Questions and Answers of Business Accounting

From the following information, calculate: (a) Earnings per share; (b) Price/earnings ratio; (c) Dividend yield; and (d) Dividend cover. (i) Net profit after interest and tax and preference dividends
If prior charge capital = £30,000 and total capital = £210,000, what is the gearing?
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
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
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 summarised accounts of Hope (Eternal Springs) Ltd for the years 2011 and 2012 are given below.Required: (a) Calculate the following ratios for 2011 and 2012: (i) Gross profit: Sales (ii)
The following figures are for AB Engineering Supplies Ltd at 31 December 2012:(a) Calculate: (i) gross profit as a percentage of the sales; (ii) rate of inventory turnover; (iii) net profit as a
Galloway Ltd has an authorised capital of 250,000 ordinary shares of £1 each.(a) At the end of its financial year, 30 April 2013, 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 2011 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
Business A and Business B are both engaged in retailing, but seem to take a different approach to this trade according to the information available. This information consists of a table of ratios,
An acquaintance of yours, H. Gee, has recently set up in business for the first time as a general dealer. The majority of his sales will be on credit to trade buyers but he will sell some goods to
The annual final accounts of businesses are normally prepared on the assumption that the business is a going concern. Required: Explain and give a simple illustration of: (a) the effect of this
One of the well known accounting concepts is that of materiality. Required: (a) Explain what is meant by this concept. (b) State and explain three types of situation to which this concept might be
A business produces a standard manufactured product. The stages of the production and sale of the product may be summarised as follows:Required: (a) What general rule do accountants apply when
(a) In accounting practice a distinction is drawn between the terms ‘reserves’ and ‘provisions’ and between ‘accrued expenses’ and ‘accounts payable’. Required: Briefly define each of
Bradwich plc is a medium-sized engineering company whose shares are listed on a major Stock Exchange. It has recently applied to its bankers for a 7-year loan of £500,000 to finance a modernisation
Explain what you understand by the accounting term ‘capital gearing’, showing clearly the benefits of, and the potential problems associated with high gearing. (Scottish Qualifications Authority)
What is the difference between absorption costing and marginal costing?
(a) What is the meaning of depreciation?(b) Give three reasons why depreciation may occur.(c) Name two methods of depreciation.(d) In what way do you think the concept of consistency applies to
Return to Review Question 7.2 and prepare a statement of financial position as at 30 June 2012.Review Question 7.2From the following trial balance of G. Foot after his first year’s trading, you
Return to Review Question 7.3 A and prepare a statement of financial position as at 31 December 2013.Review Question 7.3From the following trial balance of B. Morse drawn-up on conclusion of his
Return to Review Question7.4 A and prepare a statement of financial position as at 30 June 2012.Return to Review Question 7.4Extract an income statement for the year ending 30 June 2012 for G.
The following information relates to A. Trader’s business: Assets and liabilities at Fixtures Account receivable Inventory Accounts payable Cash Balance at bank Loan from B. Burton Motor vehicle 1
Bell started in business on 1 July 2012, with £60,000 capital in cash. During the first year he kept very few records of his transactions. The assets and liabilities of the business at 30 June 2013
From the following information, draw up the trading account section of the income statement of J. Bell for the year ending 31 December 2012, which was his first year in business: Carriage inwards
The following information is available for the year ending 31 March 2013. Draw up the trading account section of the income statement of P. Frank for that year. Inventory: 31 March 2013 Returns
The following trial balance was extracted from the books of F. Sorley on 30 April 2013. From it, and the note about inventory, prepare his income statement for the year ending 30 April 2013, and a
From the following trial balance of G. Still, draw up an income statement for the year ending 30 September 2013, and a statement of financial position as at that date. Inventory: 1 October 2012
The following is the trial balance of T. Owen as at 31 March 2012. Draw up a set of financial statements for the year ended 31 March 2012. Inventory: 1 April 2011 Sales Purchases Carriage inwards
F. Brown drew up the following trial balance as at 30 September 2011. You are to draft the income statement for the year ending 30 September 2011 and a statement of financial position as at that
Enter the following transactions in the ledger of A. Baker and prepare a trial balance at 31 May, together with a calculation of the profit for the month and a statement of financial position at 31
Ms Porter’s business position at 1 July was as follows: During July, she: Inventory Equipment Creditor (OK Ltd) Debtor (AB Ltd) Bank balance. 5,000 3,700 500 300 1,200
From the following trial balance of Kingfire, extracted after one year of operations, prepare an income statement for the year ending 30 June 2012, together with a statement of financial position as
‘The historical cost convention looks backwards but the going concern convention looks forwards.’ Required: (a) Explain clearly what is meant by: (i) the historical cost convention; (ii) the
You are to show the journal entries necessary to record the following items which occured in 2012: (a) May 1 Bought a van on credit from Deedon Garage for 6,000. (b) May 3 A debt of 100 owing from P.
Show the journal entries necessary to record the following items: 2013 Apr 1 Bought fixtures on credit from Bell and Co 1,153. 4 We take goods costing 340 out of the business inventory without paying
You are to open the books of F. Polk, a trader, via the journal to record the assets and liabilities, and are then to record the daily transactions for the month of May. A trial balance is to be
The following is a summary of the petty cash transactions of Jockfield Ltd for May 2012.You are required to:(a) Rule up a suitable petty cash book with analysis columns for expenditure on cleaning,
Fine Teas operates its petty cash account on the imprest system. It is maintained at a figure of £140, with the balance being restored to that amount on the first day of each month. At 30 April 2012
(a) Why do some businesses keep a petty cash book as well as a cash book?(b) Kathryn Rochford keeps her petty cash book on the imprest system, the imprest being £25. For the month of April 2013 her
On 1 May 2013, F. Marr Ltd, 2 Frank Lane, Manchester, sold the following goods on credit to M. Low & Son, Byron Golf Club, Cheesham, Notts:(a) Prepare the sales invoice to be sent to M. Low &
A On 1 March 2013, A. Duff, Middle Road, Paisley, sold the following goods on credit to R. Wilson, 24 Peter Street, Loughborough, Order No. 943:(a) Prepare the sales invoice to be sent to R.
The following sales have been made by F. Rae Ltd during the month of June 2012. All the figures are shown net after deducting trade discount, but before adding VAT at the rate of 10 per cent.You are
The credit sales and purchases for the month of December 2007 in respect of G. Bain & Co were: 2013 Dec 1 Sales to H. Impey Ltd 4 Sales to B. Volts 5 Purchases from G. Sharpe and Co 8 Purchases
The following sales and purchases were made by J. Flan Ltd during the month of May 2012.Enter up the Sales and Purchases Day Books, Sales and Purchases Ledgers and the General Ledger for the month of
Louise Baldwin commenced business as a wholesaler on 1 March 2012. Her sales on credit during March 2012 were: March 9 Neville's Electrical 4 computer monitors list price 180 each, less 20% trade
A Mudgee Ltd issued the following invoices to customers in respect of credit sales made during the last week of May 2013. The amounts stated are all net of Value Added Tax. All sales made by Mudgee
R. Bright, an electrical goods wholesaler, has three departments:(a) Music,(b) TV and(c) Kitchen. The following is a summary of Bright’s sales invoices during the week 1 to 7 February 2013.(a)
Enter up the relevant accounts in the purchases and general ledgers from the columnar purchases day book you completed for Question 20.2.Question 20.2Enter up a columnar purchases day book with
Enter up the relevant accounts in the purchases and general ledgers from the columnar purchases day book you completed for Question 20.4.Question 20.4A Enter up a columnar purchases day book with
H. Smith is employed at a rate of £10 per hour. During the week to 18 May 2012 he worked his basic week of 40 hours. According to the requisite tables the income tax due on his wages was £54, and
B. Charles has a basic working week of 40 hours, paid at the rate of £8 per hour. For hours worked in excess of this he is paid 11 /2 times basic rate. In the week to 12 March 2012 he worked 45
B. Croft has a job as a car salesman. He is paid a basic salary of £200 per month, with a commission extra of 2 per cent on the value of his car sales. During the month of April 2012 he sells
T. Penketh is an accountant with a salary of £2,000 per month plus bonus, which for May 2012 was £400. He pays superannuation contributions of 5 per cent of gross pay, and these are allowed as
K. Blake is employed at the rate of £6 per hour. During the week to 25 May 2012 he works 35 hours. According to the tax and National Insurance tables he should pay income tax £28 and National
R. Kennedy is a security van driver. He has a wage of £200 per week, plus danger money of £2 per hour extra spent in transporting gold bullion. During the week ended 15 June 2012 he spends 20 hours
Mrs T. Hulley is paid monthly. For part of April 2012 she earns £860 and then goes on maternity leave, her maternity pay for April being £90. She has pay free of tax £320, whilst on the next £250
P. Urmston is paid monthly. For June 2012 he earns £1,500 and also receives statutory sick pay of £150. He pays £90 superannuation which is allowed as a relief against income tax and he has
The data which follows was extracted from the books of account of H. Kirk, an engineer, on 31 March 2012, his financial year end. £(a) Purchase of extra milling machine (includes £300 for repair of
At the beginning of the financial year on 1 April 2013, a company had a balance on plant account of £372,000 and on provision for depreciation of plant account of £205,400. The company’s policy
In a new business during the year ended 31 December 2013 the following debts are found to be bad, and are written-off on the dates shown:On 31 December 2013 the schedule of remaining accounts
Why is the distinction between classifying something as capital expenditure and classifying it as revenue expenditure so important to the users of financial statements?
A business started trading on 1 January 2010. During the two years ended 31 December 2010 and 2011 the following debts were written off to the Bad Debts Account on the dates stated:On 31 December
A business had always made an allowance for doubtful debts at the rate of 2 per cent of accounts receivable. On 1 January 2011 the amount for this, brought forward from the previous year, was £300.
A A business, which started trading on 1 January 2010, adjusted its allowance for doubtful debt at the end of each year on a percentage basis, but each year the percentage rate is adjusted in
A business which prepares its financial statements annually to 31 December suffered bad debts which were written-off:The business had a balance of £400 on the Allowance for Doubtful Debts Account on
(a) Businesses often create an allowance for doubtful debts. (i) Of which concept (or convention) is this an example? Explain your answer. (ii) What is the purpose of creating an allowance for
The statement of financial position as at 31 May 2010 of Forest Traders Limited included an allowance for doubtful debts of £2,300. The company’s accounts for the year ended 31 May 2011 are now
A business makes an allowance for doubtful debts of 3% of accounts receivable, also a provision of 1% for discount on accounts receivable. On 1 January 2011 the balances brought forward on the
J. Blane commenced business on 1 January 2009 and prepares her financial statements to 31 December every year. For the year ended 31 December 2009, bad debts written off amounted to £1,400. It was
A D. Faculti started in business buying and selling law textbooks, on 1 January 2012. At the end of each of the next three years, his figures for accounts receivable, before writing-off any bad
(A) Explain why a provision may be made for doubtful debts. (B) Explain the procedure to be followed when a customer whose debt has been written-off as bad subsequently pays the amount originally
A car costs £12,000. It will be kept for three years, and then sold for £3,000. Calculate the depreciation for each year using(a) the reducing balance method, using a depreciation rate of 35 per
A. Gill purchased a notebook PC for £1,200. It has an estimated life of four years and a scrap value of £100. She is not certain whether she should use the straight line or the reducing balance
A company, which makes up its financial statements annually to 31 December, provides for depreciation of its machinery at the rate of 15 per cent per annum using the reducing balance method. On 31
Ivor Innes has supplied you with the following information:During the year to 31 March 2011, Ivor withdrew £11,400 from the business for private purposes. In November 2010, Ivor received a legacy of
A On 10 August 2009 Joblot, a computer software retailer, bought a non-current asset which cost £100,000. It had an anticipated life of four years and an estimated residual value of £20,000. Due to
A motor vehicle which cost £12,000 was bought on credit from Trucks Ltd on 1 January 2009. Financial statements are prepared annually to 31 December and depreciation of vehicles is provided at 25
A Black and Blue Ltd depreciates its forklift trucks using a reducing balance rate of 30 per cent. Its accounting year end is 30 September. On 30 September 2013, it owned four forklift trucks: (A)
A company starts in business on 1 January 2011. You are to write up the vans account and the provision for depreciation account for the year ended 31 December 2011 from the information given below.
A company starts in business on 1 January 2010, the financial year end being 31 December. You are to show:(a) The equipment account.(b) The provision for depreciation account.(c) The statement of
A company depreciates its plant at the rate of 25 per cent per annum, straight line method, for each month of ownership. From the following details draw up the plant account and the provision for
A company maintains its non-current assets at cost. A provision for depreciation account is used for each type of asset. Machinery is to be depreciated at the rate of 15 per cent per annum, and
A company maintains its non-current assets at cost. Depreciation provision accounts for each asset are kept. At 31 December 2011 the position was as follows:The following additions were made during
(a) Identify the four factors which cause non-current assets to depreciate.(b) Which one of these factors is the most important for each of the following assets? (i) a gold mine; (ii) a van; (iii) a
A vehicle bought on 1 January 2013 cost £16,000. Its useful economic life is estimated at four years and its trade-in value at that point is estimated as being £4,000. During 2015 a review of the
A Mavron plc owned the following motor vehicles as at 1 April 2012:Mavron plc’s policy is to provide at the end of each financial year depreciation using the straight line method applied on a
A Contractors Ltd was formed on 1 January 2012 and the following purchases and sales of machinery were made during the first 3 years of operations.Each machine was estimated to last 10 years and to
A machine cost £40,000 on 1 January 2012. The reducing balance depreciation method is used at 25 per cent per annum. Year end is 31 December. During 2014, it was decided that a straight line method
(a) A machine was bought on credit for £15,000 from the XY Manufacturing Co Ltd, on 1 October 2011. The estimated useful economic life of the machine was seven years and the estimated scrap value
A Distance Limited owned three lorries at 1 April 2012: Lorry A: purchased on 21 May 2008 for £31,200 Lorry B: purchased on 20 June 2010 for £19,600 Lorry C: purchased on 1 January 2012 for
XY Ltd provides for depreciation of its machinery at 20 per cent per annum on cost; it charges for a full year in the year of purchase but no provision is made in the year of sale/disposal. Financial
A company maintains its non-current assets at cost. Accumulated provision for depreciation accounts are kept for each asset. At 31 December 2011 the position was as follows:The following transactions
Alice Burke prepares her financial statements on 31 December each year and maintains a Plant and Equipment register at cost. She provides depreciation for the full year on non-current assets which
(a) The following trial balance was extracted from the books of M. Jackson on 30 April 2013. From it, and the note below it, prepare his income statement for the year ending 30 April 2013, and a
On 1 April 2009 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
A On 1 January 2011 a business purchased a laser printer costing £1,800. The printer has an estimated life of four years after which it will have no residual value. It is expected that the output
The financial year of M. Hussey ended on 31 December 2009. Show the ledger accounts for the following items including the balance transferred to the necessary part of the financial statements, also
A W. Hope’s year ended on 30 June 2011. Write up the ledger accounts, showing the transfers to the financial statements and the balances carried down to the next year for the following:(a)

Showing 100 - 200 of 1433