CIE Accounting Paper-2: Specimen Questions 99 - 100 of 103

Passage

The following entries are found in the books of Mr. Iyer for the year ending 31.12. 2010.

Purchases £1500000, Sales £2500000, Opening stock £500000, Returns Outward £45000, Returns Inward £20000, Carriage Inwards £ 45000, Cash in hand £778000, Cash at bank £608000, Wages £24000, Printing & Stationery £45000, Discount allowed £4000, Bad debts £15000, Insurance £25000, Investments £320000, Debtors £530000, Bills receivable £200000, Postage £4000, Commission £2000, Interest £10000, Repairs £4400, Lighting Charges £5000, Telephone £ 1000, Carriage outwards £4000, Car £250000, Interest received £35000, Discount received £4000, Creditors £1250000, Bills Payable £60400, Capital £1000000

He also stated the below mentioned adjustments, which are to be taken into consideration.

(i) Further bad debts £10000, Provision for doubtful [email protected] % and discount on debtors £5000

(ii) Interest is received on [email protected]%

(iii) Depreciation on car [email protected]%

(iv) Interest and wages was outstanding at £2000 and £1000 respectively

(v) Closing stock was valued at £325000

Question number: 99 (1 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

What is the meaning of Final Accounts?

Explanation

Every business concern prepares final accounts in the year end in order to ascertain whether it has earned a profit or incurred a loss during the year. The term final accounts refers to the preparation of three main statements namely:

(i) Trading Account: - It is a nominal account prepared to calculate the gross profit or loss incurred in business due to trade related activities.

(ii) Profit & loss Account: - It is an account in which all expenses and incomes are recorded to calculate the net profit or loss for the year

(iii) Balance Sheet: - This is the statement which shows the financial position of a business on a particular day having assets on one side and liabilities on the other.

Question number: 100 (2 of 5 Based on Passage) Show Passage

Essay Question▾

Describe in Detail

State any 3 differences between a trial balance and a balance sheet?

Explanation

The three differences between the trial balance and balance sheet are as follows:

(i) Trial balance is prepared to verify the arithmetical accuracy of the books, while balance sheet is prepared to find out the financial position of the business.

(ii) Valuation of closing stock is not essential in the preparation of a trial balance, while closing stock value plays an important role in the preparation of balance sheet.

(iii) Real, Nominal and personal accounts are considered in the preparation of trial balance, but a balance sheet considers only the personal and real accounts in its preparation.

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