Tag: Capital

Alex, a sole trader, does not keep a sales ledger control account or a sales daybook and is not registered for VAT.

The bookkeeper, Lucy, has discovered the following errors and omissions in Alex’s accounting records:

a cheque for £180 from a customer has been returned unpaid by the bank. No entries have been made in the accounting records for the return of the cheque

(2) a credit note for £12 was sent to a customer but was mistaken for an invoice by Alex when recording it in the daybooks.

Which of the following journals will be entered in Alex’s general ledger accounts to correct these errors?

Select ONE answer:

1. Debit Receivables £156, Debit Sales £24, Credit Cash £180
2. Debit Cash £180, Credit Receivables £156, Credit Sales £24
3. Debit Receivables £168, Debit Sales £12, Credit Cash £180
4. Debit Bad debts expense £180, Debit Receivables £24, Credit Cash £180, Credit Sales £24

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 == > Debit Receivables £180 Debit Sales (2 * £12) £24 = £204 — > Credit Cash £180 Credit Receivables £24 = £204
2. Not correct
3. Not correct
4. Not correct

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

Alex has a sole trading business with net assets of £286,400 on 13 January 2024.

The business had net assets of £266,800 on 31 January 2023.

During the year Alex did the following:

(1) took goods for his own use which cost £10,000 and had a market value of £14,000

(2) introduced capital of £50,000

(3) withdrew £30,000 as salary.

The profit for the year was therefore?

Select ONE answer:

1. £9,600
2. £30,400
3. £70,400
4. £109,600

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 – Opening net assets £266,800 + Capital £50,000 – Drawings £40,000 + Profit (Balancing Figure) £9,600 = Closing Net Assets £286,400
2. Not correct
3. Not correct
4. Not correct

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

Alex, a sole trader, has been unable to calculate his business’ profit or loss for the year ended 31 December 2023 as a fire destroyed most of his accounting records.

He has, however, been able to provide the following information to his accountant.

(1) Net assets at 31 December 2022 were £23,000 and £32,500 as at 31 December 2023

(2) Alex introduced additional capital during the year of £4,000 in cash

(3) He took cash drawings of £2,500 and goods with a selling price of £800. The cost of the goods was £750 when purchased.

What was Alex’s profit or loss for the year ended 31 December 2023?

Select ONE answer:

1. £8,750 profit
2. £(1,750) loss
3. £9,800 profit
4. £(2,750) loss

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 – Opening capital £23,000 + Capital injection £4,000 – Drawings (£2,500 + £750) £3,250 = £23,750 == > Difference to Closing capital of £32,500 is profit = £8,750
2. Not correct
3. Not correct
4. Not correct

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

A local taxes prepayment of £475 at the reporting date for his financial statements was treated as an accrual in preparing Alex’s a sole trader’s income statement.

As a result, Alex’s profit was?

Select ONE answer:

1. Understated by £950
2. Overstated by £950
3. Understated by £475
4. Overstated by £475

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 – Understated by 2 x £475 = £950
2. Not correct
3. Not correct
4. Not correct

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