Accounting for organisations with incomplete records (A Level) flashcards

Topic 14: Accounting for organisations with incomplete records

Opening capital $18,500; closing $21,300; drawings $9,600; capital introduced $1,700. Profit?

21,300 − 18,500 + 9,600 − 1,700 = $10,700. A negative answer is a loss: say so in words.

Statement of affairs

Sets out every asset and liability on one day; capital is the balancing figure. An overdraft, an accrual and a loan are liabilities; a prepayment is an asset.

Revenue $48,000 at a markup of 60%. Cost of sales and gross profit?

Cost of sales 48,000 × 100/160 = $30,000. Gross profit $18,000.

Trade receivables: opening $2,600, closing $3,050; receipts $27,400; irrecoverable debts $350. Credit sales?

27,400 + 350 + 3,050 − 2,600 = $28,200.

Trade payables: opening $5,160, closing $4,720; paid $35,850; discounts received $460. Credit purchases?

35,850 + 460 + 4,720 − 5,160 = $35,870.

Rent paid $5,400; $300 prepaid at the start and $450 at the end. Rent expense?

5,400 + 300 − 450 = $5,250.

Opening carrying amount $30,000; additions $8,000; carrying amount of disposal $2,500; closing carrying amount $28,900. Depreciation?

30,000 + 8,000 − 2,500 − 28,900 = $6,600.

Cash account: how do you find missing takings?

Opening cash + cash sales = amount banked + payments out of takings + closing cash. Solve for the missing figure.

Cost of sales $90,000; rate of inventory turnover 12 times. Average inventory?

90,000 ÷ 12 = $7,500.

Single entry vs double entry: one benefit and one limitation each

Single entry: low cost, no training; but mistakes and theft can stay hidden and an accountant must rebuild the year. Double entry: trial balance proof and full statements; but takes time, skill and often software.