Exam 4: Applying Accounting Conventions

In order to calculate profit with a reasonable degree of precision, it is important to match income and expenses in the statement of profit or loss.This is an accounting convention known as which of the following?

Arkady makes an accrual for accounting and tax advisory fees in his financial statements for the year ended 31 May 20X8..Which one of the following statements correctly describes the effects of the accrual on his statement of financial position?

Timurlane's accounting records included the following information in respect of the 20X3 financial year: What was Timurlane's net profit for the year?

Kylie runs a heating system supply business.Her closing inventory at her 31 December year end is £32 447, valued at cost.This figure includes a total cost of £2400 in respect of 20 immersion heating units which cost Kylie £120 each some months earlier.This type of unit is now becoming obsolete and Kylie has decided to sell them off at £50 per unit in the New Year. Her opening inventory was £29 955.Revenue for the year was £162 250 and purchases were £122 483.Kylie incurred import duties of £3350 in respect of a consignment of Japanese boilers. What was Kylie's gross profit for the year ended 31 December, applying the rules of inventory valuation?

Dilbert sells goods on credit to almost 400 customers.He knows from experience that a few of his customers will not pay up, but it is generally difficult to determine in advance which ones will prove to be bad payers. At Dilbert's year end, 30 September 20X4, his trade receivables total was £85 520.He discovered just after the year end that one of his oldest customers, Farebrother, had gone bankrupt.At 30 September 20X4, Farebrother owed Dilbert £1820 and it seemed highly unlikely that Dilbert would ever recover it.Reviewing his list of trade receivables, Dilbert identified two other amounts, of £180 and £263, that had been owed for over a year, and he decided that a specific allowance was required in respect of these amounts.Dilbert had never previously had to make an allowance for specific trade receivables. He decided to continue to make his usual 1% allowance against the remainder of the trade receivables outstanding at 30 September 20X4.The general allowance at 30 September 20X3 was £750. What was the net value of trade receivables in Dilbert's statement of financial position at 30 September 20X4 (to the nearest £)?

In the month of April 20X4, Gilbert allows discounts to his customers for early payment totaling £180.He receives similar discounts from his suppliers of £180.Which of the following describes the effect of these discounts on the major statement of profit or loss categories?

Which one of the following statements is correct? In the statement of profit or loss, discounts allowed are:

The following details are relevant to Lucrezia's current assets at 31 December 20X3: Inventory: her inventory at cost totals £29 030.Of this amount £2600 relates to items that are rapidly becoming obsolete.Lucrezia has been looking round for possible purchasers and thinks she has agreed a deal with a trader who will pay her £1000 for these items. Trade receivables: Lucrezia's trade receivables total £22 450.Usually, her trade receivables are settled reliably and quickly.However, there has been a general downturn in the economy and she has decided to make an allowance of 2% for the first time. Cash: cash at bank is £8850. There are no other current assets. What is the total value of Lucrezia's current assets at 31 December 20X3 for inclusion in her statement of financial position?

Dolly's year end trade receivables at 31 August 20X9 totaled £38 470.She is currently in the process of taking legal action against a customer who owes her £1070 (included in the total of £38 470).She feels that there is only a limited chance of her succeeding in this action and so she decides to make a specific allowance against the whole amount.Apart from this item, Dolly expects, on the basis of past experience, that 98.5% of her trade receivables by value will be settled.The general allowance for bad trade receivables made at 31 August 20X8 was £330.There was no specific allowance at that date. Assuming that there are no other transactions during the year ended 31 August 20X9 relating to Dolly's bad and doubtful trade receivables, what was the total of her doubtful trade receivables expense in her statement of profit or loss for the year ended 31 August 20X9 (i.e.including both specific and general allowances)?

Silvia is a market trader who deals in shoes.At 31 October 20X4 her closing inventory is valued at a cost of £13 750.Closing inventory includes a batch of shoes which cost Silvia £800 earlier in the year.This particular range of shoes has not sold well, and Silvia estimates that she will need to discount it heavily in order to shift it.She estimates that she can probably sell the batch of inventory for £300. What is the value of Silvia's closing inventory at 31 October 20X4, applying the rules of inventory valuation?

Which one of the following statements is correct?

Arthur sells goods on credit, requiring payment within 30 days.He offers a 0.5% discount for early payment.One of his customers, Smart Moves Limited, takes advantage of the discount and transfers a payment of £3980 to settle a debt of £4000. How is the discount of £20 dealt with in Arthur's statement of profit or loss?

Which one of the following statements is correct? Recognition of income and expenses occurs at the point when:

Trisha's accounting records for the year ended 31 August 20X2 included the following information: What was Trisha's net profit for the year ended 31 August 20X2?

Buffy makes a gross margin of 27.2% (worked on the basis of revenue less returns) in the month of July 20X2.The following information is relevant to her trading account for that month: What is the figure for Buffy's purchases returns for July 20X2?

Jacquetta prepares her financial statements to 31 August each year.In the year ended 31 August 20X7 she has received and paid the following gas bills: Jacquetta estimates that gas charges for the period 1.8.X7 - 31.8.X7 will be about £60. What figure for gas expense should be included in Jacquetta's accounts to 31 August 20X7?

Vijay's accounting records for the year ended 30 June 20X8 included the following totals: What was Vijay's net profit for the year ended 30 June 20X8?

Barry imports goods for onward sale to retailers.At the end of his trading year ended 31 March 20X3, his accounting records showed the following relevant details: What was Barry's gross profit for the year ended 31 March 20X3?

Bobbie's business made revenue of £280 500 in the 20X1 financial year.2% by value of the goods sold were returned.He allowed £2280 to his customers for early payment.Purchases were recorded at a total of £159 590.Bobbie also paid import duties of £3604, and received discounts for early settlement of £1580.Opening inventory was £10 200 and closing inventory was £12 200.Expenses were £50 600 and drawings were £17 000. What was Bobbie's net profit for the 20X1 financial year?

Amber's accounting records include the following totals in respect of expenses for the year ended 31 July 20X4: In addition, Amber estimates that an accrual of £400 is required in respect of telephone charges.Of the business rates total, £2000 is prepaid, and rental expense includes a prepayment of £850. What is the total of Amber's expenses for inclusion in her statement of profit or loss for the year ended 31 July 20X4?