Kilsyth Academy
NATIONAL 5 ACCOUNTING
REVISION BOOKLET 1
BUSINESS DOCUMENTS AND LEDGERS
Exercise 1
You are required to complete the ledger accounts of World of Shoes from the
information contained below:
INVOICE
SHOE MANIA
Ripon Road
224 Main Street
AIRDRIE
ML6 9SB
Telephone: 01236 745890
Fax: 01236 745891
Invoice Number: 41a
To: World of Shoes
Main Street
FALKIRK
FK5 3BL
Quantity
50
50
Description
Pairs Brown Boots
Leather shoes
(black)
VAT No: 435 21 213
Date: 1 May
Unit Price
Cost
£ p
20 00
10 00
£ p
1000 00
500 00
1500 00
Trade Discount
(10%)
Net Goods Value
VAT (20%)
150 00
1350 00
270 00
1620 00
TOTAL
1
COPY INVOICE
World of Shoes
Main Street
FALKIRK
FK5 3BL
Tel: 01324 552 277
Fax: 01324 552 278
E-mail: worldofshoes@htp.co.uk
To:
QTY
30
30
VAT NO: 427 73 652
INV NO: 4427
Great Shoes
Cameron View
EDINBURGH
EH23 3KR
Description
Brown Ankle Boots
Pumps
Trade Discount (15%)
Net Goods Value
VAT (20%)
TOTAL
DATE: 4 July
Unit Price
24 00
15 00
Cost
720 00
450 00
1170 00
175 50
994 50
198 90
1193 40
2
COPY CREDIT NOTE
World of Shoes
Main Street
FALKIRK
FK5 3BL
Tel: 01324 552 277
Fax: 01324 552 278
E-mail: worldofshoes@htp.co.uk
To:
QTY
10
VAT NO: 427 73 652
INV NO: 4427
Great Shoes
Cameron View
EDINBURGH
EH23 3KR
Description
Pumps
DATE: 9 July
Unit Price
15 00
Cost
150 00
150 00
22 50
Trade Discount
(15%)
Net Goods Value
VAT (20%)
127 50
25 50
£
153 00
TOTAL
3
SHAWLANDS BANK PLC
10 Brownlee Road, GLASGOW, G12 6ER
Pay
02-01-90
22/06
World of Shoes
One Thousand and Forty pounds and 40
pence
£ 1040.40
J Scoular
Great Shoes Ltd
(COPY OF) CASH RECEIPT
28 June
Received from M Millar with thanks £216.00 cash
Goods Leather boots (high) £180.00
VAT £36
World of Shoes
4
Exercise 2
You are required to complete the ledger accounts of Party Planners from the
information contained in the following five documents:
COPY INVOICE
Party Planners
95 High Street
MOTHERWELL
ML6 5DE
Telephone: 01698 235678
Fax: 01698 324518
E-mail: balloonstofly@ukmail.net
Invoice Number: R124
Date: 25 February
123
VAT Number: 457 659
To: Honeypot Nursery
36 Park Place
HAMILTON
HM3 6GT
Quantity
Description
12 doz
Happy Anniversary
Balloons
Helium
1
Unit Price
£ p
1 60
80 00
Cost
£ P
230 40
80 00
310 40
Trade Discount
(10%)
Net Goods Value
VAT (20%)
31 04
279 36
55 87
335 23
TOTAL
5
INVOICE
Wigs R Hairy
24 Jack Jones Road
SHOTTS
SH7 9SW
Telephone: 01698 235678
Fax: 01698 324515
E-mail: wigsrhairy@btphone.com
VAT Number: 235 653 212
Invoice Number: 876
Date: 19 August
Party Planners
95 High Street
MOTHERWELL
ML6 5DE
QTY
10
10
Description
Pink Bob Style
Electric Blue Bob Style
Trade Discount (10%)
Net Goods Value
VAT (20%)
Unit Price
8 00
8 00
Cost
80 00
80 00
160 00
16 00
144 00
28 80
172 80
6
COPY CREDIT NOTE
Party Planners
95 High Street
MOTHERWELL
ML6 5DE
Telephone: 01698 235678
Fax: 01698 324518
E-mail: balloonstofly@ukmail.net
Credit Note Number: C154
Date: 3 September
VAT Number: 457 659 123
To:
Honeypot Nursery
36 Park Place
HAMILTON
HM3 6GT
QTY
1 doz
Description
Happy Anniversary
Balloons (faulty)
Unit Price
1 60
Cost
19 20
Trade Discount (10%)
19 20
1 92
Net Goods Value
VAT (20%)
17 28
3 46
TOTAL
£
20 74
7
BELLSHILL BANK PLC
25 High Street BELLSHILL BH9 5HJ
18-26-24
18/09
Pay Party Planners
Three hundred and fourteen pounds
and 49 pence only
£ 314.49
Honeypot Nursery
(COPY OF) CASH RECEIPT
26 November
Received from L Wood with thanks £86.95cash
Goods 2 dozen balloons helium filled
VAT £14.49
Party Planners
Exercise 3
1
What is the difference between Trade and Cash Discount
2
What is the purpose of a Statement of Account
3
What details are included on an Invoice
4
What details are included on a Credit Note
8
FINAL ACCOUNTS
Exercise 1
The following trial balance was extracted from the books of Graham’s Sports
Shoes at 31 December. Prepare the final accounts.
Dr
£
Buildings (at cost)
Fixtures and fittings (at cost)
Vehicles (at cost)
Fixtures and fittings depreciation provision (1 Jan)
Vehicles depreciation provision (1 Jan)
Stock (1 Jan)
Debtors
Purchases
Purchases returns
Sales
Sales returns
Bank
Cash
Creditors
VAT
Rent received
Repairs to vehicles
Insurance
Rent and rates
Light and heat
Telephone
Wages
Capital (1 Jan)
Cr
£
52,960
35,000
15,000
4,200
2,250
1,250
23,660
97,150
550
205,000
1,500
6,978
2,127
7,485
4,025
4,000
1,700
2,100
27,950
3,250
3,920
33,650
80,685
£308,195 £308,195
Notes:
Closing stock was valued at £7,000.
At 31 December, rent of £1,350 was paid in advance and light and heat of £280
was owed.
Fixtures and fittings are to be depreciated by 4% and vehicles by 5%, both using
the straight line method.
9
Exercise 2
The following balances were taken from the books of Scottish Timber Wood
Suppliers at 31 December. Prepare the final accounts.
Dr
£
Buildings (at cost)
Plant and equipment (at cost)
Vehicles (at cost)
Plant and equipment depreciation provision (1 Jan)
Vehicles depreciation provision (1 Jan)
Stock (1 Jan)
Debtors
Purchases
Purchases returns
Sales
Sales returns
Bank
Cash
Creditors
VAT
Commission received
Plant and equipment repairs
Insurance
Rent
Heat, light and power
Miscellaneous expenses
Wages
Capital (1 Jan)
Cr
£
29,545
16,560
7,000
1,985
1,065
590
11,185
45,925
1,260
96,910
1,710
3,298
972
3,540
1,950
1,890
805
1,250
970
1,536
1,853
15,907
30,506
£139,106 £139,106
Notes:
Closing stock was valued at £3,910.
At 31 December, insurance of £754 was prepaid and heating of £156 was due.
Plant and equipment is to be depreciated by 7.5% and vehicles by 3.5%, both using
the straight line method.
10
Exercise 3
The following Trial Balance was extracted from the books of Ben Stiller on 30
June Year 3. You are required to prepare a Trading and Profit and Loss Account
for the year ended and a Balance Sheet as at that date.
£
£
Dr
Cr
Capital
25,000
Freehold Land and Buildings
9,000
Furniture and Fittings
1,340
Stock at 1 July Year 2
11,400
Lighting and Heating
178
Drawings
5,800
Purchases and Sales
78,600
105,200
General Expenses
3,602
Bank
824
Motor Van
240
Discounts
2,228
1,764
Debtors and Creditors
9,500
7,650
Rates and Insurance
192
Wages and Salaries
14,970
Bad Debts
860
Provision for Bad Debts 1 July Year 2
320
139,934
139,934
NOTES AT 30 JUNE YEAR 3
Stock £15,800
Rates and Insurance paid in advance £50
Lighting and Heating outstanding was £28
The provision for bad debts is to be increased to £460
Provide for depreciation of Furniture and Fittings at 10% of cost
11
BREAK-EVEN
Exercise 1
Wondersew produces sewing machines that are sold at £1,200 each. The following
costs are incurred:
Fixed costs
Variable costs
Materials
Component parts
Wages
£157,500
£80
£350
£140
You are required to calculate the following:
a)
b)
c)
d)
e)
f)
g)
The
The
The
The
The
The
The
contribution per sewing machine
break-even point in units and sales value
profit at output levels of 320 and 425 units
output level required to give a profit of £75,600
new contribution per unit if the selling price is reduced to £1,095
break-even point at the new selling price
new output level required to give the same profit of £75,600
Exercise 2
Scotstoun Display Stands estimates that it can sell 2,000 display stands at £200
each. The costs of production are shown below:
Variable costs per unit:
Materials
Labour
Total fixed costs
£80
£40
£96,000
You are required to find:
a) The break-even point in units and in sales revenue
b) The profit at 1,400 units and 2,000 units
c) The new break-even point if the selling price is increased by 10%
d) The new profit at output levels of 1,400 and 2,000 units
12
Exercise 3
On completion of the company’s first year selling water purifiers, Pegasus plc
prepared the following Income Statement at 31 March 2004.
Income Statement
£
£
Turnover (£150 per unit)
90,000
Less Cost of Sales (£70 per unit)
42,000
48,000
Less Expenses
Rent and Insurance
9,700
Light and Heat
2,100
Wages of Sales Assistant
Profit
10,200
22,000
£26,000
a) Calculate the number of water purifiers the company had to sell to break-even
b) In the following year, the company plans to employ another Sales Assistant and
spend £1,800 on an advertising campaign. How many more water purifiers will it
have to sell to cover these additional costs?
c) How many water purifiers will the company have to sell to make a profit of
£30,000 if it goes ahead with its plans in (b)?
13
Exercise 4
Jean MacKinnon owns and runs a business which manufactures and sells Shetland
sweaters.
She plans to produce and sell 500 sweaters at £45 each.
She estimates the following costs:
Rent
Heating and Lighting
Administration
£2,000
£1,500
£2,500
The production costs for each sweater is:
Labour
Materials
£12
£13
a) Using the information above, calculate the break-even point
b) Calculate the profit or loss if 400 sweaters are produced and sold
c) State 2 advantages of using a break even chart
d) Explain the meaning of:
i. Fixed Costs
ii. Variable Costs
iii. Contribution
14
CASH BUDGETS
Exercise 1
Clarkson plc is preparing its budgets for the latter part of the year and supplies
you with the following information. Prepare the budget for August to October.
1
Sales in units are expected as follows:
July
1200
August
1000
September
900
October
1100
November
1250
December
1400
2 The standard selling price per unit of the product is £20 but cash sales are at a
discount of 10%
3 Sales are 50% on a cash basis and 50% on one month’s credit.
4 Raw Material costs are £9 per unit and are paid one month prior to sale
5 Direct wage costs are £4 per unit and are paid in the same month of sales
6 Other expenses are expected to be £5000 in July, and then rise by £500 per
month each month until December.
7 A new machine costing £20,000 will be purchased in August. It will be paid for
by a deposit of £8,000 in that month with the balance paid in equal installments
over the next three months. The old machine which is being replaced will be
sold. Payment of £5000 will be received in October.
8 In September a loan of £10000 will be taken out.
9 A VAT bill of £6000 will be paid in September
10 The bank balance of Clarkson plc at 31 July is expected to be £6000
15
Exercise 2
Bishop plc is preparing its budgets for the first part of the year and supplies you
with the following information: Prepare the budget for January to March.
1
Sales in units are expected as follows:
Dec
1500
2
3
Jan
1400
Feb
1200
Mar
1300
Apr
1200
May
1500
Sales are 20% on a cash basis and 80% on one month’s credit
The standard selling price per unit of the product is £40 but cash sales are
at a discount of 5%
4
Raw Material costs are £15 per unit and are paid for one month prior to
sale
5
Direct Wage costs are £12 per unit and are paid in the same month as sales
6
A commission of £2 per unit on sales over 1000 units in any month will be paid
in the month following the sales
7
Fixed Costs are expected to be £10,000 in January and February but then
rise by £2,000 in March, and are paid in the month incurred.
8
In February Bishop plc will issue 20,000 new Ordinary shares at a price of £1
per share
9
The company will pay a tax bill of £30,000 in March
10
The bank balance of Bishop plc at 31 December 2004 is expected to be
overdrawn by £5000.
16
Exercise 3
M Tandell makes reading lamps and has provided the following estimated figures.
1.
Bank Balance on 1 November £6,200
2.
Estimated Credit Sales (units)
Oct
7000
Nov
10000
Dec
15000
Jan
6000
3 Selling price is £20 per unit
4 Customers settle their accounts one month after the month of sale
5 Number of units to be produced
Sept
9000
Oct
13000
Nov
12000
Dec
7000
Jan
6000
6 Raw Materials cost £8 per unit. They are paid 2 after they have been used in
production.
7 Direct Labour costs £2.50 per unit and is paid in the month in which it is
incurred.
8 Variable production overheads are £1 per unit and are paid one month after
they arise
9 An unused building is rented out to a local garage for £3,200 per month
10 Fixed Costs of £12,200 are paid each month
11 A loan of £100,000 will be received in November. The loan will be repaid in
two equal installments of £50,000 in December and January. Loan interest
will also be paid in two equal installments of £1,000 in December and January.
12 New machinery costing £120,000 will be bought in November. This will
replace existing machinery sold in November for £5,000 scrap
17
RATIO ANALYSIS
Exercise 1
The following is the balance sheet produced by Alan Mountfield, a sole trader, for the
year ended 31 December 20xx, along with some trading account figures.
Balance sheet of Alan Mountfield
as 31 December 20xx
Fixed assets
Current assets:
Stock
Debtors
Bank
Current liabilities:
Creditors
Net worth
£
40,000
45,000
35,000
120,000
50,000
Financed by:
Capital at start
Add net profit
70,000
270,000
210,000
30,000
240,000
30,000
270,000
Add long-term liabilities
Trading figures
Sales
Gross profit
Opening stock
Debtors at start
75% of sales were on credit.
£
200,000
£200,000
£60,000
£36,000
£27,500
18
(a)
From the information provided in Alan Mountfield’s balance sheet and trading figures
for the year ended 31 December 20xx, calculate the following ratios:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
gross profit ratio
net profit ratio
rate of stock turnover
debtors’ collection period
expenses ratio
current ratio
turnover to fixed assets ratio
acid test ratio
return on capital employed.
All answers should be rounded to two decimal places.
(b)
Alan calculated the following ratios from the final accounts of the previous year:
net profit ratio – 10%
return on capital employed – 9%
debtors’ collection period – 100 days
(i)
(ii)
Comment on the performances of Alan’s business over the 2-year period.
Suggest a possible reason for changes in each of the ratios.
19
Exercise 2
The following are the final accounts produced by Aziz Brown, a sole trader, for the year
ended 31 December 20xx. Some figures were not available when the accounts were
prepared.
Trading, profit and loss account of Aziz Brown
for year ended 31 December 20xx £
£
Sales
200,000
Less cost of goods sold
Opening stock
Purchases
122,500
Less closing stock
Cost of goods sold
Gross profit
Less expenses
Net profit
9,500
120,500
79,500
55,000
24,500
Balance sheet of Aziz Brown
as at 31 December 20xx
Fixed assets
Current assets
Current liabilities
Financed by:
Capital at start
Add net profit
Less drawings
Add long-term liabilities
£
43,000
16,500
£
223,500
26,500
250,000
195,000
24,500
219,500
19,500 200,000
50,000
250,000
Notes
 85% of sales were on credit.
 75% of purchases were on credit.


Debtors
Creditors
1 January
£5,780
£2,400
31 December
£6,720
£3,600
20
(a)
From the information provided in Aziz Brown’s final accounts for the year ended 31
December 20xx, calculate the following ratios:
(i) gross profit ratio
(ii) net profit ratio
(iii) rate of stock turnover
(iv) debtors’ collection period
(v) creditors’ collection period
(vi) expenses ratio
(vii) current ratio
(viii) turnover to fixed assets ratio
(ix) acid test ratio
(x) return on capital employed.
All answers should be rounded to two decimal places.
(b)
Aziz calculated the following ratios from the final accounts of the previous year:
return on capital employed – 13%
expenses ratio – 33.3%
rate of stock turnover – 20 times
(i)
(ii)
Comment on the performances of Aziz’s business over the 2-year period.
Suggest a possible reason for changes in each of the ratios.
21
JOB COSTING
Exercise 1
Hughes plc
The following information relates to Job 77. Cost the job:
Direct Materials:
30 metres of Material X at £10 per metre
25 metres of Material Y at £20 per metre
Hughes plc spent 20 hours converting the units for Job 77 into finished units.
20% of the time was in Department A, 50% in Department B and the remainder in
Department C.
Wage rates in the departments were as follows:
Department A £7 per hour
Department B £6 per hour
Department C £9 per hour
Direct Expenses of £178 were incurred on this job.
Hughes plc expect all their jobs to earn a profit of 25% on cost.
VAT is charged at 20%
Calculate
i.
The cost of Job 77
ii.
The selling price of the job
22
Exercise 2
Ambrose plc is costing Job 417 which will require the following:
Direct Materials
Direct Labour
200 metres at £10 per metre
Labour is basic rate of £12 per hour
Employee A - 30 hours
Employee B – 40 hours
(Hours worked in excess of 35 hours per employee are paid at double time)
Direct Expenses
£750
OVERHEADS:
Charge £5 per labour hour
VAT at 20%
Required
1. Prepare the Job Cost Statement for Job 417 assuming a mark up of 40%
Exercise 3
Gilmour Publications is about to start on Job 104 which will pass through both the
Printing and Binding Departments.
.
The following information has been provided.
(b) Job 104 will require the following
Direct Materials
Direct Labour
Direct Expenses
500 reams at £4.80
20 hours at £12.50
£200
Overheads
Charge £5 per labour hour for overheads.
Prepare a Job Cost Statement for Job 104 assuming a profit of 20% on the cost
of the job is required.
23
STOCK CONTROL
Exercise 1
Chan plc manufactures electronic components and the following data relates to
component C2 for the month of April. At the start of the month there were 200
items in stock each of which cost £14.50.
Date
8 April
16 April
21 April
30 April
Received (purchased)
400@£15.25 each
Issued to Factory
300
400@£15.70 each
200
Required
Calculate the closing stock in terms of units and value in respect of
(i) First In First Out (FIFO) as the basis of pricing
(ii) Last In First Out (LIFO) as the basis of pricing
24
Exercise 2
Paterson plc commenced trading on 1 April 2000. The following details relate to
the purchase and issue to production of Material X25 for the period 1 April – 21
April 2000.
Date
1 April
7 April
9 April
12 April
14 April
18 April
21 April
(a)
Purchases
Quality
1000
Unit Price
£2.50
Issues
Quantity
600
1500
£2.60
500
1200
£2.70
900
400
Prepare a stock record card for the period using:
(i) First In First Out (FIFO) as the basis of pricing
(ii) Last In First Out (LIFO) as the basis of pricing
25
CORRECTION OF ERRORS
Exercise 1
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.
26
Exercise 2
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
27
Exercise 3
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. A sale to Derby & Co amounting to £275 had been entered in the ledger
accounts as £257.
4. Goods sold to K Smith, £89 were not entered into the ledger accounts.
5. 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
28