Cambridge International AS & A Level Accounting workbook Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 1 Answers to example questions AS Level 1 Financial accounting 1.1 Types of business entity 1 D 2 C 3 B 4 i No need to share profits – sole trader keeps all profits compared with partnership where the profit is shared out in an agreed ratio. ii No need to consult on decision making – sole trader can make all the major decisions without having to consult with partners who have a say in the running of the business. 5 Any three from: • Access to more capital to expand the business – partners can contribute more capital if they all make financial contributions. • Specialisation in different roles within the business – each partner can focus on his or her own areas of expertise – the sole trader has to be an ‘expert’ in all things. • Cover can be arranged for illness and holidays can be organised without the loss of normal business continuity. • More creative ideas may be generated – greater number of people running the business should mean more creative input. 6 • Profits and losses are shared equally. • No interest on capital is allowed. • No interest on drawings is allowed. • No partnership salaries. • Any partner lending the business money is entitled to 5% interest on that loan. 7 Any two from: • Limited liability – no risk of losing own money compared with unlimited liability of (normal) partnerships. • Higher profile – more publicity for business. A limited company is likely to get more publicity – the act of conversion may itself attract media coverage. • Easier to raise finance (especially if plc) as outside investment can be brought into the company as new shareholders generate finance. • Banks and other lenders may be more willing to lend money to the business as it may be perceived to be at a lower risk of failure.
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 2 8 Differences include: • Shares in a private company cannot be publicly traded – meaning the control of the company is kept in the hands of the initial shareholders. • Size of share capital is likely to be much larger for a plc. • A plc has to publicly disclose far more information about its financial performance than a private company. 9 Security is where a business offers an asset as collateral when borrowing money. If the business fails to keep up the repayment terms on the loan (including meeting the interest payments) then the lender can take ownership of the asset used as a security. 10 Internal sources: Owners’ money, money from friends/family, retained earnings External sources: Overdraft, loan, trade credit, debentures, share issues 11 i Share capital does not have to be repaid – the finance represents permanent capital. Debentures have a fixed repayment date. ii Dividends do not have to be paid – they are optional, though shareholders may be unhappy if they expected dividends and none are paid. Debentures have a fixed interest rate that must be paid. 12 Arguments in favour of overdrafts would include: • Interest is only paid on the amount the company’s account is overdrawn by. • They are flexible in that they can be used and paid whenever the business wishes. • Obtaining an overdraft is easier than most other external sources. Arguments against overdrafts would include: • Interest rates on overdrafts are very high (especially compared to a secured loan). • Some banks may charge a flat rate fee for the use of an overdraft irrespective of the amount by which the account is overdrawn. Overall: • Overdrafts are the most often used source of finance. For a company, there are other sources available, such as loans, share issues, debentures and so on. • Knowing what form the expansion is to take and how much money is needed would probably make the decision easier. 1.2 The accounting system 1 B 2 C 3 C 4 C 5 B
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 3 6 Account to be debited Account to be credited a Motor van M Sparks b Machinery Bank c Bank Capital d C Scanlon Sales e U Baines Bank f Cash B Fanning 7 Account to be debited Account to be credited a Cash Bank b Insurance Cash c K Themen Purchases returns d Bank Commission received e Drawings Purchases f Bank E Poulou
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 4 8 Capital $ $ May 1 Cash 1 400 May 17 Computer 380 Cash $ $ May 1 Capital 1 400 May 6 Bank 800 May 13 Equipment 200 Bank $ $ May 6 Cash 800 May 8 Equipment 400 Equipment $ $ May 8 Bank 400 May 13 Cash 200 Computer $ $ May 17 Capital 380 Car $ $ May 11 T Friel 2000 T Friel $ $ May 11 Car 2000
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 5 9 Capital 2021 $ 2021 $ Jun 30 Balance c/d 1 000 Jun 1 Bank 1 000 Jul 1 Balance b/d 1 000 Bank 2021 $ 2021 $ Jun 1 Capital 1 000 Jun 28 Wages 102 Jun 30 Balance c/d 898 1 000 1000 Jul 1 Balance b/d 898 Purchases 2021 $ 2021 $ Jun 5 S Wolstencroft 98 Jun 30 Balance c/d 98 Jul 1 Balance b/d 98 S Wolstencroft 2021 $ 2021 $ Jun 12 Purchases returns 22 Jun 5 Purchases 98 Jun 30 Balance c/d 76 98 98 Jul 1 Balance b/d 76 Sales 2021 $ 2021 $ Jun 30 Balance c/d 277 Jun 8 S Rogers 99 Jun 18 P Hanley 178 277 277 Jul 1 Balance b/d 277 Purchases returns 2021 $ 2021 $ Jun 30 Balance c/d 22 Jun 12 S Wolstencroft 22 Jul 1 Balance b/d 22
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 6 S Rogers 2021 $ 2021 $ Jun 8 Sales 99 Jun 30 Balance c/d 99 Jul 1 Balance b/d 99 P Hanley 2021 $ 2021 $ Jun 18 Sales 178 Jun 20 Sales returns 58 Jun 30 Balance c/d 120 178 178 Jul 1 Balance b/d 120 Sales returns 2021 $ 2021 $ Jun 20 P Hanley 58 Jun 30 Balance c/d 58 Jul 1 Balance b/d 58 Wages 2021 $ 2021 $ Jun 28 Bank 102 Jun 30 Balance c/d 102 Jul 1 Balance b/d 102 10 Assets ($) Capital ($) Liabilities ($) a 64 742 42 422 22 320 b 18 908 13 123 5 785 c 87 971 43 421 44 550 d 61 320 39 808 21 512 e 109 091 76 359 32 732 11 Assets ($) Capital ($) Liabilities ($) a 33 465 28 980 4 485 b 78 979 23 141 55 838 c 151 409 89 808 61 601 d 212 409 168 970 43 439 e 99 080 28 711 70 369
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 7 12 Book of prime entry a Purchases made on credit. Purchases journal b Goods previously purchased by the business sent back to the supplier. Purchases returns journal c A computer taken out of business for private use. General journal d Bank transfer to settle amount owing relating to the purchase of goods for resale. Cash book e Cheque received on sale of motor vehicle Cash book f Sale on credit of machinery bought for resale Sales journal 13 Cash book Cash Bank Cash Bank $ $ $ $ Mar 1 Balance b/d 110 635 Mar 2 Rent 315 Mar 4 Sales 213 Mar 7 M Bright 175 Mar 9 Capital 500 Mar 12 Wages 199 Mar 13 Commission received 85 Mar 18 Purchases 76 Mar 22 Electricity 41 Mar 31 Balance c/d 367 370 408 1135 408 1135 Apr 1 Balance b/d 367 370 14 Cash book Discount allowed Cash Bank Discount received Cash Bank $ $ $ $ $ $ Jul 1 Balance b/d 87.00 Jul 1 Balance b/d 209.50 Jul 5 C Woods 5.60 274.40 Jul 8 Sundry expenses 46.90 Jul 5 D Hirst 6.80 333.20 Jul 9 C Palmer 14.40 345.60 Jul 5 N Jemson 9.60 470.40 Jul 20 J Sheridan 5.40 174.60 Jul 31 Balance c/d 18.10 Jul 20 N Pearson 3.60 116.40 Jul 25 Rent 250.00 Jul 31 Balance c/d 40.10 22.00 87.00 1096.10 23.40 87.00 1096.10 Aug 1 Balance b/d 40.10 Aug 1 Balance b/d 18.10
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 8 15 General journal Dr Cr $ $ Equipment 1 250 T Crooks 1 250 Equipment bought on credit. B Pritchard 250 N Wilding 250 Transfer of debt from Pritchard to Wilding. Drawings 560 Computer 560 Owner takes computer from business for personal use. Delivery van 13 250 SpareVans Ltd 13 250 Van bought on credit. Equipment 225 T Presley 225 Equipment received in settlement of business debt. 16 a The principle of consistency matters here. Ahmed should continue to use straight line for depreciating the asset. Using the same method ensures that comparisons with previous years are more meaningful if the same method is used. It is not that important if the asset has an unrealistic value. b This refers to the concept of materiality. If the value of the cups – which are ‘inventory’ of the juice bar – is sufficiently small then they could be written off as revenue expenditure. This would have to be decided by Ahmed, as to whether the value of the cups is small enough to warrant treating these as an expense rather than as an asset. c This relates to the accruals or matching concept. Incomes and expenses should be matched to the period where they were incurred or generated. Even if the money has not been received, the sale should be credited as income in the current year just as the expenses he incurred in relation to the event have been recorded in the current year. The debt should be included in trade receivables at the year end.
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 9 17 Advantages of not maintaining full records: • No legal obligation. • Might need to spend money on an accountant. • Time and effort taken to keep records. Advantages of maintaining full records. • The double-entry bookkeeping system has a number of built-in checks, making it easier to spot mistakes. • Control spending may require detailed records of where a business spends money. • Full accounting records makes theft from the business by employees less likely. Obviously, a one-person organisation will not face this problem. • Some records will need to be submitted to the tax authorities. Overall: • Perhaps a compromise can be reached – keeping more detailed records but not full records. • If the business expands, Coverdale will have to move closer to keeping full records. • If he wants to become a company, full records may have to be kept. 1.3 Accounting for non-current assets 1 C 2 D 3 B 4 D 5 Capital expenditure: b, c, f Revenue expenditure: a, d, e 6 Capital receipt: b, c Revenue receipt: a, d, e, f 7 Capital expenditure: d, h Capital income: g, j, k Revenue expenditure: a, b, e, i Revenue income: c, f, l 8 Capital expenditure $ Revenue expenditure $ Purchase price of machinery 45 000 Insurance on machinery 2 340 Delivery charge for machinery 870 Power charge for machinery 2 670 Installation cost of machinery 990 Maintenance costs 3 100 Legal fees associated with purchase 1 840 Total 48 700 Total 8 110
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 10 9 Straight-line method ($) Reducing balance method ($) Cost value 33 000 33 000 Depreciation year 1 10 200 16 500 Book value at end of year 1 22 800 16 500 Depreciation year 2 10 200 8 250 Book value at end of year 2 12 600 8 250 Depreciation year 3 10 200 4 125 Book value at end of year 3 2 400 4 125 10 Straight-line method ($) Reducing balance method ($) Cost value 25 000 25 000 Depreciation year 1 6 000 7 500 Book value at end of year 1 19 000 17 500 Depreciation year 2 6 000 5 250 Book value at end of year 2 13 000 12 250 Depreciation year 3 6 000 3 675 Book value at end of year 3 7 000 8 575 Depreciation year 4 6 000 2 572.50 Book value at end of year 4 1 000 6 002.50
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 11 11 Provision for depreciation of plant and equipment 2021 $ 2021 $ Dec 31 Balance c/d 10 000 Dec 31 Statement of profit or loss (50 000 x 0.2) 10 000 2022 2022 Dec 31 Balance c/d 25 000 Jan 1 Balance b/d 10 000 Dec 31 Statement of profit or loss [10000 + (100000 x 0.2 x 3/12)] 15 000 25 000 25 000 2023 2023 Dec 31 Balance c/d 58 000 Jan 1 Balance b/d 25 000 Dec 31 Statement of profit or loss [10000+ 20000 + (20000 x 0.2 x 9/12)] 33 000 58 000 58 000 12 General journal Dr Cr $ $ Equipment disposal 70 000 Equipment at cost 70 000 Transfer of asset to disposal account. Provision for depreciation of equipment (70000/7 x 30/12) 25 000 Equipment disposal 25 000 Transfer of accumulated depreciation to disposal account. L Tong 44 000 Equipment disposal 44 000 Receipt from sale of asset. Statement of profit or loss 1 000 Equipment disposal 1 000 Loss on disposal of asset.
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 12 13 (i) Motor vehicle disposal account 2024 $ 2024 $ Jun 30 Vehicle 25 000 Jun 30 Provision for depreciation of vehicle 12 200 Jun 30 Statement of profit or loss 700 Jun 30 Vehicle 13 500 25 700 25 700 Workings • Accumulated depreciation = $5 000 + $4 000 + $3 200 = $12 200 • New vehicle costs $20 000 – and payment of $6 500 means original vehicle was traded-in for $13 500 (ii) Motor vehicle account 2023 $ 2024 $ July 1 Balance b/d 25 000 Jun 30 Disposal 25 000 2024 Jun 30 Disposal 13 500 Jun 30 Balance c/d 20 000 Jun 30 Bank 6 500 45 000 45 000 1.4 Reconciliation and verification 1 D 2 C 3 B 4 B
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 13 5 Trial Balance at 31 December 2022 Dr Cr $ $ Sales 123 341 Purchases 62 342 Sales returns 432 Purchases returns 342 Machinery at cost 21 000 Provision for depreciation of machinery 1 220 General expenses 989 Land 50 000 Inventory at 1 January 2022 5 523 Trade payables 4 536 Trade receivables 8 778 Bank overdraft 113 Salaries 52 425 Administration costs 841 Capital 85 000 Drawings 12 222 214 552 214 552 Inventory at 31 December 2022 was valued at $6 131 6 i Entering two debits or two credits for an entry. ii Missing out half of the entry. iii Entering different amounts for each ‘half’ of the transaction. 7 a Original entry b Reversal c Commission d Principle e Compensating f Omission
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 14 8 General journal Dr Cr $ $ Purchases 400 Motor vehicles 400 Bank or cash 130 Sales 130 A Wright 72 Purchases returns 72 Sales returns 86 J Callis 86 I Burden 150 I Boden 150 9 Statement of corrected profit for the year $ $ Loss for the year (225) Add: Insurance 425 Drawings 94 519 294 Less: Sales 250 General expenses 19 269 Corrected profit for the year 25
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 15 10 General journal $ $ Purchases 164 Suspense 164 Account which was under added now amended for correct total Drawings 24 Purchases 24 Owner’s purchases included in business purchases by mistake – now corrected Wages 100 Suspense 100 Amount for wages entered on credit side twice – now amended Y Bach 9 Sales returns 9 Incorrect amount entered in both accounts – now corrected Suspense 21 Carriage inwards 21 Incorrect amount entered in carriage account – now corrected Suspense 2021 $ 2021 $ July 31 Trial balance difference 243 July 31 Purchases 164 July 31 Carriage inwards 21 July 31 Wages 100 264 264
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 16 Statement of corrected profit at 31 July 2021 $ $ Draft profit for the year 780 Add: Drawings 24 Sales returns 9 Carriage inwards 21 54 834 Less: Purchases undercast 164 Wages 100 264 Corrected profit for the year 570 11 Cash book 2020 $ 2020 $ Apr 30 Balance b/d 185 Apr 30 Bank interest 31 Apr 30 Ian Yates 85 Apr 30 Bank charges 8 Apr 30 Electricity 130 Apr 30 Balance c/d 101 507 507 May 1 Balance b/d 101 12 a Cash book 2022 $ 2022 $ Jun 30 Balance b/d 344 Jun 30 S Lebon 250 Jun 30 Dividends 132 Jun 30 Bank charges 66 Jun 30 Balance c/d 160 476 476
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 17 b Bank reconciliation statement at 30 June 2022 $ $ Balance as per updated cash book 160 Add Unpresented cheques M Harket 145 305 Less Lodgements not yet credited J Keeble 205 N Rhodes 185 390 Balance as per bank statement 85 (O/D) 13 Sales ledger control account 2021 $ 2021 $ Nov 1 Balances b/d 3 134 Nov 30 Bank 50 118 Nov 30 Credit sales 49 710 Nov 30 Discounts allowed 54 Nov 30 Sales returns 99 Nov 30 Irrecoverable debts 464 Nov 30 Balance c/d 2 109 52 844 52 844 Dec 1 Balance b/d 2 109 14 Purchases ledger control account 2023 $ 2023 $ Apr 30 Bank 94 131 Apr 1 Balance b/d 4 980 Apr 30 Discounts received 2 122 Apr 30 Credit purchases 101 900 Apr 30 Purchases returns 496 Apr 30 Balance c/d 10 131 106 880 106 880 May 1 Balance b/d 10 131
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 18 15 Sales ledger control account 2022 $ 2022 $ Mar 1 Balance b/d 42 301 Mar 31 Balance b/d 1 013 Mar 31 Credit sales 399 808 Mar 31 Bank 417 013 Mar 31 Bank 425 Mar 31 Discounts allowed 3 314 Mar 31 Balance c/d 730 Mar 31 Irrecoverable debts 870 Mar 31 Sales returns 442 Mar 31 Purchases ledger control account 756 Mar 31 Balance c/d 19 856 443 264 443 264 Apr 1 Balance b/d 19 856 Purchases ledger control account 2022 $ 2022 $ Mar 31 Bank 300 980 Mar 1 Balance b/d 23 808 Mar 31 Discount received 2 890 Mar 31 Credit purchases 288 661 Mar 31 Purchases returns 845 Mar 31 Sales ledger control account 756 Mar 31 Balance c/d 6 998 312 469 312 469 Apr 1 Balance b/d 6 998
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 19 16 Reasons for preparing control accounts: • They can deter fraud. • They assist in the location of errors. • They provide a total for Trade receivables/payables. This assists in the preparation of the trial balance and financial statements. Reasons for not preparing control accounts: • It is time consuming – if there are a small number of transactions then it may seem unnecessary. • Not all errors would be discovered using control accounts – it depends on how the error is made (e.g., an error of omission missed out from all journals/ledgers would not necessarily be spotted). Overall: • It depends on how many transactions she needs to record. • Consider if there is a risk of fraud/errors from other members of staff she may employ. • Check if she utilisse trade credit for purchases and sales. If not, then it may not be necessary. 1.5 Preparation of financial statements 1 D 2 B 3 A 4 A 5 a Insurance 2021 $ 2021 $ Dec 31 Bank 994 Dec 31 Statement of profit or loss 1 026 Dec 31 Balance c/d 32 1 026 1 026 b Electricity 2021 $ 2021 $ Dec 31 Bank 425 Dec 31 Statement of profit or loss 373 Dec 31 Balance c/d 52 425 425
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 20 6 a Wages 2023 $ 2023 $ Jan 1 Balance b/d 118 Dec 31 Statement of profit or loss 9 803 Dec 31 Bank 9 280 Dec 31 Balance c/d 405 9 803 9 803 b Rent received 2023 $ 2023 $ Dec 31 Statement of profit or loss 5 436 Jan 1 Balance b/d 214 Dec 31 Bank 4 650 Dec 31 Balance c/d 572 5 436 5 436 7 Irrecoverable debts 2023 $ 2023 $ Apr 22 G Gregory 56 Dec 31 Statement of profit or loss 1549 Jul 31 M Ware 42 Oct 19 I Craig Marsh 101 Dec 15 P Oakey 1350 1549 1549 ($0.75 × $1 800 = $1350) 8 Year Value of the allowance ($) Entry in statement of profit or loss ($) 2019 600 600 (debit) 2020 735 135 (debit) 2021 774 39 (debit) 2022 663 111 (credit)
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 21 9 2022 $ 2023 $ 2024 $ 2025 $ Effect on profit (1 688) (1 108) (1 640) (728) 10 R Becks Calculation of gross profit for the year ended 31 March 2026 $ $ $ Revenue 76 500 Less Sales returns 241 76 259 Less Cost of sales Opening inventory 4 440 Purchases 34 234 Less Purchases returns 139 34 095 Less Goods for own use 5 142 28953 Carriage inwards 280 29 233 33 673 Less Closing inventory 3 980 29 693 Gross profit 46 566
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 22 11 C Lowe Statement of profit or loss for the year ended 30 June 2023 $ $ Revenue 98 080 Less Cost of sales Opening inventory 3 121 Purchases 45 435 48 556 Less Closing inventory 4 444 44 112 Gross profit 53 968 Add Other income Commission received 221 54 189 Less Expenses Wages and salaries 17 200 Office expenses 890 Rent and rates 666 Insurance 420 Motor vehicle expenses 341 19 517 Profit for the year 34 672
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 23 12 P King Statement of profit or loss for the year ended 31 December 2024 $ $ $ Revenue 99 700 Less Cost of sales Opening inventory 12 380 Purchases 35 600 Carriage inwards 850 36 450 48 830 Less Closing inventory 8 978 39 852 Gross profit 59 848 Add Other income Discount received 1 349 Rent received 4 500 Reduction in allowance for irrecoverable debts 470 6 319 66 167 Less Expenses Wages and salaries 25 400 Office expenses 8 725 Motor vehicle expenses 125 Carriage outwards 850 Depreciation of office equipment 22 000 Depreciation of motor vehicles 7 200 64 300 Profit for the year 1 867 13
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 24 N Tennant Statement of profit or loss for the year ended 31 December 2024 $ $ $ Revenue 325 000 Less Sales returns 405 324 595 Less Cost of sales Opening inventory 28 070 Purchases 149 000 Less Purchases returns 352 148 648 Carriage inwards 614 149 262 177 332 Less Closing inventory 24 560 152 772 Gross profit 171 823 Add Other income Discount received 1 110 172 933 Less Expenses Wages and salaries 49 111 Rent and rates 6 173 Electricity 2 690 Motor vehicle expenses 341 Selling expenses 888 Allowance for irrecoverable debts 740 Depreciation of fixtures and fittings 6 440 Depreciation of motor vehicles 5 000 71 383 Profit for the year 101 550
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 25 N Tennant Statement of financial position at 31 December 2024 $ $ $ ASSETS Non-current assets Cost Accumulated depreciation Net book value Land and buildings 225 000 – 225 000 Fixtures and fittings 45 000 19 240 25 760 Motor vehicles 25 000 13 000 12 000 295 000 32 240 262 760 Current assets Inventory 24 560 Trade receivables 19 800 Less Allowance for irrecoverable debts 990 18 810 Other receivables 950 Cash in hand 223 44 543 Total assets 307 303 CAPITAL & LIABILITIES Opening balance 196 431 Add Profit for the year 101 550 297 981 Less drawings 9 800 288 181 Current liabilities Trade payables 13 288 Other payables 600 Bank overdraft 5 234 19 122 Total capital and liabilities 307 303
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 26 14 Almond and Ball Appropriation account for the year ended 31 December 2022 $ $ $ Profit for the year 22 500 Add Interest on drawings Almond 900 Ball 650 1 550 24 050 Less Interest on capital Almond 800 Ball 625 1 425 Partner’s salary Almond 8 000 9 425 14 625 Share of profit Almond 9 750 Ball 4 875 14 625
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 27 15 Datchler, Hayes and Nocito Appropriation account for year ended 30 June 2025 $ $ $ Profit for the year 124 000 Add Interest on drawings Datchler 480 Hayes 340 Nocito 160 980 124 980 Less Interest on capital Datchler 3 400 Hayes 2 400 Nocito 2 000 7 800 Partner’s salary Datchler 15 000 Hayes Nocito 22 800 102 180 Share of profit Datchler 51 090 Hayes 25 545 Nocito 25 545 102 180 Current accounts Datchler Hayes Nocito Datchler Hayes Nocito $ $ $ $ $ $ Balance b/d 6 644 Balance b/d 5 521 1 312 Drawings 12 000 8 500 4 000 Interest on capitals 3 400 2 400 2 000 Interest on drawings 480 340 160 Salaries 15 000 Balance c/d 62 531 12 461 24 697 Share of profit 51 090 25 545 25 545 75 011 27 945 28 857 75 011 27 945 28 857 Balance b/d 62 531 12 461 24 697 16 $0.04 × 350 000 = $14 000 17 Debit Bank $480 000 Credit Ordinary share capital $400 000 Credit Share premium account $80 000
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 28 18 General journal Dr Cr $ $ Property 400 000 Revaluation reserve 400 000 Business property increased in value to reflect change in value 19 a (i) General journal Dr Cr (Bonus issue) $ $ Share premium account 100 000 Retained earnings 300 000 Ordinary share capital 400 000 (ii) Debit Bank $200 000 Credit Ordinary share capital $200 000 b Lidbury plc Statement of financial position at 31 December 2022 $ ASSETS Non-current assets 600 000 Current assets 330 000 930 000 EQUITY AND LIABILITIES Equity Ordinary shares of $1 each 800 000 Revaluation reserve 30 000 Retained earnings 16 000 846 000 Current liabilities 84 000 Total equity and liabilities 930 000
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 29 20 PCHH Ltd Statement of profit or loss for the year ended 31 December 2024 $ $ Revenue 595 000 Less Cost of sales Opening inventory 64 700 Purchases 248 000 312 700 Less Closing inventory 59 807 252 893 Gross profit 342 107 Rent received 9 500 351 607 Less Expenses Wages and salaries 89 000 Rent and rates 3 000 Insurance 4 560 Selling expenses 888 Depreciation of fixtures and fittings 7 300 Depreciation of motor vehicles 6 400 111 148 Profit from operations 240 459 Finance costs 4 000 Profit before tax 236 459 Tax 30 500 Profit for the year 205 959 PCHH Ltd Statement of changes in equity for the year ended 31 December 2024 Ordinary Share capit al $ Retained earnings $ Total $ Balance at 1 Jan 2024 300 000 37 860 337 860 Profit for the year 202 959 202 959 Dividends paid (9 000) (9 000) Balance at 31 Dec 2024 300 000 234 819 534 819
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 30 PCHH Ltd Statement of financial position at 31 December 2024 $ $ $ ASSETS Non-current assets Cost Accumulated depreciation Net book value Land and buildings 425 000 425 000 Fixtures and fittings 95 000 29 300 65 700 Motor vehicles 32 000 15 400 16 600 552 000 44 700 507 300 Current assets Inventory 59 807 Trade receivables 48 900 Cash and cash equivalents 12 100 120 807 Total assets 628 107 EQUITY AND LIABILITIES Equity Ordinary share capital 300 000 Retained earnings 234 819 Total equity 534 819 Non-current liabilities 5% Debentures (2029) 80 000 Current liabilities Trade payables 132 88 Total equity and liabilities 628 107
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 31 21 Factors concerned with share issue: • Control will be diluted or potentially lost with any issue of ordinary shares. • A rights issue may help keep shareholdings with the current group of investors. • Dividends have to be paid only if profits are high enough. • Shares do not have to be repaid. Factors concerned with debenture issue: • No issue of lost control arises. • Interest payments cannot be missed. • Debenture will eventually have to be repaid. • The debenture may require security. • Cost of interest payments may be higher than likely dividend payments. Overall: • Even with a rights issue, investors can still sell their shares (it is a plc) and control may be lost. • Control would only be lost if directors were not holding significant amounts of shares. 22 Sales ledger control account $ $ Balance b/d 8 640 Bank 69 560 Sales 74 266 Discounts allowed 1 730 Irrecoverable debts 238 Balance c/d 11 378 82 906 82 906 Balance b/d 11 378 Purchases ledger control account $ $ Bank 55 980 Balance b/d 12 476 Discounts received 1210 Purchases 50 692 Balance c/d 5 978 63 168 63 168 Balance b/d 5 978 23 Shoes sold at cost price = $1000 x ¾ = $750 Cost of shoes stolen = 130 + 980 – 750 – 30 = $330
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 32 24 Workings: Sales control account Balance b/d 34 362 Receipts 268 635 Credit sales 267 213 Balance c/d 32 940 301 575 301 575 Purchases control account Payments 172 959 Balance b/d 26 268 Balance c/d 27 915 Credit purchases 174 606 200 874 200 874 Cash sales banked 84 915 Add Drawings 18 720 Cash sales 103 635 i Sykes Statement of profit or loss for the year ended 31 December 2022 $ $ Sales 370 848 Less Cost of goods sold Opening inventory 19 770 Add Purchases 174 606 194 376 Less Closing inventory 24 450 169 926 Gross profit 200 922 Less Expenses Expenses 14 520 Insurance 6 168 Wages 42 500 Depreciation of fixtures and fittings equipment 20 400 Depreciation of motor vehicles 8 400 91 988 Profit for the year 108 934
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 33 ii Sykes Statement of financial position at 31 December 2022 $ $ Non-current assets Premises 300 000 Equipment 65 100 Motor cars 29 100 394 200 Current assets Inventory 24 450 Trade receivables 32 940 Other receivables 261 Bank 124 378 182 029 Total assets 576 229 Capital and liabilities Capital at 1 January 2022 456 141 Add Profit for the year 108 934 607 575 Less Drawings 18 720 546 355 Current liabilities Trade payables 27 915 Other payables 1 959 29 874 Total capital and liabilities 576 229
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 34 1.6 Analysis and communication of accounting information 1 A 2 B 3 C 4 B 5 a Employees Interest in profits and liquidity of business for purposes of job security – whether the business is going to survive into the medium term. Interested in profits of business to determine whether business can afford to make pay increases to workers. b Lenders Interested in profitability and liquidity of business to check that the business can meet interest payments and repay any borrowed amounts. c Existing investors Will be interested in profits, which can be used to make dividend payments to existing investors (shareholders). Potential for capital gains (rising share prices) if business continues to reinvest the profits into the business (internal growth). d Suppliers Interested in profits and liquidity to ensure that the business will be reliable in paying any trade credit allowed. Interested in seeing the trade payables turnover to estimate how quickly they will be paid. 6 2023 2022 2021 ROCE (%) 225/1217 x 100 = 18.5% 199/1011 x 100 = 19.7% 169/989 x 100= 17.1% 7 2021 2020 a Mark-up 48.1% 59.6% b Gross profit margin 32.5% 37.4% 8 a Gross profit margin (%) 46.02% b Mark-up (%) 85.25% c Profit margin (%) 18.67% d Expenses to revenue ratio (%) 27.35% e Operating expenses to revenue (%) 25.88%
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 35 9 2021 2020 2019 Current ratio 2.44: 1 2.93: 1 3.20: 1 Acid test ratio 0.98: 1 1.38: 1 1.72: 1 10 Any two from: • High bank balances are undesirable as most current accounts pay no interest – surplus cash can be invested into interest bearing assets. • High cash balances are undesirable because they present a greater risk of theft. • Higher trade receivables balances may create a higher risk of irrecoverable debts and also higher costs in managing the credit control function of the business. • Inventory costs money to store and high inventory levels increases the risk of spoilage, theft or obsolescence. 11 a Non-current asset turnover 1.20 times b Trade receivables turnover 41 days c Trade payables turnover 54 days d Inventory turnover 45 days e Rate of inventory turnover 8.18 times 12 Reasons for concern: • Gross profit margin shows ability to generate profits from sales. • The fall means less profit is earned for each $1 of sales. • Fallen by 11% over 3 years. • Profit for the year is also falling (but not as quickly). Reasons for not being concerned: • Might be the result of competitive pressure on prices. • Might be the result of focus on better quality products (new product mix may mean more expensive costs of production). • Because the fall in profit is less than the decrease in the margin it may be that the fall in the margin has caused an increase in sales volume. Overall: • It is a concern but may be something all businesses are facing. • Depends on how the product mix affects profitability. • Consider other ratios, ROCE, other profit margins.
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 36 2 Cost and management accounting 2.1 Costs and cost behaviour 1 B 2 B 3 C 4 B 5 The distinction is in the relationship with each type of cost and the level of output. Variable costs change in proportion to changes in output whereas fixed costs do not change at all when the output level changes (within the relevant range). 6 Fixed costs: rent, salaries, machinery hire, advertising Variable costs: coffee, cups, milk, wages of part-time workers 7 a Net realisable value is the selling price less any costs involved in getting inventory into saleable condition (i.e., repair costs) less other costs to sell. b $23 300 ($20 000 + $1 200 + $700 + $1 400) c Prudence (allow historical cost, matching or even consistency) 8 Ovens in inventory on 31 July = 1 + 2 + 3 – 1 – 3 = 2 ovens Oldest sold first. Therefore, 2 ovens remaining are $1 400 (2 × $700) 9 a 45 units bought, 27 sold, therefore, closing inventory consists of 18 units (i) FIFO = 18 units @ $30 = $540 (ii) AVCO = 18 units at average cost of $27.33 = $492 b Gross profit for March 2023 FIFO AVCO $ $ $ $ Sales 1 764 1 764 Less Cost of sales Purchases 1 230 1 230 Less Closing inventory 540 690 492 738 Gross profit 1074 1 026 10 a In the first year, the switch will lead to an increase in inventory’s value as it will be based on most recent purchases. This will mean the cost of sales is lower and the gross profit will be higher as a result. b In subsequent years, there will be less effect on gross profit as the increased value of inventory achieved by using FIFO will also be added on to the cost of sales as opening inventory. 11 Disadvantages include, any two from: • Loss of bulk-buying discount. • Unemployment of resources during period of low demand. • Unexpected orders may not be fulfilled. • Cannot respond as quickly to a rise in demand.
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 37 12 Arguments in favour of switch: • Save money on holding inventory. • Cash is not tied up in inventory. • Not left with obsolete inventory. Arguments against switch: • May miss out on bulk-buying discounts. • If customers want their product quickly, they may miss out on sales. • Orders may be lost if materials are wasted or there is a shortfall in supply. Overall: • It will depend on the reliability of suppliers – and how quickly they can deliver. • It will depend on how predictable demand is. • How quickly can the products be produced – consider if customers are happy to wait. 2.2 Traditional costing methods 1 D 2 C 3 A 4 C 5 New selling price = $6 × 150% = $9 New break-even point = $80 000 ÷ ($9 − $4) = 16 000 units 6 a Before = $11; after = $17 b Before = $220 000 (i.e., 20 000 × $11); after = $340 000 (i.e., 20 000 × $17) c Before: profit of $20 000; after: profit of $90 000 7 a Note: the selling and distribution costs will be incurred irrespective of the source of the scooters. Contribution per unit (manufactured scooters) = 300 – (7 500+15 000+3 500+6 000)/200 = 300 – 160 = $140 Contribution per unit (bought in scooters) = 300 – 150 – (6 000/200) = 300 – 150 – 30 =$120 Parsons Ltd should continue manufacture in order to maximise profits. b Additional factors, any three from: • Quality of bought-in scooters may be higher or lower than the manufactured scooters. • Extra fixed costs may be incurred with the buying in of scooters. • Reliability of supplier/lead time. • Guarantee that the current price offered by suppliers is to remain fixed beyond shortterm. • Loss of employment and negative publicity. • Spare capacity generated could be used for other output.
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 38 8 a $ Materials 12 Labour 24 Administration 5 Power 6 Variable/direct cost per pipe 47 Selling price 60 Contribution 13 Proposal 1 price 48 Proposal 2 price 42 For proposal 1, the reduced selling price of $48 would mean that each pipe supplied would earn extra contribution of $1. This adds 2 000 × $1 = $2 000 to the profits of Rhodes Ltd. For proposal 2, the reduced selling price of $42 generates negative contribution of $5 per pipe. Rhodes Ltd would actually lose 3 000 × $5 = $15 000 on the order. On financial grounds alone, proposal 2 should be rejected. Proposal 1 could be accepted. b Additional reasons, any three from: • There may be additional (hidden) fixed costs connected with the proposal. • Regular customers may also demand the lower price. • Customers may be found instead who would be willing to pay the regular price. • Consider whether LeBon would become a regular customer that would agree to the more regular price in future. • Consider if the company would have spare capacity or whether sales to other customers would have to be cut back. • Consider if an overtime premium would have to be paid to workers, reducing or reversing the already small contribution. 9 Small Medium Large Total direct costs $19.00 $18.00 $22.00 Contribution per unit $13.00 $17.00 $18.00 Scarce resource used (hours) 1.50 1.25 1.75 Contribution per unit of scarce resource $8.67 $13.60 $10.29 Production priority 3 1 2 Hours used 2 000 2 500 3 500 Revised production schedule (number of plates) 1 333 2 000 2 000
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 39 10 a Total direct labour hours = (18 000 × 2.5) + (12 000 × 1.25) = 60 000 OAR = $80 000 ÷ 60 000 = $1.33 per direct labour hour Overhead absorbed by one unit of XP1 = $3.33 Overhead absorbed by one unit of IJY7 = $1.67 b Total overheads absorbed: XP1 = $1.33 × 18 000 × 2.5 = $60 000 IJY7 = $1.67 × 12 000 × 1.25 = $20 000 11 Overhead absorption rate = $480 000/(100 000 hours) = $4.80 per hour (i) Total production cost: JWLH SHLH $ $ Direct labour cost 2 400 000 300 000 Direct materials cost 800 000 180 000 Overheads 768 000 192 000 Total production cost 3 968 000 672 000 (ii) Production cost per unit (= total production cost/units sold) JWLH SHLH Full cost per unit $198.40 $67.20 12 Reasons for closing the branch: • Losing money will reduce funds available for reinvestment. • Three years of losses is probably significant. • Overall future of business may be risked by supporting losses regularly. • Savings may be made on indirect/fixed costs by closing a branch. Reasons for not closing branch: • Branch may be making a positive contribution to profits. • External factors may make the loss-making branch different (e.g., location). • Would need to consider what happens to the fixed overheads of the business if the branch were closed. Overall: • It depends on how big and in what direction the losses are moving. • Consider whether it is a big drain on overall business profits. • Consider how significant the difference is between profits and contribution by that branch.
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 40 13 Overhead Total ($) Basis of apportionment Dept 1 ($) Dept 2 ($) Factory rent 28 000 Factory area 7 000 21 000 Heating and lighting for factory 18 500 Electricity used 11 100 7 400 Machinery maintenance 12 400 Cost of machinery 7 440 4 960 Factory supervision 48 800 Staff employed 15 250 33 550 Machinery insurance 3 650 Cost of machinery 2 190 1 460 111 350 Total 42 980 68 370
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 41 A Level 3 Financial accounting 3.1 Preparation of financial statements 1 a Revaluation account $ $ Inventory 6 000 Premises 50 000 Capital: Gahan 36 000 Machinery 10 000 Capital: Gore 18 000 60 000 60 000 Profit on revaluation = $54 000: Gahan $36 000; Gore $18 000 b Gahan, Gore and Fletcher Statement of financial position at 1 January 2024 $ $ Non-current assets Premises 240 000 Machinery 34 000 274 000 Current assets Inventory 4 000 Bank 46 000 50 000 324 000 Capitals: Gahan 166 000 Gore 118 000 Fletcher 40 000 324 000 2 Capital accounts Drewery Connell Jackson Drewery Connell Jackson $ $ $ $ $ $ Goodwill 9 600 9 600 4 800 Balance b/d 18 000 12 000 9 000 Balance c/d 16 400 10 400 12 200 Goodwill 8 000 8 000 8 000 26 000 20 000 17 000 26 000 20 000 17 000 Balance b/d 16 400 10 400 12 200
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 42 3 Revaluation account 2022 $ 2022 $ Jan 1 Equipment 14 000 Jan 1 Premises 150 000 Motor vehicles 11 000 Capitals: Cureton 100 000 Iwelumo 25 000 150 000 150 000 4 Subscriptions account 2021 $ 2021 $ Jan 1 Balance b/d 36 1 Jan Balance b/d 45 Dec 31 Income & expenditure account 1 428 Dec 31 Receipts & payments account 1 380 Dec 31 Balance c/d 96 Dec 31 Balance c/d 135 1 560 1 560 2022 2022 Jan 1 Balance b/d 135 Jan 1 Balance b/d 96
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 43 5 Trade payables account 2024 $ 2024 $ Dec 31 Bank/cash 455 Jan 1 Balance b/d 33 Dec 31 Balance c/d 27 Dec 31 Bar purchases 449 482 482 2025 Jan 1 Balance b/d 27 The trade payables account is just one way of calculating the snack bar purchases figure. Crosspool Chess club Snack bar statement of profit or loss for the year ended 31 December 2024 $ $ Snack bar sales 890 Less Cost of sales Opening inventory 71 Add Purchases 449 520 Less Closing inventory 64 456 434 Less Wages 202 Profit on snack bar 232 6 Birkdale Football Club Income and expenditure account for year ended 31 December 2023 $ $ Income Subscriptions 1 725 Profit on raffle ($85 − $32) 53 1 778 Expenditure General expenses 76 Electricity 50 Rent 600 Repairs to club house 299 Loss on sale of football kits (*) 50 1 075 Surplus for the year 703 (* cost of kits is 0.75 × 1200 = 900)
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 44 7 Prime cost Factory overhead Statement of profit or loss purchases returns wages of factory supervisory staff sales returns production wages depreciation of factory machinery depreciation of office equipment manufacturing royalties insurance of machinery wages of administrative staff carriage outwards 8 Manufacturing account (extract) for the year ended 31 July 2023 $ $ Cost of material consumed Opening inventory of raw material 6 454 Purchases of raw material 87 012 Less Purchases returns 231 86 781 Add Carriage inwards on raw materials 544 87 325 93 779 Less Closing inventory of raw material 4 313 89 466 Direct wages 98 800 Direct expenses 24 477 Manufacturing royalties 6 213 129 490 Prime cost 218 956
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 45 9 a Provision for unrealised profit 2021 $ 2021 $ Dec 31 Balance c/d 1 480 Jan 1 Balance b/d 1 250 Dec 31 Statement of profit or loss 230 1 480 1 480 b Statement of financial position (extract) at 31 December 2021 Current assets $ $ Inventory of finished goods 7 400 Less Provision for unrealised profit 1 480 5 920
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 46 10 Morton Ltd Manufacturing account for the year ended 30 June 2022 $ $ Cost of material consumed: Opening inventory of raw material 11 890 Purchases of raw material 124 800 136 690 Less Closing inventory of raw material 8 980 127 710 Direct wages 65 790 Direct expenses 21 313 Prime cost 214 813 Add Factory overheads Indirect wages 55 900 Factory rent and rates 3 733 Factory insurance 2 223 Factory fuel and power 8 780 Factory general expenses 9 995 Depreciation of factory machinery 4 500 85 131 299 944 Add Opening inventory of work in progress 23 133 323 077 Less Closing inventory of work in progress 25 110 Production cost 297 967 Add Factory profit 74 492 Transfer price of goods completed 372 459 Calculation of gross profit for the year ended 30 June 2022 Revenue 425 000 Less Cost of sales Opening inventory of finished goods 41 414 Transfer price of goods completed 372 459 413 873 Less closing inventory of finished goods 37 760 376 113 Gross profit 48 887
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 47 11 $000 $000 Increase in retained earnings 34 Add Provision for tax 56 Debenture interest 80 Transfer to general reserve 14 Dividends paid 65 215 Profit from operations 249 12 $ Profit from operations 99 500 Increase in inventory (2 312) Decrease in trade receivables 4 312 Decrease in trade payables (2 824) Depreciation 11 000 Profit on disposal of non-current asset (690) Net cash from operating activities 108 986
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 48 13 a Jow Ltd Statement of profit or loss for the year ended 31 December 2023 $000 $000 Revenue 1 180 Less Cost of sales Opening inventory 59 Purchases 725 784 Less Closing inventory 81 703 Gross profit 477 Less Expenses Wages and salaries 111 Rent and rates 30 Insurance 45 Motor vehicle expenses 23 Selling expenses 66 Depreciation of fixtures and fittings 28 Depreciation of motor vehicles 18 321 Profit from operations 156 Finance costs 25 Profit before tax 131 Tax 46 Profit for the year 85 b Jow Ltd Statement of changes in equity for the year ended 31 December 2023 Share capital Revaluation reserve Retained earnings Total $000 $000 $000 $000 Balance at 1 Jan 2023 2 000 200 256 2 456 Profit for the year 85 85 Dividends paid (52) (52) Balance at 31 Dec 2023 2 000 200 289 2 489
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 49 c Jow Ltd Statement of financial position at 31 December 2023 $000 $000 $000 ASSETS Non-current assets Cost Accumulated depreciation Net book value Land and buildings 2 350 0 2 350 Fixtures and fittings 480 228 252 Motor vehicles 180 78 102 3 010 306 2 704 Current assets Inventory 81 Trade receivables 203 Cash and cash equivalents 102 386 Total assets 3 090 EQUITY & LIABILITIES Ordinary share capital 2 000 Revaluation reserve 200 Retained earnings 289 2 489 Non-current liabilities Debentures (2030) 500 Current liabilities Trade payables 101 Total equity and liabilities 3 090
Cambridge International AS & A Level Accounting workbook: answers to example questions Cambridge International AS & A Level Accounting workbook © David Horner/Hodder & Stoughton Ltd 2021 50 14 Chan Kingswood plc Statement of cash flows for the year ended 31 December 2022 $ $ Operating activities Profit from operations 40 000 Depreciation on premises 7000 Depreciation on plant and equipment 4000 Loss on disposal 1000 Increase in inventory (700) Increase in trade receivables 1000 Decrease in trade payables (500) Cash used in operations 49 800 Interest paid (8000) Taxation paid (7400) Net cash used in operating activities 34 400 Investing activities Proceeds from sale of plant and equipment 10 000 Purchase of plant and equipment (35 000) Purchase of premises (57 000) Net cash used in investing activities (82 000) Financing activities Proceeds from issue of shares 55 000 Ordinary dividends paid (9000) Net cash from financing activities 46 000 Net decrease in cash and cash equivalents (1600) Cash and cash equivalents at 1 January 2022 1500 Cash and cash equivalents at 31 December 2022 (3100) 3.2 Regulatory and ethical considerations 1 i a statement of financial position at the end of the period ii a statement of profit or loss for the period iii a statement of changes in equity for the period iv a statement of cash flows for the period v accounting policies and explanatory notes. 2 Any four from: • revenue • finance costs • the charge for taxation • the after-tax profit or loss for the period from discontinued operations • profit for the year (attributable to ordinary shareholders).