IGCSE Accounting Paper-1: Specimen Questions with Answers 305 - 307 of 338

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 2019Information 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 305 (1 of 4 Based on Passage)

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One Liner▾

Calculate the sales for the year ended 30 June 2019 (Marks 6)

Explanation

Calculate the sales for the year ended 30 June 2019Calculate the sales for the year ended 30 June 2019
Sales$$
Cheque received from debtors54300
Add: Discount Allowed2400
Bad debts written off250
Closing Debtors56008250
62550
Less: Opening Debtors(6000)
Sales56550

Question 306 (2 of 4 Based on Passage)

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One Liner▾

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

Explanation

Question 307 (3 of 4 Based on Passage)

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Short Answer▾

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

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 12months or 365 days by the inventory turnover. Greater turnover implies lower inventory age and vice versa.

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