a. Explain with examples the nature of prior period adjustments. b. Briefly describe the treatment of prior period adjustments in published company financial statements.
> An item of plant and machinery was sold within the year for £5,000. The asset cost the company £10,000 over two years ago. The balances on the cost account and accumulated depreciation account were £118,000 and £18,000. It is company policy to provide fo
> Plant was purchased in the year for £10,000. It has been decided to provide for depreciation on a reducing balance basis (25 per cent). A full year’s depreciation is charged in the year of purchase. Required a. Show the entries in the ledgers for the fi
> On 31 December 20X9, plant and machinery acquired at a cost of £200,000 in 20X6 was sold for £30,000. The accumulated depreciation to date was £130,000. Required Calculate the profit or loss on disposal (show all ledger account entries).
> You bought a lorry for £5,000. Its useful life is estimated at four years. The residual value is expected to be £1,000 after the four years. Required Calculate the depreciation charge for each of the four years using the straight line, reducing balance
> On 31 December 20X9, the trial balance of Joytoys showed the following chart of accounts and balances: Additional information 1. The inventory at 31 December 20X9 was valued at £19,500. 2. The bank loan is repayable in five yearsâ
> N. Moss commenced business on 1 May 20X0 with a capital of £5,000 of which £1,000 was in cash and £4,000 was in a bank current/cheque account. Her transactions during May were as follows: 1 May Borrowed £2,000 from Birmingham Bank Ltd. The funds were tra
> Extract the statement of profit or loss for the year ended 31 December 20X9 for M. McKee and the statement of financial position as at 31 December 20X9 from the following. Additional information Inventory at the year-end was £11,000.
> Balances on the main inventory accounts are as follows: The closing inventory count reveals inventory of £1,500. Required Determine the gross profit.
> A company has 100 units in inventory at the start of the year valued at £1,000. During the year it purchases a further 500 units for £5,000 and sells 400 units for £8,000. Required a. What is the quantity and value of the closing inventories? b. What is
> The balances extracted from the books of G. Ryan at 31 December 20X9 are given below: Additional information At 31 December 20X9 inventory was valued at £33,990. Required a. Post the following transactions. G. Ryan purchased £
> B. Good drew up the following trial balance as at 31 March 20X9. Additional information Inventory at the year-end was £35,650. B. Good made the following transactions. 1. Cash sales of £1,500 and credit sales of £
> The following is the trial balance of J. Peters as at 30 September 20X9: Additional information 1. The inventory at 30 September 20X9 was valued at £4,580. 2. The loan from A. Drew is repayable on 1 January 20Y5. Required Prepare a statem
> The following information is an extension to Question 11.4 in Chapter 11. a. Enter the following transactions using a three-column cash book. The following cash transactions happened in November: 9 Nov Cash paid to: Veronica by A. Adair £900, S. Ruddle £
> London Printing Co. has an opening balance on its cash account on 1 January of £20.00. On the first of each month £100 is withdrawn from the bank to cover that month’s potential petty cash requirements. The sec
> Belfast cleaning company operates its petty cash account using an imprest system. It is maintained at a figure of £100 on the first day of each month. At 31 December 20X8 £21.48 was held in the petty cash box. During January 20X
> The Oakhill Printing Co. Ltd operates its petty cash account on the imprest system. It is maintained at a figure of £80 on the first day of each month. At 30 April 20X9 the petty cash box held £19.37 in cash. During May 20X9, th
> Veronica Reichester owns a shop. The following transactions happened in November. 1 Nov Credit sales: C. Flanagan £456, S. Morgan £300, F. Hutchinson £645, A. Adair £987 2 Nov Credit purchases: N. Ward £123, F. Wood £465, S. Duffy £786, N. Hynd £56 5 Nov
> Enter the following transactions in ledger accounts of ABC (including a two-column cash book), balance off and extract the trial balance. 1 Jan ABC started business and put £1,000 in the business bank account 2Jan Bought £200 worth of inventory on credit
> The following information is an extension to Question 11.9 in Chapter 11. a. Enter the following transactions relating to the suppliers’ accounts in September using a three- column cash book: b. Make the necessary entries in the ledge
> The following information is an extension to Question 11.8 in Chapter 11: Required a. Make the necessary entries in the ledgers using your answers to Question 11.8 in Chapter 11. b. Close the suppliers’ accounts at 30 September.
> You are supplied with the following information in respect of B. Score’s transactions in September with its suppliers. The list of opening balances per the purchases ledger is as follows: The following are the transactions relating to
> You are provided with the following details about a company’s credit customers for the month of November. Balances in sales ledger Credit sales Sales returns Required You are required to update the sales ledger accounts (individua
> Close off the T accounts and prepare a trial balance from your answer to Question 9.7 in Chapter 9.
> Close off the T accounts and prepare a trial balance from your answer to Question 9.6 in Chapter 9.
> Close off the T accounts and prepare a trial balance from your answer to Question 9.5 in Chapter 9.
> a. Define a partnership. b. What are the legal limits on the number of partners? c. Outline the principal matters normally found in the articles or deed of partnership.
> Outline the differences between sole traders and partnerships.
> List the typical contents of an annual report for a public limited company.
> a. Briefly explain the nature of a qualitative characteristic of financial information. b. Prepare a diagram showing the qualitative characteristics of financial information and the relationship between each of them.
> What is the difference between solvency and liquidity?
> How does inflation affect ratio analysis?
> Explain the limitations of using accounting ratios in time-series analysis and inter-firm comparisons, giving examples where appropriate.
> a. Explain what is meant by capital gearing/leverage. b. Why might this influence a prospective investor’s decision concerning whether or not to buy equity shares in a company?
> Explain what each of the following is intended to measure: (a) dividend yield; (b) dividend cover; (c) earnings per share; (d) price–earnings ratio; and (e) return on equity.
> J. Ballantine has the following opening balances on her ledger accounts: The following transactions take place during the reporting period. 1. Bought desks for £500 by debit card 2. Paid wages of £2,000 by BACS 3. Lodged sales
> Examine the empirical evidence relating to the predictive ability of accounting ratios with regard to insolvency.
> Explain what each of the following is intended to measure: a. return on capital employed; b. profit margin; c. asset-turnover ratio; d. working capital and liquidity ratios; f. average period of credit taken by trade receivables; f. inventory turnover ra
> For many years, company financial statements consisted of a statement of financial position and a statement of profit or loss prepared using the accruals basis. Many also have to include a statement of cash flows. Required a. Explain why a statement of
> Explain the difference between the direct and indirect methods of ascertaining the ‘net cash inflow from operating activities’ shown in a statement of cash flows.
> Explain the purpose, uses and advantages of classified statements of cash flows prepared in accordance with IAS 7.
> List and describe the contents of the three headings/groups of items found in a statement of cash flows prepared in accordance with IAS 7.
> Explain the meaning of each of the following in the context of statements of cash flows: a. cash; b. cash equivalents.
> Explain how statements of cash flows differ from: (a) statements of profit or loss; and (b) statements of financial position.
> Describe the advantages and limitations of statements of cash flows.
> a. Explain the purpose(s) of a statement of cash flows. b. Describe the typical sources and applications of cash funds in an entity.
> The following is a list of balances in the general ledger of J. McKee at 30 June 20X9: Required a. Prepare a trial balance. b. The trial balance does not balance (on purpose). Which account is missing? How much is the balance on this account (the accou
> B. Jones is in business as a builders’ merchant. The following credit transactions took place during April 20X9: 1 Apr Bought goods on credit from Brick Ltd for £725 2 Apr Sold goods on credit to Oak Ltd for £410 4 Apr Bought goods costing £315 from Sto
> a. Explain with examples the nature of contingent assets and contingent liabilities. b. Describe the treatment of contingent assets and liabilities in published company financial statements.
> a. Explain with examples the nature of events after the reporting period. b. Describe the treatment of events after the reporting period in published company financial statements.
> a. Explain with examples the nature of exceptional items. b. Briefly describe the treatment of each of these items in published company financial statements.
> a. Explain the nature of acquisitions and discontinued operations. b. Briefly describe the treatment of each of these items in published company financial statements.
> Briefly explain the reason(s) for the separate disclosure of components of financial performance such as discontinued operations and exceptional items in published company financial statements.
> Explain the difference between a reserve and a provision.
> Explain the difference between revenue/distributable reserves and capital/non-distributable reserves, giving three examples of the latter.
> Set out below is the equity part of a company’s statement of financial position. Explain the purpose of each of the equity reserve accounts shown on this company’s statement of financial position.
> Explain with an example the difference between current liabilities, provisions and contingent liabilities.
> The following is a list of balances in the general ledger of R. Keith at 30 June 20X5: Required Prepare a trial balance.
> Explain the difference between the allotted share capital and called-up share capital of companies.
> Describe the contents of the statutory books of companies. What is the purpose of each of these books?
> What is the auditors’ report? How useful do you think this is in its present form and with its current legal standing in the UK?
> What is the difference between an interim dividend and a final dividend?
> Outline the main contents of a prospectus.
> Explain how each of the following arises: a. a share premium; b. a debenture discount.
> What are preliminary expenses?
> Describe the contents of the Memorandum and Articles of Association. What are the purposes of these documents?
> How does a public limited company differ from a private limited company?
> Describe the different kinds of preference share.
> The following is a list of balances in the ledger of C. Rick at 31 May 20X0: Required Prepare a trial balance.
> Explain the main difference between a limited company and a sole trader.
> What is the annual general meeting of a company? Describe the proceedings at such a meeting.
> What happens to the assets and liabilities of a partnership on dissolution?
> Describe three different methods of valuing goodwill where the purchase price is unknown.
> Jack Straw, a director in ABC Ltd, has suggested that the accounting treatment for two items be changed in the next set of financial statements. These are summarized as follows: 1. The first is goodwill. This has not been incorporated in the financial st
> a. Explain the circumstances in which goodwill might appear in the books of a partnership. b. Describe how it would be treated in the statement of financial position.
> a. What is the difference between positive and negative goodwill? b. What is the difference between purchased goodwill and internally generated goodwill?
> Explain the difference between each of the following ledger accounts in the books of a partnership: a. capital account; b. current account; c. drawings account.
> Lane and Hill have decided to form a partnership. Lane is to contribute £150,000 as capital and Hill £20,000. Hill is to work full time in the business and Lane one day a week. Because Hill has no other income, she anticipates making drawings of £1,000 p
> Explain each of the following in the context of partnership profit sharing: a. partners’ salaries; b. interest on capital; c. interest on drawings; d. residual profit.
> Enter the following transactions in the books of ‘Mary Ward’ for December (use T accounts). 1 Dec introduced a motor vehicle to the new business worth £8,000 1 Dec transferred a computer from home to the business: £500 1 Dec withdrew £200 cash from her
> If there is no partnership agreement the provisions of the Partnership Act 1890 apply. List the main provisions of this Act with regard to the rights of partners between themselves, including the sharing of profits or losses.
> Describe the different forms of incomplete records with which you are familiar.
> Describe the two main uses of a suspense account.
> Describe the types of errors that: a. cause a trial balance to disagree; b. do not cause a trial balance to disagree.
> Explain the main purposes of control accounts.
> Describe the procedures involved in the collection of the data needed to prepare a bank reconciliation statement.
> Explain the purpose of a bank reconciliation statement.
> a. What is a perpetual inventory system? b. Describe three methods of calculating the cost of fungible inventories. c. Explain the circumstances in which each of these methods may be justifiable.
> Explain fully the basis on which finished goods and work-in-progress inventories should be valued in final financial statements.
> Explain the circumstances in which inventories might be shown in the financial statements at a value different from their historical cost.
> You have received goods from trader X who invoiced you and delivered the invoice with the goods. You have just received a debit note for £100. a. What is a debit note? b. How should the £100 be accounted for?
> Explain how the matching principle is applied to the valuation of inventories.
> Work-in-progress and finished goods inventories should be valued at the cost of purchase and conversion. Explain.
> a. Explain the nature of accrued and prepaid expenses. b. Describe how the amount of each may be ascertained.
> a. Businesses often create an allowance for irrecoverable debts. i. Of which concept is this an example? Explain. ii. What is the purpose for creating an allowance for irrecoverable debts? iii. How might the amount of an allowance for irrecoverable debts
> a. Which accounting concepts directly influence the creation of an allowance for irrecoverable debts? b. Explain your reasoning.
> Examine the purpose and logic behind an allowance for irrecoverable debts, with particular reference to the timing of profits and losses arising from credit sales.
> a. Explain the nature of an allowance for irrecoverable debts. b. Explain the difference between a specific and general allowance for irrecoverable debts.
> What do you understand by the term ‘irrecoverable debts’? In what circumstances might a debt be treated as irrecoverable?
> Describe two common methods of depreciation including the resulting pattern of charges to the statement of profit or loss for depreciation expense over an asset’s useful economic life. In what circumstances might each of these be the most appropriate met
> Describe the data needed in order to compute depreciation.
