PRACTICE CHAPTER 15-18 (2)

Exercise 1: Are statements below True or False?

STATEMENTS TRUE FALSE

1 With the straight line method of depreciation, the estimated
disposal value should be allowed for in calculating the annual
depreciation provision.
2 The provision for doubtful debt has a credit balance.
3 The provision for doubtful debt cannot be adjusted.
4 The balance sheet will show the total of debtor after writing off
bad debts.
5 Amounts due from debtors, which are individually written off
should be credited to bad debts account.
6 The balance sheet will show the total of debtor after the
provision for doubtful debts being deducted.
7 Amounts paid in but not yet included in the bank statement are
income of the business.
8 Bank charges are the income of the business.
9 A bank account with overdraft has a debit balance.
10 In the petty cash book, any payment item has to be entered
twice, once in the total column and once in the appropriate
analysis column.

Exercise 2: Tick (V) on the correct underlined words/ phrases or correct the wrong
ones

STATEMENT Answer
1 An accrued expense is shown amongst the current
assets in the balance sheet.

2 A prepaid expense requires no year-end adjustment.

3 A prepaid expense is added to the expense item from

the trial balance.
4 A debit balance on the insurance account means that
insurance premiums have been paid in advance.
5 A prepaid income is shown as a current asset in the
balance sheet.
6 Depreciation provision account has a credit balance.

7 Any decrease in the provision for doubtful debt will be

debited to the P/L account.
8 Bad debts written off are not shown in the balance sheet.

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 9 Any decrease in the provision for doubtful debt will be
seen as an expense to the firm.

10 The provision for doubtful debt is never adjusted.

Exercise 3: Circle the best answer

A machine costing £20,000 was bought on 1 January Year 3. The business decided to
depreciate it at the rate of 40% per annum using the reducing balance method.
1. How much is the depreciation at 31 December Year 3?
a. £4,000 b. £8,000 c. £4,800 d. £2,880
2. How much is the Net book value of Machine at 31 December Year 3?
a. £12,000 b. £16,000 c. £7,200 d. £4,320
3. How much is the depreciation at 31 December Year 4?
a. £4,000 b. £8,000 c. £4,800 d. £2,880
4. How much is the Net book value of Machine at 31 December Year 4?
a. £12,000 b. £16,000 c. £7,200 d. £4,320
5. How much is the depreciation at 31 December Year 5?
a. £4,000 b. £8,000 c. £4,800 d. £2,880
6. How much is the Net book value of Machine at 31 December Year 5?
a. £12,000 b. £16,000 c. £7,200 d. £4,320
7. How much is the depreciation at 31 December Year 6?
a. £1,728 b. £8,000 c. £4,800 d. £2,880
8. How much is the Net book value of Machine at 31 December Year 6?
a. £12,000 b. £2,592 c. £7,200 d. £4,320
9. How much is the depreciation at 31 December Year 7?
a. £1,036 b. £1,136.20 c. £1,036.80 d. £1,136
10. How much is the Net book value of Machine at 31 December Year 7?
a. £1,555.20 b. £1,555.80 c. £1,556 d. £1,456

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 ENGLISH FOR ACCOUNTING 2
PRACTICE TEST 2
PART 1: THEORY
Exercise 1: Are statements below TRUE or FALSE
STATEMENTS TRUE/ FALSE
1. Drawings is added to capital in the balance sheet.
2. Stock included in the balance sheet is the opening stock.
3. The trading and profit and loss account can be displayed
horizontally or vertically.
4. Drawings cannot be in the form of cash.
5. If drawings is in the form of goods, it is necessary to show a
reduction from purchases in the trading account.
6. Drawings can be in the form of goods.
7. Opening stock appears both in the trading account and in
the balance sheet.

Exercise 2: Choose the correct answer

1. Accrual of income means that income due for the financial year has not been ……. by the
end of the year.
a. receive b. received c. pay d. paid
2. The provision for ………….. make up the amount of depreciation year by year.
a. depreciation b. depreciate c. bad debt d. doubtful debt
3. The asset account is ………….. if no provision for depreciation is made.
a. understated b. understate c. overstated d. overstate
4. The main …………. of depreciation are physical deterioration, economic factors and time
factors.
a. causes b. items c. cause d. ideas
5. If you take no account year-by-year of the fall in value of fixed assets, the annual profit
figures are ………
a. overstated b. understated c. undercast d. underestimate
6. Any debts written off are a/an …………of the business.
a. benefit b. gain c. loss d. expense
7. Capital is …….. when drawing is made.
a. reduced b. increased c. rose d. grew
8. Bad debts are debts that the business is unable to………..
a. buy b. pay c. give d. collect
9. Any decrease in the provision for doubtful debts is a ……….. to the firm.
a. profit b. growth c. loss d. reduction
10. The float figure can be ………..
a. amended b. moved c. left d. altered
PART 2: PRACTICE
Exercise 3:
On 1 January year 4, Tonny Green bought a motor vehicle for 12,000 by cheque. She decided to
depreciate the motor vehicle by 25% per annum using reducing balance method. She sold the
motor vehicle on 31 December year 7 for £4,700 received in cheque.
Show the

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 a. Motor vehicle account
b. Provision for depreciation of motor vehicle account, and
c. Disposal account for the financial year ending 31 December years 4,5,6 and 7.
d. An extract of Profit and Loss account at 31 December year 7, showing the transfer of
Profit/ Loss on Sales of fixed assets

Exercise 4:
From the following details, you are required
1. To bring the cash book up to date at 31 October Year 2 (10 pts)
2. To draw up a bank reconciliation statement at 31 October Year 2, to obtain the
balance at that date shown on the bank statement (10 pts)
Balance at bank as shown in the cash book £
at 31 October Year 2 960 Cr
Cheques paid into bank but not yet shown on the bank statement 440
Credit transfer from Tom Farer had not entered in the cash book 320
Standing Order to D Motors had not been entered in the cash book 150
Cheques drawn but not yet presented 280
Bank charges had not been entered in the cash book 45

Exercise 5:
From the following Extract of the Trial balance at 31 December Year 5.
Dr (£) Cr (£)
Fixtures and Fittings, at cost 46,900
Provision for depreciation on fixtures and Fittings 10,900
Bad debts, written off 2,860
Debtors 85,000
Motor vehicles at cost 81,300
Provision for depreciation on motor vehicles 19,700
Wages and salaries 63,020
Provision for doubtful debts 1,780
Insurance 6,660

The following additional information was available at 31 December Year 5:

£
1. Insurance prepaid 530
2. Wages and salaries accrued 1,210
T Malone decided to:
a. Provide for depreciation:
Fixtures and fittings: 20% on cost
Motor vehicles 20% on reducing balance
b. Adjust the provision for doubtful debts to 3% of debtors
REQUIRED:
Show the related accounts in Profit and Loss accounts at 31 December Year 5:

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 ENGLISH FOR ACCOUNTING 2
PRACTICE TEST 4
Exercise 1
From the following details, you are required
1. identify which transaction is used to update the cash book, which transaction is
used to prepare bank reconciliation statement.
2. to bring the cash book up to date at 30 June Year 3
3. to draw up a bank reconciliation statement at 30 June year 3, to obtain the balance
at that date shown on the bank statement
£ Update Prepare
cash Bank
book reconciliation
statement
Balance at bank as shown in the cash book at 30 1,250 Cr
June Year 3
Cheques paid into bank but not yet shown on the 1,310
bank statement
Credit transfer from B Smart had not entered in the 680
cash book
Cheques drawn but not yet presented to bank 770
Bank charges had not been entered in the cash 80
book
Payment to A John £730 had been recorded as
£370 in the cash book
A cheque for from D Holt had been returned by the 350
bank marked “refer to drawer” but this had not been
recorded in his cash book.
The bank had not credited a receipt paid into the 1,800
bank on 30 June Year 3

Exercise 2:
On 1 January Year 3, the beginning of the financial year, Provision for doubtful debts account
has credit balance of £850.
On 31 December Year 3, the end of financial year, J Edward found that his debtors amounted to
£31,160, in which £560 was bad debts and he now decided to write off this amount. He also
adjusted the provision for doubtful debts at 3% of the remaining debtors.
Show the calculation of
a. The provision for doubtful debts
b. The amount to be transferred to Profit/ Loss account
c. The debtors account in the Balance sheet

Exercise 3:
On 1 January year 4, Adam Smith bought a motor vehicle for £30,000 by cheque. He decided to
depreciate the motor vehicle by 20% per annum using the reducing method of depreciation. He
sold the motor vehicle on 31 December year 6 for £14,000 received in cheque.
Show the calculation of

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 a. The Provision for depreciation of Motor vehicle for 3 years ending 31 December Year 4,
5 and 6
£
Cost of Motor vehicle
Depreciation for Year 4

Depreciation for Year 5

Depreciation for Year 6

b. The amount to be transferred to Profit/ Loss account

……………………………………………………………………………………………………
……………………………………………………………………………………………………
……………………………………………………………………………………………………

c. The accumulated depreciation of motor vehicle in the Balance sheet on 31 December

year 6
Fixed assets Accumulated depreciation Year 6
Motor vehicle

Exercise 4
The following Trial balance was extracted from the books of T Smith at 31 December Year 5.
Dr (£) Cr (£)
Bank 21,520
Cash in hand 880
Purchases and Sales 254,820 464,740
Fixtures and Fittings, at cost 46,900
Provision for depreciation on fixtures and Fittings 10,900
Debtors and Creditors 90,900 29,180
Stock 1 January Year 5 13,500
Returns Inwards and Outwards 1,280 7,140
Bad debts, written off 2,860
Motor vehicles at cost 61,300
Provision for depreciation on motor vehicles 19,700
Discount allowed and received 4,180 1,420
Wages and salaries 53,020
Provision for doubtful debts 1,780
Insurance 5,380
Drawings 20,100
Office expenses 1,180
Motor vehicle running expenses 7,250
Capital ______ 50,210
585,070 585,070
The following additional information was available at 31 December Year 5:
£
1. Closing stock valued at cost 28,200

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 2. Insurance prepaid 510
3. Wages and salaries accrued 1,270
T Smith decided to:
a. Provide for depreciation:
Fixtures and fittings: 20% on cost
Motor vehicles 25% on reducing balance
b. Adjust the provision for doubtful debts to 2% of debtors
REQUIRED:
Prepare for T Smith:
a. The Trading and Profit & Loss Account for the ended 31 December Year 5.
b. A Balance Sheet at 31 December Year 5.