Chapter 5: Preparing basic financial statements

After transferring the balances on all the income and expense ledger accounts to the profit and loss ledger account, the total credits in the profit and loss ledger account exceed the total debits by £4,000. Which two of the following statements about Anchor Ltd are correct?

• Anchor Ltd has made a loss for the year of £4,000.

• Anchor Ltd has made a profit for the year of £4,000.

• To begin to calculate the closing capital account balance, Anchor Ltd should credit the capital account and debit the profit and loss ledger account with £4,000.

• The opening balance on the profit and loss ledger account for the next reporting period is £4,000 credit.

• The closing balance on the profit and loss ledger account of £4,000 should be deducted from the capital account to give the profit for the year.

The following are balances on the accounts of Luigi, a sole trader, as at the end of the current financial year and after all entries have been processed and the profit for the year has been calculated. What is the balance on Luigi’s capital account?

£

Non-current assets 85,000

Trade receivables 7,000

Trade payables 3,000

Bank loan 15,000

Accumulated depreciation, non-current assets 15,000

Inventory 4,000

Accruals 1,000

Prepayments 2,000

Bank overdraft 2,000

• £59,000

• £66,000
  

• £62,000

• £64,000

Which of the following would be a credit balance in the trial balance?

• Bank overdraft

• Drawings

• Purchases

• Delivery outwards

Which of the following statements concerning the preparation of financial statements is true?

• The balances on income and expense accounts are brought down at the end of the accounting period to be carried forward to the next accounting period.

• The balances on asset and liability accounts are summarised in an additional ledger account known as the statement of financial position ledger account.

• The statement of profit or loss ledger account is a list of all the balances extracted from the business’s accounts.

• Loss for the year is a credit entry in the statement of profit or loss ledger account.

Which of the following would be classified as a non-current asset?

• Cash

• Prepayments

• Land

• Receivables

A sole trader had trade receivables of £2,700 at 1 May. During May he made cash sales of £7,200, credit sales of £16,500 and received £15,300 from his credit customers. The balance on his trade receivables account at the end of May was:

• £1,500

• £3,900

• £8,700

• £11,100

Violet had an opening trade payables balance of £3,450 on 1 December. During the month of December, she sold goods totalling £6,780 to customers on credit, purchased goods totalling £5,100 from suppliers on credit and made cash purchases of £400. She also received £3,900 from credit customers and made payments to credit suppliers of £4,200. What was the balance on Violet’s trade payables account at the end of December?

• £4,350

• £6,330

• £4,750

• £2,550

Plym plc is a VAT registered retailer. All transactions attract VAT at the rate of 20%. For the year to 30 June 20X7, Plym plc made purchases of £69,600 including VAT and made sales of £89,400 excluding VAT. There was no change in the figures for opening and closing inventory in the statements of financial position as at 30 June 20X6 and 20X7. What was Plym plc’s gross profit for the year ended 30 June 20X7?

• £19,800

• £4,900

• £31,400

• £16,500

Gerrard Ltd is registered for VAT. In the month of April, it sells goods to customers for a total of £89,436 excluding VAT and purchases goods from suppliers for a total of £86,790 including VAT. What is the net amount shown in Gerrard Ltd’s VAT account at the end of April?

• £3,422 debit

• £2,452 debit

• £3,422 credit

• £2,452 credit