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

Passage

The following trial balance was extracted from the books of Asmita & Sons as at 31 December 2,019-

Extracted from the Books of Asmita & Sons as at 31 December 2,019-
Debit Balances

$

Credit Balance

$

Capital

56,000

Drawings

6,000

Premises

35,000

Opening Stock

10,000

Purchases

55,000

Plant & Machinery

21,000

Insurance

700

Cash

2,800

Direct Wages

14,000

Salaries

11,000

Discount Received

1,000

Sales

120,000

Trade Debtors

36,000

Trade Creditors

12,000

Carriage Inward

1,500

Bank Overdraft

7,200

General Expenses

3,200

196,200

196,200

Additional Information:

(I) Closing Stock is valued at $ 15,000 (cost) , (market value $ 20,000)

(II) Wages amounting to $ 4,000 and salaries amounting to $ 1,600 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)

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Write in Short

Short Answer▾

Calculate correct to two decimal places inventory turnover ratio of Asmita & Sons for the year ended 31 December 2,019. (Marks 2)

Explanation

Question 118 (3 of 4 Based on Passage)

Write in Short

Short Answer▾

Prepare the Balance Sheet of Asmita & Sons as at 31 December 2,019.

Asmita & Sons

Balance Sheet as at 31 December 2,019

Balance Sheet as at 31 December 2,019
Assets

$

$

Capital & Liabilities

$

$

(Marks 12)

Explanation

Asmita & Sons

Balance Sheet as at 31 December 2,019

Balance Sheet as at 31 December 2,019
Assets

$

$

Non-Current Assets:

Premises

35,000

Plant & Machinery $ 21,000

Less: Provision for Dep $ 2,100

18,900

53,900

Current Assets:

Closing Stock

15,000

Trade Debtors

36,000

Prepaid Insurance

300

Cash

2,800

54,100

Total Assets

108,000

Capital & Liabilities

$

$

Capital $ 56,000

Less: Drawings $ 6,000

$ 50,000

Add: Net Profit $ 33,200

83,200

Current Liabilities:

Trade Creditors

12,000

Outstanding Expenses (Wages+ Salaries)

5,600

Bank Overdraft

7,200

24,800

Total Liabilities

108,000

Question 119 (4 of 4 Based on Passage)

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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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