IGCSE Accounting Paper-1: Specimen Questions with Answers 281 - 282 of 338
Question number: 281
Describe in Detail
Show the effect of each of the above on the profit for the year. Write “no effect” for the error which does not affect the profit. (Marks 5)
Sudhanshu
Statement of corrected profit for the year ended 31 March 2019
Increase in Profit $ | Decrease in Profit $ | Profit $ | |
Profit for the year before rectification | 6520 | ||
Error 1 | |||
Error 2 | |||
Error 3 | |||
Error 4 | |||
Corrected Profit for the year |
Explanation
Sudhanshu
Statement of corrected profit for the year ended 31 March 2019
Increase in Profit $ | Decrease in Profit $ | Profit $ | |
Profit for the year before rectification | 6520 | ||
Error 1 | 90 | ||
Error 2 No Effect | × | × | |
Error 3 | 2000 | ||
Error 4 | 270 | ||
2000 | 360 | 1640 | |
Corrected Profit for the year | 8160 |
Question number: 282
Write in Short
What do you mean by the term ‘Reserves’? (Marks 1)
Explanation
Reserves are a part of profits set aside for a particular purpose. Reserves are made so as to save the cash from being used in any other purpose.
They can be made to buy fixed assets, pay bonus, pay off debts etc. For Ex- Debenture Redemption Reserves are made to pay off debentures.
Similarly, Valuation reserves are set up to offset the loss of value of assets like machinery, receivables etc.