IGCSE Accounting Paper-2: Specimen Questions with Answers 56 - 58 of 189

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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 56 (6 of 7 Based on Passage)

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Write in Brief

One Liner▾

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 57 (7 of 7 Based on Passage)

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Write in Brief

One Liner▾

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

Passage

Fancy dresses show the following information as on 31.12. 2012.

Debtors- £ 164000, Bad debts during the year 2012 amounts to £ 4000, Bad debts for the year 2013 amounts to £ 2000. Provision for bad and doubtful debts in 2012 is £ 5000 and for the year 2013 is@5 % . Discount allowed in 2012 is £ 2000 and for the year 2013 a provision for discount on debtors is created@2 % .

Question 58 (1 of 5 Based on Passage)

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Describe in Detail

Essay▾

Show the treatment of the above entries in the profit and loss account of Fancy dresses for the year ending 31.12. 2012

Explanation

Profit and Loss Account in the Books of Fancy Dresses for the Year Ended 31.12. 2012
PARTICUALRSAMOUNTAMOUNTPARTICUALRSAMOUNTAMOUNT
To Bad debts4000
Add: New bad debts2000
6000
Add: New Provision on bad debts@5 %8100
14100
Less: Old provision on bad and doubtful debts50009100
To discount allowed2000
To provision for discount on debtors3078

SOLUTION:

New provision@5 %= Debtors – new bad debts

= 164000 – 2000

= 162000 × 5 %

= 8100

Provision for discount on debtors

= 162000 – 8100

= 153900 × 2 %

= 3078

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