AC 12-14

Question 1

List 5 errors

Answer 1

Omission- something excluded from record
Commission- recording transaction in right FS but wrong account (motor expense as stationary)
Principle- conceptually recorded wrong (worse than c)
Compensating- errors are equal and opposite (£500 sale recorded as £50 and £500 purchase recorded as £50)
Transposition- correct double entry but two digits wrong way round (£1640 as £1460)

OCPCT

Question 2

How to tackle questions with errors

Answer 2

Did do
Should do
Correct

Question 3

What is a suspense account

Answer 3

Placeholder or temp account for transactions to be recorded

Question 4

What has an impact on profit

Answer 4

Dr SOPL Cr SOFP (profit decreases)

Dr SOFP Cr SOPL (profit increases)

Question 5

What are the two types of preference shares?

Answer 5

Redeemable- upfront money which is paid back fully over year (loan- liability)

Irredeemable- equity with dividends

Question 6

What is nominal value, issue price, market value and rights issue??

Answer 6

Nominal value- value of share
Issue price- more than NV and is cost of share
Market value- this fluctuates according to success
Rights issue- offering new share’s to existing shareholders

Question 7

What is bonus issue?

Answer 7

Bonus issue is increasing the number of shares, but it doesn’t impact how much money is coming in

Question 8

What is the formula for retained earnings?

Answer 8

Everything from last year + net profits - dividends