Questions and Answers of Frank Woods Business Accounting

A company which makes up its financial statements annually to 31 December, provides for depreciation of its machinery at the rate of 12 per cent per annum using the reducing balance method. On 31
If depreciation reduces profits and reduces the value of assets and so reduces the capital account of the owner, why do businesses bother providing for depreciation?
What do you think you do when the amount of depreciation to be charged in a period is not a whole number?
Ivor Innes has supplied you with the following information:During the year to 31 March 2015, Ivor withdrew £11,400 from the business for private purposes. In November 2014, Ivor received a legacy of
A motor vehicle which cost £12,000 was bought on credit from Trucks Ltd on 1 January 2013. Financial statements are prepared annually to 31 December and depreciation of vehicles is provided at 25
On 10 August 2013 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
Black and Blue Ltd depreciates its forklift trucks using a reducing balance rate of 30 percent. Its accounting year end is 30 September. On 30 September 2017, it owned four forklift trucks:(A)
In the past you were allowed to credit depreciation to the account of the noncurrent asset. Why do you think this is now no longer allowed?
A company starts in business on 1 January 2015. You are to write up the lorries account and the provision for depreciation account for the year ended 31 December 2015 from the information given
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 starts in business on 1 January 2014, 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
Why do you think it would be confusing to call the accumulated provision for depreciation account the 'provision for depreciation account'?
What advantages are there in making this exception to the rule by using 'depreciation' rather than 'accumulated provision for depreciation' in the entry in the statement of profit or loss?
A company maintains its non-current assets at cost. Depreciation provision accounts for each asset are kept.At 31 December 2015 the position was as follows:The following additions were made during
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
List as many things as you can think of in one minute that could cause the amount charged for depreciation to have been incorrect.
A vehicle bought on 1 January 2017 cost £36,000. Its useful economic life is estimated at three years and its trade-in value at that point is estimated as being £6,000.During 2019 a review of the
Contractors Ltd was formed on 1 January 2016 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) 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
(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?(1) a gold mine(2) a van{3) a
Mavron pic owned the following motor vehicles as at 1 April 2016:Mavron pic's policy is to provide at the end of each financial year depreciation using the straight line method applied on a
A business buys a non-current asset for £10,000. The business estimates that the asset will be used for five years. After exactly two and a half years, however, the asset is suddenly sold 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 machine cost £40,000 on 1 January 2016. The reducing balance depreciation method is used at 25 per cent per annum. Year end is 31 December. During 2018, it was decided that a straight line method
A company maintains its non-current assets at cost. Accumulated provision for depreciation accounts are kept for each asset.At 31 December 2015 the position was as follows:The following transactions
A machine was bought on credit for £15,000 from the XY Manufacturing Co Ltd, on 1 October 2015. The estimated useful economic life of the machine was seven years and the estimated scrap value
Distance Limited owned three lorries at 1 April 2016:Lorry A: purchased on 21 May 2012 for £31,200 Lorry B: purchased on 20 June 2014 for £19,600 Lorry C: purchased on 1 January 2016 for £48,800
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
The Milham Theatre Club has been in existence for a number of years. Members pay an annual subscription of £15 which entitles them to join trips to professional productions at a reduced rate.On 1
The accounting records of the Happy Tickers Sports and Social Club are in a mess. You manage to find the following information to help you prepare the accounts for the year to 31 December 2015.(1)
A business both buys loose tools and also makes some itself. The following data is available concerning the years ended 31 December 2014, 2015 and 2016.You are to draw up the Loose Tools Account for
Think about it for a minute and then list five costs you think are direct and five that you think are indirect.
Place a tick in the appropriate column for each of the following cost items: (a) Purchases of raw materials (b) Direct wages (c) General factory expenses (d) Depreciation of machinery (e) Commission
Using whichever of the following figures are required, prepare a manufacturing account and trading account for 2017. The manufacturing account should show clearly the prime cost of manufacture and
From the following information, prepare a manufacturing account and statement of profit or loss for the year ending 31 December 2016 and a statement of financial position as at 31 December 2016 for
Why do you think some expenses have been moved to the manufacturing account?
Prepare a manufacturing account and statement of profit or loss from the following balances of Z. Varga for the year ending 31 December 2017.Rent is to be apportioned: Factory 3/4 Office 1/4.
From the following information, draw up a manufacturing account and the trading account section of the statement of profit or loss for the six months ending 30 September 2017. You should show
From the following figures prepare a manufacturing account and the trading account section of the statement of profit or loss so as to show:(a) Cost of raw materials used in production.(b) Prime
E. Wilson is a manufacturer. His trial balance at 31 December 2017 is as follows:Prepare the manufacturing account and statement of profit or loss for the year ending 31 December 2017 and a statement
The financial year end of Mendip Limited is 30 June. At 30 June 2017, the following balances are available:(1) The inventory at 30 June 2017 was: raw materials £22,000; finished goods £35,600.(2)
Jean Marsh owns a small business making and selling children's toys. The following trial balance was extracted from her books on 31 December 2017.You are given the following additional information.1
The following list of balances as at 31 July 2016 has been extracted from the books of Jane Seymour who commenced business on 1 August 2015 as a designer and manufacturer of kitchen
From the following you are to draw up a departmental trading account for Grace's Department Store for the year ending 30 June 2016. Inventory: 1.7.2015 30.6.2016 f Carpet Department 30,000 36,000
Why do you think we have only mentioned gross profit and haven't referred to net profit?
From the following list of balances you are required to prepare a departmental statement of profit or loss for the year ending 31 March 2015, in respect of the business carried on under the name of
What other possible events that can only occur if the department is closed could make it profitable to close the Hairdressing Department?
The statements of financial position of A. Vantuira, a sole trader, for two successive years are shown below. You are required to draw up a statement of cash flows for the year ending 31 December
Why might the fact you are having difficulty raising cash make some debtors take longer to pay you what they owe?
Draw up a statement of cash flows for Gerry Peace for the year ending 31 December 2017 using the IAS 7 layout. You are told that fixtures bought in 2003 cost £800, whilst a van was bought for
What do you think is meant by 'cash' in this context?
Malcolm Phillips is a sole trader who prepares his financial statements annually to 30 April. His summarized statements of financial position for the last two years are shown below.Malcolm is
Can you think of any more examples? Spend a minute thinking about this and then write down any you come up with.
From the following details you are to draft a statement of cash flows for D. Duncan for the year ending 31 December 2015, using the IAS 7 layout. D. Duncan Statement of Profit or Loss for the year
What about bad debts? Should you make similar adjustments in the cash flow statement for them? Why/why not?
You are required to draw up a statement of cash flows for K. Rock for the year ending 30 June 2017 from the following information using the IAS 7 layout. K. Rock Statement of Profit or Loss for the
Jack and Wellie enter a joint venture to share profits or losses equally resulting from dealings in second-hand, TVs. Both parties take an active part in the business, each recording their own
Look closely at the Memorandum Joint Venture account. Where does each entry in the Memorandum Joint Venture account appear in the Joint Venture with Green and Joint Venture with White T-accounts? Are
Can you remember what is meant by a debit balance? Is it where the balance c/d is a debit or where the balance b/d is a debit?
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
Gross profit is(A) Excess of sales over cost of goods sold (B) Sales less purchases (C) Cost of goods sold + opening inventory (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) Statement of financial position
To find the value of closing inventory at the end of a period we(A) Do this by physically counting the inventory (i.e. stocktaking)(B) Look in the inventory account (C) Deduct opening inventory from
The descending order in which current assets should be shown in the statement of financial position is(A) Inventory, Accounts receivable. Bank, Cash (B) Cash, Bank, Accounts receivable, Inventory (C)
Which of these best describes non-current assets?(A) Items bought to be used in the business (B) Items which will not wear out quickly (C) Expensive items bought for the business (D) Items having a
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 statement of financial position (C) It is not part of motor
The costs of putting goods into a saleable condition should be charged to(A) The trading account (B) The profit and loss account (C) The statement of financial position (D) None of these
Which of the following are personal accounts? (i) (ii) Buildings Wages (iii) Accounts receivable (iv) Accounts payable (A) (i) and (iv) only (B) (ii) and (iii) only (C) (iii) and (iv) only (D) (ii)
When depositing money in your current account you should always use(A) A cheque book (B) A paying-in slip (C) A cash book (D) A general ledger
Write up a two-column cash book for a bedroom furniture shop from the following details, and balance it off as at the end of the month:2016 July 1 Started in business with capital in cash £10,000.2
Write up a two-column cash book for a second-hand bookshop from the following:2017 Nov 1 Balance brought forward from last month: Cash £295; Bank £4,240.2 Cash sales £310.3 Took £200 out of the
A three-column cash book for a wine wholesaler is to be written up from the following details, balanced-off, and the relevant discount accounts in the general ledger shown.2016 Mar 1 Balances
Enter the following in the three-column cash book of an office supply shop. Balance-off the cash book at the end of the month and show the discount accounts in the general ledger.2015 June 1
On 1 September, R. Maeve, a club manager and entrepreneur, has the following financial position relating to her activities as a corporate function organizer:During September the following events
Other than for accounting purposes, can you think of anything a business might want to record somewhere outside the accounting records concerning these transactions?
What uses would the seller have for these copies of the sales invoice?
Why would you be willing to sell goods at a lower price to these traders?
You are to enter up the Sales Day Book from the following details. Post the items to the relevant accounts in the Sales Ledger and then show the transfer to the sales account in the General
Enter up the Sales Day Book from the following details. Post the items to the relevant accounts in the Sales Ledger and then show the transfer to the sales account in the General Ledger.2017 January
F. Benjamin of 10 Lower Street, Plymouth, is selling the following items at the recommended retail prices as shown: white tape £10 per roll, green felt at £4 per metre, blue cotton at £6 per
J. Fisher, White House, Bolton, is selling the following items at the retail prices as shown:plastic tubing at £1 per metre, polythene sheeting at £2 per length, vinyl padding at £5 per box, foam
Think back to what you learnt about the list of items contained in the sales day book. What do you think is the list of items recorded in the purchases day book?
Note the entry for 1 September and compare it to the entry on the same date shown in the sales day book of J. Blake in Exhibit 14.2. What differences are there between the entries in the two day
A. Jack has the following purchases for the month of May 2016:2016 May1 From A. Bell: 4 DVD players at £30 each, 3 mini hi-fi units at £180 each. Less 25 per cent trade discount.3 From C. Gray: 2
J. Glen has the following purchases for the month of June 2016:2016 June 2 From J. Ring: 3 sets golf clubs at £900 each, 6 footballs at £35 each. Less 25 per cent trade discount.11 From F. Clark:
C. Phillips, a sole trader specialising in material for Asian clothing, has the following purchases and sales for March 2017:Mar1 Bought from Smith Stores: silk £40, cotton £80. All less 25 per
A. Henriques has the following purchases and sales for May 2017:2017 May 1 Sold to M. Marshall: brass goods £24, bronze items £36. Less 25 per cent trade discount.1 Sold to R. Richards: tin goods
List as many reasons as you can think of why (a) retail customers and (b) trade customers may return goods to the seller.
What sort of things could result in the statement and the account held in the books of the debtor showing different balances?
What sort of things could occur that make checking of all invoices, both those for sales and those for purchases, something that all businesses should do?
You are to enter up the Purchases Day Book and the Returns Outwards Day Book from the following details, then to post the items to the relevant accounts in the Purchases Ledger and to show the
A Enter up the Sales Day Book and the returns inwards day book from the following details.Then post to the customers' accounts and show the transfers to the General Ledger.2016 June 1 Credit sales
You are to enter up the sales, purchases, returns inwards and returns outwards day books from the following details, then to post the items to the relevant accounts in the sales and purchases
A You are to enter the following items in the books, post to personal accounts, and show the transfers to the General Ledger.2017 1 Credit purchases from: K. Hill £380; M. Norman £500; N. Senior
If these five books are used to record all cash and bank transactions, and all credit purchase and sales items, what are these other items that need to be recorded in a sixth book of original entry?
All the folio numbers have been entered in these ledger accounts. You do need to enter them at some time so that you can trace the other side of the entries, but why have they already been entered?
Do you think you will ever need to do this again for this business?
What are the six books of original entry?
You are to show the journal entries necessary to record the following items which occured in 2016:(a) May 1 Bought a motor bike on credit from Lakeside Garage for £5,500.(b) May 3 A debt of £347
Show the journal entries necessary to record the following items:2017 Apr 1 Bought office furniture on credit from Durham Brothers Ltd £1,400.4 We take goods costing £270 out of the business

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