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An introduction

1.1.1 to double-entry
bookkeeping
Answers to End-of-chapter questions
1 A bookkeeper records the day-to-day financial transactions of a business in a
systematic way.
An accountant prepares financial statements from the bookkeeping records
and provides some interpretation of what the statements reveal about a
businesss financial position.
3 a An income statement provides information about the profit or loss made
by an organisation.
b A statement of financial position provides information about a businesss
resources and how they have been financed. The statement provides
information for judging the businesss liquidity and profitability.
5 (a) Vehicle Asset (k) Inventory Asset
(b) Shop fittings Asset (l) Trade receivables Asset
(c) Cash at bank Asset (m) Bank overdraft Liability
(d) Bank loan Liability (n) Trade payables Liability
(e) Owners investment in the business Capital (o) Machinery Asset
(f) Cash in hand Asset (p) Loan from a friend Liability
(g) Equipment Asset (q) Value of owners stake in the business Capital
(h) Amounts owing to suppliers Liability (r) Amounts owed by customers Asset
(i) Furniture Asset (s) Cash at bank Asset
(j) Land Asset (t) Fittings Asset

7 Date Details $
1 May Purchased furniture for 2 850 Dr Purchases to reflect a decrease in capital
resale by cheque Cr Bank to record a decrease in an asset
2 May Paid rent by cheque 1 500 Dr Rent to reflect a decrease in capital
Cr Bank to record a decrease in an asset
3 May Purchased a motor vehicle 3 500 Dr Motor vehicle to record an increase in an asset
by cheque Cr Bank to record a decrease in an asset
4 May Sold furniture for cash 200 Dr Cash to record an increase in an asset
Cr Sales to record an increase in capital
4 May Purchased furniture for 4 150 Dr Purchases to reflect a decrease in capital
resale on credit Cr Trade payable to record an increase in a liability
5 May Sold furniture on credit 1 140 Dr Trade receivable to record an increase in an asset
Cr Sales to reflect an increase in capital
6 May Paid a cheque for 600 Dr Drawings to reflect a decrease in capital
drawings Cr Bank to record a decrease in an asset
7 May Purchased furniture for 400 Dr Purchases to reflect a decrease in capital
resale by cash Cr Cash to record a decrease in an asset

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9 a Capital is $15 700 (assets $22 700 - liabilities $7000)
b Dr Bank Cr
Nov 1 Balance 4 100 Nov 1 Purchases 3 100
19 Fittings 1 000 4 Rent 900
25 Abaxa 2 500 26 Bank loan 500
29 Seema Ltd 1 800

Dr Cash Cr
Nov 1 Balance 600 Nov 15 Drawings 700
7 Sales 2 800 23 Wages 1 300

Dr Furniture and fittings Cr


Nov 1 Balance 18 000 Nov 19 Bank 1 000

Dr Bank loan Cr
Nov 26 Bank 500 Nov 1 Balance 7 000

Dr Capital Cr
Nov 1 Balance 15 700

Dr Purchases Cr
Nov 1 Bank 3 100
10 Seema Ltd 3 600

Dr Rent Cr
Nov 4 Bank 900

Dr Sales Cr
Nov 7 Cash 2 800
12 Abaxa 3 300

Dr Drawings Cr
Nov 15 Cash 700

Dr Wages Cr
Nov 23 Cash 1 300

Dr Trade payable (Seema Ltd) Cr


Nov 29 Bank 1 800 Nov 10 Purchases 3 600

Dr Trade receivable (Abaxa) Cr


Nov 12 Sales 3300 Nov 25 Bank 2500

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1.1.2 Source documents and
books of prime entry

Answers to End-of-chapter questions


1 D
3 B
5 A
7 B
9 B
11 Purchases journal
Date Details Invoice No $
May 3 Whiteford Ltd 2 730 1 230
11 P Sackley 9 702 2 720
24 A Hereton 1 818 990
27 Whiteford Ltd 2 823 2 440
Total purchases 7 380

PURCHASES LEDGER
Dr Whiteford Ltd Cr
May 3 Purchases 1 230
27 Purchases 2 440

Dr P Sackley Cr
May 11 Purchases 2 720

Dr A Hereton Cr
May 27 Purchases 990

GENERAL LEDGER
Dr Purchases Cr
May 31 Purchases journal 7 380

13 Purchases journal
Date Details Invoice No $
Oct 12 Melfin Ltd 449 2 400
28 Harvey Bikes 223 4 300
Total purchases 6 700

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Sales journal
Date Details Invoice No $
Oct 7 W Gifford 811 1 920
26 T Perry 812 2 244
Total sales 4 164

PURCHASES LEDGER
Dr Melfin Ltd Cr
Oct 12 Purchases 2 400

Dr Harvey Bikes Cr
Oct 28 Purchases 4 300

SALES LEDGER
Dr W Gifford Cr
Oct 7 Sales 1 920

Dr T Perry Cr
Oct 26 Sales 2 244

GENERAL LEDGER
Dr Purchases Cr
Oct 31 Purchases journal 6 700

Dr Sales Cr
Oct 31 Sales journal 4 164

15 Returns inwards journal


Date Customer Credit note number $
June 11 Parsed Garages Ltd 454 220
13 Beretta Car Dealers 455 507
24 Parsed Garages Ltd 456 1 000
1 727

SALES LEDGER
Dr Persad Ltd Cr
June 11 Returns inwards 220
24 Returns inwards 1 000

Dr Beretta Car Dealers Cr


June 13 Returns inwards 507

GENERAL LEDGER
Dr Returns inwards Cr
June 30 Returns inwards journal 1 727

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17 Dr CASH BOOK Cr
Discounts Cash Bank Discounts Cash Bank
allowed received
$ $ $ $ $ $
June 1 Balances 450 2 720 June 5 N Singh 160 3 040
5 K Gobin 30 570 17 Bank 3 800
14 Sales 3 920 21 Zamran 75 1 425
Stores
17 Cash 3 800
24 QR Pulchan Ltd 104 1 976
134 235

PURCHASES LEDGER
Dr N Singh Cr
June 5 Bank 3 040 June 1 Balance 3 200
Discounts received 160

Dr Zamran Stores Cr
June 21 Bank 1 425 June 1 Balance 1 500
21 Discounts received 75

SALES LEDGER
Dr K Gobin Cr
June 1 Balance 600 June 5 Bank 570
5 Discounts allowed 30

Dr QR Pulchan Ltd Cr
June 1 Balance 2 080 June 24 Bank 1 976
24 Discounts allowed 104

GENERAL LEDGER
Dr Discounts allowed Cr
June 30 Cash book 134

Dr Discounts received Cr
June 30 Cash book 235

19 Sept 3 Received an invoice for some new equipment for business use Journal
6 Cheque stub showed the payment of rent for the month Cash book
11 Entries were made to correct a mistake made by the bookkeeper Journal
14 Invoice was issued for the sale of goods on credit Sales journal
15 Credit note was issued for the return of goods by a customer Returns inwards journal
20 A voucher showed the purchase of postage stamps Petty cash book
23 Invoice was received for goods for resale Purchases journal
25 Some of the new equipment was found to be faulty and was returned to the supplier Journal

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21 JOURNAL
Date Details Dr Cr
$ $
July 3 Equipment 3 600
J Rajah Ltd 3 600
Purchase of new equipment on credit, invoice
number 7361
10 Gobin Ltd 380
Discounts allowed 380
Cancellation of discount allowed
14 TM Williams 780
T Williams Ltd 780
Correction of misposted entry
19 J Rajah Ltd 520
Equipment 520
Return of equipment damaged in transit

PURCHASES LEDGER
Dr J Rajah Ltd Cr
July 19 Equipment 520 July 3 Equipment 3 600

SALES LEDGER
Dr Gobin Ltd Cr
July 10 Discounts allowed 380

Dr TM Williams Cr
July 14 T Williams Ltd 780

Dr T Williams Ltd Cr
TM Williams 780

GENERAL LEDGER
Dr Equipment Cr
July 3 J Rajah Ltd 3 600 July 19 J Rajah Ltd 520

Dr Discounts allowed Cr
July 10 Gobin Ltd 380

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Preparing
1.1.3 the books of
account
Answers to End-of-chapter questions
1 Dr CASH BOOK Cr
Discounts Discounts
allowed Cash Bank received Cash Bank
$ $ $ $ $ $
Sept 1 Balances 1 380 1 750 Sept 4 General exp 180
12 Sales 1 090 14 TM Bennett Ltd 96 1 824
21 Cash 730 19 Rent 2 480
28 KS Maharaj 30 1 470 21 Bank 730
23 Drawings 280
30 Bank charges 70

30 96

Purchases journal
Date Details Invoice number $
Sept 4 TM Bennett Ltd 2 361 2 100
Total purchases 2 100

Sales journal
Date Details Invoice number $
Sept 15 KS Maharaj 0 001 1 600
Total sales 1 600

Returns outwards journal


Date Details Credit note number $
Sept 7 TM Bennett Ltd G09 180
Total returns outwards 180

Returns inwards journal


Date Details Credit note number $
Sept 26 KS Maharaj 01 100

Total returns inwards 100

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PURCHASES LEDGER
Dr TM Bennett Ltd Cr
Sept 7 Returns outwards 180 Sept 4 Purchases 2 100
14 Bank 1 824
14 Disc received 96

SALES LEDGER
Dr KS Maharaj Cr
Sept 15 Sales 1 600 Sept 26 Returns inwards 100
28 Bank 1 470
28 Disc allowed 30

GENERAL LEDGER
Dr Bank charges Cr
Sept 30 Bank 70

Dr Bank loan Cr
Sept 1 Balance 15 000

Dr Capital Cr
Sept 1 Balance 74 630

Dr Discounts allowed Cr
Sept 30 Cash book 30

Dr Discounts received Cr
Sept 30 Cash book 96

Dr Drawings Cr
Sept 23 Cash 280

Dr General expenses Cr
Sept 6 Cash 180

Dr Non-current assets Cr
Sept 1 Balance 86 500

Dr Purchases Cr
Sept 30 Purchases journal 2 100

Dr Rent Cr
Sept 19 Bank 2 480

Dr Returns inwards Cr
Sept 30 Returns inwards journal 100

Dr Returns outwards Cr
Returns outwards
Sept 30 journal 180

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Dr Sales Cr
Sept 12 Cash CB1 1 090
30 Sales journal 1 600

3 Trial balance at 30 September 2014


Dr Cr
$ $
Cash 1 280
Bank overdraft 424
Bank charges 70
Bank loan 15 000
Capital 74 630
Discounts allowed 30
Discounts received 96
Drawings 280
General expenses 180
Non-current assets 86 500
Purchases 2 100
Rent 2 480
Purchases returns 180
Sales (i.e. Revenue) 2 690
Sales returns 100
Trade payables
Trade receivables
93 020 93 020

5 Dr Motor vehicles Cr
Aug 1 Balance 7 000 Aug 12 Bank 7 000
14 Bank 9 500 31 Balance c/d 9 500
16 500 16 500
Sept 1 Balance b/d 9 500

Dr Bank loan Cr
Aug 31 Bank 3 200 Aug 1 Balance 39 400
31 Balance c/d 36 200
39 400 39 400
Sept 1 Balance b/d 36 200

Dr Premises Cr
Aug 1 Balance 74 000

Dr Trade receivable: DBQ Ltd Cr


Aug 1 Balance 3 600 Aug 31 Balance c/d 5 300
26 Sales 1 700
5 300 5 300
Sept 1 Balance b/d 5 300

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Dr Trade payable: Zexton & Co Cr
Aug 31 Balance c/d 4 200 Aug 1 Balance 2 100
11 Purchases 800
25 Purchases 1 300
4 200 4 200
Sept 1 Balance b/d 4 200

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Capital and
1.1.4 revenue
expenditure
Answers to End-of-chapter questions
1 Capital expenditure is money spent on assets with a long-term benefit to the
organisation.
Examples: motor vehicles, fixtures and fittings, plant and machinery, property,
computer equipment.
3 Profits would be overstated.
5 a Revenue expenditure
b Capital expenditure
c Revenue expenditure
d Revenue expenditure
7 Capital expenditure: $45 600 + $1570 + $300 + $650 = $48 120
Revenue expenditure: $1200 + $260 = $1460

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Accounting
1.1.5 concepts and
principles
Answers to End-of-chapter questions
1 A
3 a Prudence
b Historical cost
c Consistency
d Accruals

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1.2.1 Accounting for
non-current assets

Answers to End-of-chapter questions


1 a ($69 000 $9000) / 8 years = $7500 per annum
b Debit: Depreciation (income statement) $7500
Credit: Provision for depreciation motor vehicles $7500
3 $
Cost 3 600
20% depreciation year 1 720
Net book value 2 880
20% depreciation year 2 576
Net book value 2 304
Sale proceeds 2 000
Loss on sale 304

5 Annual depreciation = $64 000 $34 000 = $30 000 / 5 years = $6 000
Machinery at cost
$ $
2011 2014
1 Jan Bank 64 000 31 Dec Disposals account 64 000

Provision for depreciation: machinery


$ $
2011 2011
31 Dec Balance c/d 6 000 31 Dec Income statement 6 000
2012 2012
31 Dec Balance c/d 12 000 1 Jan Balance b/d 6 000
31 Dec Income statement 6 000
12 000 12 000
2013 2013
31 Dec Balance c/d 18 000 1 Jan Balance b/d 12 000
31 Dec Income statement 6 000
18 000 18 000
2014 2014
31 Dec Disposals account 24 000 1 Jan Balance b/d 18 000
31 Dec Income statement 6 000
24 000 24 000

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Disposal of non-current assets
$ $
2014 2014
31 Dec Machinery at cost 64 000 31 Dec Provision for depreciation 24 000
31 Dec Income statement 1 000 31 Dec Bank 41 000
65 000 65 000

7 Motor vehicle at cost


Balance b/d 15 000 Disposal 15 000
Bank 21 000
Disposal 4 000 25 000 Balance c/d 25 000
40 000 40 000
Balance b/d 2 500

Motor vehicle depreciation


Disposal 12 000 Depreciation b/d 12 000

Disposal of non-current assets


Motor vehicle at cost 15 000 Motor vehicle depreciation 12 000
Income statement 1 000 Motor vehicle at cost 4 000
16 000 16 000

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1.3.1 Verification:
trial balance

Answers to End-of-chapter questions


1 C
3 B
5 C
7 Transposition error when two figures are transposed.
Addition error in the trial balance or in a general ledger account.
Posting error one side of the transaction is posted to the wrong side of an account.
Partial omission error one side of the transaction has not been posted.
Unequal posting error the debit side of the posting does not equal the credit side.
9 Dr ($) Cr ($)
Cash at bank 21 536
Capital account 29 493
Drawings 18 600
Inventory at 1 December 2013 21 700
Non-current assets at cost 43 210
Motor and travel expenses 3 748
Property rental 18 500
Purchases 72 100
Revenue 196 840
Staff wages 14 240
Sundry expenses 7 970
Trade payables 21 804
Trade receivables 26 533
248 137 248 137
11 Dr ($) Cr ($)
Capital account 54 652
Carriage inwards 1 036
Carriage outwards 894
Discounts allowed 1 290
Discounts received 614
Drawings 12 455
Fixtures and fittings at cost 54 180
Inventory at 1 May 2013 37 200
Purchases 83 660
Rent and rates 12 420
Returns inwards 1 715

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Returns outwards 1 412
Revenue 186 994
Sundry expenses 18 206
Trade payables 7 526
Trade receivables 11 150
Wages and salaries 8 557
Bank balance 8 435
251 198 251 198

13 Suspense account
$ $
Trial balance difference 775 Rent 1 250
Revenue 400
Trade receivables 75
1 250 1 250

15 $
Original profit 42 910
a Sales journal Increase 350
b Repairs to motor vehicle Decrease (520)
c Rent paid No effect
d Purchase credit note Increase 845
e Closing inventory Decrease (500)
f Sales invoice No effect
Revised profit 43 085

17 $
Original loss (1 060)
a Rent Increase 1 250
b Discounts allowed Decrease (960)
c Returns outwards No effect
d Inventory Increase 960
e Depreciation Increase 750
f Rent received Decrease (90)
Revised profit 850

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Verification:
1.3.2 bank
reconciliation
Answers to End-of-chapter questions
1 a Cheques drawn and recorded in the cash book, but not yet presented to
the bank for payment.
b Authority granted to a third party for fixed or variable payments to be
made at the request of that third party.
3 $
Balance as per cash book 1 898.34
Add: unpresented cheques 537.44
Less: uncredited bankings (914.57)
Balance as per bank statement 1 521.21

5 $
Balance as per bank statement 259.03
Less: unpresented cheques (719.55)
Add: uncredited bankings 672.28
Balance as per bank statement 211.76

7 Cash book
Dr Cr
2015 Details $ 2015 Details $
1 Jan Balance b/d 4 392.16 1 Jan 102380 Salim 816.35
1 Jan Akram 1 724.15 1 Jan 102381 Khan 492.22
4 Jan Hussain 844.50 1 Jan 102382 Mahmood 1 552.13
6 Jan Marwat 1 272.05 1 Jan 102383 Butt 390.44
6 Jan Bharti 509.49 1 Jan 102384 Mushtaq 1 272.36
31 Dec Travel expenses 9.00 1 Jan 102385 PR Travel 369.55
6 Jan Bank interest 125.70 6 Jan Bank charges 92.20
6 Jan Balance c/d 3 891.80
8 877.05 8 877.05
7 Jan Balance b/d 3 891.80

Bank reconciliation at 6 January 2015


$
Balance as per cash book 3 891.80
Add: unpresented cheques 369.55
4 261.35
Less: uncredited bankings 1 272.05
509.49 1 781.54
Balance per bank statement 2 479.81

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Verification:
1.3.3 ledger control
accounts
Answers to End-of-chapter questions
1 A
3 The balance of the control account should agree with the total of all of
the balances on individual accounts in the ledger.
5 Addition errors in the books of prime entry, the ledger or the control account.
Transposition error when two figures are transposed.
Partial omission error when an entry has been made in the ledger but not
the control account.
7 Purchases ledger control account
Dr Cr
$ $
31 Jan Purchases returns journal 1 163 1 Jan Balances b/d 33 549
31 Jan Bank 54 280 31 Jan Purchases journal 52 807
31 Jan Discounts received 714 31 Jan Bank cancelled cheque 1 250
31 Jan Contra 393
31 Jan Balance c/d 31 056
87 606 87 606
1 Feb Balance b/d 31 056
9 Sales ledger control account
Dr Cr
$ $
1 Feb Balance b/d 83 359 29 Feb Irrecoverable debt 185
written off
29 Feb Bank cancelled cheque 1 036 29 Feb Bank 85 460
29 Feb Sales journal 99 842 29 Feb Contra 249
29 Feb Discounts allowed 1 360
29 Feb Sales returns journal 2 460
29 Feb Balance c/d 94 523
184 237 184 237
1 Mar Balance b/d 94 523

Purchases ledger control account


Dr Cr
$ $
29 Feb Bank 52 131 1 Feb Balance b/d 56 407
29 Feb Discount received 858 29 Feb Bank cancelled cheque 264
29 Feb Purchases returns journal 1 553 29 Feb Purchases journal 62 042
29 Feb Contra 249
29 Feb Balance c/d 63 922
118 713 118 713
1 Mar Balance b/d 63 922

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1.4.1
Adjustments
to financial
statements
Answers to End-of-chapter questions
1 B
3 Debit Rent and rates $1 100
Debit Electricity charges $630
Credit Accruals $1 730

5 Debit Provision for doubtful debts (income statement) $2 530.50


Credit Provision for doubtful debts (statement of financial position) $2 530.50

7 Adele
Income statement for the year ended 31 December 2014
$ $ $
Revenue 354 440
Less: returns inwards (1 459)
352 981
Cost of sales
Opening inventory 47 200
Purchases 137 604
Less: returns outwards (1 337)
136 267
Add: carriage inwards 914 137 181
184 381
Less: closing inventory (43 450) (140 931)
Gross profit 212 050
Less: expenses
Advertising 4 563
Discounts allowed 2 194
Legal expenses 2 310
Light and heat 13 552
Motor expenses 11 380
Office expenses 12 275
Printing and stationery 1 849
Property rental 41 600
Wages 55 817
Workshop expenses 5 116
Depreciation 12 454
Increase in provision for doubtful receivables 244 (163 354)
Profit for the year 48 696

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Adele
Statement of financial position as at 31 December 2014
$ $ $
Non-current assets
Motor vehicles at cost 64 200
Less: provision for depreciation 32 310 31 890
Plant and equipment at cost 18 240
Less: provision for depreciation 8 304 9 936
41 826
Current assets
Inventory 43 450
Trade receivables 42 300
Less: provision for doubtful receivables (1 269) 41 031
Other receivables 6 980
91 461
Total assets 133 287
Capital account
Balance brought forward 90 283
Add: profit for the year 48 696
138 979
Less: drawings (52 496)
86 483
Non-current liabilities
Bank loan (repayable 2016) 18 370

Current liabilities
Trade payables 15 807
Other payables 600
Bank overdraft 12 027
28 434
Total equity and liabilities 133 287

7 Adjustments:
uuInventory: debit balance sheet, credit income statement.
uuDebit prepayments, credit advertising $580.
uuDebit prepayments, credit property rental $6400.
uuDebit light and heat, credit accruals $600.
uuDepreciation motor vehicles
$64 200 $21 680 = $42 520 25% = $10 630
Depreciation plant and equipment $18 240 10% = $1824
Debit depreciation (income statement), credit provisions for depreciation
(statement of financial position).
uuProvision for doubtful receivables $42 300 3% = $1269
Original provision $1025, new provision $1269, so increase in provision
is $244.
Debit income statement, credit trade receivables (statement of
financial position).
2

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Sole traders:
1.4.2A preparation
of accounts
Answers to End-of-chapter questions
1 D
3 Richard
Extract from Income Statement for the year ended 28 February 2015
$ $ $
Revenue 165 442
Less: returns inwards (1 602)
163 840
Cost of sales
Opening inventory 23 240
Purchases 89 378
Less: returns outwards (1 006)
88 372
Add: carriage inwards 914 89 286
112 526
Less: closing inventory (24 100) (88 426)
Gross profit 75 414

5 David
Income statement for the year ended 31 December 2014
$ $ $
Revenue 289 446
Less: returns inwards 1 557
287 889
Cost of sales
Opening inventory 52 800
Purchases 127 385
Less: returns outwards 904
126 481
Add: carriage inwards 815 127 296
180 196
Less: closing inventory 54 350 125 746
Gross profit 162 143
Add: discount received 1 901
164 044
Less: expenses
Carriage inwards 1 227
Cleaning expenses 548

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David
Income statement for the year ended 31 December 2014
$ $ $
Depreciation 1 500
Discount allowed 1 282
Motor expenses 5 350
Rent and rates 26 057
Stationery and advertising 1 559
Sundry expenses 7 715
Wages and salaries 42 161 87 399
Profit for the year 76 645

7 Majid
Income statement for the year ended 30 November 2014
$ $ $
Revenue 235 358
Less: returns inwards 2 060
233 298
Cost of sales
Opening inventory 42 300
Purchases 92 330
Less: returns outwards 1 593 90 737
133 037
Less: closing inventory 39 240 93 797
Gross profit 139 501
Less: expenses
Carriage outwards 2 154
Depreciation 3 200
Discounts allowed 1 508
Motor expenses 5 527
Rent and rates 12 850
Repairs and maintenance 2 207
Stationery and advertising 4 852
Sundry expenses 2 920
Wages and salaries 24 117 59 335
Profit for the year 80 166

Majid
Statement of financial position as at 30 November 2014
$ $
Non-current assets
Computers at cost 8 420
Motor vehicles at cost 18 610
Less: provision for depreciation (4 000) 14 610
Plant and machinery at cost 42 745
Less: provision for depreciation (8 200) 34 545
57 575
69 775

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Current assets
Inventory 39 240
Trade receivables 27 075
Balance at bank 14 225
80 540
138 115
Capital account
Balance brought forward 70 833
Add: profit for the year 80 166
150 999
Less: drawings (34 116)
116 883
Non-current liabilities
Bank loan (repayable 2015) 5 880

Trade payables 15 352


Current liabilities 138 115

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Final
1.4.2B accounts from
incomplete
records
Answers to End-of-chapter questions
1 Statement of affairs at 1 April 2015
$ $
Assets
Premises NBV 258 000
Vehicles NBV 14 600
Machinery NBV 26 800
Inventory 66 000
Trade receivables 19 000
Other receivables 12 800
Bank 6 500
403 700
Liabilities
Other payables 11 200
Loan 60 000
Trade payables 62 400
(133 600)
Capital 270 100
3 Statement of affairs at 1June2013
$ $
Assets
Premises 260 000
Vehicles 24 000
Machinery 24 100
Inventory 38 300
Trade receivables 39 500
Other receivables 3 700
Bank 10 600
400 200
Liabilities
Other payables 6 900
Loan 11 200
Trade payables 13 400
(31 500)
Capital 368 700

Statement of affairs at 31May2014


$ $
Assets
Premises 225 200
Vehicles 20 400
Machinery 26 600

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Inventory 28 800
Trade receivables 36 000
Other receivables 4 000
341 000
Liabilities
Other payables 5 100
Bank overdraft 5 700
Loan 29 300
Trade payables 44 500
(84 600)
Capital 256 400

$
Opening capital 368 700
Less: closing capital 256 400
112 300
Additional capital 20 000
132 300
Drawings 30 800
Loss for year 101 500

5 D
7 C
9 C
11 Income statement for the year ended
30 November 2014
$ $
Revenue: 150 000
Less: cost of sales
Opening inventory 3 200
Purchases 121 600
124 800
Closing inventory (4 800)
(120 000)
Gross profit 30 000

Cost of sales/(3200 + 4800/2) = 30 times


13 a Dr Trade payables account Cr
Bank: payments 42 200 Opening balance 9 200
Closing balance 8 400 Purchases 41 400
50 600 50 600
b Income statement for the year
ended 30 October 2014
$ $
Revenue: 53 250
less Cost of sales
Opening inventory 14 600
Purchases 41 400
56 000
Closing inventory (13 400)
(42 600)
Gross profit 10 650

Gross profit margin is 20 per cent. It is possible to convert this to mark up:
start with revenue as 100, so gross profit is 20, and so cost of sales is 80.
Gross profit is 20/80 of cost of sales, i.e. 25 per cent.
Therefore cash stolen is $53 250 - $50 600 = $2650
2

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15 aStolen cash:

Dr Cash Cr
Cash takings 41 850 Cash banked 32 100
Wages 4 800
Drawings 3 600
Missing cash 1 350
41 840 41 850

b Calculation of credit sales:


Dr Sales ledger control account Cr
Opening balance 11 300 Bank: receipts 168 500
Credit sales 165 600 Closing balance 8 400
176 900 176 900

c Calculation of credit purchases:


Dr Purchases ledger control account Cr
Bank: payments 132 800 Opening balance 6 200
Closing balance 5 900 Purchases 132 500
138 700 138 700

Calculation of opening capital:


$ $
Assets
Premises 264 000
Vehicles 28 000
Fixtures etc. 36 100
Inventory 10 500
Receivables 11 300
Prepayments 300
Bank 2 100
352 300
Liabilities
Accruals 400
Payables 6 200
(6 600)
Capital 345 700

Insurance charge for the year:


$
Paid 1 200
add opening prepayment 300
1 500
less closing prepayment (700)
800

Wages expense for the year:


$
Paid from bank 45 000
Paid in cash (12 $400) 4 800
less opening accrual (400)
49 400
add closing accrual 200
49 600

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Depreciation charges:
Premises: $264 000 less $260 000 = $4000
Vehicles: $28 000 less $22 200 = $5800
Fixtures and fittings: $36 100 add $6000 ($42 100)
less $38 200 = $3900
Income statement for the year ended 31March2015
$ $
Revenue: credit sales 165 600
cash sales 41 850
207 450
less Opening inventory 10 500
Purchases 132 500
143 000
Closing inventory (9 700)
Cost of sales (133 300)
Gross profit 74 150
less Business expenses 21 300
Wages 49 600
Insurance 800
Cash stolen 1 350
Depreciation:
premises 4 000
vehicles 5 800
fixtures 3 900
(86 750)
Loss for year 12 600

Statement of financial position at


31March2015
$ $
Non-current assets
Premises 260 000
Fixtures and fittings 38 200
Vehicles 22 200
320 400
Current assets
Inventory 9 700
Trade receivables 8 400
Other receivables 700
18 800
339 200
Capital
Opening balance 345 700
less Loss (12 600)
333 100
less Drawings (3 600)
329 500
Current liabilities
Trade payables 5 900
Bank overdraft 3 600
Other payable 200
9 700
Total capital and liabilities 339 200
17 C
19 B
21 D
4

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Partnerships:
1.4.3A preparation of
accounts
Answers to End-of-chapter questions
1 a $28 000 each.
b $50 400 for Jennifer, $25 200 for Kim and $8400 for Lewis.
c $14 000 for Jennifer, $21 000 for Kim and $49 000 for Lewis.
3 Profit for the year 274 000
Salary (Fitz) (34 000)
Profit available for partners 240 000
Cindy (3/8) 90 000
David (3/8) 90 000
Fitz (2/8) 60 000

5 a Capital account
Jackie $ Kerri $ Jackie $ Kerri $
Bank 360 000 600 000

b Jackie and Kerri


Appropriation account
for the year ended 31 March 2015
$ $
Profit for the year 216 000
add: interest on drawings
Jackie 4 620
Kerri 7 020
11 640
227 640
Less: interest on capitals
Jackie 36 000
Kerri 60 000
(96 000)
131 640
Less: salary
Jackie (60 000)
71 640
Less: shares of residual profit
Jackie 42 984
Kerri 28 656
(71 640)

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Dr Drawings accounts Cr
Jackie Kerri Jackie Kerri

Bank 38 500 58 500 Current accounts 38 500 58 500

c
Current accounts
Jackie Kerri Jackie Kerri
$ $ $ $
Interest on drawings 4 620 7 020 Interest on capital 36 000 60 000
Drawings 38 500 58 500 Salaries 60 000
bal c/d 95 864 23 136 Profit share 42 984 28 656
138 984 88 656 138 984 88 656
Balances b/d 95 864 23 136

7 Calculations of interest on drawings:


Ryan $
8 months (2/3 yr) $24 000 12% 1 920
4 months (1/3 yr) $39 000 12% 1 560
Total 3 480

Sonya $
7 months (7/12 yr) $51 000 12% 3 570
2 months (1/6 yr) $36 000 12% 720
Total 4 290

Tara $
6 months (0.5 yr) $39 000 12% 2 340
1 month (1/12 yr) $39 000 12% 390
Total 2 730

Ryan, Sonya and Tara


Appropriation account
for the year ended 31 July 2014
$ $
Profit for the year 87 390
add: interest on drawings
Ryan 3 480
Sonya 4 290
Tara 2 730
10 500
97 890
Less: interest on capitals
Ryan 52 800
Sonya 43 200
Tara 24 000
(120 000)
(22 110)
Less: salaries
Ryan 33 000
Tara 15 000
(48 000)
(70 110)

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Less: shares of residual
loss
Ryan 23 370
Sonya 23 370
Tara 23 370
70 110

Dr Capital accounts Cr
Ryan Sonya Tara Ryan Sonya Tara
Balances 660 000 540 000 300 000

Dr Drawings accounts Cr
Ryan Sonya Tara Ryan Sonya Tara
Bank 24 000 51 000 39 000 Current accounts 63 000 87 000 78 000
Bank 39 000 36 000 39 000
63 000 87 000 78 000 63 000 87 000 78 000

Dr Current accounts Cr
Ryan Sonya Tara Ryan Sonya Tara
Opening balances 5 300 2 700 Opening balance 8 100
Drawings 63 000 87 000 78 000 Interest on capitals 52 800 43 200 24 000
Interest on drawings 3 480 4 290 2 730 Salaries 33 000 15 000
Share of loss 23 370 23 370 23 370 Balances c/d 9 350 63 360 67 800
95 150 114 660 106 800 95 150 114 660 106 800

Balances b/d 9 350 63 360 67 800

9 Statement of profit shares for the year ended


31December2014
$ $
Profit for the year (before interest on loan) 135 000
Less interest on Bryans loan of $80 000 (4 000)
Profit after interest on loan 131 000
Less interest on capital at 5%
Bryan 10 000
Stacey 7 500
(17 500)
Less salaries:
Bryan 20 000
Stacey 30 000
(50 000)
63 500
Less shares of residual profit:
Bryan 31 750
Stacey 31 750
(63 500)

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11 a and b
Ishaka and Joshua
Income statement for the year ended 30 September 2014
$ $
Gross profit 237 000
Interest on loan (Ishaka) (10% $40 000) 4 000
Operating expenses ($68 000 + $5 000) 73 000
Depreciation (20% $480 000) 96 000
Provision for doubtful debts (5% $20 000) 1 000
(174 000)
Profit 63 000

Appropriation account for the year ended 30 September 2014


$ $
Profit for the year 63 000
Add: interest on drawings
Ishaka 6 000
Joshua 4 000
10 000
73 000
Less: salary (Joshua) (28 000)
45 000
Less: shares of residual profits
Ishaka 27 000
Joshua 18 000
(45 000)

c Dr Current accounts Cr
Ishaka Joshua Ishaka Joshua
$ $ $ $
Oct 1 Balance 4 000 Oct 1 Balance 7 000
Sept 30 Drawings 47 000 35 000 Sept 30 Loan interest 4 000
30 Interest on 30 Salary 28 000
drawings 6 000 4 000 30 Residual 27 000 18 000
profit
30 Balance c/d 14 000 30 Balance b/d 26 000
57 000 53 000 57 000 53 000
Oct 1 Balance b/d 26 000 Oct 1 Balance b/d 14 000

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d Statement of financial position at 30 September 2014
$ $ $
Non-current assets Cost Deprcn Net
820 000 436 000 384 000
Current assets
Inventory 63 000
Trade receivables 20 000
Less: provision for doubtful debts 1 000
19 000
Cash at bank 31 000
113 000
497 000
Capital accounts Ishaka Joshua
240 000 200 000 440 000

Current accounts (26 000) 14 000 (12 000)


428 000
Non-current liability
Loan from Ishaka 40 000
Less: current liabilities
Trade payables 24 000
Other payables 5 000
29 000
497 000

13 a Dr Capital accounts Cr
Ron Stan Frank Ron Stan Frank
Mar 31 Goodwill 15 000 15 000 Mar 31 Balances b/f 150 000 150 000 150 000
31 Current account 5 000 Goodwill 10 000 10 000 10 000
31 Loan 155 000
31 Balances c/d 145 000 145 000
160 000 160 000 160 000 160 000 160 000 160 000
April 1 Balances b/d 145 000 145 000

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b Ron and Stan
Statement of financial position at 1 April 2014
$ $
Non-current assets 470 000
Current assets 50 000
520 000
Capital accounts
Ron 145 000
Stan 145 000
290 000
Current accounts
Ron 40 000
Stan 15 000
55 000
Non-current liability
Loan: Frank 155 000

Current liabilities 20 000


520 000

15 C
17 D
19 C
21 C

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1.4.3B Dissolution of
partnerships

Answers to End-of-chapter questions


1 The balance in the partnership bank will be shared out according to the
balances on the closing capital and current accounts. This balance is affected
by the amount of drawings, etc. that a partner has taken, which will vary year
to year and may mean that Tapiwa will not have 80 per cent of the bank
balance due to him. It should also be noted that any assets taken over by a partner as
part of the dissolution will also affect the amount due.
3 Realisation account
$ $
Non-current assets 180 000 Trade payables 27 700
Inventory 24 500 Non-current assets capital acc Tracey 210 000
Trade receivables 42 600 Inventory capital acc Tracey 23 000
Trade payables 26 000 Trade receivables 41 000
Costs of dissolution 4 400
Profit on dissolution: Sara 12 100
Profit on dissolution: Tracey 12 100
301 700 301 700

Capital accounts
Sara Tracey Sara Tracey
$ $ $ $
Non-current assets 210 000 Balance b/d 110 000 114 000
Inventory 23 000 Profit on dissolution 12 100 12 100
Cash and cash 122 100 Cash and cash 106 900
equivalents equivalents
122 100 233 000 122 100 233 000

Cash and cash equivalents


$ $
Balance b/d 4 600 Trade payables 26 000
Trade receivables 41 000 Costs of dissolution 4 400
Capital account: Tracey 106 900 Capital account: Sara 122 100
152 500 152 500

5 C

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Limited
1.4.4A companies:
structure and
accounting for
share issues
Answers to End-of-chapter questions
1 Ordinary shares (300 000 0.05) = $15 000
Preference shares ($200 000 6%) = $12 000
Total dividends paid $27 000
3 Journal
Details Dr Cr
$ $
Bank 130 000
ordinary share capital 100 000
share premium 30 000
being the issue of ordinary shares

5 Journal
Details Dr Cr
$ $
bank 75 000
ordinary share capital 50 000
share premium 25 000
being issue of ordinary shares at $1.50 each
dividend paid 2 500
bank 2 500
being the payment of a dividend at $0.05 per share

7 B
9 D
11 B
13 A
15 B

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Limited
1.4.4B companies:
financial
statements
Answers to End-of-chapter questions
1 B
3 A
5 B
7 B
9 Owen Ltd
Income statement for the year ended 31 March 2015
$ $
Revenue 75 100
Cost of sales (41 650)
Gross profit 33 450
Distribution costs 3 710
Administration expenses (3 660 120) 3 540 (7 250)
Profit from operations 26 200
Finance costs (1 340)
Profit for the year 24 860

Owen Ltd
Statement of changes in equity for the year ended 31 March 2015
Total Ordinary Preference Share General Retained
shares shares premium reserve earnings
Balance at 186 120 150 000 5 000 12 500 6 000 12 620
1 April 2014
Transfer to reserve 2 000 (2 000)
Equity dividends paid (1 500) (1 500)
Profit for the year 24 860 24 860
209 480 150 000 5 000 12 500 8 000 33 980

11 Ramteet Ltd
Statement of financial position as at 31 December 2014
$000 $000
Non-current assets
Premises 410.0
Fixtures and fittings 82.0
492.0
Current assets
Inventory 44.9
Trade and other receivables 47.2 92.1
Total assets 584.1

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Ramteet Ltd
Statement of financial position as at 31 December 2012
$000 $000
Equity
Ordinary shares of $1 each 200.0
8% preference shares of $2 each 160.0
Share premium 40.0
General reserve 40.0
Retained earnings 63.9
503.9
Non-current liabilities
10% debenture (20122022) 30
Current liabilities
Trade payables 32.1
Cash and cash equivalents 18.1
50.2
584.1

13 Tiger plc
Income statement for the year ended 31 January 2015
$ $
Revenue 1 527 000
Cost of sales (102 + 615 + 12 110) (619 000)
Gross profit 908 000
Distribution costs 38 000
Administration expenses (68 + 30) 98 000 (136 000)
Profit from operations 772 000
Finance costs (115 + 2.4 + 2) (119 400)
Profit for the year 652 600

15 Robins plc
Income statement for the year ended 31 March 2015
$000 $000
Revenue 3 790
Cost of sales (110 + 1636 125 + 41) (1 662)
Gross profit 2 128
Distribution costs (662 + 56) (718)
Administration expenses (438 4 + 15) (463) (1 181)
Profit from operations 947
Finance costs (810 + 17 + 6) (833)
Profit before tax 114

Robins plc
Statement of changes in equity for the year ended 31 March 2015
Share Share Retained
Total capital premium earnings
Balance at 1 April 2014 1 309 400 40 869
Profit for the year 114 114
Equity dividends paid (70) (70)
1 353 400 40 913

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Robins plc
Statement of financial position as at 31 March 2015
$000 $000
Non-current assets
Freehold property (750 150) 600
Plant and machinery (410 328) 82
Motor vehicles (350 126) 224
906
Current assets
Inventory 125
Trade and other receivables 523
Cash and cash equivalents 427
1 075
Total assets 1 981
Equity
Issued ordinary shares of $0.25 each 400
Share premium 40
Retained earnings 913
1 353
Non-current liabilities
10% debenture (20202023) 340
Current liabilities
Trade and other payables 288
Total equity and liabilities 1 981

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Analysis and
1.5.1 communication
of accounting
information to
stakeholders
Answers to End-of-chapter questions
1 a Gross profit margin (gross profit/revenue 100)
160 000/800 000 100 = 20%
b Mark-up (gross profit/cost of sales 100)
160 000/640 000 100 = 25%
c Inventory turnover (cost of sales/average inventory)
640 000/(29 000 + 35 000)/2 = 20 times
or (29 000 + 35 000)/2/640 000 365 days = 18.25 days
3 a Profit margin (profit/revenue 100)
48 000/320 000 100 = 15%
b Office expenses as percentage of revenue (office expenses/revenue 100)
6000/320 000 100 = 1.875%
c Rent as percentage of revenue (rent/revenue 100)
24 000/320 000 100 = 7.5%
d Salaries as a percentage of revenue (salaries/revenue 100)
42 000/320 000 100 = 13.125%
5 a Working capital ratio Current assets : Current $72 000 : $40 000 1.8 : 1
(current ratio) liabilities
Liquid capital ratio Liquid assets (i.e. Current $18 000 : 40 000 0.45 : 1
(acid test ratio) assets less Inventory):
Current liabilities
Return on capital {Profit/Capital employed} Using opening capital : 11.35%
employed (return on 100 {$75 000/$661 000} 100
investment) Using closing capital : 11.08%
{$75 000/$677 000} 100
Using average capital : 11.21%
{$75 000/$669 000} 100
Trade receivables {Trade receivables/Credit {$8 000/$72 000} 365 41 days
collection period sales} 365
Trade payables {Trade payables/Credit {$39 000/$429 000} 365 34 days
payment period purchases} 365

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7 Gross profit Gross profit/ 108 500/180 000 100 For every $1 of revenue
margin revenue 100 = 60.28% 60.28 is gross profit.
Profit margin Profit (before 61 100/180 000 100 For every $1 of revenue
interest)/revenue = 33.94% 33.94 is profit.
100
Return Profit/capital 60 000/235 000 100 For every $1 of capital
on capital employed 100 = 25.53% employed within the business
employed 25.53 is profit.
Current ratio Current 59 300 : 31 300 For every $1 of current liabilities
assets:current = 1.89 : 1 there is $1.89 of current assets.
liabilities The business is liquid.
Liquid (acid) Current assets 59 300 30 200 : 31 300 For every $1 of current liabilities
test excluding = 0.93 : 1 there is $0.93 of current assets
inventory:current less inventory. The business has
liabilities potential liquidity problems.
Rate of Cost of sales/ 71 500/30 200 Inventory is replaced 2.37 times a
inventory closing inventory = 2.37 times year, i.e. every 154 days.
turnover

9 Note: This answer should be taken as a guide only there are alternative
approaches and other valid points could be made.

Grand Industry Comment
Gardening Ltd averages
Gross profit 65% 82% Lower than industry average so less gross
percentage profit is earned out of every $1 dollar of
revenue (65 compared to 82). Less
profitable per dollar perhaps due to higher
purchase costs, lower sales price or lack of
inventory control.
Profit percentage 20% 42% Lower than industry average so less profit is
earned out of every $1 dollar of revenue (20
compared to 42). Less profitable per dollar.
Although the gross profit percentage is lower,
not all of it can be explained by this reason
as the gap is larger than difference between
gross profit percentages. There must also be
proportionally higher overheads.
Current ratio 3.1 : 1 2.2 : 1 The company has $3.10 of current assets for
every $1 of current liabilities, which is greater
than the industry average. The company is
liquid and can pay off short-term debts with its
liquid assets.
Acid test 2.3 : 1 1.2 : 1 The company has $2.30 of current assets
less inventory for every $1 of current liabilities,
which is greater than the industry average.
The company is liquid and holds proportionally
less in inventory than the industry average.
Rate of inventory 32 days 24 days The company turns over inventory slower
turnover than the industry average. It takes 32 days on
average to sell an item of inventory.
Non-current 30% 40% The sales return on non-current assets is
assets turnover lower than the industry average. The company
is not using its non-current assets to make
sales as well as other companies within the
industry.
Return on capital 18% 35% The company has a lower return on its capital
employed employed than the industry average. The
company is not using its capital to make profit
as well as other companies within the industry.

11 Note: This answer should be taken as a guide only there are alternative
approaches and other valid points could be made.
2

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Report
There has been a decline in revenue of $20 000 or 10 per cent comparing 2013 with 2014.
Profitability
Strength: The gross profit margin and mark-up have increased, meaning that the
business is making more gross profit per $1 of sales.
Weaknesses: Total revenue has decreased.The profit/revenue percentage has
decreased, and the operating expenses/revenue ratio has increased.
The return on capital employed has decreased by 4 per cent, meaning that the
business is making less profit per $1 of capital invested by the owner.
Liquidity
Strength: The current capital ratio has increased and is now at the level typical for this
type of business. The business will find it easier to meet its short-term obligations.
Weakness: The liquid capital ratio has decreased and has moved away from the
average for this type of business. The business will find it more difficult to meet
its most immediate short-term obligations.
Efficiency
Strength: The rate of inventory turnover has increased, indicating that either
goods are selling more quickly or that the average inventory has been reduced.
Weaknesses: The receivables collection period has increased. This means that it is
taking longer for customers to pay. This will have a negative effect on cash flows
and could mean that credit control is less effective than previously, leading to the
possibility of irrecoverable debts.
Trade payables are now paid more quickly than before. Because they are paid
more quickly than money is collected from customers, this could have a negative
effect on cash flows.
Summary and recommendations
Overall, the businesss performance has declined comparing 2014 with 2013. There
has been a fall in revenue and this has led to a worsening of the businesss profitability,
with a decrease in some of the key ratios. The position with liquidity and efficiency
is more mixed. The working capital position has improved, but the liquid ratio has
declined. The rate of inventory turnover has increased, but the control of payments to
suppliers and the collection of amounts owed by customers have worsened.
To improve the businesss performance the owner should aim to make
improvements in the following areas:
Profitability: Increase sales, perhaps by reviewing pricing policy to make the
business more competitive, or by reviewing the range and quality of products
offered, or perhaps by reviewing marketing and advertising.
Liquidity: Review the amount of funds tied up in inventories and so alter the
balance between liquid assets and current assets.
Efficiency: Review credit control, with the aim of collecting amounts due from
receivables more quickly.
13
B 15
A
17
D 19
C

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Topic 1: Financial accounting
Answers to Exam-style
questions
1 A
3 B
5 a Raj may not have the time to prepare proper accounting records
Raj may not have the skills required to prepare proper

accounting records
Raj may be satisfied with the information provided by

incomplete records [2 marks]
b Workings
W1

Revenue


Trade receivables
Opening balance 2 830 Bank 16 500
Credit sales 15 910 Discounts allowed 540
Closing balance 1 700
18 740 18 740
Balance b/d 1 700

Total revenue: credit sales $15 910 + cash sales $73 900

= $89 810

W2

Purchases

Trade payables
Bank 38 900 Opening balance 3 490
Closing balance 3 920 Purchases 39 330
42 820 42 820
Balance b/d 3 920

Bank: as per bank statement $37 600 + unpresented cheques



$1300
Net purchases: credit purchases $39 330 less goods for own use

$390, i.e. $38 940

1
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W3

Electricity charges
$
Paid 4 240
Less opening due (780)
Add closing due 810
4 270

W4

Shop rent
$
Paid 13 400
Less opening due (440)
Less closing prepaid (530)
12 430

W5

Depreciation of fixtures and fittings
$
Opening value 28 400
Add additions 5 700
Less closing value (30 600)
3 500

Gold Medal Sports Supplies


Income Statement for year ended 31 December 2014
$ $
Revenue (W1) 89 810
Less: cost of sales
Opening inventory 4 400
Purchases (W2) 38 940
43 340
Closing inventory (4 600)
(38 740)
Gross profit 51 070
Less: discounts allowed 540
electricity charges (W3) 4 270
shop rent (W4) 12 430
administration expenses 5 730
depreciation of fixtures and fittings (W5) 3 500
(26 470)
Profit for the year 24 600

[14 marks]


2
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c Trade payables turnover
Closing trade payables
365
Purchases
3920
i.e. 365
38 940
i.e. 36.7437 days, i.e. 37 days
Trade receivables turnover

Closing trade receivables
365
Credit sales
1700
i.e. 365
15 910
i.e. 39 days
Rate of inventory turnover

 ost of sales
C

Average inventory
38 740
i.e.
4500
8.60889 i.e. 9 times
 [6 marks]
d Assessment
The trade payables turnover has lengthened by four days, meaning

that trade payables are being paid more slowly. This will benefit
the businesss cash flow, but may cause some suppliers to withdraw
credit terms.
The trade receivables turnover has also lengthened by ten days.

This means that amounts due are being collected more slowly
than before. This will cause a deterioration in the businesss
cash flow. However, it many mean that credit customers are less
likely to be awarded cash discounts.
Credit customers are now paying more slowly than payments

are made to credit suppliers. This will have an adverse effect on
liquidity.
The rate of inventory turnover has improved by two times. This

means that inventory is being sold more quickly than before, so
fewer funds are tied up in inventory, benefiting the businesss
cash flow. [8 marks]
 [Total: 30 marks]
7 a To alter the balance of shares and reserves by reducing reserves
To reduce the amount of capital reserves
 [1 mark]

3
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b Bonus issue
existing shareholding: 16m shares

3
bonus issue:

4 16m shares, i.e. 12m shares [2 marks]
c Although each shareholder will hold additional shares, it is
likely that the market price of each share will be adjusted
downwards so that the overall value of each shareholding
remains the same. Shareholders may receive more in dividends,
however, if the dividend rate is maintained.
 [3 marks]
d Dividend payment
28m shares $0.20 = $5.6m
 [2 marks]
e
Zebrex plc
Statement of changes in equity for year ended 31 March 2015
Ordinary Share Retained Total
shares premium earnings
$m $m $m $m
Balances 1 April 2014 8 5.3 5.6 18.9
Bonus issue 6 (5.3) (0.7) 0
Profit for year 6.7 6.7
Dividends paid (5.6) (5.6)
Balances 31 March 2015 14 0 6 20

[7 marks]

[Total: 15 marks]

4
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