accounts important.docx
TRANSCRIPT
Quiz
1. Fill in the Blanks:
a. A partnership firm normally requires a maximum of ———— persons.
b. Owners of a Partnership are liable to ————— for all liabilities of the firm.
d. Partners have a ————— relationship between them.
e. The individuals who own the partnership business are called collectively referred to
as ——————.
Answers
(a) 20 persons
(b) Pay
(c) Legal
(d) Partnership
2. Which of the following statements are TRUE or FALSE?
a. A partner may sometimes not work in a partnership that he part owns.
b. The interests of partners may not be used as future capital in the business.
c. A partnership firm has separate legal entity from its owners.
Answers
(a) True
(b) False
(c) False
3. Which of the following statement are TRUE or FALSE ?
(a) The members of a co-operative get a fixed rate of dividend from profit.
(b) A co-operative society can not enter into any contract.
(c) The liability of the members of a co-operative is unlimited.
(d) A co-operative society needs not be registered.
(e) A member of a co-operative society may have voting power based the amount of
shares owned.
Answers
(a) True
(b) True
(c) False
(d) False
(e) False
4. Fill in the blanks:
(a) A co-operative society may not cease to exist with the ———— of a member.
(b) New members of a co-operative are obtained ——————.
(c) ——————is the primary motive of a co-operative.
(d) The maximum membership to get a co-operative registered is ——— .
(e) Most co-operative society are restricted by ————.
Answers
(a) death
(b) Voluntarily
(c) Service
(d) Unlimlited
(e) Capital
5. Which of the following statements are TRUE or FALSE ?
(a) The minimum membership for a public limited company is 50.
(b) A company is dissolved with the entry of a new member.
(c) The members of a company may transfer their shares through on the stock market.
(d) The liability of the members of a Joint Stock Company is limited.
Answer
(a) False
(b) False
(c) True
(d) True
6. Fill in the blanks:
(a) A company has——— existence.
(b) A company may enjoy the benefits of ————operation.
(c) A partnership may be managed by ————.
(d) When the scale of operation of the business is ———a sole proprietorship form is
preferred.
(e) The capital of a sole trader may not be ——— in the stock market.
Answer
(a) Perpetual
(b) Large Scale
(c) Partners
(d) Small
(e) not
7. Fill in the blanks with suitable word/words:
(a) Accrual concept relates to the determination of ____________.
(b) Goods of Rs.50000 are sold on 25th March 2006 but payment is received on 10th
April 2007. It will be a revenue
for the year ending _____________.
(c) Accrual concept requires revenue is recognised when ____________.
(d) Expenses are matched with ____________ generated during a period.
(e) Income is the excess of revenues over ____________.
Answers
(a) Revenue
(b) 2006
(c) Service is rendered or goods are delivered
(d) Revenues
(e) Expenses
Quiz
Question
Answer
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Quiz
Question 1
On December 31, 2010, John Henry found that the debit side of his trial Balance
exceeded the credit side by $492. The difference was put to a suspense account.
February 11 of 2011 the following errors were discovered in the books:
1. $165 paid for the purchase of Fixtures had been entered to Purchases account.
2. Commissions received of $112 was debited to the Commissions received account.
3. The Returns Inwards Book was overcast by $57 and the wrong amount was entered
to the Returns Inwards account.
4. $ 217 cash paid to Mike Collester was debited to his account as $271.
5. $15 goods sold to Lee Gray was debited to Lee May’s account.
6. A cheque for $157 received from M. Ruddock was not entered to his account.
Required:
(a) State one purpose of the Trial Balance.
(b) Prepare the necessary Journal entries to correct the above mistakes.
(c) Enter up the Suspense Account.
(d) Identify from the above, ONE error of principle and ONE error of commission.
Solution
(a) The Trial Balance acts as a statement which arithmetically proves that proper
double entry is observed in making accounting entries. There are several errors which
will not be revealed by the Trial Balance.
(b)
c)
(d)(i) Error of Principle occurred in error # 1 where $165 paid for the purchase of
Fixtures had been entered to Purchases account.
(ii) Error of Commission occurred in error # 5 where $15 goods sold to Lee Gray was
debited to Lee May’s
account.
Question 2
R. Guberman keeps a three column Cash Book. All cheques received are banked
immediately. All small payments of $20 or less are paid out of a petty cash float of $50
and recorded in a Petty Cash Book with four analysis columns: Postage, Travelling,
Sundry Expenses, and small purchases of stock.
Using the following information, you are required to:
1. Write up his Cash Book and balance it.
2. Write up the Petty Cash Book and balance it.
October 16 Balances: Bank 574
Cash 126
Petty Cash 19
17 Reimbursed petty Cash Float
17 E Winters settled his debt of $580 by cash
less 5% discount.
19 Received cheque from A. Adam 675
19 Paid for stock by cheque. 473
20 Bank charges for services. 3
21 Cash sales for the week 720
21 Purchased postage stamps 12
21 Purchased small items of stock 17
22 Banked cash 500
22 Paid for stock by cheque 650
23 Drew cheques for wages. 300
23 Paid taxi fare for errands 7.65
24 Sent R. Boone a cheque to settle a debt
of $750 , less 4% cash discount.
26 Reimbursed petty cash float
26 Paid for postage of package. 18
28 Cash sales for the week 1,275
28 Banked cash 1,553.35
30 A. Adam’s cheque for $675 marked
Dishonoured was returned.
31 Paid for cleaning and painting. 15
Solution
1.
2.
Question 3
The following were transactions for Green Food Enterprises for the month of June
2007.
$
September 1 Sold Goods to V. Bentley 4,500
September 6 V. Bentley returned goods to us 1,200
September 9 Bought goods on credit from M. Mickey
8,400
September 11 Sold goods on credit to C. Ryan 2,400
September 17 Credit purchases from Discount Wholesalers
3,000
September 22 Returned goods to M. Mickey 400
September 24 Bought Fixtures from Best Furnishings for use in the business
4,900
September 28 Sold goods on credit to B. Gumby 1,350
Required:
(A) Make Entries in the books of original entry (subsidiary books) for Green Food
Enterprises.
(B) Post the books of original entry to the ledger at the end of the month.
Solution
(A)
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Question
Garvey had the following transactions for the month of January 2007.
2007 $
January 1 Started business with cash 50,000.
January 1 Paid cash for rent 500
January 2 Paid cash for fixtures. 5,000
January 3 Purchased on credit goods from
E. John. 475
January 5 Cash Purchases 1599
January 13 Cash sales 300
January 18 Sold goods on credit to A. Goodman 742
January 27 Received cash from A. Goodman 500
January 31 Stock of goods sold for cash 520
Required:
(A)Record and balance transactions in the relevant accounts including a cash account
in the ledger of A. Garvey.
(B)Extract a Trial Balance.
Solution
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Quiz
Question 1
The records of R. Graham showed the following purchases and sales of stock for the
months of May and June 2006.
May 2 Purchased 12 boxes of wine at $40 per box
May 17 Purchased 20 boxes of sodas at $20 per box
June 8 Purchased 10 boxes of vinegar at $60 per box
June 25 Purchased 5 boxes of vinegar at $10 per box
June 30 Sold 32 boxes at $65 each.
Required:
Use the LIFO, FIFO and AVCO methods of stock valuation to calculate the value of
closing stock. Please show all workings clearly.
Solution
Question 2
The Following balances were extracted from the Trial balance of T. Brooks Wholesale
at the end of 2005.
Creditors 1400
Purchases 32,000
Returns Outwards 3,600
Opening Stock 4,800
Closing Stock 3,200
Rent owing 600
Debtors 2,000
Cash in hand 2,800
Required:
1. Calculate the following Ratios:
(a)Current Ratio
(b)Acid Test Ratio
(c)Rate of Stock Turnover
2. What is the purpose of each ratio?
3. Identify one limitation associated with the use of accounting ratios.
Solution
1.
2.
(a) Current Ratio provides indication of the business to meet its short term financial
commitments. The comparison is made with (current) assets which will become liquid
within a year and (current) liabilities which should be paid within the same period of
one year. This will indicate if the business has enough short term assets to meet its
short term payments.
(b) Acid test ratio indicates the ability of the business to meet it short term payments
given the situation where all debtors settle and all creditors are paid at the same time.
(c) Stock turn provides an indication as to how fast or slow stock is been sold. It also
indicates the efficiency of the business in terms of its control of stock levels. Assuming
that gross profit percentage remains constant, a faster sale of stock will mean
increases in profits from sales, likewise a slower sale of stock could mean decreases in
profits.
3. Ratios may become misleading if they are not used in proper context. The same
ratios need to be used as a means of comparison for different time periods of a
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Quiz
Question 1
Sam Brown’s accounting period is from January 1 to December 31. The following
provides information for three periods.
Year Debtor Balances Provision for Doubtful Debts
2000 20,000 5%
2001 30,000 6%
2002 25,000 4%
Required:
Write up the Provision for Doubtful Debts Account for each of the three years ending
December 31 2000 to 2002.
Solution
Question 2
Novelty Chemicals bought a Motor Vehicle for $110,000 on January 5, 2002. The
estimated useful life of the vehicle is ten years. The disposal value is estimated at
$10,000. Annual depreciation is on the straight line method.
Required for years 2002, 2003 and 2004:
(a)The accumulated Depreciation account- Motor Vehicle
(b)The Balance Sheet extracts for motor vehicle and its related depreciation.
(c)The Profit and Loss accounts extracts for annual depreciation
Solution
Question 3
The Trial balance of Wholesome Groceries as at December 31, 2005 is shown below.
Notes:
Closing Stock $18,000
Rent paid in advance $4,000
Wages and Salaries owing $3,400
Insurance owing $600
Provision for doubtful debt to be created $600
Depreciation on machinery and equipment for the period $3,000
Prepare the Following for Wholesome Groceries:
1. The Trading and Profit and Loss account for the period ending December 32, 2005
2. The Balance Sheet as at December 31, 2005.
The following errors were found in the books of Bell Traders:
-Credit sales $536 to V. Bennett was omitted from the books.
-$758 discount received was mistakenly debited to Discount Received Account.
-$530 discount allowed was entered in error as $503 in T. Wilson’s account.
-There was a bank overdraft of $626 which was entered in error in the bank account as
$662.
-A discount received of $474 was entered in the cash book but was not entered in S.
Riddick account who was a creditor.
-A credit sale of $2,000 to G. Jones had been omitted from the accounts.
-A machine bought for cash $1,000 as a fixed asset was entered to Purchases book.
Required:
1. Journalize the correction of the above errors.
2. Post the relevant entries to Suspense account.
3. Enter in Suspense account the figure which represented the original difference in
the Trial Balance.
Solution
1.
2.
3.The figure which represented the original difference in the Trial Balance is $1033.
Question 2
The following Details were extracted from the books of Angene Bisor;
2007
October 1 Debit balances for Sales Ledger 3,050
Credit balances for Sales Ledger 150
Credit balances for Purchases Ledger 12,500
Debited balances for Purchases Ledger 925
Totals for the month ending October 31, 2007
Credit sales 10,050
Cash and cheques received 7,100
Bad Debts written off 375
Discounts Allowed 250
Returns Inwards 500
Dishonoured cheques from customers 700
Purchases Journal 15,750
Cheques paid to suppliers 17,500
Discount Received 870
Returns Outwards 300
Required:
(A)Enter up the Sales Ledger Control accounts and The Purchases Ledger Control
Accounts for October 2007.
(B)From which books would the total of Credit Sales, Discount allowed, and Returns
Inwards be taken.
Solution
(A)
(B)
Items for entry in Control Account Source
Total Credit Sales The Sales
Journal
Discounts Allowed The Cash Book
Returns Inwards The Returns Inwards
Journal
Question 3
The Following is a summary of the bank account in the Cash Book of X. Wethernorth
for the month of April 2001.
You are informed that:
-Bank charges of $70 shown on the bank statement have not been entered in the cash
book.
-Four cheques in the sums of $100, $150, $125 and $175 have not been presented to
the bank
-A Standing Order for Utilities of $200 was paid by the bank but not entered to the
cash book.
-A customers cheque for $400 was returned by the bank marked “refer to drawer”. No
entry was made in the cash book.
-The bank did not credit Wethernorth’s current account with a lodgement of $ 2,500
made on April 30 2001.
-Two customers D. Mark and F. Garvey deposited $200 and $300 respectively directly
into the current account of Wethernorth.
Required:
(a)Show the adjustments you will make in Wethernorth’s Cash Book.
(b)Prepare a Bank Reconciliation Statement as at April 30, 2001 to show the Bank
Statement balance.
Solution
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