Prepare the income statement (trading and profit and loss account) for the year ended 29 February 2016. [13] b) Prepare the position statement (balance sheet) as at 29 February 2016

Prepare the income statement (trading and profit and loss account) for the year ended 29 February 2016. [13] b) Prepare the position statement (balance sheet) as at 29 February 2016

 

 

 

 

 

 

 

 

 

BUSINESS FINANCE & BOOKKEEPING

Instructions to candidates:

a) Time allowed: Three hours (plus an extra ten minutes’ reading time at the start – do not write anything during this time)

b) Answer any FOUR questions

c) All questions carry equal marks. Marks for each question are shown in [ ]

d) Non-programmable calculators are permitted in this examination

1. The following is the trial balance of Matilde as at 29 February 2016:

£dr £cr

Sales 561,000

Accounts receivable (debtors) 31,000

Accounts payable (creditors) 18,000

Purchases 202,000

Communication expenses 29,000

Insurance 28,000

Interest on loan 1,000

Returns inwards 4,000

Energy costs 37,000

Payroll costs 165,000

Advertising expenses 41,000

Business rates 27,000

Inventory (stock) at 01 03 15 15,000

Stationery expenses 7,000

Long-term loan 30,000

Drawings 25,000

Land and buildings 420,000

Equipment 140,000

Capital (01 03 15) 565,000

Balance at bank 2,000

----------- -----------

1,174,000 1,174,000

======= =======

Notes at 29 February 2016:

• The value of inventory was £17,000

• Energy costs owing amounted to £6,000

• Advertising expenses prepaid amounted to £2,000

• Business rates prepaid amounted to £3,000

• Ignore depreciation

TASKS

a) Prepare the income statement (trading and profit and loss account) for the year ended

29 February 2016. [13]

b) Prepare the position statement (balance sheet) as at 29 February 2016. [12]

2. a) Explain the following terms:

i. Insurance

ii. Bookkeeping

iii. Accounting ratios [6 each]

b) Outline the benefits of purchasing expensive fixed assets using hire purchase. [7]

                                                                                                                                          Continued overleaf

3. Explain the following terms:

a) Life assurance

b) A bank current account

c) Working capital

d) Debenture finance

e) A trial balance [5 each]

4. The following are the summarised final accounts of a trader:

Income Statement £000

Sales 1,900

Cost of sales (1,000)

------

Gross profit 900

Expenses (500)

------

Net profit 400

====

Balance Sheet (position statement)

Fixed assets (non-current assets) 430

Inventory 160

Accounts receivable 110

Cash and bank 20

Accounts payable (260)

------

Total capital 460

====

TASKS:

a) Calculate the following ratios:

i. Gross profit to sales percentage

ii. Net profit to sales percentage

iii. The expenses to sales percentage

iv. The rate of stock turnover

v. The current ratio

vi. The acid test [3 each]

b) Comment briefly on the financial performance of the business. [7]

For information the equivalent ratios for the previous year were: gross profit percentage 39%; net profit percentage 19%; the rate of stock turnover 5.3; expenses percentage 20%; current ratio 1.8:1; acid test 0.9:1.

5. Write short notes on FIVE of the following:

a) VAT

b) The importance of stock control

c) Cash smoothing

d) Leasing

e) Petty cash

f) Cost accounting

g) A banker’s draft [5 each]


Price: £ 40

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