IGCSE Accounting Paper-1: Specimen Questions with Answers 307 - 309 of 341

Passage

Iqbal is a trader whose financial year ends on 30 June. All the purchases and sales are on credit basis.

He provides the following information for the year ending 30 June 2019.

Information for the Year Ending 30 June 2019
1 July 2018-$
Inventory4600
Debtors6000
30 June 2019-5600
Debtors
During the year-
Cheque received from debtors54300
Discount Allowed2400
Carriage Inward1300
Bad debts written off250
Total Purchases42650

On 30 June, some goods were stolen from the warehouse of Iqbal and goods worth $ 1300 were left. The profit mark up of Mr. Iqbal is 20% .

Question 307 (3 of 4 Based on Passage)

Write in Brief One Liner▾

Calculate the inventory turnover ratio of Mr. Iqbal upto two decimal places. (Marks 2)

Edit

Explanation

Question 308 (4 of 4 Based on Passage)

Write in Short Short Answer▾

State what does the inventory turnover ratio measure and what is the average age of inventory? (Marks 2)

Edit

Explanation

  • Inventory Turnover Ratio measures the speed with which the inventory is converted into sales. It is the number of times inventory is sold in a year. Greater inventory turnover implies faster sales and indicates efficiency in inventory management whereas lower turnover shows inefficiency or overstocking.
  • Average Age of Inventory is the average time it takes to sell an inventory. It is calculated by dividing 12 months or 365 days by the inventory turnover. Greater turnover implies lower inventory age and vice versa.

Question 309

Question True-False▾

Statements

  1. Preparation of trial balance is the first step of recording in accounting process (Marks 3)

  2. In a double entry system the total amount debited should always equal the total amount credited.

  3. The normal balance of drawings A/c is credit.

Choices

Choice (4)

a.

Both statement Ⅰ & statement Ⅲ are true.

b.

Only statement Ⅱ is true.

c.

All the statements are correct.

d.

None of the statements is correct.

Edit

Answer

b.

Explanation

Write True or False Against Each of the Following Statements
True/False
(I) Preparation of trial balance is the first step of recording in accounting processFalse
(II) In a double entry system the total amount debited should always equal the total amount credited.True
(III) The normal balance of drawings A/c is credit.False

Explanation:

  • The first step of recording in accounting process is journalizing. Journalizing means recording business transactions in journal for the first time using source documents. Preparation of trial balance is the first step of summarizing.
  • Double entry system is based on DUALITY concept which says that every transaction has two aspects: debits & credits and the total debits and total credits are equal.
  • Drawing is a contra Capital A/c because it reduces the balance of capital. Since, Capital A/c has a normal credit balance, the normal balance of drawings A/c has to be debit.

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