CIE Accounting Paper-1: Specimen Questions 74 - 75 of 214

Question number: 74

MCQ▾

Question

The assets of a business on 31 - 12 - 2014 were worth $50000 and its capital was $35000. Its liabilities on that date were ________

Choices

Choice (4) Response
a.

$15000

b.

$50000

c.

$35000

d.

$25000

Answer

a.

Explanation

Accounting equation is based on dual aspect. Every transaction has a two sided effect on the assets and claim on assets.

Liabilities=Capitalassets

=5000035000

=$15000

Question number: 75

Short Answer Question▾

Write in Short

Leon is a trader. Journalize the following transaction with a year end of 31 March.

(i) On 1st April leon invested $500000 cash in the business.

(ii) On 1st April paid into Bank $80000

(iii) On 30th June purchased building for $300000

(iv) On 31st December purchased goods for $70000

(v) On 31st December sold goods for $80000

(vi) On 31st December withdrew cash from bank $10000

Complete the following table, showing the double entry recording each of these transactions.

The first has been completed as an example.

Journals of the Leon trader as on 31st March

shows table in Journals of the Leon trader as on 31st March

Debit

Credit entry

$

$

(i)

Cash

500000

Leon’s capital

500000

(ii)

(iii)

(iv)

(v)

(vi)

Explanation

Calculating a given table in debit and credit values

shows given table in debit and credit

Debit

Credit entry

$

$

(i)

Cash

500000

Leon’s capital

500000

(ii)

Bank

80000

Cash

80000

(iii)

Building

300000

Cash

300000

(iv)

Purchase account

70000

Cash

70000

(v)

Cash

80000

Sales

80000

(vi)

Cash

10000

Bank

10000

Solution: Debit entries have cash, bank, and building and purchase accounts. These items are journalized according to the gold rules:

The basic rules behind the journalizing the transactions

shows given table in debit and credit

S. No

Name of account

Debit

Credit

1

Personal account

The receiver

The giver

2

Real account

What comes in

What goes out

3

Nominal account

All expenses and losses

All incomes and gains

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