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As Incomplete Records Final

The document outlines the procedures for handling incomplete financial records, detailing steps for calculating opening capital, managing bank and cash accounts, and preparing financial statements. It includes guidance on adjusting for expenses and incomes, calculating depreciation, and preparing income statements and balance sheets. Additionally, it provides examples and requirements for specific cases involving sole traders and their financial transactions.

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Hiba Siddiqui

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0% found this document useful (0 votes)

14 views107 pages

As Incomplete Records Final

Uploaded by

Hiba Siddiqui

We take content rights seriously. If you suspect this is your content, claim it here.

Available Formats

Download as PDF, TXT or read online on Scribd

PAGE 1

ADAM VICEROY
INCOMPLETE
RECORDS
PAGE 3

ADAM VICEROY
INCOMPLETE RECORDS
The business which operates under the category of incomplete records, usually maintains
one book of original entry “THE CASH BOOK”
Information is available but is in scattered form. We have to put together all the information
and make the financial statements.
Steps to solve an incomplete records question are:

1. Opening Capital:
Opening capital = Opening assets – Opening liabilities
 Date line: A set of opening and closing date is given.
 Do not forget to take the opening bank balance from the bank account.
2. Bank Account:
Usually a bank account is already given in the question. If not; following is the format
of a bank account.

 Sometimes a bank account is there but not balanced. We have to balance it.
ADAM VICEROY PAGE 4

3. Cash Account:
Normally a cash account is not given in the question. If the opening and closing cash
balances are different, we will have to make a cash account.
However, if opening and closing cash balances are same, there is no need of a cash
account. Also if there are no cash balances in the question, there is no need of a
cash account.
Following is the format of a cash account:
PAGE 5

ADAM VICEROY
4. S.L.C.A & P.L.C.A
If sales and purchases are on credit, control accounts are mandatory.

5. Adjusting for Expenses & Incomes:

NOTE: Any expense or income which has a prepaid or accrual given; we will have to
make PAAP or APPA respectively.
ADAM VICEROY PAGE 6

6. Calculation of Depreciation of Non-Current Assets:

Either the rate of depreciation will be simply provided in an adjustment or there will be “HIDDEN”
depreciation, for which there will be no adjustment.
 Hidden Depreciation
On the date line, if an asset’s opening and closing value is same, then there is no
depreciation. However, if this is not the case, then revaluation method is used to calculate
depreciation
 Revaluation Method
$
Opening balance of NCA xxx
ADD: Purchase of NCA (Check bank account) xx
LESS: Sale of NCA (At NBV, Check (xx)
adjustments)
LESS: Closing balance of NCA (xx)
Depreciation for the year xxx
PAGE 7

ADAM VICEROY
7. Income Statement:

$ $
Sales/Revenue xxx
Less: Sales return/Return inwards (x) xxx
Less: Cost of goods sold
Opening inventory xx
Purchases xx
Less: Purchase return/Return outward (x)
Carriage inwards x
Freight charges x
Import duties x
Wages for preparation of goods for sale x
Cost of goods available for sale xxx
Less: Closing inventory (x) (xx)
GROSS PROFIT Xxx
Add: Other Incomes
Discount received x
Commission received x
Gain on disposal x
Rent received x
Decrease in provision for bad debts x xx
xxx
Less: Expenses
Utility bills x
Wages & salaries x
Carriage outwards x
Rent x
Depreciation x
Bad debts x
Increase in provision for bad debts x
Repairs & maintenance x
Sundry expenses x (xx)
NET PROFIT/(NET LOSS) xxx/(xxx)

 If any NCA is disposed off, do check for gain or loss on disposal.

 Gain = Income
 Loss = Expense
 Bad debts is an operating expense.
 Stock Drawings: It is when owner withdraws goods for his own use. Stock drawings are
subtracted from purchases.
 Discount received = Income
ADAM VICEROY PAGE 8

 Discount allowed = Expense

 All the expense and revenue values will be taken from PAAP and APPA account.
 Skim through the bank account for any other expense or income.

8. Statement of Financial Position:

$ $ $
Non-Current Assets Cost Dep NBV
Premises xx (x) xx
Motor vehicles xx (x) xx
Machine x (x) x
Land x - x
xxx
Current Assets
Closing inventory xx
Trade receivables xx
Less: Bad debt (x)
Less: Provision for bad debt (x) xx
Pre-payments x
Bank x
Cash x xxx
TOTAL ASSETS xxx
Equity & Liabilities
Equity
Opening capital xx
Add: Net profit x xx
Less: Drawings (x) xxx
Current Liabilities
Payables x
Accruals x
Bank overdraft x xx
Non-Current Liabilities
Loan x
Debentures x xx xxx
TOTAL EQUITY & LIABILITIES xxx

 Do not forget to deduct the provision for doubtful debt for the year from the trade
receivables.
 The bank figure will be the closing balance of the bank account.
 If balance b/d is debit, it shows positive bank balance and hence is a current
asset.
PAGE 9

ADAM VICEROY
 If balance b/d is credit, it shows bank overdraft and hence is a current liability.
 The closing balance of prepaid expense will be recorded as a current asset and the
closing balance of accrued expense as current liability.
 The closing balance of advance/prepaid income will be recorded as a current liability
and the closing balance of accrued income as current asset.

9706/22/M/J/11
PAGE 10

1 Jasper, a sole trader, has provided the following summary of his bank receipts and payments
for the year ended 30 April 2010.
ADAM VICEROY

Dr Cr
$ $
Cash and cheques 424 000 Machinery 30 400
Payments to creditors 228 000
Rent 24 200
Insurance 14 200
Wages 104 200
Postage 800
Electricity 8 400
Sundries 4 200

Jasper’s year-end balances were as follows:

At 30 April
2009 2010
$ $
Trade receivables (debtors) 46 400 ?
Inventory (stock) 24 400 30 600
Trade payables (creditors) 29 200 32 200
Machinery at net book value 206 400 216 000
Rent prepaid – 6 200
Insurance prepaid – 3 400
Bank ? 5 400 Cr

Additional information

During the year machinery with a net book value of $5600 was sold for $1000, which was
paid into Jasper’s private bank account.

Jasper took a salary of $28 000 which was included in the wages account.

Mark-up is calculated as 75% on cost.

9706/23/M/J/10
PAGE 11

REQUIRED

For the year ended 30 April 2010:

ADAM VICEROY
(a) Calculate Jasper’s ordinary goods purchased (purchases).

..........................................................................................................................................

. .................................................................................................................................. [3]

(b) Calculate Jasper’s sales.

..........................................................................................................................................

. .................................................................................................................................. [5]

9706/23/M/J/10
PAGE 12

..........................................................................................................................................
ADAM VICEROY

..........................................................................................................................................

. ................................................................................................................................ [16]

9706/23/M/J/10
PAGE 13

(d) Prepare Jasper’s balance sheet at 30 April 2010.

..........................................................................................................................................

ADAM VICEROY
..........................................................................................................................................

..........................................................................................................................................

. .................................................................................................................................. [6]

[Total: 30]

9706/23/M/J/10
PAGE 14

1 Shaun is a sole trader. He pays all the sales receipts into the business bank account.
He provided his accountant with the following information for the year ended
31 December 2011.
ADAM VICEROY

Bank account summary for the year ended 31 December 2011

Dr. $ Cr. $

Rent received 16 800 Balance b/d 5 620

Trade receivables 203 200 Trade payables 122 460
Cash sales 18 510 General expenses 22 000
Wages 32 560
Motor vehicles 19 200
Equipment 17 400
Drawings 27 560

Shaun’s remaining assets and liabilities were:

1 January 2011 31 December 2011

$ $

Inventory (at cost) 22 300 17 400

Premises (at cost) 100 000 100 000
Equipment (net book value) 28 400 27 600
Motor vehicles (net book value) 65 000 68 200
Trade receivables 22 400 28 600
Trade payables 17 500 19 470
General expenses prepaid 1 100 900
Rent received prepaid 800 –
Rent received owing – 1 300
Wages owing 2 400 500

Additional information:

1 Shaun allowed his customers discounts of $4000.

2 Discounts received from suppliers were $3100.

3 Shaun has decided to create a provision for doubtful debts of 2% of the trade
receivables outstanding at 31 December 2011.

4 General expenses in the bank account summary include an amount of $660

which relates to the payment of Shaun’s private house insurance.

5 Shaun had taken goods at a cost price of $3700 for his personal use.

9706/23/M/J/12
PAGE 15

REQUIRED

ADAM VICEROY
(a) Calculate the value of Shaun’s sales and ordinary goods purchased for the year
ended 31 December 2011.

(i) Sales

[4]

(ii) Ordinary goods purchased

[4]

9706/23/M/J/12
PAGE 16

(b) Prepare Shaun’s income statement for the year ended 31 December 2011.
ADAM VICEROY

[10]

9706/23/M/J/12
PAGE 17

(c) Prepare Shaun's statement of financial position at 31 December 2011.

ADAM VICEROY

[12]

[Total: 30]

9706/23/M/J/12
PAGE 18

1 Patel, a sole trader, does not keep proper books of account. He provided the following information.

1 January 2014 31 December 2014

ADAM VICEROY

$ $
Land and buildings at cost 50 000 50 000
Fixtures and fittings at valuation 6 000 4 500
Motor vehicles at net book value 7 600 ?
Trade payables 16 750 14 900
Trade receivables 14 670 13 690
Wages owing 1 200 1 400
Inventory 21 750 22 450
Cash in hand 800 950
Rent in advance 1 000 ?

Summary of Patel’s bank account for the year showed the following.

Receipts $ Payments $

Balance b/d 16 980 Payments to credit suppliers 109 620

Receipts from credit customers 156 420 Wages 22 670
Cash sales 20 700 Rent 19 000
Proceeds from sale of motor vehicle 1 500 Electricity 8 650
General expenses 4 750
Purchase of new motor vehicle 16 400
Balance c/d 14 510
195 600 195 600

Additional information

1 Before banking his receipts from cash sales Patel took $400 per month for his personal
drawings. All other payments were made from the bank.

2 During the year he took goods costing $2600 for his own use.

3 Patel depreciates his vehicles at 20% per annum using the reducing balance method. A full
year’s depreciation is charged in the year of purchase. No depreciation is provided in the
year of sale.

4 The vehicle sold had a net book value at 1 January 2014 of $2880.

5 A customer has been declared bankrupt and will not pay $750 owing. The amount was
included in the trade receivables at 31 December 2014.

6 In addition Patel has decided to create a provision for doubtful debts of 5%.

7 The rent payable is $16 000 per annum.

9706/21/M/J/15
PAGE 19

REQUIRED

(a) Prepare Patel’s income statement for the year ended 31 December 2014.

ADAM VICEROY

[15]

9706/21/M/J/15
PAGE 20

(b) Prepare Patel’s statement of financial position at 31 December 2014.

ADAM VICEROY

9706/21/M/J/15
PAGE 21

ADAM VICEROY
[9]

Additional information

Patel wishes to expand his business and is undecided about taking out a five year loan or asking
the bank for an overdraft.

REQUIRED

(c) State one advantage and one disadvantage of each option.

Five year loan

Advantage

Disadvantage

Bank overdraft

Advantage

Disadvantage

[6]

[Total: 30]

9706/21/M/J/15
PAGE 22

2 Warren is a sole trader. He started trading on 1 February 2016.

During the year ended 31 January 2017 he did not keep detailed accounting records but he has
provided the following information:
ADAM VICEROY

$
Revenue 248 758
Carriage inwards 12 371
Carriage outwards 5 873
Returns inwards 6 250
Returns outwards 11 875
Goods taken for own use 2 246
Inventory at 31 January 2017 27 450

Warren applies a 50% mark-up on cost.

REQUIRED

(a) Prepare the trading section of the income statement for the year ended 31 January 2017.

[6]

9706/23/M/J/18
PAGE 23

(b) Explain two advantages of maintaining control accounts.

ADAM VICEROY
2

[4]

Additional information

Whilst preparing his accounts, Warren discovered the following:

1 Goods costing Warren $2400 had been sent to a customer on a sale or return basis on
29 January 2017. The goods had been invoiced with the usual mark-up, but the customer
had not yet decided to keep them.

2 Trade receivables were shown as $49532, but irrecoverable debts of $572 had not been
written off and a provision for irrecoverable debts of 5% was required.

REQUIRED

[5]

[Total: 15]

9706/23/M/J/18
PAGE 24

1 Ahmed and Raji are in partnership as retailers but have not maintained full accounting records.
They have been advised to use a double entry system of book-keeping.
ADAM VICEROY

REQUIRED

(a) State three advantages to business owners of using the double entry system of
book-keeping.

[3]

Additional information

The following information is available for the partnership:

1 Assets and liabilities

30 April 2019 1 May 2018
$ $
Equipment at net book value 17600 20500
Motor vehicles at net book value
(Cost $25 000 at 1 May 2018) ? 16 500
Inventory 5 470 6 750
Trade receivables 3 790 3 260
Trade payables 4 560 4 390
Wages owing 2 300 1 500
Rent paid in advance 1 600 950
Cash and bank balances 6 470 credit 5 430 debit

2 The summary of the partnership bank receipts and payments for the year ended 30 April 2019
was as follows.
$
Receipts
From credit customers 57 900

Payments
To credit suppliers 25 800
New motor vehicle 6 800
Partners’ drawings 16 700
Wages 10 700
Rent 7 500
General expenses 2 300

All purchases and sales were made on credit.

9706/21/M/J/19
PAGE 25

3 The partners wish to create a provision for doubtful debts of 5% of trade receivables.

4 Depreciation on the motor vehicles is charged at 20% using the straight-line method.

ADAM VICEROY
Depreciation is charged on a monthly basis.

5 On 1 November 2018 a motor vehicle which had cost $7000 on 1 May 2016 was
part-exchanged for a new motor vehicle. The amount of the part-exchange was $3300. The
balance of the purchase cost of the new vehicle, $6800, was paid by cheque.

6 There were no additions or disposals of equipment during the year.

REQUIRED

(b) Calculate:

(i) the profit or loss on the disposal of the motor vehicle

[3]

(ii) the total depreciation charge for motor vehicles for the year ended 30 April 2019.

[4]

9706/21/M/J/19
PAGE 26

[9]

9706/21/M/J/19
PAGE 27

(d) Explain why a business may create a provision for doubtful debts.

ADAM VICEROY
[4]

9706/21/M/J/19
PAGE 28

Additional information

When the partners started the business they each invested $25 000 and agreed to share profits
ADAM VICEROY

and losses equally.

The partners are concerned that the business has low profit and a high bank overdraft. Ahmed’s
brother is prepared to invest $25 000 into the business.
He has suggested two options to Ahmed and Raji.
Option 1: To loan this amount to the partnership and receive an annual interest of 10%.
Option 2: To invest the full amount and become an equal partner. Through his business
contacts he feels that he will be able to improve the total revenue.

REQUIRED

(e) Advise the partners which option, if either, they should accept. Justify your answer.

[7]
[Total: 30]

9706/21/M/J/19
PAGE 29

1 On 1 January 2009 Clara Coyle, a sole trader, had the following balances:

ADAM VICEROY
Inventory (stock) 24 170
Premises 60 000
Fittings and fixtures (net book value) 28 000
Cash and cash equivalents (bank) 4 000
Rates prepaid 440
Trade receivables (debtors) 3 810
Trade payables (creditors) 3 420
Capital 117 000

There was no opening cash or cash equivalent.

Full accounting records were not kept, but the following information was available for the
year ended 31 December 2009.

Bank Account Receipts $

Loan from uncle (interest free) 10 000
Receipts from trade receivables (debtors) 163 100
Cash sales paid into bank 34 000
Bank Account Payments
Payments to trade payables (creditors) 141 508
Ordinary goods purchased (purchases) by cheque 6 300
Rates 2 600
Drawings 3 650
General expenses 4 410
Wages 21 300
Cash payments from cash sales
General expenses 2 680
Purchases 1 200
Balances as at 31 December 2009
Trade receivables (debtors) 4 100
Trade payables (creditors) 11 850
Rates prepaid 240
General expenses owing 400
Wages owing 1 620
Cash and cash equivalents (cash) 515
Bank ?

Additional Information:

1 The selling price on all goods is based on cost plus 25%.

2 During the year Clara Coyle withdrew goods, costing $140, from the business, for
her own use.

3 The business allowed discounts, $1 300, to its trade receivables (debtors).

4 The business received discounts, $1 600, from its trade payables (creditors).

5 No additions or disposals of non-current (fixed) assets took place during the year.

Depreciation of $3 000 is to be provided on fixtures and fittings.

Premises are not depreciated.

9706/21/O/N/10
ADAM VICEROY PAGE 30

REQUIRED

(a) Calculate the total sales for the year ended 31 December 2009.

..........................................................................................................................................

. .................................................................................................................................. [5]

(b) Calculate the total purchases for the year ended 31 December 2009.

..........................................................................................................................................

. .................................................................................................................................. [5]

9706/21/O/N/10
PAGE 31

(c) Prepare the Income Statement (trading and profit and loss account) for Clara Coyle for
the year ended 31 December 2009.

ADAM VICEROY
..........................................................................................................................................

..........................................................................................................................................

. .................................................................................................................................. [8]

9706/21/O/N/10
PAGE 32

(d) Prepare the Balance Sheet for Clara Coyle at 31 December 2009.

..........................................................................................................................................
ADAM VICEROY

..........................................................................................................................................

. ................................................................................................................................ [12]

[Total: 30]

9706/21/O/N/10
PAGE 33

1 Iqbal runs a small trading business which has been in operation for several years. Iqbal pays all
sales receipts into the business bank account. The following is a summary of the bank account for
the year ended 31 March 2011.

ADAM VICEROY
Bank account summary for the year ended 31 March 2011

$ $
Balance b/d 4 650 Trade payables 37 000
Trade receivables 85 000 Motor expenses 4 100
Cash sales 24 000 Rent 6 000
Capital 36 000 Rates 2 200
Loan 14 000 Wages 43 000
Fixtures and fittings 40 000

Additional information

1 Discounts received from suppliers during the year ended 31 March 2011 were $500.

2 Iqbal allowed his customers discounts of $1400 during the year ended 31 March 2011.

3 Iqbal had taken goods at a cost price of $2400 for his personal use.

4 The loan was received on 1 October 2010 and interest is payable at 10% per annum.

5 The loan is due to be repaid in five years’ time.

6 Iqbal has decided to create a provision for doubtful debts of 3% of the trade receivables
outstanding at 31 March 2011.

7 Included in the wages figure in the bank account summary are Iqbal’s drawings of
$25 000.

The remaining assets and liabilities of Iqbal were:

1 April 2010 31 March 2011

$ $
Inventory at cost 8 000 9 200
Fixtures and fittings (Net Book Value) 36 000 68 000
Delivery van (Net Book Value) 10 000 7 500
Trade receivables 7 200 8 300
Trade payables 3 400 3 700
Motor expenses owing 300 –
Rent prepaid 400 600
Rates owing 200 –
Rates prepaid – 300

9706/21/O/N/11
PAGE 34

REQUIRED

(a) Prepare the income statement (trading and profit and loss account) for Iqbal for the year
ADAM VICEROY

ended 31 March 2011.

..........................................................................................................................................

..........................................................................................................................................
9706/21/O/N/11
PAGE 35

..........................................................................................................................................

ADAM VICEROY
..........................................................................................................................................

..........................................................................................................................................

. ................................................................................................................................ [18]
9706/21/O/N/11
PAGE 36

(b) Prepare the statement of financial position (balance sheet) for Iqbal at 31 March 2011.

..........................................................................................................................................
ADAM VICEROY

..........................................................................................................................................

. ................................................................................................................................ [12]

[Total 30]

9706/21/O/N/11
PAGE 37

1 Asif operates a delivery service and does not keep proper accounting records. He provided the
following information for the year ended 30 June 2014.

ADAM VICEROY
$
Cash in hand at 1July 2013 3 270
Cash in hand at 30 June 2014 2 349

Cash receipts and payments:

Vehicle repairs 2 400
Fuel payments for vehicles 14 301
Driver’s wages 4 748
Rent of a garage 1 600
Sundry expenses 2 972
Drawings 11 450
Receipts from sale of old vehicle 1 300
Cash stolen by Asif’s driver 430
Cash received from customers ?

REQUIRED

(a) Prepare Asif’s cash account for the year ended 30 June 2014.

[7]

9706/23/O/N/14
PAGE 38

Additional information
$
Trade receivables at 1 July 2013 3766
ADAM VICEROY

Trade receivables at 30 June 2014 2863

Bad debts written off during the year ended 30 June 2014 1648

REQUIRED

(b) Calculate Asif’s revenue figure for the year ended 30 June 2014.

[5]

Additional information

1 The vehicle which had been sold was purchased in May 2012 for $6200. Asif’s policy is to
depreciate the vehicles at 50% per annum using the reducing balance method. A full year’s
depreciation is charged in the year of acquisition. No depreciation is charged in the year of
disposal.

2 At 30 June 2014 driver’s wages of $200 were owing and garage rent of $400 was prepaid.

9706/23/O/N/14
PAGE 39

REQUIRED

ADAM VICEROY

[12]

9706/23/O/N/14
PAGE 40

Additional information

Asif is considering introducing a system of credit control.

ADAM VICEROY

REQUIRED

(d) Explain the benefits this may bring to the business.

[4]

(e) State two ratios that Asif could use to measure the profitability of his business.

2 [2]

[Total: 30]

9706/23/O/N/14
PAGE 41

1 Anton, a sole trader, does not keep proper books of account. He supplies the following
information for the year ended 30 September 2015.

ADAM VICEROY
1 October 2014 30 September 2015
$ $
Office fixtures at net book value 9 500 8 600
Delivery vehicles
Cost 15 700 ?
Accumulated depreciation 4 600 ?
Trade payables 12 670 13 460
Trade receivables 10 500 9 670
Rent payable owing 1 500 2 400
Cash 980 445
Inventory 24 640 40 800
Bank 2 400 Credit ?

Summary of Anton’s bank account is as follows.

Bank Account Summary

$
Receipts
Receipts from credit customers 153 300
Cash sales banked 12 900
Sale of delivery vehicle 5 400
Payments
Payments to credit suppliers 118 900
Wages 17 800
Rent 8 500
Electricity 7 540
General expenses 4 630
Purchase of delivery vehicle 13 600

Additional information

1 The inventory at 30 September 2015 was valued at selling price. Antonapplies amark up of 50%.

2 During the year a delivery vehicle which had cost $9000 on 1 October 2012 was sold for $5400.

3 Delivery vehicles are depreciated at 20% per annum using the reducing balance method.
Depreciation is charged in the year of purchase but not in the year of sale.

4 Anton took cash drawings of $600 per month before the cash sales were banked but has not
recorded these. He also took goods for his own use which had a sales value of $2763.

5 Total cash sales were $20 476.

6 There are unrecorded delivery vehicle expenses not accounted for.

9706/23/O/N/15
PAGE 42

REQUIRED

(a) Prepare Anton’s income statement for the year ended 30 September 2015.
ADAM VICEROY

[16]

9706/23/O/N/15
PAGE 43

(b) Prepare a statement of financial position at 30 September 2015.

ADAM VICEROY

9706/23/O/N/15
ADAM VICEROY PAGE 44

[8]

Additional information

Anton is not sure if he will recover all trade receivables due and has been advised to set up a
provision for doubtful debts. He plans to write off a bad debt of $750 and set up a provision for
doubtful debts at 4%.

REQUIRED

[3]

(d) Explain why he should include the provision for doubtful debts in his accounts.

[3]

[Total: 30]

9706/23/O/N/15
PAGE 45

2 Raheem is a trader who makes all his sales on credit. He prepared the following sales ledger
control account for the month of December 2015:

ADAM VICEROY
$ $
Balance b/d 22 380 Sales returns journal 1 440
Sales journal 16 910 Bank 17 380
Balance c/d 20 470
39 290 39 290
Balance b/d 20 470

Raheem extracted a list of customer account balances from the sales ledger at
31 December 2015 totaling $18 740. This did not agree with the balance on the control account.

The following errors were found:

1 A sales invoice for $960 had been correctly recorded in the sales journal, but had not been
posted to the customer’s ledger account.

2 A customer’s irrecoverable debt of $250 had not been written off in any of Raheem’s books
of account.

3 A cheque received, $670, from a customer had been correctly recorded in the cash book. It
had been entered on the debit side of the customer’s ledger account as $760.

4 A cheque received, $200, from a customer had been returned unpaid by the customer’s
bank. No entry in respect of the returned cheque had been made in any of Raheem’s books
of account.

5 Discounts allowed of $830 had not been entered in the control account. They had been
entered in the customers’ ledger accounts.

6 A contra to the purchases ledger of $1370 had been entered in the customer’s sales ledger
account, but had not been included in the control account.

REQUIRED

(a) Prepare the updated sales ledger control account for the month of December 2015. Start
your answer with the balance brought down of $20 470.

Sales ledger control account

[5]

9706/21/O/N/16
PAGE 46

(b) Prepare a statement to reconcile the original total of sales ledger balances of $18 740 with
the closing balance on the amended sales ledger control account.
ADAM VICEROY

[5]

[3]

(d) State two types of errors that will not be identified by producing a sales ledger control
account.

[2]

[Total: 15]

9706/21/O/N/16
PAGE 47

1 Maneesh has not maintained a full set of accounting records for the year ended 31 December 2015.
The following information has been provided:

ADAM VICEROY
Assets and liabilities at 1 January 2015

Assets Liabilities

$ $
Non-current assets at net book value 83 400
Inventory 18 500
Trade receivables 22 460
Prepaid rent 1 900
Cash in hand 180
Trade payables 12 770
Accrued general expenses 1 320
Bank overdraft 5 640
Balance at 1 January 2015 106 710
126 440 126 440

Summary bank account for the year ended 31 December 2015

$ $
Receipts from credit customers 176 750 Balance at 1 January 2015 5 640
Cash sales banked 7 450 Payments to credit suppliers 138 132
Balance at 31 December 2015 17 272 Non-current assets 5 200
Drawings 14 120
General expenses 11 280
Rent 27 100
201 472 201 472
Balance at 1 January 2016 17 272

Additional information

1 Maneesh makes both cash and credit sales. All sales were made at 40% gross margin.

2 Credit sales for the year totalled $184 190.

3 Credit purchases for the year totalled $136 422. There were no cash purchases.

4 The business maintains a cash float of $180.

5 Maneesh withdrew $20 per week from cash sales for drawings, before banking the rest.

6 Maneesh depreciates his non-current assets at 20% per annum using the reducing balance
method.

7 The rent charge for the year was $24 600.

8 The general expenses charge for the year was $14 160.

9 Irrecoverable debts of $900 should be written off at 31 December 2015.

9706/23/O/N/16
PAGE 48

REQUIRED

(a) Prepare the income statement for the year ended 31 December 2015.
ADAM VICEROY

[6]

9706/23/O/N/16
PAGE 49

(b) Prepare the statement of financial position at 31 December 2015.

ADAM VICEROY

9706/23/O/N/16
ADAM VICEROY PAGE 50

[9]

9706/23/O/N/16
PAGE 51

Additional information

Maneesh is concerned that the bank overdraft has increased substantially during the year ended

ADAM VICEROY
31 December 2015.

REQUIRED

[4]

9706/23/O/N/16
PAGE 52

Additional information

Maneesh has been advised by the bank manager that the bank overdraft must be repaid in full as
ADAM VICEROY

soon as possible. Maneesh’s brother has offered the following possible solutions.

1 Lend Maneesh $20 000 repayable in five equal annual instalments of $5000 each (including
interest).

2 Enter into a formal partnership with Maneesh in which his brother:

(i) immediately pays $20 000 into the business bank account; and

(ii) receives 10% share of the future profits for the year.

REQUIRED

(d) Advise Maneesh which option he should choose. Justify your answer.

[7]

9706/23/O/N/16
PAGE 53

(e) State two items which may be included in a partnership agreement (other than the share of
profit)

ADAM VICEROY
which will affect the appropriation account

2 [2]

which will not affect the appropriation account.

2 [2]

[Total: 30]

9706/23/O/N/16
PAGE 54

2 Rowsell does not keep full accounting records. However, the following information is available for
the year ended 31 May 2017:
ADAM VICEROY

$
Inventory at cost
1 June 2016 19 600
31 May 2017 16 300

Trade payables
1 June 2016 14 350
31 May 2017 17 220

Rent paid 19 500

Telephone charges paid 2 750
Non-current assets net book value at 1 June 2016 24 600
Cheque payments to trade payables 144 715

Additional information

1 All goods were sold with a 20% mark-up on cost.

2 A non-current asset with a net book value of $9380 was sold during the year for $10 175.

3 Non-current assets are depreciated using the reducing balance method at a rate of 25% per
annum. It is the policy to provide depreciation for the full year in the year of addition and
none in the year of disposal.

4 The charge for rent is $1500 per month.

5 Telephone charges paid cover the period up to 31 March 2017. An amount for the quarter to
30 June 2017 of $840 was paid in July 2017.

6 All purchases were made on a credit basis.

9706/23/O/N/17
PAGE 55

REQUIRED

(a) Prepare the income statement for the year ended 31 May 2017.

ADAM VICEROY
Rowsell
Income Statement for the year ended 31 May 2017

[12]

9706/23/O/N/17
PAGE 56

(b) State three benefits of keeping full double entry accounting records for a business.

1
ADAM VICEROY

[3]

[Total: 15]

9706/23/O/N/17
PAGE 57

1 Francesco is a sole trader who runs a small bicycle distribution business. He does not keep full
accounting records.

ADAM VICEROY
REQUIRED

(a) State two benefits to a sole trader of keeping full accounting records.

[2]

(b) Explain the accounting treatment at the year-end in the income statement and statement of
financial position of:

Prepayments

Accruals

[4]

9706/21/O/N/18
PAGE 58

Additional information

Francesco provided the following information for the year ended 30 April 2017.
ADAM VICEROY

$
Opening inventory 16250

Total sales 82 500

Total purchases 62 750

Mark-up is 25%.

The normal rate of inventory turnover is 5 times. However, it was discovered at the year-end that
some inventory had been stolen. No insurance claim has yet been made for this loss.

REQUIRED

(c) Prepare an extract from the income statement to show gross profit for the year ended
30 April 2017. Show clearly the value of inventory stolen.

Workings:

[5]

9706/21/O/N/18
PAGE 59

Additional information

The following information has also been provided.

ADAM VICEROY
1 at 1 May at 30 April
2016 2017
$ $

Trade receivables 6 875 8 250

Trade payables 5 200 6 350
Expenses prepaid 625 775
Expenses owing 350 425

2 Expenses paid from the bank account amounted to $9925.

3 Rental income received by credit transfer amounted to $15 700.

4 Balance per bank statement at 30 April 2017 of $4150 was overdrawn.

5 Unpresented cheques amounted to $850.

6 Uncredited bankings amounted to $1975.

7 There were no cash transactions. All sales and purchases were on a credit basis.

9706/21/O/N/18
PAGE 60

REQUIRED

(d) Prepare the bank account for the year ended 30 April 2017. Clearly show the opening
ADAM VICEROY

balance.

Bank account

$ $

Workings:

[8]

(e) Calculate the charge for total expenses which appeared in the income statement for the year
ended 30 April 2017.

[2]

9706/21/O/N/18
PAGE 61

Additional information

Francesco’s brother, Marco, runs a similar business. He has calculated the following ratios for his

ADAM VICEROY
own business:

30 April 30 April
2016 2017
Current ratio 2.6 : 1 1.2 : 1
Liquid (acid test) ratio 1.4 : 1 0.8 : 1

REQUIRED

(f) Discuss the liquidity position of Marco’s business using only the current and liquid (acid test)
ratios.

[4]

(g) Advise a potential new supplier whether or not to sell goods to Marco on a credit basis.
Justify your answer.

[5]

[Total: 30]

9706/21/O/N/18
PAGE 62
2

1 Tariq owns a retail business but does not maintain full accounting records. All goods are purchased
on credit, but all sales are on a cash basis.
ADAM VICEROY

Tariq provided the following information for the year ended 30 September 2019.

$
Trade payables
1 October 2018 4 980
30 September 2019 7 220
Payments to trade payables 70 300
Discounts received 940

REQUIRED

(a) Calculate credit purchases for the year ended 30 September 2019.

...................................................................................................................................................

. .......................................................................................................................................... [4]

Additional information

Assets and other liabilities

30 September 1 October
2019 2018
$ $
Furniture and equipment at valuation 28 300 26 800
Inventory 8 080 7 410
Other receivables: rent prepaid – 990
Cash at bank 1 960 3 360
Cash in hand 410 820
Bank loan 15 000 12 000
Other payables: rent accrued 1 040

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PAGE 63
3

Summary of information taken from bank statements

$
Receipts

ADAM VICEROY
Cash takings banked 112400
Additional bank loan 3 000
Payments
Trade payables 70 300
Rent of premises 14 930
New furniture 5 200
Accountant’s fees 640
Loan interest 580
Drawings 25 150

Tariq took goods for personal use valued at cost $390 during the year.

REQUIRED

(b) Calculate the depreciation of furniture and equipment for the year ended
30 September 2019.

...................................................................................................................................................

. .......................................................................................................................................... [3]

© UCLES 2020 9706/22/M/J/20 [Turn over

PAGE 64
4

Additional information

Tariq took some cash from the cash box as drawings during the year. However, no record was
ADAM VICEROY

made of the amounts withdrawn. The following information is also available about cash.

$
Cash sales 133 200
Wages of assistant 18 800

REQUIRED

...................................................................................................................................................

. .......................................................................................................................................... [5]

© UCLES 2020 9706/22/M/J/20

PAGE 65
5

(d) Prepare the income statement for the year ended 30 September 2019.

Tariq

ADAM VICEROY
Income statement for the year ended 30 September 2019

...................................................................................................................................................

. .......................................................................................................................................... [9]

Workings:

© UCLES 2020 9706/22/M/J/20 [Turn over

PAGE 66
6

(e) Explain the accounting concepts of:

(i) business entity

ADAM VICEROY

...........................................................................................................................................

...........................................................................................................................................
[2]

(ii) substance over form.

...........................................................................................................................................

...........................................................................................................................................
[2]

© UCLES 2020 9706/22/M/J/20

PAGE 67
7

Additional information

Tariq has become concerned about his business’s liquidity. He is considering two options.

ADAM VICEROY
Option 1: reduce the inventory levels
Option 2: delay payments to suppliers

REQUIRED

(f) Advise Tariq which of these actions he should take. Justify your advice.

...................................................................................................................................................

. .......................................................................................................................................... [5]

[Total: 30]

© UCLES 2020 9706/22/M/J/20 [Turn over

PAGE 68
2

1 Suyin owns a small retail business. She has not maintained full accounting records.

REQUIRED
ADAM VICEROY

(a) State two reasons why the owner of a small business may decide not to maintain full
accounting records.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

Suyin has been informed that the accounting concepts of matching and prudence must be followed
when preparing financial statements.

REQUIRED

(b) Explain how these accounting concepts are applied when a business prepares financial
statements.

Matching

...................................................................................................................................................

Prudence

...................................................................................................................................................

...................................................................................................................................................
[4]

© UCLES 2021 9706/21/M/J/21

PAGE 69
3

Additional information

Suyin has provided the following information.

ADAM VICEROY
1 On 1 August 2019 the business’s assets and liabilities included:

$
Fittings and equipment at valuation 18 500
Inventory 11440
Other payables: shop rent 510
Other receivables: insurance 290
Trade payables 3 970

2 Summary of bank statements for the year ended 31 July 2020.

$
Receipts
Cash sales banked 79 480
Proceeds from the sale of equipment (net book value $490) 550

Payments
Drawings 24 070
Shop rent 3 580
General expenses 16 810
Carriage inwards 610
Insurance 2 950
Trade payables (after deducting 2.5% cash discounts) 46 800

3 Cash account for the year ended 31 July 2020.

$ $
Balance b/d 420 Bank 79 480
Cash sales 96 000 Wages 15 430
Purchases 1 320
Balance c/d 190
96420 96420
Balance b/d 190

4 During the year ended 31 July 2020

Goods had been returned to suppliers, $1280.

All sales were made on a cash basis.

5 At 31 July 2020

Suppliers were owed $4560.

Inventory was valued at $18720.
Fittings and equipment was valued at $15 860.

© UCLES 2021 9706/21/M/J/21 [Turn over

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4

REQUIRED

...................................................................................................................................................

. ...........................................................................................................................................[5]

(d) Prepare the income statement for the year ended 31 July 2020.

Workings:

© UCLES 2021 9706/21/M/J/21

PAGE 71
5

Suyin
Income statement for the year ended 31 July 2020

ADAM VICEROY
$ $

........................................................................................... ..................... .....................

[10]

© UCLES 2021 9706/21/M/J/21 [Turn over

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6

Additional information

Suyin has the opportunity to move her business to a busier location. The following information is
ADAM VICEROY

available.

1 The rent of the new shop premises will be three times the current annual charge.

2 Annual sales could be increased by 10% on the figure for the year ended 31 July 2020.

3 She intends to achieve a gross margin of 60%.

4 She will need to apply for a bank loan of $16 000 at 8% per annum interest to cover the costs
of changing location. The loan will be repayable over a two-year period.

5 Discounts received will no longer be available.

6 All other expenses will remain unchanged and there will be no sources of additional income.

REQUIRED

(e) Calculate how much profit per annum will be made if Suyin moves her business to the new
location.

$
Revised gross profit

Revised profit for the year

[4]

© UCLES 2021 9706/21/M/J/21

PAGE 73
7

(f) Advise Suyin whether or not she should change her business’s location. Justify your answer
considering both financial and non-financial factors.

ADAM VICEROY
...................................................................................................................................................

...................................................................................................................................................

. ...........................................................................................................................................[5]

[Total: 30]

© UCLES 2021 9706/21/M/J/21 [Turn over

PAGE 74
2

1 Anjali is a sole trader. She does not maintain a full set of accounting records.

At 1 October 2019 the assets and liabilities of Anjali were as follows:

ADAM VICEROY

Cash at bank 4 600 debit

Inventory 14 500
Non-current assets (carrying value) 85 000
Trade payables 9 930
Trade receivables 12 850

During the year ended 30 September 2020 the following transactions were recorded.

General expenses paid 11480

Payments to trade payables 50 250
Receipts from trade receivables 73 850
Rental income received 9 000
Returns inwards 2 070
Returns outwards 1 290

Anjali made drawings of $600 per month throughout the year.

All receipts and payments were processed through the bank account.
Irrecoverable debts of $2300 were written off.

At 30 September 2020 the assets and liabilities were as follows:

Inventory 18 000
Non-current assets (carrying value) 72 250
Prepaid general expenses 600
Trade payables 11470
Trade receivables 14 980

REQUIRED

(a) Calculate the bank balance at 30 September 2020.

...................................................................................................................................................

. ...........................................................................................................................................[3]

© UCLES 2020 9706/22/O/N/20

PAGE 75
3

(b) Prepare the income statement for the year ended 30 September 2020. Use the space on the
next page for your workings.

ADAM VICEROY
Anjali
Income statement for the year ended 30 September 2020

...................................................................................................................................................

© UCLES 2020 9706/22/O/N/20 [Turn over

PAGE 76
4

Workings:
ADAM VICEROY

[17]

(i) Gross margin

...........................................................................................................................................

. ...................................................................................................................................[1]

(ii) Mark-up

...........................................................................................................................................

. ...................................................................................................................................[1]

(iii) Profit margin

...........................................................................................................................................

. ...................................................................................................................................[1]

© UCLES 2020 9706/22/O/N/20

PAGE 77
5

(d) (i) Explain how a business may increase its gross margin.

...........................................................................................................................................

ADAM VICEROY
...........................................................................................................................................

...........................................................................................................................................

. ...................................................................................................................................[2]

(ii) Explain how a business may improve its profit margin.

...........................................................................................................................................

. ...................................................................................................................................[2]

(e) State one reason why each of the following may be interested in the financial statements of a
business.

1 Employees ............................................................................................................................

...................................................................................................................................................

2 Suppliers ...............................................................................................................................

...................................................................................................................................................

3 Government ..........................................................................................................................

...................................................................................................................................................
[3]

[Total: 30]

© UCLES 2020 9706/22/O/N/20 [Turn over

PAGE 78
2

1 Eleni owns a business selling computers. She does not maintain full accounting records.

The following information is available.

ADAM VICEROY

At 30 June At 1 July
2021 2020
$ $
Equipment at valuation 3250 3460
Inventory 1940 2210
Trade receivables 5650 7200
Provision for doubtful debts ? 360
Other receivables: rent prepaid 1080 500
Trade payables 2120 1440
Other payables: wages 110 190
Bank 1420 Credit 860 Credit
Cash in hand – 150
Bank loan – 1350

A summary of receipts and payments made through the bank for the year ended 30 June 2021
was as follows:

Receipts $
Receipts from credit customers 58 960
Cash sales banked 3 980
Sale of equipment 180

Payments $
Payments to credit suppliers 39 750
Purchase of equipment 610
General expenses 940
Rent 6 860
Bank loan repayments 1 390
Bank charges 50
Cash withdrawn 14 080

All cash sales are banked.

© UCLES 2021 9706/21/O/N/21

PAGE 79
3

REQUIRED

(a) Calculate total revenue for the year ended 30 June 2021.

ADAM VICEROY
...................................................................................................................................................

...................................................................................................................................................

. ...........................................................................................................................................[2]

Additional information

Of the cash withdrawn from the bank, Eleni took $450 each month for drawings and paid total
wages of $7620 for the year. The remaining cash from the cash till was used to pay for general
expenses.

REQUIRED

(b) Prepare the cash account to calculate the amount paid in cash for general expenses.

Cash account

$ $

[3]

© UCLES 2021 9706/21/O/N/21 [Turn over

PAGE 80
4
Additional information

The following information is also available.

ADAM VICEROY

1 Eleni wishes to write off an irrecoverable debt of $50 at 30 June 2021. She wishes to maintain
the provision for doubtful debts at the same percentage as the previous year.

2 Equipment sold during the year had a valuation of $140.

REQUIRED

Eleni
Income statement for the year ended 30 June 2021

...................................................................................................................................................

© UCLES 2021 9706/21/O/N/21

PAGE 81
5

Workings:

ADAM VICEROY
[12]

(d) Prepare an extract from the statement of financial position at 30 June 2021 to show the capital
and liabilities section only.

Eleni
Statement of financial position at 30 June 2021

Capital and liabilities

...................................................................................................................................................

. ...........................................................................................................................................[5]

© UCLES 2021 9706/21/O/N/21 [Turn over

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124
Additional information

Eleni is concerned that she is not earning enough profit. She is considering increasing her
ADAM VICEROY

prices by 5%.

REQUIRED

(e) Advise Eleni whether or not she should increase her prices by 5%. Justify your answer.

...................................................................................................................................................

. ...........................................................................................................................................[5]

(f) State three factors that a business should consider when making a provision for doubtful
debts.

1 ................................................................................................................................................

2 ................................................................................................................................................

3 ................................................................................................................................................
[3]

[Total: 30]

1 REQUIRED
(a) State two reasons why the owner of a business might maintain minimal accounting records.

1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

(b) Identify four benefits of maintaining full accounting records.

1 ................................................................................................................................................

2 ................................................................................................................................................

3 ................................................................................................................................................

4 ................................................................................................................................................
[4]

Additional information
More recently Rafiq has been able to provide more detailed financial information.

1 On 1 January 2021, the business’s assets and liabilities were as follows:

$
Cash in hand 840
Bank overdraft 1 390
Furniture and fittings at valuation 22710
Trade payables 11870
Inventory 14430
Rent prepaid 1 250
2 The following summary of receipts and payments for the year ended 31 December 2021 has
been prepared from the business’s bank statements.

Receipts $ $
Cash sales banked 132 200
Disposal of furniture and fittings 3 480
Total receipts 135 680

Payments
Drawings 18 390
Trade payables 93 100
Rent 14 750
Additional furniture and fittings 8 000
Installation costs for new fittings 380
General expenses 5 940
Total payments 140 560

3 Rafiq purchases all goods for resale on a credit basis.

4 All sales are on a cash basis.

5 A cash discount of 5% was received when Rafiq settled debts with trade payables during the
year ended 31 December 2021.

6 At 31 December 2021 trade payables totalled $9230.

REQUIRED
(c) Calculate the total purchases for the year ended 31 December 2021.

...................................................................................................................................................

...................................................................................................................................................
[3]

127

During the year ended 31 December 2021:

1 Some cash takings were not banked but were used to pay wages, $21 540, and drawings, $2580.

2 Rafiq took goods costing $480 for private use.

3 Furniture and fittings with a value of $2950 were sold.

At 31 December 2021:

1 Cash takings of $1200 had not yet been banked.

2 The balance of cash in hand was $920.

3 Inventory was valued at $11 920.

4 Furniture and fittings were valued at $23 400.

5 Rent of $1440 was prepaid.

REQUIRED
(d) Prepare the income statement for the year ended 31 December 2021.

Workings:

127

Rafiq
Income statement for the year ended 31 December 2021

...................................................................................................................................................

...................................................................................................................................................
[14]

127

Rafiq would like to expand his business but requires additional finance to carry out this plan. He is
considering two options.
Option 1: Invite a friend, Khaled, to become a partner in the business. Khaled would introduce capital of
$10 000.
Option 2: Apply for a bank loan of $10 000.

REQUIRED
(e) Advise Rafiq which option he should choose. Justify your answer by discussing both financial and non-
financial issues of each option.

...................................................................................................................................................

...................................................................................................................................................
[7]

[Total: 30]

128

1 Reece, a sole trader, does not maintain a full set of accounting records. He has provided the following
information for the year ended 30 June 2022.
30 June 2022 1 July 2021

$ $

Cash 110 240

Electricity accrued 380 420

Inventory 21 400 23 600

Machinery

Cost ? 18 480

Accumulated depreciation ? 9 685

Rent paid in advance 1 100 950

Trade payables 8 520 6 285

Trade receivables 20 620 23 580

Bank account summary
Receipts $ Payments $

Balance b/d 1 860 Credit suppliers 80 140

Credit customers 149 810 Rent 12 250

Cash sales banked 7 170 Wages 36 240

Sale of machinery 4 000 Electricity 3 680

General expenses 18 590

New machinery 9 200

Balance c/d 2 740

162 840 162 840

The following information is also available.

1 Total cash sales for the year were $15 280.

2 Reece had also paid cash for wages during the year but had not recorded this.

3 Reece took $450 per month drawings before the cash sales were banked. He had also taken goods
for his own use with a selling price of $350 after a mark-up of 25%.

4 During the year, machinery that had cost $6000 on 1 July 2019 was sold.

5 Machinery is to be depreciated at 15% per annum using the reducing balance method. A full year’s
depreciation is charged in the year of purchase, but none in the year of disposal.

128

REQUIRED
(a) Calculate the total credit sales for the year ended 30 June 2022.

...................................................................................................................................................

. ......................................................................................................................................... [2]
(b) Calculate the total credit purchases for the year ended 30 June 2022.

...................................................................................................................................................

. ......................................................................................................................................... [1]
(c) Calculate the total cash paid for wages during the year ended 30 June 2022.

...................................................................................................................................................

. ......................................................................................................................................... [3]
(d) Calculate the depreciation charge for the year ended 30 June 2022.

...................................................................................................................................................

. ......................................................................................................................................... [3]

Additional information
Inventory at 30 June 2022 included damaged goods which had cost $1800, but needed repairs costing
$350. The goods could then be sold for 30% less than the normal selling price of $2250.
REQUIRED

128

(e) Prepare the income statement for the year ended 30 June 2022.

...................................................................................................................................................

...............................................................................................................................................

Workings:

[10]
(f) State two causes of depreciation of non-current assets.
1 ................................................................................................................................................

2 ................................................................................................................................................
[2]

(g) Explain, with reference to an accounting concept in each case, why:

(i) a business should make a provision for depreciation of non-current assets

Accounting concept
...........................................................................................................................................
Explanation

.................................................................................................................................. [2]
© UCLES 2022 9706/23/O/N/22 [Turn over
128

(ii) a business should make an adjustment for damaged inventory.

Accounting concept

...........................................................................................................................................
Explanation

...........................................................................................................................................

................................................................................................................................... [2]

Additional information

Reece has been thinking of maintaining a full set of accounting records.

REQUIRED
(h) Advise Reece whether or not he should maintain a full set of accounting records. Justify your answer.

...................................................................................................................................................

. ......................................................................................................................................... [5]
[Total: 30]

129

3 Khaled opened his business on 1 January 2021 with a capital of $41 000. He did not maintain a full set of
accounting records.

Khaled wishes to know his profit or loss for the year ended 31 December 2021. He has provided the
following information.
1 Assets and liabilities at 31 December 2021

$
Bank overdraft 3 470
Bank loan 8 500
Inventory 18 450
Non-current assets (carrying value) 27 500
Trade payables 9 940
Trade receivables 7 230
2 Non-current assets include a motor vehicle. This vehicle had been privately owned by Khaled but
during 2021 it was transferred to the business at a valuation of $9000.

3 During 2021 Khaled’s drawings were $14 870.

REQUIRED
(a) Calculate the business’s profit or loss for the year ended 31 December 2021.
...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[7]

Additional information
During 2022 Khaled kept more detailed records but could not provide a figure for revenue. The
following information is available at 31 December 2022.
$
Inventory at 31 December 2022 16250
Purchases 148300
Khaled’s policy is to mark-up all goods by 50%.

REQUIRED
(b) Calculate revenue for the year ended 31 December 2022.
...................................................................................................................................................

...................................................................................................................................................

. ..........................................................................................................................................[4]

129

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

(d) State two disadvantages to a business of maintaining a full set of accounting records.

1 ................................................................................................................................................

2 .................................................................................................................................................

[2]

[Total: 15]

130

1 Laila, a retailer, did not maintain a full set of accounting records for her business. She has provided the
following information for the year ended 30 September 2023.
Balances at 1 October 2022
$

Inventory 12 030

Non-current assets at carrying value 22 180

Other payables: light and heat 210

Other receivables: insurance 480

Trade payables 3 840

Trade receivables 4 540

Summary of bank account for the year ended 30 September 2023
$ $

Receipts: trade receivables 55 390 Balance b/d 1 220

Sale of non-current assets 860 Payments: trade payables 46 280

Balance c/d 1 170 Insurance 2 560

Light and heat 3 510

Drawings 3 850

57 420 57 420

Balance b/d 1 170

The following information is also available at 30 September 2023.

1 Laila has started to prepare her financial statements for the year ended 30 September 2023. The
following figures are available to transfer to the statement of profit or loss with no adjustment.
$

Insurance 2 720

Light and heat 3 880

Loss on disposal of non-current asset 120

2 All sales are made at a mark-up of 25%.

3 All sales and purchases are made on credit.

4 The balance of trade receivables at 30 September 2023 was $3650.

5 There were no additions to non-current assets during the year.

6 All non-current assets are to be depreciated at 10% per annum using the reducing balance method.

7 Laila was unable to physically count the inventory at 30 September 2023. The inventory was valued at
$14 400 on 4 October 2023.
9706/21/O/N/23
130

8 Between 1 October 2023 and 4 October 2023, Sales were $3400 and Purchases were $1850.

(a) Calculate the value of closing inventory at 30 September 2023.

...................................................................................................................................................

. ......................................................................................................................................... [3]

(b) Prepare the statement of profit or loss for the year ended 30 September 2023. Use the space provided
on page 4 to show your workings.
Laila
Statement of profit or loss for the year ended 30 September 2023

...................................................................................................................................................

9706/21/O/N/23
130

(c) Prepare the statement of financial position at 30 September 2023.

Workings:

Equity at 1 October 2022

Other receivables

Trade payables

Other payables

Laila
Statement of financial position at 30 September 2023

...................................................................................................................................................

...................................................................................................................................................
130

...................................................................................................................................................

. ....................................................................................................................................... [12]

9706/21/O/N/23
3
Additional information

Laila wishes to expand the business and is considering forming a partnership with her friend.
(d) State four provisions of the Partnership Act 1890 that would apply in the absence of a
partnership agreement.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................

4 ................................................................................................................................................

...................................................................................................................................................
[4]
(e) State three possible disadvantages to a business of maintaining a full set of accounting records.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]

[Total: 30]

9706/21/O/N/23
3

1 Zahid owns a small retail business. He has not maintained a full set of accounting records.

Zahid supplied the following information for the year ended 31 December 2023.

1 All sales were made on a cash basis. Cash sales totalled $195 000.

2 All goods were sold with a mark-up of 50%.

(a) Calculate the gross profit of the business for the year ended 31 December 2023.

...................................................................................................................................................

. .......................................................................................................................................... [1]

Additional information

The following information is also available.

1 Inventory and trade payables

At 1 January 2023 At 31 December 2023

$ $
Inventory 16 400 22 460
Trade payables 13 500 15 600

2 All purchases were made on credit. Trade suppliers were paid $134 240 after deducting cash
discounts totalling $560.

3 Zahid took goods for his own use during the year. However, no record was made of the value
of these goods.

9706/22/M/J/24
3

(b) Calculate for the year ended 31 December 2023:

(i) purchases

...........................................................................................................................................

. .................................................................................................................................. [3]

(ii) the value of goods taken for own use by Zahid.

...........................................................................................................................................

. .................................................................................................................................. [4]

9706/22/M/J/24
4

The following information is available for Zahid’s business.

1 Non-current assets

Non-current assets had the following values.

$
1 January 2023 194 000
31 December 2023 188 000

During the year ended 31 December 2023, a non-current asset was sold for $5600, resulting
in a profit on disposal of $2400. Additional non-current assets were purchased for $9200.

2 Income from rent receivable

At 1 January 2023 Bank receipts during the At 31 December 2023

year

owing to Zahid’s business $280 $5360 received in advance $600

3 Expenses

At 1 January 2023 Bank payments during At 31 December 2023

the year

Advertising prepaid $490 $5 960 accrued $610

General expenses accrued $570 $8 480 –

Insurance prepaid $330 $4 510 prepaid $390

Wages – $12 400 accrued $470

(c) Prepare an extract from the statement of profit or loss for the year ended 31 December 2023,
starting with the gross profit calculated in (a).

9706/22/M/J/24
5

Zahid
Statement of profit or loss for the year ended 31 December 2023 (extract)

Gross profit ............................

...................................................................................................................................................

...................................................................................................................................................
[12]

(d) Explain, with reference to an accounting concept, why Zahid made adjustments to his income
and expenses when preparing the statement of profit or loss.

...................................................................................................................................................

. .......................................................................................................................................... [3]

9706/22/M/J/24
6
Zahid plans to expand his business. This would mean he would no longer operate as a sole trader.
He is considering the following options.

Option A: form a partnership with Talha who currently owns a similar business.

Option B: form a limited liability company with himself and Talha as shareholders and
directors.

(e) Advise Zahid which option he should choose. Justify your answer by considering both the
advantages and the disadvantages of each option.

...................................................................................................................................................

. ........................................................................................................................................... [7]

[Total: 30]

9706/22/M/J/24
7

1 Ahmed is a sole trader. He does not maintain full accounting records. He provided the following
information for the year ended 30 June 2024.

1 Payments and receipts during the year included the following:

$
Carriage outwards 1 040
Cash sales 5 200
Electricity charges paid 1 920
General expenses paid 3 600
Motor expenses paid 4 250
Payments to credit suppliers 61 240
Receipts from credit customers 102 600
Rent paid 16 800

2 All purchases are made on credit.

3 Assets and liabilities included the following:

At 30 June
2023 2024
$ $
8% bank loan – 3 000
Allowance for irrecoverable debts 1 055 ?
Inventory 12 640 ?
Other payables: Rent accrued 600 –
Electricity 130 90
Other receivables: Rent prepaid – 1 800
Trade payables 8 800 6 300
Trade receivables 21 100 18 500

4 Inventory at 30 June 2024 was valued at $15 880. This included damaged items costing $960
that will be sold for $1100 after repairs costing $340.

5 During the year Ahmed took goods costing $420 for his own use.

6 An irrecoverable debt of $300 is to be written off.

7 Ahmed wished to maintain the allowance for irrecoverable debts at the same rate as in the
previous year.

8 The 8% bank loan was taken out on 1 April 2024. No interest has yet been paid.

9 Ahmed started the business on 1 July 2022. On that date he purchased a motor vehicle for
$24 000 and fixtures and fittings for $3200. No other non-current assets have been purchased
since that date.

10 Depreciation is to be provided as follows:

Motor vehicle: 20% per annum reducing balance method
Fixtures and fittings: 10% per annum straight-line method.

11 Motor expenses paid included $1140 for motor insurance for the twelve months to
31 August 2024.
9706/22/O/N/24
8
(a) Prepare the statement of profit or loss for the year ended 30 June 2024. Use the space
provided on page 4 to show your workings.

Ahmed
Statement of profit or loss for the year ended 30 June 2024

...................................................................................................................................................

[17]

9706/22/O/N/24
9
(b) Explain, with reference to an accounting concept, why adjustments 5, 6 and 11 on page 2 were
to be made to the financial statements.

Adjustment
5 Goods for own use Concept
...........................................................................................

Explanation

.........................................................................................................

6 Irrecoverable debt Concept

...........................................................................................

Explanation

.........................................................................................................

11 Motor insurance Concept

...........................................................................................

Explanation

.........................................................................................................

[6]

9706/22/O/N/24
10
Additional information

Ahmed has been offered the opportunity to purchase larger premises for $85 000 which would allow him
to increase the sales revenue of the business. As he does not have sufficient personal funds to make the
purchase, he is considering two options.

Option 1

Apply for a bank loan to cover the whole purchase price. The bank loan would be repayable over ten
years and interest would be payable at 8% per annum.

Option 2

Ahmed’s brother has offered to join the business as an equal sharing partner. He would introduce all of
the cash required to complete the purchase in exchange for a 50% share of future profits.

(c) Advise Ahmed whether he should go ahead with either of these options. Justify your advice by
discussing both financial and non-financial factors.

...................................................................................................................................................

. .............................................................................................................................................................[7]

[Total: 30]

9706/22/O/N/24
11

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