Questions and Answers of Frank Woods Business Accounting

There have been several high-profile scandals in accounting in recent times, which have contributed to the raised profile of ethics and integrity in accounting. The details of many of these scandals
There is now growing disapproval from some sections of the public of the elaborate tax planning arrangements that tax advisers at some accounting firms have recommended to their clients.These
For simplicity and convenience, this chapter discusses accountants as working ‘in practice’, ‘in industry’ or ‘in the public sector’. However, some organisations might not fall neatly
If opening inventory is £3,000, closing inventory £5,000, sales £40,000 and margin 20 per cent, then inventory turnover is(A) 8 times(B) 71/2 times(C) 5 times(D) 6 times
In this chapter you’ve learnt about some specific roles and areas of accountancy, such as ‘financial controller’ or ‘tax adviser’. Can you suggest any other particular areas of accounting
A company has always previously recorded its freehold land at its historical cost of £129,000.It has recently had its land valued by a firm of professional valuers who advise that the land is now
Some students who want to train with an accountancy practice tend to focus exclusively on trying to get a job with one of the ‘Big Four’ (PwC, Deloitte, EY and KPMG) and ignore smaller accounting
At the start of the year, a company had 60,000 ordinary shares of 50p each in issue, fully paid, and there was a balance of £170,000 on the share premium account. During the year, the company made a
You may have no plans to become an accountant in the future. Why is it still important for you to study the basics of accounting, such as those covered in this book?
A company reported a corporation tax expense of £19,900 in its income statement for this year, and it actually paid £18,700 corporation tax to the tax authorities during the year.The previous
The rate of progress in technology is so rapid that it is very difficult to predict exactly how new technology will affect accounting in the future. Can you suggest any developments in technology
A company issues 200,000 ordinary shares with a par value of 50 pence each at an issue price of £1.40 per share, fully paid. Which of the following journal entries correctly records this issue?(A)
In a statement of cash flows, which of the following would be added to the business’s profit when using the indirect method to calculate the net cash from operating activities?(i) Decrease in
A company’s ordinary shares have a par value of 5 pence each. Its balance sheet reports issued ordinary share capital, fully paid, of £90,000. If the company pays an ordinary dividend of 8 pence
At the start of the year the balance sheet of a company included retained earnings of £143,000 and at the end of the year the figure was £151,000. The company reported a profit for the year, after
In what order are the three sections of a statement of cash flows normally presented?(A) Investing activities, financing activities, operating activities(B) Investing activities, operating
You are to buy an existing business which has assets valued at Buildings £50,000, Motor vehicles £15,000, Fixtures £5,000 and Inventory £40,000. You are to pay £140,000 for the business.This
During the year a company revalued its freehold land from its original cost of £295,000 to its current market value of £1.1m. In the company’s statement of cash flows, this revaluation will:(A)
In a limited company which of the following is shown in the statement of changes in equity?(i) Loan note interest(ii) Dividends paid(iii) Transfers to reserves(iv) Directors’ remuneration(A) (i)
Gow, Short and Hill are partners. They share profits and losses in the ratios of 3/11, 4/11 and 4/11 respectively.For the year ending 31 July 2024, their capital accounts remained fixed at the
George, Henry and Lee are partners. They share profits and losses in the ratios of 5:3:2 respectively.For the year ending 31 December 2024 their capital accounts remained fixed at the following
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
Draw up a profit and loss appropriation account for the year ending 31 December 2020 and balance sheet extract at that date, from the following:(i) Net profits £111,100.(ii) Interest to be charged
Draw up a profit and loss appropriation account for Cole, Knox and Lamb for the year ending 31 December 2024, and a balance sheet extract at that date, from the following:(i) Net profits
Smith and Tolhurst are in partnership, sharing profits and losses in the ratio 5:3.The following information has been taken from the partnership records for the year ended 31 October 2019:(i)
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
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 2023:(a) Inventory at the end of the year was £74,210.(b)
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 2020:The following notes are
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 2020 was as follows:Draw up a set of financial statements for the year ending 30
Kendall and Harvey are in partnership as wholesalers of novelty products. They share residual profits in the ratio 5:3. The trial balance exhibited below was extracted from the nominal ledger of
Vantuira, Aparecida and Fraga are in partnership. They 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:
Abel, Burt, Cole and Dodds are in partnership. They 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
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
The partners have always shared profits and losses in the ratio: Cox 5: Fox 3: Lock 2.From 1 January the assets were to be revalued as the profit-sharing ratios are to be altered soon. The following
Fitch and Wall have been in partnership for many years sharing profits and losses in the ratio 5:3 respectively. The following was their balance sheet as at 31 December 2023:On 1 January 2024, they
Alan, Bob and Charles are in partnership sharing profits and losses in the ratio 3:2:1 respectively. The balance sheet for the partnership as at 30 June 2019 is as follows:Charles decides to retire
The balance sheet of A. Barnes and C. Darwin at 31 March 2022 is as follows:The partners share profits and losses: Barnes three-fifths and Darwin two-fifths. At the date of the above balance sheet,
At 31 December 2020, 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
Adrian and Thomas, who share profits and losses equally, decide to dissolve their partnership as at 30 June 2024. Their balance sheet on that date was as follows:The trade receivables realised
Mears, Pugh and Stafford were in partnership sharing profits and losses in the ratio 5:3:2 respectively.The partners had agreed that the partnership would be dissolved on 1 April 2023.The partnership
The following trial balance has been extracted from the books of Gain and Main as at 31 March 2022; Gain and Main are in partnership sharing profits and losses in the ratio 3 to 2:In appropriating
A, B and C are partners sharing profits and losses in the ratio 2 : 2 : 1. The balance sheet of the partnership as at 30 September 2020 was as follows:The partners agreed to dispose of the business
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 2020:Additional
Proudie, Slope and Thorne were in partnership sharing profits and losses in the ratio 3 : 1 :1. The draft balance sheet of the partnership as at 31 May 2019 is shown below:Additional information:1
Using the information in Review question 40.13, prepare P. Maclaran's balance sheet as at 31 December 2018.Data From Review Question 40.13:The following are summaries of the cash book and bank
N. Alphonso started in business on 1 January 2024 with \(£ 10,000\) in a bank account. Unfortunately, he did not keep proper books.He must submit a calculation of profit for the year ending 31
Stephanie Duke is a wholesaler whose accounting records are chaotic. You ascertain the following information:(i) She draws \(£ 2,000\) a month from the business for her living expenses.(ii) In June
B. Barnes is a dealer who has not kept proper books of account. At 31 October 2019 his state of affairs was as follows:During the year to 31 October 2020 his drawings amounted to \(£ 32,200\).
The following is a summary of Ellie's bank account for the year ended 31 December 2019:All of the business takings have been paid into the bank with the exception of \(£ 34,900\). Out of this, Ellie
A. Bell has kept records of his business transactions in a single entry form, but he did not realise that he had to record cash drawings. His bank account for the year 2018 is as follows:Records of
Carlos is a trader buying and selling goods. He does not maintain a full set of double accounting records but has provided the following information at 31 December 2024:3 During the year ending 31
A Bill Smithson runs a second-hand furniture business from a shop which he rents. He does not keep complete accounting records, but is able to provide you with the following information about his
Although Janet Lambert has run a small business for many years, she has never kept adequate accounting records. However, a need to obtain a bank loan for the expansion of the business has
Jean Smith, who retails wooden ornaments, has been so busy since she commenced business on 1 April 2018 that she has neglected to keep adequate accounting records. Jean's opening capital consisted of
David Denton set up in business as a plumber a year ago, and he has asked you to act as his accountant. His instructions to you are in the form of the following letter.Dear Henry, I was pleased when
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
Using the information in Review Question 27.11, prepare J. Duncan's balance sheet as at 31 December 2018.Data From Review Question 27.11:The following are summaries of the cash book and bank accounts
The following are summaries of the cash book and bank accounts of P. Maclaran who does not keep her books using the double entry system.You are required to:(a) Calculate the value of P. Maclaran's
Michael Angelo owns Picta Simpla, a company specialising in selling painting by numbers packs by mail order. The packs are purchased from a wholesaler and then resold. The public have no access to
The following balance sheet has been prepared by your client, Mr Conman, proprietor of the Sleasy Cars second-hand car dealership:.This was the first year of trading for Sleasy Cars. Mr Conman
The following represents the trial balance extracted from the books of Mr Jones, a small businessman based in Aboyne, Scotland. The books are well-maintained and there is no reason to doubt the
The following balances were extracted from the books of Mr Try, a window cleaner. He has no knowledge of double entry bookkeeping but records everything correctly. His year end is 30 June and the
Michael Baldwin owns B's Casuals, a company specialising in low-quality, high-priced clothing. The material is purchased from Canada, made up into the finished garments in his own factory, and then
Reema Yasin is preparing her business’s statement of cash flows for the 12 months to 30 September 2024, and you determine the following details in relation to that financial yearOn the basis of the
Martin Petty is in the process of preparing a statement of cash flows for his business for the year to 30 April 2023. You establish the following facts in connection with that financial year:Given
You establish the following details in connection with the non-current assets of Charlotte’s business for the year ended 31 December 2024:What figure for payments to acquire non-current assets will
You are given the following details in connection with the non-current assets of Roy Snell’s business for the year ended 31 July 2023:What figure for proceeds from disposal of non-current assets
You are given the following balance sheets of Deepak Sharma’s business as at 31 December:There were no disposals of non-current assets during 2025.Required:In accordance with the requirements of
The balance sheets of Ruth Byrde’s business as at the end of its two most recent financial years are presented below:There were no acquisitions of non-current assets during the year ended 31
You are presented with the following balance sheets of S. Ahmed’s business as at 31 March:Further information:(i) The depreciation expense for the year ended 31 March 2024 was £7,490.(ii) In
The balance sheets of Wendy Langmore’s business as at the end of its two most recent financial years are given to you below:(i) In December 2022, a delivery van was purchased for £18,950, paid for
A summary of the Balgreen Bowling Club’s cash book is shown below. From it, and the additional information, you are to construct an income and expenditure account for the year ending 31 December
The following trial balance of the Grampian Golf Club was extracted from the books as on 31 December 2019:Notes:(i) Bar purchases and sales were on a cash basis. Bar inventory at 31 December 2019 was
The treasurer of the Plumpton Leisure Centre has produced the following receipts and payments account for the year ended 31 December 2020:Notes:(i ) Refreshment inventory was valued: 31 December 2019
The following is a summary of the receipts and payments of the Miniville Rotary Club during the year ended 31 July 2023.Required:(a) Calculate the value of the accumulated fund of the Miniville
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
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
Working Capital is a term meaning(A) The amount of capital invested by the proprietor(B) The excess of the current assets over the current liabilities(C) The capital less drawings(D) The total of
Capital Expenditure is(A) The extra capital paid in by the proprietor(B) The costs of running the business on a day-to-day basis(C) Money spent on buying non-current assets or adding value to them(D)
If £500 was shown added to Purchases instead of being added to a non-current asset(A) Net profit only would be understated(B) Net profit only would be overstated(C) It would not affect net profit(D)
Which of the following should be charged in the income statement?(A) Office rent(B) Work-in-progress(C) Direct materials(D) Carriage on raw materials
If trade payables at 1 January 2019 were £2,500, trade payables at 31 December 2019 £4,200 and payments to creditors £32,000, then purchases for 2019 are(A) £30,300(B) £33,700(C) £31,600(D)
If the two totals of a trial balance do not agree, the difference must be entered in(A) The Income Statement(B) A Suspense Account(C) A Nominal Account(D) The Capital Account
A business has an item in inventory that originally cost \(£ 140\) and usually sells for \(£ 200\). But it is damaged, and before it can be sold for \(£ 200\) it must be repaired at a cost of \(£
A business has just completed its first year of trading. The cost of its closing inventory valued using the AVCO method is \(£ 7,300\). If the FIFO method had been used it would have been \(£
At the start of the year, a business's allowance for doubtful debts was \(£ 19,000\). The business wrote off bad debts of \(£ 92,000\) during the year. At the end of the year the business requires
At its year end, a business has outstanding trade receivables totalling \(£ 90,000\). The balance on the allowance for doubtful debts account brought forward from the previous year is \(£ 4,000\).
A business acquires some new equipment, incurring a total cost of \(£ 33,000\). This amount is made up of purchase price \(£ 31,180\), delivery costs \(£ 570\), installation charges \(£ 440\),
A business buys a machine for \(£ 45,000\) which it believes will last for ten years, after which it will be worth \(£ 5,000\). Using the straight line method of depreciation, what will be the
A business buys a piece of equipment for \(£ 72,000\) and depreciates it at \(25 \%\) per year using the reducing balance method. What is the depreciation expense in the third year of use?(A) \(£
A business buys a machine for \(£ 40,000\) and depreciates it at \(20 \%\) per year on a straight line basis. After exactly three years it is sold for \(£ 19,000\). What is the profit or loss on
Depreciation is (A) The amount spent to buy a non-current asset (B) The salvage value of a non-current asset (C) The part of the cost of the non-current asset consumed during its period of use
At the balance sheet date the balance on the Accumulated Depreciation Account is(A) Transferred to the Depreciation account(B) Transferred to Profit and Loss(C) Simply deducted from the asset in the
In the trial balance the balance on the Accumulated Depreciation Account is(A) Shown as a credit item(B) Not shown, as it is part of depreciation(C) Shown as a debit item(D) Sometimes shown as a
If an accumulated depreciation account is in use then the entries for the year's depreciation would be(A) Credit Accumulated Depreciation Account, debit Depreciation expense(B) Debit Asset Account,
When the financial statements are prepared, the Bad Debts Account is closed by a transfer to the(A) Balance Sheet(B) Profit and Loss Account(C) Trading Account(D) Allowance for Doubtful Debts Account
An Allowance for Doubtful Debts is created(A) When debtors become bankrupt(B) When debtors cease to be in business(C) To provide for possible bad debts(D) To write-off bad debts
You are required to prepare a sales ledger control account from the following information for the month of June: June 1 Sales ledger balances Totals for June: Sales day book Returns inwards day book
You are required to prepare a purchases ledger control account from the following information for the month of July: July 1 Purchases ledger balances Totals for July: Purchases day book Returns

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