Accounting KCs Flashcards
Which of the following would, on their own, be the cause of a debit balance of £100 on the suspense account?
i. A £100 telephone bill being debited to the electricity account.
ii. The exception report showed £100 paid from the business bank account and correctly recorded in cash at bank, could not be matched by the accounting system and so had been posted to a suspense account.
(i) only
(ii) only
Both (i) and (ii)
None of the options
(ii) only
(The original entry would have been to Credit cash and Debit suspense)
Adjustments need to be made in respect of the following matters to Gillian’s ledger accounts for the year ended 31 December 20X6.
Gillian had taken goods from inventory with a sales value of £300. The correct entry has been made in the drawings account. The business has a consistent mark-up of 25%.
At 1 January 20X6 there had been an allowance for receivables of £1,000. Gillian wishes to change this to £1,220 at 31 December 20X6.
What is the net effect of these adjustments on Gillian’s net profit for 20X6?
Increase of £5
Increase of £20
Increase of £80
Decrease of £220
Increase of £20
Francisco is a bookkeeper working for Angeles Ltd. At the beginning of the year, the financial controller asked Francisco to reverse an opening accrual of £25,000 for electricity.
Unfortunately, Francisco was unsure how to process this as he had only just started his training.
As a result, he made the following entry:
Dr Suspense £25,000
Cr Accrual £25,000
What entry should be made in order to correct Francisco’s journal and reverse the opening accrual?
Dr Suspense £25,000, Dr Electricity £25,000, Cr Accrual £50,000
Dr Electricity £25,000, Cr Suspense £25,000
Dr Accrual £25,000, Cr Suspense £25,000
Dr Accrual £50,000, Cr Electricity £25,000, Cr Suspense £25,000
Dr Accrual £50,000, Cr Electricity £25,000, Cr Suspense £25,000
The correct entry to reverse this accrual would have been:
Dr Accrual £25,000
Cr Electricity £25,000
Therefore to correct the error we must:
Dr Accrual £50,000 - Brings Accrual to Dr £25k
Cr Suspense £25,000 - clears suspense account
Cr Electricity £25,000 - balancing figure
Tamar’s exception report showed that £300 received in the business bank account, and correctly recorded in cash at bank, could not be matched by the accounting system and so had been posted to a suspense account. Tamar discovered that the receipt was in respect of a sales invoice where the customer had been expected to take a 20% prompt payment discount but had failed to pay within the required time.
Which of the following journal entries should Tamar post to correctly record the receipt and clear the suspense account?
Dr Suspense £300, Cr Trade Receivables £240, Cr Revenue £60
Dr Trade Receivables £240, Dr Revenue £60, Cr Suspense £300
Dr Suspense £300, Cr Trade Receivables £250, Cr Revenue £50
Dr Trade Receivables £250, Dr Revenue £50, Cr Suspense £300
Dr Suspense £300, Cr Trade Receivables £240, Cr Revenue £60
Expected customer would take prompt payment disc, the OG sale would be recorded at a value of £240 (£300 - 20%). The OG entry wouldve been :
Dr Trade rec £240, Cr Rev £240
The correct entry on receipt shouldve been to recognise a further £60 of revenue:
Dr Cash £300, Cr Trade Rec £240, Cr Rev £60
Therefore, in order to correctly record the receipt and CLEAR the suspense account, we must:
Dr Suspense £300, Cr Trade Rec £240, Cr Rev £60
Given below is an extract from a company’s statement of financial position:
Ordinary shares of £0.50 each = £500,000
Share Premium = £100,000
Retained earnings = £300,000
Total = £900,000
The day after this statement of financial position was drawn up the company made a 1 for 4 rights issue at a price that was at a 25% discount to the current market price of the shares of £1.20.
What would be the balance on the share premium account be after the rights issue?
50,000
100,000
150,000
200,000
200,000
1) Number of existing shares = Ordinary Share Cap/Nominal Value per Share
2) New Shares Issued = Existing Shares/Rights Issue Ratio
3) Issue Price = Market Price * (1 - Disc Rate)
4) Total Proceeds = New Shares Issued * Issue Price
5) Premium per Share = Issue Price - Nominal Value
6) Total Premium = New Shares Issued * Premium per Share
7) New Share Premium Balance = Existing Share Prem Bal + Total Prem
A company is preparing its financial statements for the year ending 31 March 20X4. The initial trial balance has the following figures relating to tax:
Tax payable at 1 April 20X3 = 21,200
Tax agreed with HMRC and paid during the year ended 31 March 20X4 = 19,500
The estimated tax liability for the year ended 31 March 20X4 is £26,700.
The figure for tax expense in the company’s statement of profit or loss will be:
£19,500
£25,000
£26,700
£28,400
£25,000
This year the company estimates it will owe 26,700
The overprovision from last year (21,200 - 19,500) = 1,700
They reduce this year’s tax expense by that amount, so the adjusted tax expense = 26,700 - 1,700 = 25,000
School plc is a large company with a share capital of 4 million 25p equity shares. To raise funds it has made a 1 for 5 rights issue of its equity shares at £2 per share. The rights issue was fully taken up but only £1.5 million had been paid up at the end of the reporting period, 30 June 20X4. The only entry has been to debit cash at bank with £1.5 million with the other side taken to the suspense account.
On its adjusted trial balance School plc should:
Debit Other receivables £100,000, Credit Share capital £200,000, Credit Share premium £1,400,000
Debit Suspense £1,500,000, Debit Other receivables £100,000, Credit Share capital £200,000, Credit Share premium £1,400,000
Debit Suspense £1,500,000, Debit Other receivables £100,000, Credit Share capital £800,000, Credit Share premium £800,000
Credit Share capital £200,000, Credit Share premium £1,300,000
Debit Suspense £1,500,000, Debit Other receivables £100,000, Credit Share capital £200,000, Credit Share premium £1,400,000
1) Calculate number of shares issued in the rights issue = 4,000,000/5 = 800,000 new shares issued
2) Calculate proceeds from the rights issue = 800,000 * 2 = 1,600,000
3) Allocate proceeds between share cap and prem -> each share has a nominal value of £0.25, so this amount goes to share cap and the rest goes to share prem
Amount to share cap = 800,000 * 0.25 = 200,000
Amount to share prem = 800,000 * (2-0.25) = 1,400,000
By the end of the period, only 1.5m has been received. This means that there is an outstanding bal that hasnt been received yet. Since the total proceeds expected are 1.6m, the outstanding amount is 1.6m - 1.5m = 100,000
As at 1 June 20X8 Fara plc had 200,000 25p equity shares, which it issued in 20X2 at 80p each fully paid. It also had 100,000 £1 5% irredeemable preference shares issued at par in 20X3. On 31 January 20X9 Fara plc made a further issue of 50,000 £1 irredeemable 5% preference shares at £1.20 fully paid. On the same date Fara plc made a 1 for 5 bonus issue of equity shares. Fara plc wishes to use share premium in respect of the bonus issue.
In its statement of financial position as at 31 May 20X9 Fara plc will have share premium of:
£100,000
£110,000
£120,000
£150,000
£110,000
Total Share Prem from Equity Shares = 200,000 * (0.8-0.25) = 110,000
Add Share Prem from Preference Share = 50,000 * (1.20-1.00) = 10,000
Deduct Share Prem used for bonus issue.
1 for 5 on 200,000 shares = 40,000 new shares
40,000 * 0.25 (nominal value of equity shares) = 10,000
Which THREE of the following would be included in current liabilities in a company’s financial statements?
Allowance for receivables
Bank overdraft
Tax payable
Share capital
Accrued interest charges
Bank overdraft
Tax payable
Accrued interest charges
You have been given the following information needed to prepare a statement of reconciliation of profit before tax to net cash from operating activities:
Profit before tax £5940
Finance costs 550
Increase in inventories £2456
Decrease in trade payables £3211
Decrease in trade receivables £2986
Depreciation £4562
Loss on disposal £450
Tax paid £900
Interest paid £500
There was no investment income.
What is the correct net cash from operating activities to be included on the statement of cash flows?
£5991
£7421
£6361
£3663
£7421
Starting with Profit before tax of £5940
Add:
FINANCE COSTS
DEPRECIATION
DECREASE IN TRADE RECS
(These are expenses that affect profit but don’t involve actual cash outflows, so we add them back)
Subtract:
Increase in inventories
Decrease in trade payables
Interest paid
Tax paid
At the start of the year, Finn plc’s non-current assets had a carrying amount of £2,100,000. At the end of the year, the assets had a carrying amount of £2,600,000. During the year, depreciation of £200,000 was charged and an item of plant with a cost of £800,000 was acquired. Finn plc made a profit on disposal of £300,000 in relation to the disposal.
What should be recorded in the statement of cash flows for the sale of non-current assets?
£100,000
£200,000
£300,000
£400,000
£400,000
Carrying amount = (Beginning carrying amount + Purchases - Depreciation) - Closing Carrying amount
= (2,100,000 + 800,000 - 200,000) - 2,600,000
= 2,700,000 - 2,600,000 = 100,000
Cash proceeds = Carrying amount + Profit on disposal
= 100,000 + 300,000
= 400,000
In the year ended 31 December 20X1 Hawk Ltd bought new vehicles from Gull Motors with a list price of £150,000 for £120,000 cash and a part exchange allowance against old vehicles of £30,000. The carrying amount of the vehicles taken in part exchange by Gull Motors was £25,000.
Hawk Ltd also sold other vehicles to Magpie Ltd with a carrying amount of £15,000 for cash of £18,000.
In Hawk Ltd’s statement of cash flow for the year ended 31 December 20X1 how would the above transactions be presented under investing activities?
Inflow: Nil Outflow: £102,000
Inflow: £18,000 Outflow: £120,000
Inflow: £40,000 Outflow: £120,000
Inflow: £48,000 Outflow: £150,000
Inflow: £18,000 Outflow: £120,000
120,000 was paid in cash therefore outflow equals 120,000
18,000 is the cash received on the sale of items so inflow equals 18,000
Baldeep plc has the following balances b/fwd and c/fwd on its share capital and share premium accounts:
Share capital (£1 shares): 40m (31 Dec X6), 10m (31 Dec X5)
Share premium: 35m (31 Dec X6), 5m (31 Dec X5)
For the year ended 31 December X6, how much would be shown as the proceeds of share issues in the statement of cash flows?
£10m
£60m
£30m
£45m
£45m
2 for 1 bonus issue means that for every existing share, 2 new shares were issued
Opening Share cap = 10million
Bonus issue created = 10million * 2 = 20million
