Solve the following questions below

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)

A B C 40 9.4 D m 41 Source of Business Calculation Group With Without Lawrence Lawrence 42 Walks Walks 43 Sold 125 85