CIE Accounting Paper-2: Specimen Questions 56 - 58 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: 56 (6 of 7 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

What is the importance of accounting equation in a business?

Explanation

Accounting equation is said to be the foundation or the stepping stone for the double entry system of book keeping. As per the Accounting equation, in every business:

Assets = Liabilities + Capital, Which means, that all the assets in the business are either financed by the proprietor or by borrowing funds from outside.

Question number: 57 (7 of 7 Based on Passage) Show Passage

One Liner Question▾

Write in Brief

Capital:

Explanation

Capital: It is said to be the value of assets minus he value of liabilities. In simple words it is the residual value that would be released after the sale of all the assets and payment of all liabilities.

Passage

Fancy dresses show the following information as on 31.12. 2012.

Debtors- £164000, Bad debts during the year 2012 amounts to £4000, Bad debts for the year 2013 amounts to £2000. Provision for bad and doubtful debts in 2012 is £5000 and for the year 2013 [email protected]%. Discount allowed in 2012 is £2000 and for the year 2013 a provision for discount on debtors is [email protected]%.

Question number: 58 (1 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

Show the treatment of the above entries in the profit and loss account of Fancy dresses for the year ending 31.12. 2012

Explanation

Profit and loss account in the books of Fancy dresses for the year ended 31.12. 2012

shows given table in Profit and loss account in the books of Fancy dresses for the year ended 31.12. 2012

PARTICUALRS

AMOUNT

AMOUNT

PARTICUALRS

AMOUNT

AMOUNT

To Bad debts

4000

Add: New bad debts

2000

6000

Add: New Provision on bad [email protected]%

8100

14100

Less: Old provision on bad and doubtful debts

5000

9100

To discount allowed

2000

To provision for discount on debtors

3078

SOLUTION:

New [email protected]%= Debtors – new bad debts

= 164000 – 2000

=162000 * 5%

=8100

Provision for discount on debtors

= 162000 – 8100

= 153900 * 2%

= 3078

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