IGCSE Accounting Paper-2: Specimen Questions with Answers 98 - 100 of 103

Passage

Mrs. Anthony sold goods worth £10000 to Mrs. Barker on Jan 1st 2016. Mrs. Anthony drew a bill on Mrs. Barker at three months for the full amount. Mrs. Barker accepted the bill and returned to Mrs. Anthony, who discounted the bill with a bank on 5th Feb 2016.@15 %. The bill was duly honored on maturity.

Question number: 98 (5 of 5 Based on Passage) Show Passage

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Short Answer Question▾

Write in Short

What were the other options available to Mrs. Anthony other than discounting the bill with the bank?

Explanation

The other options that were available to Mrs. Anthony were as follows:

(i) Retain the bill till the due date.

(ii) Send the bill to bank for collection

(iii) Discount the bill with some third party

(iv) Endorse the bill to a creditor.

Passage

The following entries are found in the books of Mr. Iyer for the year ending 31.12. 2010.

Purchases £1500000, Sales £2500000, Opening stock £500000, Returns Outward £45000, Returns Inward £20000, Carriage Inwards £ 45000, Cash in hand £778000, Cash at bank £608000, Wages £24000, Printing & Stationery £45000, Discount allowed £4000, Bad debts £15000, Insurance £25000, Investments £320000, Debtors £530000, Bills receivable £200000, Postage £4000, Commission £2000, Interest £10000, Repairs £4400, Lighting Charges £5000, Telephone £ 1000, Carriage outwards £4000, Car £250000, Interest received £35000, Discount received £4000, Creditors £1250000, Bills Payable £60400, Capital £1000000

He also stated the below mentioned adjustments, which are to be taken into consideration.

(i) Further bad debts £10000, Provision for doubtful debts@5 % and discount on debtors £5000

(ii) Interest is received on investments@5%

(iii) Depreciation on car was@5%

(iv) Interest and wages was outstanding at £2000 and £1000 respectively

(v) Closing stock was valued at £325000

Question number: 99 (1 of 5 Based on Passage) Show Passage

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Essay Question▾

Describe in Detail

Help Mr. Iyer in preparing the Final balance sheet as on 31.12. 2010?

Explanation

Balance sheet of Mr. Iyer as on 31.12. 2010

Table of Balance sheet of Mr. Iyer as on 31.12. 2010

LIABILITIES

AMOUNT

AMOUNT

ASSETS

AMOUNT

AMOUNT

Capital

1000000

Cash in hand

778000

Add: Net profit

660100

1660100

Cash at bank

608000

Creditors

1250000

Bills receivable

200000

Bills Payable

60400

Clsoing stock

325000

O/S Wages

1000

Car

250000

O/S Interest

2000

Less: Depreciation@5%

12500

237500

Investments

320000

Add: Interest@5%

16000

336000

Debtors

530000

Less: Bad debts

10000

520000

Less: Provision for doubtful debts@5%

26000

494000

Less: Discount on debtors

5000

489000

2973500

2973500

Question number: 100 (2 of 5 Based on Passage) Show Passage

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Essay Question▾

Describe in Detail

What is the meaning of Final Accounts?

Explanation

Every business concern prepares final accounts in the year end in order to ascertain whether it has earned a profit or incurred a loss during the year. The term final accounts refers to the preparation of three main statements namely:

(i) Trading Account: - It is a nominal account prepared to calculate the gross profit or loss incurred in business due to trade related activities.

(ii) Profit & loss Account: - It is an account in which all expenses and incomes are recorded to calculate the net profit or loss for the year

(iii) Balance Sheet: - This is the statement which shows the financial position of a business on a particular day having assets on one side and liabilities on the other.