CIE Accounting Paper-2: Specimen Questions 51 - 54 of 103

Passage

Miss. Rosy started a small business as a sole proprietor in the year 2013 and had the following transaction during the year:

  • Commenced business with cash £200000
  • Purchases made for cash £80000 and credit £120000
  • Made Sales of £160000 in cash of goods costing £120000
  • Rent paid £2000 and outstanding rent for the year was £400
  • Bought car on credit £20000
  • Purchased a mobile phone for personal use £20000
  • Purchased a land for cash £80000

Question number: 51 (1 of 7 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

What is the other name for accounting equation and how does the name justify itself?

Explanation

Accounting equation is also otherwise called as the Balance sheet equation. It gets the name of balance sheet because of its basic feature of double entry system. It depicts the fundamental relationship among all the elements present in a balance sheet namely the assets, Liabilities and capital. The equality of the asset and liabilities side of the balance sheet justifies the name of accounting equation as the balance sheet equation.

Question number: 52 (2 of 7 Based on Passage) Show Passage

One Liner Question▾

Write in Brief

Assets:

Explanation

Assets: The term assets refers to the items which find a place in the business activities and have a positive financial value. In other words they can be sold or exchanged for money. Assets can be tangible or intangible E. g. Machinery Goodwill

Question number: 53 (3 of 7 Based on Passage) Show Passage

One Liner Question▾

Write in Brief

Liabilities:

Explanation

Liabilities: The term liabilities refer to the items which belong to the business and have a negative financial impact. In other words money has to be paid by the business at some point of time. E. g. Outstanding rent.

Question number: 54 (4 of 7 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

Show Miss. Rosy’s balance sheet as on 31.03. 2014.

Explanation

Balance Sheet of Miss Rosy as on 31.03. 2014

shows table of Balance Sheet of Miss Rosy as on 31.03. 2014

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital

200000

Cash

178000

Add Profit on sale

40000

Building

80000

240000

Stock

80000

Less: Drawings (Phone)

20000

Car

20000

220000

Less: Expenses (Rent)

2000

218000

Creditors: Stock

120000

Car

20000

140000

Outstanding rent

400

358000

358000

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