Questions and Answers of Accounting A Smart Approach

The accounts for Rowe and Davies Ltd are set out in Table 17.1. The rest of the chapter will calculate the ratios for Bale and Cowley Ltd using the accounts prepared in the last chapter. These have
Calculate the ratios for Rowe and Davies and compare their performance with Bale and Cowley. Required For each ratio: (a) Is the ratio lower or higher than that for Bale and Cowley? (b) From Bale and
Bill was interested to see the results of the analysis of the competitor's accounts and he called in at the office just as John and Azina were discussing their findings. He listened for a while and
The latest accounts of Rhys Ltd are outlined below: Balance Sheet at 30 June 1998 () (000s) () (000s) () (000s) Fixed assets Land and buildings 320 Plant and machinery 240 Vehicles 120 680 Current
What are the two main categories of computer system controls?
What are the controls that should exist when systems are designed and developed?
What are the controls that relate to the environment within which the computer exists?
What controls would you expect to see in respect of data input?
What are the controls relevant to the processing of data?
Which controls would you expect to exist to confirm the accuracy and correctness of data output?
What are the controls for ensuring the accuracy and validity of master file and standing data file amendments?
Describe the different controls that an organization can implement to safeguard against computer insecurity.
What general controls do you think John and Azina should introduce in light of their recent experience with the break-in and loss of data?
What application controls would you advise John and Azina to introduce for data input and master file amendments?
When Azina and John first started their business Azina kept a close eye on all the expenditure relating to the business. She could almost tell exactly how much money was outstanding at any one point
John and Azina were looking at the accounts for the year ended 28 February which had just been produced. John was pleased. Turnover had increased amazingly over the previous year and although the
It is now several years since the Bales and Mike Cowley set up their company and all is going well. Mike's extra contacts and investment of cash combined with the long hours put in by Jolm and Azina,
The case study used in this text book follows the fortunes of a small business together with its proprietors. The company has been financed by a mixture of ordinary and preference shares together
Assuming the preference shares were issued at par, and that all the ordinary shares in Bale and Cowley Ltd were issued at the same time, what price do you think the ordinary shares were issued at?
Open up your computer package and select a data entry screen such as batched data entry for invoices or nominal journal. Make up a fictional entry to test the number of characters you can enter.
Assume that Bale and Cowley are setting their AIS up on a new system. They will need to enter the trial balance in the new system and make the adjusting entries ready to enter the next years'
Are the items listed below charged in calculating the profit for the year or appropriations of the profit? (i) change in provision for doubtful debts (ii) transfer to capital redemption reserve (iii)
Company & wished to make a rights issue to raise further finance. A shareholder has written to the chairman with the following comment I cannot understand why you need to make a rights issue when the
The summarized balance sheet of Friend ple is given below: Required (a) How many ordinary shares are in issue? (b) What does the term par value mean? (c) If you know that the preference shares were
Distinguish a rights issue from a bonus issue.
The following data are extracted from the balance sheet of Woolman Ltd. Required Redraft the balance sheet to show the effect of making:Fixed assets 570 000 Current assets 360 000 Current liabilities
END OF YEAR 28 FEBRUARY 1998 Bale and Cowley Ltd Trial balance at 28 February Dr () Cr () 7 623 949 Sales Purchases Directors' fees Wages and salaries Directors salaries Heat and light Postage and
Azina has now corrected or solved the points which concerned her about the draft trial balance and she has made the final adjustments. The trial balance is now in a position to be printed off in a
To which of the three expenses headings given in format 1 would you allocate the following expenses: (i) production director's salary (ii) sales director's fees (iii) depreciation of building (iv)
Taking the trial balance or the draft profit and loss account for Bale and Cowley. decide how you will allocate the expenses and try drafting the profit and loss account for publication.
Take the information for Bale and Cowley and draft the balance sheet using the format 1 given in the Companies Act 1985. Compare your answer with the one given in Table 16.5.Notes to the balance
From the previous chapter check the definitions of small, medium and large companies and the modifications to published reports that results from the classification. Compare this with the statements
The following trial balance has been extracted from the accounting system of Pendle Ltd at 31 March 1998: The finance director has asked your help in presenting the information in a form suitable for
As far as possible from the information available, draft the notes to the published financial statements for Bale and Cowley Ltd.
You should now be able to make the adjustments to the case study for the accruals and prepayments which John identified. You should do this before moving to the next section. (You should not go back
Looking at the case study for Bale and Co., they have a particular problem in setting their provision because they have no experience from previous years to fall back on and as they have only just
Using the information in the case study and your backup disks of the system so far, make the provision for doubtful debts and write off the bad debt for customer | in the Sage system. Required (a)
1 Jamilla’s accounting year ends on 31 March. On 1 June in year | she took out an insurance policy, paying an annual premium of £120. On 1 October she started a further policy and paid the annual
Jamilla pays rent quarterly on 30 April, 31 July, 31 October and 31 January in arrears. The quarterly payment is for £600. For any accounting year, how much is: (i) the payment (ii) the expense
After several years Jamilla sublets a room in the premises for a quarterly rent of £160. The rent is payable in arrears on the same date as given in 2. The tenancy commences on 1 August Year 6. How
Jamilla made the following payments. Indicate how much is an expense of the year 19X1 (the first year) and how much for the next year. (i) Computer equipment purchased April 19X1 and expected to last
Complete the following table: Goods for resale | 3000pr = [75000 | £6 OOODR Furniture to last 10 yrs me te — no scrap value 12 OOOCR 39 000 1 OOOCR Insurance eo ae 2 000 900DR Vehicle running
The following trial balance was extracted from the books of Sandros, a sole trader, at the close of business on 31 January 1996:Debtors and creditors DR () 9.660 CR () 4.960 Wages and salaries 6.980
At the end of year 1, Down and Out Ltd had a debtors balance of 253 256. They identified bad debts amounting to 4354 included in that balance. In addition to recording these, they decided to set up a
Bale and Co. have purchased a number of fixed assets and at the end of the first month's trading they just accepted the fact that since they still owned the assets they were properly disclosed in the
Try some crystal ball gazing for yourself. For each of the assets which the Bales have purchased try to decide on a suitable length of life. What sources of information might be available which would
Which method or methods would you advise Azina and John to use for their fixed assets?
Using your own estimate of the length of life and the method you have selected. draft the journal entries necessary to record the depreciation for Bale and Co. for December. Remember that this will
Hensman purchased a new machine at a cost of 145 000 at the beginning of the current trading year. The brochure from the company who supplied the machine suggested that it should be able to perform
Little and Co. purchased equipment from a new supplier for a list price of 408 000. VAT at 17.5 per cent was charged on this amount. A haulage company charged 2000 to transport the equipment to
During a trading year, Arch disposed of the following items: (i) Machine A which had cost 12 000 but had been depreciated by 10 000 was given to a local scrap dealer for nothing. (ii) A fork lift
The information for December should now all have been posted to the system and the adjustments for aceruals, prepayments doubtful debts and depreciation should have been made. The end of the month
Using the case study material to date, set up a template to produce financial statements in good form for Bale and Co. for their internal management purposes Produce the statements for December
Jay, Raph and Geena are in partnership. Jay set the business up originally and has 100 000 invested in the business. He is now semi-retired and works part-time. Raph joined Jay 15 years ago and now
Discuss how John and Azina might share profits. Prepare a table to illustrate the effect of your decision for the split of the profits for December.
In introducing the accounting concepts the example of fixed assets and deprecia- tion was used. Stock in hand at the period end also has to be valued. Required Describe in your own words how the four
Draft the accounting policies note for Bale and Co. explaining the methods you used to depreciate the assets and value stock.
For each of the situations described below, identify the concepts which are relevant and decide how the item should be treated in the accounts giving your reasons: (i) A has incurred large losses on
REVISITING THE BUSINESS FORMAT John and Azina survived the problem with the bad debt and large overdraft. However some months later while trading was good and the list of customers growing, cash flow
The following quick quiz is intended to help you test your knowledge of the information in the earlier chapters for yourself. Required (a) What do the following initials stand for: FRC UITF SSAP (b)
Consider the position of John, Azina and Mike described in the case study earlier in this chapter. Assume that they decide to explore the possibility of transferring the business to a limited
In the last decade a number of countries have introduced a free market system into a previously centrally planned economy. Poland chose to adopt the rules of the EU whereas China has announced that
Is international harmonization of company regulation desirable and or achievable?
"The EU directives require too many disclosures from small and medium sized companies and not enough from enterprises operating transnationally. Mr Herbert Biener, German government official quoted
You should collect a number of published financial statements to see examples of layouts and the language used. It is also a good way of becoming familiar with the requirements of reports. In the UK
Peter has run a successful small manufacturing business for the whole of his working life. He operates as a sole trader, but has now reached the age of 70 and wishes to retire. However he is of the
Who should register for VAT?
How to register for VAT.
Are there different rates of VAT?
Document design to capture VAT information.
What accounts will need to be set up?
How to post transactions.
How to make a quarterly return.
SHOWER WY Preparing for a visit by VAT inspectors.
Test your understanding of the chapter by answering the following questions: 1) wow (i) Is VAT an expense? (ii) What are ‘taxable supplies’? (iii) How many rates of VAT are currently used? (iv)
All the figures below relate to taxable supplies. (i) £10.50 (ii) £115.00 (iii) £5.00 (iv) £236.00 Required If the figure shown is net (without VAT) how much VAT would have to be charged
All the figures below relate to taxable supplies. (Gr 287 (ii) £27.40 (iii) £94.20 (iv) £2465.50 Required If the figure shown is gross (inclusive of VAT) what is the VAT char ged and the net value
How frequently must you complete a VAT return?
Ql Q2 Total value of sales and all other outputs excluding VAT 1A2 367.00, 125 750.00 VAT reclaimed in this period on purchases and other inputs 14 946.00 11 237.00 Total value of purchases and all
What is the significance of the ‘due date’ on your VAT return?
What records can VAT officers demand to see?
For how long must a business retain its records?
If you have ‘bad debts’ can you adjust your VAT liability (output tax) to reflect that you will never be able to collect this money?
Design a form which you intend issuing to all new customers who request credit to enable you to set an initial credit limit.
Write a letter to a new customer's bank requesting information to help you establish a credit limit for that customer.
Why are banks reluctant to be completely free with the information they have at their disposal when faced with a request from a supplier of one of their clients?
Having backed up your case study on a separate disk complete the following exercises as a new and independent exercise A Set up the following three customers. Make up your own addresses, telephone
What factors would you consider in deciding who could sign a purchase requisition?
Why is it essential to try and use more than one supplier for your key purchases?
What criteria would you use in selecting a new supplier?
Explain why: (i) buffer stock is required (ii) new orders are placed when stock levels of the item in question can still be high.
Explain the difference between a GRN and an inspection note.
List the main objectives to be achieved in successfully managing a purchase ledger.
Set up the following three suppliers. Make up your own addresses, telephone numbers, fax numbers, etc.: Acc No. PL200 Acc Name L. Bonetto Credit limit (E) PL300 PL400 S. John J. Jones 2.000 3 000
Post the following invoices for each supplier. The date of posting will be determined by your current system date. If the invoice is current, use today's date. Minus 30 and minus 60 means choose a
Print the aged supplier analysis and familiarize yourself with its layout and contents.
Using the function Transaction History together with the aged supplier report, examine each account and write a report explaining what action, if any, should be taken with regard to each supplier.
What factors would you consider in drawing up a checklist of how to decide which supplier will be paid during a month when insufficient cash is available to pay all the supplier accounts that are due.
Explain in your own words the difference between cash and profit. Why should a business monitor both these figures?
Green and Co. is a small business and cannot afford to employ more staff than at present. Current staff comprise the two brothers who own the business, two sales assistants, a driver who delivers

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