A The two accounts below were taken from the books of a retailer at the end of his financial year, 31 December 2010.

Required: Answers to the following questions. 1 What type of account is the insurance account? 2 What type of account is the rent receivable account? 3 In which subdivision of the ledger will these accounts be found? 4 Under which heading will the closing balance of the insurance account be found on the statement of financial position? 5 Under which heading will the closing balance of the rent receivable account be found on the statement of financial position? 6 In which subsidiary book (book of prime entry) will the entries transferring amounts to the profit and loss account be found? 7 Which document will be the source of information for the entry in the insurance account ‘bank £540’? 8 Which document will be the source of information for the entry in the rent receivable account ‘bank £900’? 9 What amount for insurance will appear in the trial balance dated 31 December 2010 prepared prior to the preparation of financial statements? 10 What amount for rent receivable will appear in the trial balance dated 31 December 2010 prepared prior to the preparation of financial statements? 11 If the adjustment in the insurance account for £90 on 31 December had been overlooked, would the net profit have been under- or overstated and by how much? 12 If the adjustment in the rent receivable account for £75 on 31 December had been overlooked, would the net profit have been under- or overstated and by how much?

Transcribed Image Text:

Insurance Account Dr 2010 Jan 1 Balance Jan-Dec Bank 2011 Jan 1 Balance b/d Rent Receivable Account Dr 2010 Dec 31 Profit and loss 31 Balance c/d M 80 540 620 90 885 75 960 2010 Dec 31 Profit and loss 31 Balance c/d 2010 Jan 1 Balance Jan-Dec Bank 2011 Jan 1 Balance b/d Cr 530 90 620 Cr 60 900 960 75