Accounting AS Paper 1 Revision

What are the advantages of being a sole trader?

1 ability to make quick decisions

2 no bank borrowings are needed

3 owner keeps all the profits

4 unlimited liability for debts

• 1 and 2

• 1 and 3

• 1 and 4

• 2 and 3

What is not a purpose of ledger accounts?

• to assist in the preparation of the financial statements

• to assist in the preparation of the trial balance

• to record the double entry from the subsidiary books

• to verify the accuracy of the bookkeeping system

An item is included in a financial statement because it affects the interpretation of financial statements.

Which accounting concept is being applied?

• consistency

• materiality

• money measurement

• substance over form

A business acquired new factory machinery costing of $120 000. This amount was included in non-current assets, and depreciation at 10% of cost was charged to the draft statement of profit or loss for the period.

In addition the business paid $14 000 for installation of the machinery and $6000 for insuring the machine. These amounts were treated as revenue expenditure for the period.

The draft statement of profit or loss for the period showed a profit of $50 000.

What is the revised profit for the period?

• $48 600

• $50 000

• $62 600

• $68 000

Jake sold a non-current asset which was not fully depreciated. He mistakenly recorded this by debiting the bank account and crediting the sales account with the proceeds.

What was the effect of this error?

1 Assets were overstated.

2 Assets were understated.

3 Profit was overstated.

4 Profit was understated.

• 1 and 3

• 1 and 4

• 2 and 3

• 2 and 4

Sara bought a non-current asset. Depreciation was provided at the rate of 10% per annum in years 1 and 2. It was sold at a profit in year 3. The policy of the business is not to charge depreciation in the year of disposal.

How would profits be affected if the rate had been 15% per annum?

• A

• B

• C

• D

A business buys a vehicle for $10 000 on 1 January Year 1 and sells it for $6500 on 1 January Year 3.

The business has depreciated the vehicle at 10% a year, using the straight-line method.

The business provides a full year’s depreciation in the year of purchase and none in the year of disposal

Which amount for profit or loss will appear in the disposal account, and on what side of the disposal account will it be shown?

• $1500 on the credit side

• $1500 on the debit side

• $2500 on the credit side

• $2500 on the debit side

Which errors would be identified by preparing a trial balance?

1 A bank payment of $275 for rent has been entered as $257 in the cash book.

2 A discount received of $47 has been entered twice in the account.

3 The purchase of a new motor vehicle costing $12 500 has been entered in the purchases account.

4 The total sales of $34 670 from the sales journal has been posted to the sales account as $34 760.

• 1 and 2

• 1 and 3

• 2 and 4

• 3 and 4

A suspense account was opened to record the difference on a trial balance. The following errors were then discovered.

1 The discount allowed of $2000 had only been entered in the sales ledger control account.

2 A cheque for $1500 paid for repairs had been entered as $5100 in the repairs account.

What was the opening balance on the suspense account?

• $1600 credit

• $1600 debit

• $5600 credit

• $5600 debit

At the financial year end of a business, the following information is available. (see table)

What is the current balance in the cash book?

• $550 debit

• $550 credit

• $400 debit

• $400 credit