IGCSE Accounting Paper-1: Specimen Questions with Answers 254 - 255 of 338

Question 254

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Write in Brief

One Liner▾

(a) What is an imp rest system?

________. (1)

(b) State one advantage of triple column cash book

________. (1)

Explanation

  • Imp rest system is a system of setting aside some fixed amount of cash for paying small, routine expenses and maintaining a petty cash book for the same. This amount is restored to the same level at the beginning of a new period.
  • The triple column cash book contains both- the cash A/c as well as the bank A/c. So, the contra entry (the double entry involving both the cash A/c the bank A/c at the same time) is recorded in the cash book itself. These contra entry can easily be cross checked in the triple column cash book.

Question 255

Write in Short

Short Answer▾

State the double entry for each of the following transaction in the books of Akram who sells mobile phones. (Marks 10)

Transaction in the Books
TransactionsDebitCredit
Obtained loan from a friend
Purchased shop furniture for cash
Sold a mobile phone to Shyam on credit
Took a mobile phone for personal use.
Purchased phones for cash

Explanation

Transaction in the Books
TransactionsDebitCredit
(I) Obtained loan from a friend (Aqsa)Cash A/cAqsa՚s Loan A/c
(II) Purchased shop furniture for cashFurniture A/cCash A/c
(III) Sold a mobile phone to Shyam on creditShyamSales A/c
(IV) Took a mobile phone for personal use.Drawings A/cPurchases A/c
(V) Purchased phones for cashPurchases A/cCash A/c
  • Cash is an Asset and Assets have a debit balance. When loan is taken, the balance of cash increases. To record its increase, Cash A/c should be debited.
  • Aqsa՚s Loan is a liability and liabilities have a credit balance. When loan is taken, liability increases. To record its increase, Aqsa՚s Loan A/c c should be credited.
  • Furniture & Cash are asset and assets have a debit balance. When furniture is purchased for cash, furniture increase whereas cash balance decreases. Therefore, Furniture A/c should be debited to record its increase. At the same time the cash A/c should be credited to record its decrease.
  • Sales is an income so it has a credit balance. To record a sale, sales A/c should be credited. Since the sale is on credit, Shyam becomes the debtor so Shyam should be debited.
  • Taking anything from the business for personal use is drawing. Drawing reduces the Capital so it has a debit balance. Therefore, Drawings A/c should be debited.
  • Drawing of goods (mobile phone) reduces the purchases, so Purchases A/c should be credited.
  • Purchase of goods are entered under Purchases A/c and Purchase being an expense has a debit balance. So, purchases A/c should be debited and Cash A/c should be credited to record the decrease in cash balance.

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