Kilsyth Academy
NATIONAL 5
ACCOUNTING
REVISION BOOKLET 3
Question 1
The following Trading and Profit and Loss Account of Lennon and McCartney for the
year ended 31 December year 3 is incomplete due to a recent fire which destroyed
most of the firm’s records:
Trading, profit and Loss account of Lennon and McCartney for the year ended 31
December Year 3
£000
Sales
LESS COST OF SALES
Opening stock
Purchases
Less Closing Stock
GROSS PROFIT
EXPENSES
Selling and Distribution
Administration
NET PROFIT
£000
990
80
?
?
?
33
?
?
?
?
?
The firm however, have been able to supply you with the following information for the
year.
1
2
3
The Gross Profit ratio was 33.3%
Expenses/Sales was 10%
Closing Stock was £20,000 higher than Opening Stock
(a)
Using the above information and layout, produce the completed Trading, profit
(b)
And Loss Account of Lennon and McCartney for the year ended 31 December
Year 3.
Calculate the Rate of Stock Turnover for the year.
1
Question 2
(a)
What is the purpose of a Trial Balance?
(b)
Explain the following types of error:
(i)
Error of Commission
(ii)
Error of Principle
Question 3
Bubbles Unlimited manufactures and sells lemonade. You are supplied with the
following information for Year 3:
1
The Bank Balance at 31 December Year 2 is expected to be £7,500.
2
Sales in units are expected to be:
December
9000
January
8500
February
7200
March
7800
3
Each month 20% of total sales will be on a cash basis and the remainder paid
one month after purchase.
4
The selling price per unit will be £4 but Cash Sales will receive a discount of
5%.
5
production units are expected to be:
December
9100
January
8600
February
7300
March
7900
6
Production costs per unit will be:
Raw Materials
£0.50 paid for one month after production
Wages
£1.50 paid in the same month of production
Variable Overheads
£1.20 paid for one month after production
7
Fixed Costs are expected to be £2000 in January and February, then rise by
£500 in March and are paid in the month incurred.
8
New machinery will be purchased in February for £12000. This will be paid for
in 12 equal monthly instalments starting in March
.
Prepare the cash budget for Bubbles Unlimited for 3 months January – March Year 3.
2
Question 4
Explain the following terms:
(i)
(ii)
(iii)
Piece rate
Time rate
Commission
Question 5
(a)
(b)
From the above break-even chart
Identify:
(i)
the line marked A
(ii)
the line marked B
(iii) the line marked C
State:
(iv) the break even point in units
(v)
the break even point in sales value
Calculate:
(i)
the selling price per unit
(ii)
the variable cost per unit
(iii) the contribution per unit
(iv) the profit that would be earned from 3500 units
(v)
the sales in units required to earn a profit of £14000
3
Question 6
Carlo Assenti commence trading on 1 January Year 1. The following information
relates to the stock movements of material A125 for the month of April Year 1.
Date
1 April
5
12
19
24
Purchases
Quantity
1000
500
Unit Price
£3.50
Issues
Job No
Quantity
135
400
136
137
700
200
£3.60
Prepare Stock Record Cards for the month of April to show the Quantity, Cost and
Value of units received, issued and in stock using:
(i)
First in First out (FIFO)
(ii)
Last in First out (LIFO)
Question 7
Martin Bros is a manufacturing company which has 2 production and 2 service
departments. Information relating to the cost centres is as follows:
Total
£160000
Production departments
A
B
£64000
£56000
Service Departments
X
Y
£22000
£18000
Indirect
Labour
Indirect
£32000
£14000
£18000
Materials
No of
400
150
90
100
60
Employees
Area(sq m)
40000
15000
10000
10000
5000
Value of
£500000
£100000
£250000
£50000
£100000
Machinery
The following information is also available:
Overhead Costs
Total Costs
Factory Administration
£160000
Heat and Light
£72000
Depreciation of Machinery
£140000
You are required to:
(a)
Complete the worksheet to calculate the total overheads to be allocated
(b)
Re-apportion the total overheads of Department X to the other 3 cost centres
on the basis of number of employees.
4
Question 8
Kirkpatrick Sawmill Ltd has received an order from a customer for 1000 wood
pallets. They have 2 departments, Cutting and construction. You are asked to prepar
a quotation for the customer from the following information:
Direct Materials
Direct Labour
70 metres wood @ £9 per metre
Cutting
Construction
6 hours
5 hours
Wage Rate
£6.50 per hour
£7 per hour
Direct Expenses
£20
Overheads are to be absorbed into the cost of the job as follow:
Cutting
Construction
£2 per direct labour hour
£0.20 per pallet
Kirkpatrick Sawmill Ltd wish to make a profit of 20% on Cost.
You are required to:
(a)
(b)
calculate:
(i)
the total cost of the job to Kirkpatrick Sawmill Ltd
(ii)
the price which will be quoted to the potential customer taking into
account the required profit and VAT at 17.5%.
explain:
(i)
two advantages of using spreadsheets in the preparation of accounting
statements.
5
Revision based on Int 2 past paper
Question 8
The following balances were taken from the books of Mr Ruthven for the year ended
31 March Year 3.
DR
£000
Premises at cost
Vehicles at cost
Sales
Purchases
Discount Received
Purchases Returns
Provision for doubtful debts at 1 April Year 2
Provision for Depreciation on Vehicles at 1 April
Year 2
Stock at 1 April Year 2
Debtors
Creditors
Insurance
Wages and salaries
VAT
Bank
1
2
3
CR
£000
260
30
980
415
14
15
6
5
100
200
95
60
95
75
1235
120
1235
Stock at 31 March Year 3 was valued at £125000
Provision for bad Debts is to be amended to 4% of Debtors
Depreciation on vehicles is to be provided at 20% of cost
Using the above information prepare:
(a)
(i)
Trading, Profit & Loss Accounts of Mr Ruthven for the year ended 31
March
(ii)
Balance Sheet as at that date
(b)
When carrying out ratio analysis, businesses compare their performance in
3 areas:
1 Profitability
2 Liquidity
3 Efficiency
6
For the above areas, state one ratio that would be used and give the
formula that would be used for each.
Question 9
Bikes UK manufactures and sells 3 models of bicycles, Mountain , Racer and Fold
Away. The current level of production of 2000 units of each model uses all the
available machine time.
Forecasts for the period are:
Selling Price per Unit
Mountain
£240
Variable Costs per unit:
Direct materials
£50
Variable Overheads
£4
Direct labour Hours paid at 4
the rate of £9 per hour
Machine Hours
5
Fixed Overheads are expected to be £260,000
Racer
£320
Fold Away
£210
£60
£3
5
£40
£2
4
4
6
(a)
Calculate for each of the 3 models:
(i)
variable cost per unit
(ii)
contribution per unit
(iii) contribution per machine hour
(iv) the total contribution and profit earned
(b)
If machine hours were limited what would be the order of priority of
production in order to maximise profits?
7
(c)
The following information relates to the issue and purchase of materials for
“Tots”, a new model of cycle introduced by Bikes UK:
Date
1 May
7 May
10 May
15 May
21 May
24 May
26 May
PURCHASES
Quantity
1000
Unit Price
£20.50
1500
£20.60
1300
£20.70
ISSUES
Quantity
400
700
500
1100
Using the LIFO method, prepare a Stock Record Card for the month of May showing
receipts, issues and balances
Question 10
Altamount Engineering manufactures and sells garden benches. The following
information is available:
Per Bench
Selling Price
Raw Materials
Labour
Variable Overhead
Fixed costs per month
£120
£42
£36
£12
£30000
(a)
Calculate
(i)
the
(ii)
the
(iii) the
(iv) the
(b)
if the selling price was changed to £110 per bench, variable costs per unit were
increased by £2 and Fixed Costs increased to £36000, calculate:
(i)
the new contribution per unit
(ii)
the new break even point in units.
variable cost per unit
contribution per unit
break even point in units and sales value
profit from the current sales level of 5000 per month
8
Question 11
Heath & Hatcher plc is a textile company which has 3 production departments,
Cutting, Machining and Finishing.
The estimated overheads for the next year are:
Supervision
Rent and Rates
Heat and Light
Power
Depreciation of Machinery
£28800
£7680
£6400
£18960
£6000
Information relating to the cost centres is as follows:
Power
Number of Employees
Floor Area(sq m)
Value of Machinery
Labour Hours
Machine Hours
Cutting
£6150
36
19200
£75000
8000
800
Machining
£10216
108
24000
£100000
17000
1600
Finishing
£2594
36
20800
£25000
7600
4000
TOTAL
£18960
180
64000
£200000
32600
6400
You are required to:
(a)
Complete the worksheet provided to calculate the total estimated overheads
for each Cost Centre
(b)
Explain the following terms:
(i)
Piece Rate
(ii)
Bonus
(iii) Overtime Rate
9
Question 12
The following information was taken from the ledger of Jill Wilson on 31 December
Year 3.
£000
Sales
Purchases
Wages
Creditors
Rent Received
Drawings
Sales Returns
Bank Overdraft
Capital
Heat and Light
Debtors
Buildings
Stock at 1 January Year 3
Discount Allowed
150
100
8
45
5
20
30
25
85
15
50
80
5
2
Complete the Trial Balance of Jill Wilson as at 31 December year 3.
10
Question 13
The following figures are available for A Scotsman, a sole trader, for Year 1:
Year 1
£000
Sales
Opening Stock
Closing Stock
Cost of Goods Sold
Gross profit
Net profit
Current Assets
Current Liabilities
Capital Employed
(a)
Calculate the following ratios:
(i)
(ii)
(iii)
(iv)
(v)
(b)
200
12
18
120
80
50
120
60
500
Gross profit Ratio
Net profit Ratio
Rate of Stock Turnover
Current Ratio
Return on Capital Employed
Explain the following terms:
(i)
(ii)
(iii)
Cash Discount
Capital Expenditure
Current Assets
11
Question 14
Jose Fernandez, a sole trader, runs a factory which manufactures MP3 players.
There are 4 cost centres – A,B,C and the Canteen.
Indirect wages are to be allocated for Year 2.
A
£40000
B
£60000
C
£120000
Canteen
£33000
Total
£253000
The following are estimated costs for year 2:
OVERHEAD
Heating
Supervision
Insurance of Machinery
BASIS OF
APPORTIONMENT
Floor Area (sq m)
No of Employees
Value of Machinery (£)
COST(£)
40000
120000
20000
The following information is available for the cost centres:
No of Employees
Floor Area (sqm)
Value of Machinery
A
15
20000
£100000
B
12
30000
£30000
C
27
20000
£70000
Canteen
6
10000
Total
60
80000
£200000
(a)Complete the Overhead Analysis Sheet for Jose to show the total estimated
overhead apportioned to each cost centre.
(b)Re-apportion the canteen costs between the other 3 cost centres based on the
following perentages .
A 30%
B 20%
C 50%
12
Question 15
1
2
3
4
5
6
7
8
9
A
Wonderbryte plc
B
C
D
E
F
Rate
Hours
35
40
45
Income
Tax
£100.00
£144.00
£86.40
Net Pay
£12
£15
£8
Gross
Pay
?
Wages Week 1
Claire Murphy
Michael Forrester
Levente Dalgrano
TOTAL
?
?
State an appropriate formula for cells:
(i)
(ii)
(iii)
D6
F6
F9
13
Question 16
Card Crazy holds all its greetings cards in a storeroom. Each item in the storeroom is
recorded separately on a stock record card.
On 1 September Year 1 the store has a supply of 50 boxes of cards which cost £20
each.
The following issues and receipts of boxes of cards took place in September:
Date
9 Sept
18 Sept
27 sept
Issues/Receipts
Issues to the shop
Receipts from supplier
Issues to the shop
Boxes of Cards
30
40 @ £30
50
Record the information above using the FIFO method of Stock Valuation on the stock
record card.
Question 5
The following information relates to Poppy Palmer

Cash balance at end of March Year 1 - £50000
Sales (cash)
Sales (credit)




March
£18650
£6600
April
£23400
£7490
May
£22750
£7360
Poppy allows credit customers to pay one month after sale
Poppy is to receive a loan of £10500 in April. She is to start monthly loan
repayments in May of £500.
Expected Monthly Expenses:
Wages
£15500
Insurance £400
Rent
£800 this is being increased by 25% starting in May
New machinery costing £4000 will be installed in May. This will be paid for in 4
equal instalments, the first payment being in May.
Prepare a Cash Budget for Poppy for the two months April – May Year 1.
(a)
(b)
Name the software that could be used to prepare a cash budget
Give an advantage of using this software.
14
Question 17
The following figures are available from the ledger of Khan Dowell, a Sole Trader for
the year ended 31 December Year 2:
Dr
£000s
Sales
Purchases
Stock at 1 January Year 2
Discount received
Carriage In
Purchases Returns
Sales Returns
Rent
Carriage Out
Wages
Insurance
Electricity
Bad Debts
Notes at 31 December Year 2
1
2
3
4
Cr
£000s
200
90
50
10
1
3
20
8
2
10
12
16
4
£000s
Stock
Depreciation of Equipment
per Year
Insurance prepaid
Wages owing
30
2
6
4
(a)
Using the figures above prepare the Trading, Profit and Loss Account for the
year ended 31 December Year 2.
(b)
List 3 accounting ratios that could be prepared from The Trading, Profit and
Loss Accounts prepared in part (a).
15
Question 18
The following forecasted figures are available for Heather McMorran.
Cash Balance at the start of June - £20000
Sales (cash)
Sales (credit)
Purchases (credit)



April
£70000
£30000
£60000
May
£75000
£35000
£75000
June
£80000
£20000
£85000
July
£105000
£25000
£130000
August
£85000
£22000
£120000
Heather allow credit customers to pay in full 2 months after the sale takes
place
Heather will receive a bank loan in August - £10000
Heather pays in full for purchases one month after the month of purchase.
The following expenses are to be paid:


Wages - £3000 each month
A vehicle costing £10000 purchased in April, will be paid for in 5 equal monthly
instalments starting in May.
Using the information above prepare Heather’s cash budget for the 3 months June –
August.
Question 19
Scott and David are partners who own a joinery business. They also employ Emma who
works the following hours on Job 5656.
Monday
Wednesday
Sunday
7 hours
5 hours
4 hours
Emma is paid a basic rate of £25 per hour and is paid double time on a Sunday.
Emma also receives a bonus of £50 is she completes the job in less than 20 hours.
(a)
Calculate the charge to Job 5656 for Emma’s labour.
(b)
In addition to the labour charge the following costs also relate to Job 5656
Material X 50 metres @ £20 per metre
Material Y 100 metres @ £30 per metre
Overheads £15 per labour hour worked
Prepare a Job Cost Statement to show the total cost of Job 5656.
16
Question 20
Vexhim plc runs a factory which has 4 cost centres – X, Y, Z and the Canteen.
Indirect wages are to be allocated for Year 2 as follows:
X
£10000
Y
£15000
Z
£30000
Canteen
£8000
Total
£63000
The following estimated costs are for Year 2:
Overhead
Rent and rates
Supervision
Insurance of Machinery
Basis of Apportionment
Floor Area (sq m)
No of Employees
Value of Machinery (£)
Cost (£)
30000
20000
12000
The following information is available for costs centres:
Floor area (sq m)
No of Employees
10000
15000
10000
5000
40000
X
Y
Z
Canteen
Total
Value of machinery
10
50000
15
15000
20
35000
5
50
100000
(a)
Complete the Overhead Analysis Sheet for Vexhim plc to show the total
estimated overhead apportioned to each cost centre.
(b)
Re-apportion the Canteen costs between the other 3 cost centres based on the
following percentages:
X
Y
Z
30%
20%
50%
17
Question 21
(a)
Name the following lines on the break even graph
(i)
(ii)
(iii)
(b)
(c)
A
B
C
State the break even point in units
Calculate the selling price of one unit.
Question 22
(a)
(b)
name one method of Stock Valuation
Name 2 documents used in the management of stock.
18
Question 23
The following balances were extracted from the ledger of Matthew Stevenson as 1
January Year 2.
Bank
Equipment
H Samson (Debtor)
£1500 dr
£5000
£300
(a)
Enter the balances above into the appropriate ledger accounts
(b)
Using the following information complete the entries in the ledger accounts of
Matthew, opening new accounts as necessary.
Question 24
The following figures are available for Maria Mendez, a sole trader, for Year 1
£000
Sales
300
Opening Stock
11
Closing Stock
13
Cost of Goods Sold
180
Gross Profit
120
Net Profit
90
Calculate the following ratios:
(a)
(b)
(c)
(d)
Gross Profit Ratio
Net profit ratio
Average Stock
Rate of Stock Turnover.
Give an example of:
(a)
Capital Expenditure
(b)
Revenue expenditure
19
Question 25
The following forecasted figures for Year 2 are available for Braxton plc:
Cash Balance at 1 May - £20000
March
Sales (cash)
£5550
Sales(credit)
£8000
Purchases(credit) £6600
April
£6000
£10000
£4500
May
£7500
£11500
£9000
June
£5500
£19500
£6400
July
£6000
£12300
£3800
Notes:
1
2
3
4
5
6
Credit purchases are to be paid 2 months after they are bought.
Credit sales are to be paid one month after they are sold
Petrol paid monthly - £400
Insurance paid monthly £500. The monthly payment will increase by 20% in
June.
Wages - £15000 monthly
An advertising campaign costing £10000 is to be paid for in 2 equal instalments
in June and July.
Prepare a cash budget for Braxton plc for the 3 months May – July Year 2 showing
clearly the closing balance at the end of the month.
Question 26
Craigie plc uses a spreadsheet to calculate wages.
1
2
3
A
Wages – Week 2
4 Leila Wallace
5 Asim Azad
6 Julia Rogers
TOTAL
B
C
D
E
F
Rate
Hours
Gross Pay
Net Pay
£15
£20
£10
40
35
40
?
Income
Tax
£144.00
£168.00
£96.00
?
?
State an appropriate formula for cells:
(a)
D4
(b)
F4
(c)
F7
20
Question 27
Pandarama plc produces luxury toy bears which sell for £40 each.
Fixed costs are £20000
Variable Costs are £15 per bear
From the above information calculate the:
(a)
(b)
(c)
(d)
contribution per unit
break even point in units
break even point insales value
profit/loss when 1000 bears are sold
Question 28
Explain the following terms used in the calculation of wages;
(a)
Time rate
(b)
Piece Rate
21
Question 29
Bamboozle plc operates a factory with 3 cost centres – Dept E, Dept F and the
Canteen
Indirect wages are to be allocated for Year 4 as follows:
Total
£100000
Production Departments
Dept E
Dept F
£30000
£50000
Service department
Canteen
£20000
The following estimated costs are for Year 4:
OVERHEAD
Electricity
Supervision
Insurance of Machinery
BASIS OF APPORTIONMENT
Floor Area (sq m)
No of Employees
Value of Machinery (£)
COST
£40000
£20000
£12000
The following information is available for the cost centres:
Production Departments
Floor Area (sq m)
No of Employees
Value of Machinery(£)
Dept E
Dept F
7000
10
20000
Service
Department
Canteen
Total
10000
3000
20000
35
5
50
30000
50000
(a)
Complete the Overhead Analysis Sheet for Bamboozle to show the total
estimated overhead apportioned to each cost centre
(b)
Re-apportion the Canteen costs between the other 2 cost centres based on the
following percentages:
Dept E
Dept F
60%
40%
22
Question 30
The following Trial Balance has been extracted from the ledger of Winston Elliot who
trades as a general merchant:
Trial Balance as at 31 October 20..
Dr
Sales
Purchases
Discount Allowed
Discount Received
Carriage Outwards
Carriage Inwards
Returns In
Returns Out
Rent, Rates and insurance
Heating and Lighting
Postage and Stationery
Advertising
Salaries and wages
Loan Interest
Bad Debts
Debtors
Creditors
Cash
Bank
Opening Stock
Equipment at cost
Equipment Accumulated depreciation
Loan
Drawings
Capital as at 1 November
Cr
530780
388650
1454
1973
5328
2444
1866
2449
15769
6324
7660
13765
44970
1650
2088
26550
36887
515
3466
12306
141450
55320
13500
20800
49214
The following additional information as at 31 October 20.. is available:
(a)
(b)
(c)
(d)
Rent and rates have been prepaid by £750
Loan interest is accrued by £150
Equipment is to be depreciated at 10% per annum using the straight line
method
Stock at the close of business was valued at £14521.
23
Question 31
The following is a list of balances taken from the ledger of Mr Banda, a sole trader as
at 31 July 20…
List of Balances as at 31 July 20..
£
Stock at 1 August 20..
Plant and Machinery
At cost
Accumulated depreciation
Purchases
Sales
Discounts allowed
Discounts received
Returns to suppliers
Returns from customers
Wages and salaries
Other operating expenses
Trade creditors
Trade debtors
Cash
Bank
Drawings
Capital
5830
36420
14568
48760
101890
1324
1150
531
761
15300
21850
4380
6340
199
2197
8465
24927
The following additional information as at 31 July is available:
(a)
(b)
(c)
(d)
Closing stock as at 31 July £6140
Some operating expenses have been prepaid by £172 and others have been
accrued by £233.
Plant and machinery has still to be depreciated for 20.. at 20% per annum on
cost.
Other operating costs include the following:
Carriage inwards
£650
Carriage outwards
£1540
You are required to prepare the Trading, Profit and Loss account and Balance Sheet
for Mr Banda for the year ended 31 July 20..
24
Question 32
From the following information, prepare the Trading and Profit and Loss Account and
Balance Sheet of F Smith for year ended 31 December Year 1.
£
Postages
385
Printing and stationery
525
Capital
3,755
Cash
25
Bank
1,560
Opening stock
1,250
Purchases
24,750
Sales
47,030
Sales returns
150
Purchase returns
650
Carriage inwards
250
Carriage outwards
290
Wages and salaries
5,600
Rent and rates
800
Premises
7,500
Plant and machinery
3,250
Drawings
1,000
Insurance
250
Discount allowed
150
Discount received
20
Debtors
4,250
Creditors
4,750
VAT (Cr)
1,000
Distribution expenses
6,700
Loan from Building Society
(1 July Year 2)
4,000
Furniture and Fittings
800
Motor Vehicles
1,500
Notes:
1.
Closing Stock £1,000
2.
Rates prepaid at 1 January Year 2 £200
3.
Insurance prepaid at 1 January Year 2 £20 and prepaid at 31 December Year 2
£50
4.
Wages accrued at 31 December Year 2 £400
5.
Interest at 5% per annum has still to be paid on the Building Society loan
25
Question 33
From the following list of balances prepare the Trading, Profit and Loss and Balance
Sheet of R Alburn for the year ended 31 December Year 2:
Dr
£
Cr
£
Land and buildings
115,000
Fixtures and fittings
18,000
Stock 1 January Year 2
37,500
Debtors
47,200
Creditors
Bank
13,000
Purchases
47,000
Sales
Rent and rates
2,500
Heat and light
1,200
Carriage outwards
500
Bad Debts
200
Discounts received
Sales returns
700
Office salaries
50,000
Provision for doubtful
debts
Bank loan
Capital
Drawings
15,520
_________
__________
348,320
_________
348,320
__________
11,300
160,000
2,700
3,720
20,000
150,600
Notes at 31 December Year 2:
1.
2.
3.
4.
5.
Closing stock amounted to £39,000.
Office salaries accrued £1,600.
Rates prepaid £300.
Interest on loan due £2,200.
Provision for doubtful debts to be increased to 10% of debtors.
26
Question 34
The following information is available for R Gordon, for the year ended 31 October
Year 2:
Trial Balance as at 31 October Year 2
Turnover
Net purchases
Opening Stock
Advertising
Heating and lighting
Rent and rates
Wages
Debtors and creditors
Bank
VAT
Premises
Office equipment
Plant and Machinery
Provisions for Depreciation
Office equipment
Plant and machinery
Provision for Doubtful Debts
Drawings
Capital
Dr
£
75,000
6,500
800
1,800
2,400
30,500
5,400
97,000
Cr
£
250,000
3,700
2,500
100,000
25,000
90,000
6,000
5,000
30,200
200
________
148,800
_________
440400
________
440,400
________
The following additional information is available on 31 October Year 2:
1. Closing Stock £5,900
2. Heating and lighting amount due £200
3. Advertising prepaid £200
4. Provision for doubtful debts is to be 5% of debtors
5. Depreciation on fixed assets is provided for on the written down
value using
the following percentages:
Office equipment 20%
Plant and machinery 15%
27
Question 35
The following trial balance was extracted from the ledger accounts of M Lee on 31
October Year 2 along with the accompanying notes.
Trial Balance as at 31 October Year 2
Dr
Cr
£
£
Sales
600,000
Purchases
250,000
Opening Stock
15,900
Carriage inwards
1,450
Carriage outwards
1,800
Discount received
1,300
Discount allowed
2,200
Commission received
2,500
Rent and rates
2,400
Wages
120,000
Bad Debts recovered
200
Insurance
1,900
Debtors and creditors
8,000
5,400
Bank
12,500
VAT
2,750
Premises
200,000
Office equipment
15,000
Machinery
120,000
Provision for Depreciation
Office equipment
3,500
Machinery
43,200
Provision for Doubtful Debts
500
Drawings
12,500
Capital
104,300
763,650
763,650
_______ _________
Notes at 31 October Year 2:
1. Closing Stock: £13,500
2. Accruals: Wages £3,600, Rent and Rates £500
3. Prepaid insurance £400
4. Commission received of £300 has still to be received
5. Provision for Doubtful Debts is to be 6% of annual debtors
6. Provide for depreciation using the diminishing balance method as follows:
7. Machinery 25%
8. Office equipment 15%
28
Question 36
Study the errors noted in column one of the following table. State in column 2
whether the correction of the errors will affect the Net Profit (tick for yes and a
cross for no). In column 3, state whether the correction will INCREASE, DECREASE
or have NO EFFECT on the Net Profit.
Error
Yes/No
Effect on Net Profit
Sales over added by £150
Rent under added by £20
Rates over added by £50
Cash payment to a creditor entered in
Cash Account only, £60
Omission of Drawings by cheque £100
Purchase of Machinery £100 entered in
ledger accounts as £1,000
Purchases under added by £30
Purchase of Office Equipment £50
entered in Purchases Account
Sale of motor van £500 entered in error
in Sales Account
Advertising under added by £80
Cash Payment by Debtor entered in error
on credit side of the Cash Account
29
Question 37
After the final accounts of a firm had been drawn up, the following errors were
discovered. State the effect that the CORRECTION of each of these errors would
have upon the profits. Set out your answer as shown.
Example: Sales over added by £1,240
Item
Effect upon profit
Amount
Example
Decrease
£1,240
1
2
3
4
1.
Purchases on credit had been over added by £100.
2.
Goods valued at £193.50 had been sold on credit to J Gibson but the entry had
been debited to the account of J E Gibson.
3.
Discount received totalling £55 had been misread as discount allowed and
entered accordingly in the final accounts.
4.
Closing stock was originally valued at £6,940 and entered in the Trading
Account as that figure. It has since been discovered that it should have been
valued at £7,000.
30
Question 38
Show in the table below, how the following errors would be corrected in the ledger
accounts of R Taylor.
1.
£18 received from P Park had been posted to the account of D Park.
2.
£40 spent by the trader on his own expenses had been posted to the Office
Expenses Account.
3.
£10 received in respect of the sale of some Bookcases from the office had
been posted to the Sales Account
4.
£28 paid to D Allan had been posted to the account of J Callen.
5.
£65 spent by R Taylor on office furniture had been posted to the Office
Expenses Account.
6.
Machinery valued at £1,600 purchased on credit from Mitchell Ltd, had been
debited to the Purchases Account.
Error
1
Account Debited
Amount
Amount Credited Amount
2
3
4
5
6
31
Question 39
Show in the table below, how each of the following errors would be corrected in the
ledger accounts of H Gibson.
1.
The purchase of a computer, value £750.50, had been wrongly included in the
Purchases Account.
2.
A credit note issued to R Morgan for goods returned to the value of £60, less
5% Trade Discount, had been posted to the account of R Morton.
3.
When paying J Johnson, a creditor, Gibson had deducted £5 discount. Johnson
had disallowed this discount.
4.
A sale to Derby & Co amounting to £275 had been entered in the ledger
accounts as £257.
5.
Goods sold to K Smith, £89 were not entered into the ledger accounts.
6.
A payment made to R Strong, a creditor, of £100 had been entered on the
debit side of the Cash Account and credited in R Strong’s Account.
Error
1
Account Debited
Amount
Amount Credited Amount
2
3
4
5
6
32