1. a) Explain how a suspense account can be used as part of the book-keeping

error correction process. (4 marks)

b) The following are extracted balances from Harbhajan's business accounts along

with other information relating to the business's year end on 30 April 2017.

For some reason, the figure for Capital at the beginning of the year has not

been supplied, although you have been given the year end net profit figure:

Capital as at 1 May 2016 unknown

Machinery at cost 100,000

Sales Revenue 59,000

Motor Vehicles at cost 50,000

Purchases 25,000

Trade Receivables 13,500

Trade Payables 12,500

Accumulated [provision for] depreciation: Machinery 10,000

HM Revenue and Customs: VAT (owing) 7,750

Net Profit as at 30 April 2017 7,105

Accumulated [provision for] depreciation: Motor Vehicles 5,000

Water and Utilities 4,500

Inventory as at 1 May 2016 3,500

Wages and Salaries 3,500

Rent 3,000

Bank (in funds) 1,800

Purchases Returns 1,355

Business Rates 1,250

Bad Debts written off 1,150

Sales Returns 1,250

Discounts Allowed 950

Cash in Hand 760

Drawings 750

Discounts Received 550

The Rent figure includes 600 relating to May, June and July 2017.

The Machinery still has to be depreciated at year end by 10% straight line.

There was unpaid Wages and Salaries at year end 30 April 2017 of 800.

Stocktake at year end 30 April 2017 valued Inventory at 5,000.

Motor Vehicles need year end depreciation (diminishing [reducing] balance

at 10%).

June 2017 7B/PQP/8 Continued

TASK for part b)

Use the information given about Harbhajan's business as appropriate to

prepare Statement of Financial Position for its year end, including the

missing figure for Capital. (12 marks)

c) Explain the problems from a working capital perspective for a business which

has i) too many orders and ii) too few orders. (4 marks)

Total 20 marks

Identify the assets from the list below. State if the asset is a current or a fixed asset. (a) Stock. (b) Money owed to supplier. (c) Computer equipment. (d) Money outstanding for goods sold. Identify the liabilities from the following list. Give the nature of the liability, i.e. current or long term. (a) Loan due to be repaid to A Brown in 4 months' time. (b) Money owed to a supplier. (c) Fixtures and fittings. (d) Money outstanding for goods sold by us. (e) Loan due to be repaid to G Smythe in 3 years' time. (f) VAT due to be paid to HMRC. (g) Bank overdraft.The following list of balances was extracted from the books of Middlesex Ltd at 31 December 2009. Trade creditors 75,000 Debtors 100,000 Overdraft 30,000 Debenture interest 2,000 Administrative expenses 47,000 Selling & distribution expenses 10,000 5% debentures 60,000 Freehold land & buildings at cost 200,000 Fixtures & fittings at cost 150,000 Motor vehicles at rost 200.000 Accumulated depreciation at 1 Jan 2009: - Fixtures & fittings 30,000 - Motor vehicles 60,000 Opening stock at 1 January 2009 125,000 Purchases 185,000 Sales 375,000 Share capital 160,000 Revaluation reserve 35,000 Provision for doubtful debts at 1 Jan 2009 7,000 Profit & loss account at 1 January 2009 187,000 You are also provided with additional information relating to the financial year end: (1) Closing stock at 31 December 2009 is valued at $175,000. (ii) Included in the figure for administrative expenses is $18,000, being an advance payment for twelve months' rent from 31 August 2009. (iii) Depreciation is to be charged as follows: (a) Fixtures and fittings: 20 per cent straight line. (b) Motor vehicles: 30 per cent reducing balance. (iv) Provision for doubtful debts should be increased and made equal to 10 per cent of outstanding debtors. (v) During the year the company engaged computer consultants at a cost of E15,000. Their bill has not yet been paid but must be provided for. (vi) It is expected that the accountancy fees for 2009 will amount to $12,000. You are required to prepare the profit and loss account and balance sheet for 31 December 2009