IGCSE Accounting Paper-2: Specimen Questions with Answers 87 - 89 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 87 (4 of 5 Based on Passage)

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Short Answer▾

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
LIABILITIESAMOUNTAMOUNTASSETSAMOUNTAMOUNT
Loan from Mr. Rock1000Plant & Machinery60000
Interest on loan60Add: Adiditional Plant2600086000
Creditors8340Stock9000
Cash in hand8200
CAPITAL (Bal Figure)128000Debtors46000
Less: Bad180044200
147400147400

Interest on loan:

2000@4 % for 6 months =

1000@4 % for 6 months =

40 + 20 = 60

Question 88 (5 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.

Passage

For the year ended 31st March 2014, the receipts and payments account of Enjoyment Club was as follows:

Find Out Payment Account Details
RECEIPTSAMOUNTAMOUNTPAYMENTSAMOUNTAMOUNT
To balance b/d5125By salaries10400
To subscriptionsBy stationery2000
2013 - 2014225By rent3000
2014 - 201510500By telephone500
2015 - 201637511150By investment6250
To profit on sports meet7750By sundry expenses4625
To income from investments5000By balance c/d2250
2902529025

The club provided additional information such as

(i) There are 450 members paying subscription of £ 25, £ 250 were in arrears for 2013 - 2014 as on 1st April 2014

(ii) As on 31st march 2015, the rents were prepaid till June 30th2015, the amount paid every year being £ 3000

(iii) Outstanding telephone bill £ 175 on march 31st 2015

(iv) Outstanding sundry expenses on 31st march 2015 amounted to £ 350

(v) Stock of stationery on 31st march 2014 was £ 250 and on 31st march 2015 is £ 450

(vi) As on 31st march 2014 - 2015 building was valued at £ 50000, subject to depreciation at a rate of 5 % per annum

(vii) Investments on 31st march 2014 was £ 100000

(viii) On 31st march 2015 income accrued on investments purchased during the year amounted to £ 187

Question 89 (1 of 5 Based on Passage)

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Essay▾

Why does Enjoyment club prepare an Income and Expenditure account and not a Profit and loss account?

Explanation

Non - profit organizations such as clubs, societies, associations, do not have profit as their motto. Their main objective is to provide service to the society, unlike commercial organizations who have profit as their main objective. Enjoyment club being a non-profit organization, prepares income and expenditure account unlike commercial organizations who prepare the profit and loss account

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