These seven original questions follow financial statements of a sole trader. All amounts are in RM and all names are invented.
Give every statement a heading and a date. You can also run a timed set with the timed practice session builder.
Questions
1. Opening stock is 6 000, purchases 30 000 and closing stock 8 000. Find cost of sales.
Answer
Cost of sales = 6 000 + 30 000 − 8 000 = 28 000.
2. Sales are 48 000 and cost of sales is 28 000. Find gross profit and say which statement it belongs to.
Answer
Gross profit = 48 000 − 28 000 = 20 000. It belongs to the trading account.
3. Gross profit is 20 000. Rent is 4 800, wages 7 200 and electricity 1 500, with discount received of 400. Find net profit.
Answer
Expenses = 4 800 + 7 200 + 1 500 = 13 500. Net profit = 20 000 + 400 − 13 500 = 6 900. Discount received is other income, so it is added.
4. The owner paid her child’s school fees of 1 200 from the business bank account. Where does it go?
Answer
Drawings. It is deducted from capital in the statement of financial position. It is not in the profit and loss statement, so net profit is unchanged.
5. Opening capital 20 000, net profit 6 900 and drawings 2 400. Find closing capital.
Answer
Closing capital = 20 000 + 6 900 − 2 400 = 24 500.
6. Prepare the assets side of a statement of financial position: equipment 15 000, closing stock 8 000, debtors 5 500, bank 6 500. Creditors are 10 500. Find net current assets and total net assets.
Answer
Current assets = 8 000 + 5 500 + 6 500 = 20 000. Current liabilities = 10 500.
Net current assets = 20 000 − 10 500 = 9 500. Net assets = 15 000 + 9 500 = 24 500, which equals the closing capital from question 5. The statement balances.
7. A student worked out gross profit as 48 000 − 4 800 − 7 200 − 28 000 = 8 000. Explain the error.
Answer
The student subtracted rent and wages from sales inside the trading account. Gross profit is sales minus cost of sales only. The correct gross profit is 20 000, and rent and wages belong in the profit and loss statement.
If you got these wrong
- Questions 1 to 3 and 7: read distinguishing gross and net profit and preparing a trading account.
- Question 4: read separating business spending from drawings.
- Questions 5 and 6: read preparing a statement of financial position.
Log misses in the mistake log. For a teacher who checks your layout, see online one-to-one Accounting tuition.