IGCSE Accounting Paper-2: Specimen Questions with Answers 84 - 86 of 189

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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 84 (1 of 5 Based on Passage)

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Short Answer▾

Does Mr. Norway earn a profit or suffer a loss during the year?

Explanation

Mr. Norway earned a profit during the year amounting to £ 48840

Statement of Profit or Loss for the Year Ended 31.12. 2015
PARTICULARSAMOUNT
Capital as on 31.12. 2015128000
Add: Drawings16600
144600
Less: Capital introduced20000
124600
Less: Capital as on 01.01. 201575760
Profit for the year 201548840

Question 85 (2 of 5 Based on Passage)

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Short Answer▾

State any 2 differences between single entry and double entry system of book keeping?

Explanation

The differences between single entry and double entry system of book keeping are as follows:

(i) Single entry system is an incomplete system of book keeping, while double entry system is a complete system.

(ii) Single entry system of book keeping is not accepted for the assessment of taxation, while double entry system is accepted for ascertainment of tax.

Question 86 (3 of 5 Based on Passage)

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Short Answer▾

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.

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