Answers to activities, practice exercises and exam practice questions

Answers to activities, practice exercises and exam practice questions This text has not been through the Cambridge endorsement process. 2 [1] The cheque which Noel cashed was for his personal expenses. It is therefore debited to the Drawings account. [2] Following the principle of purchases returns, sales returns are always debited to their own account, never to the sales account. [3] The costs of running motor vehicles (petrol, licence, insurance, repairs, etc.) are not debited to the motor vehicles account. A new account, motor expenses, is opened to record them. All answers that appear in this publication have been written by the author. 1 Double-entry bookkeeping: cash transactions Practice exercises 1 1 Noel pays a cheque into his business bank account as capital 2 Purchases some goods for resale and pays by cheque 3 Sells some goods and banks the takings Debit account Bank Purchases Bank Credit account Noel Capital Bank Sales 4 Pays rent by cheque Rent payable Bank 5 Purchases shop fittings and Shop fittings Bank pays by cheque 6 Cashes cheque for personal Drawings Bank expenses [1] 7 Pays wages by cheque Wages Bank 8 Returns goods to supplier and Bank Purchases returns banks refund 9 Receives rent from tenant and Bank Rent receivable banks cheque 10 Refunds money to customer by Sales returns Bank cheque for goods returned [2] 11 Motor vehicle purchased and Motor vehicles Bank paid for by cheque 12 Pays for petrol for motor vehicle and pays by cheque [3] Motor expenses Bank 2 Bank account May 1 Martine capital 300 May 3 Rent payable 100 May 2 Charline loan 1 000 May 4 Shop fittings 400 May 5 Purchases 20 May 4 Purchases 300 returns May 6 Sales 40 May 7 Wages 60 May 8 Drawings 100 Martine capital account May 1 Bank 300 Charline Loan account May 2 Bank 1 000

Answers to activities, practice exercises and exam practice questions: Chapter 1 Rent payable account May 3 Bank 100 Shop fittings account May 4 Bank 400 Purchases account May 4 Bank 300 Purchases returns account May 5 Bank 20 Sales account May 6 Bank 40 Wages account May 7 Bank 60 May 8 Bank 100 Drawings account 3 3 a Notes: 1 The narrative must always contain the name of the account where the opposite entry can be made. 2 Purchases returns are always posted to their own account, never to the credit of the purchases account. July 1 Debit account Bank Lee started business by paying $20 000 of his savings into a business bank account He also had $500 in cash which he decided to use to pay Cash Capital cash expenses for the business 2 Bought some goods for resale for $1300, paying by cheque Purchases Bank 3 Paid $2500 by cheque to rent some business premises Rent payable Bank 4 Bought some office furniture by cheque for $750 Office furniture Bank Bought office stationery for $120, paying by cash Stationery Cash 6 Sold some goods for $1700 and paid the money into the bank Bank Sales Sold more goods for $180. He received cash for this sale Cash Sales Credit account Capital 8 Retuned some faulty goods valued at $60 to the supplier and received a cheque refund Bank Purchases returns 9 A customer returned some faulty goods. Lee gave the Sales returns Cash customer a cash refund of $25 10 Sold goods for $420. Lee received cash for the goods. Cash Sales He kept $200 as business cash and banked the rest Bank 11 Lee took cash drawings of $160 Drawings Cash

Cambridge International AS and A Level Accounting b Bank account July 1 Capital 20 000 July 2 Purchases 1 300 July 6 Sales 1 700 July 3 Rent 2 500 July 8 Purchases returns 60 July 4 Office furniture 750 July 10 Sales 220 Cash account July 1 Capital 500 July 4 Stationery 120 July 6 Sales 180 July 9 Sales returns 25 July 10 Sales 200 July 11 Drawings 160 Capital account July 1 Bank 20 000 Cash 500 Purchases account July 2 Bank 1 300 4 Sales account July 6 Bank 1 700 Cash 180 July 10 Bank 220 Cash 200 Purchases returns account July 8 Bank 60 Sales returns account July 9 Cash 25 Rent account July 3 Bank 2 500 Office furniture account July 4 Bank 750

Answers to activities, practice exercises and exam practice questions: Chapter 1 Stationery account July 4 Cash 120 Drawings account July 11 Cash 160 4 5 Debit account 1 Local taxes paid by cheque Taxes Bank Credit account 2 Bank pays interest to trader Bank Interest received 3 Other operating expenses paid by cheque Other operating expenses Bank 4 Postage and stationery paid by cheque Postage and stationery Bank 5 Telephone bill paid by cheque Telephone Bank 6 Carriage inwards paid by cheque Carriage inwards Bank 7 Carriage outwards paid by cheque Carriage outwards Bank 8 Interest paid by cheque to brother in Interest payable Bank respect of a loan received from him 9 Interest paid to bank Interest payable / bank interest Bank Bank account June 1 Farook capital 15 000 June 2 Premises 8 000 Amna loan 5 000 June 3 Office furniture 2 000 June 5 Sales 1 500 June 4 Purchases 5 000 June 10 Sales 2 400 June 6 Insurance 600 June 12 Purchase returns 900 June 7 Motor van 3 000 June 13 Insurance 100 June 8 Motor expenses 50 June 14 Office furniture 800 June 9 Purchases 2 000 June 10 Wages 400 June 11 Sales returns 1 200 June 13 Drawings 200 June 15 Loan 1 000 5 Capital account June 1 Bank 15 000 Loan account June 15 Bank 1 000 June 1 Bank 5 000 June 2 Bank 8 000 Premises account

Cambridge International AS and A Level Accounting Office furniture account June 3 Bank 2 000 June 14 Bank 800 Purchases account June 4 Bank 5 000 June 9 Bank 2 000 Sales account June 5 Bank 1 500 June 10 Bank 2 400 Insurance account June 6 Bank 600 June 13 Bank 100 Motor van account June 7 Bank 3 000 6 June 8 Bank 50 Motor expenses account June 10 Bank 400 June 11 Bank 1 200 June 13 Bank 200 Exam practice questions Multiple-choice questions 1 B 2 B 3 D 4 B Wages account Sales returns account Purchases returns account Drawings account June 12 Bank 900

Answers to activities, practice exercises and exam practice questions: Chapter 2 2 Double-entry bookkeeping: credit transactions Practice exercises 1 Khor account June 10 Purchases returns [1] 180 June 1 Purchases 2 700 June 30 Bank 2 394 June 30 Discounts received 126 Lim account June 30 Bank 2 394 June 15 Purchases 2 520 June 30 Discounts received 126 [1] The goods which Geraud returned to Khor will have had the trade discount deducted from them when they were purchased. This must be adjusted when the goods are returned. Their cost was $200-10% trade discount of $20 = 180. Lai account June 5 Sales 600 June 25 Sales returns 180 June 30 Bank 399 June 30 Discounts allowed 21 Chin account June 20 Sales 1 300 June 30 Bank 1 235 June 30 Discounts allowed 65 7 Purchases account June 1 Khor 2 700 June 15 Lim 2 520 Purchases returns account June 10 Khor 180 Sales account June 5 Lai 600 June 20 Chin 1 300 Sales returns account June 25 Lai 180 [2] [2] The same is true for the goods returned by Lai, which had cost $200 but need to have the 10% trade discount deducted.

Cambridge International AS and A Level Accounting Bank account June 30 Lai 399 June 30 Khor 2 394 June 30 Chin 1 235 June 30 Lim 2 394 Discounts received account June 30 Khor 126 June 30 Lai 126 Discounts allowed account June 30 Lai 21 June 30 Chin 65 Note: Remember trade discount is never entered in the ledger. 2 In the books of Brian: 8 Ken account April 1 Sales 1 500 April 2 Purchases 400 April 3 Sales 600 April 6 Purchases 720 April 12 Bank 380 April 10 Bank 1 455 Discount received 20 Discount allowed 45 Sales account April 1 Ken 1 500 April 3 Ken 600 Purchases account April 2 Ken 400 April 6 Ken 720 Bank account April 10 Ken 1 455 April 12 Ken 380 Discounts allowed account April 10 Ken 45 Discounts received account April 12 Ken 20

Answers to activities, practice exercises and exam practice questions: Chapter 2 In the books of Ken: Brian account April 2 Sales 400 April 1 Purchases 1 500 April 6 Sales 720 April 3 Purchases 600 April 10 Bank 1 455 April 12 Bank 380 Discount received 45 Discount allowed 20 Sales account April 2 Brian 400 April 6 Brian 720 Purchases account April 1 1 500 April 3 600 Bank account April 10 Brian 380 April 12 Brian 1 455 April 12 Brian 20 Discounts allowed account 9 Discounts received account April 10 Brian 45 3 Adams account July 5 Purchases returns 510 July 1 Purchases 4 250 July 14 Bank 3 590 Discount received 150 Bond account July 14 Bank 2 160 July 4 Purchases 2 250 Discount received 90 Astle account July 9 Purchases returns 640 July 7 Purchases 5 600 July 14 Bank 4 712 Discount received 248

Cambridge International AS and A Level Accounting Cairns account July 14 Bank 3 591 July 10 Purchases 3 780 Discount received 189 Purchases account July 1 Adams 4 250 July 4 Bond 2 250 July 7 Astle 5 600 July 10 Cairns 3 780 Purchases returns account July 5 Adams 510 July 9 Astle 640 10 Bank account July 14 Adams 3 590 Bond 2 160 Astle 4 712 Cairns 3 591 Discount received account July 14 Adams 150 Bond 90 Astle 248 Cairns 189 4 Blignaut account March 1 Sales 2 250 March 15 Bank 2 160 Discount allowed 90 Ebrahim account March 4 Sales 3 400 March 6 Sales returns 170 March 15 Bank 3 069 Discount allowed 161 Friend account March 8 Sales 2 560 March 15 Bank 2 432 Discount allowed 128

Answers to activities, practice exercises and exam practice questions: Chapter 2 Flower account March 12 Sales 1 800 March 14 Sales returns 315 March 15 Bank 1 426 Discount allowed 59 Sales account March 1 Blignaut 2 250 March 4 Ebrahim 3 400 March 8 Friend 2 560 March 12 Flower 1 800 Sale returns account March 6 Ebrahim 170 14 Flower 315 Bank account March 15 Blignaut 2 160 Ebrahim 3 069 Friend 2 432 Flower 1 426 11 March 15 Blignaut 90 Ebrahim 161 Friend 128 Flower 59 Exam practice questions Multiple-choice questions 1 A 2 B 3 A Discount allowed account

Cambridge International AS and A Level Accounting 3 Books of prime entry Activities Activity 1 Purchases journal Sales journal March 1 Tikolo 8 000 March 4 Snyman 1 080 March 6 Walters 7 200 March 10 Karg 2 250 March 13 Burger 5 250 March 17 Kotze 2 700 March 18 Tikolo 4 800 March 25 Snyman 1 620 Purchases returns journal 25 250 7 650 Sales returns journal March 12 Tikolo 400 March 11 Snyman 200 March 22 Burger 1 000 March 20 Karg 300 1 400 500 12 Cash book Discounts Bank Discounts Bank March 31 Snyman 100 2 400 March 31 Tikolo 620 11 870 March 31 Karg 78 1 872 March 31 Walters 360 6 840 March 31 Kotze 135 2 565 March 31 Burger 170 4 080 313 1150 March 31 Purchases journal total 25 250 Purchases account Purchases returns account March 31 Sales account Purchases returns journal total 1 400 March 31 Sales journal total 7 650 March 31 Sales returns journal total Sales returns account 500 March 31 Cash book total 313 Discounts allowed account

Answers to activities, practice exercises and exam practice questions: Chapter 3 Discounts received account March 31 Cash book total 1 150 Tikolo account March 12 Purchases returns 400 March 1 Purchases 8 000 March 31 Bank 11 780 March 18 Purchases 4 800 March 31 Discounts received 620 Walters account March 31 Bank 6 840 March 6 Purchases 7 200 Discounts received 360 Burger account March 22 Purchases returns 1 000 March 13 Purchases 5 250 March 31 Bank 4 080 March 31 Discounts received 170 Snyman account March 4 Sales 1 080 March 11 Sales returns 200 March 25 Sales 1 620 March 31 Bank 2 400 March 31 Discounts allowed 100 13 Karg account March 10 Sales 2 250 March 20 Sales returns 300 March 31 Bank 1 872 March 31 Discounts allowed 78 Kotze account March 17 Sales 2 700 March 31 Bank 2 565 March 31 Discounts allowed 135 Activity 2 Cash book Disc Cash Bank Disc Cash Bank $ March 1 Sales 1 100 March 2 Electricity 130 March 3 Sales 900 March 4 Bank 1 700 March 4 Cash 1 700 March 5 Other operating expenses 25 March 6 Bank 800 March 6 Cash 800 March 7 Purchases 750

Cambridge International AS and A Level Accounting Activity 3 Accounts Dr Cr a A & Co. 120 A. Cotter 120 Correction of credit note no. 964 received from A and Co. Ltd. in the sum of $120 debited to A. Cotter in error. b Purchases 400 Hussain 400 Correction of invoice no. 104 in the sum of $400 received from Hussain omitted from the purchases journal. c Maya 45 Sales 45 Correction of posting error: invoice no. 6789 in the sum of $150 sent to Maya entered in the sales journal as $105. d Machinery 2 300 Purchases 2 300 Correction of purchase of machine posted in error to purchases account. e Sales returns 68 Hanif 68 Correction of omission of credit note no.23 for $68 and sent to Hanif, omitted from the sales returns journal. 14 [1] It is assumed that the value of the goods returned were after adjusting for the trade discount. Whether a returns amount given needs to be adjusted for the trade discount should be clear. Practice exercises 1 a Purchases journal Purchases returns journal April 1 Bilal 2 400 April 8 Bilal [1] 100 April 3 Asad 1 040 April 21 Asma [1] 600 April 15 Asma 3 000 April 26 Bilal 3 200 Sales journal 9 640 700 Sales returns journal April 2 Imran 720 April 13 Imran [1] 60 April 10 Raza 880 April 24 Amna [1] 300 April 16 Amna 1 200 April 17 Raza 1 280 4 080 360 Journal Accounts Dr Cr 5 April Motor vehicles/delivery van 6 000 Syed 6 000 Purchase of delivery van, from Syed, invoice no. 324.

Answers to activities, practice exercises and exam practice questions: Chapter 3 b Bank account Discount allowed Bank Discount received Bank April 30 Imran 33 627 April 30 Bilal 275 5 225 April 30 Raza 108 2 052 April 30 Asma 120 2 280 April 30 Amna 45 855 April 30 Asad 52 988 April 30 Syed 6 000 186 447 Bilal account April 8 Purchase returns 100 April 1 Purchases 2 400 April 30 Bank (5600-100 95%) 5 225 April 26 Purchases 3 200 Discount received 275 5 600 5 600 Asad account April 30 Bank (1040 95%) 988 April 3 Purchases 1 040 Discount received 52 1 040 1 040 15 Asma account April 21 Purchase returns 600 April 15 Purchases 3 000 April 30 Bank (3000-600 95%) 2 280 Discount received 120 3 000 3 000 April 30 Purchases journal total 9 640 Purchases account Purchases returns account April 30 Purchases returns journal total 700 Imran account April 2 Sales 720 April 13 Sales returns 60 April 30 Bank (720-60 95%) 627 Discount allowed 33 720 720

Cambridge International AS and A Level Accounting Raza account April 10 Sales 880 April 30 Bank (2160 95%) 2 052 April 17 Sales 1 280 Discount allowed 108 2 160 2 160 Amna account April 16 Sales 1 200 April 24 Sales returns 300 April 30 Bank (1200-300 95%) 855 Discount allowed 45 1 200 1 200 Sales account April 30 Sales journal total 4 080 April 30 Sales returns journal total 360 Sales returns account 16 April 30 Bank 176 Discount allowed account Discount received account April 30 Bank 447 Syed account April 30 Bank 6 000 April 5 Del. Van (Inv 324) 6 000 April 5 Syed 6 000 Delivery van account

Answers to activities, practice exercises and exam practice questions: Chapter 3 2 Date Accounts Dr Cr a March 3 Machinery 10 000 Mumtaz 10 000 Purchase of machinery on credit on invoice 506. b March 6 Sales 675 Wayne 675 Correction of invoice 495 entered twice in error. c March 7 Delivery van 4 250 Younas 4 250 Purchase of new delivery van from Younas on invoice 998. d March 10 Sales returns 190 Browne 190 Credit note 103 omitted from sales returns journal. e March 15 Geeta 1 300 Sandra 1 300 Transfer of invoice no. 854 from Sandra posted to Geeta s account in error. Exam practice questions Multiple-choice questions 1 C 2 B 3 B 4 C 17

Cambridge International AS and A Level Accounting 1 4 Balancing accounts Practice exercise Discounts allowed Three-column cash book Cash Bank Discounts received Cash March 1 Capital 10 000 March 2 Rent 1 000 March 3 Sales 550 March 7 Joe 190 3 610 March 8 Balance b/d 530 5 390 March 7 Postages 20 Bank March 7 Balance c/d 530 5 390 550 10 000 190 550 10 000 Capital account March 7 Balance c/d 10 000 March 1 Bank 10 000 360 March 8 Balance b/d 10 000 18 Purchases account March 2 Joe 4 000 March 7 Balance c/d 4 000 March 8 Balance b/d 4 000 Joe account March 5 Purchases returns 200 March 2 Purchases 4 000 March 7 Bank ($4000 $200 95%) 3 610 March 7 Discount received 190 4 000 4 000 Purchases returns account March 7 Balance c/d 200 March 5 Joe 200 March 8 Balance b/d 200 Barney account March 3 Sales 2 000 March 7 Balance c/d 2 000 March 8 Balances b/d 2 000

Answers to activities, practice exercises and exam practice questions: Chapter 4 Sales account March 7 Balance c/d 2 550 March 3 Barney 2 000 March 3 Cash 550 2 550 2 550 March 8 Balance b/d 2 550 Rent account March 2 Bank 1 000 March 7 Balance c/d 1 000 March 8 Balance b/d 1 000 Postages account March 7 Cash 20 March 7 Balance c/d 20 March 8 Balance b/d 20 19

Cambridge International AS and A Level Accounting 5 The classification of accounts and division of the ledger Activities Activity 1 Account Personal Non-current asset Current asset Revenue or other income Expense Capital Sales returns Delivery vans Purchases Rent payable Trade receivables 2 Inventory Discount allowed Drawings Bank 1 Rent receivable Trade payables 3 Computer Wages 20 Discount received Notes: 1 The bank account would be a current liability if it was overdrawn. 2 Trade payables is the International Accounting Standards terminology for the aggregate amount owing to suppliers. It is not literally a personal account but is a description given to the total of the credit balances on the supplier personal accounts. Trade payables are presented as a current liability in the statement of financial position (see later chapters) at the end of an accounting period. 3 Trade receivables is the International Accounting Standards terminology for the aggregate amount receivable from customers. It is not literally a personal account but is a description given to the total of the debit balances on the customer personal accounts. Trade receivables are presented as a current asset in the statement of financial position (see later chapters) at the end of an accounting period.

Answers to activities, practice exercises and exam practice questions: Chapter 5 Practice exercises 1 Statement The purchase of a motor car is revenue expenditure The payment of wages to employees is revenue expenditure The accounts for customers are kept in the sales ledger Repairs to the office windows is an example of capital expenditure The purchase of office stationery is revenue expenditure The sales account is a nominal account The fixtures and fittings account is a real account Suppliers accounts are kept in the nominal ledger The day-to-day costs of running the business is an example of revenue expenditure True or false False True True False True True True False True 2 a The sales account records the revenue of the business and is an example of a nominal account. b The purchase of a new machine is an example of capital expenditure and the account is an example of a real account c Small items of expenditure are recorded in the petty cash book. d A non- current asset is bought to keep in the business for a long period of time. 21

Cambridge International AS and A Level Accounting 6 The trial balance Activities Activity 1 22 The grocer s trial balance at 31 December Account Dr Cr Premises 50 000 Motor vans 8 000 Office furniture 2 000 Computer 3 000 Sales 60 000 Sales returns 700 Purchases 4 000 Purchases returns 500 Motor vehicle running expenses 4 200 Wages 1 800 Rent 2 000 Bank 1 650 Capital 20 000 Drawings 3 150 Activity 2 a Complete reversal of entries b Error of principle c Error of omission d Compensating errors e Error of commission f Error of original entry 80 500 80 500 Practice exercises 1 Hassan s trial balance at 31 December 2015 Account Dr Cr Sales 160 000 Sales returns 2 600 Purchases 84 000 Purchases returns 3 400 Wages 26 000 Heating and lighting 3 160 Rent payable 5 000 Rent receivable 1 000 Advertising 2 900 Postage and telephone 2 740 Discounts allowed 6 100 Discounts received 5 900 Plant and machinery 50 000 Delivery van 9 000

Answers to activities, practice exercises and exam practice questions: Chapter 6 2 Bank 2 300 Trade receivables 7 400 Trade payables 3 700 Drawings 8 800 Capital 36 000 210 000 210 000 Notes: Items in the debit column are mainly assets or expenses. Items in the credit column are mainly income or liabilities. Andrea s corrected trial balance at 31 December 2015 Account Dr Cr Premises 70 000 Plant and machinery 30 000 Office equipment 5 000 Wages 7 600 Rent payable 4 000 Heating and lighting 1 500 Other operating expenses 1 720 Sales 133 000 Purchases 57 000 Discounts allowed 2 450 Discounts received 1 070 Bank 2 910 Trade receivables 14 000 Trade payables 10 140 Purchases returns 2 400 Sales returns 3 150 Rent receivable 1 200 Capital 80 000 Drawings 28 480 227 810 227 810 23 Exam practice questions Multiple-choice questions 1 B 2 B 3 C 4 C

Cambridge International AS and A Level Accounting 7 Income statements for sole traders Activities Activity 1 Liz Trading section of the income statement for the year ended 31 March 2016 Debit Credit Purchases 68 000 Sales 150 000 Less: purchases returns 1 700 Less: sales returns 4 200 Activity 2 66 300 145 800 24 Rodney Trading section of the income statement for the year ended 30 September 2015 Debit Credit Purchases 84 000 Sales 140 000 Less: purchases returns 1 400 Less: sales returns 1 200 82 600 138 800 Less: closing inventory 4 900 Cost of sales 77 700 Gross profit 61 100 138 800 138 800 Activity 3 Sofia Income statement for the year ended 31 December 2015 Revenue 200 000 Less: sales returns 6 300 193 700 Cost of sales Purchases 86 500 Less: purchases returns 5 790 80 710 Less: inventory at 31 December 2015 10 000 70 710 Gross profit 122 990 Add: rent received 3 000 Add: discounts received 3 210 129 200 Less: Wages 61 050 Rent payable 12 000 Electricity 5 416 Insurance 2 290

Answers to activities, practice exercises and exam practice questions: Chapter 7 Income statement for the year ended 31 December 2015 Motor van expenses 11 400 Discounts allowed 5 110 Other operating expenses 3 760 Loan interest 1 000 102 026 Profit for the year 27 174 Activity 4 Khor Extract from the income statement for the year ended 31 December 2015 $ Revenue 48 000 Less: sales returns 1 600 Less: cost of sales 46 400 Opening inventory 4 000 Purchases 21 000 Less: purchases returns 900 20 100 24 100 Less: closing inventory 7 500 16 600 Gross profit 29 800 Activity 5 25 Lamar Income statement for the year ended 31 March 2016 $ Revenue 104 000 Less: sales returns 3 700 100 300 Less: cost of sales Opening inventory 6 000 Purchases 59 000 Less: purchases returns 2 550 56 450 62 450 Less: closing inventory 10 000 52 450 Gross profit 47 850 Rent receivable 1 800 Discounts receivable 770 50 420 Less: Wages 13 000 Rent payable 2 000 Heating and lighting 2 700 Repairs to machinery 4 100 (cont.)

Cambridge International AS and A Level Accounting Income statement for the year ended 31 March 2016 $ Discounts allowed 1 030 Loan interest 750 23 580 Profit for the year 26 840 Activity 6 26 Sara Income statement for the year ended 31 March 2016 $ Sales 40 000 Less: cost of sales Opening inventory 5 000 Purchases 20 500 Carriage inwards 1 320 21 820 26 820 Less: closing inventory 3 000 Cost of sales 23 820 Gross profit 16 180 Less: Wages 6 000 Rent 10 000 Electricity 2 600 Carriage outwards 1 080 Other operating expenses 1 250 20 930 Loss for the year (4 750) Practice exercises 1 Hadlee Income statement for the year ended 31 December 2015 $ Sales 72 800 Less: sales returns 1 600 71 200 Less: cost of sales Opening inventory 11 000 Purchases 28 540 Less: purchases returns 2 144 26 396 37 396 Less: closing inventory 9 000 28 396 Gross profit 42 804 Less: expenses Wages 3 100 Rent 4 000 Heating and lighting 5 120

Answers to activities, practice exercises and exam practice questions: Chapter 7 $ Advertising 2 400 Other operating expenses 2 010 Loan interest 250 16 880 Profit for the year 25 924 2 Tikolo Income statement for the year ended 31 March 2016 $ Sales 204 000 Less: sales returns 3 600 200 400 Less: cost of sales Opening inventory 18 000 Purchases 118 000 $(120 000 2 000) Less: purchases returns 4 440 113 560 Add: carriage inwards 5 000 118 560 136 560 Less: closing inventory 20 000 116 560 Gross profit 83 840 Add: other income Discounts received 3 160 87 000 Less: expenses Wages 36 800 Rent 8 000 Heating and lighting 6 450 Discounts allowed 5 020 Carriage outwards 3 724 Other operating expenses 1 143 61 137 Profit for the year 25 863 27 Exam practice questions Multiple-choice questions 1 A 2 C 3 C 4 D 5 A

Cambridge International AS and A Level Accounting 28 8 Statements of financial position for sole traders Practice exercises 1 Sofia Statement of financial position at 31 December 2015 $ Non-current assets Land and buildings 84 000 Plant and machinery 22 000 Motor vans 19 000 125 000 Current assets Inventory 10 000 Trade receivables 12 425 Cash and cash equivalents 5 065 27 490 Total assets 152 490 Capital and liabilities Capital at 1 January 2015 127 000 Add: profit for the year 27 174 154 174 Less: drawings 25 904 128 270 Non-current liability Loan 20 000 Current liabilities Trade payables 4 220 Total capital and liabilities 152 490 2 Lamar Statement of financial position at 31 March 2016 $ Non-current assets Premises 60 000 Plant and machinery 12 000 72 000 Current assets Inventory 10 000 Trade receivables 1 624 Cash and cash equivalents 5 000 16 624 Total assets 88 624

Answers to activities, practice exercises and exam practice questions: Chapter 8 3 $ Capital and liabilities Capital at 1 April 2016 55 000 Add: profit for the year 26 840 81 840 Less: drawings 10 096 71 744 Non-current liability Loan 15 000 Current liabilities Trade payables 1 880 Total capital and liabilities 88 624 Hadlee Statement of financial position at 31 December 2015 $ Non-current assets Plant and machinery 25 000 Office furniture 6 000 31 000 Current assets Inventory 9 000 Trade receivables 4 740 Cash and cash equivalents 3 327 17 067 Total assets 48 067 Capital and liabilities Opening capital 20 000 Add: profit for the year 25 924 45 924 Less: drawings (4 833) 41 091 Non-current liabilities Loan 5 000 Current liabilities Trade payables 1 976 Total capital and liabilities 48 067 29

Cambridge International AS and A Level Accounting 30 Tikolo Statement of financial position at 31 March 2016 $ Non-current assets Fixtures and fittings 9 000 Office furniture 2 000 11 000 Current assets Inventory 20 000 Trade receivables 1 970 Cash and cash equivalents 2 496 24 466 Total assets 35 466 Capital and liabilities Opening capital 30 000 Add: profit for the year 25 863 55 863 Less: drawings $(20 527 + 2 000) (22 527) 33 336 Current liabilities Trade payables 2 130 Total capital and liabilities 35 466 Exam practice questions Multiple-choice questions 1 D 2 A 3 B 4 C

Answers to activities, practice exercises and exam practice questions: Chapter 9 9 Accounting principles or concepts Exam practice questions Multiple-choice questions 1 B 2 A 3 A 4 B 5 B 6 D 31

Cambridge International AS and A Level Accounting 10 Accruals and prepayments (the matching concept) Activities Activity 1 a Telephone account 2015 2015 Dec 31 Bank 1 450 Dec 31 Balance c/d (rental prepaid) 400 Dec 31 Bank 2 000 Dec 31 Income statement 3 410 b Alexander s total telephone expense for the year is $3410. This is made up of calls $(1450 + 360) = $1810 + line rental $(2000 400) = $1600. c Dec 31 Balance c/d (calls owing) 360 2016 2016 3 810 3 810 Jan 1 Balance b/d 400 Jan 1 Balance b/d 360 The amount of $360 for calls owing will appear under current liabilities. The figure of $400 will appear under current assets. Never net off the two amounts. 32 Activity 2 Rent payable account 2015 2015 Dec 31 Bank 1 000 Dec 31 Income statement 2016 Jan 1 Balance b/d 200 Dec 31 Balance c/d (rent prepaid) 800 200 1 000 1 000 Electricity account 2015 2015 Dec 31 Bank 630 Dec 31 Income statement Dec 31 Balance c/d (accrued expense) 180 810 810 810 2016 Jan 1 Balance b/d 180

Answers to activities, practice exercises and exam practice questions: Chapter 10 Stationery account 2015 2015 Dec 31 Bank 420 Dec 31 Income statement Dec 31 2016 Balance c/d (amount owing) 130 Dec 31 410 Balance c/d (inventory) 140 550 550 Jan 1 Balance b/d 140 Jan 1 Balance b/d 130 Dec 31 Rent receivable account 2015 2015 2016 Income statement 400 Jan 1 Balance b/d 100 Dec 31 Bank Dec 31 300 Balance c/d (rent owing) 100 400 400 Activity 3 a Devram Income statement for the year ended 31 December 2015 Gross profit 30 000 Rent $(2 600 300) 2 300 Electricity $(926 + 242) 1 168 Stationery $(405 + 84 100) 389 Motor expenses $(725 + 160) 885 Interest on loan $(500 + 500) 1 000 5 742 Profit for the year 24 258 33 b Note: Unpaid interest on the loan must be accrued although it is not mentioned in the question. Devram Statement of financial position at 31 December 2015 Non-current assets 40 000 Current assets Inventory 7 000 Stationery inventory 100 7 100 Trade receivables 1 600 (cont.)

Cambridge International AS and A Level Accounting Statement of financial position at 31 December 2015 Other receivables: prepaid rent 300 Cash and cash equivalents 2 524 11 524 Total assets 51 524 Capital and liabilities Capital at 1 January 2015 20 000 Profit for the year 24 258 44 258 Less: drawings 5 120 39 138 Non-current liabilities Long-term loan 10 000 Current liabilities Trade payables 1 400 Other payables 986 $(242 + 84 + 160 + 500) 2 386 Total capital and liabilities 51 524 34 Practice exercises 1 a Prudence; accruals b Antonia Income statement for the year ended 31 December 2015 $ Sales 120 000 Less: sales returns 7 300 112 700 Less: cost of sales Opening inventory 5 660 Purchases 62 400 Less: purchases returns 4 190 58 210 63 870 Less: closing inventory 8 000 55 870 Gross profit 56 830 Less: expenses Wages $(17 310 + 558) 17 868 Rent $(3 200 800) 2 400 Heating and lighting $(2 772 + 328) 3 100 Motor expenses 1 284 Loan interest $(500 + 250) 750 25 402 Profit for the year 31 428

Answers to activities, practice exercises and exam practice questions: Chapter 10 c Antonia Statement of financial position at 31 December 2015 $ Non-current assets Premises 24 000 Motor vehicles 7 400 31 400 Current assets Inventory 8 000 Trade receivables 12 440 Other receivables: prepaid rent 800 Cash and cash equivalents 5 055 26 295 Total assets 57 695 Capital and liabilities Opening capital 16 000 Profit for the year 31 428 47 428 Less: drawings 7 036 40 392 Non-current liabilities Loan 10 000 Current liabilities Trade payables 6 167 Other payables $(558 + 328 + 250) 1 136 7 303 Total capital and liabilities 57 695 35 d The loan received is shown as a non-current liability as it is not due for repayment within 12 months from the date of the statement of financial position (31 December 2015). Any part of it which becomes due for repayment within 12 months will be shown as a current liability. 2 a Desmond Income statement for the year ended 31 March 2016 $ Sales 219 740 Less: sales returns 17 420 202 320 Less: cost of sales Opening inventory 9 000 Purchases 100 100 Less: purchases returns 8 777 91 323 Add: carriage inwards $(5 170 + 330) 5 500 96 823 105 823 Less: closing inventory 11 000 94 823 (cont.)

Cambridge International AS and A Level Accounting Income statement for the year ended 31 March 2016 $ Gross profit 107 497 Add: other income Rent receivable $(2 600 200) 2 400 Interest receivable $(840 + 160) 1 000 Discounts received 1 040 111 937 Less: expenses Wages 67 000 Rent payable $(8 000 + 2 000) 10 000 Discounts allowed 2 826 Carriage outwards $(7920 + 280) 8 200 Stationery and other operating 1 643 89 669 expenses $(1 963 200 120) Profit for the year 22 268 36 b Desmond Statement of financial position at 31 March 2016 $ Non-current assets Plant and machinery 36 000 Motor vehicles 17 000 53 000 Current assets Inventory 11 000 Trade receivables 7 060 Other receivables (other operating expenses, 480 stationery inventory and interest accrued) Cash and cash equivalents 5 400 23 940 Total assets 76 940 Capital and liabilities Opening capital 70 000 Add: profit for the year 22 268 92 268 Less: drawings 22 088 70 180 Current liabilities Trade payables 3 950 Other payables $(2000 + 330 + 280 + 200) 2 810 6 760 Total capital and liabilities 76 940

Answers to activities, practice exercises and exam practice questions: Chapter 10 c Carriage inwards is the cost of bringing the goods from the supplier. It is regarded as part of the cost of the item bought and appears in the calculation of the cost of sales. Carriage outwards is the cost of delivering goods to the customer. It is regarded as a business expense and appears with other expenses in the income statement. 3 a The annual financial statements of a business are prepared using the accruals basis. Expenses of the period are matched with the income of the same period. It doesn t matter whether or not the expenses have been paid. Therefore, any amounts owing but unpaid for in a particular year are brought into the financial statements for that year (accruals). Any amounts paid during the year, but relating to a future period (prepayments) are excluded from the financial statements for that year. b b Rent account 2015 2015 Jan 1 Balance b/d 2 000 Dec 31 Income statement 9 500 $(2 000 + [3 2 500]) Dec 31 Bank $(2500 4) 10 000 Dec 31 Balance c/d 2 500 12 000 12 000 2016 Jan 1 Balance b/d 2 500 Electricity account 2015 2015 Dec 31 Bank 1 800 Jan 1 Balance b/d 150 Balance c/d ($480 3 2) 320 Dec 31 Income statement 1 970 2 120 2 120 2016 Jan 1 Balance b/d 320 37 Exam practice questions Multiple-choice questions 1 D 2 B 3 B 4 A

Cambridge International AS and A Level Accounting 38 11 Provisions for the depreciation of non-current assets Activities Activity 1 a Provision for depreciation of motor vehicles account Year 1 Balance c/d 2 000 Year 1 Income statement 2 000 Year 2 Balance c/d 4 000 Year 2 Balance b/d 2 000 Income statement 2 000 4 000 4 000 Year 3 Balance c/d 6 000 Year 3 Balance b/d 4 000 Income statement 2 000 6 000 6 000 Year 4 Balance c/d 8 000 Year 4 Balance b/d 6 000 Income statement 2 000 8 000 8 000 Year 5 Balance c/d 10 000 Year 5 Balance b/d 8 000 Income statement 2 000 10 000 10 000 Year 6 Balance c/d 12 000 Year 6 Balance b/d 10 000 Income statement 2 000 12 000 12 000 Year 7 Balance c/d 14 000 Year 7 Balance b/d 12 000 Income statement 2 000 14 000 14 000 Year 8 Year 8 Balance b/d 14 000 b Statement of financial position extracts Cost Depreciation Net book value $ Year 1: Motor vehicles 18 000 2 000 16 000 Year 2: Motor vehicles 18 000 4 000 14 000 Year 3: Motor vehicles 18 000 6 000 12 000 Year 4: Motor vehicles 18 000 8 000 10 000 Year 5: Motor vehicles 18 000 10 000 8 000 Year 6: Motor vehicles 18 000 12 000 6 000 Year 7: Motor vehicles 18 000 14 000 4 000 Activity 2 a Provision for depreciation of machinery account Year 1 Balance c/d 12 000 Year 1 Income statement 12 000 Year 2 Balance c/d 20 400 Year 2 Balance b/d 12 000 Income statement 8 400 20 400 20 400 Year 3 Balance c/d 26 280 Year 3 Balance b/d 20 400 Income statement 5 880 26 280 26 280

Answers to activities, practice exercises and exam practice questions: Chapter 11 Year 4 Balance c/d 30 396 Year 4 Balance b/d 26 280 Income statement 4 116 30 396 30 396 Year 5 Balance c/d 33 277 Year 5 Balance b/d 30 396 Income statement 2 881 33 277 33 277 Year 6 Year 6 Balance b/d 33 277 b Statement of financial position extracts Cost Depreciation Net book value $ Year 1: Machinery 40 000 12 000 28 000 Year 2: Machinery 40 000 20 400 19 600 Year 3: Machinery 40 000 26 280 13 720 Year 4: Machinery 40 000 30 396 9 604 Year 5: Machinery 40 000 33 277 6 723 Activity 3 a Machinery at cost account 2016 2016 Jan 1 Balance b/d 18 000 May 7 Disposal of 6 000 machinery Jun 3 Bank 7 000 Jun 3 Disposal of 12 000 machinery Disposal of 3 000 Dec 31 Balance c/d 10 000 machinery 28 000 28 000 2017 Jan 1 Balance b/d 10 000 39 b Provision for depreciation of machinery account 2016 2016 May 7 Disposal of 2 400 Jan 1 Balance b/d 9 600 machinery (2 400 + 7 200) Jun 3 Disposal of 7 200 Dec 31 Income statement 1 000 machinery Dec 31 Balance c/d 1 000 10 600 10 600 2017 Jan 1 Balance b/d 1 000

Cambridge International AS and A Level Accounting c Disposal of machinery account 2016 2016 May 7 June 3 Machinery at cost Machinery at cost 6 000 May 7 Provision for depreciation 2 400 of machinery Bank 1 500 Income statement (loss) 2 100 12 000 June 3 Provision for depreciation 7 200 of machinery Machinery at cost part 3 000 exchange Income statement (loss) 1 800 18 000 18 000 Practice exercises 1 a The straight-line method of depreciation is calculated by charging the rate of depreciation on the cost of the non-current asset. The reducing balance method of depreciation is calculated by charging the rate of depreciation on the cost of the non-current asset minus the accumulated depreciation to date before making the charge. b Piccolo 40 Income statement for the year ended 31 May 2016 Sales 300 000 Less: cost of sales Opening inventory 30 000 Purchases $(190 000 4 000) 186 000 216 000 Less: closing inventory 42 000 174 000 Gross profit 126 000 Less: expenses Wages 56 000 Heating and lighting $(17 600 + 1 800) 19 400 Repairs to machinery 5 100 Advertising $(7 000 6 000) 1 000 Depreciation of freehold buildings ($80 000 4%) 3 200 Depreciation of plant and machinery 11 000 95 700 ($76 000 $32 000 25%) Profit for the year 30 300

Answers to activities, practice exercises and exam practice questions: Chapter 11 Piccolo Statement of financial position at 31 May 2016 Cost Accumulated depreciation Net book value $ Non-current assets Freehold land and buildings 100 000 43 200 56 800 Plant and machinery 76 000 43 000 33 000 176 000 86 200 89 800 Current assets Inventory 42 000 Trade receivables 14 000 Other receivables (prepaid 6 000 advertising) Bank 5 500 67 500 Total assets 157 300 Capital and liabilities Opening capital 150 000 Add: net profit 30 300 180 300 41 Less: drawings $(27 100 + 4000) 31 100 149 200 Trade payables 6 300 Other payables (heat and light) 1 800 8 100 Total capital and liabilities 157 300 c Piccolo should not change his method of charging depreciation. To do so will go against the concept of consistency. There is no valid reason why a change should be made. 2 a Wilhelmina Income statement for the year ended 31 March 2016 Sales 80 600 Less: sales returns 1 590 79 010 Less: cost of sales Opening inventory 13 000 Purchases 50 914 Less: purchases returns 825 50 089 63 089 (cont.)

Cambridge International AS and A Level Accounting Income statement for the year ended 31 March 2016 Cost Depreciation Net book value $ Less: closing inventory 16 000 47 089 Gross profit 31 921 Less: expenses Wages 13 017 Electricity $(1 012 + 300) 1 312 Repairs to machinery 643 Other operating expenses $(1 234 180) 1 054 Interest on loan and HP 2 200 $(1 000 + 1 000 + 200) Depreciation of leasehold property 3 000 ($45 000 15) Depreciation of plant and machinery 8 950 ($21 000 + $[30 000 6 000] - $9 200 25%) Depreciation of office equipment ($7 000 15%) 1 050 31 226 Profit for the year 695 42 b Wilhelmina Statement of financial position at 31 March 2016 Cost Accumulated depreciation Net book value $ Non-current assets Leasehold property 45 000 16 500 28 500 Plant and machinery 45 000 18 150 26 850 Office equipment 7 000 3 450 3 550 97 000 38 100 58 900 Current assets Inventory 16 000 Trade receivables 1 526 Other receivables (other operating 180 expenses) Bank 1 964 19 670 Total assets 78 570 Capital and liabilities Opening capital 50 000 Add: net profit 695 50 695 Less: drawings 18 598 32 097

Answers to activities, practice exercises and exam practice questions: Chapter 11 $ Non-current liabilities Loan (repayable 2020) 20 000 Trade payables 973 Other payables (electricity 1 300 and loan) Loan for machinery (including accrued interest $200) 24 200 26 473 Total capital and liabilities 78 570 Notes: Hire purchase is not on the syllabus. However, the amount due to the company from whom the machinery was bought is $24 000 $(30 000 6 000). This is added on to the cost of the machinery $(21 000 + 24 000). Interest to be paid over the course of HP agreement is $800 (4 $200) and as the agreement was for one year and began on 1 January 2016, three month s interest, ( 3 12 or 1 4 $800 = $200 ) must be accrued at 31 March 2016. The entire loan for the machinery is repayable within 12 months from the date of the statement of financial position. This means that the whole of the amount is treated as a current liability. Exam practice questions Multiple-choice questions 1 D 2 C 3 A 4 A 43 Structured question 1 a Businesses will use different methods of depreciation because non-current assets lose value at different rates during their working life. For example, a motor vehicle will depreciate more in the early years of its life. Thus, the reducing balance method of depreciation is best for this asset. On the other hand, something like office furniture will lose its value evenly over its life and is depreciated using the straight-line method. b Asset disposal account 2016 2016 May 31 Motor vehicles at cost 8 000 May 31 Motor vehicles accumulated depreciation 4 000 Bank 3 000 Income statement 1 000 8 000 8 000

Cambridge International AS and A Level Accounting c i Motor vehicles at cost $(28 000 8 000 + 12 000) = $32 000 ii Motor vehicles accumulated depreciation Beginning of year less vehicle sold $(12 000 4 000) = $8 000 Depreciation charge for the year $(32 000 8 000) 25% = $6 000 (Add to get) Accumulated depreciation at end of year = $14 000 iii Office equipment at cost $(20 000 + 2 000) = $22 000 iv Office equipment accumulated depreciation Beginning of the year $8 000 Assets charged a full year of depreciation $20 000 10% = $2 000 Assets bought in year and held for only 3 months $2 000 10% 1 = $50 4 (Add to get) Accumulated depreciation at end of year $10 050 44

Answers to activities, practice exercises and exam practice questions: Chapter 12 12 Irrecoverable and doubtful debts Activities Activity 1 a 2012: $(4 000 + 1 150) = $5 150 2013: $(6 400 + 1 375) = $7 775 2014: $(7 500 + 1 125) = $8 625 2015: $(3 000 + 1 250) = $4 250 2016: $(8 300 + 1 420) = $9 720 b Provision for doubtful debts account 2012 2012 Mar 31 Balance c/d 5 150 Mar 31 Income statement 5 150 Apr 1 Balance b/d 5 150 2013 2013 Mar 31 Balance c/d 7 775 Mar 31 Income statement 2 625 7 775 7 775 Apr 1 Balance b/d 7 775 2014 2014 Mar 31 8 625 Mar 31 Income statement 850 8 625 8 625 Apr 1 Balance b/d 8 625 2015 2015 Mar 31 Income statement 4 375 Balance c/d 4 250 8 625 8 625 Apr 1 Balance b/d 4 250 2016 2016 Mar 31 Balance c/d 9 720 Mar 31 Income statement 5 470 9 720 9 720 Apr 1 Balance b/d 9 720 45 Practice exercises 1 a David Income statement for the year ended 31 March 2016 $ Revenue $(210 000 4 000) 206 000 Less: sales returns 9 240 196 760 Less: cost of sales Opening inventory 4 000 Purchases 84 000 Less: purchases returns 5 112 78 888 Add: carriage inwards 1 840 80 728 84 728 (cont.)

Cambridge International AS and A Level Accounting 46 Income statement for the year ended 31 March 2016 $ Less: closing inventory $(5 000 + 3 000) 8 000 76 728 Gross profit 120 032 Add: other income Reduction in provision for doubtful debts $(800 550) 250 Discounts received 2 480 122 762 Less: expenses Wages $(37 000 + 400) 37 400 Rent $(7 600 1600) 6 000 Telephone $(900 + 100) 1 000 Electricity $(1 027 + 360) 1 387 Postage and stationery 359 Carriage outwards 1 220 Discounts allowed 6 015 Irrecoverable debts $(3 100 +1 700) 4 800 Depreciation of leasehold premises ($70 000 5%) 3 500 Depreciation of delivery vans ($18 000 - $3 600 25%) 3 600 Depreciation of office furniture ($3 000 10%) 300 65 581 Profit for the year 57 181 Notes: 1 The calculation for the adjustment is as follows: Trade receivables account Opening balance 19 800 Goods on sale or return 4 000 Specific irrecoverable debt 1 700 Specific provision 3 100 Balance 11 000 19 800 19 800 Provision required = 11 000 5% = $550 Existing provision $800 Reduction in provision $250 2 It would have been possible to combine the specific provision for the irrecoverable debt into the provision for doubtful debts account. This would be shown as: Provision for doubtful debts account Specific irrecoverable debt 3 100 Opening balance 800 Balance c/d 550 Income statement 2 850 3 650 3 650

Answers to activities, practice exercises and exam practice questions: Chapter 12 b 3 The net effect on the income statement is the same. In the statement above there is a credit of $250, being the reduction in the provision, and expenses of $3100 included in the figure for irrecoverable debts. You can use either approach. In practice it is usual to keep irrecoverable debts and the provision for doubtful debts as two separate accounts. David Statement of financial position at 31 March 2016 Cost Accumulated depreciation Net book value $ Non-current assets Leasehold premises 70 000 8 500 61 500 Delivery vans 18 000 7 200 10 800 Office furniture 3 000 1 800 1 200 91 000 17 500 73 500 Current assets Inventory 8 000 Trade receivables $(19 800 4 000 1 700 3 100) 11 000 Less: provision for doubtful receivables 550 10 450 Other receivables (rent prepaid) 1 600 Cash and cash equivalents 1 245 21 295 Total assets 94 795 Capital and liabilities Opening capital 50 000 Add: profit for the year 57 181 107 181 Less: drawings 20 446 86 735 Current liabilities Trade payables 7 200 Other Payables $(400 + 360 + 100) 860 8 060 Total capital and liabilities 94 795 47 Note: The total assets equal the total capital and liabilities, thus the statement of financial position balances. If you don t get the two figures the same then look for the difference, but don t waste time.

Cambridge International AS and A Level Accounting 48 2 a Saul Income statement for the year ended 31 May 2016 $ Sales 700 000 Less: sales returns 6 670 693 330 Less: cost of sales Opening inventory 40 000 Purchases (410 890 2 400) 408 490 Less: purchases returns 3 112 405 378 445 378 Add: carriage inwards 4 240 449 618 Less: closing inventory 58 000 391 618 Gross profit 301 712 Add: other income Rent receivable $(1 020 + 280) 1 300 Discounts received 2 942 305 954 Less: expenses Wages 137 652 Rent payable $(10 000 2 000) 8 000 Heating and lighting $(4 720 + 400) 5 120 Telephone and postage 3 217 Stationery $(6195 + 220 450) 5 965 Repairs to machinery 17 600 Discounts allowed 3 220 Carriage outwards 1 819 Increase in provision for doubtful debts [($34 600 $1 800) 5%] 1 200 440 Irrecoverable debt written off 1 800 Depreciation Freehold property ($180 000 4%) 7 200 Depreciation Plant and machinery 14 550 ($97 000 15%) Depreciation Motor vehicles ($41 000 27 000 30%) 4 200 210 783 Profit for the year 95 171

Answers to activities, practice exercises and exam practice questions: Chapter 12 b Saul Statement of financial position at 31 May 2016 Cost Accumulated depreciation Net book value $ Non-current assets Freehold property 180 000 52 200 127 800 Plant and machinery 97 000 67 550 29 450 Motor vehicles 41 000 31 200 9 800 318 000 150 950 167 050 Current assets Inventory 58 000 Other operating inventory 450 (stationery) Trade receivables $(34 600 1 800) 32 800 Less: provision for doubtful debts $(1 200 + 440) 1 640 31 160 Other receivables $(280 + 2 000) 2 280 Cash and cash equivalents 11 374 103 264 Total assets 270 314 Capital and liabilities Opening capital 200 000 Add: profit for the year 95 171 295 171 Less: drawings $(28 797 + 2 400) 31 197 263 974 Current liabilities Trade payables 5 720 Other Payables $(400 + 220) 620 6 340 Total capital and liabilities 270 314 49 Exam practice questions Multiple-choice questions 1 C 2 B 3 D 4 B

Cambridge International AS and A Level Accounting 13 Bank reconciliation statements Activities Activity 1 $475 Debit Activity 2 $540 Debit (overdrawn) Activity 3 a Revised cash book balance: $80 $210 = $130 overdrawn b Bank reconciliation statement at 31 March 2016 Balance per bank statements $(650 + 220) 870 Less: cheque not sent (1 000) Balance per cash book (130) Note: Notice that the final figure is in brackets. This identifies that the balance in the cash book is overdrawn. Activity 4 Adjusted trial balance items: $ 50 Debit Credit Trade receivables $(1 055 420 + 323) 958 Trade payables $(976 360) 616 Rent $(800 + 200) 1 000 Bank $(1 245 360 + 420 200 323) 782 Practice exercise 1 Changes Starting totals Calculation Revised totals Debit Credit Debit Credit $ Trade receivables 400 78 322 Trade payables 380 298 82 Rent receivable 750 +150 900 Interest receivable +10 10 Bank charges 100 +130 230 Bank 990 (+10 130 298 + 78 + 150) 800 Exam practice questions Multiple-choice questions 1 C 2 C 3 B 4 A 5 B

Answers to activities, practice exercises and exam practice questions: Chapter 14 14 Control accounts Activities Activity 1 Byit Limited Purchase ledger control account 2016 $ 2016 $ Mar 1 Balance b/d 16 Mar 1 Balance b/d 10 000 Mar 31 Purchases returns 824 Mar 31 Purchases journal 33 700 Bank 27 500 Balance c/d 156 Discounts received 1 300 Balance c/d 14 216 43 856 43 856 Apr 1 Balance b/d 156 Apr 1 Balance b/d 14 216 Activity 2 Soldit Limited Sales ledger control account 2016 $ 2016 $ May 1 Balance b/d 27 640 Balance b/d 545 May 31 Sales journal 109 650 Sales returns 2 220 Irrecoverable debt recovered 490 Bank 98 770 Balance c/d 800 Discounts allowed 3 150 Bank irrecoverable debt recovered Purchase ledger contra 490 2 624 Balance c/d 30 781 138 580 138 580 Jun 1 Balance b/d 30 781 Jun 1 Balance b/d 800 51 Activity 3 a Purchase ledger balances Sales ledger balances Debit Credit Debit Credit Before amendment 64 7 217 Before amendment 23 425 390 Deduct invoice entered twice Debit balance incorrectly listed as credit balance 50 (50) Corrected balances 114 7 067 (100) Correction of invoice $326 entered as $362 (36) Corrected balances 23 389 390

Cambridge International AS and A Level Accounting b Corrected purchase ledger control 2015 $ 2015 $ Dec 31 Cancellation of invoice 100 Dec 31 Balance b/d 7 847 Discounts received 84 Balance c/d 114 Sales ledger contra 710 Trazom Balance c/d 7 067 7 961 7 961 2016 2016 Jan 1 Balance b/d 114 Jan 1 Balance b/d 7 067 Corrected sales ledger control 2015 $ 2015 $ Dec 31 Balance b/d 22 909 Dec 31 Sales journal 800 Purchase ledger 710 understatement contra Trazom Balance c/d 390 Balance c/d 23 389 24 099 24 099 2016 2016 Jan 1 Balance b/d 23 389 Jan 1 Balance b/d 390 52 c Amended profit for the year ended 31 December 2015 $ Profit per draft income statement 31 000 Add: Reduction in purchases 100 Discounts received omitted 84 Increase in sales 800 Amended profit for the year 31 984 d Statement of financial position extract at 31 December 2015 Trade receivables Sales ledger 23 389 Purchase ledger 114 23 503 Trade payables Purchase ledger 7 067 Sales ledger 390 7 457 52