IGCSE Accounting Paper-2: Specimen Questions with Answers 166 - 168 of 189

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 166 (4 of 5 Based on Passage)

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Calculate the gross profit for the year ended 31st March 2019. (Marks 1)

Explanation

Ankita is planning to purchase a new machine costing $ 10,000. Also, she can invest additional capital of $ 4000.

Question 167 (5 of 5 Based on Passage)

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State any two items which included under ‘Factory Overheads’ . (Marks 2)

Explanation

(i) Factory Electricity

(ii) Depreciation on Factory Fixed Assets

  • Factory Overheads are those indirect expenses which are related to the factory in which the product is manufactured. For an item to be categorized under factory overheads, should have two main things-
    • Firstly, it should be indirect expense, i.e.. . cannot be directly attributed to the product.
    • Secondly, it should be incurred until the production or manufacturing process.

Question 168

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According to the conservatism principle, a business should value its closing stock a (Marks 1)

Explanation

the lower of cost or market value

  • Conservatism Principle is the policy of playing safe. It says that all the anticipated losses should be provided for and recorded in the books of accounts while the anticipated profits should not be recorded.
  • It also says that the closing stock should be recorded the lower of cost or market value so that the profits may not be overstated.

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