IGCSE Accounting Paper-2: Specimen Questions with Answers 100 - 101 of 189

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 100 (2 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 2010 amounting to £ 660100

Profit and Loss Account of Mr Iyer for the Year Ended 31.12. 2010
PARTICULARSAMOUNTAMOUNTPARTICULARSAMOUNTAMOUNT
To Printing & Stationery45000By Gross profit775000
To Discount allowed4000By Interest received35000
To insurance25000By Interest on investments@5 %16000
To Postage4000By discount received4000
To commission2000
To interest10000
Add: O/S interest200012000
To repairs4400
To Carriage outwards4000
To Discount on debtors5000
To Depreciation on car@5 %12500
To Telephone charges1000
To Bad debts15000
Add: New bad debts10000
25000
Add: New provision on Doubtful debts@5 %2600051000
To Net profit660100
830000830000

Question 101 (3 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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