Accounting Workbook Section 3 Answers

Cambridge IGCSE and O Level Accounting
Workbook answers
Section 3 (Chapters 8–13 of the Coursebook)
Multiple choice questions
1 A 10 D
2 D 11 B
3 A 12 D
4 C 13 B
5 D 14 C
6 D 15 C
7 C 16 A
8 D 17 B
9 D 18 C
Structured questions
1 a
Jane
Sales account
Date Details Fo. $ Date Details Fo. $
20–7 20–7
Dec 31 Income statement 89 000 Dec 31 Total for year 89 000
1
89 000 89 000
Wages and salaries account

20–7 20–7
Dec 31 Total paid 20 500 Dec 31 Income statement 20 500
20 500 20 500
Rent receivable account

20–7 20–7
Dec 31 Income statement 5 200 Dec 31 Total received 5 200
5 200 5 200
Purchases returns account

20–7 20–7
Dec 31 Income statement 490 Dec 31 Total for year 490
490 490
© Cambridge University Press 2018

Inventory account
20–7 20–7
Jan 1 Balance b/d 4 400 Dec 31 Income statement 4 400
4 400 4 400
20–8
Dec 31 Income statement 5 300 Dec 31 Balance c/d 5 300
5 300 5 300
20–8
Jan 1 Balance b/d 5 300
Drawings account
20–7 20–7
Dec 31 Total for year 8 000 Dec 31 Capital 8 000
8 000 8 000
Capital account
20–7 20–7
2
Dec 31 Drawings 8 000 Jan 1 Balance b/d 40 000
Balance c/d 38 000 Dec 31 Profit 6 000
46 000 46 000
20–8
b The balance decreased because the drawings during the year were greater than the profit
earned in the year. This could have been avoided by taking less drawings or earning a greater
profit (for example the expenses could have possibly been reduced).
2 a
Mustafa
Income statement for the year ended 30 June 20–4
$ $ $
Commission receivable 84 000
Interest receivable 2 300
86 300
Less Rent and rates 12 000
Office expenses 8 050
Salary of assistant 25 000
Postages and telephone expenses 4 950 50 000
Profit for the year 36 300

b Gross profit is the profit earned on goods sold without taking account of the expenses of
running the business. It is calculated by deducting the cost of sales from the sales.
Profit for the year is the final profit after taking account of running expenses and other
income. It is found by adding other income to the gross profit and deducting the expenses.
c It was not possible to calculate a gross profit for Mustafa as he is not operating a trading
business, i.e. he is not buying and selling goods. He is providing a service instead.
3 a
Haleema
Income statement for the year ended 31 August 20–3
$ $ $
Revenue 80 000
Less sales returns 2 000 78 000
Less Cost of sales
Opening inventory 10 000
Purchases 35 000
Carriage inwards 7 500 42 500
52 500
Less Closing inventory 16 000 36 500
Gross profit 41 500
Add Discount received 230
41 730
Less Carriage outwards 5 000
Discount allowed 450 3
Operating expenses 18 000
Wages 24 000 47 450
Loss for the year 5 720
b Purchases: debit income statement, credit purchases account

Sales returns: debit income statement, credit sales returns account
Operating expenses: debit income statement, credit operating expenses account
Discount received: debit discount received account, credit income statement
Opening inventory: debit income statement, credit inventory account

4 a
Kelly
Income statement for the year ended 31 March 20–7
$ $ $
Gross profit 39 100
Add Rent receivable 3 000
42 100
Less Wages 18 650
Motor expenses 1 570
Discount allowed 950
Rent and rates 9 600
Insurance 2 400
Carriage outwards 1 160
Advertising costs 3 110 41 910
Profit from operations 190
Less Loan interest 250
Loss for the year 60
b
Kelly
Capital account
Date Details Fo. $ Date Details Fo. $ 4
20–7 20–6
Ma 31 Drawings 2 340 Apl 1 Balance b/d 50 000
Loss 60
Balance c/d 47 600
50 000 50 000
20–7
Apl 1 Balance b/d 47 600
5 a Machinery – non-current assets Inventory – current asset

Trade payables – current liability Trade receivables – current asset
Drawings – capital Petty cash – current assets
Bank overdraft – current liability Five–year bank loan – non-current liability
Loss for the year – capital
b Non-current assets are usually arranged in increasing order of liquidity with the most
permanent assets coming first, e.g. premises, machinery, fixtures and motor vehicles.
c Current assets are usually arranged in increasing order of liquidity with the furthest away
from cash coming first, e.g. inventory, trade receivables, bank and cash.
d Non-current liabilities are amounts owed which are not due for repayment in less than
one year.

6
Samira
Statement of financial positon at 31 March 20–1
$ $ $
Assets
Non-current assets
Premises 80 000
Fixtures and equipment 30 000
Motor vehicles 15 000
125 000
Current assets
Inventory
Trade receivables 12 000
Cash 9 000
200
21 200
Total assets 146 200
Capital and liabilities
Capital
Opening balance 140 000
Less Loss for the year 11 500
128 500
5
Less Drawings 9 000
119 500
Non-current liabilities
Loan – AB Loans 10 000
Current liabilities
Trade payables 12 000
Bank overdraft 4 700
16 700
Total capital and liabilities 146 200
7
Vijay
Income statement for the year ended 31 May 20–6
$ $ $
Fees from clients 136 000
Add Rent receivable 10 000
146 000
Less Salaries 72 500
Motor vehicle expenses 1 480
Discount allowed 2 100
Rates and insurance 6 750 96 400

Vijay
Statement of financial positon at 31 May 20–6
$ $ $
Assets
Non-current assets
Premises 50 000
Office equipment 10 400
69 700
Current assets
Bank 13 900
Petty cash 100
26 500
Total assets 96 200
Capital
Plus Profit for the year 49 600
129 600
Less Drawings 35 000
94 600 6
Current liabilities

8 a
Bethany
Income statement for the year ended 31 July 20–9
$ $ $
Revenue 62 000
Less sales returns 2 000 60 000
Less Cost of sales
Purchases 36 000
Less purchases returns 3 000
33 000
47 500
Gross profit 18 600
Add Commission receivable 4 000
22 600
Less Bank charges 300
Lighting and heating 2 500
Rates and insurance 5 100
Repairs and maintenance 3 080
Operating expenses 2 070
Carriage outwards 2 950 16 000
7
Bethany
Statement of financial positon at 31 July 20–9
$ $ $
Assets
Non-current assets
Premises 50 000
Fixtures and fittings 10 600
Office equipment 4 900
65 500
Current assets
Inventory 6 100
Bank 1 330
9 660
Total assets 75 160
Capital
76 600
Less Drawings 4 100
72 500
Current liabilities

b Advantage
• better working conditions.
Disadvantages
• no increase in operating profit
• cost is $30 000
• is Bethany able increase her capital?
• can a loan be obtained (will have to pay annual interest and may need security and will
decrease the profit for the year)?
Plus any other suitable comments.
Recommendation – disadvantages outweigh the advantages so recommend do not
proceed.
9 a i The business is treated separately from the owner of the business. Only those
transactions affecting the business are recorded in the accounting records of that
business. For example, the purchase of motor vehicle by the business for business use
would be recorded, but the purchase of a motor vehicle by the owner for personal use
would not be recorded.
ii The accounting records of a business are maintained on the basis of assumed continuity.
It is assumed that the business will continue to operate for an indefinite period of time
and that there is no intention to close down the business or reduce the size of the
business significantly. For example, the non-current assets of a business will appear in
the statement of financial position at their book value: if it was intended to close the
business these should be included at their expected sale values.
iii Every transaction has two aspects – a giving and a receiving. Both these aspects must
be recorded in the books of a business. The term double entry is used to describe how 8
these two aspects of a transaction are recorded in the accounting records. For example,
the purchase of machinery by bank transfer will be debited to the machinery account to
show the ‘receiving’ and credited to the bank account to show the ‘giving’.
iv All the assets and expenses of a business are recorded at their actual cost. This is a
fact and can be easily verified. Inflation can make comparisons difficult when assets
are purchased at different times. This principle is linked to the money measurement
principle. For example, if premises are valued at $80 000 but the business managed to
purchase them for $75 000, it is the latter figure which will be recorded in the accounting
records.
b Understandability
c Information in accounting records can be useful if it can be compared with similar
information about the same business for another accounting period or at another point in
time. It is also useful to be able to make comparisons with similar information about another
business. In order to make meaningful comparisons it is essential that each set of financial
statements are prepared on a comparable basis. Alternatively, it is necessary to be aware
of any different policies which may have been used and the effects of those policies on the
accounting statements being reviewed.
d Two from:
• free from significant errors
• free from bias
• prepared with suitable caution being applied to judgements and estimates
• capable of being depended upon by users as being a true representation of the
underlying transactions and events being represented.

10 a i Capital expenditure is money spent on purchasing non-current assets, or improving

and expanding existing non-current assets. These costs will appear in the statement of
financial position under non-current assets.
ii Revenue expenditure is money spent on running a business on a day-to-day basis. These
costs will appear in the income statement where they are matched against the revenue
for the period.
iii Capital receipts occur when money is received other than from normal trading activities.
This includes the receipt of capital from the owner, the receipt of loans and the proceeds
of sale of a non-current asset. A capital receipt is not entered in the income statement
(apart from a profit or loss on sale of a non-current asset).
iv Revenue receipts occur when money is received from normal trading activities. These
include revenue from the sale of goods, fees from clients and other income such as rent
received, commission received, discount received and so on. These are entered in the
income statement.
b i capital expenditure ii capital expenditure iii revenue expenditure
iv revenue expenditure v capital expenditure
c Profit for the year will be overstated by $100, non-current assets will be overstated by $100.
11 a
Ali
Income statement for the year ended 31 January 20–7
$ $ $
Revenue 36 000
Less Cost of sales
Purchases 18 000 9
Gross profit 19 500
Less General expenses 5 220
Rent and rates 8 100
Insurance 450 13 770
b Two from:
• proceeds of sale of equipment as this is a capital receipt and should not be included in
the income statement
• purchase of equipment as this is capital expenditure and should not be included in the
income statement
• drawings as these do not affect the calculation of the profit as they represent money
taken by the owner and are not a business expense.
c The purchase of new equipment was included as an expense so the value of the non-current
assets would be understated. The proceeds of sale of one quarter of the equipment was
included as income so the value of the non-current assets would be overstated by the book
value of the equipment at the date of sale..
12 a
The cost of inventory is the actual purchase price of the goods plus any additional costs
incurred in bringing the goods to their present position and condition.
b The net realisable value of inventory is the estimated receipts from selling the goods less any
costs of completing the goods or costs of selling.

c Applying the principle of prudence to the valuation of inventory ensures that the profit is not
overstated and the value of the inventory is not overstated.
d DZ22 410 units × $18 7 380
LS15 290 units × ($15 + $2) 4 930
SH49 300 units × $25 7 500
e Inventory DZ22 was valued at selling price as this was lower than the cost price.
Inventory LS15 was valued at the total cost price (the cost of the product plus the cost of
bringing the goods to the premises) as this was lower than the selling price.
Inventory SH49 was valued at the cost price as this was lower than the selling price.
f Profit for the year ended 30 June 20–7 overstated
Current assets at 30 June 20–7 overstated
Martha’s Capital at 1 July 20–7 overstated
Gross profit for the year ending 30 June 20–8 understated
Current assets at 30 June 20–8 no effect
13
Yee
Wages account
20–8
Dec 31 Bank/cash 68 000 20–8
Balance c/d 1 550 Jan 1 Balance b/d 1 300
69 550 Dec 31 Income statement 68 250
10
69 550
20–9
Insurance account
20–8 20–8
Jan 1 Balance b/d 1 140 Dec 31 Income statement 2 340
Dec 31 Bank/cash 2 400 Balance c/d 1 200
3 540 3 540
20–9

14 a
Zeema
20–3 20–4
Oct 1 Balance b/d 550 Sep 30 Bank/cash 8 250
20–4
Sep 30 Income statement 6 600
Balance c/d 1 100
8 250 8 250
20–4
Oct 1 Balance b/d 1 100
b
Zeema
Extract from Income statement for the year ended 30 September 20–4
Income $
Rent receivable 6 600
15 a
Mandeep
11
20–4 20–4
Jun 30 Income statement 1 300 Jan 1 Bank 650
Balance c/d 650 Apl 1 Bank 650
Jun 30 Bank 650
1 950 1 950
20–4
Jul 1 Balance b/d 650
b
Mandeep
Commission receivable account
20–3 20–3
Jul 1 Balance b/d 520 Jul 2 Bank 520
Jun 30 Income statement 1 860 Oct 3 Bank 410
20–4
Jan 3 Bank 630
Mar 2 Bank 340
Jun 30 Balance c/d 480
2 380 2 380
20–4
Jul 1 Balance b/d 480

c Only revenue related to the particular time period covered by the income statement should
be included, irrespective of the actual amount received. The items have been adjusted for
the amounts prepaid or accrued so that they represent the revenue for the year.
16 a
Jenny
Income statement for the year ended 31 December 20–6
$ $ $
Revenue 350 000
Less Cost of sales
Purchases 280 000
Less purchases returns 10 000
270 000
295 000
Gross profit 79 000
Add Rent receivable (5 500 + 500) 6 000
Discount received 4 100
89 100
Less Operating expenses 12 200
Rates and insurance (5 490 − 400) 5 090
Repairs and maintenance 3 870 12
Salaries (41 000 + 3 500) 44 500
Motor vehicle expenses 2 940
Bank charges 790 69 390
Jenny
Statement of financial positon at 31 December 20–6
$ $ $
Assets
Non-current assets
Premises 80 000
103 500
Current assets
Inventory 24 000
Other receivables (400 + 500) 900
54 000


Capital
129 710
112 710
Current liabilities
Other payables 3 500
Bank overdraft (17 200 + 790) 17 990
44 790
b Advantages
• not due for repayment for three years
• lower percentage rate of interest
• definite date set for repayment (unlike overdraft when can be called in at short notice)
Disadvantages
• will need to provide security
• will need to enough funds are available to repay the loan when due
• total interest may be higher as is charged on full amount of loan (overdraft interest 13
• charged only on actual amount outstanding)
Plus any other suitable comments
Recommendation–may depend on whether the overdraft is regarded as temporary finance
or whether it is thought that long-term finance is required. If it is only required in the short
term the business should continue with the overdraft. If long-term finance is required, the
loan may be the better option.
17 a
Leo
Income statement for the year ended 31 October 20–7
$ $ $
Gross profit 34 500
Less Stationery (380 − 95) 285
Wages (19 800 + 790) 20 590
Rent and rates (2 600 − 220) 2 380
Heating and lighting 2 200
Bank charges 200 28 755
Profit from operations 5 745
Less Loan interest 250

b
Leo
Statement of financial positon at 31 October 20–7
$ $ $
Assets
Non-current assets
Equipment 32 000
45 600
Current assets
Inventory 6 500
Inventory of stationery 95
Other receivables 220
10 555
Total assets 56 155
Capital
49 495
Less Drawings 5 000
14
44 495
Loan – FS Limited 5 000
Current liabilities
Other payables (790 + 250) 1 040
Bank overdraft 2 120
6 660
18 a
Depreciation is an estimate of the loss in value of a non-current asset over its expected
working life.
b Two from: physical deterioration, economic reasons, passage of time and depletion.
c Depreciation is charged to avoid overstating the value of non-current assets as most lose
value over a period of time. It also ensures that the cost of the non-current assets is spread
over the years which benefit from the use of those assets. This also means that the profit is
not overstated.
d Principles of prudence and matching.
e i Straight line method of depreciation = $3 600 per annum
ii Reducing balance method of depreciation
Year ended 31 July 20–2 − 40% × $20 000 $8 000
Year ended 31 July 20–3 − 40% × ($20 000 − $8 000) $4 800
Year ended 31 July 20–4 − 40% × ($20 000 − $12 800) $2 880

19 a
Gugu
Equipment account
20–1 20–2
May 1 Superquip b/d 30 000 Apl 30 Balance c/d 30 000
30 000 30 000
20–2 20–3
May 1 Balance b/d 30 000 Apl 30 Balance c/d 40 000
Nov 2 Bank 10 000
40 000 40 000
20–3
May 1 Balance b/d 40 000
Provision for depreciation of equipment account

20–2 20–2
Apl 30 Balance c/d 6 000 Apl 30 Income statement 6 000
6 000 6 000
20–2
20–3 May 1 Balance b/d 6 000
15
Apl 30 Balance c/d 13 000 20–3
Apl 30 Income statement
(6 000 + 1 000) 7 000
13 000 13 000
20–3
b
Gugu
Extract from income statement for the year ended 30 April 20–3
Expenses $
Depreciation – equipment 7 000
c
Gugu
Extract from statement of financial position at 30 April 20–3
$ $ $
Cost Accumulated Net book
deprecation value
Non-current assets
Equipment 40 000 13 000 27 000

d Depreciation actually charged 20% × (40 000 − 13 000) = 5 400

Depreciation which should have been charged 20% × 40 000 = 8 000
Both the profit for the year and the value of the equipment will be overstated by 2 600.
20 a–b
Dinesh
Machinery account
20–6 20–6
Jan 1 Balance b/d 18 000 Jun 30 Disposal 9 000
Jul 1 Western Ltd 12 000 Dec 31 Balance c/d 21 000
30 000 30 000
20–7
Provision for depreciation of machinery account

20–6 20–6
Jun 30 Disposal 5 400 Jan 1 Balance b/d 10 800
Dec 31 Balance c/d 9 600 Dec 31 Income statement
(1 800 + 2 400) 4 200
16
15 000 15 000
20–7
Disposal of machinery account

20–6 20–6
Jun 30 Machinery 9 000 Jun 30 Provision for 5 400
depreciation
Cash 2 800
Dec 31 Income statement 800
9 000 9 000
21 a
Depreciation is an application of the principle of matching because it spreads the cost of
the non-current asset over the years which benefit from the use of that asset. Depreciation
is an application of the principle of prudence as it ensures that the non-current assets are
recorded as more realistic values and are not overstated.
b The same method of depreciation should be used each year for the same type of asset in
order to apply the principle of consistency.

c
Melody
Equipment account
20–4 20–5
Oct 1 Superquip 10 000 Sep 30 Balance c/d 10 000
10 000 10 000
20–5 20–6
Oct 1 Balance b/d 10 000 Sep 30 Balance c/d 14 000
Bank 4 000
14 000 14 000
20–6 20–7
Oct 1 Balance b/d 14 000 Mar 31 Disposal 5 000
Sep 30 Balance c/d 9 000
14 000 14 000
20–7
Provision for depreciation of equipment account

20–5 20–5
Sep 30 Balance c/d 2 000 Sep 30 Income statement 2 000 17
2 000 2 000
20–6 20–5
Sep 30 Balance c/d 4 800 Oct 1 Balance b/d 2 000
20–6
Sep 30 Income statement
(2 000 + 800) 2 800
4 800 4 800
20–7 20–6
Mar 31 Disposal 2 000 Oct 1 Balance b/d 4 800
(1 000 + 1 000)
Sep 30 Balance c/d 4 600 20–7
Sep 30 Income statement
(1 000 + 800) 1 800
6 600 6 600
20–7

Disposal of equipment account

20–7 20–7
May 31 Equipment 5 000 May 31 Provision for depreciation 2 000
Cash 1 800
Sep 30 Income statement 1 200
5 000 5 000
d
Melody
Extract from income statement for the year ended 30 September 20–7
Expenses $
Loss on disposal 1 200
Depreciation – equipment 1 800
e
Melody
Extract from statement of financial position at 30 September 20–7
$ $ $
deprecation value
Non-current assets 18
Equipment 9 000 4 600 4 400
22 a
Dave
Income statement for the year ended 31 July 20–9
$ $ $
Fees 102 000
Less Office expenses 11 550
Wages and salaries 42 500
Bank charges 140
Depreciation fixtures and fittings 950
Depreciation motor vehicle 4 480 74 350
Less Loan interest (300 + 300) 600

b
Dave
Statement of financial positon at 31 July 20–9
$ $ $
depreciation value
Assets
Non-current assets
Premises 55 000 55 000
Fixtures and fittings 9 500 1 900 7 600
Motor vehicles 28 000 10 080 17 920
92 500 11 980 80 520
Current assets
8 120
Total assets 88 640
Capital
95 050 19

76 450
Loan – QT Limited 10 000
Current liabilities
Trade payables 590
Other payables 300
Bank overdraft (1 160 + 140) 1 300
2 190

23 a
Varsha
Income statement for the year ended 31 December 20–0
$ $ $
Revenue 190 000
Less Cost of sales
Purchases 120 000
Less Goods for own use 940 119 060
126 060
Gross profit 72 440
Add Commission receivable (4 000 + 200) 4 200
Discount received 1 950
78 590
Less Operating expenses 21 200
Wages (31 750 + 2 140) 33 890
Depreciation equipment 1 900
Depreciation motor vehicles 1 536 66 766
20
b
Varsha
Statement of financial positon at 31 December 20–0
$ $ $
depreciation value
Assets
Non-current assets
Premises 40 000 40 000
Equipment 19 000 7 600 11 400
Motor vehicles 12 000 5 856 6 144
71 000 13 456 57 544
Current assets
Inventory 8 500
Other receivables (200 + 960) 1 160
Bank 5 790
29 850
Total assets 87 394


Capital
79 644
Less Drawings (8 480 + 940) 9 420
70 224
Loan – A1 Finance 6 000
Current liabilities
Other payables (2 140 + 90) 2 230
11 170
24 a i Irrecoverable debts are amounts owing to a business which will not be paid by the credit
customers.
ii Debts written off recovered occur when credit customers pay all or some of the amount
owed after the amounts were written off.
iii A provision for doubtful debts is an estimate of the amount which a business will lose in
a financial hear because of irrecoverable debts.
b 21
Waqas
Provision for doubtful debts account
20–2 20–2
Aug 31 Balance c/d 165 Aug 31 Income statement 165
165 165
20–3 20–2
Aug 31 Balance c/d 186 Sep 1 Balance b/d 165
20–3
Aug 31 Income statement 21
186 186
20–4 20–3
Aug 31 Income statement 39 Sep 1 Balance b/d 186
Balance c/d 147
186 186
20–4
Sep 1 Balance b/d 147

c
Waqas
Extract from statement of financial position at 31 August 20–2
$ $ $
Current assets
Less Provision for doubtful debts 165 5 335

$ $ $
Current assets

$ $ $
Current assets
25 a
22
Hiba
J Mavuso account
20–7 20–7
Oct 30 Balance b/d 480 Oct 30 Bank 450
Irrecoverable debts 30
480 480
K Ngwenga account
20–7 20–3
Oct 30 Balance b/d 1 520 Oct 30 Bank 1064
1 520 1 520
L Makamba account
20–7 20–3
Oct 30 Balance b/d 250 Oct 30 Irrecoverable debts 250
250 250

Irrecoverable debts account

20–7 20–3
Oct 30 J Mavuso 30 Oct 31 Income statement 736
K Ngwenga 456
L Makamba 250
736 736

20–7 20–7
Oct 31 Balance c/d 800 Oct 31 Income statement 800
800 800
20–7
Nov 1 Balance b/d 800
b Not following the principles of:

• consistency – once an accounting policy has been decided it should be applied in
successive years unless good reason not to do so
• prudence – not anticipating possible losses
• matching – not matching the sales for which are not likely to be paid against the year in
23
which those sales were made.
Although there has been no significant decrease in trade receivables it is still likely that some
of these will be irrecoverable debts.
Recommendation – reduce provision not remove it.
26 Irrecoverable debts account:
PK Stores – a debt owed by PK Stores was written off as irrecoverable
Double entry – credit PK Stores account
Sellfast & Co – a debt owed by Sellfast & Co was written off as irrecoverable
Double entry – credit Sellfast & Co account
Income statement – the total of the irrecoverable debts for the year was transferred to the
income statement
Double entry – debit income statement
Provision for doubtful debts account:
Balance b/d – the total provision for doubtful debts at the start of the year
Double entry – debit provision for doubtful debts account for the previous financial year
Income statement – the difference between the existing provision and the amount which is
required at the end of the current financial year which represents the surplus amount of the
provision (which is transferred to the income statement as income)
Double entry – credit income statement
Balance – the provision for doubtful debts at the end of the year which is carried down to start
the following financial year
Double entry – debit the provision for doubtful debts account for the current financial year and
credit the provision for doubtful debts account for the next financial year

27 a
Alice
Safat Stores account
20–4 20–4
Nov 1 Balance b/d 590 Nov 27 Bank 490
590 590
El Nil Traders account

20–4 20–4
Nov 1 Balance b/d 1 400 Nov 5 Bank 1 372
Nov 14 Sales 420 Discount 28
1820 Nov 30 Balance c/d 1 420
1 820 1 820
20–4
Dec 1 Balance b/d 420
Irrecoverable debts account

Date Details Fo. $ Date Details Fo. $ 24
20–4 20–4
Nov 27 Safat Stores 100 Nov 30 Income statement 100
100 100

20–4 20–3
Nov 30 Balance c/d 540 Dec 1 Balance b/d 500
20–4
Nov 30 Income statement 40
540 540
20–4
Dec 1 Balance b/d 540
Debts recovered account

20–4 20–4
Nov 30 Income statement 50 Nov 25 Bank (Ramsis Road 50
Traders)
50 50

b
Alice
Extract from income statement for the year ended 30 November 20–4
$
Income
Debts recovered 50
Expenses
Provision for doubtful debts 40
c
Alice
Extract from statement of financial position at 30 November 20–4
$ $ $
Current assets
d One from:
• principle of prudence – ensures that the profit for the year is not overstated and that the
trade receivables are shown at a realistic value in the statement of financial position
• principle of matching – the amount of sales for which Alice is unlikely to be paid is
regarded as an expense of the year in which those sales are made. 25
28
Thabo
Income statement for the year ended 28 February 20–7
$ $ $
Income from customers 42 000
Add Commission receivable 2 420
44 420
Less Motor expenses (2 850 − 62) 2 788
Insurance 1 970
Repairs and maintenance 2 590
Wages 26 100
Provision for doubtful debts
((5% × 4 300) − 200) 15
Operating expenses (310 + 43) 353
Depreciation equipment
(10 860 − 10 120) 740
Depreciation motor vehicles
(16 000 − 13 850) 2 150 36 856

Thabo
Statement of financial positon at 28 February 20-7
$ $ $
Assets
Non-current assets at valuation
Equipment 10 120
23 970
Current assets
Bank 1 040
5 187
Total assets 29 157
Capital
37 564
Less Drawings 9 200 26
28 364
Current liabilities
Trade payables 750
Other payables 43
793

29 a
Kala
$ $ $
Gross profit 140 000
Add Discount received 3 200
Reduction in provision for doubtful
debts (850 − (3% × (24 300–100)) 124
143 324
Less Rent 13 100
Rates and insurance 8 100
Wages 79 500
Office expenses (2 100 − 122) 1 978
Operating expenses (6 300 + 80) 6 380
Irrecoverable debt 100
Depreciation fixtures and fittings
(10% × (39 000 − 7 410) 3 159
(20% × (18 000 − 6 480) 2 304 114 621
27

b
Kala
$ $ $
depreciation value
Assets
Non-current assets
Fixtures and fittings 39 000 10 569 28 431
Motor vehicles 18 000 8 784 9 216
57 000 19 353 37 647
Current assets
Inventory 39 050
Inventory of stationery 122
Trade receivables (24 300 − 100) 24 200
Bank 12 190
74 836
Capital
Opening balance 70 000 28
98 703
80 903
Current liabilities
Other payables 80
31 580

30 a
Tahir
$ $ $
Gross profit 42 000
Add Commission receivable (2 800 + 160) 2 960
Reduction in provision for doubtful
debts (420 − (4% × 9 900)) 24
44 984
Less Administration expenses 4 950
Wages 22 400
Depreciation fixtures and equipment
(15% × 22 000) 3 300
(20% × (18 000 − 6 480) 2 304 40 184
29

b
Tahir
$ $ $
depreciation value
Assets
Non-current assets
Premises 60 000 60 000
Fixtures and equipment 22 000 9 900 12 100
Motor vehicles 18 000 8 784 9 216
100 000 18 684 81 316
Current assets
Inventory 8 200
Other receivables (160 + 600) 760
Bank 3 200
21 664
Capital 30
90 700
Less Drawings 5 500
85 200
6% loan 10 000
Current liabilities
Other payables 300
7 780

Accounting Workbook Section 3 Answers

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Accounting Workbook Section 3 Answers

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Cambridge IGCSE and O Level Accounting

Wages and salaries account

Rent receivable account

Purchases returns account

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© Cambridge University Press 2018

b Purchases: debit income statement, credit purchases account

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5 a Machinery – non-current assets Inventory – current asset

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10 a i Capital expenditure is money spent on purchasing non-current assets, or improving

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Capital and liabilities

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Provision for depreciation of equipment account

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d Depreciation actually charged 20% × (40 000 − 13 000) = 5 400

Provision for depreciation of machinery account

Disposal of machinery account

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Provision for depreciation of equipment account

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Disposal of equipment account

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Less Drawings 18 600

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Capital and liabilities

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Extract from statement of financial position at 31 August 20–3

Extract from statement of financial position at 31 August 20–4

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Irrecoverable debts account

Provision for doubtful debts account

b Not following the principles of:

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El Nil Traders account

Irrecoverable debts account

Provision for doubtful debts account

Debts recovered account

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© Cambridge University Press 2018

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10 a i Capital expenditure is money spent on purchasing non-current assets, or improving