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.
1 July 2018- | $ |
Inventory | 4600 |
Debtors | 6000 |
30 June 2019- | 5600 |
Debtors | |
During the year- | |
Cheque received from debtors | 54300 |
Discount Allowed | 2400 |
Carriage Inward | 1300 |
Bad debts written off | 250 |
Total Purchases | 42650 |
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)
EditExplanation
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)
EditExplanation
- 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
Preparation of trial balance is the first step of recording in accounting process (Marks 3)
In a double entry system the total amount debited should always equal the total amount credited.
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. |
Answer
b.Explanation
True/False | |
(I) Preparation of trial balance is the first step of recording in accounting process | False |
(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.