IGCSE Accounting Paper-2: Specimen Questions with Answers 14 - 17 of 103

Passage

ABC & Co. started business on 1st January 2014 with a capital of £240000.

During the month, the following transactions took place:

2nd Bought goods from XYZ on credit £60000

5th Sold goods to MNO £75000

5th Cash Purchases £75000

8th Cash Sales £45000

9th Goods returned to XYZ £ 6000

15th Bought Furniture £45000

16th Cash paid to XYZ £36000

16th Loan taken from Mr. K £90000

17th Goods Returned by MNO £9000

20th ABC takes stock for personal use £9000

21st Cash received from MNO £36000

25th Salary paid £15000

28th Purchase of Stationery £ 3000

29th Amount paid to Mr. K on loan Account £ 54000

30th Interest received £12000

Question number: 14 (4 of 5 Based on Passage) Show Passage

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Essay Question▾

Describe in Detail

The following items will find their place on which side of the trial balance.

(i) Opening Stock: ————————

(ii) Closing Stock: ————————

(iii) Loan taken: ————————-

(iv) Goodwill: ————————

(v) Returns outwards: ————————-

Explanation

(i) Debit balance

(ii) Will not find place in trial balance

(iii) Credit balance

(iv) Debit balance

(v) Credit balance

Question number: 15 (5 of 5 Based on Passage) Show Passage

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Essay Question▾

Describe in Detail

Prepare the trial balance of ABC & Co for the month ended 31.01. 2014

Explanation

Trial balance of ABC & Co as on 31.01. 2014

shows Trial balance of ABC & Co as on 31.01. 2014

PARTICULARS

LF

DEBIT AMOUNT

£

CREDIT AMOUNT

£

Cash A/C

195000

Capital A/C

240000

Stock A/C

9000

XYZ A/C

18000

MNO A/C

30000

Furniture A/C

45000

Loan from Mr. K A/C

36000

interest A/C

12000

Salaries A/C

15000

Drawings A/C

9000

Stationery A/c

3000

Total

306000

306000

Passage

Mr. Jack purchases machinery at a cost of £100000. The life of the machinery is said to be 3 years At the end of 3 years the machinery is sold as scrap at £20000.

Question number: 16 (1 of 5 Based on Passage) Show Passage

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Short Answer Question▾

Write in Short

Why should Mr. Jack depreciate his machinery before selling it as scrap?

Explanation

Any asset over a period of time becomes old and incurs wear and tear expenditure. Hence Mr. Jack should depreciate his machinery to know the book value of it in order to ascertain whether he sold the asset at profit or loss.

Question number: 17 (2 of 5 Based on Passage) Show Passage

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Short Answer Question▾

Write in Short

Calculate the profit or loss of Mr. Jack if he depreciates the machinery on Straight line method assuming the percentage of depreciation is 25%

Explanation

Loss of £5000

Deprecation in the books of Mr. Jack on the basis of Straight line method

shows Deprecation in the books of Mr. Jack on the basis of Straight line method

PARTICULARS

AMOUNT

Cost of asset in year 1

100000

Less Depreciation@25%

25000

Book value at the end of year 1

75000

Book value at the beginning of year 2

75000

Less Depreciation@25%

25000

Book value at the end of year 2

50000

Book value at the beginning of year 3

50000

Less Depreciation@25%

25000

Book value at the end of year 3

25000

Scrap value

20000

Loss = Book Value - Scrap Value

-5000