IGCSE Accounting Paper-2: Specimen Questions with Answers 153 - 154 of 189
Passage
Pihu Jaiswal opened a laptop shop on 1 Jan 2020 with the following assets:
| $ | |
| Freehold shop premises | 45000 |
| Stock of laptop | 10000 |
| Cash (paid into a business bank account) | 4000 |
Pihu obtained a loan of $ 12000 from her friend, Komal on the same date and paid this into the bank account.
Question 153 (3 of 5 Based on Passage)
Write in Brief
One Liner▾If error (I) above is not corrected, what are the effects on: (Marks 2)
(I) Polly՚s Trading and Profit and Loss Account,
(Marks 2)
Explanation
Purchases will be overstated and it will lead to understatement of the Gross Profit as well as the Net Profit.
In error I, a capital expenditure is treated as a revenue expenditure. When a capital expenditure is treated as a revenue expenditure, two things happen-
- Profits are understated because of increased revenue expenditure and Assets are also understated because these are only recorded in Trading & Profit & Loss A/c and not in the balance sheet.
- Depreciation is not charged on the asset purchased.
Question 154 (4 of 5 Based on Passage)
Write in Short
Short Answer▾Pass Journal entries of the above transactions (without narratives) . (Marks 7)
Pihu
Journal
| Date | Dr $ | Cr $ | |
| 2020 Jan 1 |
Explanation
Pihu
Journal
| Date | Dr $ | Cr $ | |
| 2020 Jan 1 | Shop Premises | 45000 | |
| Stock | 10000 | ||
| Bank (II) | 16000 | ||
| Capital (III) | 59000 | ||
| Komal՚s Loan | 12000 |
Working Notes-
(I) When Assets and Liabilities are brought in a business, Respective Assets Accounts are debited and the liabilities are credited, the balance remaining on the credit is the amount of Capital and the same is credited to the Capital A/c.
(I) Bank A/c will include cash paid by Pihu into the bank as well as loan amount from Komal i.e..
(II)
During Jan 2020 Pihu found the following matters.
(I) The purchase of a laptop for shop՚s use $ 4000 had been entered in the Purchases account.
(II) Goods bought on credit from Rehan, $ 3000, had been entered in
Rohan՚s A/c.
(III) A sale on credit to Sanyukta, $ 240 had been entered in the Sales account and in Sanyukta՚s account as $ 420.
(IV) New shop fittings had been purchased on credit from Gautam Supplies for $ 8500, but no entry had been made in Pihu՚s books