1 Anika owns property which she rents out to university students.

She has made a consistent profit

for each year she has been in business. Her trial balance at 31 August 2022 was as follows.

Debit Credit
$ $
Capital 400 000
Rent receivable 162 000
General expenses 26 500
Bank 39 400
Rates 38 200
Insurance 12 400
Repairs 32 000
Drawings 18 500
Non-current assets at cost
Premises 418 000
Fittings 90 000
Provision for depreciation of non-current assets
Premises 42 000
Fittings 71 000
675 000 675 000

Additional information

1 At 31 August 2022, rent received of $8100 has been paid in advance.

2 At 31 August 2022, general expenses of $1300 have been paid in advance and rates of
$3400 were owing.

3 The insurance includes $1800 paid for the 15 month period ending 30 November 2022.

4 Expenditure of $9000 for new fittings has been recorded in repairs.

5 Depreciation is to be provided as follows:

Premises by equal instalments on cost each year over a 50 year period

Fittings 20% per annum by the reducing balance method

A full year’s depreciation is charged on fittings during the year of purchase.

REQUIRED

(a) Prepare the income statement of Anika for the year ended 31 August 2022.

Anika
Income Statement for the year ended 31 August 2022

$ $

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Workings:

[9]
(b) Prepare the capital account for the year ended 31 August 2022 showing the balance brought
down at 1 September 2022.

Anika
Capital account

Date Details $ Date Details $

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[3]

Anika plans to buy more property to rent out. She will need additional capital for this. She has
savings earning 3% per annum which she could use for the additional capital. Alternatively, she
could invite Janos, a builder, to provide the capital and join her to form a partnership.

REQUIRED

(c) Advise Anika on her plans and whether she should provide her own additional capital or form
a partnership with Janos. Justify your answer.

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............................................................................................................................................. [5]
(d) Explain to Anika the difference between capital expenditure and revenue expenditure. Why is
this difference between the two important when preparing the financial statements?

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[Total: 20]
1 BC a sole trader prepared the following trial balance from his accounts on 31 August 2022.

Dr Cr
$ $
Purchases 120 000
Revenue 231 500
Sales returns 3 600
Inventory 1 September 2021 11 100
Capital 111 900
Bank 4 100
Non-current assets at cost
Premises 98 000
Machinery 52 000
Provision for depreciation of non-current assets
Machinery 28 400
Commission receivable 2 200
Trade receivables 19 200
Trade payables 7 300
Discount allowed 600
Discount received 1 400
Insurance 9 600
Repairs 12 400
Salaries 53 900
Rates 6 000
Carriage inwards 400
386 800 386 800

Additional information

1 The closing inventory at 31 August 2022 was valued at $12 000.

2 Commission received of $800 was owing at 31 August 2022.

3 The balance shown for salaries covers the 11 months to 31 July 2022. Salaries for August
2022 are due and unpaid. There have been no salary increases over the previous 12 months
and an equal amount is paid each month.

4 At 31 August 2022 rates were prepaid by $300.

5 The insurance included $700 covering a private insurance premium for BC.

6 The repairs included $4000 that related to a new attachment for machinery.

7 Machinery is to be depreciated at the rate of 20% per annum by the reducing balance method.
A full year’s depreciation is charged regardless of the date of any purchases. There were no
disposals during the year. Premises are not depreciated.
REQUIRED

(a) Prepare the income statement of BC for the year ended 31 August 2022

BC
Income Statement for the year ended 31 August 2022
$ $

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[12]
(b) Calculate the working capital at 31 August 2022.

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............................................................................................................................................. [3]
BC has been making future plans for the business and he needs to purchase $6000 of machinery
immediately. There are two options to finance the purchase.

Option 1 On credit with the full amount of $6000 payable in 60 days

Option 2 Obtain a $6000 8% loan repayable in 5 years

REQUIRED

(c) Advise BC on which option he should use. Justify your answer.

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[Total: 20]
1 Anika owns property which she rents out to university students. She has made a consistent profit
for each year she has been in business. Her trial balance at 31 August 2022 was as follows.

Debit Credit
$ $
Capital 400 000
Rent receivable 162 000
General expenses 26 500
Bank 39 400
Rates 38 200
Insurance 12 400
Repairs 32 000
Drawings 18 500
Non-current assets at cost
Premises 418 000
Fittings 90 000
Provision for depreciation of non-current assets
Premises 42 000
Fittings 71 000
675 000 675 000

Additional information

1 At 31 August 2022, rent received of $8100 has been paid in advance.

2 At 31 August 2022, general expenses of $1300 have been paid in advance and rates of
$3400 were owing.

3 The insurance includes $1800 paid for the 15 month period ending 30 November 2022.

4 Expenditure of $9000 for new fittings has been recorded in repairs.

5 Depreciation is to be provided as follows:

Premises by equal instalments on cost each year over a 50 year period

Fittings 20% per annum by the reducing balance method

A full year’s depreciation is charged on fittings during the year of purchase.

REQUIRED

(a) Prepare the income statement of Anika for the year ended 31 August 2022.

Anika
Income Statement for the year ended 31 August 2022

$ $

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Workings:

[9]
(b) Prepare the capital account for the year ended 31 August 2022 showing the balance brought
down at 1 September 2022.

Anika
Capital account

Date Details $ Date Details $

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[3]

Anika plans to buy more property to rent out. She will need additional capital for this. She has
savings earning 3% per annum which she could use for the additional capital. Alternatively, she
could invite Janos, a builder, to provide the capital and join her to form a partnership.

REQUIRED

(c) Advise Anika on her plans and whether she should provide her own additional capital or form
a partnership with Janos. Justify your answer.

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............................................................................................................................................. [5]
(d) Explain to Anika the difference between capital expenditure and revenue expenditure. Why is
this difference between the two important when preparing the financial statements?

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[Total: 20]
2 Jabir owns an electrical wholesale business.

The following balances appeared in his books on 30 September 2021.

$
Inventory 8 000
Purchases 109 000
Trade payables 11 600
Revenue 160 000
Trade receivables 22 600
Operating expenses 35 200

The inventory on 1 October 2020 was $11 000.

All sales and purchases were on a credit basis.

REQUIRED

(a) Calculate the gross profit and profit for the year.

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2 Fatima is a sole trader. She prepares her financial statements to the end of March each year.

At 31 March 2022, Fatima’s ledger account balances included the following.

$
Revenue 79 400

Sales returns 3 970

Purchases 36 500

Rent and rates 9 000

Wages 10 100

General expenses 1 287

Insurance 1 800

Discount received 1 095

Inventory at 1 April 2021 3 000

Fixtures and equipment at cost 80 000

Fixtures and equipment – provision for depreciation 39 040

Trade receivables 6 400

Trade payables 4 995

Provision for doubtful debts 156

Cash drawings 8 580

Capital at 1 April 2021 59 000

The following information is also available.

1 Inventory at 31 March 2022 was $3120.

2 Fatima took goods for her own use from the business during the year ended 31 March 2022.
These goods cost $1300.

3 Depreciation on fixtures and equipment is to be charged at 20% per annum using the reducing
balance method.

4 Accrued wages at 31 March 2022 were $800.

5 Rent includes a payment of $1500 for the 3 months from 1 March 2022 to 31 May 2022.

6 An irrecoverable trade receivable of $200 is to be written off.

7 The provision for doubtful debts is to be set at 3% of trade receivables.

REQUIRED

(a) Prepare Fatima’s income statement for the year ended 31 March 2022.

Fatima
Income Statement for the year ended 31 March 2022

$ $

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[11]
(b) Prepare Fatima’s capital account for the year ended 31 March 2022. Balance the account
and bring down the balance on 1 April 2022.

Fatima
Capital account
Date Details $ Date Details $

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[4]

Fatima would like to expand the business. She thinks that additional finance of $20 000 would be
required for the equipment which she would need. Fatima’s bank have offered to lend her $20 000,
to be repaid after four years at interest of 6% per annum.

REQUIRED

(c) Advise Fatima whether or not to agree to the bank loan. Justify your answer.

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3 Gok is a wholesaler. He prepares his financial statements to the end of February each year.

At 29 February 2020, Gok’s ledger account balances included the following.

$
Revenue 420 000
Purchases 311 400
Sales returns 12 000
Discount allowed 9 000
Wages 12 360
Rent and rates 11 750
General expenses 4 220
Irrecoverable debts 8 600
Insurance 4 500
Telephone expenses 4 565
Inventory at 1 March 2019 26 700
Drawings 9 500
Fixtures and equipment at cost 120 000
Provision for depreciation of fixtures and equipment 43 200

Additional information

1 Gok did not have time to count and value his inventory at 29 February 2020. His margin is
25%.

2 A loan of $60 000 was obtained from the bank on 1 July 2019. Interest is charged at 7% per
annum.

3 The fixtures and equipment are being depreciated at 20% per annum using the reducing
balance method.

4 The insurance includes $1500 which covers the period from 1 March to 30 September 2020.

5 Drawings include a payment of $1660 for Gok’s personal telephone expenses. One quarter
of this amount was for business use.
REQUIRED

(a) Prepare Gok’s income statement for the year ended 29 February 2020.

Gok
Income Statement for the year ended 29 February 2020

$ $
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[15]
The wages paid by Gok are to his part-time warehouse assistant, Aiman.

REQUIRED

(b) Advise Gok whether or not he should offer Aiman a partnership in the business. Justify your
answer with two advantages and two disadvantages.

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[Total: 20]
4 Sara is a trader. She has prepared her income statement for the year ended 31 December 2023.
This shows a profit for the year of $20 180. She has closed the ledger accounts for income and
expenses and has transferred the closing inventory to the income statement.

The following balances remain in Sara’s ledger at 31 December 2023.

Premises (cost) 100 000

Fixtures and fittings (cost) 40 000

Accumulated depreciation on fixtures and fittings 15 000

Inventory (at 31 December 2023) 6 275

Trade receivables 8 540

Provision for doubtful debts 427

Trade payables 5 125

Bank overdraft 4 900

Cash 350

Long-term loan 12 000

Wages (accrued) 1 000

Capital (at 1 January 2023) 115 793

Drawings 19 260

REQUIRED

(a) Prepare the inventory account for the year ended 31 December 2023. Balance the account
and bring down the balance at 1 January 2024.
 Sara
Inventory account
Date Details $ Date Details $
2023
Jan 1 Balance b/d 5 811 ............. .................................. .............

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[4]

(b) Prepare the capital account for the year ended 31 December 2023. Balance the account and
bring down the balance at 1 January 2024.

Sara
Capital account
Date Details $ Date Details $

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(c) Prepare the statement of financial position at 31 December 2023.

Sara
Statement of financial position at 31 December 2023
$ $ $

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[7]
Sara is considering purchasing a delivery vehicle. She thinks that her sales would increase if she
was able to deliver goods to her customers. She would charge a small amount to her customers to
cover the cost of delivery.

REQUIRED

(d) Advise Sara whether or not she should purchase the delivery vehicle. Justify your answer by
providing two advantages and two disadvantages of purchasing the delivery vehicle.

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(e) State the meaning of the term revenue receipts.

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[Total: 20]
2 Zamir is in business providing legal services. Zamir provided the following balances from his
books of account at 31 December 2020.

$
Fee income 151 750
Rent and rates 26 000
Salaries 55 000
Stationery and advertising 6 450
Electricity 8 000
Bank charges 4 100
Office equipment – cost 60 000
Office equipment – provision for depreciation 22 500
Proceeds of disposal of office equipment 1 000
Bank overdraft 7 900
Trade receivables 15 600
Capital 57 000
Drawings 65 000

Additional information

1 The annual rent is $16 000. On 31 December 2020 rent was paid to cover the period from
1 January to 31 March 2021.
There was no accrual or prepayment of rent at 1 January 2020.

2 Rates of $6000 were paid during the year to 31 December 2020. This payment covered the
period 1 January 2020 to 31 October 2020 only. From 1 November 2020 annual rates were
$7560.

3 Depreciation is to be charged on office equipment at 15% per annum using the straight-line
method. No depreciation is charged in the year of disposal.

4 In February 2020 office equipment was sold for $1000. This equipment had been purchased
for $1800 on 1 January 2018. The sales proceeds have been debited to the bank account
and credited to the proceeds of disposal of office equipment account. No other entries have
been made in respect of the disposal.

5 One of Zamir’s clients has become bankrupt. The client owed $1885. Zamir does not expect
to recover this amount.
REQUIRED

(a) Prepare Zamir’s income statement for the year ended 31 December 2020.

Zamir
Income Statement for the year ended 31 December 2020
$ $

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[10]
(b) Prepare the assets section of Zamir’s statement of financial position at 31 December 2020.

Zamir
Statement of Financial Position (assets section) at 31 December 2020

$ $ $

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[3]

(c) Suggest two possible reasons why Zamir required a bank overdraft.

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

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

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[2]
Zamir employs Sharif, who is another lawyer. Sharif also keeps the books of account for the
business. Zamir would like to ensure that Sharif does not leave to start work for a rival legal
business.

REQUIRED

(d) Advise Zamir whether he should offer Sharif an increase in salary or invite him to become a
partner in the business. Justify your answer with two advantages of each course of action.

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[Total: 20]

(d) State three advantages to Arjun of operating as a sole trader.

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

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

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

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[Total: 20]