IGCSE Accounting Paper-2: Specimen Questions with Answers 160 - 162 of 189
Passage
Mohan Bhagwat’s is a businessman who closes his accounts on 30 June every year. He does not maintain a full set of accounting records.
All goods are bought and sold on credit terms.
He provided the following information.
$ | |
For the year ended 30 June 2,019: | |
Payments to Trade creditors | 42,300 |
Receipts from Trade debtors | 55,200 |
Discount allowed to Trade debtors | 700 |
Purchases Returns | 1,400 |
Bad debts written off | 70 |
Carriage inwards | 3,000 |
On 1 July 2,018: | |
Trade Creditors | 1,600 |
Trade Debtors | 3,500 |
Inventory | 1,100 |
On 30 June 2,019: | |
Trade Creditors | 2,200 |
Trade Debtors | 4,130 |
Question 160 (3 of 3 Based on Passage)
Write in Short
Short Answer▾Calculate the credit purchases for the year ended 30 June 2,019 (Marks 6)
Explanation
Calculation of Credit Purchases for the year:
$ | |
Closing Trade Creditors | 2,200 |
Add: Payments to Trade Creditors | 42,300 |
Purchases Returns | 1,400 |
45,900 | |
Less: Opening Trade Creditors | (1,600) |
Credit Purchases | 44,300 |
Question 161
Write in Short
Short Answer▾Amrita bought the business of Kareena for $ 345,000. However, the net assets of Kareena were worth $ 360,000. State one reason why Amrita paid lesser for the business than its net assets. (Marks 1)
Explanation
Amrita paid lesser for the business than its net assets because of Negative Goodwill of Kareena’s business.
Explanation:
- Negative Goodwill arises when the price paid for the acquisition of a business is less than its net tangible assets.
This may happen when the concerned business witnesses a significant fall in the demand of its product due to sudden industry disruption.
For the purchaser, the negative goodwill is a capital profit and as such it is transferred to the Capital Reserve A/c.
Question 162
Write in Short
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.