Cambridge International A Level · Accounting (9706)

Preparation of financial statements - Adjustments to draft financial statements: Practice Questions

1 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Preparation of financial statements - Adjustments to draft financial statements.

6 questions20 marksFree, no account

Question 1

1 mark

At the end of the financial year, a business has an unpaid electricity bill for the final month of $\$150$. How does the adjustment for this accrual affect the financial statements?

Question 2

2 marks

A business reported a draft profit for the year of $\$35,000$. It was subsequently discovered that stationery purchases of $\$800$ remained completely unused at the year-end and should have been recorded as prepaid stationery expenses (closing inventory of stationery).
Calculate the revised profit for the year.

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Question 3

3 marks

A motor vehicle repair costing $\$450$ was incorrectly debited to the Motor Vehicles account. Identify the type of error and state the effect on the non-current asset value in the Statement of Financial Position.

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Question 4

5 marks

On 1 January 2022, a machine was purchased for $\$10,000$. Depreciation is charged at 20% per annum using the reducing balance method. Calculate the depreciation charge for the second year ended 31 December 2023.

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Question 5

4 marks

A sole trader has prepared a draft Statement of Profit or Loss showing a profit of $\$15,600$ for the year ended 31 December 2023. After the preparation, the following information was discovered:
1. Accrued electricity expenses of $\$240$ were not recorded in the draft accounts.
2. Insurance paid during the year was $\$1,200$, which includes a payment for $\$600$ covering the period from 1 January 2024 to 30 June 2024.
3. Rental income received of $\$500$ for January 2024 was incorrectly included in the current year's income.

Required:
Calculate the adjusted profit for the year ended 31 December 2023.

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Question 6

5 marks

Omar is a sole trader whose draft Statement of Profit or Loss for the year ended 31 March 2024 showed a profit of $45,000 before considering the following information.

Additional Information:

Rent expense paid during the year was $13,500. This payment covered the 15 months commencing 1 January 2024.
Depreciation of equipment is calculated at 20% per annum using the straight-line method. The original cost of the equipment was $60,000. No depreciation has been charged for the year.
The balance of Trade Receivables was $82,000. Omar wishes to maintain the allowance for irrecoverable debts at 5% of trade receivables. The existing allowance brought forward from 1 April 2023 was $4,500.
A credit sale of $1,200 to a customer was completely omitted from the books. No payment has been received yet.

Required:

(a) Calculate the adjusted profit for the year ended 31 March 2024, showing clearly how each adjustment affects the profit.

(b) State the value of the Trade Receivables (net of allowance) that will appear in the Statement of Financial Position as at 31 March 2024.

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