Accounting Notes Principles of Accounting Notes
These notes are prepared by a professional Chartered Certified Accountant and a faculty member in Cambridge Affiliated Institutes.
These note are specially designed for students to easily understand the complex areas of accounting.
According to the original author good grades are reasonably assured....
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Standard Format of Income statement of a sole trader:
Mr. Memon
Trading and Profit and loss account
For the Year Ended December 31, 20XX
Sales xxx
Less: Sales return (x)
Net Sales xxx
Less: Cost of goods sold:
Opening inventory xx
Add: purchases xx
Add: carriage in xx
Less: Purchase return (x)
Goods available for sale xx
Less: Closing inventory (x) (xx)
Gross Profit xxx
Less: Overheads / Expenses:
Depreciation xx
Rent xx
Wages and salaries xx
Interest on loan xx
Sundry expenses xx
Insurance xx (xx)
Add: Other Income:
Discount received xx
Rent income xx xx
Net Profit before tax xxx
Less: Taxation (xx)
Net Profit after tax xxx
*** Only those expenses and revenues will go into TPL which belongs to the given accounting period. (Remember Matching/accruals concept)
Standard Format of Balance sheet of a sole trader:
Mr. Memon
Balance sheet as on December 31, 20XX
Noncurrent assets: Cost Accumulated dep. NBV
(000) (000) (000)
Land xx --- xx
Building xx xx xx
Machinery xx xx xx
Motor vehicle xx xx xx
xx xx xx
Current Assets:
Inventory xx
Receivable xx
Less: Provision for bad debt (x) xx
Prepayments xx
Cash/Bank xx xx
Less: Current Liabilities:
Payables xx
Tax liability xx (xx)
Working capital xx
Less: Noncurrent liabilities:
Bank loan (x)
Net Assets xxx
Financed by:
Capital
Opening capital XXX
Add: Profit XX
Less: Drawings (XX)
Closing capital XXX
*** The two boxes should be match with each other, then the balance sheet is said to be balanced.
Mcqs:
Given the following data, calculate the value of the firm’s capital: Non-current assets4,000; inventory 350; accounts receivable 180; cash at bank 650 and accounts payable 280.
4,900
5,000
5,180
5,460
__________________________________________________________________________________________________________
Which of the following would not be classified as an asset?
Money owed by us to a supplier
Premises
Money owed to us by customers
Cash in hand
__________________________________________________________________________________________________________
The correct double entry to record the return of goods by us to suppliers is:
Debit Credit
Accounts payable Purchases
Accounts payable Returns inwards
Bank Returns outwards
Accounts payable Returns outwards
__________________________________________________________________________________________________________
Which of the following statements is not true?
Paying for assets with cash leaves total assets unchanged in overall value
An increase in liabilities leaves capital and assets both unchanged
Profit adds to capital
Drawings reduces capital
__________________________________________________________________________________________________________
Which of the following is not a liability?
Overdraft
Accounts receivable
Loan
Mortgage
__________________________________________________________________________________________________________
A sole trader introduces a typewriter that is her own into the business for business use. The double-entry transaction needed to record this would be:
Debit Credit
Capital Typewriter
Drawings Typewriter
Typewriter Drawings
Typewriter Capital
__________________________________________________________________________________________________________
Which of the following statements about the trial balance is incorrect?
All errors would be highlighted by the trial balance
Preparation of the final accounts is speeded up
It provides a useful check on the accuracy of the ledger accounts
The totals of each column should agree
__________________________________________________________________________________________________________
Which of the following statements is correct?
Capital must always involve the owner withdrawing money
Cash can be either a credit or debit balance
Drawings reduces the capital balance
Capital is a debit balance
Sale of goods on credit to L Parker should be recorded as:
Debit Credit
Sales L Parker
Sales Profit and loss
L Parker Sales
Profit and loss Sales
__________________________________________________________________________________________________________
Goods purchased on credit by Walsh that are returned to Baker should be entered in the accounts of Baker as:
Debit Credit
Baker Returns outwards
Returns inwards Baker
Returns inwards Walsh
Walsh Returns outwards
__________________________________________________________________________________________________________
What is the closing balance on the following account as at 31 March 1999?
300 credit
225 credit
300 debit
225 debit
________________________________________________________________________________________________________
The correct heading for the balance sheet of Clayton Ltd drawn up on 31 December 1998 would be:
Balance Sheet for Clayton Ltd for year as on 31 December
Balance sheet as on 31 December 1998
Clayton Ltd, Balance Sheet as on 31 December 1998
Balance sheet for Clayton Ltd as for the year ended 31 December 1998
_______________________________________________________________________________________________________
A furniture retailer buys tables for cash for use in the head office. What entry would record this correctly in the accounts?
Debit Credit
Purchases Cash
Cash Purchases
Office furniture Cash
Cash Office furniture
__________________________________________________________________________________________________________
Buying inventory on credit has the following effect on assets and liabilities:
Effect on assets Effect on liabilities
Decrease inventory No effect
Increase inventory No effect
Decrease inventory Increase accounts payable
Increase inventory Increase accounts payable
...
Buy the full version of these notes or essay plans and more in our Principles of Accounting Notes.
These notes are prepared by a professional Chartered Certified Accountant and a faculty member in Cambridge Affiliated Institutes.
These note are specially designed for students to easily understand the complex areas of accounting.
According to the original author good grades are reasonably assured....
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