IGCSE Accounting Paper-2: Specimen Questions with Answers 102 - 103 of 189
Passage
The following entries are found in the books of Mr. Iyer for the year ending 31.12.2010.
Purchases £ 1,500,000, Sales £ 2,500,000, Opening stock £ 500,000, Returns Outward £ 45,000, Returns Inward £ 20,000, Carriage Inwards £ 45,000, Cash in hand £ 778,000, Cash at bank £ 608,000, Wages £ 24,000, Printing & Stationery £ 45,000, Discount allowed £ 4,000, Bad debts £ 15,000, Insurance £ 25,000, Investments £ 320,000, Debtors £ 530,000, Bills receivable £ 200,000, Postage £ 4,000, Commission £ 2,000, Interest £ 10,000, Repairs £ 4,400, Lighting Charges £ 5,000, Telephone £ 1,000, Carriage outwards £ 4,000, Car £ 250,000, Interest received £ 35,000, Discount received £ 4,000, Creditors £ 1,250,000, Bills Payable £ 60,400, Capital £ 1,000,000
He also stated the below mentioned adjustments, which are to be taken into consideration.
(i) Further bad debts £ 10,000, Provision for doubtful debts@5% and discount on debtors £ 5,000
(ii) Interest is received on investments@5%
(iii) Depreciation on car was@5%
(iv) Interest and wages was outstanding at £ 2,000 and £ 1,000 respectively
(v) Closing stock was valued at £ 325,000
Question 102 (4 of 5 Based on Passage)
Describe in Detail
Essay▾Does Mr. Iyer have net profit or net loss during the year ending 31.12.2010?
Explanation
Mr. Iyer earns a NET PROFIT during the year 2,010 amounting to £ 660,100
| PARTICULARS | AMOUNT | AMOUNT | PARTICULARS | AMOUNT | AMOUNT |
To Printing & Stationery | 45,000 | By Gross profit | 775,000 | ||
To Discount allowed | 4,000 | By Interest received | 35,000 | ||
To insurance | 25,000 | By Interest on investments@5% | 16,000 | ||
To Postage | 4,000 | By discount received | 4,000 | ||
To commission | 2,000 | ||||
To interest | 10,000 | ||||
Add: O/S interest | 2,000 | 12,000 | |||
To repairs | 4,400 | ||||
To Carriage outwards | 4,000 | ||||
To Discount on debtors | 5,000 | ||||
To Depreciation on car@5% | 12,500 | ||||
To Telephone charges | 1,000 | ||||
To Bad debts | 15,000 | ||||
Add: New bad debts | 10,000 | ||||
25,000 | |||||
Add: New provision on Doubtful debts@5% | 26,000 | 51,000 | |||
To Net profit | 660,100 | ||||
830,000 | 830,000 |
Question 103 (5 of 5 Based on Passage)
Explanation
The three differences between the trial balance and balance sheet are as follows:
(i) Trial balance is prepared to verify the arithmetical accuracy of the books, while balance sheet is prepared to find out the financial position of the business.
(ii) Valuation of closing stock is not essential in the preparation of a trial balance, while closing stock value plays an important role in the preparation of balance sheet.
(iii) Real, Nominal and personal accounts are considered in the preparation of trial balance, but a balance sheet considers only the personal and real accounts in its preparation.