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

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

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

Chapter 5
Accounting in context
Anyone for coffee?
Learners’ answers may include:
• More than one year One year or less
Vans Coffee and other ingredients, e.g. milk, sugar
Fridges Coffee cups, stirrers, etc.
Fittings for the vans
Coffee making equipment
• There are many accounts that might be used such as: motor vehicles, fittings, equipment (e.g. fridge,
coffee maker, computer and software), purchases, individual supplier accounts, sales, wages, insurance,
licences (e.g. to trade), motor vehicle expenses, cash, bank, capital.
• If a business has many suppliers, keeping the records together can help the owner to know or quickly
find out who it owes and how much it owes. Businesses might also want to compare suppliers on price
and terms, e.g. credit limits, cash discounts, payment periods.

Activities
Activity 5.1
Account Asset Liability Revenue or Expense
other income
Delivery vehicles ✓
Rent ✓
Loan ✓
Interest received ✓
Interest paid ✓
Trade receivables ✓
Inventory ✓
Discounts allowed ✓
Postage ✓
Bank ✓ [1]
Rent receivable ✓

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

Account Asset Liability Revenue or Expense

other income
Trade payables ✓
Computer ✓
Wages ✓
Discounts received ✓

Note:
[1] Bank is an asset unless overdrawn

Activity 5.2
Ledger
Motor vehicle General
Capital General or private
A customer who buys goods on credit Sales
Supplier of office equipment Purchases
Bank Cash book
Wages General
Sales General

Activity 5.3
a The purchases ledger contains the accounts of suppliers from whom the business buys on credit
b The heating and lighting account is stored in the general ledger and is an example of a(n)
expense account.
c Goods bought on credit are recorded in the sales ledger.
d A non-current asset is bought for use in the business for a long period of time.

Practice questions
1 A The money that the owner takes from a business is confidential.
2 B Discounts allowed to customers are an expense, discounts received from suppliers are a reduction
in cost, hence they are treated as income.
3 Learners’ answers might include:
• It’s useful because the accounts are grouped into those with similar features, for example
transactions that will be treated in a similar way. This reduces the likelihood of bookkeepers
getting mixed up and making mistakes.
• Wages, rent, stationery, heating and lighting, etc. are all expenses. As such, transactions in any
of these accounts are debit entries and the accounts have debit balances. Again, this reduces the
chance of errors.
• Motor vehicles, equipment, property, etc. are all non-current assets. As such, transactions in any
of these accounts are debit entries and the accounts have debit balances.
• The balances from some types of account are all put in the statement of profit or loss and others
all go into the statement of financial position. This helps owners, lenders and other stakeholders to
see all relevant information in one place.
4 Learners’ answers might include:
• Sales and purchases ledgers are useful if a business buys and/or sells on credit as it keeps all of
one type of account together. They improve organisation and provide useful information to
the business.

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

• Using a cashbook means that it is easier to see the business’s cash and bank balances
simultaneously and make decisions based on the money readily available.
• Separate ledgers can be controlled by different bookkeepers with specialist knowledge, e.g. a sales
ledger accounts assistant and a purchases ledger accounts assistant.
• Private ledgers may be important to some business owners so that their capital, drawings and
profits are not readily available information for others to see.
• The bigger the business and the more accounts a business has, the more helpful it can be to group
similar accounts together to aid organisation and find errors if they occur.

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