Question 1
On 1st June 2018 Mr Steven commenced a business dealing in import and export of consumables goods. He paid £50,000 into the business bank account and the following transactions took place during the first week of June.
1 June Purchased premises for £25,000 from the previous owner
including £6,000 for furniture and fittings.
Purchased inventory for £10,000 and further furniture
and fittings £2,000.
All transactions above were completed by cheque.
£
2 June Withdrew cash from bank for shop use 400
Paid for sundry incidentals 90
Sold goods for cash 300
Sold goods on credit to Rakesh 100
3 June Bought goods for resale on credit from Dominique 600
Sold goods for cash 550
4 June Sold goods for cash 400
Sold goods on credit to Raj 350
Paid office expenses in cash 70
5 June Received cheque from Rakesh 60
Paid cheque on account Dominique 250
Sold goods for cash 200
Sold goods on credit Maleeha 480
Bought goods for cash 250
Paid all excess cash into bank
6 June Stock on hand at cost 9,500
Required
(a) Record the above transactions in the ledger accounts of Mr Steven maintaining separate cash and bank accounts.
(25 Marks)
(b) Balance off the ledger accounts as at 5 June 2018 and extract a trial balance.
(25 Marks)
Question 2
You work for a consultancy firm of accountants and Mr Steven have approached your Company in particular Mr Samuel, your Manager for some advice on the accounting aspect as he just launched his business of import and export.
After his meeting, Mr Samuel have asked you to prepare a report to Mr Steven on the points raised namely:
a) Outline and define what does the term “true and fair view” means and how does it relates to financial statements?
(4 Marks)
b) Define the four qualitative characteristics of a financial information that can be identified in a Financial Statements. You are required to prepare a note explaining each one.
(8 Marks)
c) List four users of accounting information. Outline what information each user is interested in and why. (Guidance: one of the four users must be internal to the business)
(8 Marks)
d) A business can be run through one of three possible mediums: sole trader, partnership and limited company. Provide a brief description including the advantages and disadvantages of each of these business types.
(15 Marks)
e) Accounting concepts and conventions are of fundamental importance in the preparation of financial statements. With the aid of relevant examples outline your understanding on any three of the following concepts/conventions.
i. Accruals
ii. Going Concern
iii. Historical Cost
iv. Materiality
v. Prudence
(15 Marks)