Questions and Answers of Cambridge International AS And A Level Accounting

Explain why the balance in a cash book at the financial year end may be different from that shown on a bank statement at the same date.
List the steps that you would take to produce a bank reconciliation statement at a financial year end.
Why might a trader keep control accounts?
How many control accounts might a trader maintain?
In which control account would you find bad debts written off, returns outwards, provision for doubtful debts, a dishonoured cheque and cash sales?
What is a memorandum account?
(a) What is a contra item?(b) Give another name for contra items.
On which control account’s debit side would a contra item be found?
What does a credit balance brought down in a sales ledger control account represent?
Diedre has sent a cheque for $412 to Yasser; the cheque has been entered in Yasser’s cash-book as $214. What effect will this error have on:(a) Yasser’s sales ledger control account (b) The
Hugo has increased his provision for doubtful debts from $1200 to $1210. How will this affect: (a) His purchases ledger control account (b) His schedule of trade receivables (c) His
What is the difference between the accruals concept and the matching concept?
The opening balance on the provision for doubtful debts account was $820. The closing debit balance on the sales ledger control account was $25 500 and a provision of 3% is to be made. (a)
State which of the following you would find in the trading account: returns inwards; carriage outwards; opening inventory; purchase of office equipment.
How would you calculate goods available for sale?
Goods held at the end of a financial year as inventory cost $2510; they can currently be purchased for $2000; they have a resale value of $3000. What is the value of closing inventory?
A damaged article held at the end of a financial year cost $60; after repairs costing $20 it can be sold for $75. What is the value of the article for inventory purposes?
How should carriage inwards and outwards be treated in the profit and loss account?
Complete the following formulae: (a) Profit for the year + revenue expenses = ? (b) Gross profit − revenue expenses = ? (c) Gross profit − profit for the year = ?
Which of the following are noncurrent assets for a garage that sells cars, repairs vehicles and sells spare parts: a break-down recovery vehicle; spare parts for Honda cars; a lifting jack; a desk
Arrange the following non-current assets in the order that they would appear in a statement of financial position: vehicles; premises; office equipment; machinery.
Arrange the following current assets in the order that they would appear in a statement of financial position: bank balance; inventory; trade receivables; cash in hand.
You are given a cash book, bank statements and a list of assets and liabilities at the beginning of a year. How would you calculate opening capital?
Opening capital $45 000; closing capital $37 000; further capital invested during the year $10 000. Calculate business profit (or loss) for the year.
Cash paid to trade payables during a year is credited to a trade payables adjustment account to find sales for the year.’ Is this statement true or false?
Cash received from trade receivables during a year is credited to a trade receivables adjustment account to find sales for the year.’ Is this statement true or false?
A fire has destroyed some inventory during a year. You are uncertain of its value, but the following data are available. There is a uniform mark-up on all goods sold of 20%. Calculate the value of
The opening balance on a machinery account is debit $48 000. The closing balance is debit $40 000. There were no purchases or sales of machinery during the year. What is the cause of the difference
A partnership must have a written partnership agreement.’ Is this statement true or false?
Explain the advantages of having a partnership agreement.
What rules are laid down in the Partnership Act 1890?
A public limited company could have 3 500 000 shareholders.’ Is this statement true or false?
Preference shareholders who own more than 1000 shares have a vote at a company’s AGM.’ Is this statement true or false?
Explain the function of an appropriation account.
Explain why a salary paid to a partner is not included in the profit and loss account along with all the other salaries paid to staff employed by the business.
A partner cannot have both interest charged on drawings and interest paid on capital account balances.’ Is this statement true or false?
Explain how a business partner could have a debit balance on their current account.
Identify one example of a debit entry in the capital account of a partner.
Identify two examples of debit entries that might be found in the current account of a partner.
Identify two examples of credit entries that might be found in the current account of a partner.
Give two examples of changes that result in a partnership being restructured.
Explain the circumstances that could cause the dissolution of a partnership.
Goodwill is the value placed on the customers of the business being taken over.’ Is this statement true or false?
Non-current assets $56 000; net current assets $12 000; purchase price paid to acquire the business $100 000. Calculate the value of goodwill.
Explain the term ‘inherent goodwill’ and describe how it should be shown in a statement of financial position.
(a) Identify two items that you might expect to find on the debit side of a realisation account. (b) Identify two items that you might expect to find on the credit side of a realisation account.
The debit side of a revaluation account is greater than the credit side. (a) Does this represent a profit or a loss on realisation? (b) Where would you expect to find the corresponding
Gross profit $70 000; administrative expenses $40 000; interest payable $8000. Calculate profit from operations and profit before tax.
Operating profit is only earned by privately owned hospitals and clinics.’ Is this statement true or false?
What items might be found under the heading of financial costs in an income statement?
Explain why the current year’s dividend is not included in a statement of changes in equity.
Explain why different types of business organisation exist.
Explain why cash inflows are important to a business.
Explain the terms ‘cash’ and ‘cash equivalents.
Explain how a profitable business might be short of cash and require overdraft facilities.
Explain why cash inflows and profits are not necessarily the same.
Identify the cash flows resulting from the following transactions: (a) Sale of goods $78 on credit to Jose. (b) Purchases of goods $39 on credit from Rajan. (c) Rent paid $450 with
Explain how a fall in the value of trade receivables over a year will affect the cash resources of a business.
What are the two principal types of share issued by a limited company?
In which section of the statement of financial position would you expect to find issued debentures?
Explain the difference between debentures and convertible loan stock.
What is the difference between a lessor and a lessee?
What is a hire purchase agreement?
A reserve is money saved by a limited company for use in times of financial hardship.’ Is this statement true or false?
Land is an example of a tangible non-current asset.’ Is this statement true or false?
Distinguish between a bonus issue of shares and a rights issue of shares.
A company wishes to raise $100 000. Should the company use a bonus issue or a rights issue to raise the extra capital?
Give the formulae for the following ratios: (a). Gross margin (b). Return on capital employed (c). Current ratio (d). Liquid (acid test) ratio (e). Trade receivables
Explain what the following sources would be used for: (a) Bank overdraft (b) Debt factoring (c) Leasing (d) Issue of shares
Another name for a rights issue is a bonus issue.’ Is this statement true or false?
Directors can draw cash from company reserves when they feel it is necessary.’ True or false?
The cash held as reserves can be used to pay directors’ bonuses.’ True or false?
Identify four user groups of financial information.
Explain why ratios rather than actual results are used to evaluate the performance of a business.
Distinguish between direct costs and indirect costs.
Explain briefly the meaning of the following costs: (a) Semi-variable (b) Stepped (c) Sunk
List the components of prime cost.
Identify three components that make up cost.
How is net realisable value calculated?
Complete the following sentence: Inventories should be valued at the lower of _______ and _________.
Which method of valuing inventories uses the most recent price paid to purchase the goods?
Choose the correct phrase in the following sentence: ‘Closing inventories shown in a statement of financial position are always based on a physical count/computer-based printout’.
Explain the difference between a periodic and a perpetual method of valuing closing inventory.
A store selling fish must always use the FIFO method to value closing inventories.’ Is this statement true or false?
Identify a cost centre and a cost unit for a manufacturer of furniture.
How should the following budgeted overhead expenses be apportioned to production departments: rent; local taxes; supervisory wages; insurance of premises?
Which of the following overhead expenses would be apportioned and which would be allocated to a cost centre: direct materials; electrical power; cost of running a maintenance department; direct wages?
Define ‘variable costs’ and give two examples.
Define ‘semi-variable costs’ and give one example.
A business produces 6000 units of a product. Variable costs total $18 000; fixed costs total $5000. Calculate the total cost of producing 7500 units.
Explain the term ‘contribution’.
Calculate contribution from the following information: selling price per unit $65; variable costs per unit $38; fixed costs per unit $12.
What is the connection between a key factor and a limiting factor?
What is meant by the break-even point and how may it be calculated?
How is the contribution to sales ratio calculated? Explain how it is used to find the break-even point.
Which formula used to calculate the break-even point gives an answer in: (a) Units (b) Sales revenue?
Explain the statement ‘fixed costs are irrelevant in decision making’.
Give another name for long-term planning.
What is meant by the term ‘budget’?
Give an example of an entry in a partner's capital account.

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