GCSE/ IGCSE Accounting (Principles of Account) Sample Questions IV

The partners are currently looking to expand their operations and are considering
converting their business to a limited liability company.
Evaluate this proposed change to their business structure.
_
On 31 August 2011 Mr Wong received his bank statement, which stated that he owed
his bank £650 on that date. He checked this against his cash book which showed a
balance on his bank account of £1 003 Dr. On comparing the bank statement with his
cash book, he identified several differences.
His bank statement showed a direct debit on 10 August for £125 in favour of the local
council and a credit transfer from a customer for £200 on 21 August, neither of which
had been entered in the cash book.
He also discovered that his bank had not taken account of monies which he had paid
in the previous day totalling some £1 926 and that a cheque for £198 had not yet
been presented to the bank for payment. Both these items had been entered in his
cash book.
State three other items that could be recorded in the bank statement before they
are entered in the cash book.
_
Explain two advantages to Mr Wong of drawing up a bank reconciliation
statement
_
The trainee accountant of Mozart and Son produced a draft profit and loss account
which showed a net profit for the year ended 31 November 2011 of £56 900.
During the following month several errors and omissions were identified. These were:
1. The cost of repairs to a delivery van of £680 had been debited to the motor
vehicles account.
2. The sales day book had been undercast by £250.
3. A payment of £500 for insurance had been completely omitted from the accounts.
4. A cheque for £300 received from T Jones, a debtor, had been credited to the
account of T Bones.
5. Discount received of £850 had been charged as an expense in the profit and loss
account.
6. A payment of £890 for rates had been debited to the rent account.
Complete the following table to show clearly the effect on net profit after these
errors and omissions have been corrected. If there is no effect, write ‘no effect’ in
the correct column.
_

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