CAMBRIDGE INTERNATIONAL AS & A LEVEL ACCOUNTING: TEACHER'S RESOURCE

Exam-style questions and sample answers have been written by the authors. In examinations, the way marks are awarded may
be different.

Coursebook answers
Most of the answers are in ‘outline’ form indicating the appropriate points and skills that learners need
to include in their answers. They provide the necessary guidance to allow learners to develop and extend
the points for a fuller answer that contains the relevant skills. In many instances, there may be other valid
approaches to answering the question.

Chapter 2
Accounting in context
Buy now, pay later
Learners’ answers may include:
• 7-Eleven’s customers are the general public. It is common practice to expect the general public to pay
for items immediately. 7-Eleven does not know all its customers hence does not know if they can be
trusted to pay later. Complex systems would need to be put in place to allow customers to pay later,
which would be time consuming and expensive to operate.
• It is common practice when working with regular, business suppliers. 7-Eleven is likely to work with a
much smaller number of suppliers than customers. It is likely to have regular suppliers with whom it
builds up a relationship and trust.
• Similar reasons to answers given in Q2: it is common practice when working with regular, business
suppliers in many industries. Businesses have regular suppliers and customers with whom it builds up
relationships and trust.

Activities
Activity 2.1
Purchases account
Debit Credit
$ $
1 Oct Tina 2 000
8 Oct Lim 2 400

Sales account
Debit Credit
$ $
2 Oct Ali 300
9 Oct Omar 1 100

Cambridge International AS & A Level Accounting – Hopkins, Malpas, Randall & Seagrove
1 © Cambridge University Press 2021
 CAMBRIDGE INTERNATIONAL AS & A LEVEL ACCOUNTING: TEACHER'S RESOURCE

Purchase returns account

Debit Credit
$ $
4 Oct 200
10 Oct 100

Sales returns account

Debit Credit
$ $
11 Oct Ali 300

Tina account
Debit Credit
$ $
4 Oct Purchase returns 200 1 Oct Purchases 2 000
10 Oct Purchase returns 100

Lim account
Debit Credit
$ $
8 Oct Purchases 2 400

Ali account
Debit Credit
$ $
2 Oct Sales 300 11 Oct Sales returns 300

Omar account
Debit Credit
$ $
9 Oct Sales 1 100

Activity 2.2
Calculations:
1 Nov purchases from Ting: $5 000 − (0.15 × 5 000) = $4 250
10 Nov purchase returns: $500 − (0.15 × 500) = $425
15 Nov purchases from Wei: $4 800 – (0.2 × 4 800) = $3 840
20 Nov payment to Ting: $4 250 − $425 = $3 825

Purchases account
Debit Credit
$ $
1 Nov Ting 4 250
15 Nov Wei 3 840

Cambridge International AS & A Level Accounting – Hopkins, Malpas, Randall & Seagrove
2 © Cambridge University Press 2021
 CAMBRIDGE INTERNATIONAL AS & A LEVEL ACCOUNTING: TEACHER'S RESOURCE

Sales account
Debit Credit
$ $
5 Nov Li 1 000

Purchase returns account

Debit Credit
$ $
10 Nov Ting 425

Bank account
Debit Credit
$ $
25 Nov Li 1 000 20 Nov Ting 3 825
20 Nov Wei 3 840

Ting account
Debit Credit
$ $
10 Nov Purchase returns 425 1 Nov Purchases 4 250
20 Nov Bank 3 825

Wei account
Debit Credit
$ $
20 Nov Bank 3 840 15 Nov Purchases 3 840

Li account
Debit Credit
$ $
5 Nov Sales 1 000 25 Nov Bank 1 000

Activity 2.3
Name of account Name of account
to debit to credit
1 Sells goods to Diya on credit Diya Sales
2 Buys machinery for use by the business on credit from Machinery Joints Ltd
Joints Ltd
3 Purchases goods on credit from Alan. Trade Purchases Alan
discount received
4 Returns goods bought on credit to Alan Alan Purchases returns
5 Goods bought on credit returned by Diya Sales returns Diya
6 Returns goods to a supplier and banks refund Bank Purchases returns
7 Refunds money to a customer by cheque for Sales returns Bank
goods returned
8 Paid Joints Ltd for goods bought Joints Ltd Bank

Cambridge International AS & A Level Accounting – Hopkins, Malpas, Randall & Seagrove
3 © Cambridge University Press 2021
 CAMBRIDGE INTERNATIONAL AS & A LEVEL ACCOUNTING: TEACHER'S RESOURCE

Name of account Name of account

to debit to credit
9 Received full payment from Diya less cash discount Bank Diya
Discounts Allowed (Diya again)
10 Paid Alan for goods bought less cash discount Alan Bank
(Alan again) Discounts received

Activity 2.4
Possible points for discussion:
• Can Zoe trust the business and be confident that it will pay her later? Alternatively, it might result in a
bad debt.
• Will Zoe potentially lose this customer and sales if she says no to the request?
• Zoe will need to consider payment terms for the new customer and other new bookkeeping records and
procedures if she starts selling on credit.
• Zoe’s cash flow might be adversely affected if she has to pay for the goods she is supplying but wait for
the cash to be received.

Practice questions
1 D This is the only option requiring the business to make a payment, hence a credit entry.
2 A In Jose’s books Maria is a supplier, hence Maria is given a discount allowed and her account
is credited.
3 D In Myra’s books this is a credit sale; only the trade discount of $100 is subtracted; hence debit
Zara $900 and credit sales $900.
4 Calculations:
1 Jan purchases from Yun: $800 − (0.15 × 800) = $680
9 Jan owed to Liyna: $900 − 180 = $720; discount received: 720 × 0.02 = $14.40;
payment: 720 − 14.40 = $705.60

Purchases account
Debit Credit
$ $
1 Jan Yun 680.00
5 Jan Liyna 900.00

Purchase returns account

Debit Credit
$ $
6 Jan Liyna 180.00

Bank account
Debit Credit
$ $
9 Jan Liyna 705.60
23 Jan Yun 680.00

Cambridge International AS & A Level Accounting – Hopkins, Malpas, Randall & Seagrove
4 © Cambridge University Press 2021
 CAMBRIDGE INTERNATIONAL AS & A LEVEL ACCOUNTING: TEACHER'S RESOURCE

Yun account
Debit Credit
$ $
23 Jan Bank 680.00 1 Jan Purchases 680.00

Liyna account
Debit Credit
$ $
6 Jan Purchases returns 180.00 5 Jan Purchases 900.00
9 Jan Bank 705.60
9 Jan Discounts received 14.40

Discounts received account

Debit Credit
$ $
9 Jan Liyna 14.40

Cambridge International AS & A Level Accounting – Hopkins, Malpas, Randall & Seagrove
5 © Cambridge University Press 2021