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:
Understated by £950
Overstated by £950
Understated by £475
Overstated by £475
Show your workings to arrive at your answer, and explain and justify your reasons:
Alex is a sole trader prepares financial statements each year to 31 May.
His rent is payable quarterly in advance on 1 January, 1 April, 1 July and 1 October.
Local property taxes are paid each year in two equal instalments on 1 April and 1 October.
His annual rental for the calendar years 2022 and 2023 was £4,800 and £5,400 respectively but on 1 January 2024 this was increased to £6,600 per annum.
Local property tax for the last three years has been as follows:
•Year commencing 1 April 2022 – 3,600
•Year commencing 1 April 2023 – 3,900
•Year commencing 1 April 2024 – 4,500
In preparing his financial statements for the year ended 31 May 2024, the charge to the profit and loss account from his rent and local property tax account would be what for Alex?
Select ONE answer:
£9,900
£10,100
£10,200
£10,300
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
Correct – £4,000 tax +£5,900 rent = £9,900 == > Rent 1June 2023 to 31 December 2023 = 7/12 x £5,400 + 1 January 2024 to 13 May 2024 = 5/12 x £6,600 = £5,900 + Local property tax 1 June 2023 to 31 March 2024 = 10/12 x £3,900 + 1 April 2024 to 31 May 2024 = 2/12 x £4,500 = £4,000
A sole trader’s trial balance as at 13 October 2023 does not agree, with the debit side totalling £500 less than the credit side.
During November, the following errors are discovered:
1 The sales daybook for October had been undercast by £150 2 Rent received of £240 had been credited to the rent expense payables (accrual) account from the cash book 3 The allowance for doubtful debts for receivables, which decreased by £420, had been recorded in the allowance for doubtful debts for receivables account as an increase
Following the correction of these errors, the balance on the suspense account would be?
Select ONE answer:
£340 credit
£250 credit
£1,340 debit
£340 debit
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
Correct – DR £500 & CR £840 (Error 3) = DR £340 — > Error 1 requires a debit to the receivables account and a credit to sales with no effect on suspense. Error 2 is simply moving the credit from one account to another with no effect on suspense.
Which of the following errors would have the effect of reducing the difference when corrected?
Select ONE answer:
The bank deposit balance of £8,000 has been omitted from the trial balance
£4,000 received for rental income for part of the office being sublet has been correctly recorded in the cash book but debited to the rent expense account
No entry has been made in the records for a cash sale of £8,000
£8,000 paid for repairs to plant has been debited to the plant asset account
Show your workings to arrive at your answer, and explain and justify your reasons:
You must be logged in to post a comment.