Questions and Answers of Frank Woods Business Accounting

Think about this for a minute and then write down as many reasons as you can for people wanting to form a partnership.
White, Green and Willis are partners. They share profits and losses in the ratios of 1/4, 1/4 and 1/2 respectively.For the year ending 31 December 2016 their capital accounts remained fixed at the
Dunn and Outram sell toys. Their individual investments in the business on 1 January 2018 were:Dunn £160,000; Outram £70,000.For the year to 31 December 2018, the net profit was £90,000 and the
What advantages do you think there might be to general partners in having a limited partner?
Some partnerships don't bother drawing up a partnership agreement. How do you think the partners in those partnerships know what rights and responsibilities they have? (You have not been told this
Draw up a profit and loss appropriation account for the year ending 31 December 2017 and statement of financial position extract at that date, from the following:(1)Net profits £111,100.(2) Interest
Penrose and Wilcox are in partnership, sharing profits and losses in the ratio 3:2. The following information was taken from their books for the year ending 31 December 2016, before the completion of
Draw up a profit and loss appropriation account for Cole, Knox and Lamb for the year ending 31 December 2017, and a statement of financial position extract at that date, from the following:(1) Net
Frame and French are in partnership sharing profits and losses in the ratio 3:2. The following is their trial balance as at 30 September 2016:Required:Prepare a statement of profit or loss and profit
A and B are in partnership sharing profits and losses 3:2. Under the terms of the partnership agreement, the partners are entitled to interest on capital at 5 per cent per annum and B is entitled to
Scot and Joplin are in partnership. They share profits in the ratio: Scot 70 per cent; Joplin 30 per cent. The following trial balance was extracted as at 31 December 2017:Required:Draw up a set of
Sage and Onion are trading in partnership, sharing profits and losses equally. Interest at 5% per annum is allowed or charged on both the capital account and the current account balances at the
Bush, Home and Wilson share profits and losses in the ratios 4:1:3 respectively. Their trial balance as at 30 April 2017 was as follows:Draw up a set of financial statements for the year ending 30
Reid and Benson are in partnership as lecturers and tutors. Interest is to be allowed on capital and on the opening balances on the current accounts at a rate of 5% per annum and Reid is to be given
The partners have always shared their profits in the ratios of Vantuira 3: Aparecida 2: Fraga 5. They are to alter their profit ratios to Vantuira 4: Aparecida 1: Fraga 3. The last statement of
If you were running a successful business, would you be willing to sell it for the value of its net assets? Why/why not?
In the example in Section 42.1, goodwill was a positive figure of £50,000. If, instead, it had been a negative figure of £100,000 (being the estimated cost of a marketing campaign that would be
The partners are to change their profit ratios as shown:They decide to bring in a goodwill amount of £150,000 on the change. The last statement of financial position before any element of goodwill
Owing to staff illnesses, the draft final accounts for the year ended 31 March 2016 of Messrs Stone, Pebble and Brick, trading in partnership as the Bigtime Building Supply Company, have been
There is another possible explanation for purchased goodwill appearing in a sole proprietor's statement of financial position. What do you think it might be?
Why do the assets need to be revalued in these cases? The business has not been sold.
The shown partners have always shared profits and losses in the ratio: Holt 4; Stott 2: Young 1. From 1 January the assets were to be revalued as the profit sharing ratios are to be altered soon.The
When you were looking at goodwill in the previous chapter, you were interested in the difference between the amount received and the value of net assets. Why do we consider only the assets when there
Fitch and Wall have been in partnership for many years sharing profits and losses in the ratio 5:3 respectively. The following was their statement of financial position as at 31 December 2016:On 1
Alan, Bob and Charles are in partnership sharing profits and losses in the ratio 3:2:1 respectively. The statement of financial position for the partnership as at 30 June 2016 is as follows:Charles
The statement of financial position of A. Barnes and C. Darwin at 31 March 2015 is as follows:The partners share profits and losses: Barnes three-fifths and Darwin two-fifths. At the date of the
At 31 December 2017, the statement of financial position 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
The following are summaries of the cash book and bank accounts of J. Duncan who does not keep his books using the double entry system.You are required to:(a) Calculate the value of J. Duncan's
Read the following and answer the questions below.On 31 December 2015 the bank column of C. Tench's cash book showed a debit balance of £1,500.The monthly bank statement written up to 31 December
The bank columns in the cash book for June 2016 and the bank statement for that month for D. Hogan are as follows:You are required to:(а) Write the cash book up to date to take the above into
On 1 April 2013 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) The following trial balance was extracted from the books of M. Jackson on 30 April 2017. From it, and the note below it, prepare his statement of profit or loss for the year ending 30 April 2017,
On 1 January 2015 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 from
From your knowledge of double entry, you should be able to work out what the double entry required is in these two cases. What do you think it is? If you don't know what names to give the accounts,
The financial year of S. Smith ended on 31 December 2013. Show the ledger accounts for the following items including the balance transferred to the necessary part of the financial statements, also
From your knowledge of accounting, how should ail accruals and all the prepayments appear in the statement of financial position - as one debit entry and one credit entry or as a separate entry for
W. Hope's year ended on 30 June 2015. 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) Stationery:
(a) Where in the current asset sequence do you place prepayments?(b) Where in the current liability sequence do you place accruals?(c) Why?
Where do you think these items of accrued income go in the statement of financial position?
On 1 January 2015 the following balances, among others, stood in the books of A. Cook, a sole proprietor:(a) Business rates, £600 (Dr);(b) Packing materials, £1,400 (Dr).During the year ended 31
On 1 January 2016 the following balances, among others, stood in the books of B. Baxter:(a) Lighting and heating, (Dr) £192.(b) Insurance, (Dr) £1,410.During the year ended 31 December 2016 the
Prepare a similar schedule for rates.
Three of the accounts in the ledger of Charlotte Williams indicated the following balances at 1 January 2017:Insurance paid in advance £562;Wages outstanding £306;Rent receivable, received in
The two accounts below were taken from the books of a retailer at the end of his financial year, 31 December 2014.Required:Answers to the following questions.1 What type of account is the insurance
Why is identifying errors of this type easier when using an extended trial balance than when using a conventional manual approach to preparing the financial statements?
The following trial balance was extracted from the books of R. Giggs at the close of business on 28 February 2014.Required:Draw up the statement of profit or loss for the year ending 28 February 2014
List three examples of situations where this may be appropriate.
The trial balance for a small business at 31 August 2015 is as follows:At 31 August 2015 there was:• Inventory valued at cost prices £9,100 • Accrued rent of £400 • Prepaid business rates of
J. Wright, a sole trader, extracted the following trial balance from his books at the close of business on 31 March 2016:Required:Prepare the statement of profit or loss for the year ending 31 March
This question also relates to extended trial balances (see Exhibit 28.2). From the following trial balance of John Brown, store owner, prepare a statement of profit or loss for the year ending 31
The following trial balance has been extracted from the ledger of Mr Yousef, a sole trader.The following additional information as at 31 May 2016 is available:(a) Rent is accrued by £210.(b) Rates
Mr Chai has been trading for some years as a wine merchant. The following list of balances has been extracted from his ledger as at 30 April 2014, the end of his most recent financial year.The
From the following figures calculate the closing inventory-in-trade that would be shown using (1) FIFO, (2) LIFO, (3) AVCO methods. Bought Sold March 400 at 30 each December 420 for 40 each September
Can you see another, simpler way of arriving at the same valuation under LIFO?
The sixth formers at the Broadway School run a tuck shop business. They began trading on 1 December 2016 and sell two types of chocolate bar, 'Break' and 'Brunch'.Their starting capital was a £200
Can you see another, simpler way of arriving at the same valuation under FIFO?
What valuation do you think should be placed on the eight units of inventory? Why?
If two units had been sold in December, at what cost would they have been sold?
Mary Smith commenced trading on 1 September 2016 as a distributor of the Straight Cut garden lawn mower, a relatively new product which is now becoming increasingly popular.Upon commencing trading,
Thomas Brown and Partners, a business of practising accountants, have several clients who are retail distributors of the Allgush Paint Spray guns.The current price list of Gushing Sprayers Limited,
Which method has produced(a) the highest, (fa) the middle and(c) the lowest value for closing inventory? Why do you think this has occurred?
(a) What happens to gross profit if closing inventory is undervalued? Why?(b) What happens to gross profit if closing inventory is overvalued? Why?
If you have no detailed inventory records, how could you use AVCO, FIFO or FIFO?
Yuan Ltd has an accounting year ended 28 February 2015. Due to staff shortages, the stocktaking had not been undertaken until 9 March 2015 and the inventory valued at this date is£100,600. This
After stocktaking for the year ended 31 May 2016 had taken place, the closing inventory of Cobden Ltd was aggregated to a figure of £87,612.During the course of the audit which followed, the
What might cause the two balances to be different? Spend two minutes making a list.
The following are extracts from the cash book and the bank statement of Z. Varga.You are required to:(a) Write the cash book up to date, and state the new balance as on 31 December 2016, and(b) Draw
Draw up a bank reconciliation statement, after writing the cash book up to date, ascertaining the balance on the bank statement, from the following as on 31 March 2016: f Cash at bank as per bank
From the following, draw up a bank reconciliation statement from details as on 31 December 2016: Cash at bank as per bank column of the cash book 6,000 Unpresented cheques 1,400 Cheques received and
What sensible rule does this give you relating to when you should balance-off the bank account in the cash book at the end of the accounting period?
Try to identify which items are causing the two balances to be different even after the bank statement has been checked against the cash book and the necessary additional entries have been made in
Will the bank statement show 'Dr' or 'Cr' if an account is overdrawn?
In the draft accounts for the year ended 31 October 2016 of Thomas P. Lee, garage proprietor, the balance at bank according to the cash book was £894.68 in hand.Subsequently the following
The following is the cash book (bank columns) of F. King for December 2017:You are required to:(a) Write the cash book up to date to take the necessary items into account, and(b) Draw up a bank
The bank statement for R. Hood for the month of March 2016 is:You are required to:(a) Write the cash book up to date, and(b) Draw up a bank reconciliation statement as on 31 March 2016. 2016 Mar 1
You are required to prepare a purchases ledger control account from the following information for the month of April. The balance of the account is to be taken as the amount of accounts payable as on
If you look at these eight steps, you can see that the first three are those you learnt to do earlier in the book, so you know that the other part of the double entry has been completed in the normal
How do you find errors of the types that a trial balance cannot detect?
From the following trial balance of G. Foot after his first year's trading, you are required to draw up a statement of profit or loss for the year ending 30 June 2016. A statement of financial
(a) Distinguish between capital and revenue expenditure.(b) Drake Ltd took delivery of a computer network on 1 July 2016, the beginning of its financial year. The list price of the equipment was
At the beginning of the financial year on 1 April 2017, 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 is
What circumstances might lead you to write-off a debt as bad and not close the debtor's account?
In a new business during the year ended 31 December 2017 the following debts are found to be bad, and are written-off on the dates shown:On 31 December 2017 the schedule of remaining accounts
A business started trading on 1 January 2014. During the two years ended 31 December 2014 and 2015 the following debts were written off to the Bad Debts Account on the dates stated:On 31 December
Why do accountants have to make these allowances?
A business had always made an allowance for doubtful debts at the rate of 3 per cent of accounts receivable. On 1 January 2015 the amount for this, brought forward from the previous year, was £400.
Why do you only need to create an expense for the difference between the provisions of the two years?
Without looking back in your textbook, write down the double entries for(a) an increase and(b) a decrease in the allowance for doubtful debts.
A business, which started trading on 1 January 2014, 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
Why do you think we reinstate the debt just to cancel it out again? Why don't we simply debit the bank account and credit the bad debts recovered account?
(a) Businesses often create an allowance for doubtful debts.(1) Of which concept (or convention) is this an example? Explain your answer.(2) What is the purpose of creating an allowance for doubtful
The statement of financial position as at 31 May 2014 of Pondlake Limited included an allowance for doubtful debts of £4,600. The company's accounts for the year ended 31 May 2015 are now being
Which one of the following would result from a decrease in the allowance for doubtful debts?(a) An increase in gross profit(b) A reduction in gross profit(c) An increase in net profit(d) A reduction
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 2015 the balances brought forward on the
J. Blane commenced business on 1 January 2013 and prepares her financial statements to 31 December every year. For the year ended 31 December 2014, bad debts written-off amounted to £1,400. It was
(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
D. Faculti started in business buying and selling law textbooks, on 1 January 2016. At the end of each of the next three years, his figures for accounts receivable, before writing-off any bad debts,
D. Bell purchased a laptop for £480. It has an estimated life of three years and a scrap value of £60.She is not certain whether she should use the straight line or the reducing balance basis for
Write down the three characteristics that distinguish non-current assets from current assets.
A machine costs £26,660. It will be kept for four years, and then sold for an estimated figure of £6,400. Show the calculations of the figures for depreciation (to nearest £) for each of the five

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