Financial Accounting and the Regulatory Framework Answer Booklet

BA (HONS) BUSINESS FINANCE PATHWAY
SEMESTER 2 EXAMINATIONS 2021/22
FINANCIAL ACCOUNTING AND THE
REGULATORY FRAMEWORK
ANSWER BOOKLET
INSTRUCTIONS TO CANDIDATES:
There are four compulsory questions on this
paper.
Answer all four questions.
All questions carry equal marks.
Calculators may be used but full workings
must be shown. You can copy and paste any
calculation from Excel to MS Word answer
Booklet.
Please submit your Answer Booklet through
Turnitin Link in Moodle.

Answer to the Question 1 (a)
Write your response here
Statement of profit and loss account (Sandra Shop)
For the year ended 31st December, 2020
Particulars Details Amount
Sales revenue 196375
Less Cost of Sales:
Opening inventory 8560
Add Purchases 123000
Less closing inventory 9400
Total 122160
Gross Profit 74215
Add Provision for doubtful debt excluding new
provision 280 - 280 0
Total 74215
Less Operating expenses:
Rent minus prepaid rent 6000 - 2000 4000
Heat and Light 12000
Wages and salaries 32000
Motor expenses 12350
Insurance 5600
Bad debt 200
Interest on loan 10000 * 5% 500
outstanding gas and electricity expense 250
New Provision for doubtful debt minus old provision
for doubtful debt (36450 * 2%) - 280 449
Depreciation on fixtures and fittings 38900 * 5% 1945
Depreciation on motor vehicle (12500 - 7600) * 20% 980
Total 70274
Net Income/ Profit 74215 - 70274 3941
Answer to the Question 1 (b)
2

Write your response here
Statement of Financial Position (Sandra Shop)
As at 31st December, 2020
Particulars Details Amount
ASSETS
Non-current assets:
Fixture and Fitting at cost 38900
Motor Vehicle at cost 12500
Current assets:
Inventory 9400
Accounts receivable minus provision for
doubtful debt 36450 - 729 35721
Prepaid rent 2000
Bank 4780
Cash 225
52126
Total 103526
Equity and liabilities
Current liabilities
Accounts payable 5460
Provision for depreciation: fixtures and fittings 8450 + 1945 10395
Provision for depreciation: motor vehicle 7600 + 980 8580
Interest payable 500
Outstanding gas and electricity 250
25185
Non-current liabilities
Loan 10000
Equity
Opening equity 110000
Add Net profit of the year 3941
Less Drawings 45600 68341
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Total 103526
Answer to the Question 1 (c)
Write your response here
Trial balance is basically a bookkeeping worksheet in which all the closing balance of
ledger account is transferred to debit and credit column of trial balance. The total of debit and
credit column must be equal. With the help of trial balance, company can detect any
mathematical error that have occurred in the double entry system of accounting. But on the
other hand, if though the total of trial balance equal does not state that there is no error in the
trial balance. It is because if the debit of trial balance is equal to credit of trial balance means
that there is no mathematical error in the ledger but it does not mean that there is no error in
company’s accounting system. For example, wrong journal entry of transaction such as credit
sales is recorded and posted as debit cash and credit sales. In this case, both debit and credit
entry have been passed and posted in ledger with same amount which leads to equal trial
balance but this does not show correct entry (VA, 2021). In this way, it can be said that
transferred classifying improperly and simply missing from the accounting books could leads
to material accounting error. Also, such material accounting error would not be detected from
the trial balance procedure and double entry system.
Answer to the Question 2 (a)
Write your response here
Partnership appropriation account
For the year
Particular (Debit) Amount Particular (credit)
Amoun
t
To interest on capital:
By profit and loss, a/c (net
profit) 132000
Partner Bridge 15000 By interest on drawing:
Partner March 7500 Partner Bridge 900
To interest on loan: Partner March 600
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