IGCSE Accounting Paper-2: Specimen Questions with Answers 162 - 165 of 189

Question 162

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Short Answer▾

Asim bought goods on credit from Siddharth. In Siddharth ledger, this transaction was entered on the credit side of Asim՚s account. (Marks 1)

(i) Name the type of error committed by Siddharth.

Explanation

Error of Commission

  • Error of Commission is made when a transaction is entered on the wrong side of an account or on the right side but with a wrong amount.
  • In the given example, Asim is Siddharth՚s debtor. So, under Siddharth ledger, the given transaction should be entered on the DEBIT side of Asim՚s account.

Passage

Ankita is a manufacturer. Her financial year ends on 31st March. She sells her output at 30 % mark up.

She provided the following information for the year ended 31st March 2019.

She Provided the Following Information for the Year Ended st March 2019
$
Prime Cost25000
Factory Overheads4200
Cost of production20800

Question 163 (1 of 5 Based on Passage)

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One Liner▾

What is meant by ‘Prime Cost’ ? (Marks 1)

Explanation

Prime Cost is the sum total of all the direct expenses incurred to manufacture a product.

Question 164 (2 of 5 Based on Passage)

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Short Answer▾

Calculate the estimated gross profit for the year if the new machine is purchased. (Marks 4)

Explanation

Calculate the Estimated Gross Profit for the Year if the New Machine is Purchased
$
Prime Cost32500
Factory Overheads5200
Cost of Production37700

Question 165 (3 of 5 Based on Passage)

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Short Answer▾

Suggest two ways in which Ankita could get the additional funds required to purchase the machine. (Marks 2)

Explanation

(I) By admitting a new partner

(II) Loan from bank

Explanation:

  • The source of finance will depend on its suitability for Ankita. The admission of a new partner will bring additional capital in the business which can be utilized for purchasing the machine without increasing any liability of the business.
  • However, this can also dilute the ownership and control of Ankita on her business. Contrarily, loan from bank is an external liability but can be suitable if Ankita does not want to lose control over her business.

Ankita estimated that machine if purchased would affect the following as-

(i) Prime Cost would directly proportional to the output which increases by 30 %

(ii) Factory overheads would increase by $ 1000

(iii) Markup would have to be reduced to 20 %

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