IGCSE Accounting Paper-1: Specimen Questions with Answers 304 - 305 of 338
Question number: 304
MCQ▾
Question
Ramzan isuues a cheque to shehnaz in payment for goods purchased from her previous month. How should this transaction be entered in the books of Ramzan?
Choices
| Choice (4) | |
|---|---|
a. | Debit- Shehnaaz, Credit- Bank A/c |
b. | Debit- Purchases A/c, Credit- Shehnaz |
c. | Debit- Purchases A/c, Credit- Bank A/c |
d. | Credit- Shehnaaz, Debit- Bank A/c |
Answer
c.Explanation
Shehnaz is Ramzan’s supplier. Suppliers are creditors and normally have a credit balance. When a supplier is paid off, its balance decreases by that amount. To record decrease Shehnaz would be debited.
Bank A/c normally has a debit balance. When a cheque is paid, the bank balance decreases, so to record the decrease, Bank A/c will be credited.
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 number: 305 (1 of 4 Based on Passage) Show Passage
Short Answer Question▾
Write in Short
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.