Financial Accounting 1 Final Exam

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Questions and Answers

When the transaction is posted to the general ledger, which TWO of the following entries should be included?

Cr Payables control account (correct)

Cr Bank

Cr Sales tax (correct)

Dr Purchases (correct)

What double entry should John post to record the return of the goods?

Cr Sales returns $600 Cr Receivables ledger control $600 (correct)

Dr Receivables ledger control $600 Cr Bank $600

Dr Receivables ledger control $600 Cr Sales returns $600

Dr Bank $600 Cr Receivables ledger control $600

Which of the following errors could have caused the $1,200 difference in the trial balance?

An insurance payment of $600 had been debited to a non-current asset account

A $1,200 cheque received from a customer had been credited to the customer's account in the payables ledger

A non-current asset costing $600 had been credited to the purchases account (correct)

A $1,200 cheque paid to a supplier had been credited to the supplier's account in the payables ledger

What should be the capital balance?

16200 Signup and view all the answers

What entry is needed to correct the electricity expense posting error?

Dr Suspense account $180 Cr Electricity expense $180 Signup and view all the answers

What should be the cost of goods sold for the month of January using the first in, first out (FIFO) method?

$1,325 Signup and view all the answers

What will be the value of closing inventory in Maine's accounts at 30 June?

23550 Signup and view all the answers

How should the loan be reported on Jane's statement of financial position at 31 May 20X3?

As a current liability of $12,000 and a non-current liability of $48,000 Signup and view all the answers

How should Mike's drawings balance be treated in the final accounts?

As a reduction in capital Signup and view all the answers

In completing the extended trial balance, where should the balance in allowance for receivables be entered?

Statement of financial position credit Signup and view all the answers

If the owner of a business takes goods from inventory for own personal use, which accounting concept should be applied to record that transaction?

The business entity concept Signup and view all the answers

The Conceptual Framework for Financial Reporting identifies several qualitative characteristics that make financial information useful. Which one of the following only contains qualitative characteristics of useful information contained in the Framework?

Relevance, faithful representation, timeliness, comparability, verifiability Signup and view all the answers

Which of the following group of statements is correct?

A credit entry will increase a bank overdraft Signup and view all the answers

What would a debit balance on a ledger account indicate?

It represents either an asset or an expense Signup and view all the answers

Which one of the following is a book of prime entry?

the petty cash book Signup and view all the answers

How much is due to the tax authority for the quarter if all sales are inclusive of a 10% standard rate sales tax and purchases were $12,000 (net)?

800 Signup and view all the answers

At what cost should John record his purchase from Chris if a trade and settlement discount were applied?

9000 Signup and view all the answers

At what value should Chris record the sale transaction to John if a trade and settlement discount were applied?

8100 Signup and view all the answers

Which of the following best explains what is meant by 'capital expenditure'?

expenditure relating to the acquisition or improvement of non-current assets Signup and view all the answers

What amount should James recognize as the cost of the machine in his financial statement after additional costs?

55000 Signup and view all the answers

A non-current asset was purchased for $4,800 and depreciated by 20% per annum. What should be the depreciation charge for the year ended?

$768 Signup and view all the answers

What was the depreciation charge for the lorry in Dwane's financial statements for the year ended September 30, 2022?

2500 Signup and view all the answers

A non-current asset was sold for $3,400. What was the profit or loss on disposal of the asset?

$328 loss Signup and view all the answers

A receivables control account with a closing balance of $8,800 contained a contra entry of $400 entered incorrectly. What should be the correct balance?

$8000 Signup and view all the answers

What is the correct value of payables to be reported on Mike's financial statement at May 31, 2023, after discovering the recording error?

79080 Signup and view all the answers

How should the bank balance be reported in Jane's financial statement at May 31, 2023, given certain bank reconciliation information?

$2720 liability Signup and view all the answers

At 31 May 2023, what should the bank statement balance be, given certain bank reconciliation details?

1290 Signup and view all the answers

How much should James add to the petty cash to maintain a float of $400 at the end of November?

325.60 Signup and view all the answers

How should discounts received from suppliers for early settlement be treated in the statement of profit or loss?

As a deduction from the value of purchases Signup and view all the answers

Study Notes

Financial Accounting Concepts

The business entity concept should be applied to record a transaction where the owner of a business takes goods from inventory for personal use.
The Conceptual Framework for Financial Reporting identifies several qualitative characteristics of useful financial information, including relevance, faithful representation, timeliness, comparability, and verifiability.

Accounting for Transactions

A credit entry will increase a bank overdraft, while a debit entry will decrease payables.
A debit balance on a ledger account indicates an asset or expense, while a credit balance indicates a liability or revenue.
The petty cash book is a book of prime entry.

Depreciation

Depreciation is the allocation of the cost of a non-current asset over its useful life.
The reducing-balance method of depreciation involves deducting a percentage of the asset's carrying value each year.
The straight-line method of depreciation involves allocating the cost of the asset evenly over its useful life.

Accounting for Non-Current Assets

Capital expenditure refers to the expenditure relating to the acquisition or improvement of non-current assets.
The cost of a non-current asset includes delivery and installation costs, as well as any testing and training costs.

Accounting for Receivables and Payables

Discounts received from suppliers for early settlement should be treated as a deduction from the value of purchases.
A receivables ledger control account should be reconciled to ensure that the balance agrees with the total of the individual accounts in the ledger.

Bank Reconciliations

A bank reconciliation statement should be prepared to reconcile the bank statement balance with the cash book balance.
Items to be included in a bank reconciliation statement include outstanding cheques, outstanding lodgements, and bank charges.

Petty Cash

An imprest system of petty cash involves maintaining a float, and regularly replenishing it to the original amount.
The float should be maintained at a constant level, and any discrepancies should be investigated and corrected.

Errors and Corrections

Errors in accounting can result in a trial balance that does not agree, and these errors should be investigated and corrected.
A suspense account should be used to record errors and corrections, and to ensure that the accounting equation remains balanced.

Financial Statements

The statement of profit or loss should include all revenues and expenses, including irrecoverable debts and prepayments.
The capital balance should be calculated by adding the opening capital balance to the profit, and deducting drawings.
Accruals and prepayments should be accounted for in the financial statements to ensure that revenue and expenses are matched accurately.### Accounts and Finance
At 30 April 20X3, Neardey's total amount owed by customers was 64,865,andthereceivablesallowancewas64,865, and the receivables allowance was 64,865,andthereceivablesallowancewas3,775. These balances should be reported in Neardey's statement of financial position as at 30 April 20X3 as 64,865asacurrentassetand64,865 as a current asset and 64,865asacurrentassetand3,775 as a current liability.
A company's receivables totaled 800,000,andanallowanceforreceivablesof800,000, and an allowance for receivables of 800,000,andanallowanceforreceivablesof100,000 had been brought forward from the previous year. Debts totaling 76,000werewrittenoff,andtheallowanceforreceivableswasadjustedto1076,000 were written off, and the allowance for receivables was adjusted to 10% of the receivables. The charge for receivables expense should be 76,000werewrittenoff,andtheallowanceforreceivableswasadjustedto1056,000.
The correct formula to calculate cost of goods sold is: Purchases + Opening inventory - Closing inventory.
In inventory costs, carriage inwards and import duties should be included, but not carriage outwards or administrative costs.
Using the first in, first out (FIFO) method, the value of inventory at 31 January would be 1,000,andthecostofgoodssoldforthemonthofJanuarywouldbe1,000, and the cost of goods sold for the month of January would be 1,000,andthecostofgoodssoldforthemonthofJanuarywouldbe1,325.
Maine valued her inventory at 30 June at its cost of 25,000,includingitemscosting25,000, including items costing 25,000,includingitemscosting2,100 that were difficult to sell. After repackaging at a cost of 350,theycanbesoldfor350, they can be sold for 350,theycanbesoldfor1,000. The value of closing inventory in Maine's accounts at 30 June would be $23,550.
Jane had a loan with an outstanding balance of 60,000at31May20X3andwasrequiredtorepay60,000 at 31 May 20X3 and was required to repay 60,000at31May20X3andwasrequiredtorepay1,000 on the 10th of each month. The loan should be reported on her statement of financial position at 31 May 20X3 as a current liability of 12,000andanon−currentliabilityof12,000 and a non-current liability of 12,000andanon−currentliabilityof48,000.
Mike's trial balance included a balance for his drawings, which should be treated in the final accounts as a reduction in capital.
When the extended trial balance is being completed, the balance in allowance for receivables should be entered in the statement of financial position credit column.
The result for the year can be calculated from the extended trial balance totals: a profit of $11,936.
James and Dwayne were in partnership, sharing profits and losses in the ratio 3:4. The statement of profit or loss for the year to 31 May 20X3 reported a net profit of 35,000.Dwayne′sshareoftheprofitfortheyearto31May20X3wouldbe35,000. Dwayne's share of the profit for the year to 31 May 20X3 would be 35,000.Dwayne′sshareoftheprofitfortheyearto31May20X3wouldbe12,000.
Ant and Dec were in partnership. Ant's drawings were 36,000,andthepartnershipappropriationaccountincludedAnt′ssalary,interestondrawings,andshareofresidualprofit.ThebalanceonAnt′scurrentaccountat31October20X3wouldbe36,000, and the partnership appropriation account included Ant's salary, interest on drawings, and share of residual profit. The balance on Ant's current account at 31 October 20X3 would be 36,000,andthepartnershipappropriationaccountincludedAnt′ssalary,interestondrawings,andshareofresidualprofit.ThebalanceonAnt′scurrentaccountat31October20X3wouldbe48,500.
Mara and Kara were equal partners in a business. Janna joined the partnership, introducing 160,000incash.ThebalanceonMara′scapitalaccountimmediatelyaftertheadmissionofJannatothepartnershipwouldbe160,000 in cash. The balance on Mara's capital account immediately after the admission of Janna to the partnership would be 160,000incash.ThebalanceonMara′scapitalaccountimmediatelyaftertheadmissionofJannatothepartnershipwouldbe270,000.
Anna and Karen were in partnership sharing profits and losses equally. Nina was admitted to the partnership, and it was agreed that goodwill would be valued at 150,000butnotmaintainedinthebooks.Ninamustcontribute150,000 but not maintained in the books. Nina must contribute 150,000butnotmaintainedinthebooks.Ninamustcontribute50,000 in cash.
John's sales were 364,000atamarkupof30364,000 at a markup of 30%. His opening inventory value was 364,000atamarkupof3023,600, and his closing inventory value was 19,400.ThevalueofJohn′spurchasesintheyearto30April20X3wouldbe19,400. The value of John's purchases in the year to 30 April 20X3 would be 19,400.ThevalueofJohn′spurchasesintheyearto30April20X3wouldbe275,800.
Janine's capital balance increased by 13,596,andherdrawingstotaled13,596, and her drawings totaled 13,596,andherdrawingstotaled29,200. She introduced additional capital of 5,800.Hernetprofitorlossfortheyearwouldbe5,800. Her net profit or loss for the year would be 5,800.Hernetprofitorlossfortheyearwouldbe36,996 profit.
If James normally earns a mark-up on cost of sales of 25%, his gross profit margin would be 20.00%.

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Description

This exam consists of 50 questions, worth 2 marks each, and has to be completed within 2 hours. It's a comprehensive assessment of Financial Accounting 1.