CIE Accounting Paper-2: Specimen Questions with Answers 103 - 103 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 debts@5 % and discount on debtors £5000

(ii) Interest is received on investments@5%

(iii) Depreciation on car was@5%

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

(v) Closing stock was valued at £325000

Question number: 103 (5 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.