Questions and Answers of Introducing Accounting

Over time, with the decline of the manufacturing company and rise of the service company, inventory, cost of sales and gross profit are becoming less important. Discuss.
State which of the following statements is true and which false? If false, explain why.(a) Profit is income earned less expenses paid.(b) Revenue less cost of sales less expenses will give net
Joan Smith has the following details from her accounts year ended 31 December 2012.Required:Draw up Joan Smith’s income statement (trading and profit and loss account) for the year ended 31
Dale Reynolds has the following details from his accounts for the year ended 31 December 2012.Required:Draw up Dale Reynolds trading account for the year ended 31 December 2012. Opening inventory
Mary Scott has the following details for the year to 31 December 2012.Required:Draw up Mary Scott’s income statement (trading and profit and loss account) for the year ended 31 December 2012.
Given the following different scenarios, calculate revenue, gross profit and cost of sales from the information available.(a) Revenue £100,000, gross margin 25%.(b) Revenue £200,000, mark-up
What is the importance, if any, of accounting?
Can you think of three business decisions for which managers would need accounting information?
What do you consider to be the main differences between fi nancial and management accounting?
Discuss the idea that as society changes so does accounting.
‘Managers should only supply fi nancial information to the “current” shareholders of companies, no other user groups have any rights at all to information, particularly not the general public
What is fi nancial accounting and why is its study important?
Formal defi nitions‘The objective of general purpose fi nancial reporting is to provide fi nancial information about the reporting entity that is useful to existing and potential investors, lenders
Sole traders, partnerships and limited companies all have different users who need financial information for different purposes. Discuss.
Classify the following as an income, an expense, an asset or a liability:(a) Friend owes business money(b) Football club’s gate receipts(c) Petrol used by a car(d) Photocopier(e) Revenue or
State whether the following are true or false. If false, explain why.(a) Assets and liabilities show how much the business owns and owes.(b) The income statement shows the income, expenses and thus
Sharon Taylor has the following financial details:Required:Prepare Sharon Taylor’s (a) Income Statement (Profit and Loss Account)(b) Statement of Financial Position (Balance Sheet)(c) Statement of
Priya Patel is an overseas student studying at a British University. Priya has the following financial details:Required:Priya’s:(a) Income Statement (Profit and Loss Account)(b) Statement of
Why is double-entry bookkeeping so important?
How do you think that the books of account kept by different businesses might vary?
Computerization means that there is no need to understand double-entry bookkeeping. Discuss.
How much trust can be placed in a trial balance which balances?
Why are there usually more debit balances in a trial balance than credit balances?
State whether the following are true or false. If false, explain why.(a) We debit cash received, but credit cash paid.(b) Revenue is debited to a revenue account, but purchases are credited to a
The following accounts appear in Theresa Gorton’s general ledger. (The dates of the transactions have been omitted).Requireda) Close down the relevant accounts in the general ledger.b) Show how
The information given relates to the business of Sean Brady.Summarised trading and profit and loss account for the year ended 30 November 20*8RequiredCalculate:a) Gross profit marginb) Net profit
The information given relates to the business of May Styles.Summarised trading and profit and loss account for the year ended 28 February 20*8RequiredCalculate:a) Mark-upb) Net profit marginc)
Look back at the worked examples above.Is Fradtly plc high geared or low geared?Is Anthea’s business high geared or low geared?Is Wharma plc a high geared company or is it low geared? WORKED
The directors of Shuttlemann plc provide the following information:RequiredCalculate the company’s gearing ratio. Non-current liabilities 5% debentures (2031) Shareholders' equity Ordinary shares
The information given is for the business of Agnes Tutin.Summarised balance sheet at 30 September 20*8Additional informationPurchases all on credit £160,000; sales all on credit
Milly has provided £130,000 capital for her business. She has borrowed £30,000 for business use, from BHSC Bank plc.RequiredCalculate the gearing ratio for Milly’s business.
The information given is for the business of Trefor Johns.Summarised balance sheet at 31 January 20*8Additional informationPurchases all on credit £291,900; sales all on credit
The following information is given for Sadie Lolly for the year ended 31 August 20*8:RequiredCalculate the following ratios:a) Gross profit marginb) Net profit marginc) Overheads in relation to
The following information is given for Hemal Limbachia for the year ended 31 December 20*8:RequiredCalculate the following ratios:a) Mark-upb) Net profit marginc) Overheads in relation to turnover
The following information is given for Zena Paul:Trading account for the year ended 30 November 20*8Additional informationAll purchases and sales are on credit.The net profit margin for the year
The following information is given for Chris Tynan:Trading account for the year ended 31 March 20*8Additional informationAll purchases and sales were on credit.The gross margin for the year ended 31
The following information is given for the business of Selena Chulk:Trading account for the year ended 31 July 20*8Balance sheet at 31 August 20*8Additional information80% of total sales were on
The following information is given for two businesses in the same industry for the year ended 30 June 20*8:All purchases and sales were on credit.RequiredPrepare a summarised trading and profit and
The following financial statements have been produced for Lisus Ltd at 31 March 20*8:All sales are credit sales.RequiredCalculate:a) Gross marginb) Net profit marginc) Return on capital employedd)
The following financial statements are provided for Bredgol plc at 31 January 20*9:All sales are credit salesRequiredCalculate:a) Gross marginb) Net profit marginc) Return on capital employedd) Net
The following budgeted information relates to Rajpoot Ltd for the three months ending 30 October 20*9. The cash balance at 1 August 20*9 is expected to be £2,100.RequiredPrepare a cash budget for
The following budgeted information relates to Chin Ltd for the three months ending 31 July 20*9.The cash balance at 1 May 20*9 is expected to be £120.RequiredPrepare a cash budget for each of the
The following budgeted information is available for Hunter Ltd:It is expected that the cash balance at 1 February will be £3,200.Debtors are expected to settle their debts one month after sales have
The following budgeted information is available for Slipper Ltd:It is expected that the cash balance at 1 March will be £2,900.Cash sales are expected to be 10% of total sales.Debtors are expected
The following budgeted information is given for Singh Ltd:It is expected that the cash balance at 1 April will be £1,500 overdrawn.Five per cent of purchases are expected to be for cash.Creditors
The following budgeted information is given for O’Casey Ltd:It is expected that the cash balance at 1 May will be £800 overdrawn.Ten per cent of purchases are expected to be for cash.Creditors
The following information relates to the business of Marcel:It is expected that:■ The cash balance at 1 August will be £2,570■ 10% of sales will be cash sales■ 10% of purchases will be for
The following budgeted information relates to the business of Pierre:It is expected that:■ The cash balance at 1 June will be £350 overdrawn■ 5% of sales will be for cash■ 10% of purchases
Tommy Chan supplies the following budgeted information relating to his business:It is expected that:■ The cash balance at 1 October will be £670■ 10% of all sales will be on credit■ 10% of
Andy Gillespie supplies the following budgeted information relating to his business:It is expected that:■ The cash balance at 1 July will be £580 overdrawn■ 30% of sales will be cash sales■
Match the titles and the dates:Trading account ................. at 30 June 20*8Balance sheet ..................... for the year ended 30 April 20*8
Malcolm provides the following information:1. Malcolm purchases a delivery vehicle £12,650 on credit from Drest Motors.2. Malcolm purchases goods for resale £542 on credit from S Unset.3. He
The following transactions have taken place:1. A cheque paid to Watkins for £200.2. The total of cash sales for the day £1,730.3. A payment by cheque to Smith for £200, less 5% cash discount.4.
The following items are shown on a trial balance extracted on 30 June 20*8:At the financial year-end the following amounts remained outstanding and unpaid:RequiredComplete the table below, showing
Petra provides the following information, which has been extracted from her books of prime entry on 31 July 20*8:RequiredPrepare a sales ledger control account for the month of July 20*8.
The following items appear in a trial balance extracted on 31 August 20*8:The following additional information is available at 31 August 20*8:RequiredComplete the table. Indicate the amount to be
Explain:(a) The type of transactions that would increase the bank balance.(b) The type of transactions that would decrease the bank balance.The amounts withdrawn from the bank account by cheque
Some of the accounts in Theresa’s ledger are listed:■ Sales account■ Purchases account■ The account of Abdul, a credit customer■ The account of Bart, a credit supplier■ Sales returns
Malcolm’s gross profit for the year ended 30 November 20*8 is £72,385. Malcolm works on a commission basis for Hijah Ltd. He earns 10% commission on all goods sold. Sales of goods received from
Gilly’s gross profit for the year ended 31 December 20*8 is £123,902. Gilly sublets part of her premises at an annual rental of £3,900. At the financial year-end 31 December 20*8, Gilly’s
Ben Trent provides the following trial balance extracted from his books of account on 31 March 20*8, after his first year of trading:Additional information at 31 March 20*8:stock was valued at
Lottie Chum provides the following trial balance extracted from her books of account on 31 October 20*8, after her first year of trading.Additional information at 31 October 20*8:stock was valued at
Toby Moore provides the following trial balance extracted from his books of account on 31 July 20*8.Additional information at 31 July 20*8:stock was valued at £9,315; insurance has been prepaid
Natasha Bedi provides the following trial balance extracted from her books of account on 31 January 20*8:Additional information at 31 January 20*8:stock was valued at £10,564; rates paid in advance
Seok Chin provides the following trial balance extracted from her books of account on 30 April 20*8:Additional information at 30 April 20*8:stock was valued at £26,449; wages owing amounted to
Sol Jensen provides the following trial balance extracted from his books of account on 31 December 20*8:Additional information at 31 December 20*8:stock was valued at £18,593; loan interest owing
Julie Wreak provides the following trial balance extracted from her books of account on 31 May 20*8:Additional information at 31 May 20*8:stock was valued at £34,897; wages amounting to £6,238 had
Tonya Gook provides the following trial balance extracted from her books of account on 30 November 20*8:Additional information at 30 November 20*8:stock was valued at £6,236; accrued wages £368;
The following accounts appear in Ben Halliday’s general ledger (the dates of the transactions have been omitted).Requireda) Close down the relevant accounts in Ben’s general ledger.b) Show how
Tom Jackson provides the following information relating to his business for the year ended 29 February 20*8:stock 1 March 20*7 £2,351; stock 29 February 20*8 £3,722; purchases £52,765; sales
Cary Thims provides the following information for her business for the year ended 31 March 20*8:stock at 1 April 20*7 £1,768; stock at 31 March 20*8 £1,439; purchases £23,771; sales £56,880;
Thomas Timms sells furniture. He is uncertain how to value three items of stock.RequiredCalculate the value to be placed on each of the three items of stock.
Tom O’Leary provides the following information for his business for the year ended 30 November 20*8:stock at 1 December 20*7 £8,663; stock at 30 November 20*8 £6,711; purchases £106,734; sales
Thelma Goodyear made three payments to her insurance broker.At 30 September 20*8, her financial year-end, she had paid a £60 insurance premium that related to October and November 20*8.Requireda)
Bob Banger sells second-hand cars. He has yet to value the vehicles listed below.RequiredCalculate the value placed on each of the three cars in stock. Make Cost £ Ford 1,200 Citröen
Alec Rooney made three payments of £900 for rent during the year ended 30 November 20*8. At 30 November he owed his landlord £900.RequiredPrepare a rent account for the year ended 30 November 20*8.
Tammy Mount supplies the following incomplete trial balance and four ledger accounts.Additional informationAfter completing the trial balance the following account was opened:At 31 March 20*8 stock
Shirley Burton has a clothes shop. Three items remaining in stock have yet to be valued.RequiredCalculate the value placed on each of the three items of stock. Article Jeans 24 Gent's suit Cost
Willie Gill provides the following draft trial balance and four detailed ledger accounts.Additional informationStock was valued at £3,760 at 30 September 20*8.Requireda) Complete the trial balance
Chetan Nath provides the following draft trial balance as at 31 August 20*8. He also provides four detailed ledger accounts.Additional informationStock was valued at £8,470 at 31 August
Dave provides the following draft trial balance. He also provides six ledger accounts.Additional informationStock was valued at £10,140 on 30 April 20*8.Requireda) Complete the trial balance at 30
John Frost started in business on 1 January 20*7. He purchased a delivery vehicle costing £28,000 on that day. He expects to keep the vehicle for four years and hopes to sell the vehicle then for
Agnes Trotter started in business on 1 March 20*6. She purchased office machinery costing £12,000 on that day. She expects the machinery to last 10 years, by which time she expects it will have a
Shajal Patel started in business on 1 April 20*6. Her financial year end is 31 March. She made the following purchases of machinery:■ 1 April 20*6: one machine costing £13,000■ 1 April 20*7: two
Tony Prem started in business on 1 September 20*6. His financial year end is 31 August. He made the following purchases of machinery:■ 1 September 20*6: two machines costing £14,000 each■ 1
The following information is available at 30 September 20*7:■ Vehicles account £120,000.■ Provision for depreciation of vehicles account £73,000.■ In July 20*8 a machine that had cost
The following information is available at 30 June 20*7:■ Premises account £278,000.■ Provision for depreciation of premises account £88,960■ During February 20*8 part of the premises that had
A machine is purchased for £20,000. It has an expected life of 10 years and an expected scrap value of £1,000.RequiredCalculate the annual depreciation charge using the straight line method.
A machine is purchased for £40,000. It has an expected life of eight years and an expected trade-in value of £6,000.RequiredCalculate the annual depreciation charge using the straight line method.
A vehicle is purchased for £30,000. Depreciation is to be provided at 40% per annum using the reducing balance method.RequiredCalculate the annual depreciation charge for the first three years of
A vehicle is purchased for £70,000. Depreciation is to be provided at 30% per annum using the reducing balance method.RequiredCalculate the annual depreciation charge for the first three years of
Equipment is purchased on 1 January 20*6 at a cost of £60,000. It has an expected life of 10 years, after which it will have no scrap value.RequiredPrepare the provision for depreciation of
Equipment is purchased on 1 August 20*6 at a cost of £50,000. It has an expected life of four years, after which it will have a scrap value of £2,000.RequiredPrepare the provision for depreciation
A lorry costing £140,000 was purchased on 1 March 20*5. It is depreciated at 60% per annum using the reducing balance method.RequiredPrepare the provision for depreciation of lorry account for the
A lorry costing £112,000 was purchased on 1 April 20*5. It is depreciated at 35% per annum using the reducing balance method.RequiredPrepare the provision for depreciation of lorry account for the
A machine which cost £45,000 on 1 January 20*7 had an expected life of 10 years. It has been depreciated using the straight line method. It was sold for £31,000 on 31 December
A machine which cost £20,000 on 1 January 20*7 had an expected life of four years. It has been depreciated using the straight line method. It was sold for £5,200 on 31 December
When a machine was purchased on 1 October 20*6 for £19,000, it was thought that it would be used for six years and then sold for scrap worth £1,000.The machine was sold for £13,250 on 30 September
A vehicle was purchased on 1 June 20*4 for £50,000. It was thought that it would be used for six years and then sold for scrap worth £2,000.The machine was sold for £16,500 on 31 May 20*8 after
A vehicle was purchased for £26,000. It was depreciated at 40% per annum using the reducing balance method. It was sold after two years of use for £9,500.RequiredPrepare a disposal account for the

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