Edexcel IGCSE Accounting: End-of-period adjustments (4AC1) – 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.

This set is aligned to the Pearson Edexcel International GCSE in Accounting (4AC1) specification, Issue 1, October 2016. It covers Topic 5, sections 5.2 Depreciation, 5.3 Irrecoverable debts and 5.4 Other receivables and other payables. None of these points is marked as tier-specific. All businesses and figures are invented. Amounts are in dollars, written without a currency sign.

Links: Edexcel IGCSE Accounting hub, printable checklist, free 10-minute diagnostics, study guide, revision notes.

Questions

1. Explain two causes of depreciation. Use a different business asset as an example for each. [4]

2. Pilkerton Tiles buys a cutting machine for 31,500. Its residual value is 3,500 and its useful life is 4 years. The business uses the straight line method.

(a) Calculate the annual depreciation charge. [2] (b) Calculate the carrying value after 3 years. [1]

3. Pilkerton Tiles also buys a kiln for 40,000 and depreciates it at 30% a year using the reducing balance method.

(a) Calculate the charge for year 1 and for year 2. [2] (b) Calculate the carrying value at the end of year 2. [1] (c) Distinguish the reducing balance method from the straight line method. [2]

4. Bellmere Foods buys a van for 21,000 at the start of year 1 and depreciates it at 20% a year, reducing balance.

(a) Prepare the provision for depreciation account for years 1 and 2. [4] (b) Show the van’s entry in the non-current assets section of the statement of financial position at the end of year 2. [2]

5. Lovatt Signs sells a machine that cost 18,000. The provision for depreciation on it is 11,500. It is sold for 5,100 paid into the bank.

(a) Calculate the carrying value at the date of sale. [1] (b) Calculate the profit or loss on disposal and state which it is. [2] (c) Prepare the disposal account. [3]

6. Oakmeer Bakehouse has trade receivables of 54,000 before adjustments. Debts of 1,800 and 700 are irrecoverable. The business keeps a provision of 4% of remaining trade receivables. The provision brought forward is 2,100.

(a) Calculate the total irrecoverable debts. [1] (b) Calculate the provision needed at the year end. [2] (c) Calculate the change in the provision. [1] (d) Calculate the total charge to the statement of profit or loss. [1] (e) Calculate trade receivables as shown in the statement of financial position. [1]

7. (a) Explain why a business provides for irrecoverable debts. [2] (b) Distinguish an irrecoverable debt from a provision for irrecoverable debts. [2]

8. Ormiston Frames has trade receivables of 63,000 before adjustments. A customer’s debt of 1,350 is irrecoverable. The provision is 6% of remaining trade receivables. The provision brought forward is 3,000.

(a) Prepare the irrecoverable debts account. [2] (b) Calculate the provision needed. [1] (c) Prepare the provision for irrecoverable debts account. [3]

9. Mowbrey Ices owed 900 for wages at the start of the year. It paid 31,200 in wages during the year and owes 1,300 at the year end. Prepare the wages account for the year. [5]

10. (a) Distinguish other receivables from other payables. [2] (b) Explain why a business accounts for them at the year end. [2]

11. Sandovar Toys has gross profit of 118,400 for the year. Information at the year end:

Item	Detail
Equipment at cost	36,000; provision for depreciation brought forward 9,000; depreciate at 25% reducing balance
Trade receivables	48,500 before adjustments; 1,500 to be written off; provision 5% of the remainder; provision brought forward 1,800
Electricity	Paid 5,640; 460 owing at year end; no opening balance
Insurance	Paid 3,900; 650 relates to next year; no opening balance
Other expenses	41,300

(a) Calculate the depreciation charge for the year. [2] (b) Calculate the total charge for irrecoverable debts and the provision. [3] (c) Calculate the electricity and insurance expenses. [2] (d) Calculate the net profit. [2] (e) State the figures for equipment, trade receivables, other receivables and other payables in the statement of financial position. [2]

Answers

1. Cause one, such as wear and tear [1], linked to an asset, for example delivery vans lose value through daily use on the road [1]. Cause two, such as obsolescence [1], linked to a different asset, for example a computer becomes out of date as faster models appear [1]. [4] Examiner insight: An explanation usually needs the cause and a link to the asset. A bare list of two terms leaves the second point unsupported.

2. (a) (31,500 - 3,500) / 4 [1] = 7,000 [1] [2] (b) 31,500 - (3 x 7,000) = 10,500 [1] [1] Examiner insight: Subtracting the residual value before dividing is the step that separates method from guesswork, so write the bracket out.

3. (a) Year 1: 30% x 40,000 = 12,000 [1]. Year 2: 30% x 28,000 = 8,400 [1] [2] (b) 40,000 - 12,000 - 8,400 = 19,600 [1] [1] (c) Reducing balance applies a percentage to the carrying value, so the charge falls each year [1]; straight line gives the same charge each year [1]. [2] Examiner insight: A distinguish question wants both methods addressed. Describing only reducing balance gives half the picture.

4. (a)

Provision for depreciation: van (end of year 1)
Bal c/d                4,200 | Depreciation           4,200

Provision for depreciation: van (end of year 2)
Bal c/d                7,560 | Bal b/f                4,200
                             | Depreciation           3,360
                       7,560 |                        7,560

Year 1 charge 20% x 21,000 = 4,200 [1]. Year 2 charge 20% x 16,800 = 3,360 [1]. Balance brought forward shown on the credit side at start of year 2 [1]. Closing balance 7,560 [1]. [4] (b) Cost 21,000, accumulated depreciation 7,560 [1], carrying value 13,440 [1] [2] Examiner insight: Show the closing balance as the total of both years’ charges. A single-year balance in the year 2 position is a common slip.

5. (a) 18,000 - 11,500 = 6,500 [1] [1] (b) Proceeds 5,100 less carrying value 6,500 [1] = loss of 1,400 [1] [2] (c)

Disposal of machine
Machinery at cost     18,000 | Provision for dep     11,500
                             | Bank                   5,100
                             | Loss on disposal       1,400
                      18,000 |                       18,000

Cost on debit side [1]; provision and bank on credit side [1]; loss 1,400 as balancing figure on the credit side [1]. [3] Examiner insight: State the word “loss” or “profit” as well as the number. A figure with no label leaves the answer incomplete.

6. (a) 1,800 + 700 = 2,500 [1] [1] (b) Remaining receivables 54,000 - 2,500 = 51,500 [1]; 4% x 51,500 = 2,060 [1] [2] (c) 2,100 - 2,060 = 40 decrease [1] [1] (d) 2,500 - 40 = 2,460 [1] [1] (e) 51,500 - 2,060 = 49,440 [1] [1] Examiner insight: The provision is worked out after the write-offs. Using 54,000 instead of 51,500 changes every later figure.

7. (a) Some receivables may not pay [1]; prudence and matching require the expected loss to be shown in the year of the sale so that assets and profit are not overstated [1]. [2] (b) An irrecoverable debt is a debt known to be unpaid and is written off from a named customer’s account [1]; a provision is an estimate of possible future losses from receivables as a whole, with no individual account written off [1]. [2] Examiner insight: A distinguish answer should contrast, with both items in the same sentence or paired points.

8. (a)

Irrecoverable debts
Trade receivable       1,350 | SPL                    1,350
                       1,350 |                        1,350

Debit 1,350 in the account [1]; transfer to SPL [1] [2] (b) 63,000 - 1,350 = 61,650; 6% x 61,650 = 3,699 [1] [1] (c)

Provision for irrecoverable debts
Bal c/d                3,699 | Bal b/f                3,000
                             | SPL (increase)           699
                       3,699 |                        3,699

Balance brought forward 3,000 [1]; increase 699 to SPL [1]; closing balance 3,699 [1] [3] Examiner insight: Only the increase of 699 goes to the statement of profit or loss. Entering the full 3,699 there is a frequent error.

9.

Wages
Bank                  31,200 | Bal b/f accrued          900
Bal c/d accrued        1,300 | SPL                   31,600
                      32,500 |                       32,500

Opening accrual on the credit side [1]; bank payments on the debit side [1]; closing accrual carried down on the debit side [1]; expense 31,600 [1]; both sides total 32,500 [1] [5] Examiner insight: An opening accrual is on the credit side and reduces the expense. Check the direction before balancing.

10. (a) Other receivables are amounts paid in advance (prepayments), which are current assets [1]; other payables are expenses owed at the year end (accruals), which are current liabilities [1]. [2] (b) The statement of profit or loss must include the expenses of the period, whether paid or not [1] (accruals), and the statement of financial position must show what is owed and what is paid in advance [1]. [2] Examiner insight: Naming the accruals concept and linking it to profit gains more than saying figures must be “accurate”.

11. (a) Carrying value 36,000 - 9,000 = 27,000 [1]; 25% x 27,000 = 6,750 [1] [2] (b) Receivables after write-off 48,500 - 1,500 = 47,000 [1]; provision 5% x 47,000 = 2,350, increase 550 [1]; total charge 1,500 + 550 = 2,050 [1] [3] (c) Electricity 5,640 + 460 = 6,100 [1]; insurance 3,900 - 650 = 3,250 [1] [2] (d) Expenses 41,300 + 6,750 + 2,050 + 6,100 + 3,250 = 59,450 [1]; net profit 118,400 - 59,450 = 58,950 [1] [2] (e) Equipment 36,000 - 15,750 = 20,250, trade receivables 47,000 - 2,350 = 44,650 [1]; other receivables 650, other payables 460 [1] [2] Examiner insight: Each adjustment feeds both statements. Listing figures in an extract with labels makes each one easy to credit.

Where marks are usually lost

• Giving only a label for a cause of depreciation, with no link to the asset.
• Using cost every year in a reducing balance calculation.
• Subtracting residual value from a reducing balance charge.
• Leaving out accumulated depreciation when preparing a disposal account.
• Writing a disposal figure with no word “profit” or “loss”.
• Calculating the provision before removing the irrecoverable debts.
• Sending the whole provision rather than the change to the statement of profit or loss.
• Classing a prepayment as a payable, or an accrual as a receivable.
• Reversing the opening accrual or prepayment in the wrong direction.

Next steps

• Review the revision notes and the study guide.
• Check the course hub and the printable checklist.
• Try all the free 10-minute diagnostics.
• Book a free trial class.

Frequently asked questions

What goes into the statement of profit or loss for the provision for irrecoverable debts? Only the change in the provision goes to the statement of profit or loss: an increase is an expense and a decrease is credited as income. Sending the whole provision, or calculating it before removing irrecoverable debts, are common errors in Edexcel IGCSE Accounting (4AC1).

How should you explain a cause of depreciation? Name the cause, such as wear and tear, obsolescence, passage of time or depletion, and link it to the asset described in the question. Giving only a label with no link to the asset loses marks.

Is a prepayment an asset or a liability? A prepayment is an other receivable, a current asset, because the business has paid for a benefit it has not yet received. An accrual is an other payable, a current liability; swapping the two is a common error.

How do you label a disposal account answer? State the balancing figure clearly as a profit or a loss on disposal, and include accumulated depreciation in the account. A figure without the word profit or loss does not earn full credit.

Official syllabus

Pearson Edexcel International GCSE in Accounting (4AC1) specification, Issue 1, October 2016, published by Pearson Education Limited: Topic 5, sections 5.2 Depreciation, 5.3 Irrecoverable debts and 5.4 Other receivables and other payables.