IGCSE Accounting Paper-2: Specimen Questions with Answers 103 - 104 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 103 (5 of 5 Based on Passage)

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Describe in Detail

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.

Question 104

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Write in Short

Short Answer▾

In which section of the balance sheet would ‘Outstanding Salaries’ appear? (Marks 1)

Explanation

‘Outstanding Salaries’ would appear under Current Liabilities of the ‘Liabilities’ section of the balance sheet.

  • Salaries incurred and due for payment in an accounting year but not yet paid are ‘Outstanding Salaries’ .
  • Since this is an expense which has become payable but the payment is postponed, so this becomes the liability of the business.
  • Further, the payment outstanding salary is to be made within a year, so it is a current liability.

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