MAN00012C Financial Accounting 2018-9
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MAN00012C
BA, BSc, Degree Examinations 2018-9
Management
Financial Accounting
Question ONE
A. Define the following items and name the financial statement where they would appear (10 marks):
i. Trade payables
ii. Closing stock
iii. Administration expenses
iv. Revenue
v. Wages
B. Using examples where necessary, explain the following concepts (10 marks):
i. Prudence
ii. Comparability
iii. Relevance
iv. Accruals basis
v. Materiality
C. Discuss the purpose of the following financial statements (5 marks):
i. The Statement of Profit or Loss
ii. The Statement of Financial Position
Question TWO
Susan has decided to start a shoe manufacturing business in the UK. As her accountant, you find the following transactions in the first week of trading:
● She introduces capital of £400,000, which she puts into the bank account.
● She pays rent for the factory premises for the first week of £100,000 by cheque.
● She buys a stitching machine for £60,000 from Z Limited, paying by cheque.
● She purchases raw leather from Tanning Suppliers on credit for £100,000.
● She sells shoes to Clarks plc, on credit, for £70,000
● She receives a cheque of £70,000 from Clarks, in part payment for the above
She pays Tanning Suppliers £30,000 for the raw leather purchased earlier in the week.
Required:
Susan has requested you to prepare the following for her first week of trading (25 marks):
A. Journal entries for the above transactions
B. Post the above journal entries to “T accounts”, round off the “T accounts”
C. Trial balance
Xavier Plc provides you with the following trial balance as at 31 December 2018 :
|
|
Dr |
Cr |
|
|
£ |
£ |
|
Sales |
|
200,000 |
|
Inventory at 1 January 2018 |
55,000 |
|
|
Marketing expenses |
18,000 |
|
|
Rent for office building |
9,000 |
|
|
Capital |
|
500,000 |
|
Purchases |
135,000 |
|
|
Telephone |
3,000 |
|
|
Trade receivables |
150,000 |
|
|
Office building |
250,000 |
|
|
Accumulated depreciation at 1 January 2018 |
|
50,000 |
|
Trade payables |
|
100,000 |
|
Bank and cash |
350,000 |
|
|
Retained profit at 1 January 2018 |
|
120,000 |
|
|
970,000 |
970,000 |
Additional information:
● The inventories at the year end have been valued at £45,000.
● Depreciation is to be provided on the office building using the reducing balance method at a rate of 10% per annum.
● Marketing expenses outstanding for the year ended 31 December 2018 amounts to £2,000.
● £1,000 of the office rent relates to 2019.
● Bad debts to be written off amount to £5,000.
Required
Prepare a Statement of Profit or Loss for the year ended 31 December 2018 and a Statement of Financial Position as at 31 December 2018 (25 marks).
Question FOUR
The financial statements for Moscato Plc are given below:
|
Income Statements for the year ending 31 December: |
||||
|
|
2018 |
2018 |
2018 |
2017 |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
|
Sales |
|
15,000 |
|
10,000 |
|
Cost of sales |
|
|
|
|
|
Opening inventory |
1,500 |
|
1,800 |
|
|
Purchases |
7,000 |
|
6,500 |
|
|
Closing inventory |
-700 |
|
-1,000 |
|
|
|
|
7,800 |
|
6,300 |
|
Gross profit |
|
7,200 |
|
3,700 |
|
Administrative expenses |
|
-500 |
|
-850 |
|
Selling and distribution costs |
|
-300 |
|
-200 |
|
Loan interest |
|
-500 |
|
-100 |
|
Profit before tax |
|
5,900 |
|
2,550 |
|
Tax |
|
-1180 |
|
-510 |
|
Net Profit |
|
4,720 |
|
2,040 |
|
|
|
|
|
|
|
Statements of Financial Position as at 31 December: |
||||
|
|
2018 |
2018 |
2017 |
2017 |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
|
ASSETS |
|
|
|
|
|
Non current assets |
|
|
|
|
|
Property, plant and equipment |
|
30,000 |
|
15,000 |
|
Current assets |
|
|
|
|
|
Inventories |
700 |
|
1,000 |
|
|
Trade receivables |
5,500 |
|
3,500 |
|
|
Bank |
800 |
|
1,500 |
|
|
|
|
7,000 |
|
6,000 |
|
|
|
37,000 |
|
21,000 |
|
|
|
|
|
|
|
EQUITY & LIABILITIES |
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
Ordinary share capital (nominal value £1.00) |
|
19,000 |
|
12,000 |
|
Profit and loss account reserve |
|
6680 |
|
4,000 |
|
|
|
25,680 |
|
16,000 |
|
Current liabilities |
2023-09-01