er cee Pensa Coursebook answers Chapter 1 Answers to test yourself questions Test yourself 1.1 1 Book-keepingis the detailed recording of al the financial transactions of a business. 2. Accountingis preparing the financial statements of a business from the book-keeping records 3. Two from: + tocalculate the profit or loss earned by the business during a pertod of time + toknow the financial position of the business at regular intervals, + tobeable to measure the progress of the business over several periods. + toassistin decision-making and future planning, 4 Financial statements consist of an income statement and a statement of financial position (other statements may be added: these are explained in later chapters of the Coursebook}. Test yourself 1.2 Assets are anything which is owned by or owed to a business. b Liabilities are amounts owed by the business. © Capital isthe amount owed by the business to the owner of that business. Testy. 5 a Capital $22500 b Assets $63700 © Liabilities $1230 Test yourself 1.4 1a. Any two assets not mentioned in Walkthrough 1.1 and 1.2, eg. machinery, fixtures and fittings, motor vehicles, cash, expenses paid in advance. b_ Any-two liabilities not mentioned in Walkthrough L.1 and 1.2, e.g short term loans, long term loans, expenses owing 2a Atrade payable is an amount owed to a person or business to whom the trader owes an amount of money for goods purchased on credit. b_ Atrade receivable is an amount receivable from a person or business who owes the trader an amount of money of goods sold to them on credit. Answers to exam-style questions 18 2 a Assets = (180000 + 23420 + 21710 + 32600 + 15900 + 2550) = $276.180 b Liabilities = (26 180 + 80000) = $106 180 € Capital = 276180 — 106180 = $170000 38 4B ‘© Cambridge University Press 2018er cee Pensa 5b Assets Increase inventory Liabilities - Increase trade payables € Assets ~ Increase bank, decrease trade receivables, LiabIlities - No effect d_ Assets - increase trade receivables, decrease Inventory Liabilities ~ No effect Assets - Decrease cash Liabilities ~ Decrease loan 6 $ $ Assets Liabilities Machinery (19000 + 7000) 26000 Capital 35000 Motor vehicles 6000 Loan Lenders Ltd 8000 Jventory 4900 Trade payables (8000 — 3000) 5000 Trade receivables (3000 ~ 500) 2500 Bank (10100 ~ 3000 + 8000 ~ 7000) 8100 Cash 500 ‘© Cambridge Unwversity Press 2018,er cee Pensa Coursebook answers Chapter 2 Answers to test yourself questions Test yourself 2.1 1 Itisnecessary to make a double entry for each transaction in order to record the two effects of each transaction - a giving and a receiving, 2. The folio column in a ledger account is used for reference purposes and shows the page of the ledger on which the account named in the details column appears, Test yourself 2.2 1a debitratesaccount credit bank account debit machinery account credit bank account debit bank account credit commission receivable account d_ debitxYZ Loan co credit bank account Test yourself 2.3 1a. debitcash or bank account credit capital account debit drawings account ‘credit motor vehicles account debit drawings account credit purchases account 5 Test yourself 2.4 1 Find the difference between the two sides of the account. Enter this figure on the next available line on the side which is the smaller in money. Write the date and the word ‘Balance’ and enter ‘cfd! in the folio column. Enter a matching total on each side of the account (on the same level) Make the double-entry for the balance by entering the amount of the balance on the opposite side to that where it was entered as a balance carried dawn, Write the date and the word ‘Balance’ in the details column and ‘b/d’ in the folio column. 2. Credit purchases are goods purchased for resale which are paid for at a later date rather than at the time of purchase. 3° Two from: + goods were faulty + goods were damaged + goods were not what was ordered. 4 Sales returns may be called returns inwards. 5 Carriage inwards is the cost of transporting goods purchased by the business to its premises This is part of the cost of purchasing the goods. Carriage outwards is the cost of delivering goods to a customer's premises. This isa selling expense. Answers to exam-style questions 1B 2A 3 0 ‘© Cambridge University Press 2018ee et cece Pel eee hy * Date Details Fo. § Date Details Fo. $ 20-6 20-6 July 1 Capital 50000 July2 Premises 25000 9 Sales 200 4 Equipment 4000 7 Advertising expenses 60 14 MayurVihar Traders L000 Balance fd 20140 50200 50200 20-6 — — July 15 Balance b/d 20140 Date Details Fo. $ Date Details Fo § 20-6 July 1 Bank 50000 Date Details Fo. $ Date Details Fo. $ 20-6 July 2 Bank 25000 Date Details Fo. $Date _ Details Fo. $ 20-6 July 4 Bank 4000 Date Details Fo. $Date Details Fo. $ 20-6 July 6 MayurVhar Traders 1500 Date Details Fo. $Date Details Fo. $ 20-6 20-6 July 14 Bank 1000 July 2 Purchases 1500 Balance od _500 __ 1500 1500 20-6 — July 15. Balance bid 500 ‘© Cambridge Unwversity Press 2018,ee et cece Pel eee hy Date Details Fo. $Date Details Fo. $ 20-6 July 7 Bank 60 Date Details Fo. $ Date Details Fo. $ 20-6 July 9 Bank 200 12. Ridhima. 310 Date Details Fo. § Date Details Fo. § 20-6 20-6 July 12 Sales 310 July 13 Salesreturns 2 14 Balance ci 290 310, 310 July 15. Balance bia 290 - Date Details Fo. § Date Details Fo S$ 20-6 July 13 Ridhima 20 Date Details Fo. $ Date Details Fo § 20-4 Oct 1 Balance b/d 15000 Date Details, Fo. $ Date Details Fo. $ 20-4 Oct 1 Balance b/d 3400 Date Details Fo. § Date Details Fo. $ 20-4 Oct 1 Balance b/d 10100 ‘© Cambridge Unwversity Press 2018,ee et cece Pel eee hy Date Details Fo. 20-4 Oct 1 Balance bya 1110 uo Date Details 20-4 Oct 30 Bank Fo. 1110 1110 Date Details Fo. 20-4 Oct 7 Purchases retums 14 Bank 31 Balance cd 80 1760 1420 3260 Date Details 20-4 Oct 1 Balance 2 Purchases 20-4 Nov 1 Balance Fo, bid bd Date Details Fo. 20-4 Oct 10 Bank 2000 2000 Date Details 20-4 Oct 1 Balance Fo. bid 2000 2000 Date Details Fo. 20-4 Oct 1 Balance bya 21 Sales 30. Daisy 20-4 Nov 1 Balance bya 4150 940 10 6200 Date 20-4 Oct 4 ABFinanceLoan 14 Zara 31 Balance Detalls Fo. cfd 2000 1760 2440 6200 Date Details Fo. $ Date Details Fo. $ 20-4 20-4 Oct 2 Zara 1500 Oct 28 Drawings 140 Date Details Fo. ‘© Cambridge Unwversity Press 2018, Date Details 20-4 Oct 7 Zara Fo. 80er cee Pensa Date Details Fo. $ Date Details Fo. § 20-4 Oct 21. Bank 940 Date Details Fo. $ Date Details Fo. § 20-4 Oct 28 Purchases 140 6 May 1 Amount owed by Marine Drive Stores to Central Wholesalers Double entry: debit Central Wholesalers account for April 10 Marine Stores purchased goods on credit from Central Wholesalers Double entry: debit purchases account 17 Marine Drive Stores returned goods to Central wholesalers Double entry: credit purchases returns account 20 Marine Drive Stores paid a cheque to Central Wholesalers, Double entry: credit bank account 31 Amount owed by Marine Drive Stores to Central Wholesalers Double entry: credit Central Wholesalers account for June ‘© Cambridge Unwversity Press 2018,er cee Pensa Coursebook answers Chapter 3 Answers to test yourself questions Test yourself 3.1 1 Atrial balance is a list of the balances on the accounts in the ledger ata certain date, 2 Two from: + itis prepared to check the arithmetical accuracy of the double entry book-keeping + itcanhelp in locating arithmetical errors + Itisuseful when preparing financial statements. 3. The column in the trial balance in which the balance ofa ledger account is entered is, determined by the side of the account which is the largest in money. For example, if the amount ‘on the credit side of a ledger account is more than the amount on the debit side, the difference between the two sides will be entered in the credit column of the trial balance 4 Ifthe totals ofa trial balance agree it indicates that the double entry book-keeping Is arithmetically correct. Test yourself 3.2 Credit because a loan is a lability and liabilities always have credit balances. Debit because It is an expense and expense accounts always have debit balances, Debit because itis an asset and assets always have debit balances. i Credit because itis a liability and liabilities always have credit balances. Debit because expenses always have a debit balance (or cost of purchases} Credit because itis an income and items of income always have credit balances, awange Test yourself 3.3 a Enorofprinciple b — Etrorof © Compensating d_Errorof complete commission erroris) reversal ‘© Cambridge Unwversity Press 2018,