IGCSE Accounting Paper-2: Specimen Questions with Answers 117 - 119 of 189

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Passage

The following trial balance was extracted from the books of Asmita & Sons as at 31 December 2019-

Extracted from the Books of Asmita & Sons as at 31 December 2019-
Debit Balances

$

Credit Balance

$

Capital56000
Drawings6000
Premises35000
Opening Stock10000
Purchases55000
Plant & Machinery21000
Insurance700
Cash2800
Direct Wages14000
Salaries11000
Discount Received1000
Sales120000
Trade Debtors36000
Trade Creditors12000
Carriage Inward1500
Bank Overdraft7200
General Expenses3200
196200196200

Additional Information:

(I) Closing Stock is valued at $ 15000 (cost) , (market value $ 20,000)

(II) Wages amounting to $ 4000 and salaries amounting to $ 1600 are outstanding

(III) Prepaid Insurance amounted to $ 300

(IV) Plant & machinery is to be depreciated@10 % pa

Question 117 (2 of 4 Based on Passage)

Write in Short

Short Answer▾

Prepare the Balance Sheet of Asmita & Sons as at 31 December 2019.

Asmita & Sons

Balance Sheet as at 31 December 2019

Balance Sheet as at 31 December 2019
Assets$$
Capital & Liabilities$$

(Marks 12)

Explanation

Asmita & Sons

Balance Sheet as at 31 December 2019

Balance Sheet as at 31 December 2019
Assets$$
Non-Current Assets:
Premises35000
Plant & Machinery $ 21000

Less: Provision for Dep $ 2100

1890053900
Current Assets:
Closing Stock15000
Trade Debtors36000
Prepaid Insurance300
Cash280054100
Total Assets108000
Capital & Liabilities$$
Capital $ 56000

Less: Drawings $ 6000

$ 50000

Add: Net Profit $ 33200

83200
Current Liabilities:
Trade Creditors12000
Outstanding Expenses (Wages + Salaries)5600
Bank Overdraft720024800
Total Liabilities108000

Question 118 (3 of 4 Based on Passage)

Edit

Write in Short

Short Answer▾

Calculate correct to two decimal places inventory turnover ratio of Asmita & Sons for the year ended 31 December 2019. (Marks 2)

Explanation

Question 119 (4 of 4 Based on Passage)

Edit

Write in Short

Short Answer▾

State the reason why was the closing stock valued at cost? (Marks 2)

Explanation

  • Closing Stock is valued at cost because of the application of prudence concept. As per the prudence concept the closing stock should be valued at cost or market price whichever is lower.
  • Prudence Concept says that one should be conservative while recording assets. i.e.. Assets should never be overstated. An accountant should not overestimate the amount of revenues or underestimate the amount of expenses. Further, assets too shouldn՚t be overstated and the liabilities should not be underestimated.

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