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)

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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

Profit and Loss Account of Mr Iyer for the Year Ended 31.12.2010
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)

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Essay▾

State any 3 differences between a trial balance and a balance sheet?

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.

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