Level 1 Book keeping Solutions Booklet Home LCCI International Book

Level 1 Book keeping Solutions Booklet Home LCCI International Book
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    Level 1 Book-keeping Solutions Booklet For further information contact us: Tel. +44 (0) 8707 202909 Email. enquiries@ediplc.com www.lcci.org.uk

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    London Chamber of Commerce and Industry (LCCI) International Qualifications are provided by EDI, a leading international awarding body. Passport to Success Level 1 Book-keeping Solutions Booklet

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    The initials LCCI and the words LONDON CHAMBER OF COMMERCE AND INDUSTRY are registered trademarks belonging to the London Chamber of Commerce and Industry and are used under licence. Every effort has been made to trace all copyright holders, but if any have been inadvertently overlooked the Publ...

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    TABLE OF CONTENTS 1. The Accounting Equation and the Balance Sheet 1 2. Double entry system for assets, liabilities and capital 4 3. Recording double entry for stock 7 4. The double entry system for Expenses and Revenues and 11 the Effect of Profit (or loss) and drawings u...

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    1 Chapter 1 The Accounting Equation and the Balance Sheet Answers to ‘Think about it’ Questions Page 5 – Why are liabilities shown on the right hand side of the balance sheet and not on the left? Because based on the accounting equation it has to be on the same side as capital. Answers t...

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    2 Question 2 ASSETS LIABILITIES £ £ Shop fittings 3 100 Cash register 800 Stock of goods 2 200 Creditors 1 000 Loan – T Armani 1 800 Bank 870 6 970 2 800 Capital = Assets – Liabilities Capital = 6...

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    3 Question 5 W Mandrake Balance Sheet at 30 June 20X5 £ Stock of goods 5 360 Debtors 4 500 Cash at Bank 1 845 Fixtures and fittings 2 800 Motor vehicles 5 100 19 605 £ Creditors 2 900 Loa...

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    4 Chapter 2 Double Entry System for Assets, Liabilities and Capital Answers to ‘Think about it’ Questions Page 16 – Why is it necessary to keep separate accounts for each debtor and creditor? So it can clearly be seen how much is owed to individual creditors and how much is owed by indiv...

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    5 Question 4 Bank 20X2 £ July 01 Capital 6 000 20X2 £ July 15 Office Machinery 420 July 29 Elstead Garage 2 900 Capital ...

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    6 Bank 20X9 £ April 01 Capital 8 000April 03 Loan – S Lee 3 000April 08 Cash 1 00020X9 £ April 14 Del...

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    7 Chapter 3 Recording Double Entry for Stock Answers to Activities Activity 3.1 Debit Credit (a) Bought office furniture for use in the business by cash Office Furniture Cash (b) Sold goods for cash Cash Sales (c) Bought goods on credit from A Litton Purchases A Litton (d) Returned to A Litto...

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    8 Question 4 Bank 20X7 £ March 01 Capital 10 000March 30 B Wright 7020X7 £ March 03 Office Furniture 460 March 23 Scales Motors 3 600 March 26 T Hunt 320 Capital ...

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    9 Motor Vehicle 20X7 £ March 15 Scales Motors 3 600 Scales Motors 20X7 £ March 23 Bank 3 600 20X7 ...

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    10 Fixtures & Fittings 20X7 £ October 05 Display Ltd 2 750 20X7 £ October 07 Display Ltd 730 Display Ltd 20X7 £ October 09 Fixtures & ...

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    11 Chapter 4 The Double Entry System for Expenses and Revenues and the Effect of Profit (or Loss) and Drawings upon Capital Answers to ‘Think about it’ Questions Page 36 – What kinds of expense and revenue accounts would you expect to see in the books of a Bank? Revenu...

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    12 Question 2 Expense accounts should be debited and revenue accounts should be credited. Question 3 Bank 20X3 £ April 01 Capital 5 000April 24 Sales 85April 30 Capital 1 000 20X3 £ April 03 ...

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    13 Cash 20X3 £ April 14 Bank 130 20X3 £ April 15 Wages 115 Wages ...

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    14 Purchases 20X4 £ May 05 R Lester 520 R Lester 20X4 ...

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    15 Wages 20X4 £ May 30 Cash 80 Office Equipment 20X4 ...

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    16 Chapter 5 Balancing Accounts and the Trial Balance Answers to ‘Think about it’ Questions Page 49 – How the double entry principle relates to the balancing of accounts. For every ‘balance c/d’ there is a corresponding ‘balance b/d’ of the same amount on the opposite side of...

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    17 Solutions to Target Practice Questions Question 1 E. Appleby 20X6 £ October 03 Sales 650October 12 Sales 276October 24 Sales 190 1 116November 01 Balance b/d 506 20X6 £ October 07 Returns Inw...

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    18 Question 3 T Dove 20X3 Debit Credit Balance £ £ £ March 02 Purchases 270 270 Cr March 07 Returns Outwards 35 235 Cr March 15 Purchases 310 545 Cr March 28 Bank 235 310 ...

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    19 Rent 20X5 £ January 1 Bank 2 000 2 000February 01 Balance b/d 2 000 20X5 £ January 31 Balance c/d 2 000 2 000 Purchase...

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    20 Cash 20X5 £ January 10 Sales 6 000January 25 Bank 500 …….. 6 500February 01 Balance b/d 25020X5 £ January 23 Bank 6 ...

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    21 Office Expenses 20X5 £ January 28 Cash 250 250February 01 Balance b/d 25020X5 £ January 31 Balance c/d 250 250 Electricity 20X5...

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    22 Capital 20X8 £ May 31 Balance c/d 20 000 20 000 20X8 £ May 01 Balance b/d 20 000 20 000 June 01 Balance b/d 20 000 Cash 20X8 £ May...

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    23 Sales 20X8 £ May 31 Balance c/d 7 000 ____ 7 000 20X8 £ May 04 Cash 2 000 May 10 Fish 5 000 7 000 June 01 Balance b/d 7 000 Office Expenses 20X8 ...

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    24 Question 6 (a) T. Lennon Trial Balance at 31 December 20X9 DR CR £ £ Motor Vehicle 4 500 Purchases 2 960 Sales 4 230 Stock of Goods 1 800 Cash at Bank ...

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    25 Chapter 6 Trading and Profit & Loss Accounts: An Introduction Answers to Activities Activity 6.1 Solutions to Target Practice Questions Question 1 Andrew Gordon Trading and Profit & Loss Account for the year ended 31 December 20X2 £ £ Purchases 26 200 Sales 34 67...

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    26 Question 2 A. Darnell Trading and Profit & Loss Account for the year ended 30 September 20X7 £ £ Purchases 23 380 Sales 30 870 Less Stock at 30 September 20X7 3 650 Cost of goods sold 19 730 Gross profit c/d 11 140 _____ 30 870 30 870 Rent 900 Gross profi...

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    27 Question 4 Ada Cheung Trading and Profit & Loss Account for the year ended 31 March 20X3 Question 5 (a) 1. Comparing performance with other businesses or with previous periods of time to see if the business is growing. 2. Planning ahead – profits will allow the firm to expand so info...

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    28 Chapter 7 The Balance Sheet Answers to ‘Think about it’ Questions Page 72 – Why the balance sheet is prepared at a specified date while the trading and profit and loss is prepared for a period of time. Because it shows the financial position of a business at a particular date and not...

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    29 Question 3 Andrew Gordon Balance Sheet as at 31 December 20X2 £ £ £ £ Fixed Assets Capital 68 660 Premises 54 000 Add: Net profit 3 730 Fixtures and fi...

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    30 Question 5 B Betty Balance Sheet as at 31 June 20X5 £ £ £ £ Fixed Assets Capital 7 500 Office furniture 650 Add: Net profit 2 435 Motor vehicle 2 800 Less: Drawings 1 230 ...

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    31 Chapter 8 Final Accounts with Further Considerations Answers to Activities Activity 8.1 T Antonio Trading Account for the month ending 30 April 20X8 Solutions to Target Practice Questions Question 1 (a) Carriage Inwards is associated with the cost of getting goods into the business and rea...

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    32 Question 2 R Knight Trading and Profit & Loss Account for the year ended 31 October 20X6 £ £ £ Sales 120 500 Less: Returns inwards ...

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    33 Question 3 T Pearl Trading and Profit & Loss Account for the year ended 31 August 20X7 £ £ £ Sales 34 350 Less: Returns inwards 1 230 Turnover ...

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    34 Question 4 P Franks Trading and Profit & Loss Account For the year ended 28 February 20X8 £ £ £ Sales 221 300 Less: Returns Inwards 5 200 Turnove...

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    35 P Franks Balance Sheet at 28 February 20X8 £ £ Fixed assets Premises 104 000 Equipment 28 000 Motor vehicle 21 000 153 000 Current assets Stock 1...

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    36 Question 5 T Williams Trading and Profit & Loss Account for the year ended 31 May 20X8 £ £ £ Sales 139 200 Less: Returns inwards 430 Turnover ...

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    37 T Williams Balance Sheet at 31 May 20X8 £ £ Fixed assets Buildings 32 000 Fixtures and fittings 4 250 36 250 Current assets Stock 30 580 Debtors 21 460 Bank 4 450 Cash 195 56 685 Less: Cu...

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    38 Chapter 9 The Division of the Ledger and Books of Original Entry Answers to ‘Think about it’ Questions Page 93 – What have you noticed about the Cash Book? It is a Book of Original Entry as well as a Ledger. Answers to Activities Activity 9.1 1. General Ledger 2. Sales Ledger 3. G...

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    39 Chapter 10 Bank Facilities Answers to Activities Activity 10.1 Solutions to Target Practice Questions Question 1 Bank 20X7 £ November 30 Interest receivable 145 20X7 £...

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    40 Question 3 A standing order is used for payments of fixed amounts at regular intervals at the request of the account holder while a direct debit is made at the request of the payee (the person/organisation that is owed) and can be used for either fixed or changing amounts and for payments at...

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    41 Chapter 11 Cash Books Answers to ‘Think about it’ Questions Page 111 – Is it possible for the cash columns to have a credit balance? Give reasons for your answer. No – because it is impossible to spend more cash than is available. If the business has cash in hand of only £50 the...

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    42 Question 3 T. Karekla – Cash Book 20X9 Details Cash £ Bank £ 20X9 Details Cash £ Bank £ July 1 July 4 July 15 July 20 July 23 July 29 July 30 Aug 1 Capital Bank (C) Loan Bank (C) Sales Sales Cash (C) Balances b/d 150 100 390 ___ 640 95 6 0002 000 540 ...

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    43 Discount Received 20X7 £ February 28 Total for the month 75 Question 5 (a) Sally Foon – Cash Book 20X2 DETAILS Discount Allowed £ Cash £ Bank...

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    44 Chapter 12 The Sales and Purchases Day Books Answers to ‘Think about it’ Questions Page 125 – Why do you think the invoice numbers are not sequential in S French’s Purchases Day Book? Because S French has not assigned unique numbers to each invoice but is instead using the invoice ...

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    45 L Ryle 20X8 £ October 15 Sales 810 F Law 20X8 £ October 23 Sales ...

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    46 T Ronald 20X5 £ July 07 Sales 480 July 30 Sales 435 N Smithers 20X5 ...

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    47 (b) Purchases Day Book D Bellamy 20X3 £ April 01 Purchases 306 April 14 Purchases ...

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    48 Chapter 13 The Returns Day Books Answers to ‘Think about it’ Questions Page 129 – What are some of the possible reasons that a customer may return goods to the seller? Goods may be damaged or faulty Goods of the wrong type More received than ordered Solutions to Target Practice Que...

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    49 T. Sharpe 20X7 £ Sept 26 Sales 405 General Ledger Sales ...

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    50 Returns Inwards Day Book Date Details Net Amount 20X9 Jan 06 Jan 31 Jan 31 K Devine D Lemon Transferred to Returns Inwards Account £ 49 64 113 (b) Purchases Ledger ...

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    51 Sales 20X9 £ Jan 31 Credit sales for the month 1 175 Returns Outwards 20X9 ...

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    52 Question 4 (a) Purchases Day Book (b) Sales Day Book (c) Returns Inwards Day Book (d) Returns Outwards Day Book Question 5 A credit note is sent to the buyer (customer) by the supplier showing the amount of allowance to be given. A debit note is sent to the supplier from the buyer, gi...

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    53 Chapter 14 The Journal Solutions to Target Practice Questions Question 1 (a) Debit Credit £ £ Premises 25 000 Equipment 3 500 Stock 1 400 Debtors 2 1...

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    54 (c) M Jones Balance Sheet at 1 January 20X7 £ £ £ Fixed assets 25 000 Premises 3 500 Office equipment _5 000 33 500 Current assets Stock 1 400 Debtors...

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    55 Question 3 Journal 20X7 Debit £ Credit £ Aug 1 Aug 2 Aug 7 Aug 3 Aug 18 Aug 23 Aug 29 Computers Siskin Computers Drawings Cash Siskin Computers Computers Motor Van Motor Traders Bank Bad debts D Wong Drawings Telephone J Cummings Fi...

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    56 Chapter 15 The Petty Cash Imprest System Solutions to Target Practice Questions Question 1 (a) M Leighton Petty Cash book Receipts Date 20X7 Details Voucher Number Total Wages Stationery Postage Ledger £ 17.5...

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    57 (c) 1. It deals with small payments. 2. Enables the person looking after the Cash Book to concentrate on the bigger transactions. Question 2 F Salmon ...

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    58 Question 3 (a) Receipts Date 20X3 Details Total Motor Vehicle Expense Stationery Postage Travel Expense Cleaning Expense Ledger £ 32.00 12.70 9.50 8.00 11.30 24.80 12.80 15.10 9.00 14.50 13.20 £ 32.00 £ 12.70 15.10 £ 9.50 12.80 13.20 £ ...

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    59 Chapter 16 Adjusting for Accruals and Prepayments Answers to ‘Think about it’ Questions Page 160 – Why are expense prepayment and income accrual shown as current assets on the Balance Sheet? Where an expense has been paid for before it is actually used, the supplier owes the business ...

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    60 (b) B. Kouzalai Balance Sheet (extract) at 30 June 20X7 £ £ Current assets Debtors 9 430 Prepayment 80 Commission receivable 141 Current liabilities Creditors 7 62...

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    61 Birch Balance Sheet at 31 December 20X6 £ £ Fixed assets Motor vehicles: cost 9 843 Current assets Stock 3 765 Debtors 3 553 Prepayments 2 059 Bank 195 9 572 Cur...

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    62 Chapter 17 Depreciation of Fixed Assets Answers to ‘Think about it’ Questions Page 168 – What can be said about the yearly depreciation charge under the two different methods? Under the straight line method, the yearly depreciation charge is the same each year over the useful life of ...

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    63 Question 2 (a) £ Cost 8 000 20X5 depreciation (25%) 2 000 Net Book Value at 31 Dec 20X5 6 000 20X6 depreciation 25% x £6000 1 500 Net Book...

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    64 Question 3 Motor Vans 20X7 £ Jan 1 Bank 8 400 Aug 1 Bank ...

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    65 Provision for Depreciation – Furniture & Fittings 20X4 £ Dec 31 Balance c/d 975 97520X5 Dec 31 Balance c/d 1 950 ...

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    66 Working 1 [W1] £9200 - £1400 = £975 8 Working 2 [W2] £ Cost 15 000 20X4 depreciation (£15 000 x 40% x 6/12) 3 000 Net Book Value at 31 Dec 20X4 12 000 20X5 de...

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    67 (d) 1. Economic factors, i.e. the fixed asset may become obsolete or out of date due to an improved product being available, e.g. computers. 2. Passage of time, i.e. even if an item is not used very often, as the years pass and it becomes older, it will lose value.

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    68 Chapter 18 Bad Debts Solutions to Target Practice Questions Question 1 (a) Bad Debts 20X7 £ Jan 30 C Lumas 348Feb 28 Dent and Son 268Mar 31 J Lowe 125Mar 31...

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    69 (c) C Shaw Profit and Loss (Extract) for the year ended 30 April 20X7 £ £ Gross Profit ...

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    70 Question 4 (a) F Turner 20X7 £ July 1 Balance 700July 4 Sales (£600 x 80%) 480 …….. ...

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    71 Chapter 19 Bank Reconciliation Statements Answers to ‘Think about it’ Questions Page 184 – Why items on the bank statement appear on the opposite side to the cash book? Because the bank statement is prepared from the point of view of the bank, while the cash book is prepared from the...

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    72 (b) N Swann Bank Reconciliation Statement at 31 August 20X9 £ £ Balance as per Bank statement 2 670 Add: Late lodgements R Quaile 185 Sal...

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    73 Question 3 (a) Cash Book £ Balance 23 399 Credit Transfer (T Brock) 814 P May (£740 - £470) 270 Sales ...

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    74 (b) T Merry Bank Reconciliation Statement at 31 July 20X1 £ £ Balance as per cash book 114 Add: Unpresented cheques 91 67 211 369 453 Less: Late lodgement 233 Balance as per Bank ...

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    75 Chapter 20 Capital and Revenue Expenditure Answers to ‘Think about it’ Questions Page 194 – What is meant by the term fixed assets? Give examples. Fixed assets are bought for use in the business and are expected to have a long life. Examples include land and buildings, fixtures and f...

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    76 Question 3 (a) 1. Capital 2. Revenue 3. Revenue 4. Revenue 5. Capital 6. Revenue 7. Capital 8. Capital 9. Revenue 10. Revenue (b) (i) Capital expenditure is the expenditure on the purchase of fixed assets, or expenditure to increase the value of an existing fixed asset. (ii) Revenue e...

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    77 Chapter 21 Errors in the Accounts and their Corrections Answers to Activities Activity 21.1 Error Type of Error (a) A purchases invoice for £452 had been entered into the books of account as £425. Error of Original entry (b) A sales invoice for £200 was debited to th...

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    78 Solutions to Target Practice Questions Question 1 Journal Dr Cr ...

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    79 Question 3 (a) J Gill Journal Dr Cr £ £ Purchases 90 P Sawyer 90 A Rae 220 Sales 220 Interest Payable 65 Interest Receivable 65 Stock (Trading Account) 450 Stock (Balance Sheet) 450 Drawings 60 Purchases 60 Motor Vehicle – cost 5 000 Bank 5 000...

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    80 Question 4 (a) (i) 1. Omission 2. Reversal 3. Commission 4. Compensating 5. Principle (ii) Henry Lim Journal Dr Cr ...

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    81 Chapter 22 Control Accounts Solutions to Target Practice Questions Question 1 Sales Ledger Control Account 20X7 £ Balance b/d 37 170 Sales 100 819 ...

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    82 Chapter 23 Final Accounts and Year-end Adjustments Solutions to Target Practice Questions Question 1 J Cleaver Trading and Profit & Loss Account Year ended 31 December 20X6 £ ...

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    83 Cleaver Balance Sheet at 31 December 20X6 Cost Aggregate Net Book Depn Value ...

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    84 M Tiong Balance Sheet at 30 April 20X5 Cost Aggregate Net Book Depn Value ...

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