customers 96000
Payments credit suppliers 71000

$
Sales return 500
Dishonored cheques by customers 200
Purchases return 1000
Required
3. Prepare Joe’s trading account for the year ended 31 December 2015. (8)
Question 111
Captain cool is sole trader who sells goods for cash and credit. He provided the following information for
year ended 31/12/15
1/1/15 31/12/15
$ $
Debtors 8000 12000
Stock 7000 2000
$
Receipts from credit customers 56000
Payments to cash and credit suppliers 91000

$
Sales return 500
Bad debts 1000
Purchases return 1000
Required
3. Prepare Captain Cool’s trading account for the year ended 31 December 2015. (8)
Question 112
Tanvir does not keep a full set of double entry accounts.

The following information is available for the year ended 30 April 2011.
Summarized Bank account
Receipts from customers 60 500 Balance b/d $100

Sale of non-current asset $750 Payments to suppliers $34 900
Wages $15 000
Lighting and heating $2 500
Drawings $5 000
Balance c/d $10 250 Purchase of non-current asset $8 000
General expenses $6 000
$71 500 $71 500
1 May 2010 30 April 2011
$ $
Inventory 5 250 11 000
Trade receivables 9 750 8 400
Trade payables 10 500 9 300
Non-current assets (book value) 42 000 40 000
Lighting and heating 600 Prepaid 250 Accrued
6% Bank loan repayable 30 April 2016 20 000 20 000
Capital 25 000 ?
• The non-current asset sold during the year had a book value of $1 000
REQUIRED
(a) Calculate for the year ended 30 April 2011:
(i) Sales
(ii) Purchases
(b) Prepare the income statement for the year ended 30 April 2011
(c) Calculate the value of closing capital
Question 113
Indira is a computer consultant. She does not keep a full set of double entry accounts but the following
information is available for the year ended 31 March 2010.
Summarized Cash Book
$ $
Balance 1 April 2009 3 500 Purchase of office equipment 5 500
Receipts of consultancy fees 74 000 Wages 23 600
Sale of office equipment 750 Drawings 20 000
Loan interest and repayments 2 600
Rent 9 000
Balance 31 March 2010 4 650
78 250 78 250
The sale of office equipment was at net book value.
1 April 31March
2009$ 2010 $
Plant and equipment (Office equipment) 16 000 17 500
Trade receivables (debtors) for consultancy fees 14 200 11 000
Non-current liability (6% loan) 10 000 8 000
Other receivables (General expenses prepaid) 100 500
Other payables (Rent accrued) 400 60
(a) Prepare the income statement for the year ended 30 April 2011
(b) Calculate the value of closing capital
Question 114
Jacob does not keep a full set of double entry accounts.
The following information is available for the year ended 30 April 2011.
Summarised Bank account
Receipts from customers $65 500 Balance b/d$ $100

Sale of non-current asset $1250 Payments to creditors $34 900
Salaries $15 000
Lighting $2 500
Drawings $5 000
Purchase of non-current asset $9 000
General expenses $7 000
1 May 2010 30 April 2011
$ $
Inventory 5 050 10 000
Trade receivables 9 650 7 400
Trade payables 12 500 7 300
Non-current assets (book value) 43 000 45 000
Lighting and heating 500 Prepaid 250 Accrued
8% Bank loan repayable 30 April 2016 30 000 30 000
• The non-current asset sold during the year had a book value of $1 000
REQUIRED
(a) Calculate for the year ended 30 April 2011:
(i) Sales
(ii) Purchases
(b) Prepare the income statement for the year ended 30 April 2011
(c)Evaluate the usefulness of double entry bookkeeping system.
Question 115
Jackson is tuition master. She does not keep a full set of double entry accounts, but the following
information is available for the year ended 31 March 2010.
Summarized Cash Book
$ $
Balance 1 April 2009 4 500 Purchase of office equipment 5 500
Receipts of tuition fees 78 000 Wages 3 600
Sale of office equipment 750 Drawings 10 000
Loan interest and repayments 2 600
Sundry expenses 12 900
Rent 10 000
The sale of office equipment had a net book value of 1000.

Bad debts written off 500.
1 April 31March
2009$ 2010 $
Plant and equipment (Office equipment) 16 000 17 500
Trade receivables (debtors) for tuition fees 12 200 13 000
Non-current liability (8% loan) 10 000 8 000
Other receivables (General expenses prepaid) 100 500
Other payables (Rent accrued) 400 60
(a) Prepare the income statement for the year ended 30 April 2011
(b) Calculate the value of opening capital
Question 116
Sue Searle is in the import business. The following balances were extracted from her books on 31 March
2009.
$
Sales 95 800
Purchases 48 340
Returns outwards 960
Stock at 1 April 2008 10 780
Wages of motor vehicle driver 11 500
Motor vehicle running expenses 6 500
Provision for depreciation of motor vehicle at 1 April 2008 15 000
Premises 60 000
Provision for depreciation of premises at 1 April 2008 12 000
Rent and insurance 7 700
Light and heat 4 950
General and marketing expenses 6 200
Discount received 5 300
8 % Bank loan repayable 30 June 2011 30 000
Cash 270
Debtors 18 500
Creditors 9 750
Drawings 11 310
Capital at 1 April 2008 35 000
1 Stock at 31 March 2009 was valued at $12 600.
2 The motor vehicle is used to bring purchases to the business premises of Sue Searle and to deliver goods
to customers. The motor vehicle is used 20 % of the time to collect purchases and 80 % to deliver goods to
customers.
3 Depreciation is to be charged on the premises at the rate of 2 % per annum on cost using the straight
line method and on the motor vehicle at 20 % per annum using the diminishing (reducing) balance method.
4 The loan interest is outstanding at 31 March 2009.
5 Insurance, $450, was prepaid at 31 March 2009.
6 Electricity for lighting, $130, was due at 31 March 2009.
7 The provision for doubtful debts is to be maintained at 2 % of debtors.

REQUIRED
1. Prepare the trading and profit and loss account for Sue Searle for the year ended 31 March 2009.
2. Prepare the balance sheet of Sue Searle at 31 March 2009.
Question 117
Jamal Mohsin has been provided with some information about a general trading business, Easisell, which
buys and sells goods on credit. The following information relates to the year ended 30 September 2009.
$
Sales 120 000
Stock at 1 October 2008 12 000
Purchases 91 000
Stock at 30 September 2009 28 000
Expenses 15 000
Debtors 30 000
Creditors 43 000
Capital 150 000
REQUIRED
(a) Calculate, to two decimal places, the following ratios. Show your workings.
1. Gross profit to sales percentage

2. Net profit to capital percentage
3. Working capital ratio (current ratio)
Jamal Mohsin obtained the following ratios for a similar business:
• 1 Gross profit to sales percentage 40 %

• 2 Rate of stock turnover 6 times
• 3 Net profit to capital percentage 12 %
• 4 Working capital ratio (current ratio) 1.8 :
REQUIRED
(b) Using the information above and your answer to (a) compare and comment upon the performance of
Easisell under the following headings.
1. Controlling stock
2. Net profit to capital percentage
3. Ability to pay creditors
Question 118
Zaynah is in business buying and selling goods on credit. The following balances were extracted from her
books on 30 April 2010.
Revenue (Sales) 200 000

Cost of sales 130 000
Expenses 65 000
Inventory (stock) 1 May 2009 20 000
Inventory (stock) 30 April 2010 60 000
Trade receivables (debtors) 16 000
Trade payables (creditors) 35 000
Loans repayable within 12 months 5 000 (Bank overdraft)
Closing capital 100 000
REQUIRED
(a) Calculate, to one decimal place, the following ratios for the year ended 30 April 2010. Clearly show all
workings.
1. Gross profit to revenue (sales) percentage
3. Quick ratio (acid test)
4. Profit for the year (net profit) to capital percentage
5. Comment on the following ratios at 30 April 2010 Quick ratio (acid test).
In the previous year, ended 30 April 2009, the business of Zaynah achieved the following ratios:
• Gross profit to revenue (sales) percentage 50%

• Working capital ratio (current ratio) 1.7:1
REQUIRED
(c) Suggest one possible reason for the change over the year ended 30 April 2010 in the:
1. gross profit to sales percentage;

2. working capital ratio (current ratio).
Question 119
Jones is a trader, buying and selling goods on credit. The following balances were available on 30 April
2012.
Capital 350 000

Revenue 200 000
Expenses 40 000
Inventory 30 April 2012 25 000
Net profit/sales 15%
REQUIRED
(a) Calculate the cost of sales. Show your workings
(b) Calculate, to two decimal places, the following ratios:
1. Percentage net profit/capital

3. Quick ratio (acid test)
Jones has been considering how he might improve his working capital ratio (current ratio). The following
proposals have been made.
1 Obtain a long-term loan from the bank, $5000.
2 Pay half the trade payables in exchange for a cash discount of 4%.
3 Sell non-current assets with a net book value of $12 000 for $8000.
Question 120
After preparation of the manufacturing account for the year ended 31 October 2015, a profit and loss
account was prepared for the same period. It showed that net profit for the year was £115 000. The
balance sheet showed that capital employed on 1 November 2014 was £560 000.
The return on capital employed has decreased from 28% for the year ended 31 October 2013 to 25% for
the year ended 31 October 2014.
1. Calculate the return on capital employed for the year ended 31 October 2014. Use the capital
employed figure on 1 November 2014 for your calculation.
2. Evaluate the significance of this ratio for Zutin Limited and state, with reasons, whether you believe
that the company is operating efficiently. (5)
Question 121
Which of the following accounts always has a debit balance?
A Capital
B Purchases
C Purchase returns
D Sales
Question 122
Which of the following is an intangible fixed asset?
A Bank loan
B Debtors
C Goodwill
D Premises
Question 123
A petty cash system operates on the imprest system with a float of £350. If £275 is spent in the period,
how much will be reimbursed at the end of the period?
A £75
B £275
C £350
D £425
Question 124
What does a credit balance of £500 in the account of R Jones in the books of T Richards mean?
A Jones owes Richards £500
B Jones has purchased goods from Richards costing £500
C Richards owes Jones £500
D Richards has paid Jones £500
Question 125
If capital expenditure is treated as revenue expenditure, which of the following will be incorrect?
A Bank balance
B Creditors
C Debtors
D Net profit
Question 126
In which book of original entry would the purchase of a motor vehicle on credit be recorded?
A cash book
B journal
C purchases book
D sales book
Question 127
A trader purchases goods with a list price of £750. He receives a trade discount of 20% and a cash discount
of 2%. What amount should be entered in the purchases account?
A £600
B £660
C £735
D £750
Question 128
A trader sells goods on credit to Brown but enters the transaction in error in the account of Bowen. What
type of error is this?
A commission
B omission
C original entry
D principle
Question 129
A trader owes a month’s rent at the end of his financial year. He adds this amount to the rent actually paid
during the year to obtain the total rent expense for the year. Which accounting concept is he applying?
A accruals/matching
B business entity
C consistency
D going concern
Question 130
A sole trader’s capital decreases by £10 000 during the year. His books show that his total drawings for the
year were £6 500. What was the amount of profit or loss for the year?
A £10 000 loss
B £10 000 profit
C £3 500 profit
D £3 500 loss
Question 131
Which of the following is a source of information for a debtors control account?
A petty cash book
B purchases book
C returns outwards book
D sales book
Question 132
Which of the following is recorded on the credit side of a creditors control account?
A credit purchases
B discount received
C payments to creditors
D purchases returns
Question 133
A sole trader has included a private car repairs bill as a business expense. Which double entry would
correct this error?
account debited account credited
A capital motor vehicles
B drawings motor expenses
C motor expenses motor vehicles
D motor vehicles capital
Question 135
A trader records purchases of £250 in his books as £520. What type of error is this?
A commission
B compensating
C original entry
D principle
Question 136
A business maintains a full set of books of account. Where will the purchases account appear?
A general journal
B general ledger
C purchases journal
D purchases ledger
Question 137
The totals of the discount columns in a trader’s cash book were £350 debit and £100 credit. What entry
will the trader make in the discount received account?
A £100 credit
B £350 credit
C £100 debit
D £350 debit
Question 138
Which of the following transactions represents capital expenditure to a sole trader?
A additional capital invested by the owner
B cash withdrawn by the owner
C expenditure on the improvement of fixed assets
D expenditure to finance day-to-day expenses
Question 139
What will be the effect on a sole trader’s balance sheet of the writing off of a bad debt?
A capital reduced and assets reduced
B liabilities increased and assets reduced
C liabilities reduced and assets increased
D no effect on assets or liabilities
Question 140
A trader always uses the straight-line method of depreciation for all motor vehicles. Which accounting
concept is he applying?
A accrual
B consistency
C dual aspect
D going concern
Question 141
The owner's capital is regarded as a liability of the business. Which accounting principle is being applied?
A business entity
B consistency
C matching
D realization
Question 142
Money received from a customer must be recorded in the debtor’s account and the bank account. What
accounting principle is being applied?
A business entity
B duality
C matching
D money measurement
Question 143
A trader wants his accounts to record his customers' satisfaction with his business. Which accounting
principle prevents this?
A business entity
B duality
C money measurement
D realization
Question 144
It was discovered that a credit customer had been charged $76 for a purchase instead of $67. Which
document will be issued by the seller to correct the error?
A credit note
B debit note
C invoice
D statement
Question 145
A seller has allowed a customer a cash discount. What did the customer do to earn this discount?
A agreed to become a regular customer
B introduced a new customer to the seller
C paid his account within a stated time
D placed a large order
Question 146
Which is a current liability?
A capital
B creditors
C debtors
D stock
Question 147
Which is an error of omission?
A No entry has been made for the purchase of stationery by cheque.
B Purchase of stationery has been entered only in the cash book.
C Purchase of stationery has been entered only in the stationery account.
D The stationery account has been missed out of the trial balance
Question 148
When is a suspense account opened?
A when a Balance Sheet fails to balance
B when a trial balance fails to balance
C when an error of omission is corrected
D when an error of principle is corrected
Question 149
A business receives a bank statement and updates its cash book.
Which item will increase the bank balance in the cash book?
A bank charges
B credit transfers received
C interest charges
D standing orders paid
Question 150
A business's financial year ends on 30 September. On 1 July 2003 $200 was paid for insurance for six
months to 31 December.
What is the correct entry in the Balance Sheet on 30 September 2003?
A an accrual of $100
B a prepayment of $100
C an accrual of $200
D a prepayment of $200

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CONTENTS

3. Adjustments to financial statements 32

4. Financial statements for sole traders 46

6. Financial statements for partnerships 62

9. Multiple choice questions 79

1|A CC OUN TING W OR KB OOK ©SANDARU HARSHANA

2|A CC OUN TING W OR KB OOK ©SANDARU HARSHANA

Show the effect of above transactions on the following accounting equation.

Transaction Motor Bank Stock Debtors Creditors Bank loan Capital

Show the effect of above transactions on the following accounting equation.

Transaction equipment Bank Stock Debtors Creditors Bank loan Capital

4|A CC OUN TING W OR KB OOK ©SANDARU HARSHANA

7|A CC OUN TING W OR KB OOK ©SANDARU HARSHANA

You are required to:

Debtors balance as at 1/4/2015

Sales day book

05/4 Babanis 1100

10/4 Amanis 880

12/4 Babanis 550

15/4 Savaris 770

18/4 Babanis 2200

20/4 Savaris 1100

28/4 Nonis 550

9|A CC OUN TING W OR KB OOK ©SANDARU HARSHANA

Sales return day book

05/4 Babanis 165

10/4 Amanis 275

Total of the month 440

Cash book (debit side)

Cash sales 500

Cash sales 2300

Rent received 1000

Purchase ledger(Babanis) 190

Sale ledger(Babanis) 190

Set off a receivable with a payable

Debtors balance as at 1/4/2015

Sales day book

05/4 Singh Thumbi 2200

10/4 Akko 1100

12/4 Singh Thumbi 660

15/4 Akko 440

18/4 Thangachi 220

20/4 Aiya 880

28/4 Thangachi 1100

Total of the month 6600

Sales return day book

05/4 Singh Thumbi 330

10/4 Aiya 165

Cash book (debit side)

Singh Thumbi 60 240

Cash sales 2200

Commission received 1000

Singh Thumbi 40 360

Cash sales 4400

Purchase ledger (Singh Thumbi) 110

Sale ledger(Singh Thumbi) 110

Set off a receivable with a payable

Prepare the following:

1. Sales day book

1.3.16. Sold goods on credit to Mormount for a list price of £4400