Questions and Answers of Business Accounting

Paper Products has a head office in London and a branch in Bristol. The following information has been extracted from the head office books of account as at 31 March 2016:Additional information:1
RST Limited is a family-controlled company which operates a chain of retail outlets specialising in motor spares and accessories. Branch inventory is purchased by a centralised purchasing function in
J Micheil Ltd, whose head office is in Cumbernauld, operates a branch in Lincoln. All goods are purchased by head office and invoiced to and sold by the branch at cost plus 60%. Other than a sales
If the current account balances do not represent assets or liabilities, what do they represent?
Gail Dawson is the owner of a retail business. She has employed an inexperienced bookkeeper to maintain her accounting records.(a) On 31 March 20X9, the end of the business’s accounting year, the
Arthur deals in bicycles. His business position at 1 October was as follows:Having established good relations with his supplier he is able to obtain bicycles on one month’s credit. He kept notes of
Trading account for:The stock valuations used in the above trading accounts at the end of 20X7 and at the end of 20X8 were inaccurate. The stock at 31 December 20X7 had been under-valued by £1,000,
Ivor Clue is a magician. He has conjured up the following results from his non-existent accounting records.Fees are equal to five times his direct costs.At any given time his stocks equal one
The following trial balance of The Shire Golf Club was extracted from the books as on 31 December 20X3:Notes:(i) Bar purchases and sales were on a cash basis. Bar stocks at 31 December 20X3 were
Using whichever of the following figures are required, prepare a manufacturing and trading account for 20X3. The manufacturing account should show clearly the prime cost of manufacture and the
Prepare manufacturing, trading and profit and loss accounts from the following balances of W Miller for the year ended 31 December 20X3.Rent is to be apportioned: Factory 3/4; Office 1/4. Stocks at
From the following information, draw up a manufacturing and trading account for the six months ending 30 September 20X5. You should show clearly:(a) Cost of raw materials consumed.(b) Prime cost of
On 1 January 20X1 a business purchased a laser printer costing £1,800. The printer has an estimated life of 4 years after which it will have no residual value. It is expected that the output from
From the following figures prepare manufacturing and trading accounts so as to show:(a) Cost of raw materials used in production.(b) Prime cost.(c) Production cost of finished goods produced.(d) Cost
E Wilson is a manufacturer. His trial balance at 31 December 20X2 is as follows:Prepare the manufacturing, trading and profit and loss accounts for the year ended 31 December 20X2 and a balance sheet
Jean Marsh owns a small business making and selling children’s toys. The following trial balance was extracted from her books on 31 December 20X9.You are given the following additional
The financial year end of Mendip Limited is 30 June. At 30 June 20X2, the following balances are available:(i) The stocks at 30 June 20X2 were: raw materials £22,000; finished goods £35,600.(ii)
State which depreciation method will be the most appropriate in the case of each of the following assets and why. Also, indicate to what extent obsolescence will affect each of the assets.(a) A
The following list of balances as at 31 July 20X6 has been extracted from the books of Jane Seymour who commenced business on 1 August 20X5 as a designer and manufacturer of kitchen
From the following you are to draw up the trading account for Fine’s Department Store for the year ended 30 June 20X6. Stocks: Carpet Department White Goods Department Music Department Sales for
J Horner is the proprietor of a shop selling paintings and ornaments. For the purposes of his financial statements he wishes the business to be divided into two departments:The following balances
From the following list of balances you are required to prepare a departmental trading and profit and loss account in columnar form for the year ended 31 March 20X5, in respect of the business
The balance sheets of F Black, a sole trader, for two successive years are shown below. You are required to draw up a cash flow statement for the year ended 31 December 20X4 (a) Using the FRS 1
Draw up a cash flow statement for Gerry Peace for the year ended 31 December 20X3 using (a) The FRS 1 layout and (b) The IAS 7 layout. You are told that fixtures bought in 20X3 cost £400,
Malcolm Phillips is a sole trader who prepares his accounts annually to 30 April. His summarised balance sheets for the last two years are shown below.Malcolm is surprised to see that he now has an
From the following details you are to draft a cash flow statement for D Duncan for the year ended 31 December 20X5: using (a) The FRS 1 layout and (b) The IAS 7 layout.*Debtors 20X4 £8,800
You are required to draw up a cash flow statement for K Rock for the year ended 30 June 20X9 from the following information using (a) The FRS 1 layout and (b) The IAS 7 layout.*Debtors 20X8
Stanley and Barclay enter a joint venture to share profits or losses equally resulting from dealings in second hand digital TVs. Both parties take an active part in the business, each recording his
Bull, Craig and Finch entered into a joint venture for dealing in strawberries. The transactions connected with this venture were:Required:Show the joint venture accounts in the books of Bull, Craig
Rock, Hill and Pine enter into a joint venture for dealing in paintings. The following transactions took place:Required:Show the joint venture accounts in the books of the three parties. Show in full
Black, Brown and Cook are partners. They share profits and losses in the ratios of 2/9, 1/3 and 4/9 respectively.For the year ended 31 July 20X2, their capital accounts remained fixed at the
Gray, Wilkes and Booth are partners. They share profits and losses in the ratios of 3/8, 3/8 and 1/4 respectively.For the year ended 31 December 20X3 their capital accounts remained fixed at the
I Skip and U Jump sell toys. Their individual investments in the business on 1 January 20X4 were: Skip £80,000, Jump £40,000.For the year to 31 December 20X4, the net profit was £30,000 and the
Draw up a profit and loss appropriation account for the year ended 31 March 20X8 and balance sheet extracts at that date, from the following:(i) Net profits £111,100.(ii) Interest to be charged on
Draw up a profit and loss appropriation account for Cole, Knox and Lamb for the year ended 31 December 20X5, and a balance sheet extract at that date, from the following:(i) Net profits
Frame and French are in partnership sharing profits and losses in the ratio 3/5 : 2/5, respectively. The following is their trial balance as at 30 September 20X5.Required:Prepare a trading 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 20X7.Required:Draw up a set of
Sage and Onion are trading in partnership, sharing profits and losses and 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 20X4 was as follows:Draw up a set of financial statements for the year ended 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 balance sheet
The partners are to change their profit ratios as shown:They decide to bring in a goodwill amount of £72,000 on the change. The last balance sheet before any element of goodwill has been introduced
Black and Smart are in partnership, sharing profits and losses equally. They decide to admit King. By agreement, goodwill valued at £40,000 is to be introduced into the business books. King is
Blunt, Dodds and Fuller are in partnership. They shared profits in the ratio 1:3:2. It is decided to admit Baxter. It is agreed that goodwill is worth £60,000, but that this is not to be brought
At 31 December 20X7, the balance sheet of A, B, and C who are equal partners, was as follows:A retired at that date. In order to determine the amount due to him the following revaluations were made:
A new partner has joined the business during the year and has paid in £10,000 for ‘goodwill’. This £10,000 has been credited by the bookkeeper to the account of the new partner. The senior
Poole and Burns, who share profits and losses equally, decide to dissolve their partnership as at 30 June 20X1. Their balance sheet on that date was as follows:The debtors realised £8,200, the
On 1 April 20X6 a business purchased a machine costing £112,000. The machine can be used for a total of 20,000 hours over an estimated life of 48 months. At the end of that time the machine is
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 ended 31 December 20X9, before the completion
X, Y and Z have been in partnership for several years, sharing profits and losses in the ratio 3 : 2 : 1. Their last balance sheet which was prepared on 31 October 20X9 is as follows:Despite making
The following trial balance has been extracted from the books of Gain and Main as at 31 March 20X8; Gain and Main are in partnership sharing profits and losses in the ratio 3 to 2:In appropriating
A, B & C are partners sharing profits and losses in the ratio 2 : 2 : 1. The balance sheet of the partnership as at 30 September 20X7 was as follows:Authors’ note: Inventory is another word for
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
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 20X8:Additional
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 20X8:Additional information:1. The partnership agreement
Flyer Ltd started in business on 1 April 20X4. Its issued share capital was 200,000 ordinary shares of £1 each and 100,000 5 percent preference shares of £1 each. The following information is
Trainsign Ltd has an authorised capital of £500,000, consisting of 350,000 ordinary shares of £1 each and 150,000 7 per cent preference shares of £1 each. Of these, 260,000 ordinary shares and
A balance sheet is to be drawn up from the following information as at 30 September 20X2: Issued share capital: ordinary shares £1 each Authorised share capital: ordinary shares of £1 each 6 per
The following balances remained in the ledger of OK Ltd after preparation of the profit and loss account for the year ended 31 March 20X6The directors propose:(i) A transfer to general reserve of
Select Ltd is registered with an authorised capital of 300,000 ordinary shares of £1. The following trial balance was extracted from the books of the company on 31 March 20X1, after the preparation
Developing Ltd has an authorised capital of 50,000, 10% preference shares of £1 each and 200,000 ordinary shares of 50p each. After preparation of the profit and loss account for 20X4, the following
The trial balance extracted from the books of Tailor Times Ltd at 31 December 20X3 was as follows:You are given the following additional information:(i) The authorised and issued share capital is
(a) From the above information, prepare the balance sheet of Budgie Limited indicating clearly the shareholders’ funds and working capital.(b) Comment on the capital position disclosed by the
The following is the trial balance of Tully Ltd as on 31 December 20X5:Given the following information, you are to draw up a trading and profit and loss account for the year ending 31 December 20X5,
You are to draw up a trading and profit and loss account for the year ending 31 December 20X2, and a balance sheet as at that date from the following trial balance and details of Partido Ltd:Notes at
Here is the trial balance of Falta Ltd as at 30 April 20X5:Given the following information as at 30 April 20X5, draw up a profit and loss account and balance sheet for the year to that date:(i) Stock
Study the following financial statements of two companies and then answer the questions which follow. Both companies are stores selling carpets and other floorcoverings. The values shown are in
Burden PLC has an authorised capital of 500,000 ordinary shares of £0.50 each.(a) At the end of its financial year, 31 May 20X9, the following balances appeared in the company’s books:The
The accountant of Fiddles PLC has begun preparing financial statements but the work is not yet complete. At this stage the items included in the trial balance are as follows:Notes (i ) to (vii) below
(a) The business of V A Fraga is taken over by T Malloy in its entirety. The assets are deemed to be worth the balance sheet values as shown. The price paid by Malloy is £260,000. Show the opening
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 20X6, in order to provide a basis for more efficient
Explain what you understand by the accounting term ‘debentures’ and indicate the circumstances under which a debenture issue would or would not be an appropriate form of financing.
The directors of the company by which you are employed as an accountant have received the forecast profit and loss account for 20X9 which disclosed a net profit for the year of £36,000. This is
I Dodgem’s balance sheet as at 31 December 20X8 was as follows:An opportunity had arisen for Dodgem to acquire the business of A Swing who is retiring.Dodgem agreed to take over Swing’s premises,
Spectrum Ltd is a private company with an authorised 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 20X8, the partnership trial
You are to study the following financial statements for two furniture stores and then answer the questions which follow.Required:(a) Calculate the following ratios for each business:(i) Gross profit
Durham Limited had an authorised capital of £200,000 divided into 100,000 ordinary shares of £1 each and 200,000 8% preference shares of 50p each. The following balances remained in the accounts of
The summarised accounts of Hope (Eternal Springs) Ltd for the years 20X8 and 20X9 are given below.Stock at 1 January 20X8 was £50,000.Required:(a) Calculate the following ratios for 20X8 and
The following figures are for AB Engineering Supplies Ltd at 31 December 20X9:(a) Calculate:(i) Gross profit as a percentage of the sales;(ii) Rate of stock turnover;(iii) Net profit as a percentage
L Mann started business with £5,000 in the bank on 1 April. The business transactions during the month were as follows:(i) Took £300 out of the bank for petty cash(ii) Bought a second-hand van and
Of the following, which are correct?(A) (i) and (iii) only(B) (i) and (ii) only(C) (ii) and (iv) only(D) (iii) and (iv) only (i) Goods sold on credit to R Williams (ii) S Johnson returns goods to
Which of the following are incorrect?(A) (i) and (iii) only(B) (iii) only(C) (ii) and (iv) only(D) (iv) only Goods sold for cash (ii) Goods bought on credit from T Carter (iii) Goods returned by us
Given the following, what is the amount of Capital? Assets: Premises £20,000; Stock £8,500; Cash £100. Liabilities: Creditors £3,000; Loan from A Adams £4,000(A) £21,100(B) £21,600(C)
Of the following, which are incorrect?(A) (ii) and (iv) only(B) (i) and (ii) only(C) (i) and (iii) only(D) (ii) and (iii) only (i) Sold van for cash (ii) Bought stationery by cheque (iii) Took cash
What is the balance on the following account on 31 May 20X5?(A) A credit balance of £395(B) A debit balance of £380(C) A debit balance of £395(D) There is a nil balance on the account 20X5 May 1
Which of the following is correct?(A) Profit does not alter capital(B) Profit reduces capital(C) Capital can only come from profit(D) Profit increases capital
What would have been the balance on the account of C De Freitas in MC17 on 19 May 20X5?(A) A debit balance of £265(B) A credit balance of £95(C) A credit balance of £445(D) A credit balance of
Which of the following best describes a trial balance?(A) Shows the financial position of a business(B) It is a special account(C) Shows all the entries in the books(D) It is a list of balances on
Is it true that the trial balance totals should agree?(A) No, there are sometimes good reasons why they differ(B) Yes, except where the trial balance is extracted at the year end(C) Yes, always(D)
Gross profit is(A) Excess of sales over cost of goods sold(B) Sales less Purchases(C) Cost of goods sold + Opening stock(D) Net profit less expenses of the period.
Net profit is calculated in the(A) Trading account(B) Profit and loss account(C) Trial balance(D) Balance sheet.
To find the value of closing stock at the end of a period we(A) do this by stocktaking(B) look in the stock account(C) deduct opening stock from cost of goods sold(D) deduct cost of goods sold from
The credit entry for net profit is on the credit side of(A) The trading account(B) The profit and loss account(C) The drawings account(D) The capital account.
Which of these best describes a balance sheet?(A) An account proving the books balance(B) A record of closing entries(C) A listing of balances(D) A statement of assets.
The descending order in which current assets should be shown in the balance sheet is(A) Stock, Debtors, Bank, Cash(B) Cash, Bank, Debtors, Stock(C) Debtors, Stock, Bank, Cash(D) Stock, Debtors, Cash,
Which of these best describes fixed assets?(A) Are bought to be used in the business(B) Are items which will not wear out quickly(C) Are expensive items bought for the business(D) Are of long life
Carriage inwards is charged to the trading account because(A) It is an expense connected with buying goods(B) It should not go in the balance sheet(C) It is not part of motor expenses(D) Carriage
Given figures showing: Sales £8,200; Opening stock £1,300; Closing stock £900; Purchases £6,400; Carriage inwards £200, the cost of goods sold figure is(A) £6,800(B) £6,200(C) £7,000(D)

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