accounting questions

Question 1

Answer 1

Question 2

Answer 2

Question 3

Answer 3

1.recorded under “trade receivables” heading on the debit side because it increases assets
2.when the customer pay back money (-5%) it is recorded under “bank” on debit side because the company has received cash [always on debit side]
2a. simultaneously recorded on credit side under trade receivables

3.must record the discount; this goes under “discounts allowed heading”. Because the discount is an expense to the company it goes under debit side

Question 4

Answer 4

Question 5

Answer 5

we ignore the initial account amount of £1,800; anything in profit and loss account from last year will not be carried forward into the next year [this is not the same for asset, liability and capital etc, we dont refresh]

Question 6

what does this mean

Answer 6

1. sale on debit side meaning the company has received £200 by cash sale
2. credit side, means company has payed £50 for staff wages, reducing their bank balance

Question 7

how would you balance this account

Answer 7

add balance c/d to the side that needs balancing
1. draw a single line under that
2. then write total with double underline
3. carry the balance c/d to the other side- this is the final balance

Question 8

what would be on either side of the debit and credit side of a profit and loss account

Answer 8

Question 9

produce a trial balance in the template

Answer 9

they just go on the side where they increase either debit or credit
-motor vehicle is asset as it is something the company has/ it is an asset/ capital expense or long term asset

Question 10

gross profit is cost of sale

Answer 10

Question 11

in a normal account and then in this T graph

Answer 11

55,000 inventory moved to cost of sales ready for sale
-purchases moves to cost of sales and cancelled out under purchases

-unsold product goes in closing inventory and comes out of cost of sales account

-move 475,000 over to other side to “bring it down”

Question 12

Answer 12

-30,000 is paid as soon as it is invoiced so goes from expense into cash

-27,000 = rent paid covering this year June-june so totally expense can only be 27,000

Question 13

Answer 13

bad debt goes on credit side of trade receivables
-provision for doubtful debt goes under selling and distribution costs

Question 14

share capital is to do with nominal value

Answer 14

bank is £500,000 because that is what the company bank receives

Question 15

what is the T account for this

Answer 15

Question 16

how would you work out how many shares there are in the company (how many shares people have in the company)

Answer 16

ordinary shares of £0.1 each column
there is £300,000 worth of shares in total so if each share is 0.1 then there are 300,000/0.1 = 3 million total shares

Question 17

Answer 17

previous value= 1,260,500
new value= 1,400,000
it has been valued upwards by 139,500

-debit land and buildings by 139,500
-credit revaluation reserve by 139,500

Question 18

Answer 18

NCE= 240m equity + non current liabilities (doesn’t have any)

Question 19

Answer 19

Question 20

Answer 20

initial £100,000 is a sunk cost and irrelevant cost as you already paid it and it is irrelevant to the decision making
-second option is getting £20,000 sale instead of £10,000 in first one

-materials cannot be shown in the sheet at £100,000 because they are not worth that and hat would be an overvaluation. You would put the better option £20,000 as inventory worth

Question 21

calculate break even point

Answer 21

Question 22

calculate break even point

Answer 22

Question 23

how many units need to be sold to make £40,000 profit

Answer 23

Question 24

profit = total revenue - total costs

Answer 24

Question 25

Answer 25

Question 26

Answer 26

Question 27

Management has suggested two scenarios to improve profits:

Answer 27

Question 28

describing the tables -different products W, X, Y, Z and each have their own costs and labour hours -store requisitions onwards are other activities leading to cost incurred -overhead costs for the month table are all the total indirect costs for all units of W, X, Y and Z

Answer 28

labour hour is the cost driver to be used 1. Blanket overhead rate= total overhead rate/total hours [18,225/6,950] = £2.622 per labour hour 2. times rate for each labour hour by the labour hours of each product

Question 29

**Calculate the overhead absorption rate per unit for each product on an activity basis** describing the tables -different products W, X, Y, Z and each have their own costs and labour hours -store requisitions onwards are other activities leading to cost incurred -overhead costs for the month table are all the total indirect costs for all units of W, X, Y and Z

Answer 29

1. Calculate overhead rate for each of the store drivers (store costs, maintenance costs...) 2. Calculate how much each product gives to each overhead costs for each store driver [e.g overhead rate x each driver 3. All these add up to total overhead

Question 30

revise this initial project plan in light of the new information -what is relevant information and what is not

Answer 30

P- relevant cost because you dont have to pay 19,000 if you dont take on the project

Question 31

Answer 31

should accept the order Only variable costs, the extra selling costs and sales revenues differ between alternatives Since relevant revenues exceed relevant costs the order is acceptable subject to the following assumptions: Normal selling price of £40 will not be affected. No better opportunities will be available during the period. The resources have no alternative uses.