CIE Accounting Paper-1: Specimen Questions with Answers 118 - 119 of 214

Passage

Ryno has a business selling spare parts for cars. He lost many of his financial records in a flood but has been able to provide the following information.

1 November 2015 31 October 2015

$ $

Non-current (fixed) assets 10 000 12 000

Current assets 100 000 90 500

Current liabilities 25 000 23 000

Question number: 118 (4 of 4 Based on Passage) Show Passage

Short Answer Question▾

Write in Short

In the table below, place a tick (√) under the correct heading to show the effect which taking the loan will have on each of the following items. If Ryno has decided to take a 10-year business loan from the bank. The money will be paid in to his business bank account.

The changes in the accounting transaction of the firm

Finding a value of increase, decrease and no charge

Increase

Decrease

No change

Current Liability

Long term liabilities

Current Assets

Fixed Assets

Explanation

Calculate in table value of increase, decrease and nocharge.

calculate value of increase, decrease and no charge

Increase

Decrease

No change

Current Liability

Long term liabilities

Current Assets

Fixed Assets

The Long term liabilities and cash in current assets will increase while the loan is taken by the Ryno for a long period of 10 years. The short term loan will be affected in the Current liabilities and the value of fixed assets will be changes when purchase of fixed assets took place during the year.

Question number: 119

MCQ▾

Question

A trader recognizes that his machinery depreciate in value each year.

How does he record this in his final accounts?

Choices

Choice (4) Response

a.

shows given table in record in the final accounts

shows table in decrease expenses and decrease fixed assets.

Profit and Loss Account

Balance Sheet

Increase expenses

Decrease expense

Increase fixed assets

Decrease fixed asset

b.

shows a record in the final accounts

shows table in increase expenses and increase fixed assets.

Profit and Loss Account

Balance Sheet

Increase expenses

Decrease expense

Increase fixed assets

Decrease fixed asset

c.

shows The record in the final accounts

shows table in decrease expenses

Profit and Loss Account

Balance Sheet

Increase expenses

Decrease expense

Increase fixed assets

Decrease fixed asset

d.

The record in the final accounts

shows table in increase expenses

Profit and Loss Account

Balance Sheet

Increase expenses

Decrease expense

Increase fixedassets

Decrease fixed asset

Answer

d.

Explanation

The expenses incurred in relation to the fixed assets are shown in the profit and loss account in the debit side and the same amount is decreased from the fixed asset of the business. Hence the expenses will increase in profit and loss account and decrease the value of the assets.