2 Ben runs a small business but does not maintain a full set of accounting records.

He has provided
the following information:

31 March 2024 1 April 2023

$ $
Premises at cost 140 000 140 000
Machinery at cost 106 000 92 000
Accumulated depreciation on machinery 36 000 10 000
Inventory 42 000 24 600
Trade receivables 43 400 39 600
Trade payables 19 700 24 750
Bank 13 000 debit 3 200 credit
Other receivables 1 200 1 650

REQUIRED:

(a) Calculate Ben’s opening and closing capital.

Workings Answer $
Capital at 1 April 2023

Capital at 31 March 2024

[2]
During the year ended 31 March 2024, Ben withdrew goods for his own use, $620. He also deposited
an additional $10 000 cash into the business bank account from his personal funds.

REQUIRED:

(b) Calculate the profit for the year using the table below. Include your opening and closing
capitals from 2(a) and indicate whether the amounts of Ben’s transactions shown should be
added or deducted from the opening capital.

Added to opening Deducted from Total

capital opening capital $
$ $
Capital at 1 April 2023
Capital introduced
Profit for the year
Drawings
Total adjustments
Capital at 31 March 2024
[4]

In addition, Ben was able to provide details of transactions received and paid.

$
Receipts from credit customers 452 000
Cash sales 21 000
Payments to credit suppliers 224 700

REQUIRED:

(c) (i) Calculate Ben’s credit purchases for the year ended 31 March 2024.

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[3]
 (ii) Calculate Ben’s total sales for the year ended 31 March 2024.

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[3]

As his business is growing, Ben is considering maintaining a full set of accounting records. To allow him
to do this, he believes he would need to employ an experienced book-keeper at a salary of $18 000.

REQUIRED:

(d) Advise Ben whether he should employ a book-keeper. Justify your answer with two
advantages and two disadvantages of employing a book-keeper.

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[5]
Ben has reviewed the age and level of his trade receivables and believes he should provide for possible
doubtful debts.

REQUIRED:

(e) (i) Which accounting principle would he be applying by creating a provision for doubtful
debts?

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[1]

(ii) Complete the table by placing a tick (✓) to show what effect creating a provision for
doubtful debts would have on Ben’s profit for the year, trade receivables and cash at
bank.

Profit for the year Trade receivables Cash at bank

Increase
Decrease
No effect
[2]

[Total: 20]
3 Lionel started trading on 1 July 2022. He paid $15 000 of his own personal money into the business
bank account. He did not keep full accounting records but has supplied the following information
at 30 June 2023.

1. Cash sales of $90 000 were made and paid into the bank. No other money was received.
Lionel marks up his goods by 50%.

2. Payments from the bank:

$
Purchase of motor vehicle (van) 8 000
Payments to credit suppliers 55 000
Wages 8 060
General expenses 1 140
Rent and insurance 5 585
Motor expenses 4 992
Cash drawn from bank 14 600

3. Purchases returns amounted to $3000.

4. Inventory at 30 June 2023 was valued at $4175.

5. One third of the motor expenses paid were for Lionel’s private car.

6. A full year’s depreciation at 25% is to be charged on the van using the reducing balance
method.

7. Lionel withdrew $1000 each month from the business cash, for personal use. The remaining
cash drawn from the bank was used to pay wages.
REQUIRED
(a) Prepare Lionel’s income statement for the year ended 30 June 2023.
Lionel
Income Statement for the year ended 30 June 2023
$ $

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[9]

(b) Prepare Lionel’s capital account for the year ended 30 June 2023. Balance the account and
bring down the balance at 1 July 2023.
Lionel
Capital account
Date Details $ Date Details $

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[5]
(c) State one reason why Lionel should keep double-entry bookkeeping records.

............................................................................................................................................. [1]

Lionel currently makes cash sales only. He would like to start selling on credit and is considering
whether to offer a 10% trade discount to regular customers or a 3% discount for payment within
21 days.

REQUIRED

(d) Advise Lionel whether he should offer the 10% trade discount or the 3% cash discount.
Justify your answer.

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[Total: 20]
1 Shiv is a trader. His financial year ends on 31 August. He does not maintain a full set of accounting
records but was able to provide the following information for the year ended 31 August 2021.

Total revenue $320 000

Mark-up 25%

Bank account summary for the year ended 31 August 2021

$ $
Balance b/d 49 000 Expenses 34 000
Cash sales 3 700 Drawings 4 200
Receipts from trade receivables 312 400 Payments to trade payables 257 700
Equipment 16 000
Balance c/d 53 200
365 100 365 100

Assets and liabilities

1 September 2020 31 August 2021

$ $
Inventory at cost 23 500 ?
Trade receivables 22 000 25 900
Expenses owing – 400
Trade payables 32 600 29 600
Equipment at net book value – 12 800
Premises at cost 90 000 90 000

Shiv had withdrawn $900 for a family holiday during the year. He had included this in the expenses.

On 31 August 2021 Shiv decided to create a provision for doubtful debts of 3% of trade receivables.

REQUIRED

(a) Calculate the purchases for the year ended 31 August 2021.

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(b) Prepare the income statement for the year ended 31 August 2021. The inventory on
31 August 2021 should be clearly shown within the statement.

Shiv
Income Statement for the year ended 31 August 2021

$ $

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[11]

(c) Name the accounting principle Shiv should apply when recording the $900 he had used for a
family holiday.

............................................................................................................................................. [1]
Shiv has always valued his inventory at cost price. He is considering valuing the inventory on
31 August 2021 at selling price as he believes it would result in a higher profit for the year.

REQUIRED

(d) Discuss the implications of Shiv valuing the inventory on 31 August 2021 at selling price.

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[Total: 20]
3 Haziq has not maintained full accounting records for his business.

Haziq provided the following information for the year ended 31 July 2020.

At 1 August At 31 July
2019 2020
$ $
Bank loan 6 000 4 500
Inventory 8 400 ?
Non-current assets at net book value 35 580 32 450
Rent prepaid 240 –
Trade payables 6 280 7 460
Wages accrued – 610

Summary of bank account for the year ended 31 July 2020

Date Details $ Date Details $
2020 2019
July 31 Sales receipts 166 000 Aug 1 Balance b/d 2 150
Balance c/d 6 600 2020
July 31 Payments to credit suppliers 96 220
Bank loan repayments 1 500
Bank loan interest 300
Rent 2 640
Wages 41 400
General expenses 10 890
Drawings 17 500
172 600 172 600

Additional information

1 The gross margin was 40%.

2 All sales were for cash and all cash received was banked.
REQUIRED

(a) Prepare the income statement for the year ended 31 July 2020.

Haziq
Income Statement for the year ended 31 July 2020
$ $

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[15]
(b) Advise Haziq whether or not he should maintain a double entry bookkeeping system for his
business. Justify your answer with two advantages and two disadvantages.

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[Total: 20]
5 Stella started in business as a retailer on 1 April 2023. She sells one type of good only. She has
not kept a full set of accounting records but has provided the following information.

1 Half of Stella’s purchases were on cash terms and half on credit terms. During the year ended
31 March 2024, Stella paid $34 250 to credit suppliers. On 31 March 2024, she owed $2960
to credit suppliers.

2 Unlike her competitors, Stella made all of her sales for cash. Stella’s mark-up was 32%.

3 The following amounts were paid for expenses during the year to 31 March 2024.

Rent and insurance 6750

Wages 8300

Other expenses 1815

4 At 31 March 2024, $300 was unpaid for wages and $500 was paid in advance for rent.

5 Insurance is $2400 per annum. On 1 April 2023, Stella paid $3000 for insurance for the
following 15 months.

6 Other expenses included $120 paid for vases and flowers. One third of these were for Stella’s
own home. Stella treats business costs of under $150 as revenue expenditure.

7 Inventory was valued at $6420 at 31 March 2024.

REQUIRED

(a) Calculate total purchases for the year ended 31 March 2024.

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(b) Prepare Stella’s income statement for the year ended 31 March 2024.

Stella
Income Statement for the year ended 31 March 2024

$ $

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[8]

Stella’s sales revenue was the same each month for the year to 31 March 2024. She is now
considering selling on credit terms as well as for cash.

REQUIRED

(c) Advise Stella whether or not to start selling on credit terms. Justify your answer by providing
points for and against starting selling on credit.

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(d) State:

(i) the accounting principle which Stella is following when she treats payments for small
items which may last longer than one year, as revenue expenditure.

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(ii) one advantage of following the principle in 5(d)(i).

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(e) State two advantages of maintaining a full set of double entry accounting records.

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[Total: 20]
2 Stalla started trading on 1 April 2021. All receipts are paid into the bank and all payments are made
from the bank. She has not kept a full set of books but has provided the following information.

Summary of receipts and payments for the year ended 31 March 2022

Receipts

Capital introduced 8 000

Loan received (repayable 2027) 5 000

Sales (all cash) 36 000

Payments

Trade payables 17 850

Fixtures and fittings 12 000

General expenses 1 920

Rent and insurance 7 100

Drawings ?

Bank balance at 31 March 2022 2 330

REQUIRED

(a) Record the total receipts and total payments to Stalla’s bank account showing the cash
drawings for the year ended 31 March 2022. Balance the bank account and bring the balance
down on 1 April 2022.

Stalla
Bank account
Date Details $ Date Details $

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[4]
During the year ended 31 March 2022, Stalla took goods from the business for her own personal
use. The selling price of these goods is $3375. Her mark‑up is 25%.

REQUIRED

(b) Calculate Stalla’s total drawings for the year ended 31 March 2022.

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Stalla has provided a list of balances at 31 March 2022.

Fixtures and fittings (net book value) 10 800

Inventory 2 150

Prepaid rent 500

Balance at bank 2 330

Trade payables 1 875

Loan (repayable 2027) 5 000

Capital ?

REQUIRED

(c) Prepare a statement of affairs to calculate Stalla’s capital at 31 March 2022.

 Stalla
Statement of Affairs at 31 March 2022
$ $
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[5]

(d) Calculate Stalla’s profit for the year ended 31 March 2022.

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Stalla is now considering whether she should start to sell at least some of her goods on credit.

REQUIRED

(e) Advise Stalla whether or not she should start selling on credit terms. Justify your answer.

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[Total: 20]
5 Maira opened a shop on 1 January 2020.

She provided the following trading information.

Gross margin: 40%

Purchase price: $70 per unit
Carriage inwards: $2 per unit
Inventory: 130 units at 31 December 2020

REQUIRED

(a) Calculate the cost of Maira’s inventory at 31 December 2020.

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Maira has not kept a full set of accounting records, but provided the following information.

1 All sales were made on cash terms. The sales for the first year were:

for the first two months: $10 800 each month

for the next eight months: $12 000 each month
for the last two months: $16 200 each month

2 During the year Maira purchased 1400 units. Carriage was paid on these units.

3 Maira took goods from the business during the year ended 31 December 2020. No record
was kept of these drawings.
REQUIRED

(b) Prepare Maira’s income statement (trading section) for the year ended 31 December 2020.

Maira
Income Statement (trading section) for the year ended 31 December 2020
$ $

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[8]
Maira has been too busy to keep a full set of accounting records. However, she is now considering
using double-entry book-keeping for her business.

(c) Advise Maira on whether or not she should start to keep a full set of accounting records.
Justify your answer with two advantages and two disadvantages.

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(d) Place a tick (3) in the correct column to indicate to Maira the book of prime entry in which
each of the following should be recorded.

Cash book Purchases journal Purchases

returns journal
Discount received from a
supplier for prompt payment
Credit note received from a
supplier
Direct debit paid to a
supplier
[3]

(e) Complete the table by placing a tick (3) in the correct column to indicate to Maira the
accounting objective which is described in each statement.

Comparability Relevance Reliability

Maira’s financial statements should be
free from significant errors.
Maira’s financial statements should be
provided in time for her to use them
when making decisions about her shop.
[2]

[Total: 20]