Level 1&2 Text Book V2 - Batch 2

T.T.
S ACCOUNTANCY TRAINING CENTRE
CONTENTS
1. Introduction 1-3
2. Double Entry System (Assets , Liabilities and Capital) 4-5
3. Double Entry System (Inventory) 6-8
4. Double Entry (Expense , Incomes , Profit or loss and Drawing) 9-10
5. The Trial Balance 11-14
6. Final Accounts 15-18
7. The division of Ledger 19-20
8. Cash Book 21-23
9. Petty Cash Book 24-25
10. Sales, Purchase & Return Journal-Day Book 26-28
11. General Journal 29-30
12. Capital & revenue Expenditures 31-31
32-36
13. Accrued & Prepaid (Expense & Income)
14. Depreciation ,Accumulated Depreciation, Disposal 37-41
15. Irrecoverable debt , Allowance for Doubtful debt & ID Recover 42-44
16. Sole Trader : Final Accounts 45-48
17. Partnership : Final Accounts 49- 52
18. Change in Partnership Interest 53-55
19. Dissolution/Realization of Partnership 56-58
20. Limited Company : Final Account 59-63
21. Manufacturing Account 64-67
22. Incomplete Records 68-71

23. Non – Trading Organization : Final Account 72-76
24. Control Account 77-81
25. Error & Suspense Account 82-85
26. Accounting Ratio 86-89
27. Accounting Concept 90
BOOK-KEEPING & ACCOUNTING Pg -1

T.T.S ACCOUNTANCY TRAINING CENTRE
Chapter (1)
Introduction
1.1 Book-Keeping : is the systematic recording in books of accounts of the business transaction
Of a business.
1.2 Accounting : is the process of recording, classifying, summarizing, reporting business
transactions and analyzing the results.
1.3 Accounting Equation
Assets = Capital (Equity)

$100,000 $100,000
Assets = Capital + Liabilities

$100,000 $70000 + $30000
ASSETS
The property owned by a business and used in the operation of that business is called assets
CAPITAL
Capital is the amount invested in the business by the owners or shareholders.
LIABILITIES
Obligations of a company or organization. Amounts owed to lenders and suppliers.
EXERCISE
1.1 Distinguish from the following list the items that are liabilities from those that are assets:
(a) Office Machinery (d) Motor Vehicle
(b) Loan from John (e) we owe for goods
(c) Fixtures and Fitting (f) Bank balance
1.2 Classify the following item into liabilities and assets:

(a) Motor vehicles (f ) Owing to bank
(b) Premises (g) Cash in hand
(c) Payable for goods (h) Loan from John
(d) Inventory of goods (i) Machinery
(e) Receivables

1.3 State which of the following are shown under the wrong classification for J White5s business:
Assets Liabilities
Loan from C Smith Inventory
Cash in hand Receivables
Machinery Bank Overdraft
Payable
Cash at Bank
Motor van
1.4 Which of the following are shown under the wrong headings:
Assets Liabilities
Cash at bank Loan from Mary
Fixtures Machinery
Payable Motor vehicles
Inventory of goods
Receivables
Capital
Premises
1.5 You are to complete the gaps in the following table:
Assets Liabilities Capital
(a) 12500 1800 ?

(b) 28000 4900 ?
(c) 16800 ? 12500
(d) 19600 ? 16450
(e) ? 6300 19200
(f) ? 11650 35,000

Chapter (2)
Double Entry System for Assets, Liabilities and Capital
2.1 Double Entry Book-Keeping System

A system where each transaction is entered twice, once on the debit side and once on the credit
Side.
2.2 Double Entry Rules for Assets, Liabilities and Capital

Asset (Debit nature) increase Dr Side / decrease Cr side
Capital (Credit nature) increase Cr side / decrease Dr Side
Liabilities (Credit nature) increase Cr side / decrease Dr Side
Assets A/C Capital & Liabilities A/c
Debit Credit Debit Credit

+ ‐
Debit XXXXX A/c Credit

Date Particular Folio $ Date Particular Folio $

EXERCISE
2.1 You are required to open the asset and liability and capital accounts and record the following transactions
for June 20X4 in the records of Williams.
20X4
June 1 Started business with $2,000 in cash.
June 2 paid $ 1,800 of the opening cash into a bank account for the business.
June 5 bought office furniture on credit from Beta-Built Ltd for $ 120.
June 8 Bought a motor van paying by cheque $950.
June 12 Bought works machinery from Evans & Sons on credit $560.
June 18 Returned faulty office furniture costing $62 to Beta-Built Ltd.
June 25 sold some of the works machinery for $75 cash.
June 26 Paid amount owing to Beta-Built Ltd $58 by cheque.
June 28 took $ 100 out of the bank and put it in the cash till.
June 30 T Smith lent us $500 giving us the money by cheque.
2.2 Write up the asset and liability and capital accounts to record the following transactions in the records of
Powell.
20X3
July 1 Started business with $2,500 in the bank. II
July 2 Bought office. Furniture by cheque $ 150.
July 3 Bought machinery $750 on credit from Planers Ltd.
July 5 Bought a motor van paying by cheque $600.
July 8 sold some of the office furniture - not suitable for the firm - for $60 on credit to J Walker & Sons.
July 15 paid the amount owing to Planers Ltd $750 by cheque.
July 23 received the amount due from J Walker $60 in cash.
July 31 bought more machinery by cheque $280.

Chapter (3)
Double Entry System for Inventory
3.1 Inventory - Goods held by business for selling in the market.
Purchase Goods Sales

(On credit) (On credit)
Trade payable (supplier) Trade Receivable (customer)
Purchase Return (Return Outward) Sales Return (Return Inward)
3.2 Double Entry
Transaction Debit Credit

Bought goods for cash Purchase A/C Cash A/C
Bought goods on credit Purchase A/C Trade Payable A/C
Goods return to supplier Trade Payable A/C Return Outward A/C
Sold goods for cash Cash A/C Sales A/C
Sold goods on credit Trade Receivable A/C Sales A/C
Goods return by customer Return Inward A/C Trade Receivable A/C
Purchase (Dr)
( +) Dr
Sales Return /Return Inward (Dr)
Inventory
(Dr) Sales (Cr)
(-) Cr
Purchase Return /Return Outward (Cr)

EXERCISES
3.1 Enter up the following transactions in the records of E Sangster.

20X7
July 1 Started business with $10,000 in the bank.
July 2 T Cooper lent us $400 in cash.
July 3 Bought goods on credit from F Jones $840 and S Charles $3,600.
July 4 Sold goods for cash $200.
July 6 took $250 of the cash and paid it into the bank.
July 8 Sold goods on credit to C Moody $ 180.
July 10 Sold goods on credit to J Newman $220.
July 11 Bought goods on credit from F Jones $370
July 12 C Moody returned goods to us $40.
July 14 Sold goods on credit to H Morgan $ 190 and J Peat $320.
July 15 we returned goods to F Jones $140.
July 17 Bought motor van on credit from Manchester Motors $2,600.
July 18 Bought office furniture on credit from Faster Supplies Ltd $600.
July 19 we returned goods to S Charles $110.
July 20 Bought goods for cash $220.
July 24 Goods sold for cash $70.
July 25 Paid money owing to F Jones by cheque $1,070.
July 26 Goods returned to us by H Morgan $30.
July 27 returned some of office furniture costing $160 to Faster Supplies Ltd.
July 28 E Sangster put a further $500 into the business in the form of cash.
July 29 Paid Manchester Motors $2,600 by cheque.
July 31 Bought office furniture for cash $100.

3.2 You are to enter the following in the accounts needed:
20X6
Aug 1 Started business with $1,000 cash.
2 Paid $900 of the opening cash into the bank
4 Bought goods on credit $78 from S Holmes.
5 Bought a motor van by cheque $500.
7 Bought goods for cash $55.
10 Sold goods on credit $98 to D Moore.
12 Returned goods to S Holmes $18.
9 Sold goods for cash $28.
22 Bought fixtures on credit from Kingston Equipment Co $ 150.
24 D Watson lent us $100 paying us the money by cheque.
29 We paid S Holmes his account by cheque $60.
31 We paid Kingston Equipment Co by cheque $ 150.
3.3 Enter up the following transaction in the records of G Morgan.
20x5 May
1 Started business with $2,000 in the bank.

2 Bought goods on credit from C Shaw $900.
3 Bought goods on credit from F Huge $ 250.
6 We return goods to C Shaw $40.
8 Bought goods on credit form F Huge $190.
10 Sold goods on credit to G Wood $390.
18 Took $300 of the cash and paid it into the bank.

21 Bought machinery by cheque $550.
22 Sold goods on credit to L More $220.
23 G Wood returned goods to us $140.
25 L More returned goods to us $140.
28 We returned goods to F Huge $30.
29 We paid C Shaw by cheque $860.
31 Bought machinery on credit from D Lee $270.

Chapter (4)
Double Entry for Expenses, Incomes, Profit or Loss and Drawings
Definitions
Income
Income is the value of goods or services sold by the business during a trading period.
Expense (Cost of operation)
Expenditure is the value of goods or services bought by the business during a trading period.
Profit
Profit is the excess of income over expenditure. Income > Expense
Loss
Loss is the excess of expenditure over income. Income < Expense
Drawing
Drawing is the amounts taken by the owner of a business for his personal use.
Example of Income
Rent receivable, Interest receivable, Commission receivable, Discount Received.
Example of Expenses
Selling expense, Discount Allowed, Irrecoverable Debt, Depreciation expense, General Expense,
Interest charged, Rent, Wages & Salaries, Insurance, Repairs & Maintenance, Motor expense.
Double Entry Rules
Income
(+) Cr Cr
Profit
Capital)
(Cr Nature) Expense
(-) Dr Loss Dr
Drawing

EXERCISE
4.1 Enter Follow transactions.

2000
Jan 1 Started business with cash $2,000 & Bank $6,000.
Jan 5 Paid Office rent $2,000 by cheque.
Jan 10 Purchase stationery by cash $500, on credit $ 1,000 from D mate Store.
Jan 15 receive sale commission $ 1,000 by cash.
Jan 20 Owner took cash $200 and cheque $800 for private use.
Jan 25 Paid office rent for next month $2,000 by cheque.
Jan 30 Received Bank interest $ 1,000.
Jan 31 Paid staff wages $500 by cheque.
4.2 You are to enter the following transactions, completing the double entry in the books for the month of May
20X7.
20X7
May 1 Started business with $2,000 in the bank.
May 2 Purchased goods $ 175 on credit from M Mills.
May 3 Bought fixtures and fittings $ 150 paying by cheque.
May 5 Sold goods for cash $275
May 6 Bought goods on credit $ 114 from S Waites.
May 10 Paid rent by cash $15.
May 12 Bought stationery $27, paying in cash.
May 18 Goods returned to M Mills $23.
May 21 let off part of the premises receiving rent by cheque $5.
May 23 Sold goods on credit to U Henry for $77.
May 24 Bought a motor van paying by cheque $300.
May 30 Paid the month’s wages by cash $ 117.
May 31 the proprietor took cash for himself $44.
Balancing the accounts

Finding and entering the difference between the two sides of an account on the lesser side, so as to
equalize the two side of an account.

Chapter (5 )
Trial Balance
Checking the balance

Before using the account balance to prepare final accounts, this proof of the equality of debit and
credit balance is called a Trial Balance.
Trial Balance as at (D/M/Y)
Account Name Dr Bal Cr Bal
$ $
Assets A/c
Capital A/c
Liabilities A/c
Purchase A/c
Revenue A/c
Return Inward A/c
Return Outward A/c
Expenses A/c
Income A/c
Drawing A/c
Summary of Double Entry Rule

No Type of Account Dr Cr
1 Assets Increase decrease
2 Liabilities Decrease Increase
3 Capital Decrease Increase
Trade
4 Personal A/c Receivable Trade Payable
5 Nominal A/c Expense /Loss Income/Profit
6 Cash / Bank Receipt Payment

Exercise
5.1 Record the following details for the moths November 20X3 and
Extract at trial balances as at 30 November 20X3.
20X3
Nov 1 started with $5,000 in the bank
Nov 3 Bought goods on credit from T Henrique $160, J Smith $230,
W Rogers $400, P Boone $310.
Nov 5 Cash Sales $240.
Nov 6 Paid rent by cheque $20.
Nov 7 Paid rates by cheque $ 190.
Nov 11 old goods on credit to L Matthews $48, K Allen $32, R Hall $ 1,170.
Nov 17 Paid wages by cash $ 40.
Nov 18 we returned goods to T Henriques $ 14, P Boone $20.
Nov 19 Bought goods on credit from P Boone $80, W Rogers $270, D Dtaz
$130.
Nov 20 Goods were returned to us by K Allen $2, L Matthews $4.
Nov 21 Bought motor van on credit from U Z Motors $500.
Nov 23 we paid the following by cheque T Henrique $ 146, J Smith $230,
W Rogers $300.
Nov 25 Bought another motor van, paying by cheque immediately $700.
Nov 26 received a loan of $400 cash from A Williams.
Nov 28 Received cheques from LMatthews $44, K Allen $30.
Nov 30 Proprietor brings a further $300 into the business, by a payment into
the business bank account.

5.2 Record the following for the month of January balance of all the accounts and then extract a trial
balance as at 31 January 20X4.
20X4
Jan 1 Started business with $3,500 cash.
Jan 2 Put $2,800 of the cash into a bank account.
Jan 3 Bought goods for cash $ 150.
Jan 4 Bought goods on credit from L Coke $360, M Burton $490, T Hill $ 110, C
Small $340.
Jan 5 Bought stationery on credit from Swift Ltd $ 170.
Jan 6 Sold goods on credit to S Walters $90, T Binns $ 150, C Howard $ 190,
P Peart $ 160.
Jan 8 Paid rent by cheque $55.
Jan 10 Bought fixtures on credit from Matalon Ltd $480.
Jan 11 Paid salaries in cash $ 120.
Jan 14 Returned goods to M Burton $40, T Hill $60.
Jan 15 Bought motor van by cheque $700.
Jan 16 Received loan from J Henry by cheque $600.
Jan 18 Goods returned to us by S Walters $20, C Howard $40.
Jan 21 Cash Sales $90.
Jan 24 Sold goods on credit to T Binns $ 100, P Peart $340, J Smart $115.
Jan 26 we paid the following by cheque M Burton $450, T Hill $50.
Jan 29 Received cheques from J Smart $ 115, T Binns $250.
Jan 30 Received a further loan from J Henry by cash $200.
Jan 30 Received $500 cash from P Peart.

5.3 Against each of the listed items tick ( ) either the Debit column or the Credit column according to which
side of the trial balance you would expect the item to appear.
Debit Credit
Payables
Receivables
Fixtures and fittings
Capital
Wages
Motor vehicle
Revenue
Loan from T Black
Premises
Purchases
Cash
Insurance
Drawings
Inventory of goods
5.4 On 31 December Year 4, T Lennon had the following account balances:

Motor vehicle 4,500
Purchases 2960
Revenue 4230
Inventory of goods 1800
Cash at bank 6740
Fixture and fitting 7900
Wages 2310
Receivables 1960
Payables 2600
Rent 1250
Drawing 180
General Expense 930
Loan from D Waller 2000
Capital 21700
Prepare the trial balance of T Lennon at 31 December Yea 4.

Chapter (6)
Final Accounts
Final Accounts
1. Statement of Profit or Loss
- Displays on the effects of the operations on the owner’s equity. It shows the income and the
cost of operations for the period.
2. Statement of financial Position

- presents the financial position of an entity on a particular date
- Represents the Assets, Liabilities and Equity of a business at a point in time.

Statement of Profit or Loss for the Year ended (D/M/Y)
$ $ $
Revenue xx
(-) Return Inwards (xx)
Net
xx Purchase
Net Revenue
Less Cost of Goods sold

Opening inventory xx
Purchase xx
(+) Carriage Inwards xx Cost of Goods
(-) Return Outwards (xx) xx Sales
xx
(-) Closing inventory (xx) (xx)
Gross Profit xx
(+) Income xx
xx
(-) Expenses (xx)

Profit for the year xxx

Statement of Financial Position as at (D/M/Y)
$ $
Assets
Non-Current Assets
Land xx
Building xx
Fixture & Fitting xx
Motor Van xx xx
Current Assets
Inventory xx
Trade Receivable xx
Cash & Cash Equivalent xx
(Cash + Bank) xx
Total Assets xxx
Equity & Liabilities

Equity
Opening Capital xx
(+) Net Profit xx
(-) Drawing (xx)
xx
Closing Capital
Non-Current Liabilities
Long term loan xx
Current Liabilities
Trade Payable xx
Bank Overdraft xx
xx
Total Equity & Liabilities xxx
Assets = Capital + Liabilities

NCA (more than 1 year) NCL (more than 1 year.)
CA (within 1 year.) CL (within 1 year)

6.1 From the following trial balance of T Williams, prepare a Statement of Profit or Loss for the year ended 31
May Year 7 together with a Statement of Financial Position at that date.
Dr ($) Cr ($)
Revenue 139,200
Purchases 103,500
Wages and salaries 15,320
Buildings 32,000
Inventory, 1 June Year 6 27,230
Carriage inwards 630
Rent 5,400
Fixtures and fittings 4,250
Returns Outwards 960
Insurance 325
Returns inwards 430
Trade Receivables 21,460
Trade Payable 12,240
Loan from T Smart, repayable in Year 11 15,000
Sundry expenses 475
Carriage outwards 2,340
Cash at bank 4,450
Cash in hand 195
Drawings 11,400
Capital 62.005
229,405 229,405
Inventory at 31 May Year 7 was valued at $30,580.

6.2 From the following trial balance of R Graham draw up a Statement of Profit or Loss for the year
ended 30 September 20X6, and Statement of Financial Position as at that date.
Dr Cr
(t：
Inventory 1 October 20X5 2,368
Carriage outwards 200
Returns Inwards 205
Returns Outwards 322
Purchases 11,874
Revenue 18,600
Salaries and wages 3,862
Rent 304
Insurance 78
Motor expenses 64
Office expenses 216
Lighting and heating expenses 166
General expenses 314
Premises 5,000
Motor vehicles 1,800
Fixtures and Fittings 350
Trade Receivables 3,896
Trade Payable 1,731
Cash at bank 482
Drawings 1,800
Capital 12,636
33,289 33,289
Inventory at 30 September 20X6 was $2,946.

Chapter (7)
The division of Ledger
7.1 Types of Accounts
(a) Personal Accounts
(b) Real Accounts
(c) Nominal Accounts
7.2 Types of ledger

(a) General Ledger (c) Trade payable ledger (Purchase ledger)
(b) Trade receivable ledger (Sale Ledger) (d) Cash Book
Real A/C Nominal (General) A/c Personal A/c

Non-Current Asset Revenue / return Inwards Trade Receivable
Inventory Purchase/ Return Outwards Other receivable
Bank Income / Expense Trade Payable
Cash Other payable
Capital /Drawing
Source Original Double

Documents Entry Entry
Profit or Loss Trial

Balance
SOFP

Books of Original Entry (Day Books)

1 Sales Day Book
2 Purchase Day Book
3 Return inwards Day Book
4 Return outwards Day Book
5 Cash Book
6 Petty Cash Book
7 Journal
7.1 Name the ledger in which you would expect each of the following accounts to appear:
(a) Purchases account

(b) D Smith - Trade Receivable
(c) Rent payable
(d) Machinery
(e) Drawings
(f) Sales
7.2 What type of account is each of the following?

Machinery
Sales
General expenses
Bank
Inventory

Chapter (8)
Books of Original Entry (Cash Book)
1. Sales Day Book / Journal - For Credit Sales

2. Purchase Day Book / Journal - For credit purchase
3. Return inwards Day Book / Journal - For return inwards
4. Return outwards Day Book/ Journal - For return outwards
5. Cash Book - For receive & payment of cash and cheque
6. Petty Cash Book - For Small Payments
7. General Journal - For other items
8.2 Two Column Cash Book
Dr Cash Book Cr
Date Particular Folio Cash Bank Date Particular Folio Cash Bank

$ $ $ $
8.3 Three column cash Book Cash Book
Date Particular Folio Discount Cash Bank Date Particular Folio Discount Cash Bank
Allowed Received

$ $ $
$ $ $

Discount
Trade Discount (do not record in the accounts) reduction at the buying time
Cash Discount (for prompt or early payment)
Business can be both allowing and receiving cash discount.
Sales on Credit > Trade Receivable > Discount allowed (Expense – Dr Nature)
Double Entry for Dis allowed (Discount Allowed A/c Dr / Trade Receivable Cr)
Purchase on Credit > Trade Payable > Discount Received (Income – Cr Nature)
Double Entry for Dis Received (Trade Payable A/c Dr / Discount Received A/c Cr)
EXERCISE
8.1 Write up a two-column cash book from the following:
20X6
Nov 1 Balance brought forward from last month: Cash $105; Bank $2,164
2 Cash Sales $605
3 Took $500 out of the cash till and paid it into the bank
4 J Matthews paid us by cheque $217
5 We paid for postage stamps in cash $60
6 Bought office equipment by cheque $ 189
7 We paid J Lucas by cheque $50 9 Received rates refund by cheque $72.
11 Withdrew $250 from the bank for business use
12 Paid wages in cash $239.
14 Paid motor expenses by cheque $57
15 L Levy lent us $200 in cash.
20 R Norman paid us by cheque $ 112.
28 We paid general expenses in cash $.22
30 Paid insurance by cheque $74
30 Cash sales $300, $250 of this paid direct into the bank account.
30 Cash sales paid direct into the bank $100.

8.2 Prepare a two-column cash book from the following details, balancing it at the end of the month.
Year 3
Oct 1 Balances brought forward from the previous month:
Cash $35; Bank $ 1,640 (Dr)
Oct 3 Paid rent by cheque $ 165.
Oct 5 Withdrew from bank for office cash $60.
Oct 7 Sold goods for $390: $70 in cash: $320 by cheque.
Oct 10 Paid T Rendell by cheque $265.
Oct 12 Bought postage stamps $ 15 in cash.
Oct 14 Received cheque from A Pine $ 130.
Oct 16 Cash Sales $450, $300 of this was paid direct into the bank account.
Oct 19 The proprietor withdrew $80 in cash for private use.
Oct 23 Paid insurance by cheque $110.
Oct 25 Bought goods by cheque $770.
Oct 27 Cash Sales $215.
Oct 29 Paid general expenses in cash $65.
Oct 30 Banked $250 cash.
8.3 Enter the following in three-column cash book Balance of the cash book at the end of the month and
show the discount accounts in the general ledger.
20X8
June 1 Balances brought forward: Cash $97; Bank $2,186.
June 2 The following paid us by cheque in each case deducting a 5 per cent cash discount: R Harris $ 1,000
C White $280; P Peers $ 180; O Hardy $600.
June 3 Cash Sales paid direct into the bank $ 134.
June 5 Paid rent by cash $88.
June 6 We paid the following accounts by cheque, in each case deducting 2.5% cash discount J Charlton
$400, H Sobers $640; D Shall cross $200.
June 8 Withdrew cash from the bank for business use $250.
June 10 Cash Sales $206.
June 12 D Deeds paid us their account of $89 by cheque less $2 cash discount.
June 14 Paid wages by cash $250.
June 16 We paid the following accounts by cheque L Lucas $ 117 less cash discount $6: D Fisher $206
less cash discount $ 8.
June 20 Bought fixtures by cheque $8,000.
June 24 Bought motor lorry paying by cheque $7,166.
June 29 Received $ 169 cheque from D Steel.
June 30 Cash Sales $116.
June 30 Bought stationery paying by cash $60

Chapter (9)
Petty Cash Book
9.1 Division of Cash Book
(a) Main Cash Book
(b) Petty Cash Book (Cash Book for small Payments)
9.2 The Imperest system
A system where a restore is made of the total paid out in the period.
Example $
1‐Sep Main cashier paid to Petty cashier 1000
1~30 Expense Paid by Petty cash ‐980
30‐Sep Petty cash balance 20

1‐Oct Main cashier restore Petty cash 980
1000
Dr Cr
Received Payment
Total Motor Stationery Postage Ledger
Date Particular Vr ($) vehical $ $
$ Folio
No expense
$ Folio $
50 1-May bal b/d
150 1-May Main cash book
purchase
5-May stationery 15 15
8-May Postage stamp 10 10
27-
May Petrol 15 15
27-
May Mr Jone 50 50
90 15 15 10 50
30-
May bal c/d 110
200 200
110 1-Jun Bal b/d
90 1-Jun main Cash book

EXERCISE
9.1 T Wylie uses the petty cash imprest system, the imprest being $ 150. At 1 November Year 4,
the balance of petty cash in hand is $32.10.
The following transactions were dealt with by the petty cashier during the month of November.
Year 4
Nov 1 T Wylie gave cash to petty cashier to make up to the imprest amount.
Nov 3 Paid $ 15.20 for petrol
Nov 5 Paid $20 for postage stamps.
Nov 8 Paid $8 for cleaning materials.
Nov 12 Paid $9.60 for petrol.
Nov 14 Paid $9.15 for travelling expenses.
Nov 17 Paid $5 for cleaning materials.
Nov 21 Paid $5.30 for postage.
Nov 22 Paid $ 10.10 to C Talisman, a payable.
Nov 25 Paid $ 11.50 for petrol.
Nov 26 Paid $7.64 for travelling expense.
Nov 27 Paid $30 for postage stamps.
Nov 30 Paid $3.50 to D Cole, a payable.
Required Enter the above transactions in the petty cash book of T Wylie for November Year 4, showing
the balance at the end of the month. Bring down the balance and show the entry to reimburse the account on
1 December Year 4.
Note The analysis columns used by T Wylie are motor vehicle expenses, postage, cleaning expenses, travelling
expenses and ledger

Chapter (10)
Book of Original Entry – Sales, Purchases & Returns Day Book
Type of Ledgers
Trade receivable ledger (sales ledger)
Trade payable ledger (purchase ledger)
Cash Book
General Ledger
Day Books
1. Sales Day Book/Journal
2. Purchase Day Book/Journal
3. Return Inward Day Book/Journal
4. Return Outward Day Book/Journal
5. Cash Book
6. Petty cash Book
7. General Journal
Sales Day Book (credit sales)
Sales
Date Trade Receivable or customer F $
invoice
2006
1-May T Thompson 10
1-May L Rock 50
1-May K Barton 100

Purchase Day Book-credit purchase
Purchase
Date invoice Trade Payable or Supplier F $
2006
5-May P Potter 100
5-May H Harris 20
15-May H Miles 150
Return Inward Day Book-return inward
Credit
Date Note Trade Receivable or customer F $
no
2006
31-May T Thomspon 5
31-May K Barton 11
31-May K Kelly 14
Return Outward Day Book- Return outward
Debit Note
Date Trade Payable or Supplier F $
No
2006
20-May P Potter 12
20-May B Spencer 22

10.1 You are to enter up the sales, purchases and the returns inwards and returns outwards journals from
the following details, then to post the items to the relevant accounts in the Trade receivable ledger
(sale ledger) and Trade payable ledger (Purchase ledger). The total of the journals are then to be
transferred to the accounts in the general ledger.
20X6
May 1Credit Sales: T Thompson $56, L Rock $ 148, K Barton $ 145.
5 Credit purchases: P Potter $144, H Harris $25, B Spencer $76
10 Credit Sales K Kelly $89, N Mendes $78, N Lee $257
15 Credit purchases; B perking $24, H Harris $58, H Miles $ 123
iiii 20 Goods returned by us to: P Potter $ 12, B Spencer $22
31 Goods returned to us by: T Thompson $5, K Barton $ 11, K Kelly $ 14
10.2 You are to enter the following items in the books, post to personal accounts and show transfers to the
general ledger.
20X5
July 1Credit purchase from: K Hill $380, M Norman $500, N Semon $ 106
10 Credit Sales to E Ring by $510, E Phillips $246, F Thompson $356
15 Credit purchases from: R Morton $200, J Cook $ 180, D Edwards $410, C Davies $66.
24 Credit Sales to: A Green $307, H George $250, J Ferguson $ 185
28 Returns outwards to: M Norman $30, N Semon $ 16
31 Returns inwards from: E Phillips $ 18, F Thompson $22.

Chapter (11)
General Journal
General Journal is a day book or journal which is used to record transactions relating to adjustment
entries, opening entries, accounting errors etc.
11.1 General Journal
Journal
Date Particular Folio Dr Cr
$ $
2019 1,000
Jan 1 Fixture & Fitting A/c
Lucky Co., Ltd A/c 1,000
Narrative ‐(Being the entry for Purchase
of Fixture & Fitting)
11.2 Use of General Journal
(a) Purchase and Sale of Non‐Current Assets on credit
Example
(i) Purchase of Fixture and Fitting on credit from Lucky Co., Ltd $ 1000.
(ii) Sale of Vehicles on credit to Mr. John $ 10,000.
(b) The correction of error
(c) Writing off Irrecoverable debt (Bad debt)
Example
(i) Jenny owes to us $500 is written off as a irrecoverable debt because She is declared
Bankrupt.
(d) Opening entries
(e) Others items.

11.1 You are to show the journal entries necessary to record the following items:
20X5
May 1 Bought a motor vehicle on credit from Kingston Garage for $6,790.
May 3 A debt of $34 owing from H Newman was written off as a Irrecoverable debt.
May 8 Office furniture bought by us for $490 was returned to the Unique
Office, as it was unsuitable. Full allowance will be given us.
May 12 We are owed $150 by W Charles. He is declared bankrupt and we received $39 in full
Settlement of the debt.
May 14 We take $45 goods out of the business inventory without paying for them.
May 28 Some time ago we paid an insurance bill thinking that it was all in respect of the business.
We now discover that $76 of the amount paid was in fact insurance of our private house.
May 28 Bought machinery $980 on credit from Systems Accelerated.
11.2 Show the journal entries necessary to record the following items:
20X7
Apr 1 Bought fixtures on credit from J Harper $1,809
4 We take $500 goods out of the business inventory without paying for them
9 $28 of the goods taken by us on 4 April is returned back into inventory by us. We do not
take any money for the return of the goods
12 K Lamb owes us $500. He is unable to pay his debt. We agree to take some office equipment from
him at the value and so cancel the debt.
18 Some of the fixtures bought from J Harper. $65 worth, are found to be unsuitable and are returned to
him for full allowance.
24 A debt owing to us by J Brown of $68 is written off as a Irrecoverable debt.
30 Office equipment bought on credit from Super Offices for $2,190

Chapter (12)
Capital & Revenue Expenditure
12.1 Capital Expenditure
- Acquisition or Upgrade of a Non‐Current Asset.
- Statement of financial position as Non‐Current Assets.
- Example: Purchase of non current assets
Extension Cost of Building
New construction
12.2 Revenue Expenditure
■ Operating expenses, which are short term expenses used to run the daily business operation.
Statement of Profit or Loss at the end of final period as Expenses (deducted
from Gross Profit)
■ Example: Repairs of Motor Van / building
Running Cost (Fuel, Petrol) for vehicles.
Question (12.1)
For the business of J Charles wholesale chemist classify the following between ’capital’ and ’revenue expenditure’.
(a) Purchase of an extra motor van.
(b) Cost of rebuilding warehouse wall which had fallen down.
(c) Building extension to the ware house.
(d) Painting extension to warehouse when it is first built.
(e) Repainting extension to warehouse three years later than that done in (d)
(f) Carriage costs on bricks for new warehouse extension.
(g) Carriage costs on purchases.
(h) Carriage costs on sales.
(i) Legal costs of collection debts
(j) Legal charges on acquiring, new premises for office.
(k) Fire insurance premium
(l) Costs of erecting new machine.
Question (12.2)
For the business of H Ward，a food merchant classify the following between ’capital’ and ’revenue expenditure’
(a ) Repairs to meat slicer.
( b ) New tyre for van.
( c ) Additional shop counter.
(d )Renewing signwriting on shop.
(e) Fitting partitions in shop.
( f) Roof repairs
(g ) Installing thief detection equipment.
( h ) Wages of shop assistant.
(i ) Carriage on returns outwards.
(J) New cash register.
( k ) Repairs to office safe.
( l ) Installing extra toilet

Chapter (13)
Accrued & Prepaid Expenses and Accrued & Advance Income
(1) Accrued Expense

Liabilities - Credit balance
-is an amount owing for an accounting period, which remains unpaid at the end of period.
Expense A/c - Dr (SOP&L)
Accrued Expense A/c – Cr (SOFP – CL)
Example (1)
For the year ended 31 December 2016.
-Rent per month $100.
-Paid rent $1,000 by cheque during the year.
Required: Prepare Rent Account.
(2) Prepaid Expense

Assets - Debit balance
-is an amount paid during the current accounting period to cover an expense for the next period.
Prepaid Expense A/c Dr (SOFP – CA)
Expense A/c Cr (SOP&L)
Example (2)
-Insurance per annum $2000.
-Paid insurance $3,000 by cheque during the year.
Required: Prepare Insurance Account
(3) Accrued Income

Assets - Debit balance
-is due for the financial period, but not been received till the end of that period.
Accrued Income A/c Dr (SOFP –CA)

Income A/c Cr (SOP&l)

Example (3)
-Rent receivable per month $50.
-Rent receive by cash $550 during the year.
Required: Prepare Rent Receivable Account
Advanced Income Liabilities - Credit balance

.the income received in advance relates to the next accounting period , not for the current.
Income A/c Dr (SOP&L)

Advance Income A/c Cr (SOFP – CL)
Example (4)
-Rent receivable per annum $600.
-Rent receive by cash $700 during the year.
Required: Prepare Rent Receivable Account
ေပးရန်ရှိစရိတ် -
Accrued Expense Liabilities - Cr
ရန်၇ှိ
Expense
(စရိတ)် Prepaid Expense ကိတင်ေပးစရိတ် - Asset - Dr

ကိ
Accrued income ရရန်ရှိ၀င်ေငွ - Asset - Dr

Income
(၀င်ေငွ) Advance income ကိတင်ရ ၀င်ေငွ Liabilities - Cr

Q (13.1) Alum, a retailer, had the following account balances in his books on 1 August 2005:
$
Rent payable 130 (Cr)
Telephone 90 (Cr)
Insurance 80 (Dr)
Rent receivable 420 (Dr)
Rent payable is due on 1 July, 1 October, 1 January and 1 April.
During the year, the following payments and receipts were paid and received by cheque:
2005 $
Aug 1 Rent payable 390
Sep 1 Telephone expenses 185
Sep 1 Insurance (annual premium payment to Aug 31 2006) 800
Oct 1 Rent payable 447
Dec 1 Telephone expenses 203
Dec 1 Rent receivable (half‐ year receipt to 30 April 06
plus amount outstanding at 1 August 2005) 1,260
2006
Jan 1 Rent payable 447
Marl Telephone expenses 189
Apr 1 Rent payable 447
Jun 1 Rent receivable (half‐year receipt to 31 Oct 06) 890
Jun 1 Telephone expenses 205
July 1 Rent payable 447
Additional information:
At 31 July 2006, $ 90 was accrued for telephone expenses.
Required
(a) Open the four accounts listed above and post the required transactions. Balance the accounts and make
the appropriate transfers to the Statement of Profit or Loss for the year ended 31 July 2006.
(12 marks)
(b) Prepare the Statement of Profit or Loss extract for the year ended 31 July 2006.(6 marks)
(c) Prepare the Statement of Financial Position extract at 31 July 2006, showing the amounts to be entered
Under Current Assets and Current Liabilities. (5 marks)
Specimen 2008

Q (13.2) Annie is a sole trader.
Annie buys and sells goods to Nick. At the year end, Nick owes Annie $80
(a) Identify the double entry to record this offset in Annie’s ledger. (1)

Dr Cr
□ A Bank Trade payables control account
□ B Bank Trade receivables control account
□ C Trade payables control account Trade receivables control account
□ D Trade receivables control account Trade payables control account
(b) Identify in which account discount allowed is recorded. (1)

□ A Credit in trade payables control account
□ B Debit in trade payables control account
□ C Credit in trade receivables control account
□ D Debit in trade receivables control account
Annie prepares annual financial statements to 31 December 2016. She paid the following insurance.
■ $600 on 1 April 2015 for the year ending 31 March 2016.
■ $720 on 1 April 2016 for the year ending 31 March 2017.
She received rental income as follows:
1 March 2016 $1,500
1 June 2016 $1,500
1 September 2016 $1,500
1 December 2016 $1,800
(c) Prepare Annie5s insurance account for the year ended 31 December 2016. Balance the account at that date
and bring the balance down to 1 January 2017. (5)
From 1 March 2016 Annie received rent.
(d) Prepare the rent receivable account for the year ended 31 December 2016. Balance the
account at that date and bring the balance down to 1 January 2017. (5)
(e) State the section of the income statement (statement of profit or loss) that shows the
rent receivable. (1)
(Total 13 marks)
(May 2017)

Q 13.3 Philips provided the following information for the year ended 30 June 2017, after the calculation of the
gross profit.
1 July 2016 30 June 2017

$ $
Insurance prepaid 80 120
Light and heat accrued 145 170
Rent received prepaid 200 250

Bank interest received 54
General expenses 23,200
Gross profit 49,420
Insurance 690
Light and heat 1,350
Loan interest 186
Rent received 2,700
(a) Prepare the rent received account for the year ended 30 June 2017. Balance the account at
that date and bring the balance down on 1 July 2017. (5)
(b) Prepare an extract of the statement of profit or loss for the year ended 30 June 2017, showing

the profit or loss section only. (8)
(c) Complete the following table by indicating with a tick (v^) the section of the statement of

Financial position where each balance will be shown.

(3)
Current assets Current liabilities
Insurance prepaid
Light and heat accrued
Rent received prepaid
(December 2017)

Chapter (14)
Depreciation, Accumulated Depreciation and Disposal of Non-Current Assets
14.1 Depreciation on Non-Current Assets

An accounting method of allocating the cost of a tangible or physical asset over its useful life. It
represents how much of an asset's value has been used up.
Cause of Depreciation
1. Physical deterioration – by using the non-current assets
2. Economic Factors – Noncurrent assets may become obsolete or out of date due to an improved product
being available. E.g. computers.
3. Time factors – as the year pass and it became older and will lose value.
14.2 Method of calculation Depreciation

(a) Straight Line Method
(b) Reducing Balance Method
14.3 Straight Line Method

Annual Depreciation = Cost ‐ Scrap Value
Useful Life
(or)
—
(Cost ‐Scrap value) x Depn: Rate %
14.4 Reducing Balance Method
Annual Depreciation = Carrying value x Depreciation Rate %
Carrying value = Cost – Accumulated Depreciation (or) Provision for Depreciation
14.5 Double Entry for Depreciation
Debit Credit
$ $
Depreciation Expenses A/c XX
(Statement of Profit or Loss)
Accumulated Depn: / Provision for Depn: A/c XX


14.6 Disposal of Non-Current Assets
- Causes of Disposal
(i) Sale of Non-Current Assets by cash
(ii) Damage of Non-Current Assets as fire, accident etc.
(iii) Exchange (Trade in) of Non-Current Assets
(iv) Non-Current Asset is taken over by owner.
14.7 Disposal A/c

$ $
N. C. Assets –Cost (1) XXX Prov: for depreciation (2) XXX
Cash/Bank A/c - Sales Proceeds (3) XXX

Disposal Profit (SOP&L-Income) Disposal Loss (SOP&L-Expenses)
Double Entry for Disposal

Cost
Disposal A/C Dr
Non-current Assets at cost Cr
Accumulated Dep
Acc: Dep A/C Dr
Disposal A/C Cr
Proceed
Bank A/C Dr
Disposal A/C Cr
ြခားနားချက် debit side ေပရင် disposal profit

Disposal A/C Dr
SOP&L income Cr
ြခားနားချက် credit side ေပရင် disposal loss

SOP&L (expense) Dr
Disposal A/C Cr


Example
A machine costs $12,500.It will be kept for four years, and then sold for an estimated figure of $5,120.Show the
calculations of the figures for depreciation (to nearest $) for each of the four years using (a) the straight line
method.(b)the reducing balance method for this method using a depreciation rate of 20%.

Questions (14.1)
Kerry leases a small shop. On 1 July 20X4, she purchased fixtures and fittings costing $ 25,000. She decided to
depreciate the fixtures and fittings at 20% per year on a straight-line basis. Kerry prepares her accounts annually
to 30 June.
(a) Show the
(i) fixtures and fittings account
(ii) accumulated depreciation of fixtures and fittings account
(iii) depreciation expenses account
for the three years ending 30 June 20X5,20X6.
(b) Show how the asset would appear in the Statement of Financial Position of R Silvester on 30 June 20X5,
20X6.
Questions (14.2)
On 1 April Year 2, Andrew Pointer bought a machine for $ 15,000 by cheque. He decided to depreciate it at the
rate of 20% per annum using the reducing balance method of depreciation. On 31 March Year 5, he sold the
machine for $6,900 by cheque.
Show the
(a) machine account
(b) accumulated depreciation of machine account, and
(c) disposals account
for the financial years ending 31 March Years 3,4 and 5.

Question (14.3)
Annie Lee has a year end of 31 October. Her depreciation policy for motor vehicles is as follows:
All motor Vehicles are depreciated at the rate of 25% using the straight line method A full year ?s depreciation is
charged when an asset is purchased in the financial year There were no residual value expected for the motor
vehicles No depreciation is charged in the year of sale.
The following purchases and sales of Motor Vehicle were made in the 3 years ended 31 October 2010. All payments
Date of Purchase Asset Cost ($)

01 Nov 07 Motor Vehicle A 20,000
21 Oct 08 Motor Vehicle B 24.000
28 Feb 09 Motor Vehicle C 28.0
11 Nov 09 Motor Vehicle D 32,000
Date of Sale Asset Sale price ($)
11 Nov 09 Motor Vehicle A 13,500
and receipts were made by cheque.
Required
Prepare the following accounts for the 3 year ended 31 October 2008, 2009 and 2010.
(a) Motor Vehicle Account (6 marks)
(b) Motor Vehicle Depreciation Account (6 marks)
(c) Motor Vehicle Accumulated Depreciation Account (6 marks)
(d) Motor Vehicle Disposal Account (4 marks)
(e) Name three methods of depreciation other than the straight line method (3 marks)
(2011 Series 2)

Question (14.4)
On 1 January 2016 the cost of Motor Vehicle was $6,000, accumulated depreciation of $4,102 & Bank of $8,920.
On 31 December 2016, Logan James purchased a new motor vehicle costing $9,000
- He received a trade in allowance (part exchange) for his old vehicle of $2,500. This vehicle had originally cost
$6,000 on 1 January 2012.
■ Logan James paid the remaining balance for the new vehicle by cheque.
- Motor vehicles are depreciated at the rate of 25% per annum using the reducing (diminishing) balance method.
■ A full year5s depreciation is charged in the year of acquisition but none in the year of disposal.
(a) Prepare the accounts to record the acquisition and disposal of the motor vehicle. Balance off the appropriate
accounts at the year ended 31 December 2016.
(i) Motor Vehicle Account
(ii) Accumulated Depreciation Account
(iii) Bank Account
(iv) Disposal Account (12)
(b) State in which section of the statement of profit or loss on disposal identified in (a) would be
Shown. (1) (Total 13 marks)
(2017 January)
Question (14.5)
Willow is a manufacturer of cricket bats.
Willow depreciates machinery at a rate of 25% per annum on a reducing (diminishing) balance basis， with a foil
year’s depreciation charged in the year of acquisition and none in the year of disposal.
On 1 April 2016 the total cost of machinery was $188,500 with accumulated depreciation of $36,150. This included a
machine, purchased on 1 July 2015 costing $8,600, which was sold on 1 March 2017 for $6,500.
On 1 February 2017 new machinery was purchased costing $3,200.
All purchases and sales of non-current assets were made by cheque.

(a) Prepare the following ledger accounts for the year ended 31 March 2017, showing any transfers to the
statement of profit or loss. Balance the accounts on that date and bring the balances down on 1 April 2017.
(i) Machinery Cost Account (3)
(ii) Machinery Disposal Account (4)
(iii) Machinery Accumulated Depreciation Account (5)
(b) Calculate the carrying value of machinery at 31 March 2017. (1) (2017 April) (Total 13 marks)

Chapter (15)
Irrecoverable debt (Bad debt), Allowance for doubtful debts and
Irrecoverable debt recovered of Trade receivable
15.1 Irrecoverable debt (Bad debt)
-to be uncollectable.
Dr Irrecoverable debt account

Cr Trade Receivable account
15.2 Allowance for Doubtful debt

- is an estimate of how much of the trade receivable balance of a business will become irrecoverable in
the next.
If increase
Dr
Statement of Profit or Loss (Expenses)
Cr
Allowance for doubtful debts account
If decrease
Dr
Allowance for doubtful debts account
Cr
Statement of Profit or Loss (Income)
Allowance for Doubtful Debt A/C

(ေျကြးဆံုးလ်ာထားခ်က္)
Allowance for Doubtful Debt A/C
Date Particular $ Date Particular $

Balance b/d xx

if decrease xx
(SOP&L income) if increase xx

Bal c/d xx (SOP&L Exp)
(TR c/d- ID ) x% 300
xxx xxx
16.1 Irrecoverable debt recovered
Bank A/c Dr
Irrecoverable debt recover A/c Cr (Previous year irrecoverable debt)
(Or)
Irrecoverable debt Cr (This year irrecoverable debt)


Question (15.1)
The following information is available for Python Limited:
Year Ended
31 December 31 December 31 December
1999 2000 2001
$ $ $
Trade Receivable 127,800 145,600 165,600
691 375 735
Irrecoverable debt
written off during year
Date written off 30 September 1999 30 September 2000 30 September 2001
Irrecoverable debt recovered 85 400 175
Date recovered 28 May 1999 1 February 2000 3 December 2001
Irrecoverable debt recovered

originally written-off in
1998 1999 2001
Doubtful debts Allowance
to be adjusted to 2.5% 2.75% 2.25%
Notes:
(1) The balance on the Allowance for Doubtful Debts Account at 1 January 1999 was $2,750.
(2) The trade receivable balances shown above are after all Irrecoverable debt write-offs.
Required
(a) Prepare the following accounts in the ledger of Python Ltd for each of the years ended 31 December
1999,2000 and 2001:
(i) Irrecoverable debt
(ii) Irrecoverable debts recovered
(iii) Allowance for doubtful debts.
(b) Show the Statement of Financial Position extract in respect of trade receivable for each of the years
ended 31 December 1999,2000 and 2001
(c) Show the Statement of Profit or Loss extract for the year ended 31 December 1999, 2000,2001.

Question (15.2 )
The following balances were extracted from the books of Kevin Ling，a sole trader on 31 March 2015.
Account $
Allowance for doubtful debts 120
Trade receivables 12,600
Kevin has advised that the following adjustments need to be accounted for:
1. An amount owing by a debtor, $600, is irrecoverable and is to be written off.
2. A 2% allowance for doubtful debts is to be maintained.
Required
(a) Prepare an extract of a statement of financial position to show how the allowance for doubtful debts
would be presented. (4)
(b) Explain why Kevin Ling finds it necessary to include an allowance for doubtful debts in his final a/c. (3)
The bad debt that was previously written off at 31 March 2015 of $600, was repaid in full on 10 June 2015.
(c) Prepare the journal entry to record this transaction. Narratives are not required. (2)
(d) Explain how this adjustment would affect the financial statements for the year ending
31 March 2016. (3)
(Total 12 marks) / (2015 November)
Question (15.3)
(a) Explain the difference between irrecoverable debts and an allowance for doubtful debts. (6)
Your manager provided you with the following information:

-Trade receivables at 31 May 2015 were $27,900.
-A irrecoverable debt of $1,500 has not yet been accounted for in the accounting records.
The company introduces an allowance for doubtful debts of 3〇/〇 trade receivables.
Required
(b) Prepare the journal entries to finalize the year end accounts at 31 May 2015. Narratives are
not required. (5)
(c) Explain three consequences for the business of credit customers not paying on time. (6)
(Total 17 marks) (2016 April)
Question (15.4)
At 31 December 2016, the following balances were provided by Annie.
Trade receivables control account $41,200
Allowance for doubtful debts account $600
Annie will provide an allowance for doubtful debts of 2% of trade receivables at 31 December 2016.
A receivable owing $1,200 has been declared bankrupt. This amount will not be paid and has yet to be accounted for.
Required
(i) Prepare the irrecoverable debts account at 31 December 2016. (2)
(ii) Prepare the allowance for doubtful debts account at 31 December 2016. (5)
(Total 7 marks) (2017 May)

Chapter (16)
Sole Trader: Final Accounts
2. Statement of Financial Position
Question (16.1)
The following is the Trial Balance at 31 December Year 5 of K Larkin, a sole trader: Trial Balance at 31 December
Year 5.
DR $ CR $
Land and building at cost 71,000
Machinery and equipment at cost 25,000
Motor vehicle at cost 10,000
Bank 3,400
Cash 950
Trade Receivables and Payable 5,100 4,900
Inventory 1 January Year 5 4,950
Purchases and Revenue 21,900 51,700
Returns inwards and outwards 210 540
Discounts allowed and received 450 700
Advertising 2,200
Drawings 4,200
Interest on loan 200
Travelling expenses 1,000
Rent 1,500
Postage and stationary 180
2,050
Light and heat
Provision for depreciation at 1 January Year 5:
Machinery and equipment 6,000
Motor vehicles 4,000
90,000
Capital at 1 January Year 5
Loan: From 1 January Year 5 for 10 years
at 10% per annum 4,000
161,840 161,840
The following additional information is available

(1) Inventory at 31 December Year 5 is value at $5,780.
(2) K Larkin makes a Allowance of 5% for doubtful debts
(3) It is K Larkin’s policy to provide for depreciation as follows.
(i) Machinery and equipment at 25% per annum using the reducing balance method.
(ii) Motor vehicles at 20% per annum on cost.
(4) Included in travelling expenses is an amount of $ 180 used by K Larkin for a short holiday.
(5) Rent of $600 for the period 1 October to 31 December Year 5 had no yet been paid.
(6) And account for electricity $ 140 is outstanding at 31 December Year 5:
(7) Wages & Salaries have been prepaid by $ 100.
Required
Prepare for K Larkin Statement of Profit or Loss for the Year ended 31 December Year 5 and a Statement of Financial
position at 31 December Year 5.

Question (16.2)
T Morgan, a sole trader, extracted the following trial balance from his books at the
close of business on 31
March 20X9:
Dr Cr

Inventory 1 April 20X8 5,160
Capital 1 April 20X8 7,200
Bank overdraft 4,350
Cash 90
Discounts 1,440 930
Returns inwards 810
Returns outwards 570
Rent and insurance 1,740
Allowance for bad and doubtful debts 660
Delivery van 2,100
Trade Receivable & Payable 11,910 6,060
Drawings 2,880
General office expenses 450
61,740 61,740
Notes:
(a) Inventory 31 March 20X9 $4,290

(b) Wages and salaries accrued at 31 March 20X9 $210; Office expenses owing $20.
(c) Rent prepaid 31 March 20X9 $ 180.
(d) Increase the allowance for bad and doubtful debts by $ 150 to $810.
(e) Provide for depreciation as follows: Fixtures and fittings $ 120; Delivery van $300.
Required
Prepare the Statement of Profit or Loss for the year ended 31 March 20X9 together with a Statement of Financial
Position as at that date, using vertical formats.

Question (16.3)
John Cleaver has completed his second year of trading. His trial balance, extracted from the Ledger at 31
December Year 2, is as follows:
John Cleaver
Trial Balance at 31 December Year 2
Dr Cr
$ $
Capital 26,120
Loan from brother 8,000
Returns inwards and outwards 188 326
Inventory 1 January Year 2 3,930

Drawings 12,300
Trade Receivable and Payable 22,100 9,380
Bank interest 245
Wages 5,593
Rent 1,860
Insurance 270
Heat and light 440
Advertising 265
Delivery costs 1,803
Irrecoverable debt 436
Non-Current assets (at cost) 32,000

Accumulated depreciation on non-current Assets to
31 December Year 1
3,200
130,800 130,800
The following adjustments are to be taken into account:
(1) Inventory at 31 December Year 2 $2,876.

(2) Cleaver borrowed the $8,000 from his brother on 1 January Year 2. He had agreed to pay 15% interest
per annum but not payment has yet been made.
(3) Provide for annual depreciation of non-current assets at 10% on cost.
Required
Prepare Cleaver’s Statement of Profit or Loss for the year ended 31 December Year 2, and a Statement of
Financial Position at that date.

Question (16.4)
M Tong，a sole trader engaged in wholesaling extracted the following trial balance from his books at the dose
of business on 30 April Year 5.
M Tiong
Trial Balance at 30 April Year 5
Dr Cr
$ $
Office furniture and equipment 6,000
Discounts 1,170 390
Cash at bank 3,240
Cash in hand 160
Inventory 1 May Year 4 2,970
Rent, rates and insurance 2,340
Delivery vehicle, at cost 7,400
Provision for depreciation on delivery vehicle 2,000
Trade Receivable and Payable 8,400 3,650
Allowance for doubtful debts 600
Capital 1 May Year 4 20,000
Drawings 4,500
Vehicle running expenses 1,840
Sundry expenses 410
61,670 61,670
In addition, Tiong has noted the following points:
(1) Inventory at 30 April Year 5 has been valued at $3,160.

(2) Wages accrued amount to $280.
(3) The depreciation provision on the delivery vehicle is to be increased by $ 1,200. A provision of $500 is
to be created in respect of depreciation on office furniture and equipment.
(4) The Allowance for doubtful debts is to be set at 5% of trade receivable.
(5) During the year, Tiong took goods, at a cost price of $90, for his own use. He has not yet recorded this
in the books of account.
(6) Insurance paid in advance is $ 120.
Required
Prepare, in respect of M Tong:
(a) The Statement of Profit or Loss for the year ended 30 April Year 5.
(b) A Statement of Financial Position at 30 April Year 5.

Chapter (17)
Partnership: Final Accounts
17.1 Partnership Final Account
(1) Statement of Profit or Loss
(2) Profit or Loss Appropriation Account
(3) Partners' Capital Account
(4) Partners' Current Account
(5) Statement of Financial Position
17.2 Profit or Loss Appropriation Account
■ Prepare by partnership profit sharing agreement.
A & B Partnership
Profit or Loss Appropriation Account for the Year ended:
$ $
Profit for the Year XX
(+) Interest on drawing
A (Drawings x %) XX
B (Drawings x %) XX XX
XX
(‐)Interest on Capital
A (Capital x %) XX
B (Capital x %) XX (XX)
(‐)Partner’s salaries
A XX
B XX (XX)
Residual Profit XX
(‐)Share of Profit
A XX
B XX (XX)
0

Question (17.1)
Stokes, Morgan and Ruhee are in partnership.
Required
(a) Explain two benefits of forming a partnership. Their partnership agreement states. (4)
Stokes Morgan Ruhee
Profits and losses are shared 40% 40% 20%
Annual salaries $32,000 - $24,000
Annual interest
• Capital is paid at 5% interest on the opening balance.

• Drawings are charged at 5% interest on closing balance.
• The loan to the partnership is paid at 7% interest per annum.
On 31 March 2017 the following information was provided.

Stokes ($) Morgan ($) Ruhee ($)
1 April 2016
Capital account 65,000 65,000 65,000
Current account 18,200 11,360 17,640
Loan to partnership - - 45,000
For the year ended 31 March 2017

Drawings 36,500 38,200 28,600
• Profit for the year before interest was $194,235
• No loan repayments were made in the year
Required
(b) Prepare the appropriation account for the year ended 31 March 2017. (9)
(c) Prepare Ruhee current account for the year ended 31 March 2017. Balance the account on
31 March 2017 and bring the balance down on 1 April 2017. (7)
(Total 20 marks)
(2017 April)

Question (17.2)
Elena and Fotini are in partnership.

Their partnership agreement provided for:
• profits and losses to be shared in the ratio of 3:2
• interest on capital and interest on drawings at 6% per annum on the balances at the end of the year
• annual salaries:
• Elena $30,000
• Fotini $15,000
At 1 November 2016 current account balances were:
• Elena $25,300
• Fotini $18,600
During the year ended 31 October 2017:
• profit for the year was $242,000
• drawings:
• Elena $65,000
• Fotini $38,000
• interest on capital:
• Elena $24,000
• Fotini $24,000
Required
(a) Calculate the interest on drawings for each partner. (Elena & Fotini) (2)
(b) Prepare the appropriation account for the year ended 31 October 2017. (6)
(c) Prepare Elena?s current account at 31 October 2017. Balance the account at that date and
bring the balance down on 1 November 2017. (8)
(d) State how each of the following would be accounted for in the absence of a partnership
agreement. (Share of profits / losses，Interest on capital，Interest on partner’s loan) (3)
(e) Identify the double entry to record the share of losses made by a partnership. (1)
Account to be debited Account to be credited
□ A Appropriation Capital
□ B Capital Appropriation
□ C Appropriation Current
□ D Current Appropriation
Dec 2017 (Total 20 marks)

Question (17.3)
Louise, Adam and Grace have a partnership agreement that states profits and losses are shared 3:2:1 respectively.
Interest is allowed on capital at 3% and charged on drawings at 2%.
At 1 April 2014 the partners had the following balances.
Capital account ($) Current account ($)
Louise 16,000 1,200
Adam 8,000 800 debit
Grace 7,000 1,000
Profit for the year ended 31 March 2015 was $72 000. During the year Louise took a salary of
$10,000. $
Drawings for the year: Louise 14,000
Adam 3,000
Grace 7,500
Required
(a) Prepare the appropriation account for the partnership for the year ended 31 March 2015. (10)
(b) Prepare Louise’s current account showing the balance brought down at 1 April 2015. (7)
Explain what the debit entry in Adam’s current account represented on 1 April 2014. (3) (2016 April

Chapter (18)
Change in Partnership Interest
Question (18.1)
Matthews and Finney are in partnership, sharing profits and losses in the ratio 3:2. The
Statement of Financial
Position of the partnership at 31 December 2001 was as follows:
Non-Current Assets $ $
Land and Buildings 144,400
Fixtures and Fittings 43,600
Motor Vehicle 36,000 224,000
Current Assets
Inventory 25,440
Trade Receivable 30,600
Cash at Bank
16,160
72,200
Total Assets 296,200
Capital A/c - Matthews 164,000

-Finney 104,000 268,000
Current A/c - Matthews 8,720

-Finney 4,680 13,400
281,400
Current Liabilities
Total Capital and Liabilities 296,200
On 31 December 2001, Matthews retired.

On that date, goodwill was valued at $46,000 and land and buildings were valued at $ 160,000. There was a trade
receivable of $2,400 which was considered a irrecoverable debt, and this balance was written off. The inventory was
valued at $24,840. All other assets and liabilities were maintained at Statement of financial position values.
On 1 January 2002, Finney admitted Mortensen to the partnership. The new partnership agreement was that profits
and losses should be shared in the ratio of 4: 1.
At the commencement of the new partnership, Mortensen introduced the following assets:
$
Motor Vehicle 24,000
Cash 96,000
At 31 December 2001, Matthews agreed to leave $ 100,000 of his capital as a loan to the new partnership. Any balance
due to Matthews from the partnership, after making the loan, was immediately paid by cheque.
Finney and Mortensen agreed not to show goodwill in their books.
Required
(a) The Partners5 Capital Account.
(b) The Revaluation Account
(c) The Partnership Goodwill Account
(d) Opening Statement of Financial Position at 1 January 2002 for the Finney and Mortensen partnership.
(2002 Series 3)

Question (18.2)
Arnold, Bindu and Calvin are in a partnership. They share profits in the ratio of the balances on their capital accounts.
They intend to change how they share the profits from 1 April 2017 when all profits will be shared equally.
Balances on the capital accounts at 31 March 2017
Arnold $50,000 Bindu $40,000 Calvin $30,000 Goodwill was valued at 31 March 2017 at
$60,000 and is not to be retained in the books.
Required
(a) Prepare the partner’s Capital accounts at 31 March 2017. Balance the account at that date and
bring the balance down to 1 April 2017. (9)
(b) Identify which one of the following would be entered in the partnership appropriation account.
□ A Partners’ capital
□ B Partners’ drawings
□ C Partners loan interest
□ D Partners’ salaries (1) (Total 10 marks) (2017 May)
Question (18.3)
Tom and Jon are in partnership sharing profit and losses 4:2 respectively. Their partnership agreement provides for
partners to receive 5% interest on opening capital.
At the year ended 31 December 2014, the capital and current account balances were:
Capital account Current account
Tom $30,000 $1,550 Cr
Jon $15,000 $250 Dr
On 1 July 2015 Don joined the partnership investing $8,000 by cheque. The new profit sharing ratio for Tom, Jon and
Don became 4:2:2 respectively. It was also agreed that Tom would start receiving a salary of $12,000 per annum.
Goodwill was valued at $24,000. Goodwill is not to be maintained in the accounts.
During the year ended 31 December 2015 profit for the year was $153,600. Profits were evenly earned throughout the
year.
Drawings were as follows:
Partner Drawings Interest on drawings
Tom $2,000 per month $720
Jon $18,000 per annum evenly distributed $540
Don $1,000 per month $144
Required
(a) Prepare the opening entries in the appropriate accounts to record Don’s investment on
1 July 2015. (2)
(b) Prepare the appropriation account for the each six month ended 30 June 2 0 1 5
& 3 1 December 2015. (7)
(c) Prepare the current accounts for Tom, Jon and Don for the year ended 31 December 2015.
Dates are not required. (7)
(d) Prepare the capital accounts for Tom, Jon and Don for the year ended 31 December 2015.
Dates are not required. (9) (2016 September)

Question (18.4)
Data for part (a).

Ali, Bob and Charlie have been in partnership for many years.
For the year ending 28 February 2017 the draft profit was $128,370
This was before adjusting for:

1. electricity owing, $450
2. insurance, $240, paid on 10 January 2017 for the three months to 31 March 2017
3. closing inventory which was overvalued by $3,000
4. depreciation charge of $5,000
5. profit on disposal of non-current asset $1,200
Data for parts (b) and (c).

The partnership agreement provides for:
• sharing profits in the ratio 3:2:1
• partners’ annual salaries:
• Ali $22,500
• Bob $15,000
• Charlie $7,500
• interest on capital of 4% per annum paid on the opening balance of $30,000 each
• Interest on drawings of 6% per annum charged on the total drawings for the year.
During the year ended 28 February 2017 Partners’ drawings:

• Ali $16,000
• Bob $14,000
• Charlie $10,000
Required
(a) Calculate the adjusted profit for the year ended 28 February 2017. (7)
(b) Calculate the profit available to each partner after accounting for the appropriations. (8)
The partners are changing the profit sharing ratio to 5:4:3.

They have valued goodwill at $60,000 and this will not be maintained in the books.
Required
(c) Prepare the capital account of Charlie after these changes are made. Balance the account on
28 February 2017 and bring the balance down on 1 March

Chapter (19)
Dissolution / Realization of Partnership
Q (19.1) Alice and Brenda have been in partnership for many years, sharing profits and losses equally. At 30
September 2007, their summarized Statement of Financial Position was as follows:
Non-Current Assets Goodwill Premises (at cost)

50.000
40.000
Motor vehicles (at net book value) 24.0
114,000
Current Assets
Inventory Trade Receivable Bank 4,000
28,000
Total Assets 16.000
48,000
162,000
Capital
Alice
Brenda
66,000
Current Liabilities 60,000
Total Capital & Liabilities
36,000
They decided to dissolve the partnership and close the books at 162,000
the Statement of financial position date and on the following
terms:
(i) The premises were sold for $45,000 cash
(ii) Alice took a motor vehicle valued at $ 10,000 and Brenda the other vehicle valued at $ 14,000. The
partners made no payment for the vehicles
(iii) The goodwill and trade receivable were sold for $80,000 cash
(iv) The inventory was sold for $2,400 cash
(v) Dissolution expenses were $ 1,000, paid in cash
(vi) Trade Payable were paid $33,000 cash in full and final settlement
These transactions took place on 30 September 2007 and all cash receipts and payments went through the
partnership bank account.
Required
(a) Dissolution Accounts
(b) Capital Accounts in columnar form (7 marks)
(c) The Bank Account (6 marks)
(2007 Series 4)
In the books of the partner


Q (19.2) Li, Hana and Nasir are in partnership sharing profits and losses in the ratio of 3:1:1.
Li，Hana and Nasir
Statement of Financial Position at 31 December 2012
Non-Current Assets $ $
Premises 180,000
Vehicles 50,000
Fixtures and fittings 35.000
265,000
Current Assets
Inventory 24,000
Bank 28.000 84.000
Total Assets 349.000
Capital Accounts $ $
U 120,000
Hana 80,000
Nasir 70.000
270,000
Current Accounts
Ij 35,000
Hana (10,000)
Nasir 15.000 40.000
310,000
Non-Current Liabilities
6% Bank loan 25,000
Current Liabilities
Trade Payable 14.000

Total Capital & Liabilities 349.000
The partners decide to dissolve the business on 31 December 2012.
Additional information:
(1) The premises were sold to Salako Ltd at a purchase price of $240,000. Payment was made by the issue of $
1 ordinary shares in Salako Ltd, shared among the partners in their profit sharing ratio.
(2) All the vehicles were taken by the partners, at agreed values as follows
li 18,000
Hana 14,000
Nasir 12,000
(3)Sales of other assets were: $
Inventory 21,770
(4) Trade Payable were settled, less cash discount of 5%
(5) The bank loan was paid off
(6) Dissolution expenses were $1,270.
Required: Prepare the: (a) Dissolution A/C (b) Partner’s Capital A/c (c) Bank A/c. (2013 series 2)
c


Question (19.3)
Cedar, Elm and Pin were in partnership, sharing profits and losses equally. The Statement of Financial Position of the
business at 31 December Year 13 is shown below:
$
Non-Current Assets
Land and buildings 901,080
Equipment Motor 154,790
vehicles 36,130
Current Assets
Inventory Trade 74000
Receivable 102,000
Capital accounts
Cedar
140,000
Elm
90.000
Pine
22,000

Current accounts
10,000
Cedar
16,000
Elm
(6,100)
Pine
Non‐Current Liabilities
Loan account- Cedar 200,000
Current Liabilities
Trade Payable Bank 182,800
overdraft 613,300
Following trading losses, the partners dissolved the partnership and entered into an arrangement with Meredew Ltd.
(1) Mere dew Ltd purchased the land and building the equipment three of the motor vehicles and the inventory for a
total of $908,000.
(2) Mere dew Ltd paid $78,600 into the partnership bank account. The balance of the purchase consideration was
settled in ordinary shares in Meredew Ltd.
The partnership repaid the loan from cedar. Meredew Ltd take over responsibilities of trade payable.
The partnership collected all the amounts due from trade receivable, with the exception of $ 12,400 which was written off
as irrecoverable debt. Partnership dissolution expenses amounted to $1,500.
The remaining motor vehicle was taken over by Elm at an agreed valuation of $8,000.
Pine was unable to contribute any funds to the dissolution. Any debit balance on capital account which a partner could not
make good was to be borne by the other partners in proportion to their capital balance at 31 December Year 13.
Required
Prepare the following accounts to close the book of the partnership at 31 December Year 13:
(a) Dissolution Account
(b) Capital Accounts in columnar form (c) Meredew Ltd (d) Bank

Chapter (20)
Limited Company – Final Accounts
Limited Liability
-means the shareholders are not personally liable for the company debts, meaning the must shareholders could lose is
the amount they invested.
Company Final A/c
2. Statement of Changes in Equity
3. Statement of financial Position
Type of Shares – Ordinary Share

-Preference Share
Ordinary Shareholder Preference shareholder

1.have voting rights 1.do not have voting rights
2.receive a variable dividend 2. Receive fixed dividend.
Statement of Changes in Equity for the year ended (D/M/Y)

Share
Share Revaluation General Retain
Capital
Premium Reserve Reserve Earning
(OS + PS)
Balance B/d xx xx xx xx xx
(+)Share issue xx xx
(+)Profit for the year xx
(-)Transfer to General Reserve xx (xx)
(-)Total dividend (xx)
Balance c/d xxx xxx xxx xxx xxx
SOFP
Equity Section
Share capital xx
Share Premium xx
Revaluation Reserve xx
General Reserve xx
Retain Earning xx


Question (20.1)
The following balances were extracted from the books for Dingle Spares Ltd at 31 December 2015.
Account $
8% Debentures 50,000
Accumulated depreciation - Equipment 20,000
Accumulated depreciation - Fixtures and fittings 10,000
Accumulated depreciation - Motor vehicles 30,000
Cash and cash equivalents 6,000
Directors’ fees 29,000
Dividends paid 6,400
Equipment at cost 120,000
Fixtures and fittings at cost 40,000
Inventory at 1 January 2015 25,000
Motor vehicles at cost 80,000
Ordinary shares at $0.25 each 80,000
Printing and stationery 7,000
Purchases 125,000
Rent and rates 11,000
Retained earnings at 1 January 2015 21,400
Revenue 260,000
Share premium account 36,000
Trade payables 16,000
Additional information at 31 December 2015:

• Closing inventory $49,000
• Interest on loan needs accruing • Depreciation of non-current assets is to be provided for as follows:
• Equipment 10% straight line
• Fixtures and fittings 15% straight line
• Motor vehicles 25% reducing balance
Required
(a) Calculate the total depreciation charge for non-current assets for the year ended 31
December 2015. (4)
(b) Prepare the Statement of profit or loss for Dingle Spares Ltd for year ended 31 December 2015. (11)
(c) Describe how the purchase of new equipment would affect the:
(i) Statement of profit or loss (3)
(ii) Statement of financial position (3)
(21 Marks)
(2016April)

Question (20.2)
Data for parts (a) and (b).

Dan zip Ltd provided the following information at 30 Sep 2017, after preparation of the statement of profit or
loss.
$
Debentures 6 % (2025) 20,000
Cash at bank 6,000
(Cr)
Cash in hand 5,000
Inventory 24,000
Property, plant and equipment - carrying value to be calculated
Addition information
.Profit for the year ended 30 Sep 2017 was $113375
.a dividend of $0.50 per share was paid on the 45,000 ordinary $1 share.
.there was a transfer to the general reserve of $ 15,000.
(a) Required
Complete the statement of changes in equity for the year ended 30 September 2017.
Statement of Changes in Equity for the year ended (D/M/Y)
Share General Retain
Total
Capital Reserve Earning
Balance at 1 Oct 2016 45,000 25,000 58,690 128,690
(+)Profit for the year

(-)Transfer to General Reserve
(-)Total dividend
Balance at 30 Sep 2017
( b ) Prepare the statement of financial position at 30 September 2017.
Data for part (c).
Dan zip Ltd is considering two options to purchase new machinery costing $100,000:
• Option 1: Issue of 5% Debentures (2030)
• Option 2: Issue of ordinary shares.
( c ) Assess the impact on Dan zip Ltd of both options.


Question (20.3)
At 1 January 2016, the following balances for Kane Ltd were available.
Share capital $50,000, Share premium $10,000, Retained earnings $15,000
During the year ended 31 December 2016 the following took place.
• There was a share issue of 10,000 ordinary $1 shares at a premium of $0.20
• There was also an issue made on 1 January 2016 of $5,000 8% debentures (2021). Only 6 month
interest has been paid during the year.
• The company made a loss of $3,000
• A dividend was paid on 31 December 2016 of $0.10 to all existing shareholders the share capital of
Kane Ltd consists of 50,000 $1 ordinary shares.
Required
(a) State two differences between ordinary shares and preference shares. (2)
(b) Prepare a statement of changes in euity at 31 Dece: 2016 by completing the following tabl (8)
Kane Ltd: Statement of changes in equity at 31 December 2016

Share Retained
Total
Share Capital $ Premium $ Earning $
Balance at 1 Jan 2016 50,000 10,000 15,000
Share issue
Profit for the year
Dividend
Balance at 31 Dec 2016
(c) (i) Explain why shareholders should be concerned about a potential increase in the amount of
loan capital. (2)
(ii) The directors of Kane Ltd are considering changing to Kane pic. Explain one effect on
shareholders of this proposal. (2)
(d) (i) Prepare an extract of the statement of profit or loss to show the treatment of the debenture
interest for the year ended 31 December 2016. (2)
(ii) Prepare an extract of the statement of financial position for Kane Ltd at 31 December 2016 to
show the treatment of the debentures. (4)
(20 marks)
(2017 May)

Question (20.4)
Star Ltd prepared a list of balances for the year end 31 December 2015.
Details $
Plant and equipment - accumulated depreciation 45,000
Motor vehicles - accumulated depreciation 75,000
Bank 14,500 Cr
Inventory at 31 December 2015 55,000
Ordinary share capital at 1 January 2015 ($0.50 share value) 112,260
Other payables 13,980
Other receivables 15,350
Plant and equipment - cost 125,000
Draft profit for the year 50,240
Motor vehicles - cost 175,000
Retained earnings 1 January 2015 50,120
General reserve 25,000
Following the preparation of the income statement for the year ended 31 December 2015, the following
d
• Depreciation for the year ended 31 December 2015.
• The businesses depreciation policy is: motor vehicles at 25% reducing (diminishing) balance
method; plant and equipment 10% straight line method.
• On 31 December 2015 insurance accrued was $8 000; and electricity of $5 000 was prepaid.
Required
(a) Calculate the corrected profit for the year after the adjustments have been made at the year ended 31
December2015.
On 1 Jun 2015 Caestar Ltd issued 50 000 ordinary shares at $0.75 each.
Required
(b) Complete the table to show the effect on the following accounts of the share issue. The first one
has been completed as an example
Increase Decrease No effect Amount $

General □ □ × 0
Ordinary □ □ □
h
Share □ □ □
i
Bank □ □ □
(c) Prepare the statement of financial position at 31 Dec 2015.
(d) Explain the accounting treatment in the financial statements of bank loans and preference shares.

Chapter (21)
Manufacturing Account
Direct Material Cost $ $

Opening Inventory of Materials xx
(+) Raw Material Purchase xx
(+) Raw material carriage inward xx
(-) Raw material Return Outward (xx) xx
xx
(-) closing Inventory of Material (xx)
Raw Material Cost (used) xx
Direct Labour Cost
wages xx
Direct Expenses
Royalties / Patent /Copy right xx
Prime cost xx
Production/Factory Overhead(Indirect)
Factory rent xx
Electricity xx
factory machinery depreciation xx xx
xx
(+) Opening inventory work in process xx

(-) Closing inventory work in process (xx)
Production cost of finished goods xx
Statement of Profit or Loss
$ $
Revenue XX
Less: Cost of Sales

Opening Inventory of Finished Goods XX
(+) Production cost of finished goods (from manufacturing A/C) XX
Closing Inventory of Finished Goods (XX) (XX)
Gross Profit XX
Statement of Financial Position

Current Assets - Inventory
Raw Material xx
WIP xx
Finished Goods xx


Question (21.1)
Chong Ltd started a manufacturing business on 1 January 2016. The business also purchases finished goods for
resale from a supplier.
The business has accounts from 1 January 2016 to 31 December 2016.
The following balances are from the 31 December 2016. $
Production overheads 13,450
Purchases - raw materials 20,500
Purchases - finished goods 7,600
Revenue 62,500
Direct lab our 5,600
Direct overheads 2,400
Royalties 535
The following information is also available.

Inventory at 31 Dec 2016
Raw Material $400
Work in progress $885
Finished goods from supplier $950
Finished goods manufactured $5100.
Production overheads prepaid by $250
Direct labour accrual $150
The net profit percentage was eight percent.
The directors of Chong Ltd started a manufacturing business on 1 Jan 2016 and will prepare account to
31 Dec 2016.
Required
(a) State two differences between direct and indirect costs.
(b) Prepare the Manufacturing account for the year ended 31 Dec 2016.
(c) Prepare the statement of profit or loss for the year ended 31 Dec 2016
(2017 May)

Question (21.2)The following balances have been extracted from the ledgers of Tool Manufacturing Limited
for the year ended 31 March 2015.
Inventory Inventory
1 April 2014 ($) 31 March 2015 ($)
Raw materials 12,375 14,500
Work in progress 3,200 3,450
Finished goods 28,500 25,500
For the year ended 31 March 2015: $
Raw materials purchased 38,350

Direct wages 21,275
Factory indirect expenses 8,500
Depreciation charge machinery 1,500
Rent and rates (see note) 4,000
General administration expenses 9,270
Vehicle expenses 2,200
Depreciation charge vehicle 1,400
Sales revenue 145,000
Note: Rent and rates are apportioned 75% factory and the remainder administration.
Required
(a) Explain why it is important to apportion the rent and rates (3)
(b) Explain how work in progress is valued. (2)
(c) Define the following terms:

(i) raw materials (2)
(ii) finished goods (2)
(d) Prepare the manufacturing account of Tool Manufacturing Limited for the year ended
31 March 2015. (9)
(Total 18 marks)
(2015 Nov)


Question (21.3) Willow is a manufacturer of cricket bats.

(a) Complete the table below with a tick ( ) to show if the item of expenditure is a direct or an indirect cost.
(4)
Item of expenditure Direct Cost Indirect Cost
Carriage inwards
Delivery vehicle depreciation

Factory supervisor’s salary
Production staff wages
(b) State how each of the following types of inventory will be treated in the financial statements. (3)
Finished goods
Work in progress
Raw materials (Total 7 marks)
(2017April).
Question (21.4)
You have been asked to assist in the preparation of the end of year accounts for several clients.
Poynter Manufacturing
Poynter Manufacturing, a manufacturer of designer furniture, provided you with the following information
relating to the year ended 31 December 2015.
1 January 2015 31 December 2015
Inventories $ $
Raw materials 5,0 6,750
Work-in-progress 3,211 4,611
Finished goods 7,500 8,125
For the year ended 31 Dec 2015 $
Factory power 26,389

Depreciation charge – factory machinery 7,000
Factory wages 37,450
Supervisor’s salaries 18,011
Purchase of raw materials 64,300
Required
Prepared the manufacturing account for the year ended 31 Dec 2015. (2016 July)


Chapter (22)
Incomplete Record
Question (22.1)
Austin has a small shop and does not keep full accounting records. The following is a summary of his bank transaction for
the year ended 31 Dec 2012.
Receicpts $
Cash Sales 50,800
Trade receivable 20,000
70,800
Payments
Payments to trade payable 27,400
(including bank loan interest)
Rent 4,050
Fixtures & Fittings 3,000
Bank loan repayment 500
Inusrance 1,750
Wages 8,500
Additional information :
(1)Balance at 1 Jan 2012 31 Dec 2013
Fixtures and fitting (net book value) 2,300 4,900
Trade Payable 5,600 6,120
General expenses owing 180 220
Insurance prepaid 120 -
Inventory 3,400 3,860
Bank Loan (Long term) 2,000 1,500
Bank 4,400 ?
Trade Receivable 1,000 2,000
(2)Cash sales of $800 had been used to pay wages.
(3)Discount of $350 had been received from suppliers & discount allowed to customer $100.
(4)Austin had taken $420 of goods for his own use.
Required
(a) Prepared the Statement of Profit or Loss for the year ended 31 Dec 2012. (15 marks)
(b) Prepared the Statement of Financial Position at 31 Dec 2012. (10 marks)
(2013 June)

Question (22.2)
Data for parts (b) and (c).
Tine buys and sells all his goods on credit but does not maintain full accounting records. He provide
The following information for the year ended 31 August 2017.
$
Trade Receivable ledger control account balance at 1 Sep 2016 6,220
Interest charged to credit customers 160
Receipts from credit customers 124,420
Trade receivables ledger control account balance at 31 Aug 2017 6,260
Required
(a)Identify where the sales account will appear.
A. General Journal
B. General Ledger
C. Sales Journal
D. Sales Ledger
(b)Prepare the trade receivables ledger control account for the year ended 31 Aug 2017 to show the credit sales
for the year. Balance the account on this date and bring the balance down on 01 Sep 2017.
Tamas makes a gross profit margin of 60%.
(c ) Calculate the gross profit for the year ended 31 Aug 2017.
1 Sep 2016 31 Aug 2017
Other Receivables – general expenses 65 -
Inventory 18,300 to be calculated
Other payables- rent owing 1,040 1,120
For the year ended 31 Aug 2017.
$
Payments for general expenses 14,442
Payments for rent 12,480
Purchases 41,640
Purchases returns 820
(d)Prepare the statement of profit or loss for the year ended 31 Aug 2017.
(e) Identify the term used to describe gross profit as a percentage of cost of goods sold.
A. Inventory turnover
B. Margin
C. Mark up
D. Return on capital employed
2017 November

Question (22.3)
On 1 Jan 2017, Nico owned motor vehicles costing $26340 with accumulated depreciation of $9950.
On 1 Oct 2017 a motor vehicle purchase on 1 April 2016 for $4,200, with a carrying value of $2940 , was sold.
Motor vehicles are depreciated at 20% per annum , using the straight line method on the basis of one month’s ownership
equals one month’s provision for depreciation.
Nico maintains a cash float of $500 and all sales are made for cash.
During the year ended 31 Dec 2017, the following cash transaction were recorded.
$
Cash banked 83,350
Motor expenses 4,950
Proceeds from sales of motor vehicle 2100
Required
(a) Calculated the profit or loss on disposal of the motor vehicle
(b) Calculated the total depreciation charge for motor vehicles for the year ended 31 Dec 2017.
(c) Prepare Nico’s Cash account for the year ended 31 Dec 2017 to show the salse for the year.Balance the account at
that date and bring the balance down on 1 Jan 2018.
Nico makes a gross profit as a percentage of revenue (margin) of 37.5% on all goods sold.
(d) Calculate for the year ended 31 Dec 2017:
(i) Gross profit
(ii) Profit for the year.
(e) Identify the effect of a payment for motor insurance being treated as capital expenditure.
A. Gross profit overstated
B. Gross profit understated
C. Profit for the year overstated
D. Profit for the year understated
(f)Identify the double entry to record the purchase of a delivery vehicle on credit from Tai.
A. Motor vehicles Tai
B. Tai Motor vehicles
C. Purchses Tai
D. Tai Purchases
(2018 Jan)

Question (22.4)
Lucy does not maintain a full set of accounting records. The information she has provided for the year ended 31 Dec
2015 is as follows.
All sales and purchases are made on credit.
Account Name 1 Jan 2015 31 Dec 2015
$ $
Fixtures and fitting 6,000 5,000
Inventory 22,900 27,600
Trade receivable 24,700 19,600
Trade payable 17,650 18,000
Bank 5,000 To be calculated
Administration expense owing 200 300
Bank Summary $
Receipts from trade receivables 122,650
Payments to trade payables 82,600
Drawings 13,500
Administration expense 31,600
Bank charges 310
Required
(a) Calculate the Equity at 1 Jan 2015.
(b) Prepare the trade receivables control account for the year ended 31 Dec 2015.
(c) Prepare the trade payables control account for the year ended 31 Dec 2015
(d) Prepare the bank account for the year ended 31 Dec 2015 to calculate the closing balance.
(e) Prepare the administration expenses account for the year ended 31 Dec 2015, showing clearly the amount to
be transferred to the income statement.
(2016 April)

Chapter (23)
Non Trading Organization – Final Account
Non Trading organization

-are the organizations where there is no sales or purchase of goods.
-Not for making profit
Example – Clubs, Charity Firm, recreational societies, religious institutions etc.
Differences between Nonprofit and profit Organizations

Not for profit For Profit
Owner None Shareholders
provide service needed by Earn profit to increase
Objective
society shareholder's wealth
Donor contribution, Grants, Sales of products or services,
Revenue
Membership fees, investment income
Excess of revenue
the further purpose of Distribute to owner as dividend
over
the organization or reinvested into business
expenses (profit)
Profit Not for profit

Cash / Bank A/C Receipts and Payments A/c
Statement of Profit or Loss A/c Income & Expenditure A/c
Statement of Financial Position Statement of Financial Position
Annual Subscription (Income) A/c
Equity (can be changed by Business Type) Equity Section
Eg Sole Trader's Equity
Opening capital Opening accumulated fund
(+/-)Surplus /Deficit of income over
(+/-) Net Profit/Loss Expense
(-) Drawing (+) Donation
Donation > annual subscription ----SOFP -opening Acc: Fund (+)
Donation < annual subscription ---- I & E A/C - Income

Question (23.1)
The following is a summary of the receipts and payments of the Lynton Sports and Social Clud for the year ended 30 June
2012.
Receipts $
Restaurant taking 210,600
Annual subscriptions 115,400
Donation 400,000
Payments
Wages of restaurant staff 40,890
Restaurant purchases 100,740
Sports equipment 30,025
Club treasurer’s fee 6,000
Rent and rates 100,800
Light & heat 30,080
General Expenses 9,160
Bank charges 900
Sports club manager’s salary 15,360
Additional information
(1)Balance at 1 July 2011 30 June 2012
Inventory of restaurant supplies 11,090 6,050
Light & heat accrued 550 690
Rent and rates paid in advance 4,000 -
Rent and rates in arrears 5,070
Cash in hand 650 650
Cash at bank 30,890 ?
Sports equipment at net book value 119,400 144,700
Trade Payable for restaurant supplies 6,010 8,050
Subscription in arrears 4,850 5,010
Subscription paid in advance 3,005 3,010
(2)Rent and rate is to be apportioned 50% to the restaurant.
Required
Prepare the:
(a) Restaurant Account for the year ended 30 June 2012.
(b) Income and Expenditure Account for the year ended 30 June 2012.
(c) Statement of Financial Position at 30 June 2012.


Question (23.2)
Towers Climbing Club
Towers Climbing Club, a local club for climbers, has provided the following information relating to
subscriptions received.
1 Jan 2015 31 Dec 2015
Subscriptions in arrears $230 $210
Subscriptions in advance $300 $420
During the year ended 31 Dec 2015:

. The club received $7,500 in subscriptions from members.
. This included $200 of the subscriptions in arrears on 1 Jan 2015.
. The remainder is to be written off.
Required
Prepare the subscription account for the year ended 31 Dec 2015.Balance the account on that date and bring
the balances down to 1 Jan 2016.
Question (23.3)
You have recently been appointed as the treasurer of the Peter Park Social Club.You are advised that on 1
June 2015 the club had the following assets and liabilities.
$
Clubhouse 10,000
Sports equipment 2,500
Cash at bank 1,000
Subscriptions in arrears 395
Subscription in advance 92
Inventory of refreshments 461
Amount owed to suppliers of refreshment 123
Required
(a)Calculate the accumulated fund at 1 June 2015

You have been provided with the following items of income and expenditure for the year ended 31 May
2016.
$
Total Subscriptions received from members 3,000
Gross Profit from refreshments 560
Staff wages 229
Net surplus of raffle 133
Heating and lighting 625
Depreciation of equipment 500
Donation for equipment 10,000
Required
(b)Prepare the income and expenditure account for the year ended 31 May 2016
(c ) Explain how the surplus or deficit calculated in (b) would affect your answer to (a)
(2016 September)


Question (23.4)
(a) Explain the accounting treatment of :

(i) Subscriptions in advance
(ii) Subscriptions in arrears
Bella Sports Club offers a life subscription fee for members of $1,000.This is accounted for over 10
Years. On 1 March 2015, the life subscription account balance was $6,000.On this date an additional
Three life subscriptions were purchased.
Required
(b) Prepare the life subscription account for the year ended 29 Feb 2016,showing any transfers Balance the
account on this date and bring the balance down on 1 March 2016.
Bella Sport Club operates a refreshments bar for members.
On 29 Feb 2016, it provided the following information for the year.
$
Opening inventory at 1 March 2015 250
Closing inventory at 29 Feb 2016 180
Trade payables at 1 March 2015 175
Trade Payables at 29 Feb 2016 55
Interest charged by trade payable 25
Returns to trade payables 90
Bank payments made to trade payables 225
Revenue from refreshments 225
Required
(c ) Prepare an account to calculate the credit purchases for the year ended 29 Feb 2016.
(d ) Prepare the trading account for the year ended 20 Feb 2016.
(2017 Jan)
Question (23.5)
Strom Golf Club provided the following information for the year ended 31 Jan 2017.
1 Feb 2016 31 Jan 2017
Accounts payable-clubhouse supplies 5,920 6,150
Clubhouse inventory 18,160 16,450
Light & heat owing 590 710
Equipment – cost 86,500 91,300
Equipment- Acc: Depreciation 27,300 to be calculated
Property 900,000 900,000
Subscriptions – in arrears 4200 3,850
Subscription – in advance 4,950 2,300

Receipts and Payments A/C

Date Receipt $ Date Payments $
1-Feb- 31-Jan-
16 Bal b/d 4,860 17 Clubhouse purchase 68,400
31-Jan- Clubhouse
17 income 103,824 General expenses 61,415
Equipment sold 1,300 Light & heat expense 3,840
Subscriptions 124,550 Purchase of mowing equipment 9,300
Wages-clubhouse staff 21,195
Wages-grounds man 24,240
Balance c/d 46,144
234,534 234,534
. Equipment is to be depreciated at a rate of 20% on a reducing (diminishing) balance basis.

. The equipment sold during the year cost $4,500 and had a carrying value of $ 2,120.
Required
(a) Prepare the clubhouse profit or loss for the year ended 31 Jan 2017.
(b) Prepare the subscription account for the year ended 31 Jan 2017. Balance the account on 31 Jan 2017 and
bring the balance down on 1 Feb 2017.
(c) Prepare the income and expenditure account for the year ended 31 Jan 2017.
(2017 March)

Chapter (24)
Ledger Control Account
1 Sales ledger (Trade Receivable Ledger) Individual TR
2 Purchase ledger (Trade Payable Ledger) Individual TP
3 Cash Ledger (Cash Book) Cash /Bank A/C
General Ledger (All other A/C except TR/TP,Cash
4 bank)
Books of Original Entry

1 Sales Day Book Credit sales
2 Purchase Day Book Credit purchase
3 Purchase return (RO)Day book credit purchase return
4 Sales Return (RI) Day book credit sales return
Cash /Cheque (discount allowed/discount
5 Cash Book received)
6 General Journal Eg Irrecoverable debt
Trade Receivable Ledger Control (Sales ledger Control) A/c

Balance b/d (major) Balance b/d (minor)
Credit Sales (Sale Day Book) Return Inwards (Sales Return Day Book)
Dishonor Cheque (Cash book) Receipts (Cash Book)
Journal (Irrecoverable debt)
Journal (Contra) Trade payable control
Discount Allowed (Cash Book)
Bal c/d (minor) Bal c/d (major)
Trade Payable Ledger Control (Purchase ledger Control) A/c

Balance b/d (minor) Balance b/d (major)
Discount received (Cash Book) Credit purchase (Purchase Day Book)
Return Outward (Purchase Return Day Book)
Payments (Cash Book)
Trade receivable control (contra) Journal
Bal c/d (major) Bal c/d (major)

Question (24.1)
The following information relates to the business of Ping.

Balances in the books at 1 July 2012:
Trade Payable Ledger Debit $2,458
Credit $112,129
Trade Receivable Ledger Debit $197,326
Credit $6,580
The following figures were extracted from the books for the month ended 31 July 2012:
$
Cash Purchase 8,309
Credit Purchase 317,773
Returns outwards 6,499
Payments by cheque to trade payable 290,440
Carriage charged to trade receivable 15,805
Set off against balances in TR ledger to TP Ledger 13,825
Interest charged to trade receivable 2,467
Credit sales 598,804
Returns inwards 9,721
Irrecoverable debt written off 4,840
Discount received 8,728
Cash Sales 44,446
Debtors’ cheques dishonoured 12,877
Discount allowed 17,647
Payments from trade received by cheque 652,690
Allowance to Sung,a customer, for damage goods 3,250
Additional Information:
Balance in the books at 31 July 2012 :
$
Trade Payable Ledger Debit 4,535
Trade Payable Ledger Credit ?
Trade Receivable Ledger Debit ?

Trade Receivable Ledger Credit 11,693
Required
Prepare the following for the month ended 31 July 2012:
(a) Trade Payable Ledger control account

(b) Trade Receivable Ledger control account
(2013 Series 4)

Question (24.2)
On 31 Jan 2016 Lunar sent the following document to Saturn trading, a customer.
Lunar
23 Sun Court, Blackheath
Customer : Saturn Trading Date : 31 Jan 2016
Date Detail Debit $ Credit $ Balance $
1-Jan Balance b/d 850 (Dr)
10-Jan Sales 1,340 2,190 (Dr)
16-Jan Returns 250 1940 (Dr)
21-Jan Payment received 816 (i)
21-Jan Discount 34 (ii)
Required
(a) State the name of this document. (1)
(b) Calculate the amount to be entered at (i) & (ii) (2)
(c) State one reason why this document is produced. (1)
(d) Complete the following table to show the document and original entry for the each transaction. (4)
Transaction date Document Books of original entry

10-Jan-16
19-Jan-16
(e ) (i) Explain the purpose of the discount given to Saturn Trading on 21 Jan 2016. (2)
(ii)State how this discount will be recorded in the books of Lunar and the books Saturn Trading.

Books of Lunar
Books of Saturn Trading
(2016 July)


Question (24.3)
Scarlett Provided the following information for the year ended 31 Oct 2016.
$
Trade payables at 1 Nov 2015 23,260 1,050 Dr
Trade receivables at 1 Nov 2015 22,560 1,828 Cr
Contra 920
Credit Sales 19,083
Dishonoured cheque from a trade receivable 1,950
Interest charged to trade receivables 550
Interest on trade payables 75
Irrecoverable debts written off 1,950
Payments to trade payables 15,275
Receipts from trade receivable to be calculated
Return Inwards 1,245
Return outwards 2,955
Trade Payables at 31 Oct 2016 19,750 202 Dr
Trade receivables at 31 Oct 2016 18,775 175 Cr
Required
(a)(i) Prepare the trade receivable control account at 31 Oct 2016.Balance the account on that date and bring
the balance down to 1 Nov 2016.
(ii) Prepare the trade payable control A/c at 31 Oct 2016.
On 31 Oct 2016 Scarlett’s receivables ledger balances were :

Customer $
T Smythe 5,633
F Forde 175
S Ford 7,296
S Hanno 4,671
AJH 1,000
Required
(b)Prepare a reconciliation statement of the trade receivables control account and the sum of the balances in
the receivables ledger at 31 Oct 2016.
(c) (i) Explain how the difference identified in (b) may have occurred.
(ii) Describe what Scarlett should do in order for the subsidiary ledger and trade receivales control account
to reconcile.
(2016 Nov)
Question (24.4)
On 1 Jan 2016 the trade receivables balance was $66,800.Included in this balance was Jame, a credit customer,
who owed $2,200. During the year James paid $600 by cheque, which was later dishonoured.On 31 Dec 2016,
Ewa wrote off the balance on Jame’s account as an irrecoverable debt.
Required
 Prepare Jame’s account at 31 Dec 2016.


On 31 Dec 2016 the following totals were extract from the books.
$
Cash sales 61,640
Credit sales 180,950
Returns outwards 400
Transfers to trade payable ledger 1,840
James’s dishonoured cheque 600
On 31 Dec 2016 the trade receivables ledger balances were:
$
Allen 11,410
Bab 10,420
Edwards 8,610
Phillips 9,490
Stephens 13,470
Required
(c ) Prepare the following accounts for the year ended 31 Dec 2016 showing any transfers to the income
statement. Balance the account on that date bring the balances down on 1 Jan 2017.
 Trade Receivables Ledger control Account
 Irrecoverable Debts Account
 Allowance for Doubtful Debts Account
(2017 April)
Question (24.5)
The following information is made available for Zola Ltd for the year ended 31 Dec 2015.
$
Trade receivables 1 Jan 2015 15,650
Credit Sales 790,460
Cash Sales 55,940
Credit Sales returns 10,250
Dishonoured cheques form credit customers 5,500
Required
 Prepare the trade receivable control account for the year ended 31 Dec 2015 and clearly show the
balance brought down at 1 Jan 2016. (7)
On 31 Dec 2015 Zola Ltd realized it had omitted to record irrecoverable debts of $1,750
 Prepare the Journal entry to correct this omission. (5)
On 31 Dec 2015 Zola Ltd introduced an doubtful debts at 3 % of trade receivables.
(c ) Prepare the journal entry to record this transaction. (5)
(d)Prepare the statement of financial position at 31 Dec 2015 to show the trade receivables (3)
(2016 Nov)


Chapter (25)
Error & Suspense Account
Type of error
(a)Errors where the trial balance still balances
(1) Error of omission: A transaction has been completely omitted from the accounting records, e.g.
a cash sale of $100 was not recorded.
(2) Error of commission: A transaction has been recorded in the wrong account, e.g. rates expense
of $500 has been debited to the rent account in error.
(3) Error of principle: A transaction has conceptually been recorded incorrectly, e.g. a non-current
asset purchase of $1,000 has been debited to the repair expense account rather than an asset
account.
(4) Compensating error: Two different errors have been made which cancel each other out, e.g. a
rent bill of $1,200 has been debited to the rent account as $1,400 and a casting error on the sales
account has resulted in sales being overstated by $200.
(5) Error of original entry: The correct double entry has been made but with the wrong amount,
e.g. a cash sale of $76 has been recorded as $67.
(6) Reversal of entries: The correct amount has been posted to the correct accounts but on the
wrong side, e.g. a cash sale of $200 has been debited to sales and credited to bank.
(b)Error effect on Trial Balance agreement
Eg (1) A Payment $68 for office cleaning had been posted as $86.
Eg (2) A Payment $75 for rent had been posted to as $57 to insurance A/c
Eg (3) Total discount received $500 had been posted to debit side of discount allowed.
Suspense A/C
A suspense account is a general ledger account in which amounts are temporarily recorded.
The suspense account is used because the appropriate general ledger account could not be determined at the
time that the transaction was recorded.
When trial balance does not balance, we use suspense as tempory A/C to correct errors.
Suspense A/C must be cleared after correcting errors.


Question (25.1)
Jones has drawn up the following trial balance at 31 March 2008. It contains a number of errors.
Trial Balance at 31 March 2008
Dr ($) Cr ($)
Purchase 290,000
Revenue 450,000
Capital 94,300
Drawings 43,000
Carriage inwards 4,000
Office equipment at cost 24,000
Provision for depreciation office equipment 4,800
Fixture & fitting at cost 13,000
Provision for depreciation fixtures & fitting 2,600
Sales Returns 2,000
Purchase returns 1,000
Insurance 8,000
Inventory at 1 April 2007 30,000
Inventory at 31 March 2008 26,000
Wages 40,000
Sundry expenses 14,000
Cash 1,900 0
739,400 418,000
Required
(a) Prepare an amended Trial Balance at 31 March 2008. Clearly show the balance to be transferred to the
Suspense A/C.
After preparing the Trial balance, Jones discovered the following errors:
(i) Light & heat expenses of $2,500 have been correctly entered in the Cash Book but no other entry
had been made.
(ii) An Entry of $1,000 for insurance has been entered on the credit side of the insurance account.
(iii) A credit sales to D Farrow of $300 has been debited to the account of D Marlow.
(iv) Fixtures & fitting of $77,500 purchased in Jan 2008, have been entered as $7,500 in the fixtures &
Fitting Account but correctly entered in the Cash Book. No Depreciation is charged in the year of
purchase.
(v) A Balance on the Rent payable Account of $6,500 has not been entered on the Trial Balance.


Required
(b) Prepare a Suspense account showing the necessary corrections to be made.
(c) State FOUR types of error that will not be identified by the preparation of a Trial Balance.
(2008 Nov)
Question (25.2)
Sandy is a sole trader. Sandy extracted her trial balance on 30 April 2017. She found the following errors.
1. A motor vehicle purchased for $9,500 had been debited to the motor expenses account.
2. A payment of $60 for printing had been posted to the cash book but the other entry had been omitted.
3. A credit purchase of $ 150 from Springfield Ltd had been credited to Summerfield Ltd.
4. A payment of $210 from Petula had been entered in the cash book correctly but had been debited to
her account as $201.
Required
(a) Prepare journal entries to correct the four errors. Narratives are not required. (8)
(b) Prepare the suspense account. (3)
(c) State two uses of the journal other than error correction. (2)
Vehicle Cost $ 16,000 , Accumulated Depreciation $5,760 , Carrying value $10,240
Sandy disposes of Vehicle A on 31 May 2017 for $5,500.
(d) Prepare the disposal account. (5)
Sandy always uses the reducing balance method of deprecation for motor vehicles.
(e ) Identify which accounting concept is being applied (1)
A. Accruals
B. Consistency
C. Going concern
D. Prudence
(f)Sandy maintains an allowance for a doubtful debts account. Identify which accounting concept is being
applied.
A. Accruals
B. Materiality
C. Prudence
D. Realization
(2017 May)
Question (25.3)
On 31 May 2017 Zang’s draft accounts showed a profit for the year of $81,650. An investigation revealed the
following errors.
1. Discount received of $78 had been twice in the discount received account.
2. A Payment, $176, for general had been correctly entered in the cash book, but was entered as $167 in
the general expenses account.
3. A payment, $50, for repairs and renewals, had been entered in the cash book.The other entry had not
been made.
4. On 1 Dec 2016 a payment of $5,000 for plant and equipment had been entered in the general expense
account. Depreciation is charged for each month of owner ship at 20% per annum on a straight line
basis.

Required
(a) Prepare the suspense account. (5)
(b) (i)Identify the type of error made in error 4.
A. Commission
B. Compensation
C. Original Entry
D. Principle
(ii)State in which book of original entry the purchase of a non-current asset on credit should be enterd.
Zang uses the straight line method of depreciation.
(iii)State two other method of depreciation. (2)
(iv)Prepare the accumulated depreciation account for the year ended 31 May 2017. Balance the account on
this date and bring the balance down on 1 June 2017. (3)
(c ) Calculate the adjusted profit for the year . (6) (2017 July)
Question (25.4)
On 31 Aug 2017 Morgan discovered the following errors.
.Carriage inwards of $160 had been credited to the carriage outwards account.
.Purchases included $1,650 of goods purchased for Morgan’s own use.
.The purchase day book had been overcast by $1,000.
.The purchase of a new machine on 1 September 2016,costing $8,300,had been posted to the repairs
account.The machinery is expected to have a useful life of five year when it will be sold for $300.
. Morgan depreciates his non current assets using the straight line method.
Required
(a) (i) Calculate the amount of depreciation that should have been charged on the new machinery for the
year ended 31 Aug 2017. (3)
(ii)Prepare Morgan’s journal entries to correct the errors. Narratives are not required.(11)
Morgan’s draft statement of profit or loss for the year ended 31 Aug 2017 showed a gross profit of $77,374.
Required
(b) Calculate the adjusted gross profit. (4)
(c) Explain why Morgan should use the reducing (diminishing) balance method to depreciate his motor
vehicles.(2)
(2017 September)

Chapter (26)
Accounting Ratio
LIQUIDITY RATIO
current ratio / Working Capital
Ratio
Current Assets …. : 1
Current Liabilities
Quick/Liquid/Acid test ratio

Current Assets-Inventory …. : 1
Current Liabilities
Rate of inventory turnover (times)

Cost of Sales times
Avg inventory
(OR)
Avg inventory x365 days
Cost of Sales
Avg Inventory = b/d inventory+ c/d inventory

2
Trade receivable collection period (day)

TR x365 days
Cr Sales
Trade Payable settlement period (day)

TP x365 days
Cr purchase
PROFITABILITY RATIO
Gross profit as a % of revenue(Margin)

GP x100
Revenue
Gross Profit as a % of COGS (mark up)

GP x100
COGS
Net profit as a % of Revenue

NP before interest x100
Revenue
Return on capital Employed

NPBI x100
total capital employed
(Equity +NCL)


Question (26.1)
The accounts of Jack Ltd, for the years 2007 and 2008,are summarized below:
Statement of Profit or Loss for the year ended 30 November
2007 2008
$000 $000
Revenue 800 1,120
Less: Cost of sales
Opening Inventory 140 70
Purchases 530 870
670 940
Less Closing Inventory (70) ( 100)
(600) (840)
Gross profit 200 280
Less
Administration expenses (154) (186)
Debenture interest , (4) (16)
Net profit 丨 42 78
Statement of financial Position at 30 November

2007 2008 2007 2008
$000 $000 $000 $000
Non-current assest at 490 560 Capital & Reserves
(carrying amount) Ordinary share capital 400 400
Profit or loss 120 164
Current Assets Non-Current Liabilities
Inventory 70 100 8% Debentures 50 200
Trade Receivable 110 132
Bank - 20 Current Liabilities
Trade Payable 60 48
Bank overdraft 40 -
Total Assets 670 812 Total Equity & Liabilities 670 812
Required
Calculate the following ratio for 2007 and 2008 to the nearest TWO decimal places:
(a) Liquidity Ratio
(i) Current ratio (working capital)
(ii) Liquidity ratio(acid test)
(iii) Rate of inventory turnover
(iv) Accounts receivable collection period (days)
(v) Accounts payable settlement period (days)
(b) Profitability
(i) Gross profit as a percentage of revenue (margin)
(ii) Gross profit as a percentage of cost of goods sold (mark up)
(iii) Net profit as a percentage of revenue
(iv) Rate of return on capital employed
(2008 series 4)


Question (26.2)
Alpha Ltd provided the following information for the year ended 30 June 2016.
$
Closing inventory 950
Cost of goods sold 7,250
Current assets 6,240
Equity 14,600
Gross profit 12,750
Non-current assets 10,400
Profit for the year 2,600
Revenue 20,000
Total assets 16,640
Required
(a) Complete the following table for Alpha Ltd. The first row has been completed as an example.(10)
Formula Answer
Net profit as a percentage of revenue

profit for the year/revenue x 100 13%
Gross profit as a percentage of
revenue
Account Receivable collection period
Account Payable payment period
Return on capital employed
Liquid (acid test ratio)
The agree terms of trade for trade receivables is 60 days and for trade payables is 90 days.
(b) Analyze how these terms may have impacted Alpha Ltd during the year ended 30 June 2016.(4)
Account receivables collection period
Account payables payment period
(2017 Jan)

Question (26.3)
Japan Ltd has provided the following extracts from the accounts for the years ended 31 January 2015
and 2016.
2015 ($) 2016 ($)
Revenue 191,000 244,000

Gross profit 128,400 154,040
Profit for the year 63,260 66,750
Total equity 124,000 141,000
Current liabilities 29,350 41,600
Non-current liabilities 50,000
■
Required
(a) Complete the table to show the profitability ratios for 2015 and 2016. Give your answers to two
decimal places .(6)
2015 2016
Gross profit as a % of revenue
(margin)
Net profit as a % of revenue
Return on capital employed
(b)Analyse the profitability of Japan Ltd over the two years period. (6)
(c)State three ratios that could be used to assess liquidity. (3)
(2017 March)

Chapter (27)
Accounting Concept
1. Going Concern
The financial statements are normally prepared on the assumption that an entity is a going concern and will continue
in operation for the foreseeable future.
2. Accruals basis
The effects of transactions and other events are recognized when they occur (and not as cash or its equivalent is received
or paid) and they are recorded in the accounting records and reported in the financial statements of the periods to which
they relate.
3. Materiality
Information is material if omitting it or misstating it could influence decisions that users make on the basis of financial
information about a specific reporting entity.
It is common to apply a convenient rule of thumb (for example material items are those with a value
Greater than 5% of profits).
4. Consistency
To maintain consistency, the presentation and classification of items in the financial statements should stay the same
from one period to the next, accepts as follows.
(a) There is a significant change in the nature of the operations or a review of the financial statements indicate a
more appropriate presentation.
(b) A change in presentation is required by an IFRS.
5. The Business Entity concept
The business entity concept is always to treat a business as a separate entity from its owner.
This means the transactions of the owner should never be mixed with the business’s transaction.
6. Prudence
Assets and income are not overstated and liabilities and expenses are not understated.
(Eg decisions relating to Irrecoverable debt and allowances for doubtful debts.)


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T.T.

S ACCOUNTANCY TRAINING CENTRE

22. Incomplete Records 68-71

27. Accounting Concept 90

BOOK-KEEPING & ACCOUNTING Pg -1

1.3 Accounting Equation

Assets = Capital (Equity)

Assets = Capital + Liabilities

1.2 Classify the following item into liabilities and assets:

BOOK-KEEPING & ACCOUNTING Pg -2

Loan from C Smith Inventory

Cash in hand Receivables

Machinery Bank Overdraft

1.5 You are to complete the gaps in the following table:

Assets Liabilities Capital

(a) 12500 1800 ?

BOOK-KEEPING & ACCOUNTING Pg -3

2.1 Double Entry Book-Keeping System

2.2 Double Entry Rules for Assets, Liabilities and Capital

Assets A/C Capital & Liabilities A/c

Debit Credit Debit Credit

Debit XXXXX A/c Credit

BOOK-KEEPING & ACCOUNTING Pg -4

BOOK-KEEPING & ACCOUNTING Pg -5

3.1 Inventory - Goods held by business for selling in the market.

Purchase Goods Sales

3.2 Double Entry

Transaction Debit Credit

BOOK-KEEPING & ACCOUNTING Pg -6

3.1 Enter up the following transactions in the records of E Sangster.

July 1 Started business with $10,000 in the bank.

July 2 T Cooper lent us $400 in cash.

July 4 Sold goods for cash $200.

July 8 Sold goods on credit to C Moody $ 180.

July 10 Sold goods on credit to J Newman $220.

July 11 Bought goods on credit from F Jones $370

July 12 C Moody returned goods to us $40.

July 14 Sold goods on credit to H Morgan $ 190 and J Peat $320.

July 15 we returned goods to F Jones $140.

July 17 Bought motor van on credit from Manchester Motors $2,600.

July 19 we returned goods to S Charles $110.

July 20 Bought goods for cash $220.

July 24 Goods sold for cash $70.

July 25 Paid money owing to F Jones by cheque $1,070.

July 26 Goods returned to us by H Morgan $30.

July 29 Paid Manchester Motors $2,600 by cheque.

July 31 Bought office furniture for cash $100.

BOOK-KEEPING & ACCOUNTING Pg -7

Aug 1 Started business with $1,000 cash.

2 Paid $900 of the opening cash into the bank

4 Bought goods on credit $78 from S Holmes.

5 Bought a motor van by cheque $500.

7 Bought goods for cash $55.

10 Sold goods on credit $98 to D Moore.

12 Returned goods to S Holmes $18.

9 Sold goods for cash $28.

22 Bought fixtures on credit from Kingston Equipment Co $ 150.

24 D Watson lent us $100 paying us the money by cheque.

29 We paid S Holmes his account by cheque $60.

31 We paid Kingston Equipment Co by cheque $ 150.

3.3 Enter up the following transaction in the records of G Morgan.

1 Started business with $2,000 in the bank.