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frank woods business accounting

Questions and Answers of Frank Woods Business Accounting

The chairman of a public limited company has written his annual report to the shareholders, extracts of which are quoted below.Extract 1'In May 2016, in order to provide a basis for more efficient
The directors of the company by which you are employed as an accountant have received the forecast statement of profit or loss for 2016 which disclosed a net profit for the year of £36,000.This is
Required:(a) The business of V. A. Fraga is taken over by T. Malloy in its entirety. The assets are deemed to be worth the statement of financial position values as shown. The price paid by Malloy is
I. Dodgem's statement of financial position as at 31 December 2015 was as follows:An opportunity had arisen for Dodgem to acquire the business of A. Swing who is retiring.Dodgem agreed to take over
Spectrum Ltd is a private company with an authorized capital of £700,000 divided into shares of £1 each. 500,000 shares have been issued and are fully paid. The company has been formed to acquire
Dinho and Manueli are in partnership sharing profits and losses equally after interest of 10% on each partner's capital account in excess of £100,000. At 31 December 2015, the partnership trial
Calculate return on capital employed for a sole proprietor whose net profit was £90,000 and whose capital employed was £270,000.
Calculate gross profit as a percentage of sales if gross profit was £110,000 and sales were £640,000.
Calculate net profit as a percentage of sales if net profit was £80,000 and sales were £560,000.
(a) Calculate the current ratio if current assets are £60,000 and current liabilities are £50,000.(b) If inventory is £32,000, what is the acid test ratio?
(a) If accounts receivable are £95,000 and sales are £340,000, what is the accounts receivable/ sales ratio?(b) How many days does the average debtor take to pay?
(a) If accounts payable are £55,000 and purchases are £232,000, what is the accounts payable/ purchases ratio?(b) How many days does the business take on average to pay its creditors?
Durham Limited had an authorised capital of £200,000 divided into 100,000 ordinary shares of £1 each and 200,000 8 per cent preference shares of 50p each. The following balances remained in the
The summarized accounts of Hope (Eternal Springs) Ltd for the years 2015 and 2016 are given below.Inventory at 1 January 2015 was £50,000.Required:(a) Calculate the following ratios for 2015 and
The following figures are for AB Engineering Supplies Ltd at 31 December 2016:(a) Calculate:(1) gross profit as a percentage of the sales;(2) rate of inventory turnover;(3) net profit as a percentage
Galloway Ltd has an authorised capital of 250,000 ordinary shares of £1 each.(a) At the end of its financial year, 30 April 2017, the following balances remained in the company's books after
The trading inventory of Joan Street, retailer, has been reduced during the year ending 31 March 2015 by £6,000 from its commencing figure of £21,000.A number of financial ratios and related
Harold Smart, who is a small manufacturer trading as Space Age Projects, is very pleased with his recently completed financial results which show that a planned 20 per cent increase in turnover has
The treasurer of the Plumpton Leisure Centre has produced the following receipts and payments account for the year ended 31 December 2017:(1) Refreshment inventory was valued: 31 December 2016 £680;
The following is a summary of the receipts and payments of the Miniville Rotary Club during the year ended 31 July 2016.The following valuations are also available:Required:(a) Calculate the value of
From your general knowledge, can you think of any well-known partnerships where the partners are located, not just in different cities, but in different countries? What line of business are they in?
Can you think of any partnership you know of where a partner left? How do you think the change in the partnership was treated in the ledgers?
What is the difference between these events and partners simply leaving a partnership? For example, if there are three partners in a dental practice and two leave, why can't the third continue the
Dick and Francis, who share profits and losses equally, decide to dissolve their partnership as at 30 June 2017. Their statement of financial position on that date was as follows:The accounts
X, Y and Z have been in partnership for several years, sharing profits and losses in the ratio 3:2:1. Their last statement of financial position which was prepared on 31 October 2016 is as
The following trial balance has been extracted from the books of Gain and Main as at 31 March 2015; Gain and Main are in partnership sharing profits and losses in the ratio 3 to 2:In appropriating
The partners agreed to dispose of the business to CNO Limited with effect from 1 October 2017 under the following conditions and terms:(1) CNO Limited will acquire the goodwill, all non-current
Amis, Lodge and Pym were in partnership sharing profits and losses in the ratio 5:3:2. The following trial balance has been extracted from their books of account as at 31 March 2015:Additional
Proudie, Slope and Thome were in partnership sharing profits and losses in the ratio 3 : 1 The draft statement of financial position of the partnership as at 31 May 2016 is shown below:1 Proudie
Lock, Stock and Barrel have been in partnership as builders and contractors for many years. Owing to adverse trading conditions it has been decided to dissolve the partnership. Profits are shared
Grant and Herd are in partnership sharing profits and losses in the ratio 3 to 2. The following information relates to the year to 31 December 2015:1 The partnership agreement allows for Herd to be
Where is the debit side of this entry made?
Although Janet Lambert has run a small business for many years, she has never kept adequate accounting records. However, a need to obtain a bank loan for the expansion of the business has
Why may some people consider this to be incorrect? That is, why is the fact that the control account is kept in the General Ledger not enough to justify saying that the control account is part of the
From the following figures, compile accounts receivable ledger and accounts payable ledger control accounts for the month, and ascertain what the net balances of the respective ledgers should be on
The following extracts have been taken from the subsidiary books of the business owned by D. Jenkinson for the month of April 2017.Required:(a) The name of the source document which will have been
The financial year of The Better Trading Company ended on 30 November 2014. You have been asked to prepare a Total Accounts Receivable Account and a Total Accounts Payable Account in order to produce
In which book should all the correcting double entries first be entered?
After preparing its draft final accounts for the year ended 31 March 2013 and its draft statement of financial position as at 31 March 2013 a business discovered that the inventory lists used to
Thomas Smith, a retail trader, has very limited accounting knowledge. In the absence of his accounting technician, he extracted the following trial balance as at 31 March 2015 from his business's
The following statement of financial position has been prepared by your client, Mr Conman, proprietor of the Sleasy Cars second-hand car dealership:This was the first year of trading for Sleasy Cars.
A trial balance was extracted from the books of N. Paisey, and it was found that the debit side exceeded the credit side by £200. This amount was entered in the suspense account. The following
Does the use of a suspense account in financial statements affect the true and fair view that they are meant to portray?
Your bookkeeper extracted a trial balance on 31 December 2016 which failed to agree by £860, a shortage on the credit side of the trial balance. A suspense account was opened for the difference.In
You have extracted a trial balance and drawn up accounts for the year ended 31 December 2014. There was a shortage of £78 on the credit side of the trial balance, a suspense account being opened for
The following balances were extracted from the books of Mr Try, a window cleaner. He has no knowledge of double entry bookkeeping but records everything correctly. His year end is 30 June and the
The following is a trial balance which has been incorrectly drawn up:In addition to the mistakes evident above, the following errors were also discovered:1 A payment of £315 made to a creditor had
Michael Baldwin owns B's Casuals, a company specialising in low-quality, high-priced clothing. The material is purchased from Canada, made up into the finished garments in his own factory, and then
Gail Dawson is the owner of a retail business. She has employed an inexperienced bookkeeper to maintain her accounting records.(a) On 31 March 2016, the end of the business's accounting year, the
Study the following and answer the questions below.The trial balance of Mary Harris (Gowns) as at 31 December 2015 showed a difference which was posted to a suspense account. Draft final accounts for
J. Almeida is a trader who sells all of her goods at 40% above cost. Her books give the following information at 31 December 2017:You are required to:(a) Ascertain cost of goods sold.(b) Show the
R. Jack gives you the following information as at 31 March 2018:Jack's mark-up is 40% on 'cost of goods sold'. His average inventory during the year was £17,000.Draw up a statement of profit or loss
The trial balance as at 30 April 2014 of Timber Products Limited was balanced by the inclusion of the following debit balance:Difference on trial balance suspense account £2,513.Subsequent
What do you think is meant by the term 'incomplete records'?
Can you see a simple rule connecting mark-up to margin?
The same approach is taken when you want to know the VAT included in a bill you've paid. Assuming a VAT rate of 17.5%, what is the VAT when the total bill is £235?
V. Fraga's business has a rate of inventory turnover of 8 times per year. Average inventory is £21,000. Mark-up is 30%. Expenses are 40% of gross profit.You are to calculate:(a) Cost of goods
The following figures relate to the retail business of A. Bell for the month of July 2016. Goods which are on sale fall into two categories, X and Y.You are to calculate for each category of
Spend a minute thinking about this and then write down why you think gross profit won't always increase if sales revenue increases.
Spend a minute thinking about this and then write down why you think it might be useful to know how many times we turn over our inventory in a period.
The following trading account is extracted from the statement of profit or loss for the year ending 31 December 2015 and is given to you by the owner of the business, S. Vane:Vane says that he
R. Sheldon presents you with the trading account set out above. He always calculates his selling price by adding 331/3% of cost on to the cost price.(a) If he has adhered strictly to the statement
The following information is available for the years 2014, 2015 and 2015:The inventory valuations used above at the end of 2014 and at the end of 2015 were inaccurate. The inventory at 31 December
Arthur deals in bicycles. His business position at 1 October was as follows:Capital £3,369 Inventory £306 (3 x Model A bicycles @ £54 and 3 x Model B @ £48)Balance at bank £3,063 Having
What may cause these accounting statements and figures to need to be calculated?(1) profits(2) sales(3) financial statements
J. Philip started in business on 1 January 2015 with £60,000 in a bank account. Unfortunately, he did not keep proper books of account.He must submit a calculation of profit for the year ending 31
What is the formula for the accounting equation? Write down both(a) the normal form and(b) the alternate form.
Wellie Bell is a magician. She has conjured up the following results from her non-existent accounting records. Fees are equal to five times her direct costs.At any given time her inventory equals one
B. Barnes is a dealer who has not kept proper books of account. At 31 October 2016 his state of affairs was as follows:During the year to 31 October 2017 his drawings amounted to £32,200. Winnings
Why is arriving at a figure for drawings that is as accurate as possible very important for the owner of a business?
The following is a summary of Ellie's bank account for the year ended 31 December 2016:All of the business takings have been paid into the bank with the exception of £34,900. Out of this, Ellie has
A. Bell has kept records of his business transactions in a single entry form, but he did not realise that he had to record cash drawings. His bank account for the year 2015 is as follows:Records of
On 1 May 2015 Jenny Barnes, who is a retailer, had the following balances in her books: Premises £70,000; Equipment £8,200; Vehicles £5,100; Inventory £9,500; Trade accounts receivable
Bill Smithson runs a second-hand furniture business from a shop which he rents. He does not keep complete accounting records, but is able to provide you with the following information about his
Jean Smith, who retails wooden ornaments, has been so busy since she commenced business on 1 April 2015 that she has neglected to keep adequate accounting records. Jean's opening capital consisted of
The following are summaries of the cash book and bank accounts of P. Maclaran who does not keep her books using the double entry system.You are required to:(a) Calculate the value of P. Maclaran's
Why do you think non-profit-oriented organizations prepare receipts and payments accounts when they have all this information in the cash book already?
A summary of the Balgreen Bowling Club's cash book is shown below. From it, and the additional information, you are to construct an income and expenditure account for the year ending 31 December
The following trial balance of the Grampian Golf Club was extracted from the books as on 31 December 2016:(1) Bar purchases and sales were on a cash basis. Bar inventory at 31 December 2016 was
Why do you think this statement was described as being a 'statement of affairs' rather than a 'statement of financial position'?
Read the following and answer the questions below.On 1 January 2015 the Happy Haddock Angling Club had the following assets:During the year to 31 December 2015 the Club received and paid the
Does this policy of ignoring subscriptions due when preparing the financial statements comply with the prudence concept? Why/Why not?
Gow, Short and Hill are partners. They share profits and losses in the ratios of 3/11, 4/11 and 4/11 respectively.For the year ending 31 July 2016, their capital accounts remained fixed at the
Think about this for a minute and then write down as many reasons as you can for people wanting to form a partnership.
White, Green and Willis are partners. They share profits and losses in the ratios of 1/4, 1/4 and 1/2 respectively.For the year ending 31 December 2016 their capital accounts remained fixed at the
Dunn and Outram sell toys. Their individual investments in the business on 1 January 2018 were:Dunn £160,000; Outram £70,000.For the year to 31 December 2018, the net profit was £90,000 and the
What advantages do you think there might be to general partners in having a limited partner?
Some partnerships don't bother drawing up a partnership agreement. How do you think the partners in those partnerships know what rights and responsibilities they have? (You have not been told this
Draw up a profit and loss appropriation account for the year ending 31 December 2017 and statement of financial position extract at that date, from the following:(1)Net profits £111,100.(2) Interest
Penrose and Wilcox are in partnership, sharing profits and losses in the ratio 3:2. The following information was taken from their books for the year ending 31 December 2016, before the completion of
Draw up a profit and loss appropriation account for Cole, Knox and Lamb for the year ending 31 December 2017, and a statement of financial position extract at that date, from the following:(1) Net
Frame and French are in partnership sharing profits and losses in the ratio 3:2. The following is their trial balance as at 30 September 2016:Required:Prepare a statement of profit or loss and profit
A and B are in partnership sharing profits and losses 3:2. Under the terms of the partnership agreement, the partners are entitled to interest on capital at 5 per cent per annum and B is entitled to
Scot and Joplin are in partnership. They share profits in the ratio: Scot 70 per cent; Joplin 30 per cent. The following trial balance was extracted as at 31 December 2017:Required:Draw up a set of
Sage and Onion are trading in partnership, sharing profits and losses equally. Interest at 5% per annum is allowed or charged on both the capital account and the current account balances at the
Bush, Home and Wilson share profits and losses in the ratios 4:1:3 respectively. Their trial balance as at 30 April 2017 was as follows:Draw up a set of financial statements for the year ending 30
Reid and Benson are in partnership as lecturers and tutors. Interest is to be allowed on capital and on the opening balances on the current accounts at a rate of 5% per annum and Reid is to be given
The partners have always shared their profits in the ratios of Vantuira 3: Aparecida 2: Fraga 5. They are to alter their profit ratios to Vantuira 4: Aparecida 1: Fraga 3. The last statement of
If you were running a successful business, would you be willing to sell it for the value of its net assets? Why/why not?
In the example in Section 42.1, goodwill was a positive figure of £50,000. If, instead, it had been a negative figure of £100,000 (being the estimated cost of a marketing campaign that would be

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