Grade 9(B1) IGCSE ACCOUNTING -0452

Aim
These Questions as for establishing strong basics as pre requisites to IGCSE curriculum
Instructions
Answer the following Question in you notebook
It should be handwritten (in case of any challenge Please write to me to seek approval)
Question and Answers
1.Why do people do business? To make Profit
2.Who are the three participants in a business economy Producer /Consumer & Government
3.What are their goals?
Producer – Profit maximization
Consumer – Utility maximization
Government – Welfare maximization
4.What does a business entrepreneur require to do business – Resources like raw materials labour finance
etc.,
5.What is meant by resources?
Elements required to run/operate the business
6. What are the factors of production The Resources required to run business are many and it is very
complex to say however the economists have categorized the resources into four elements – Land
Labour Capital and Enterprise
7,What is meant by capital? Capital is the money used to build, run, or grow a business. It can also refer to
the net worth (or book value) of a business. You have to put money into a business in order to get a profit
back out. Capital is what we call the money that goes in. The capital introduced by the investors or owners
and is treated as a liability from the point of view of a business. The business owes money to the investor
and the owner to the extent of his capital just like it owes money to lenders and creditors. The investors
get intrest along with the Principal amount they have contributed while owner’s (owner’s equity ) get
share in profit (called as dividend)
8.What are various means of raising capital for business? Owner’s equity / Bank loans / Share capital
9.Once the Capital/Finance is procured how will it be utilised in the business
The business will procure the necessary requirements for the running /operating the business such as
machinery ,land and buidings ,inventory (raw materials ) keep some liquid cash to meet unforeseen
expenses
10.What is meant by a credit transaction? Give two Examples
When a good or service is bought but the payment towards the same is deferred to some other time
1.Purchased furniture with credit card
2.Sold goods to Vee and co today and agreed to take the full settlement of payment in 3 months from now
11.What is meant by a cash transaction? Give two Examples
When a good or service is bought and the payment towards the same is made immediately
1. Sold garments for cash to the client
2.Settled the hotel bill immediately after consuming lunch at Eatery pvt ltd
12.What is meant by mutual benefit in a business transaction? Give two Examples
When both the buyer and seller benefits together immediately after a business transaction. It is generally
observed in a cash transaction
13.What are Assets? Give two Examples
Assets are elements that business owns
1.Machinery
2.Land and buildings
14.What are Non-current Assets? Give two Examples
Assets are elements that business owns for more than 1 year . It stays with the business and is replaced once
 in 4 or 5 years or even more
1.Machinery
2.Land and buildings

15.What are Current Assets? Give two Examples

Assets are elements that business owns for less than 1 year . It has to flow in and out of business to run and
make profit
1.Cash
2.Inventory – Raw materials or work in progress goods or finished goods
3.Prepaid expenses
4. Sundry Debtors
16.What is a Liability? Give two Examples
Assets are elements that business owes
1.Bank loan
2. Owner’s equity
17.What is a Non-current Liability? Give two Examples
Assets are elements that business owes and can be settled beyond one year
1. Long term bank loans
2.Long term loans for buying home
18.What is a Current Liability? Give two Examples
Assets are elements that business owes and to be settled within one year of time period
1. Short term bank loans
2. Bank over draft
3.Outstanding expenses
4.Advance incomes taken
19.What is a capital expenditure? Give two Examples
The capital spent by a business or organization in acquiring or purchasingnon current or fixed assets,
such as land, buildings, and equipment.
20.What is a revenue expenditure? Give two Examples
The expenses incurred by a business in its day-to-day operations to generate revenue. Examples of revenue
expenditure include salaries and wages, rent, utility bills, advertising costs, and raw material expenses

Following are the transactions of Zara an entrepreneur. Identify the nature of transactions. The
first 3 are done for your reference
S.no Transaction Cash or Explanation Debit Explanation Credit
/Credit
transaction?
1 Purchased Car for Cash Car is a non- Car Cash is a current Cash
office use Transaction current asset asset now
as mutual and it has decreases in
benefit has increased in business as it is
been the business used to purchase
passed to car
both the
parties at
the same
time
2. Purchased Raw Cash Raw Raw Cash decreases as Cash
materials worth 2000 materials or materials it is been used up
inventory is a
 dollars for business in current asset or to purchase raw
cash from v&co has Purchases materials
increased
3 Sold goods worth 500 It is credit Ras and co is Ras and Cash was Raw
dollars on credit to transaction yet to settle Co supposed to come materials
Ras and Co as mutual cash for the but did not as it is or Sales
benefit has goods taken a credit
not been therefore in transaction. The
passed at the lieu of sales is the income
the same cash we will and incomes are
time debit Ras always credited
and Co.Also Also another
Ras and co is interpretation is
a Debtor Goods /inventory
until they are current Assets
settle the and have reduced
payment due now as it has gone
from them out of business by
way of sales . As
this decreases it is
credited
4 Paid Rent to landlord Cash Rent is an Rent Cash is a current Cash
450 dollars for Transaction as expense asset and comes
warehouse mutual benefit down
is passed at
the same time
5 Received commission Cash Cash the Cash Commission is the Commissio
in cash 100 dollars Transaction as current assets income n
for business referrals mutual benefit comes into
is passed at business and
the same time increases
6 Purchased Furniture Credit Furniture the Furniture Ikea is now a liability Ikea
and Fittings for office Transaction as asset increases account
use on credit from mutual benefit
Ikea worth 800 is not passed
dollars at the same
time
7 Sold goods for Cash Cash Cash comes in Cash Income comes from Sales
to Kaycee worth 200 Transaction as sales
dollars mutual benefit
is passed at
the same time
8 Sold old machinery Cash Cash comes in Cash Old machinery now Machinery
for 30 dollars to Tan Transaction as goes off from account
and co mutual benefit business
is passed at
the same time
9 Deposited Cash at Cash Bank balance Bank Cash balance Cash
bank for office Transaction as increases decreases account
purposes mutual benefit
is passed at
the same time
from cash to
 bank – contra
entry

10 80 dollars of Cash Cash Expenses are Office travel Cash comes down Cash
was spent for office Transaction as debited expenses account
travel purposes mutual benefit account
is passed at
the same time