Questions and Answers of Introduction To Financial Accounting

What are the advantages of a trial balance?
J. Ballantine has the following opening balances on her ledger accounts:The following transactions take place during the reporting period.1. Bought desks for £500 by debit card2. Paid wages of
Explain the main purposes of a trial balance.
H. George commenced business as a butcher on 1 October 20X9 introducing cash of £5,000 from her personal bank account to the newly opened business bank account. Her transactions during October 20X9,
A customer returns goods to your business because they were not the items ordered. What documentation should you issue to the customer and which books of account have to be updated as a result of
Explain the difference between a direct debit transaction and a standing order transaction.
What do you have to do to a cheque to make it safe when sending it to a supplier using the postal system?
You are working in the finance department of a school. The school is 15 years old. Identify whether the following items are capital or revenue expenditure.1. A desk2. Payments to a handyman for
List the four books of prime entry that are used to record inventory movements.
Prepare the statement of financial position for C. Koat at 31 December 20X9:Assets: Office building £25,000, Factory £60,000, Inventory £8,000, Cash £500, Monies owed from a customer
J. Frank commenced business on 1 January 20X9. His position was:Assets: land and buildings, £75,000; fixtures, £5,600; balance at bank, £17,400.Liabilities: mortgage on land and buildings,
Roger has a building worth £25,000, land worth £125,000, a car worth £10,000. He has a mortgage on the building of £20,000 and a car loan of £12,000. He owes R. Graham £2,000 for supplies
Séan is a farmer. Identify whether each of the following will be treated as revenue or capital expenditure in his financial statements:1. A new trailer.2. Tax for the tractor.3. New fencing that
A colleague from the sales department has approached you with an idea for an expansion plan for the car dealership where you both work. Second-hand cars have higher margins. Therefore, he suggests
a. Define each of the following elements:i. Assetsii. Liabilitiesiii. Ownership interestiv. Incomev. Expenses.b. Define each of the following terms:i. Off-balance sheet financeii. Substance over
‘If a business invests in shares, and the market value of the shares increases above cost then, until and unless the business sells them, no profit is made. If the business invests in inventory for
You are Adam Anty a qualified accountant working in Clash PLC. You receive a phone call from Frances Higgins, an old colleague of yours from school. You have a chat about the years since you knew
Zonton, a UK public limited company, has been experiencing a downturn in its fortunes. The company’s performance in the past seems to have moved in line with the performance of the UK economy. The
Nesales plc, a large food manufacturer, has purchased the brand name of a chocolate bar from one of its competitors for £5 million. It proposes to include this on its statement of financial position
Explain the term ‘audit risk’.
Describe the accounting concept that would be relevant when deciding on how to account for a transaction that involves an owner of a business taking inventory for his own use.
The Conceptual Framework argues that general purpose financial reports should provide information that enables the primary users of general purpose financial reporting (present and potential
a. Outline the objective of financial statements as set out in the IASB’s Conceptual Framework for Financial Reporting (2018)b. Identify the users of financial statements and briefly describe their
What is a general purpose financial statement?
Describe the purposes of a conceptual framework of accounting.
What is the ‘conceptual framework of accounting’?
Explain the accounting framework options open to the following types of UK entity:a. A subsidiary of a company that has prepared consolidated financial statements using EU-adopted IFRSb. An entity
Describe the structure of the current institutional framework concerned with the setting and enforcement of accounting standards in the UK.
Describe the sources of the rules and regulations that govern the content and format of company final financial statements in the UK.
Explain the role of the IFRS Interpretations Committee.
Describe the objectives of the International Accounting Standards Board (IASB).
Explain briefly each of the following: internal control; internal check; stewardship accounting; and accountability.
Why are financial statements prepared by companies?
Outline the differences between sole traders and companies.
Outline the differences between sole traders and partnerships.
In which statement will the following appear, and under which heading will it be included?a. Furniture and fixtures;b. Rent;c. Wages;d. Amounts owing to a supplier;e. Amounts due from a customer.
The following is the trial balance of R. Woods as at 30 September 20X9:The inventory at 30 September 20X9 is valued at £2,946.RequiredPrepare a statement of profit or loss for the year ended 30
K. Wills has an accounting year ending on 31 December. The following amounts were paid in respect of rent and gas:You are required to show the ledger entries in the rent and light and heat accounts
The ledger of RBD & Co. included the following account balances:During the year ended 31 May 20X9 the following transactions had arisen:RequiredPost and balance the appropriate accounts for the
a. Explain the nature of accrued and prepaid expenses.b. Describe how the amount of each may be ascertained.
The following transactions are to be recorded. At the beginning of year 1 an allowance for irrecoverable debts account is to be opened. It should show an allowance of 2 per cent against trade
You bought a lorry for £5,000.Its useful life is estimated at four years.The residual value is expected to be £1,000 after the four years.RequiredCalculate the depreciation charge for each of the
A. Black & Co. Ltd owned two machines that had been purchased on 1 October 20X8 at a combined cost of £3,100 ex works. They were identical as regards size and capacity and had been erected and
Wexford Ltd, who prepare their financial statements on 31 December each year, provide for depreciation of their vehicles by a reducing balance method, calculated as 25 per cent on the balance at the
a. Explain the nature of an allowance for irrecoverable debts.b. Explain the difference between a specific and general allowance for irrecoverable debts.
a. Which accounting concepts directly influence the creation of an allowance for irrecoverable debts?b. Explain your reasoning.
A business has an accounting year ending on 31 July. It sells goods on credit and on 31 July 20X9 had trade receivables of £15,680. This includes debts of £410 due from A. Wall and £270 from
B. Summers has an accounting year ending on 30 April. At 30 April 20X8 his ledger contained the following accounts:The trade receivables at 30 April 20X9 were £19,500. This includes £620 due from

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