IGCSE Accounting Paper-2: Specimen Questions with Answers 102 - 103 of 189

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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 102 (4 of 5 Based on Passage)

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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 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 103 (5 of 5 Based on Passage)

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Describe in Detail

Essay▾

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.

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