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Question 1
On December 31, 2010, John Henry found that the debit side of his trial Balance exceeded the credit
side by $492. The difference was put to a suspense account. February 11 of 2011 the following errors
were discovered in the books:
1. $165 paid for the purchase of Fixtures had been entered to Purchases account.
Trial Balance.
(b)
c)
(d)(i) Error of Principle occurred in error # 1 where $165 paid for the purchase of Fixtures had been
entered to Purchases account.
(ii) Error of Commission occurred in error # 5 where $15 goods sold to Lee Gray was debited to Lee
Mays
account.
Question 2
R. Guberman keeps a three column Cash Book. All cheques received are banked immediately. All
small payments of $20 or less are paid out of a petty cash float of $50 and recorded in a Petty Cash
Book with four analysis columns: Postage, Travelling, Sundry Expenses, and small purchases of
stock.
Using the following information, you are required to:
1. Write up his Cash Book and balance it.
2. Write up the Petty Cash Book and balance it.
October 16 Balances: Bank
Cash
574
126
Petty Cash
19
17
17
less 5% discount.
19
675
19
473
20
21
720
21
12
21
17
22
Banked cash
22
650
23
300
23
7.65
24
500
26
28
1,275
28
Banked cash
1,553.35
30
18
2.
15
Question 3
The following were transactions for Green Food Enterprises for the month of June 2007.
$
September 1
4,500
September 6
September 9
September 11
September 17
September 22
September 24
1,200
8,400
2,400
3,000
400
4,900
1,350
Required:
(A) Make Entries in the books of original entry (subsidiary books) for Green Food Enterprises.
(B) Post the books of original entry to the ledger at the end of the month.
Solution
(A)
(B)
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Wizznotes.com
Question
Garvey had the following transactions for the month of January 2007.
2007
50,000.
500
5,000
475
1599
300
742
500
520
Required:
(A)Record and balance transactions in the relevant accounts including a cash account in the ledger of
A. Garvey.
(B)Extract a Trial Balance.
Solution
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Quiz
Question 1
The records of R. Graham showed the following purchases and sales of stock for the months of May
and June 2006.
May 2
Question 2
The Following balances were extracted from the Trial balance of T. Brooks Wholesale at the end of
2005.
Creditors
1400
Purchases
32,000
Returns Outwards
3,600
Opening Stock
4,800
Closing Stock
3,200
Rent owing
Debtors
Cash in hand
600
2,000
2,800
Required:
1. Calculate the following Ratios:
(a)Current Ratio
(b)Acid Test Ratio
(c)Rate of Stock Turnover
2. What is the purpose of each ratio?
3. Identify one limitation associated with the use of accounting ratios.
Solution
1.
2.
(a) Current Ratio provides indication of the business to meet its short term financial commitments.
The comparison is made with (current) assets which will become liquid within a year and (current)
liabilities which should be paid within the same period of one year. This will indicate if the business
has enough short term assets to meet its short term payments.
(b) Acid test ratio indicates the ability of the business to meet it short term payments given the
situation where all debtors settle and all creditors are paid at the same time.
(c) Stock turn provides an indication as to how fast or slow stock is been sold. It also indicates the
efficiency of the business in terms of its control of stock levels. Assuming that gross profit percentage
remains constant, a faster sale of stock will mean increases in profits from sales, likewise a slower
sale of stock could mean decreases in profits.
3. Ratios may become misleading if they are not used in proper context. The same ratios need to be
used as a means of comparison for different time periods of a business, or in comparison with similar
business entities.
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Quiz
Question 1
Sam Browns accounting period is from January 1 to December 31. The following provides
information for three periods.
Year
Debtor Balances
2000
20,000
5%
2001
30,000
6%
2002
25,000
4%
Required:
Write up the Provision for Doubtful Debts Account for each of the three years ending December 31
2000 to 2002.
Solution
Question 2
Novelty Chemicals bought a Motor Vehicle for $110,000 on January 5, 2002. The estimated useful
life of the vehicle is ten years. The disposal value is estimated at $10,000. Annual depreciation is on
the straight line method.
Required for years 2002, 2003 and 2004:
(a)The accumulated Depreciation account- Motor Vehicle
(b)The Balance Sheet extracts for motor vehicle and its related depreciation.
(c)The Profit and Loss accounts extracts for annual depreciation
Solution
Question 3
The Trial balance of Wholesome Groceries as at December 31, 2005 is shown below.
Notes:
Closing Stock $18,000
Rent paid in advance $4,000
Wages and Salaries owing $3,400
Insurance owing $600
Provision for doubtful debt to be created $600
Depreciation on machinery and equipment for the period $3,000
Prepare the Following for Wholesome Groceries:
1. The Trading and Profit and Loss account for the period ending December 32, 2005
2. The Balance Sheet as at December 31, 2005.
Solution
1.
2.
Required:
1. Journalize the correction of the above errors.
2. Post the relevant entries to Suspense account.
3. Enter in Suspense account the figure which represented the original difference in the Trial
Balance.
Solution
1.
2.
3.The figure which represented the original difference in the Trial Balance is $1033.
Question 2
The following Details were extracted from the books of Angene Bisor;
2007
October 1 Debit balances for Sales Ledger
Credit balances for Sales Ledger
Credit balances for Purchases Ledger
Debited balances for Purchases Ledger
3,050
150
12,500
925
10,050
7,100
375
Discounts Allowed
250
Returns Inwards
500
700
15,750
17,500
Discount Received
870
Returns Outwards
300
Required:
(A)Enter up the Sales Ledger Control accounts and The Purchases Ledger Control Accounts for
October 2007.
(B)From which books would the total of Credit Sales, Discount allowed, and Returns Inwards be
taken.
Solution
(A)
(B)
Items for entry in Control Account
Source
Discounts Allowed
Returns Inwards
Question 3
The Following is a summary of the bank account in the Cash Book of X. Wethernorth for the month
of April 2001.
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