IGCSE Accounting Paper-2: Specimen Questions with Answers 53 - 57 of 103

Passage

Miss. Rosy started a small business as a sole proprietor in the year 2013 and had the following transaction during the year:

  • Commenced business with cash £200000
  • Purchases made for cash £80000 and credit £120000
  • Made Sales of £160000 in cash of goods costing £120000
  • Rent paid £2000 and outstanding rent for the year was £400
  • Bought car on credit £20000
  • Purchased a mobile phone for personal use £20000
  • Purchased a land for cash £80000

Question number: 53 (3 of 7 Based on Passage) Show Passage

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Capital:

Explanation

Capital: It is said to be the value of assets minus he value of liabilities. In simple words it is the residual value that would be released after the sale of all the assets and payment of all liabilities.

Question number: 54 (4 of 7 Based on Passage) Show Passage

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Liabilities:

Explanation

Liabilities: The term liabilities refer to the items which belong to the business and have a negative financial impact. In other words money has to be paid by the business at some point of time. E. g. Outstanding rent.

Question number: 55 (5 of 7 Based on Passage) Show Passage

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What is the importance of accounting equation in a business?

Explanation

Accounting equation is said to be the foundation or the stepping stone for the double entry system of book keeping. As per the Accounting equation, in every business:

Assets = Liabilities + Capital, Which means, that all the assets in the business are either financed by the proprietor or by borrowing funds from outside.

Question number: 56 (6 of 7 Based on Passage) Show Passage

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Assets:

Explanation

Assets: The term assets refers to the items which find a place in the business activities and have a positive financial value. In other words they can be sold or exchanged for money. Assets can be tangible or intangible E. g. Machinery Goodwill

Question number: 57 (7 of 7 Based on Passage) Show Passage

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Short Answer Question▾

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Show Miss. Rosy’s balance sheet as on 31.03. 2014.

Explanation

Balance Sheet of Miss Rosy as on 31.03. 2014

shows table of Balance Sheet of Miss Rosy as on 31.03. 2014

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital

200000

Cash

178000

Add Profit on sale

40000

Building

80000

240000

Stock

80000

Less: Drawings (Phone)

20000

Car

20000

220000

Less: Expenses (Rent)

2000

218000

Creditors: Stock

120000

Car

20000

140000

Outstanding rent

400

358000

358000