An Introduction To Double-Entry Bookkeeping: Answers To End-Of-Chapter Questions

An introduction
1.1.1 to double-entry
bookkeeping
Answers to End-of-chapter questions
2 Sole trader: one individual owns the business; the individual controls the
business; any profit made belongs to the individual; the individual can lose his
or her investment in the business and private resources as well if the business
is unsuccessful.
Partnership: there are several owners; jointly responsible for running the
business and for the debts of the business; partners share in profits or losses;
they can lose their investment in the business and private resources if the
partnership is unsuccessful.
Limited company: the company is owned by shareholders; shareholders elect
directors to run the company on their behalf; shareholders receive a share of
profits in the form of a dividend if the company is successful; shareholders
only lose the amount they have agreed to invest should the company be
unsuccessful.
Not-for-profit organisation: this type of organisation includes clubs, societies,
charities, etc. it has members rather than owners; the main aim is to
provide facilities for members to enjoy or to give support to needy causes;
profit is not an objective, but these organisations need to be financially viable.
4 a Non-current asset: resources owned by a business which will benefit the
business in the long term (more than one year) (e.g. motor vehicles).
b
Current asset: resources owned by a business that will benefit the business
in the short-term (less than one year) (e.g. cash at bank)).
c
Non-current liability: an amount owed by a business that will not be repaid
until the next accounting period at the earliest (e.g. a bank loan).
d
Current liability: an amount owed by the business that will be paid within
the current accounting period (e.g. an amount due to a trade payable).
e
Capital: the owner’s investment in the business.
6 Business A Capital $60 000
Business B Capital $31 000
Business C Liabilities $33 000
Business D Liabilities $160 000
Business E Assets $190 000
Business F Assets $640 000
© Oxford University Press 2015: this may be reproduced for class use solely for the purchaser’s institute 1
8
1 Sept Debit: Bank
Credit: Capital
1 Sept Debit: Purchases
Credit: Trade payable
3 Sept Debit: Cash
Credit: Sales
3 Sept Debit: Trade receivable
Credit: Sales
4 Sept Debit: Motor vehicle repairs
Credit: Bank
5 Sept Debit: Purchases
Credit: Bank
5 Sept Debit: Drawings
Credit: Bank
6 Sept Debit: Motor vehicles
Credit: Bank
10 a Capital is total assets $22 300 less liabilities $4000, i.e. $18 300
Dr Bank Cr
Jan 1 Balance 3 400 Jan 4 Rent 500
12 Bank loan 2 000 23 Shop fittings 1 700
29 HLK 4 900 25 Trez Ltd 2 900
Dr Cash Cr
Jan 1 Balance 900 Jan 2 Purchases 800
9 Sales 1 700 14 Drawings 700
26 Wages 1 000
Dr Shop fittings Cr
Jan 1 Balance 18 000
23 Bank 1 700
Dr Bank loan Cr
Jan 1 Balance 4 000
12 Bank 2 000
Dr Capital Cr
Jan 1 Balance 18 300

Dr Purchases Cr
Jan 2 Cash 800
6 Trez Ltd 5 800

Dr Rent Cr
Jan 4 Bank 500
Dr Sales Cr
Jan 9 Cash 1 700
19 HLK Ltd 4 900
Dr Drawings Cr
Jan 14 Cash 700
Dr Wages Cr
Jan 26 Cash 1 000
Dr Trade payable (Trez Ltd) Cr

Jan 25 Bank 2 900 Jan 6 Purchases 5 800
Dr Trade receivable (HLK) Cr

Jan 19 Sales 4 900 Jan 29 Bank 4 900
Source
1.1.2 documents and
books of prime
entry
2 B
4 A
6 B
8 B
10 B
12
Sales journal
Date Details Invoice number $
Aug 5 Bartford Ltd T339 1 480
10 J Williams T340 920
23 Bartford Ltd T341 2 840
28 J Williams T342 1 500
Total sales 6 740
SALES LEDGER
Dr Bartford Ltd Cr
Aug 5 Sales 1 480
23 Sales 2 840
Dr J Williams Cr
Aug 10 Sales 920
28 Sales 1 500
GENERAL LEDGER
Dr Sales Cr
Aug 31 Sales journal 6 740
14
Returns outwards journal
Date Details Credit note $
number
March 11 Scott Ltd 242 275
18 Taylor & Sons 375 328
29 Scott Ltd 247 440
Total returns outwards 1 043
PURCHASES LEDGER
Dr Scott Ltd Cr
March 11 Returns outwards 275
29 Returns outwards 440
Dr Taylor & Sons Cr

March 18 Returns outwards 328
GENERAL LEDGER
Dr Returns outwards Cr
March 31 Returns outwards journal 1 043
16
Dr CASH BOOK Cr
Discounts Cash Bank Discounts Cash Bank
allowed received
$ $ $ $ $ $
Nov 1 Balances 2 190 7 330 Nov 5 TM Davis 80 1 520
8 Fray Ltd 18 882 17 Bank 1 250
14 Sales 1 420 21 Ryan & Co 115 2 185
17 Cash 1 250
24 VK Watson 13 637
31 195
GENERAL LEDGER
Dr Discounts allowed Cr
Nov 30 Cash book 31
Dr Discounts received Cr
Nov 30 Cash book 195
18
Receipts Date Details Voucher Postage Stationery Vehicle Casual Office Purchase
number expenses labour expenses ledger
$ $ $ $ $ $ $ $
14.55 Feb 1 Balance
205.45 1 Cash
2 Stationery 141 9.70 9.70
8 Fuel 142 35.50 35.50
10 Postage 143 11.10 11.10
13 Casual labour 144 38.25 38.25
15 Office 145 8.42 8.42
expenses
18 Ryan & Co Ltd 146 17.11 17.11
21 Fuel 147 34.22 34.22
23 BY Scott 148 9.28 9.28
25 Postage 149 8.56 8.56
26 Casual labour 150 21.80 21.80
193.94 19.66 9.70 69.72 60.05 8.42 26.39
20
Feb 4 Purchases journal
7 Cash book
11 Petty cash book
15 Returns outwards journal
17 General journal
18 Cash book
22 General journal
24 Returns inwards journal
28 General journal
22
JOURNAL
Date Details Dr Cr
$ $
May 1 Bank 5 000
Fixtures and fittings 23 000
Bank loan 8 000
Capital 20 000
Entries to record the assets, liability and capital
on opening books of account
12 Administration expenses 105
Purchases 105
Correction of posting error
15 Fixtures and fittings 1 050
Albo Shelving Ltd 1 050
Purchase of fixtures on credit invoice 3088
30 Discount received 100
Trade payable: TX Singh Ltd 100
Cancellation of discount
Dr CASH BOOK Cr
allowed received
$ $ $ $ $ $
May 1 General journal 5 000
PURCHASES LEDGER
Dr Albo Shelving Ltd Cr
May 15 Fixtures 1 050
Dr TX Singh Ltd Cr
May 30 Discounts received 100
GENERAL LEDGER
Dr Fixtures and fittings Cr
15 Albo Shelving Ltd 1 050
Dr Bank loan Cr
Dr Capital Cr
Dr Administration expenses Cr
May 12 Purchases 105
Dr Purchases Cr
May 12 Administration 105
expenses
May 30 TX Singh Ltd 100
Preparing the
1.1.3 books of account
and the trial
balance
2
Trial balance at 31 March 2015
Dr Cr
$ $
Capital 13 700
Cash at bank 600
Cash in hand 100
Trade payables 2 500
Trade receivables 1 400
Drawings 2 200
Electricity 300
Furniture 14 900
Loan interest 500
Purchases 7 700
Salaries 11 200
Sales 22 700
38 900 38 900
4
JOURNAL
Date Details Dr Cr
$ $
Nov 14 Oldbridge Retail Unit 140
Discounts allowed 140
Cancellation of discount allowed
20 Furniture and equipment 1 460
Deva Office Supplies 1 460
Purchase of equipment for business use on credit,
invoice number 2789
Dr CASH BOOK Cr
allowed received
$ $ $ $ $ $
Nov 1 Balance 440 Nov 1 Balance 1 480
7 Oldbridge Retail Unit 140 2 660 1 Operating expenses 380
12 Sales 2 460 13 Drawings 720
18 Cash 1 800 18 Bank 1 800
29 Peterson Stores 110 3 430 25 M Chin Ltd 160 3 040
250 160
PURCHASES JOURNAL
Nov 3 LDZ Ltd 891 3 000
Total purchases 3 000
SALES JOURNAL
Nov 17 Peterson Stores 407 1 960
Total sales 1 960
RETURNS OUTWARDS JOURNAL

Date Details Credit note number $
Nov 8 LDZ Ltd 223 220
Total returns outwards 220
RETURNS INWARDS JOURNAL

Date Details Credit note number $
Nov 22 Peterson Stores 082 120
Total returns inwards 120
PURCHASES LEDGER
Dr LDZ Ltd Cr
Nov 8 Purchases returns 220 Nov 1 Balance 4 500
3 Purchases 3 000
Dr M Chin Ltd Cr
Nov 25 Bank 3 040 Nov 1 Balance 3 200
25 Disc received 160
SALES LEDGER
Dr Oldbridge Retail Unit (Account number 1) Cr
Nov 1 Balance 2 800 Nov 7 Bank 2 660
14 Disc allowed 140 7 Disc allowed 140
Dr Peterson Stores (Account number 2) Cr

Nov 1 Balance 1 700 Nov 22 Sales returns 120
17 Sales 1 960 29 Bank 3 430
29 Disc allowed 110
GENERAL LEDGER
Dr Deva Office Supplies Cr
Nov 20 Furniture and equipment 1 460
Dr Capital Cr
Nov 1 Balance 103 560
Dr Discounts allowed Cr
Nov 1 Balance 1 320 Nov 14 Oldbridge
30 Cash book 250 Retail Unit 140
Nov 1 Balance 1 890
30 Cash book 160
Dr Drawings Cr
13 Bank 720
Dr Furniture and equipment Cr

20 Deva Office 1 460
Supplies
Dr Operating expenses Cr
1 Cash 380
Dr Purchases Cr
30 Purchases journal 3 000
Dr Returns inwards Cr
Nov 1 Balance 4 890
30 Returns inwards journal 120
Dr Returns outwards Cr
Nov 1 Balance 5 130
30 Returns outwards journal 220
Dr Sales Cr
12 Cash 2 460
30 Sales journal 1 960
Trial balance at 30 November 2012
Dr Cr
$ $
Cash 720
Bank 2 650
Capital 103 560
Discounts allowed 1 430
Discounts received 2 050
Drawings 38 040
Furniture and equipment 181 460
Operating expenses 45 740
Purchases 581 270
Returns inwards 5 010
Returns outwards 5 350
Sales 736 760
Trade payable: LDZ Ltd 7 280
Deva Office Supplies 1 460
Trade receivable Oldbridge Retail Unit 140
856 460 856 460
6
Dr Equipment Cr
Jan 1 Balance 3,240 Jan 11 Bank 1,050
15 Bank 4,360 31 Balance c/d 6,550
7,600 7,600
Feb 1 Balance b/d 6,550
Dr Trade payable: UVY Ltd Cr

Jan 31 Balance c/d 6,190 Jan 1 Balance 4,150
16 Purchases 2,040
6,190 6,190
Dr Bank loan Cr
Jan 31 Bank 1,320 Jan 1 Balance 11,000
31 Balance c/d 9,680
11,000 11,000
Dr Fittings Cr
Jan 1 Balance 14,900
Dr Equipment Cr
Jan 1 Balance 4,980 Jan 31 Balance c/d 8,050
18 Bank 3,070
8,050 8,050
Capital and
1.1.4 revenue
expenditure
2 Revenue expenditure is money spent that has a short-term benefit to the
business.
Examples: rent, motor expenses, repairs and renewals, cleaning expenses, etc.
4 Profits would be understated.
6 a Revenue expenditure.
b Capital expenditure.
c Revenue expenditure.
d Capital expenditure.
Accounting
1.1.5 concepts and
principles
2 A
4 a Consistency
b Materiality
c Realisation
d Matching
Accounting for
1.2.1 non-current
assets
2 a Year 1: $24 000 × 25% = $6 000. Net book value (NBV) = $18 000
Year 2: $18 000 × 25% = $4 500. NBV = $13 500
Year 3: $13 500 × 25% = $3 375. NBV = $10 125
b
Motor vehicle at cost
Dr Cr
$ $
Year 1 Bank 24 000
Motor vehicle – provision for depreciation

Dr Cr
$ $
Year 1 Balance c/d 6 000 Year 1 Income statement 6 000
Year 2 Balance c/d 10 500 Year 2 Balance b/d 6 000
Year 2 Income statement 4 500
10 500 10 500
Year 3 Balance c/d 13 875 Year 3 Balance b/d 10 500
Year 3 Income statement 3 375
13 875 13 875
Year 4 Balance b/d 13 875
4 Annual depreciation = $18 000 − $4 000 = $14 000/4 years = $3 500 per
annum.
$
Cost 18 000
Depreciation Year 1 3 500
Net book value 14 500
Sale proceeds 8 500
Profit on sale 1 000
6 Depreciation year 1: $32 000 × 25% =
$8 000. Net book value (NBV)
= $24 000
Depreciation year 2: $24 000 × 25% = $6 000. NBV = $18 000
Depreciation year 3: $18 000 × 25% = $4 500. NBV = $13 500
Motor van at cost
$ $
2011 2014
1 April Bank 32 000 31 March Disposals account 32 000
Motor van – provision for depreciation

$ $
2012 2012
31 March Balance c/d 8 000 31 March Income statement 8 000
2013 2013
31 March Balance c/d 14 000 1 April Balance b/d 8 000
31 March Income statement 6 000
14 000 14 000
2014 2014
31 March Disposals account 18 500 1 April Balance b/d 14 000
18 500 18 500
Disposal of non-current assets

$ $
2014 2014
31 March Motor van at cost 32 000 31 March Provision for depreciation 18 500
31 March Bank 12 000
32 000 32 000
8 a
Plant and machinery at cost
Balance b/d 160 000 Disposal of non-current assets 14 000
Bank 34 000 Disposal of non-current assets 8 000
Disposal of non-current assets 4 000 Balance c/d 176 000
198 000 198 000
Balance b/d 176 000
b
Plant and machinery – provision for depreciation
Disposal of non-current assets 9 000 Balance b/d 96 000
Disposal of non-current assets 7 000
Balance c/d 80 000
96 000 96 000
Balance b/d 80 000
c
Disposal of non-current assets
Plant and machinery at cost 14 000 Plant and machinery at cost 4 000
Plant and machinery at cost 8 000 Plant and machinery depreciation 9 000
Plant and machinery depreciation 7 000
Income statement 2 000
22 000 22 000
1.3.1 Verification:
trial balance

2 C
4 D
6 D
8 Error of omission – both sides of the transaction have been omitted from the
records.
Compensating error – errors on the debit side are equal to errors on the credit
side.
Error of commission – amount posted to an incorrect account of the same class.
Error of principle – amount posted to an incorrect class of account.
Error of original entry – an error is made transferring the amount from the
source document to the book of original entry.
Error of reversal – the account that should have been debited is credited and
vice versa.
10
Dr ($) Cr ($)
Bank overdraft 11 276
Capital account 16 983
Carriage outwards 652
Drawings 9 420
Inventory at 1 February 2011 22 030
Non-current assets at cost 37 200
Purchases 65 152
Rent payable 12 600
Returns inwards 325
Revenue 159 238
Sundry expenses 12 049
Wages and salaries 26 337
200 322 200 322
12
Dr ($) Cr ($)
Capital account 65 183
Carriage inwards 1 882
Carriage outwards 1 270
Computer equipment at cost 27 115
Drawings 18 240
Fixtures and fittings at cost 24 625
Inventory at 1 April 2013 45 750
Purchases 96 512
Rent and rates 17 400
Returns inwards 945
Revenue 279 546
Bank balance 40 532
364 531 364 531
14
Suspense account
Dr Cr
$ $
Purchases 20 Drawings 800
Bernard 500
Stationery 9
Opening balance 271
800 800
16
Original profit for the year 4 970
a Inventory Increase 1 200
b Discount received Increase 480
c Insurance Increase 9
d Purchase invoice Decrease (5 840)
e Rent received Decrease (600)
f Cleaning No effect –
Amended profit for the year 219
1.3.2 Verification: bank
reconciliation

2 a Cash or cheques received and entered in the cash book that have not yet
appeared on the bank statement.
b A fixed payment made at regular intervals by the bank on the instructions
of the account holder.
4
$
Balance as per cash book (1 912.86)
Add: unpresented cheques 277.10
Less: uncredited bankings (463.28)
Balance as per bank statement (2 099.04)
6
$
Balance as per bank statement (916.05)
Less: unpresented cheques (161.33)
Add: uncredited bankings 304.85
Balance as per bank statement (772.53)
8
Cash Book
Dr Cr
2012 Details $ 2012 Details $
1 Jan Balance b/d 2 880.12 2 Jan 271012 Evans 730.85
1 Jan Andrews 1 435.60 2 Jan 271013 Swann 416.56
4 Jan Portland 702.16 2 Jan 271014 Morris 1 552.13
6 Jan Wright 1 272.05 3 Jan 271015 Friar 390.44
2 Jan CT James 312.00 3 Jan 271016 Dawson 1 138.74
4 Jan Bank interest 209.55 4 Jan Bank charges 132.40
5 Jan Direct debit: Green 110.50
6 Jan Balance c/d 2 339.86
6 811.48 6 811.48
7 Jan Balance b/d 2 339.86
Bank reconciliation at 6 January 2012
$
Balance as per cash book 2 339.86
Add: unpresented cheques 1 552.13
390.44 1 942.57
4 282.43
Less: uncredited bankings (1 272.05)
Balance as per bank statement 3 010.38
Verification:
1.3.3 ledger control
accounts
2 B
4 Error of commission – an amount is posted to the wrong person’s account.
Error of omission – where an entry is completely omitted from the records.
Error of original entry – where an error is made transferring the amount from
the source document.
6
Sales ledger control account
Dr Cr
$ $
1 Jan Balance b/d 42 356 31 Jan Sales returns journal 1 442
31 Jan Sales journal 68 902 31 Jan Bank 62 837
31 Jan Discounts allowed 840
31 Jan Irrecoverable debts 225
written off
31 Jan Contra 532
31 Jan Balance c/d 45 382
111 258 111 258
1 Feb Balance b/d 45 382
8
Sales ledger control account
Dr Cr
$ $
1 Dec Balance b/d 37 485 31 Dec Bank 72 313
31 Dec Sales journal 75 605 31 Dec Sales returns journal 914
31 Dec Bank 121 31 Dec Irrecoverable debt 882
written off
31 Dec Discount allowed 634
31 Dec Balance c/d 38 468
113 211 113 211
1 Jan Balance b/d 38 468
Adjustments
1.4.1 to financial
statements
2 D
4
Dr ($) Cr ($)
Prepayments 285.71
Property rental 285.71
Being property rental prepaid
Prepayments 400
Hotel expenses 400
Being hotel expenses prepaid
6
Adjustments
uuDepreciation motor vehicle: $54 600 − $23 888 = $30 172 × 25% = $7 678.
Debit depreciation (income statement), credit provision for depreciation
(statement of financial position).
uuDebit prepayments, credit property rental $4 800.
uuDebit light and heat, credit accruals $520.
uuProvision for doubtful receivable $35 870 × 2%. Debit provision for doubtful
receivables (income statement), credit trade receivables (statement of financial
position).
uuInventory: debit statement of financial position, credit income statement.
Daniel
Income statement for the year ended 31 March 2015
$ $ $
Revenue 212 520
Less: returns inwards (1 251)
211 269
Cost of sales
Opening inventory 10 250
Purchases 109 690
Less: returns outwards 1 036
108 654
Add: carriage inwards 1 280 109 934
120 184
Less: closing inventory 12 440 107 744
Gross profit 103 525
Add: discount received 1 452
104 977
Less: expenses
Light and heat 3 629
Motor expenses 6 846
Office expenses 8 309
Professional fees 2 400
Property rental 28 800
Stationery and advertising 2 884
Wages 42 256
Depreciation 7 678
Increase in provision for doubtful debts 718 106 941
Loss for the year (1 964)
Daniel
Statement of financial position at 31 March 2015
$ $
Non-current assets
Motor vehicles at cost 54 600
Less: provision for depreciation 31 566
23 034
Current assets
Inventory 12 440
Less: provision for doubtful debts 718 35 152
Prepayments 4 800 52 392
Total assets 75 426
Capital and liabilities

Capital account
Opening balance 88 022
Less: loss for the year (1 964)
86 058
Less: drawings 31 180
54 878
Non-current liabilities
Bank loan (repayable 2019) 8 400
Current liabilities
Accruals 520
Bank overdraft 2 274 12 148
Total capital and liabilities 75 426
Sole traders:
1.4.2A preparation
of accounts
2 D
4
Harris
Extract from income statement for the year ended
31 March 2015
$ $
Revenue 204 308
202 558
Purchases 92 345
Less: returns outwards (1 240)
Carriage inwards 1 280
126 885
Closing inventory (32 100) 94 785
Gross profit for the year 107 773
6 a
Kumar
Income statement for the year ended 31 January 2015
$ $
Revenue 273 582
271 522
Cost of sales
Purchases 74 454
Less: returns outwards (1 593)
109 561
Closing inventory (32 650) 76 911
Gross profit for the year 194 611
Less: expenses
Depreciation 2 000
Motor expenses 6 143
Printing and stationery 5 526
Property rental 28 500
Property repairs 1 112
Wages 77 109 126 433
Profit for the year 68 178
b
Kumar
Statement of financial position at 31 January 2015
$ $ $
Non-current assets Cost Depreciation NBV
Motor vehicles 34 200 6 840 27 360
Plant and machinery 52 734 12 200 40 534
86 934 19 040 67 894
Current assets
Inventory 32 650
Trade receivables 16 737 49 387
Total assets 117 281
Capital and liabilities

Capital account
Opening balance 55 346
Add: profit for the year 68 178
123 524
Less: drawings (28 824)
94 700
Bank loan 9 700
Current liabilities
Bank overdraft 5 640 12 881
Total capital and liabilities 117 281
Final
1.4.2B accounts from
incomplete
records
2 Calculation of profit or loss for 2014
$
Closing capital 51 000
Less opening capital 64 500
Change in capital (13 500)
Add back drawings 12 000
Less additional investment (10 000)
Loss for year (11 500)
4 Statement of affairs at 1 January 2014

$ $
Assets
Premises 160 000
Vehicles 14 000
Machinery 4 500
Inventory 18 000
Other receivables 1 200
216 700
Liabilities
Loan 9 300
Other payables 4 000
28 300
Capital 188 400

Statement of affairs at 31 December 2014
$ $
Assets
Premises 155 000
Vehicles 12 000
Machinery 6 000
Inventory 16 500
Other receivables 2 500
Bank 8 500
214 500
Liabilities
Loan 7 600
Other payables 3 000
23 500
Capital 191 000
$
Opening capital 188 400
Less: closing capital 191 000
(2 600)
Additional capital 15 500
12 900
Drawings (32 000)
6 B
8 B
10 Dr Sales ledger control account Cr
Opening balance 16 200 Receipts 81 400
Credit sales 86 600 Discounts allowed 1 600
Irrecoverable debts 200
Returns inwards 3 700
Closing balance 15 900
102 800 102 800
Dr Purchases ledger control account Cr
Payments 254 300 Opening balance 28 100
Discounts received 13 400 Credit purchases 305 300
Closing balance 23 500
333 400 333 400
12 a Alvin
Income statement for the year ended 31 December 2014
$ $
Revenue 169 500
Purchases 111 600
136 100
Closing inventory (23 100)
Cost of sales (113 000)
Gross profit (50% × cost of sales) 56 500
b Dr Trade receivables Cr
Sales 169 500 Closing balance 21 400
192 700 192 700
c Cash stolen
$
Receipts from trade receivables 171 300
Less cash banked (165 100)
Missing cash 6 200
14 a Dr Trade receivables Cr
Credit sales 46 800 Closing balance 6 200
54 300 54 300
b Dr Trade payables Cr
Payments 32 400 Opening balance 3 900
Closing balance 4 700 Credit purchases 33 200
37 100 37 100
c
Rent
$
Payment 6 000
Add opening prepayment 500
Less closing prepayment (400)
6 100
Advertising
$
Payment 2 000
Less opening accrual (200)
Add closing accrual 100
1 900
d
K.D. Green
Income statement for the year ended 30 June 2014
$ $
Revenue 46 800
Less: Opening inventory 8 500
Purchases 33 200
41 700
Closing inventory (8 800)
13 900
Less: rent 6 100
advertising 1 900
depreciation
premises 10 000
vehicles (W1) 1 800
(19 800)
Loss for year (5 900)
W1 Depreciation of vehicles
$
Opening nbv 8 000
Add purchase of new vehicle 6 000
14 000
Less closing nbv (12 200)
1 800
Statement of financial position at 30 June 2014

$ $
Non-current assets
Premises at net book value 54 000
Vehicles at net book value 12 200
66 200
Current assets
Inventory 8 800
Other receivables (rent prepaid) 400
Bank 200
15 600
81 800
Capital
Opening balance (W2) 81 200
Less loss for year (5 900)
Less drawings (8 300)
67 000
Non-current liability
Loan 10 000
Current liabilities
Other payables (advertising due) 100
4 800
81 800
W2 Opening capital
$ $
Assets
Premises 64 000
Vehicles 8 000
Inventory 8 500
Prepaid rent 500
Bank 2 300
90 800
Liabilities
Advertising accrual 200
Loan 5 500
9 600
81 200
16 D
18 D
20 B
22 B
Partnerships:
1.4.3A preparation
of accounts
2 Robin Sharla Tom Total
$ $ $ $
Interest on capitals 16 000 28 800 19 200 64 000
Shares of residual profit 67 000 44 667 22 333 134 000
83 000 73 467 41 533 198 000
4 Yvonne Zara Total

$ $ $
Interest on capitals 33 600 28 800 62 400
Salary 51 000 51 000
Shares of residual loss (39 600) (19 800) (59 400)
45 000 9 000 54 000
6 a General journal
Dr Cr
$ $
Premises 290 000
Furniture and fittings 38 000
Inventory 29 000
Bank 22 000
Bank loan 25 000
Capital (Rajiv) 342 000
assets, liabilities and capital contributed
to partnership by Rajiv
b General journal
Dr Cr
$ $
Premises 75 000
Inventory 17 000
Bank loan 10 000
Capital (Sharla) 104 000
assets, liabilities and capital contributed
to partnership by Sharla
c
Rajiv and Sharla
Statement of financial position at 1 May 2014
$ $
Non-current assets
Premises 365 000
431 000
Current assets
Inventory 46 000
Bank 14 000
69 000
500 000
Capital accounts
Rajiv 342 000
Sharla 104 000
446 000
Bank loans 35 000
Current liabilities
500 000
8 a Jenny and Keith

Appropriation Account for the year ended 31 July 2014
$ $
Loss for year 25 000
Salaries
Jenny 33 000
Keith 18 000
51 000
76 000
Share of residual loss
Jenny 30 400
Keith 45 600
76 000
b
Dr Capital accounts Cr
Jenny Keith Jenny Keith
Drawings 55 490 62 440 Opening balances 284 570 345 830
Shares of residual loss 30 400 45 600 Salaries 33 000 18 000
Closing balances c/d 231 680 255 790
317 570 363 830 317 570 363 830
Balances b/d 231 680 255 790
10 a
Gaynor, Henry and Irvin
Income statement for the year ended 31 August 2014
$000 $000
Gross profit 291
Add: discounts received 15
decrease in provision for doubtful debts
[$6 − (5% × $40)] 4
19
310
Less: discounts allowed 11
general expenses 19
insurance ($27 − $3 prepaid) 24
wages and salaries ($139 + $12 due) 151
depreciation of furniture and equipment 44
(249)
Profit for year 61
b Appropriation account for year ended 31 August 2014

$000 $000
Profit for year 61
Add interest on drawings
Gaynor 4
Henry 5
Irvin 7
16
77
Less salary, Gaynor (28)
49
Less: interest on capitals
Gaynor 26
Henry 31
Irvin 37
(94)
(45)
Less: shares of residual loss
Gaynor 9
Henry 18
Irvin 18
(45)
c
Dr Current accounts Cr
Gaynor Henry Irvin Gaynor Henry Irvin
$000 $000 $000 $000 $000 $000
Opening balance 6 9 Opening balance 8
Drawings 44 61 52 Salary 28
Interest on drawings 4 5 7 Interest on capitals 26 31 37
Share of residual loss 9 18 18 Closing balances c/d 9 45 49
63 84 86 63 84 86
Balances b/d 9 45 49
d Statement of financial position at 31 August 2014

$000 $000
Non-current assets
Premises at cost 660
Furniture and equipment at cost 220
less provision for depreciation 110
110
770
Current assets
Inventory 68
Trade receivables ($40 less provision for 38
doubtful debts $2)
Other receivables (insurance) 3
109
879
Capital accounts
Gaynor 260
Henry 310
Irvin 370
940
Current accounts
Gaynor (9)
Henry (45)
Irvin (49)
(103)
Current liabilities
Trade payables 18
Other payables (wages and salaries) 12
Bank overdraft 12
42
879
12 Goodwill
Marion Nina Oliver
$ $ $
Shared 50 000 40 000 (for task a)
Written off (45 000) (36 000) (9 000) (for task b)
Net 5 000 4 000 (9 000)
a Marion, Nina and Oliver
Statement of financial position at 1 November 2014
$ $
Goodwill 90 000
Other non-current assets 520 000
Current assets (+$60 000 cash) 130 000
740 000
Capital accounts
Marion (+$50 000) 350 000
Nina (+$40 000) 280 000
Oliver 60 000
690 000
Current accounts
Marion (4 000)
Nina 9 000
5 000
Long-term liability
Loan from Francis 30 000
Current liabilities 15 000
740 000
b Marion, Nina and Oliver

Statement of financial position at 1 November 2014
$ $
Other non-current assets 520 000
Current assets (+$60 000 cash) 130 000
650 000
Capital accounts
Marion (+$5 000) 305 000
Nina (+$40 000) 244 000
Oliver ($60 000 − $9 000) 51 000
600 000
Current accounts
Marion (4 000)
Nina 9 000
5 000
Long-term liability
Loan from Francis 30 000
Current liabilities 15 000
650 000
14 Walter and Vera

Income statement for the year ended 31 August 2014
$000 $000
Gross profit 135
Less general expenses 20
Insurance 12
Wages and salaries 63
Depreciation: furniture and equipment 16
(111)
Profit for year 24
Appropriation account for the year ended 31 August 2014
$000 $000
Profit for first 4 months (1/3 × $24) 8
Share of profits
Walter 4
Vera 4
(8)
Profit for last 8 months (2/3 × $24) 16

Less: salary Vera (2/3 × $9) (6)
10
Less: interest on capital
Walter (2/3 × 6% × $200) 8
Vera (2/3 × 6% × $250) 10
(18)
(8)
Share of residual loss
Walter 4
Vera 4
8
Statement of financial position at 31 August 2014

$000 $000 $000
Non-current assets
Premises at cost 270
Furniture and equipment 160
less provision for depreciation (96)
64
334
Current assets
Inventory 33
Trade receivables 42
75
409
Capital accounts
Walter 200
Vera 250
450
Current accounts Walter Vera
Opening balances 5 (12)
Add salary 6
Interest on capital 8 10
Share of profits for first four months 4 4
Share of residual loss for last eight months (4) (4)
13 4
Less drawings 34 44
(21) (40) (61)
Statement of financial position at 31 August 2014
$000 $000 $000
Current liabilities
Trade payables 12
Bank overdraft 8
20
409
16 D
18 B
20 B
22 D
1.4.3B Dissolution of
partnerships

2 a Dr Realisation account Cr
Inventory 12 000 Trade payables 12 000
Machinery 16 200 Bank
Trade receivables 7 400 Inventory 9 200
Vehicles 24 000 Machinery 15 400
Bank, costs 3 000 Trade receivables 6 800
Bank, trade payables 11 400 Capital accounts for vehicles taken over
Onai 9 200
Mazrita 12 400
Realisation loss
Onai 6 000
Mazrita 3 000
74 000 74 000
b Dr Realisation account Cr
Inventory 12 000 Bank
Machinery 16 200 Inventory 9 200
Vehicles 24 000 Machinery 15 400
Bank, costs 3 000 Capital accounts for vehicles taken over
Onai 9 200
Mazrita 12 400
Discounts received 600
Realisation loss
Onai 6 000
Mazrita 3 000
55 800 55 800
4 Dr Premises Cr
Balance 250 000 Realisation 250 000

Dr Machinery Cr

Dr Fixtures and fittings Cr

Dr Motor vehicles Cr

Dr Inventory Cr

Trade receivables

Dr Provision for doubtful debts Cr
Realisation 1 400 Balance 1 400

Dr Trade payables Cr
Bank 32 600 Balance 36 600
Realisation, discounts received 4 000
36 600 36 600
Dr Bank Cr
Realisation Balance 14 200
Premises 256 000 Trade payables 32 600
Machinery 59 200 Realisation, costs 8 000
Fixtures and fittings 38 400 Capitals
Inventory 26 400 Jane 274 100
Trade receivables 39 800 John 90 900
419 800 419 800
Dr Realisation Cr
Assets Provision for doubtful
Premises 250 000 debts 1 400
Machinery 64 200 Bank
Fixtures and fittings 43 800 Premises 256 000
Motor vehicles 22 000 Machinery 59 200
Inventory 29 600 Fixtures and fittings 38 400
Trade receivables 43 600 Inventory 26 400
Bank, dissolution costs 8 000 Trade receivables 39 800
Motor vehicles taken
over
Capital, Jane 9 000
Capital, John 11 000
Loss on realisation
Capital, Jane 10 000
Capital, John 6 000
461 200 461 200

Dr Current accounts Cr
Jane John Jane John
Balance 27 100 Balance 68 100
Capital 68 100 Capital 27 100
Dr Capital accounts Cr
Jane John Jane John
Current account 27 100 Balance 225 000 135 000
Motor vehicles taken over 9 000 11 000 Current account 68 100
Loss on realisation 10 000 6 000
Bank 274 100 90 900
293 100 135 000 293 100 135 000
6 C
Limited
1.4.4A companies:
structure and
accounting for
share issues
2
Ordinary shares: 400 000 × $0.02 = $8 000
Preference shares: $100 000 × 5% $5 000
$13 000
4
Journal
Details Dr ($) Cr ($)
Bank 225 000
Preference share capital 100 000
Share premium 125 000
being issue of preference shares
Bank 200 000

8% debentures 200 000
being issue of 8% debentures
6
Journal
Date Details Dr ($) Cr ($)
1 Jan Bank 200 000
6% debentures 200 000
being issue of 6% debentures
31 Dec Interest paid 12 000
Bank 12 000
being interest paid on 6% debentures
8 D
10 B
12 B
14 B
16 C
Limited
1.4.4B companies:
financial
statements
2 C
4 B
6 D
8 D
10
Lightowler Ltd
Income statement for the year ended 30 April 2015
$000 $000
Revenue 92 000
Gross profit 47 500
Other income 500
48 000
Administration expenses 1 100
Auditors’ fees 2 200
Directors’ remuneration 2 600
Depreciation – premises 540
Depreciation – vehicles 200 (9 240)
Profit from operations 38 760
Finance costs (1 700)
Lightowler Ltd
Statement of changes in equity for the year ended 30 April 2015
Retained earnings
$000
Balance at 1 May 2014 16 200
Dividend paid (2 200)
Transfer to general reserve (2 000)
Balance at 30 April 2015 49 060
12
Bendon Ltd
Statement of financial position at 31 October 2014
$ $
Non-current assets
Premises (160 – 40) 120 000
Vehicles (36 – 8) 28 000
Fixtures and fittings (50 – 10) 40 000
188 000
Current assets
Inventory 38 100
Trade and other receivables (56 900 + 5 200) 62 100
Cash and cash equivalents 15 300 115 500
Total assets 303 500
Equity
Ordinary share capital 100 000
Share premium 30 000
General reserve 20 000
Retained earnings 46 100
196 100
10% debentures (2014–2024) 50 000
Current liabilities
Trade and other payables (42 400 + 15 000) 57 400
Total equity and liabilities 303 500
14
Airlie plc
Income statement for the year ended 31 March 2015
$000 $000
Revenue 2 245
Cost of sales (65 + 983 – 75 + 54) (1 027)
Gross profit 1 218
Distribution costs (145 + 4 + 32) (181)
Administration expenses (102 – 2) (100) (281)
Profit from operations 937
Finance costs (275 + 3 + 4) (282)
Profit for the year 655
16 a
Ionians plc
Income statement for the year ended 30 April 2014
$000 $000
Revenue 5 528
Cost of sales (2 619 + 136 – 148 + 82) (2 689)
Gross profit 2 839
Distribution costs (714 + 68) (782)
Administration expenses (613) (1 395)
Profit from operations 1 444
Finance costs (956 + 10) (966)
Profit for the year 478
b
Ionians plc
Statement of changes in equity for the year ended 30 April 2014
($000)
Total Share Share Retained Revaluation
capital premium earnings
Balance at 1 May 2013 1 610 750 30 680 150
Share issue 70 50 20
Equity dividends paid (90) (90)
Revaluation 50 50
Balance at 30 April 2014 2 118 800 50 1 068 200
c
Ionians plc
Statement of financial position as at 30 April 2014
$000
Non-current assets
Freehold property 950
Plant and machinery (820 – 410) 410
Motor vehicles (645 – 441) 204
1 564
Current assets
Inventory 148
Trade and other receivables 850
Cash and cash equivalents 108 1 106
Total assets 2 670
Equity
Ordinary shares of $0.25 each 800
Share premium 50
Revaluation reserve 200
Retained earnings 1 068
2 118
10% debenture (2020–2023) 200
Current liabilities
Trade and other payables 352
2 670
Analysis and
1.5.1 communication
of accounting
information to
stakeholders
2 a–c
Gross profit × 100 240 000 × 100
Gross profit margin i.e. i.e. 33.33%
Revenue 720 000
Gross profit × 100 240 000 × 100

Mark-up i.e. i.e. 50%
Cost of sales 480 000
Cost of sales 480 000

Rate of inventory turnover i.e. i.e. 16 times
Average inventory 30 000
4 a–e
Profit before interest × 100 91 000 × 100
Profit margin i.e. i.e. 11.38%
Revenue 800 000
Wages × 100 56 000 × 100

Wages/Revenue % i.e. i.e. 7.00%
Revenue 800 000
Insurance × 100 12 000 × 100

Insurance/Revenue % i.e. i.e. 1.50%
Revenue 800 000
Loan interest × 100 9 000 × 100

Loan interest/Revenue % i.e. i.e. 1.13%
Revenue 800 000
Depreciation × 100 63 000 × 100

Depreciation/Revenue % i.e. i.e. 7.88%
Revenue 800 000
6 a–e
Current ratio current assets : current liabilities i.e. 36 000 : 24 000 i.e. 1.5 : 1
current assets less inventories : current

Acid test ratio i.e. 19 000 : 24 000 i.e. 0.79 : 1
liabilities
Profit before interest* × 100 45 000 × 100

Return on capital
Capital + Non-current liabilities i.e. 298 000 i.e. 15.10%
employed
* interest ignored as no information available
Trade receivables Trade receivables × 365 16 000 × 365

i.e. i.e. 26.07 days
turnover Credit revenue 224 000
Trade payables Trade payables × 365 14 000 × 365

i.e. i.e. 33.18 days
turnover Credit purchases 154 000
8 a
gross profit × 100 257 500 × 100
Gross profit margin i.e. i.e. 53.65%
revenue 480 000
operating profit × 100 81 800 × 100

revenue 480 000
Return on capital profit before interest × 100 81 800 × 100

i.e. i.e. 16.69%
employed capital + non-current liabilities 490 000
current assets less inventories :

Acid test ratio i.e. 22 300 : 82 500 i.e. 0.27 : 1
current liabilities
rate of inventory cost of sales 122 500

i.e. i.e. 3.21 times
turnover average inventory 38 200
b The gross profit margin shows how much gross profit in cents was made in relation
to each one dollar of sales (here 53.65 cents).
The profit margin shows how much profit for the year in cents was made in relation
to each one dollar of sales (here 15 cents).
The return on capital employed shows how much profit (before interest) was made
in relation to each one dollar of capital employed (here 16.69 cents).
The current ratio shows how much current assets in dollars there is for each dollar
of current liabilities (here $0.73).
The acid test ratio shows how liquid assets (current assets less inventory) there is
for each dollar of current liabilities (here $0.27).
The rate of inventory turnover shows how many times the average inventory was
sold during the financial year (here 3.21 times).
10 a gross profit × 100 201 500 × 100
Gross profit
i.e. i.e. 69.60%
margin revenue 289 500
operating profit × 100 64 000 × 100

revenue 289 500
current assets less

Acid test ratio i.e. 60:000 : 96 000 i.e. 0.63 : 1
inventories : current liabilities
Return on capital profit before interest × 100 64 000 × 100

i.e. i.e. 12.26%
employed capital + long-term liabilities 522 000
b ross profit margin: there has been an increase in this ratio (+4.6 per cent),
G
so the company is making more gross profit (an extra 4.6 cents) for every
$1 of revenue. This is a strength for the company and may have arisen due
to a change in pricing policy, or as a result of finding a cheaper supplier or
changing products offered for sale, etc.
Profit margin: this has increase significantly (+10.73 per cent) so the
company is making more profit (an extra 10.73 cents) for every $1 of
revenue. This is a strength for the company and may have arisen partly as a
result of the improved gross profit margin, but also from greater efficiency in
relation to costs.
Current ratio: this has decreased from 2.1 : 1 to 1.5 : 1. This means there are
less current assets available to cover the company’s everyday obligations.
This could be a weakness for the company as it may find it more difficult
to meet its commitments. On the other hand, if the current ratio has been
unnecessarily high, the reduction could be a sign of greater efficiency with
less capital tied up in current assets.
Liquid (acid test) ratio: this has also decreased from 1.2 : 1 to 0.63 : 1. This
means there are less liquid assets to meet the company’s more immediate
commitments. This could be a weakness for the company if it is forced to
borrow funds to meet its commitments. On the other hand, if the acid test
ratio had been unnecessarily high, the reduction could also be a sign of
greater efficiency with less capital tied up in liquid assets.
Return on capital employed: this has increased by 4.26 per cent, which means
that the company is earning an extra 4.26 cents for every dollar of capital
employed. This is a strength for the company because it shows its resources
are being more profitable. The improvement may have arisen due to the
improved profitability as shown in the increase in the profit margin. It may
also have arisen as a result of a reduction in the company’s capital employed
(perhaps a reduction in borrowing for example).
Overall, there is clear evidence of an improvement in the company’s
profitability. This is coupled with a decline in the liquidity ratios, which
could be a weakness. However, the decline in liquidity ratios could be from
levels that were previously unnecessarily high.
12 Revenue and profitability: the business’s revenue has declined in each successive
year over the three-year period. This is a weakness for the business as revenue
is the key to profitability. The business’s gross profit margin and mark-up
have decreased in each year over the three-year period. This is a weakness as
it means the business will be making less gross profit per $1 of revenue and
$1 of cost of sales. The decrease could be due to a change in pricing policy: a
deliberate decrease in prices which has not, however, resulted in an increase in
revenue. Alternatively, the decrease could be due to a failure to pass on higher
prices charged by suppliers. The business’s profit/revenue ratio has fallen in
each year during the three-year period. This is a weakness as it means the
business is making less profit per $1 of revenue. The decrease may be due
to the decrease in gross profit, but it also appears to be due to less efficient
control of costs since both the wages/revenue and the other expenses/revenue
ratios have increased over the years. The business has experienced a decrease
in the return on capital employed in each year over the three-year period. This
is a weakness as the business is making less profit per $1 of capital employed.
This may have resulted from the decrease in profits, but it could also be due
to an increase in capital employed: it could be that the business is borrowing
additional funds. Overall, the profitability of the business has declined in
every aspect over the three-year period.
Liquidity: the business’s liquidity appears to have declined in each year over
the three-year period. The current ratio has decreased in each of the years,
which is a potential weakness for the business as it will find it more difficult
to meet its everyday obligations. The decrease in the acid test ratio is also a
weakness and indicates that the business will find it more difficult to meet
its obligations, this time in the more immediate future. However, it would be
necessary to have typical liquidity ratios for this type of business to be sure
that a weakness has occurred. If the ratios for the first year in the three-year
period were too high, the decreases in the two ratios could indicate a more
effective use of liquid resources.
Efficiency ratios: the rate of inventory turnover has increased over the three-
year period. The ratio is now in line with the typical ratio for this type
of business, whereas before it was weaker than the typical ratio. This is a
potential strength for the business as it indicates that inventory is being sold
more quickly. This could have been due to a change in pricing policy or to
holding a smaller average inventory. However, the improvement in this ratio
has not resulted in increased revenue for the business. The trade receivables
turnover period has increased over the three-year period and is now longer
than the typical ratio for this type of business. This is a weakness for the
business as it is collecting amounts due from credit customers at a slower
rate than is usual. The trade payables turnover period has shortened over the
three-year period and is now faster than is typical for this type of business.
This is a weakness for the business because it will have an impact on liquidity,
particularly since money is paid to credit suppliers more quickly than money
is received from credit customers. Overall the efficiency ratios present a mixed
picture.
14 D
16 C
18 A
Topic 1: Financial accounting
Answers to exam-style questions
2 C
4 D
6 a
Error 2 error of commission
Error 4 error of original entry [2 marks]
b
JOURNAL
Dr Cr
$ $
1 Suspense 440
Sales 440
2 Carriage inwards 163
Carriage outward 163
3 Suspense 756
Discount received 756
4 Returns outwards 54
Trade payable: KLZ Ltd 54
5 Suspense 876
Trade receivable S Wilson 876
Bank 768
Suspense 768
Bank 867
Trade receivable: S Wilson 867
[8 marks]
c
Dr Suspense Cr
1 Sales 440 5 Bank 768
3 Discount received 756 Difference in TB 1 304
5 S Wilson 876
2 072 2 072
[5 marks]
[Total: 15 marks]
8 a To ensure that the business’s capital is secure and unchanging
To maintain the relative financial position of each partner
within the business
To ensure day to day changes in the financial position of each
partner are clearly recorded separately [1 mark]
b
Kelly and Leo

Appropriation account for the year ended 31 December 2014
$ $
Profit for year 55 400
Add: interest on drawings
Kelly 1 300
Leo 900
2 200
57 600
Less: interest on capitals
Kelly (5% × $116 000) 5 800
Leo (5% × $58 000) 2 900
8 700
48 900
Less: shares of residual profit
Kelly 32 600
Leo 16 300
48 900
[5 marks]
c
Dr Current account (Kelly) Cr

Opening balance 3 200 Interest on capital 5 800
Drawings 23 400 Share of profits 32 600
Interest on drawings 1 300
Closing balance c/d 10 500
38 400 38 400
Balance b/d 10 500
[5 marks]
d
Workings
Revaluation of assets
$
Non-current assets (13 000)
Provision for doubtful debts (460) (5% × $9 200)
Inventory (1 540) [$1 340 damaged items; 50 × $4 difference
between cost and net realisable value]
(15 000)
Dr Capitals Cr
Kelly Leo Martin Kelly Leo Martin
Asset revaluation 10 000 5 000 Opening balance 116 000 58 000
Goodwill adjustment 27 000 15 000 18 000 Goodwill adjustment 40 000 20 000
Closing balances c/d 119 000 58 000 62 000 Bank 80 000
156 000 78 000 80 000 156 000 78 000 80 000
Balances b/d 119 000 58 000 62 000
[10 marks]
e
uu Martin may bring additional expertise and new ideas to the
partnership.
uu Martin’s contribution (financial and non-financial) may ensure the
business’s profitability increases.
uu The original partners may find there is less pressure on them as there
are now three people responsible for running the business rather than
just two.
uu There is the danger that unless profits increase in step with the
additional capital provided by Martin, the original partners will
receive a smaller share of profits, since all profits will now be shared
with Martin.
uu It may become more difficult to make timely decisions as there will be
three people to reach agreement instead of two.
uu The original partners may find it difficult to work with Martin, leading
to disputes and disagreements, which could eventually lead to the
dissolution of the partnership.
[9 marks]
[Total: 30 marks]

An Introduction To Double-Entry Bookkeeping: Answers To End-Of-Chapter Questions

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An Introduction To Double-Entry Bookkeeping: Answers To End-Of-Chapter Questions

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An introduction

Dr Trade payable (Trez Ltd) Cr

Dr Trade receivable (HLK) Cr

Dr Taylor & Sons Cr

RETURNS OUTWARDS JOURNAL

RETURNS INWARDS JOURNAL

Dr Peterson Stores (Account number 2) Cr

Dr Furniture and equipment Cr

Dr Trade payable: UVY Ltd Cr

Motor vehicle – provision for depreciation

Motor van – provision for depreciation

Disposal of non-current assets

Answers to End-of-chapter questions

Answers to End-of-chapter questions

Capital and liabilities

Capital and liabilities

4 Statement of affairs at 1 January 2014

Statement of financial position at 30 June 2014

4 Yvonne Zara Total

8 a Jenny and Keith

b Appropriation account for year ended 31 August 2014

d Statement of financial position at 31 August 2014

b Marion, Nina and Oliver

14 Walter and Vera

Profit for last 8 months (2/3 × $24) 16

Statement of financial position at 31 August 2014

Answers to End-of-chapter questions

419 800 419 800

Capital 68 100 Capital 27 100

293 100 135 000 293 100 135 000

Bank 200 000

Gross profit × 100 240 000 × 100

Cost of sales 480 000

Wages × 100 56 000 × 100

Insurance × 100 12 000 × 100

Loan interest × 100 9 000 × 100

Depreciation × 100 63 000 × 100

current assets less inventories : current

Profit before interest* × 100 45 000 × 100

Trade receivables Trade receivables × 365 16 000 × 365

Trade payables Trade payables × 365 14 000 × 365

operating profit × 100 81 800 × 100

Return on capital profit before interest × 100 81 800 × 100

current assets less inventories :

rate of inventory cost of sales 122 500

operating profit × 100 64 000 × 100

current assets less

Return on capital profit before interest × 100 64 000 × 100

Kelly and Leo

Dr Current account (Kelly) Cr

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