IGCSE Accounting Paper-2: Specimen Questions with Answers 85 - 87 of 103

Passage

Mr. Norway starts a small business & maintains his records under single entry system. Following information was obtained from his books: Plant & Machinery £60000; Stock £10000; Cash in hand £200; Debtors £34000; Loan from Mr. Rock £2000@4 % interest; Bank Overdraft £2200; Creditors £24240

On 31.12. 2015, he owed to his creditors £18340 and paid Mr. Rock £1000 on 1.07. 2015, however interest on loan was not paid. Additional machinery worth £26000 was brought in. Debtors were £46000 out of which £1800 are bad. Cash balance was £8200 and stock was £9000. Drawings for the year were £16600 and £20000 was introduced as additional capital during the year.

Question number: 85 (2 of 5 Based on Passage) Show Passage

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Short Answer Question▾

Write in Short

What are the advantages and disadvantages Mr. Norway has while maintain books under single entry system?

Explanation

Mr. Norway enjoys advantages such as:

(i) Need not possess full knowledge in the principles of accounting.

(ii) Ascertainment of profit and loss becomes easier

However, the following disadvantages are suffered by him:

(i) There is no control over the assets

(ii) True profit is not known as the trading account is not prepared.

Question number: 86 (3 of 5 Based on Passage) Show Passage

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Short Answer Question▾

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What is the capital of Mr. Norway at the end of the financial year 31.12. 2015?

Explanation

Statement of affairs of Mr. Norway as on 31st Dec 2015

Table of Statement of affairs of Mr. Norway as on 31st Dec 2015

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Loan from Mr. Rock

1000

Plant & Machinery

60000

Interest on loan

60

Add: Adiditional Plant

26000

86000

Creditors

8340

Stock

9000

Cash in hand

8200

CAPITAL (Bal Figure)

128000

Debtors

46000

Less: Bad

1800

44200

147400

147400

Interest on loan:

2000@4 % for 6 months = =40

1000@4 % for 6 months = =20

40 + 20 = 60

Question number: 87 (4 of 5 Based on Passage) Show Passage

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Short Answer Question▾

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What is the initial capital Mr. Norway invests in starting the business on Jan 1st 2015?

Explanation

The initial Capital invested by Mr. Norway on Jan 1st 2015 is £75760

Statement of affairs of Mr. Norway as on 1st Jan 2015

Table of Statement of affairs of Mr. Norway as on 1st Jan 2015

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Loan from Mr. Rock

2000

Plant & Machinery

60000

Bank Overdraft

2200

Stock

10000

Creditors

24240

Cash in hand

200

Debtors

34000

CAPITAL (Bal Figure)

75760

104200

104200