Osborne Books Tutor Zone

AdvancedBookkeepingPractice assessment 1

© Osborne Books Limited, 2016

Task 1This task is about non-current assets. You are working on the accounts of a business known as BlenheimBuilders. You may ignore VAT in this task.The following is an extract from a purchase invoice received by Blenheim Builders relating to a printer tobe used in its office:

To: Blenheim Builders Invoice 1749 Blenheim Road On-line Supplies plc Lindum Laceby Road Date: LD3 7PF Rustonby 22 March 20-0 RS4 2YD

Item Details Quantity £ QX Laser printer Serial no 21XD4751 1 755.00 Next-day delivery 1 25.00 Printer cartridges @ £40.00 each 2 80.00 Net total 860.00

Blenheim Builders paid the invoice in full on 30 March 20-0.

The following information relates to the sale of a car:

Registration number LN07 SBT Date of sale 15 March 20-0 Selling price £11,500.00

• Blenheim Builders has a policy of capitalising expenditure over £500.• Vehicles are depreciated at 25% on a diminishing balance basis.• Computer equipment is depreciated at 20% on a straight-line basis assuming no residual value.• A full year’s depreciation is applied in the year of acquisition and none in the year of disposal.

(a) For the year ended 31 March 20-0, record the following in the extract from the non-current assetregister on the next page.• Any acquisitions of non-current assets during the year ended 31 March 20-0.• Any disposals of non-current assets during the year ended 31 March 20-0.• Depreciation for the year ended 31 March 20-0.

Notes:• Not every cell will require an entry.• Show your answers to two decimal places.

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EXTRACT FROM NON-CURRENT ASSET REGISTER

Description/ Acquisition Cost Depreciation Carrying Funding Disposal Disposalserial number date charges amount method proceeds date

£ £ £ £

Computer equipment

XXL laptop 16/06/-7 960.00 Cash

Year ended 31/03/-8 192.00 768.00

Year ended 31/03/-9 192.00 576.00

Year ended 31/03/-0

Year ended 31/03/-0

Vehicles

LN07 SBT 11/08/-7 22,400.00 Cash

Year ended 31/03/-8 5,600.00 16,800.00

Year ended 31/03/-9 4,200.00 12,600.00

Year ended 31/03/-0

LN08 TQZ 17/07/-8 19,600.00 Part-exchange

Year ended 31/03/-9 4,900.00 14,700.00

Year ended 31/03/-0

(b) Which one of the following statements is true?

(a) Revenue expenditure is expenditure incurred on the running expenses of abusiness

(b) The cost of repairs of a non-current asset is included in the capitalexpenditure of that asset

(c) The cost of delivery of a non-current asset is recorded as revenueexpenditure

(d) The cost of an annual service contract for a non-current asset is recorded ascapital expenditure

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Task 2

This task is about ledger accounting for non-current assets.• You are working on the accounting records of a business.• VAT can be ignored.• During the year an old vehicle – a delivery van – was disposed of.• The vehicle had been bought for £10,000.• Two years’ depreciation has been applied.• Depreciation is provided at 30 per cent per year on a diminishing balance basis.• The vehicle was sold for £5,200, with payment being received into the bank.Select your entries from the following list:Balance b/d, Balance c/d, Bank, Depreciation charges, Disposals, Purchases, Purchases ledger control,Sales ledger control, Statement of profit or loss, Value Added Tax, Vehicles: accumulated depreciation,Vehicles at cost.

(a) Calculate the accumulated depreciation on the vehicle now sold:

Year 1 £ Year 2 £

Total £

(b) Make entries in the accounts below for the disposal of the vehicle, showing clearly any balancecarried down or transferred to the statement of profit or loss.Vehicles at cost

Balance b/d £10,000

Disposals

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(c) Tick the relevant box to show whether there is a gain or loss on disposal of the vehicle.

Gain Loss

Show the journal entry to transfer the gain or loss to the relevant financial statement.

Account Debit £ Credit £

Task 3This task is about ledger accounting, including accruals and prepayments and applying ethical principles.(a) Enter the figures given in the table below in the appropriate trial balance columns.

Do not enter zeros in unused column cells. Do not enter any figures as negatives. Extract from the trial balance as at 31 March 20-1.

Ledger balance Trial balanceAccount £ Dr £ Cr £Prepaid expenses 1,050

Discounts received 790

Accrued income 3,220

Opening inventory 10,445

You are working on the accounting records of a business for the year ended 31 March 20-1. In this task, you can ignore VAT.

You have the following information:• The balance on the rent receivable account at the beginning of the financial year is £650. This

represents a prepayment for rent receivable as at the end of the year on 31 March 20-0.• The cash book for the year shows receipts for rent receivable of £8,000.• The rent receivable account has been correctly adjusted for £2,100 rent for the quarter ended

31 May 20-1. This was received into the bank and entered into the cash book on 29 March 20-1.

(b) Complete the following statements by calculating the required figure and selecting one option fromeach box.

On 1 April 20-0, the rent receivable account shows a DEBIT / CREDIT balance of £

On 31 March 20-1, the rent receivable account shows an adjustment for

ACCRUED EXPENSES

ACCRUED INCOME

PREPAID EXPENSES

PREPAID INCOME

of £

Calculate the rent receivable for the year ended 31 March 20-1.

£

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Business policy: accounting for accruals and prepaymentsAn entry is made into the income or expense account and an opposite entry into the relevant asset orliability account. In the following period, this entry is reversed.

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The cash book for the year shows payments for vehicles expenses of £7,240.(c) Update the vehicles expenses account for this, showing clearly the balance to be carried down. Select your entries from the following list: Accrued expenses, Accrued income, Balance b/d, Balance c/d, Bank, Prepaid expenses, Prepaid

income, Purchases, Purchases ledger control, Rent receivable, Sales, Sales ledger control,Statement of profit or loss, Vehicle expenses.

Vehicle expenses £ £ Accrual expenses (reversal) 225

You now find out that there is an unpaid bill of £960 for vehicle fuel for the two months ended 30 April 20-1 that has not been included in the accounting records.

Complete the following statements by calculating the required figure and selecting one option fromeach box.

Adjusting for this will INCREASE / DECREASE / HAVE NO EFFECT ON the total vehicleexpenses figure transferred to the statement of profit or loss for the year.The adjustment is £ .Vehicle expenses will show as a DEBIT / CREDIT in the statement of profit or loss account inthe general ledger.

(d) Accrued expenses shows a balance of £750 for the year ended 31 March 20-1. This relates tounpaid wages. Complete the following statements:The reversal of this accrual is a DEBIT / CREDIT in Accrued expenses account and a

DEBIT / CREDIT in Wages account.

(e) A junior colleague asks you to explain the reason for applying the accruals principle in accounting.Which of the following can you use as an explanation? Choose one answer for each row.

Acceptable reason Not acceptable reason(a) It allows for manipulation of period end

profit or loss(b) It ensures that revenues and expenses

are recorded when they are earned(c) It ensures that revenue and expenses are

recorded when they are paid for

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Task 4This task is about accounting adjustments.You are working on the accounting records of a business with a year-end of 31 March. A trial balance hasbeen drawn up and a suspense account opened. You now need to make some corrections andadjustments for the year ended 31 March 20-1.You may ignore VAT in this task.

(a) No entries have been made for closing inventory for the year end 31 March 20-1. Closing inventoryhas been valued at cost at £14,400. Included in this figure are some items costing £1,250 that willbe sold for £990.

Calculate the value of closing inventory. £

(b) (1) Record this adjustment into the extract from the extended trial balance (on the next page). (2) Make the following further adjustments. You will not need to enter adjustments on every line. Do not enter zeros into unused column

cells.• Entries need to be made for an irrecoverable debt of £165.• A payment of £700 for vehicle expenses has been made from the bank account. The

correct entry was made in vehicle expenses account, but no other entries weremade.

• The figures from the columns of the purchases day book for 31 March have beentotalled correctly as follows:

Purchases column £4,400 Value Added Tax column £880 Total column £5,280

The amounts have been posted as follows:

Dr Purchases £4,400 Cr Value Added Tax £880 Cr Purchases ledger control £5,280

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Extract from extended trial balance

Ledger balances Adjustments

Dr Cr Dr Cr £ £ £ £

Allowance for doubtful debts 1,100

Bank 2,650

Closing inventory – statement of financial position

Closing inventory – statement of profit or loss

Depreciation charge 2,500

Irrecoverable debts

Office expenses 18,370

Purchases 68,000

Purchases ledger control 10,450

Sales ledger control 20,150

Suspense 1,060

Value Added Tax 2,140

Vehicle expenses 3,810

(c) The ledgers are ready to be closed off for the year ended 31 March 20-1. Show the journal entriesto close off the office expenses account.

Select your entries from the following list: Allowance for doubtful debts, Bank, Closing inventory – statement of financial position, Closing

inventory – statement of profit or loss, Depreciation charge, Irrecoverable debts, Office expenses,Purchases, Purchases ledger control, Sales ledger control, Statement of profit or loss, Suspense,Value Added Tax, Vehicle expenses.

Account Dr Cr

Select the appropriate narrative for the journal above:

(a) Transfer of office expenses for the year ended 31 March 20-1 to the statement offinancial position

(b) Closure of office expenses account for the year ended 31 March 20-1 (c) Transfer of office expenses for the year ended 31 March 20-1 to the statement of

profit or loss (d) Removal of office expenses for the year ended 31 March 20-1

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(d) An allowance for doubtful debts account is kept (choose one option):

(a) To set aside a sum of cash to compensate the business when doubtful debts become irrecoverable

(b) To record adjustments to the trial balance when it does not balance

(c) To show a realistic figure of trade receivables in the statement of financialposition

(d) Until the end of the financial year, when the balance is credited to sales ledger control account

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Task 5This task is about period end routines, using accounting records, and the extended trial balance.(a) You are preparing to reconcile purchases ledger control account to purchases ledger.

The balance showing on purchases ledger control account is a credit of £14,280 and the totalaccount balances in the purchases ledger is a credit of £14,350.The purchases ledger has been compared with purchases ledger control account and the followingdifferences identified:1 Settlement (cash) discount received of £180 has been entered in the purchases ledger

accounts but has been omitted from purchases ledger control account.2 A payment of £645 has been debited to the purchases ledger account of Amery Ltd instead

of purchases ledger account of Avery Ltd.3 A BACS payment sent to a credit supplier was for £450, but the amount that should have

been paid is £540.4 A set-off entry for £300 has been omitted from purchases ledger control account.5 A purchase of £550 from Hewitt & Co has been omitted from purchases day book, but has

been correctly entered into the purchases ledger.6 A purchases return of £240 has been debited to the purchases ledger account of Bristow Ltd

instead of the purchases ledger account of W Bristol Ltd.Use the following table to show the three adjustments you need to make to purchases ledgercontrol account.

Adjustment Amount Debit Credit number £

(b) Which of the following statements about the VAT control account is true? Choose one.

(a) A refund of VAT from HMRC is debited to the VAT control account

(b) VAT is not adjusted when settlement discounts are taken

(c) Purchases returns VAT increases VAT liability to HMRC

(d) VAT on non-current asset acquisitions is apportioned over the useful life of theasset

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(c) You have the following extended trial balance. The adjustments have already been correctlyentered.Extend the figures into the statement of profit or loss and statement of financial position columns.Do not enter zeros into unused column cells.Complete the extended trial balance by entering figures and a label (see * below) in the correctplaces.

Extended trial balance

Ledger account Ledger balances Adjustments Statement Statement of of Profit or Loss Financial Position

Dr £ Cr £ Dr £ Cr £ Dr £ Cr £ Dr £ Cr £

Administration expenses 15,450 200

Allowance for doubtful debts 750 250

Allowance for doubtfuldebts: adjustment 250Bank 5,400 350

Capital 20,000

Closing inventory 12,150 12,150

Depreciation charge 4,000

Office equipment at cost 30,000Office equipment: accumulated depreciation 12,000 4,000

Opening inventory 14,250

Payroll expenses 25,450 300

Purchases 125,000

Purchases ledger control 22,600

Sales 195,000 600

Sales ledger control 30,300

Selling expenses 18,400

Suspense 1,050 1,250 200

Value Added Tax 2,050

*

258,850 258,850 17,850 17,850

*Select your entry from the following list:

Balance b/d, Balance c/d, Gross profit/loss for the year, Profit/loss for the year, Suspense.