AQA A-Level Accounting: Preparation of financial statements of sole traders (7127) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover section 3.6, Preparation of financial statements of sole traders, of the AQA A-level Accounting (7127) specification (version 1.1, October 2026, A-level exams June 2019 onwards). The qualification is not tiered and section 3.6 is assessed on Paper 1. Use a calculator throughout. All businesses and figures are invented.

Learn the content with the study guide and the revision notes. See also the AQA A-level Accounting hub and the 7127 checklist.

Questions

1. Fenwick Tutoring’s year ends 31 December. Insurance of £420 was prepaid at 1 January 2025. On 1 April 2025 it paid £2,040 for the 12 months to 31 March 2026. Prepare the insurance account for 2025. [4]

2. Brook Storage sublets part of its unit. At 1 January 2025 rent of £300 had been received in advance. During 2025 it received £5,100. At 31 December 2025 the tenant owes £450. Prepare the rent receivable account for 2025. [4]

3. Dale Couriers (year end 31 March) bought a van on 1 April 2023 for £28,000. Policy: 20% reducing balance, a full year’s charge in the year of purchase and none in the year of disposal. The van was sold on 15 January 2026 for £16,500.

(a) Calculate the accumulated depreciation at disposal. [3] (b) Prepare the disposal account. [4]

4. Kestrel Supplies had a provision for doubtful debts of £1,500 on 1 January 2024. The provision is kept at 4% of trade receivables.

• 31 December 2024: trade receivables £46,000, before writing off irrecoverable debts of £2,000.
• 31 December 2025: trade receivables £38,500, after all irrecoverable debts.

(a) Prepare the provision for doubtful debts account for 2024 and 2025. [4] (b) Show the 2025 entries in the income statement and statement of financial position. [3]

5. Lowfield Café’s debt of £720 was written off in the year ended 30 June 2024. On 12 March 2026 it paid the £720 in full. Show the entries and state the effect on profit for the year ended 30 June 2026. [4]

6. Calculate the value of closing inventory for these three product lines. [3]

Line	Cost £	Information
A	5,400	Selling price £7,100
B	3,250	Selling price £3,400; selling costs £350
C	1,900	Damaged; will sell for £1,200 after repairs costing £200

7. Moss Interiors’ draft profit is £41,300. Not yet dealt with:

• Goods sent on sale or return at selling price £2,400 (mark-up 60% on cost) were recorded as a credit sale. They are not yet accepted and not in closing inventory.
• The owner took goods costing £680 for her own use.
• Electricity of £290 is accrued.

Calculate the corrected profit for the year. [5]

8. Ashby Consulting is a service business. Extract from its trial balance at 30 June 2026:

	Dr £	Cr £
Fees receivable		98,600
Commission received		2,400
Salaries	41,200
Rent and rates	12,600
Office expenses	4,380
Motor expenses	3,150
Irrecoverable debts	510
Provision for doubtful debts 1 July 2025		700
Trade receivables	12,400
Office equipment at cost / provision for depreciation	18,000	7,200
Car at cost / provision for depreciation	22,000	8,800

Notes: work completed and earned but not invoiced, £1,200; commission includes £400 for next year; salaries accrued £800; rent and rates prepaid £1,050; write off a further irrecoverable debt of £400; provision for doubtful debts 5% of trade receivables; depreciate office equipment at 15% on cost and the car at 30% reducing balance.

Prepare the income statement for the year ended 30 June 2026. [12]

9. Hartley Cycles’ profit for the year ended 31 December 2025, after all adjustments, is £27,340. Balances before the notes below:

• Equipment at cost £36,000; provision for depreciation at 1 January 2025 £12,600
• Inventory £23,450 (already at the lower of cost and NRV); trade receivables £18,600; insurance prepaid £600
• Trade payables £14,900; wages accrued £720; bank overdraft £3,180
• Bank loan repayable 2030 £15,000
• Capital at 1 January 2025 £21,985; drawings £21,600

Notes: depreciation for the year is 20% reducing balance; goods at selling price £1,350 (cost £900) recorded as a credit sale are still on sale or return; the owner took goods costing £950, not yet recorded; create a provision for doubtful debts of 2% of trade receivables.

Prepare the statement of financial position at 31 December 2025. [10]

10. A sole trader says: “A provision for doubtful debts is pointless. It is only a guess, and it just makes my profit look smaller.” Evaluate this view. [6]

Answers

1.

Insurance account
2025                      £      2025                       £
1 Jan Balance b/d       420      31 Dec Income statement 1,950
1 Apr Bank            2,040      31 Dec Balance c/d        510
                      2,460                              2,460

Opening prepayment £420 debited [1]; payment £2,040 [1]; closing prepayment 2,040 x 3/12 = £510 carried down [1]; charge 420 + 2,040 - 510 = £1,950 [1]. [4] Examiner insight: A closing prepayment carried down on the wrong side usually costs the balance and transfer marks.

2.

Rent receivable account
2025                        £      2025                       £
31 Dec Income statement 5,850      1 Jan Balance b/d         300
                                   Bank                    5,100
                                   31 Dec Balance c/d        450
                        5,850                              5,850
2026 1 Jan Balance b/d    450

Opening £300 received in advance credited [1]; receipts £5,100 [1]; income statement £5,850 [1]; income due £450 carried down and brought down as a debit (current asset) [1]. [4] Examiner insight: In an income account the transfer to the income statement is on the debit side.

3. (a) Year to 31 March 2024: 28,000 x 20% = 5,600 [1]. Year to 31 March 2025: (28,000 - 5,600) x 20% = 4,480 [1]. No charge in the year of disposal, so accumulated depreciation = £10,080 [1]. (b)

Disposal account
                         £                                     £
Van (cost)          28,000    Provision for depreciation   10,080
                              Bank                         16,500
                              Income statement (loss)       1,420
                    28,000                                 28,000

Cost debited [1]; accumulated depreciation credited [1]; proceeds credited [1]; loss of £1,420 to the income statement [1]. [7] Examiner insight: An error in (a) can be carried into (b) as own figure if the account layout is correct.

4. (a)

Provision for doubtful debts account
2024                       £     2024                       £
31 Dec Balance c/d     1,760     1 Jan Balance b/d      1,500
                                 31 Dec Income statement  260
                       1,760                            1,760
2025                             2025
31 Dec Income statement  220     1 Jan Balance b/d      1,760
31 Dec Balance c/d     1,540
                       1,760                            1,760

2024 provision 4% x (46,000 - 2,000) = £1,760 [1]; increase £260 credited from the income statement [1]; 2025 provision 4% x 38,500 = £1,540 [1]; decrease £220 debited to the income statement [1]. (b) Income statement: decrease in provision for doubtful debts £220 shown as income [1]. Trade receivables £38,500 [1] less provision £1,540 = £36,960 [1]. [7] Examiner insight: Charging the whole £1,540 to the income statement loses the mark; only the change goes there.

5. Reinstate: debit Lowfield Café, credit irrecoverable debts recovered, £720 [1]. Cash: debit bank, credit Lowfield Café, £720 [1]. Irrecoverable debts recovered £720 is income in the 2026 income statement [1]; profit rises by £720 [1]. [4] Examiner insight: Reopening the 2024 accounts earns nothing; the recovery belongs to the year the cash arrives.

6. A at cost £5,400. B: NRV 3,400 - 350 = £3,050, below cost [1]. C: NRV 1,200 - 200 = £1,000, below cost [1]. Total 5,400 + 3,050 + 1,000 = £9,450 [1]. [3] Examiner insight: Compare each line separately; comparing total cost with total NRV gives the wrong value and loses the final mark.

7. Remove the sale: -£2,400 [1]. Add the goods to inventory at cost, 2,400 / 1.6 = 1,500: +£1,500 [1]. Goods for own use reduce purchases: +£680 [1]. Accrued electricity: -£290 [1]. Corrected profit 41,300 - 2,400 + 1,500 + 680 - 290 = £40,790 [1]. [5] Examiner insight: Show each adjustment with its sign; a wrong bare final figure earns no marks, while shown adjustments can still earn method marks.

8.

Ashby Consulting: Income statement for the year ended 30 June 2026
                                               £          £
Fees receivable (98,600 + 1,200)                     99,800
Commission received (2,400 - 400)                     2,000
Decrease in provision for doubtful debts                100
                                                    101,900
Less expenses
  Salaries (41,200 + 800)                  42,000
  Rent and rates (12,600 - 1,050)          11,550
  Office expenses                           4,380
  Motor expenses                            3,150
  Irrecoverable debts (510 + 400)             910
  Depreciation: office equipment            2,700
  Depreciation: car                         3,960
                                                     68,650
Profit for the year                                  33,250

Fees £99,800 [1]; commission £2,000 [1]; provision 5% x (12,400 - 400) = £600 [1]; decrease of £100 shown as income [1]; salaries £42,000 [1]; rent and rates £11,550 [1]; office and motor expenses [1]; irrecoverable debts £910 [1]; office equipment 15% x 18,000 = £2,700 [1]; car 30% x (22,000 - 8,800) = £3,960 [1]; total expenses £68,650 [1]; profit £33,250 [1]. [12] Examiner insight: A service business has no cost of sales or gross profit; adding a trading section wastes time.

9.

Hartley Cycles: Statement of financial position at 31 December 2025
                                 Cost   Acc. dep.   Carrying
Non-current assets                  £          £           £
  Equipment                    36,000     17,280      18,720
Current assets
  Inventory (23,450 + 900)               24,350
  Trade receivables          17,250
  Less provision                345      16,905
  Other receivables                         600
                                         41,855
Current liabilities
  Trade payables             14,900
  Accrued expenses              720
  Bank overdraft              3,180      18,800
Net current assets                                    23,055
                                                      41,775
Non-current liabilities: bank loan                    15,000
Net assets                                            26,775

Capital (equity)
  Opening capital                                     21,985
  Add profit for the year                             27,340
                                                      49,325
  Less drawings (21,600 + 950)                        22,550
                                                      26,775

Depreciation 20% x 23,400 = 4,680, carrying amount £18,720 [1]; inventory £24,350 [1]; receivables 18,600 - 1,350 = 17,250, less 2% provision, £16,905 [1]; prepayment as a current asset [1]; current liabilities £18,800 [1]; net current assets £23,055 [1]; loan as non-current [1]; net assets £26,775 [1]; drawings £22,550 [1]; closing capital agrees [1]. [10] Examiner insight: Subheadings carry marks; a loan listed under current liabilities loses the non-current liability mark and distorts net current assets.

10. Against: prudence – receivables are not shown above what the business expects to collect [1]. Accruals – the likely cost of credit sales is matched to the year of the revenue [1]. A realistic profit stops drawings being taken from profit that may never become cash [1]. For: it is an estimate, so a poor percentage misstates profit [1]; it does not affect cash [1]. Judgement: the view is weak, since the estimate rests on past experience and only the change hits profit each year [1]. [6] Examiner insight: “Evaluate” needs both sides and a supported judgement; one-sided answers cannot reach full marks.

Where marks are usually lost

• Charging the full provision for doubtful debts instead of the change.
• Calculating the provision before writing off further irrecoverable debts.
• Applying reducing balance to cost instead of to the carrying amount.
• Valuing sale or return goods at selling price.
• Placing an income received in advance or a loan in the wrong section.
• Leaving out workings, so no own-figure credit is possible.

Next steps

• Revision notes for this topic
• Study guide for this topic
• AQA A-level Accounting hub
• 7127 checklist
• All free 10-minute diagnostics
• Book a free trial class

Official syllabus

AQA A-level Accounting (7127) specification, version 1.1, October 2026, for A-level exams June 2019 onwards, published by AQA – section 3.6, Preparation of financial statements of sole traders.