Question

9. A retail trader had not kept proper books of Accounts, but from the following
details you are required to ascertain the profit or loss for the yar ended 30 th June, 1991
and also to prepare a Statement of Affairs as at that date.
L
1st July 90
30th June 91
Rs.
Rs.
Stock in trade
16.700
18,500
Sundry Creditors
15,400
14.000
Sundry Debtors A
11.200
10,500
Cash in hand
250
1,200
Bank Overdtaft
20.200
19,400
Bills Receivable
15.050
14,200
Fixture & Fittings, etc.
A
1,500
1,500
Motor Van A
1.900
1,900
The drawings during the year amount to Rs. 2,600. Depreciate Fixtures, etc., by 10
per cent; write off Rs. 300 to Motor Van. As regards the Debtors, it is ascertained that Rs.
500 are irrecoverable, and a further reserve of 5 per cent should be made. Also reserve Rs.
.700 in respect of Bills Receivable.
(P.U.Lahore Board)

Answer 1

Answer:

Exercise 1.3

3.1 The missing words in order are: (a) book-keeping, books; (b) profit,

loss, financial accounting; (c) management accounting; (d) accounting.

If this caused any difficulty reread the defmitions on pages 3 and 7.

3.2 Henry is a sole proprietor or sole trader because he alone owns the

business.

3.3 The three examples that come most readily to my mind are:

(a) Money received and paid. Money is the lifeblood of all businesses

and a close check must be kept on it.

(b) Amounts owing to suppliers. Credit is important to many busi-

nesses, none of which want to lose this facility. Care must be

taken not to offend suppliers by being too slow in payment.

(c) Amounts due from customers. Many customers have to be asked

more than once for the money they owe.

There are other examples on page S to which you can refer if neces-

sary. A reason should occur to you for each one. Besides individual

reasons you might also have given general ones. For example all such

information is needed for an owner to know how successful he is. It

will be needed to calculate profits and losses. Such information is also

needed to satisfy the Inspector of Taxes. It is also useful in providing

the material needed to aid decision making.

3.4 Your general knowledge together with what you have read in this

chapter should have led you to say 'None'. If you have any doubts

about this find out what each of them does and reconsider.

Exercise 1.4

(a) assets £15,000, (b) capital £14,000, (c) liabilities £25,000, (d) capital

-£10,000.

Exercise 1. S

(a) These cars should be classified as fixed assets. They will last for a

reasonable amount of time and, while they contribute to a firm's

ability to make profits, it is not intended that profits should be made

directly from any change in their value.

(b) These should be regarded as current assets. They are a means by which

the garage is making a profit. Cars will be bought and sold and thus

the value of this asset will often be changing. From the garage's point

of view the cars will be part of their stock-in-trade, one of the things