CAMBRIDGE INTERNATIONAL AS & A LEVEL ACCOUNTING: TEACHER'S RESOURCE

Exam-style questions and sample answers have been written by the authors. In examinations, the way marks are awarded may
be different.

Coursebook answers
Most of the answers are in ‘outline’ form indicating the appropriate points and skills that learners need
to include in their answers. They provide the necessary guidance to allow learners to develop and extend
the points for a fuller answer that contains the relevant skills. In many instances, there may be other valid
approaches to answering the question.

Chapter 16
Accounting in context
Filling in the gaps
Learners’ answers may include:
• Many self-employed small business owners do not maintain full double-entry accounting
systems because:
• they do not have bookkeeping expertise and so are unable to do so
• they are too busy to spend much time on administration.
• This is likely to cost them a lot of money because:
• Accounting firms need to make a profit and it is likely that time is charged out at a rate that
represents several times the hourly wage rate – the more of the work the accountant has to do, the
higher the fee the client will pay.
• If the business owner fails to keep adequate records, the tax office may make a very high
assessment of how much tax the client has to pay. It is also possible that income might be over-
added or expenses under-stated and the profit figure might be higher than it should be, but the
client won’t know or be able to prove this.
• If the client is late in submitting a tax return and paying what they owe, they may face large
interest charges or penalties.
• Small business owners can save money by:
• Learning basic bookkeeping skills and doing a lot of the basic work themselves.
• Hiring a bookkeeper to do much of the work – the more work that can be done, the more money
can be saved.
• There are lots of simple to use accounting packages – some can be linked to smartphones –
which enable the small business owner to do a lot of the work, even basic financial statements
themselves. This means that the role of qualified accountants is limited to the final stages,
which will save money.

Cambridge International AS & A Level Accounting – Hopkins, Malpas, Randall & Seagrove
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 CAMBRIDGE INTERNATIONAL AS & A LEVEL ACCOUNTING: TEACHER'S RESOURCE

Activities
Activity 16.1
Sales ledger control account
Debit Credit
$ $
Opening balance b/d 11 905 Sales returns 7 160
Sales 200 430 Receipts 187 640
Discounts allowed 2 105
Irrecoverable debts 3 280
Closing balance c/d 12 150
212 335 212 335
Closing balance b/d 12 150

Purchases ledger control account

Debit Credit
$ $
Purchases returns 4 985 Opening balance b/d 24 110
Payments 67 900 Purchases 69 415
Discounts received 3 015
Closing balance c/d 17 625
93 525 93 525
Closing balance b/d 17 625

Motor expenses control account

Debit Credit
$ $
Opening balance b/d 890 Opening balance b/d 260
Bank 9 015 Expense for the year 9 520
Closing balance c/d 440 Closing balance c/d 565
10 345 10 345
Closing balance b/d 565 Closing balance b/d 440

Cambridge International AS & A Level Accounting – Hopkins, Malpas, Randall & Seagrove
2 © Cambridge University Press 2021
 CAMBRIDGE INTERNATIONAL AS & A LEVEL ACCOUNTING: TEACHER'S RESOURCE

Activity 16.2
Receipts and payments account
Debit Credit
Cash Bank Cash Bank
$ $ $ $
Opening balance b/d 395 Opening balance b/d 4 210
Sales/takings 12 065 33 080 Paid into bank 7 650
Cash banked 7 650 Suppliers 3 305 11 475
Wages 6 600
Rent and rates 2 850
Electricity 1 140
Administrative expenses 1 265
Drawings (52 × 400) 20 800
Closing balance c/d 6 345 Closing balance c/d 240
12 460 47 075 12 460 47 075
Closing balance b/d 240 Closing balance b/d 6 345

Activity 16.3
Situation 1:
Cost has increased to 18 600 + 23 400 = $42 000
Opening accumulated depreciation = 18 600 − 5400 = $13 200
Closing accumulated depreciation = 42 000 − 19 700 = $22 300
Depreciation for the year = 22 300 − 13 200 = $9 100
Cost Accumulated Net book
depreciation value
Motor vehicles 42 000 22 300 19 700

Situation 2:
(65 000 − 11 000)
Depreciation on Machine A = = $6 750
8
(36 000 − 4 000) 9
Depreciation on Machine B = × = $4 800
5 12
Total depreciation for the year = $11 550
Cost of machines = 65 000 + 36 000 = $101 000
Accumulated depreciation = 47 100 + 11 550 = $58 650
Cost Accumulated Net book
depreciation value
Motor vehicles 101 000 58 650 42 350

Cambridge International AS & A Level Accounting – Hopkins, Malpas, Randall & Seagrove
3 © Cambridge University Press 2021
 CAMBRIDGE INTERNATIONAL AS & A LEVEL ACCOUNTING: TEACHER'S RESOURCE

Exam-style questions
1 C The capital introduced was 12 000 + 5 000 = $17 000 (the other items do not effect capital).
2 C Opening capital = 73 000 − 18 000 = $55 000
Closing capital = 84 000 − 23 000 = $61 000
61 000 = 55 000 + 20 000 + profit – 42 000
61 000 = 33 000 + profit … so profit = 61 000 − 33 000 = $28 000
3 D 37 840 + 246 540 − 4 445 − 6 860 − 41 430 = amount paid = $231 645

Practice question
4 a Artur
Statements of affairs
July 2019
$ $
Bank 2 465
Inventory 11 085
Motor vehicles (Net book value) 13 125
Office furniture (Net book value) 7 440
Prepaid expenses – Insurance 1 375
Trade receivables 8 845
44 335
Less:
Accrued expenses – rent 700
Trade payables 5 210 (5 910)
Net assets (= capital) 38 425

b Receipts and payments (bank) account

Debit Credit
$ $
1 Jul 19 Balance b/d 2 465 30 Jun 20 Cash purchases 27 145
30 Jun 20 Credit sales 81 230 Drawings 21 305
Trade receivables 50 095 Insurance 2 910
Office furniture 4 800
Trade payables 49 165
Rent and rates 8 600
Wages and salaries 16 720
30 Jun 20 Balance c/d 3 145
133 790 133 790
1 Jul 20 Balance b/d 3 145

Cambridge International AS & A Level Accounting – Hopkins, Malpas, Randall & Seagrove
4 © Cambridge University Press 2021
 CAMBRIDGE INTERNATIONAL AS & A LEVEL ACCOUNTING: TEACHER'S RESOURCE

c Sales ledger control account

Debit Credit
$ $
1 Jul 19 Balance b/d 8 845 31 Jun 20 Bank 50 095
30 Jun 20 Credit sales [1] 54 020 Sales returns 1 420
Discounts allowed 870
Irrecoverable debts 715
31 Jun 20 Balance c/d 9 765
62 865 62 865
1 Jul 20 Balance b/d 9 765
Note:
[1] + cash sales of 81 230 = total sales $135 250

Purchases ledger control account

Debit Credit
$ $
30 Jun 20 Bank 49 165 1 Jul 19 Balance b/d 5 210
Purchases returns 2 400 30 Jun 20 Purchases [1] 52 500
Discounts received 1 215
30 Jun 20 Balance c/d 4 930
57 710 57 710
1 Jul 20 Balance b/d 4 930
Note:
[1] + cash purchases of 27 145 = total purchases $79 645

d Rent and rates

Debit Credit
$ $
31 Mar 20 Bank 8 600 1 Jul 19 Balance b/d 700
31 Mar 20 Balance c/d 750 31 Mar 20 Expenses 8 650
9 350 9 350
1 Apr 20 Balance b/d 750

Insurance
Debit Credit
$ $
1 Apr 19 Balance b/d 1 375 31 Mar 20 Expenses 2 745
31 Mar 20 Bank 2 910 31 Mar 20 Balance c/d 1 540
4 285 4 285
1 Apr 20 Balance b/d 1 540

e Depreciation on motor vehicles (whole year) = 20% × 17 500 = 3 500

Depreciation on office furniture (whole year) = 15% × 9600 = 1 440
9
(9 months) = × 15% × 4 800 =   540 1 980
12
Total = $5 480

Cambridge International AS & A Level Accounting – Hopkins, Malpas, Randall & Seagrove
5 © Cambridge University Press 2021
 CAMBRIDGE INTERNATIONAL AS & A LEVEL ACCOUNTING: TEACHER'S RESOURCE

f Statement of profit or loss for Artur for the year ended 31 June 2020
$ $ $
Revenue 135 250
Less: Sales returns   (1 420)
133 830
Less: Cost of sales
Opening inventory 11 085
Purchases 79 645
Less: Purchases returns (2 400) 77 245
88 330
Less: Closing inventory (13 210) (75 120)
Gross profit 58 710
Discount received   1 215
59 925
Less: Expenses
Depreciation 5 480
Discounts allowed    870
Irrecoverable debts    715
Insurance 2 745
Rent and rates 8 650
Wages and salaries 16 720
Total expenses (35 180)
Profit for the year 24 745

g Statement of financial position for Artur at 30 June 2020

Cost Accumulated Net book
depreciation value
$ $ $
Non-current assets:
Motor vehicles 17 500 7 875 9 625
Office furniture 14 400 4 140 10 260
31 900 12 015 19 885
Current assets:
Inventory 13 210
Trade receivables 9 765
Bank 3 145
Other receivables 1 540 27 660
47 545

Opening capital 38 425

Net profit 24 745
63 170
Drawings (21 305) 41 865
Current liabilities:
Trade payables 4 930
Other payables    750 5 680
47 545

Cambridge International AS & A Level Accounting – Hopkins, Malpas, Randall & Seagrove
6 © Cambridge University Press 2021