Tag: AQA

If rent receivable has been prepaid to the extent of £75 at the end of a firm’s first financial year, the amount of rental income shown in its profit and loss account, relative to the amount of rent it received during the year, will be . . .

Select ONE answer:

1. the same.
2. £75 more.
3. £75 less.
4. None of the above.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 3

1. Not correct
2. Not correct
3. Correct
   For example, if the rent receivable applicable to the year is £100 and £175 has been received, then, in accordance with the accruals concept, the amount to be shown in the profit and loss account is £100, £75 less than the amount received. This would be shown as follows:
   Rent Receivable Income (B/S)
   Dr Profit and Loss £100
   Dr Balance c/d £75
   Cr Bank £175
   Totals £175
4. Not correct

 

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During its first financial year, ended on 31 December 1995. a firm paid £3,000 in respect of insurance premiums.

All premiums were paid in advance and, except for the following related to policies with renewal dates similar to the firm’s accounting year-end date.

Policy X                               Policy Y

Annual premium                        £240                                     £1,200
Renewal date                               30 June 1996                      30 April 1996
Premium paid                             1 July 1995                          1 May 1995

The firm’s insurance expense for 1995 was:

Select ONE answer:

1. £2,280
2. £2,480
3. £2,580
4. £3,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
   Year-end Prepayment
   Policy X = January to June 1996 = 6 months @ £240 pa. = £120
   Policy Y = January to April 1996 = 4 months @ £1,200 pa. = £400
   Total = £520
   Insurance Expense:
   Dr Bank £3,000
   Cr Profit and Loss £2,480
   Cr Balance c/d (above) £520
   Cr Totals £3000
3. Not correct
4. Not correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

A sole trader rents the premises from which he operates and does not pay or receive any other rent.

On 1 January 1995 the rent account in his ledger showed accrued rent payable of £2,500.

During 1995 the trader paid rent totalling £12,750 including all bills in respect of 1995 and one bill for £3,750 in respect of the three months ended on 31 January 1996.

The charge for rent, in the profit and loss account for 1995 was:

Select ONE answer:

1. £9,000
2. £11,500
3. £12,750
4. £14,000

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct
   Dr Bank £12,750
   Cr Balance b/d £2,500
   Cr Profit and Loss £9,009
   Cr Balance c/d (£3,750 / 3 prepaid) £1,250
   Total £12,750
2. Not correct
3. Not correct
4. Not correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

A firm which commenced business on 1 January 1994 rents the premises from which it operates. During 1995 the firm paid rent of £1,320.

This was 10% more than the total rent expense for 1994 – only half of which was paid by 31 December 1994.

If there is no accrual or prepayment in respect of rent at 31 December 1995, the rent expense for the year then ended is:

Select ONE answer:

1. £600
2. £720
3. £1,200
4. £1,320

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct
   £1,320 = 1994 expense + 10%.
   Therefore, 1994 expense = (£1,320/ 110 * 100) = £1,200.
   Only half of the 1994 expense (£600) was paid in 1994.
   Therefore, the other half (£600) was due at 1 January 1995.
   As there is no accrual or prepayment at 31 December 1995, the £1,320 paid has to be made up of the £600 in respect of 1994 and the balance – £720 – in respect of the full expense for 1995.
3. Not correct
4. Not correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.

During 1994 an employee borrowed £10,000 from the firm where he worked at a simple interest rate of 10% per annum, fixed for the three years over which the loan was to be repaid in equal monthly installments.

On 1 January 1995, the employee had paid £100 interest in advance. On 31 December 1995, the employee was in arrears with his interest payments to the extent of £300.

The figure for interest receivable on this loan in the firm’s profit and loss account for 1995, is:

Select ONE answer:

1. £850
2. £1,000
3. £1,150
4. £1,250

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct
2. Correct – In accordance with the accruals concept, the income figure to be shown in the profit and loss account is the income earned during the period covered by the profit and loss account, irrespective of whether received or not 2 £10,000 * 10% = £1,000
3. Not correct
4. Not correct

 

This work is licensed under a Creative Commons Attribution 4.0 International License.