IGCSE Accounting Paper-1: Specimen Questions with Answers 262 - 263 of 338

Question 262

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Write in Brief

One Liner▾

The owner introduces his personal car into his business. How this transaction would affect the accounting equation? (Marks 1)

(I) Assets- Increase

Liabilities- No effect

Capital- Increase

(II) Assets- Decrease

Liabilities- Increase

Capital- No effect

(III) Assets- No effect

Liabilities- Increase

Capital- Increase

(IV) Assets- Decrease

Liabilities- No effect

Capital- Decrease

Explanation

(I) Assets- Increase

Liabilities- No effect

Capital- Increase

  • Car is a Fixed Assets. When a car is introduced in the business, the total assets increase. And since it is the owner’s own car, it will form part of capital and not liabilities.
  • Therefore, both Capital and Assets increase when the owner introduces his personal car into his business.

Question 263

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Write in Short

Short Answer▾

Indicate with a tick where each of the following item appear in the final accounts of Akram. (Marks 4)

Item appear in the final accounts Item appear in the final accounts
P&L A/cBalance Sheet
Purchase of a motor bike
Petrol for motor bike
Insurance for motor bike
Delivery charge of the motor bike

Explanation

Item appear in the final accounts Item appear in the final accounts
P&L A/cBalance Sheet
Purchase of a motor bike
The Image of Right

The Image of Right

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Petrol for motor bike
The Image of Right

The Image of Right

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Insurance for motor bike
The Image of Right

The Image of Right

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Delivery charge of the motor bike
The Image of Right

The Image of Right

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  • The revenue expenditures are debited to P&L A/c whereas the capital expenditures are shown as assets in the balance sheet.
  • Purchase of a motor bike is a capital expenditure for Akram as it is going to provide economic benefits to Akram for more than one accounting year. Delivery charge is incurred at the time of purchase of the motor bike so, it will also be treated as capital expenditure.
  • The purchase of petrol and insurance expense of motor bike is of recurring nature. The insurance charges and cost of petrol paid in one accounting year will give benefits in that year alone. So, these are revenue expenditures.

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