CIE Accounting Paper-1: Specimen Questions with Answers 86 - 88 of 214

Passage

The following balances were taken from the books of Hason, a sole trader, at 30 April 2015. $

Revenue through rent 210 000

Purchases 75 000

Stock 1 May 2014 11 500

Bills receivables 2 300

Bills payables 2 900

Machinery 8 400

Office expenses 30 600

Bank (overdraft) 4 100

Capital 12 500

Drawings 6 600

Hason’s inventory at 30 April 2015 was $20 100.

Question number: 86 (2 of 2 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

Write a short note on suspense account

Explanation

The suspense account is an imaginary and temporary account. It is created when difficult to locate the mistake before preparing the final account and the difference in the trial balance is transferred to the suspense account. This account is prepared to avoid delay in the preparation of final accounts.

Question number: 87

Short Answer Question▾

Write in Short

In the table below, place a tick (√) under the correct heading to show how the monthly total in the purchase returns journal should be posted in the nominal (general) ledger.

General ledger posting for purchase returns journal

Show given table in Purchase returns account

Debit entry

Credit entry

Purchase returns account

Explanation

General ledger posting for purchase returns journal.

Show given table in Purchase returns account

Debit entry

Credit entry

Purchase returns account

Goods returned by the customer to the supplier when goods are purchased on credit are entered in this book. The periodical totaling of this book will took place at the end of every month by the firm. Debit note is important source of document while recording purchase return to the supplier.

Question number: 88

Short Answer Question▾

Write in Short

Which accounting convention states that understatement of assets and income and overstatement of provisions and liabilities?

Explanation

Convention of conservation

The policy behind the conservation is playing safe. According to this convention least favorable situation to the firm will materialize and necessary action should be taken on that basis of accounting treatments.