Question Simulator

AS & A Level Accounting (9706)

Financial statements of sole traders Banker

29 questions · about 3% of the marks we indexed · examined in 9 of 9 sessions.

Questions by year

2026

  • 2026 May/June · Paper 12 · Q121 markIrrecoverable debts and credit control
  • 2026 May/June · Paper 12 · Q141 markStatement of profit or loss and SOFP
  • 2026 May/June · Paper 12 · Q161 markStatement of profit or loss and SOFP
  • 2026 May/June · Paper 22 · Q1 (d)12 marksStatement of profit or loss and SOFP
  • 2026 May/June · Paper 22 · Q2 (c)5 marksStatement of profit or loss and SOFP

2025

  • 2025 Oct/Nov · Paper 12 · Q131 markIrrecoverable debts and credit control
  • 2025 Oct/Nov · Paper 12 · Q141 markAccruals and prepayments
  • 2025 Oct/Nov · Paper 12 · Q151 markStatement of profit or loss and SOFP
  • 2025 May/June · Paper 12 · Q141 markAccruals and prepayments
  • 2025 May/June · Paper 12 · Q151 markIrrecoverable debts and credit control
  • 2025 May/June · Paper 12 · Q161 markAdjustments to draft statements
  • 2025 May/June · Paper 22 · Q3 (c, d)4 marksIrrecoverable debts and credit control

2024

  • 2024 Oct/Nov · Paper 12 · Q141 markAccruals and prepayments
  • 2024 Oct/Nov · Paper 12 · Q151 markIrrecoverable debts and credit control
  • 2024 May/June · Paper 12 · Q121 markIrrecoverable debts and credit control
  • 2024 May/June · Paper 22 · Q1 (c)12 marksStatement of profit or loss and SOFP

2023

  • 2023 Oct/Nov · Paper 12 · Q131 markAccruals and prepayments
  • 2023 Oct/Nov · Paper 12 · Q151 markAdjustments to draft statements
  • 2023 May/June · Paper 12 · Q111 markAccruals and prepayments
  • 2023 May/June · Paper 12 · Q121 markAccruals and prepayments
  • 2023 May/June · Paper 12 · Q131 markAdjustments to draft statements

2022

  • 2022 Oct/Nov · Paper 12 · Q81 markAdjustments to draft statements
  • 2022 Oct/Nov · Paper 12 · Q91 markInventory valuation (NRV)
  • 2022 Oct/Nov · Paper 12 · Q101 markAccruals and prepayments
  • 2022 Oct/Nov · Paper 12 · Q111 markAccruals and prepayments
  • 2022 May/June · Paper 12 · Q81 markInventory valuation (NRV)
  • 2022 May/June · Paper 12 · Q91 markAccruals and prepayments
  • 2022 May/June · Paper 12 · Q101 markAdjustments to draft statements
  • 2022 May/June · Paper 12 · Q111 markStatement of profit or loss and SOFP

References only, not question text. Open Official paper ↗ where Cambridge publishes the paper, or see the official Cambridge past-papers page; for other papers, ask your school. “Paper 42” means Paper 4, variant 2.

Practice questions

Original questions written by HomiLabs in the style of the exam, with answers and mark schemes. They are not Cambridge past paper questions and have not been reviewed by Cambridge. Try each one before opening the answer.

Q1Statement of profit or loss and SOFP · Core · Paper 1 style · 1 mark
  1. (a) [1]
Show answer
  1. (a) B $83,000
    Cost of sales = 14,200 + 86,500 − 2,300 + 1,400 − 16,800 = 83,000. Carriage outwards is a selling expense, not part of cost of sales (A adds it); C adds the returns instead of deducting them; D leaves out carriage inwards.
Q2Statement of profit or loss and SOFP · Core · Paper 2 style · 6 marks

Amina runs a stationery shop in Lahore. Her bookkeeper gives these figures for the year ended 31 March 2026. $Revenue 186,400Sales returns 2,400Purchases 112,300Purchases returns 1,800Inventory at 1 April 2025 15,600Inventory at 31 March 2026 18,100Wages 24,500Rent 9,600Electricity 3,150Discount received 900Discount allowed 1,250Depreciation of fixtures 4,200

  1. (a) Calculate the cost of sales. [2]
  2. (b) Calculate the gross profit. [1]
  3. (c) Calculate the profit for the year. [3]
Show answer
  1. (a) $108,000
    M1 15,600 + 112,300 − 1,800 − 18,100; A1 108,000.
  2. (b) $76,000
    B1 (186,400 − 2,400) − 108,000 = 76,000 (own figure for cost of sales).
  3. (c) $34,200
    B1 add discount received 900; M1 deduct total expenses 24,500 + 9,600 + 3,150 + 1,250 + 4,200 = 42,700; A1 34,200.
Q3Statement of profit or loss and SOFP · Core · Paper 2 style · 6 marks

Daniyal's capital at 1 January 2026 was $58,000. On 1 July 2026 he paid a further $7,500 of his savings into the business bank account. Profit for the year ended 31 December 2026 was $21,300. During the year he withdrew $14,400 in cash and took goods costing $900 for his own use.

  1. (a) Prepare the capital section of the statement of financial position at 31 December 2026. [4]
  2. (b) Explain why the goods taken by Daniyal are recorded as drawings and not as an expense of the business. [2]
Show answer
  1. (a) CapitalBalance at 1 January 2026 58,000Add capital introduced 7,500Add profit for the year 21,300 86,800Less drawings: cash 14,400 goods 900 (15,300)Balance at 31 December 2026 71,500
    B1 opening capital and capital introduced added; B1 profit added; B1 drawings 15,300 including goods; B1 closing capital 71,500.
  2. (b) The goods were used privately, not to earn revenue for the business; under the business entity concept the owner's private use is a withdrawal of capital (drawings), recorded at cost.
    1 mark: not used to earn income for the business / private use; 1 mark: business entity concept – owner and business are separate, so it reduces capital.
Q4Statement of profit or loss and SOFP · Core · Paper 2 style · 8 marks
  1. (a) State where each of the following is shown in the financial statements of a sole trader (for example 'cost of sales in the statement of profit or loss', 'current asset').(i) Carriage inwards(ii) Bank overdraft(iii) Bank loan repayable in 2031 (the year end is 31 December 2026)(iv) Discount received(v) Insurance paid in advance(vi) Drawings [6]
  2. (b) Explain the difference between a current liability and a non-current liability. [2]
Show answer
  1. (a) (i) Cost of sales (statement of profit or loss)(ii) Current liability(iii) Non-current liability(iv) Other income, added to gross profit(v) Current asset (prepayment)(vi) Deducted from capital in the statement of financial position
    1 mark for each correct location.
  2. (b) A current liability is due for payment within 12 months of the date of the statement of financial position; a non-current liability is due after more than 12 months.
    1 mark each side of the distinction (within 12 months / after 12 months).
Q5Statement of profit or loss and SOFP · Core · Paper 2 style · 6 marks

Kwame runs a printing business in Accra. During the year he paid his home electricity bill of $460 and his daughter's school fees of $2,300 from the business bank account. Both were recorded as general expenses of the business. His draft profit for the year is $25,700 and recorded drawings are $12,000.

  1. (a) Calculate the corrected profit for the year. [2]
  2. (b) Calculate the corrected drawings. [1]
  3. (c) State and explain the effect of the correction on Kwame's capital at the end of the year. [2]
  4. (d) Name the accounting concept that has not been applied. [1]
Show answer
  1. (a) $28,460
    M1 add back 460 + 2,300; A1 28,460.
  2. (b) $14,760
    B1 12,000 + 2,760.
  3. (c) No effect: profit increases by $2,760 and drawings increase by $2,760, so closing capital is unchanged.
    1 mark: no change; 1 mark: equal increase in profit and drawings cancel out.
  4. (d) Business entity concept
    B1.
Q6Statement of profit or loss and SOFP · Standard · Paper 1 style · 1 mark
  1. (a) During the year the owner of a shoe shop took shoes costing $650 for her family. No entry has been made. Which entry records this? [1]
Show answer
  1. (a) C Debit drawings, credit purchases
    Goods taken for own use are drawings, recorded at cost, and they reduce the goods available for sale, so purchases is credited. A reverses the entry. D credits revenue, which would treat the goods as a sale; B uses the closing inventory account, which is not adjusted during the year.
Q7Statement of profit or loss and SOFP · Standard · Paper 2 style · 9 marks

Bilal owns an electronics shop in Karachi. The following balances were taken from his books at 30 June 2026. $Revenue 312,000Sales returns 4,800Purchases 198,500Purchases returns 3,600Carriage inwards 2,900Carriage outwards 3,400Inventory at 1 July 2025 27,300Wages and salaries 38,200Rent and rates 14,400Discount allowed 1,700Discount received 2,100Commission received 3,500Shop fittings at cost 48,000Accumulated depreciation on fittings at 1 July 2025 12,000Additional information:1 Inventory at 30 June 2026 was $31,500.2 Shop fittings are depreciated at 10% per annum using the straight-line method.

  1. (a) Prepare the statement of profit or loss for the year ended 30 June 2026. [8]
  2. (b) Calculate the carrying amount of the shop fittings at 30 June 2026. [1]
Show answer
  1. (a) BilalStatement of profit or loss for the year ended 30 June 2026 $ $ $Revenue 312,000Less sales returns (4,800) 307,200Less cost of sales Opening inventory 27,300 Purchases 198,500 Less purchases returns (3,600) 194,900 Carriage inwards 2,900 197,800 225,100 Less closing inventory (31,500) (193,600)Gross profit 113,600Add discount received 2,100Add commission received 3,500 5,600 119,200Less expenses Carriage outwards 3,400 Wages and salaries 38,200 Rent and rates 14,400 Discount allowed 1,700 Depreciation of fittings 4,800 (62,500)Profit for the year 56,700
    B1 net revenue 307,200; B1 purchases less returns plus carriage inwards; B1 cost of sales 193,600; B1 gross profit 113,600; B1 discount received and commission received added; B1 carriage outwards and discount allowed as expenses; B1 depreciation 4,800; B1 profit for the year 56,700 (own figure).
  2. (b) $31,200
    B1 48,000 − (12,000 + 4,800) = 31,200.
Q8Statement of profit or loss and SOFP · Standard · Paper 2 style · 8 marks

Farah owns a clothes boutique in Dubai. Her profit for the year ended 31 December 2026 was $29,850. After preparing the statement of profit or loss, the following balances remained in her books. $Premises at cost 120,000Fixtures and fittings at cost 36,000Accumulated depreciation: premises 18,000Accumulated depreciation: fixtures 14,400Inventory 22,700Trade receivables 9,800Provision for doubtful debts 490Trade payables 12,350Bank overdraft 3,260Cash in hand 640Insurance prepaid 520Electricity accrued 380Bank loan (repayable in 2031) 40,000Capital at 1 January 2026 89,530Drawings 18,600

  1. (a) Prepare the statement of financial position at 31 December 2026. [8]
Show answer
  1. (a) FarahStatement of financial position at 31 December 2026 Cost Acc dep CarryingNon-current assets $ $ $Premises 120,000 18,000 102,000Fixtures and fittings 36,000 14,400 21,600 156,000 32,400 123,600Current assetsInventory 22,700Trade receivables 9,800Less provision for doubtful debts (490) 9,310Insurance prepaid 520Cash in hand 640 33,170Total assets 156,770Current liabilitiesTrade payables 12,350Bank overdraft 3,260Electricity accrued 380 15,990Non-current liabilitiesBank loan 40,000Total liabilities 55,990Net assets 100,780Capital at 1 January 2026 89,530Add profit for the year 29,850 119,380Less drawings (18,600)Capital at 31 December 2026 100,780
    B1 non-current assets at carrying amount 123,600; B1 receivables net of provision 9,310; B1 prepayment and cash as current assets (total 33,170); B1 overdraft and accrual as current liabilities (total 15,990); B1 loan as non-current liability; B1 net assets 100,780; B1 capital + profit − drawings; B1 closing capital 100,780 equal to net assets.
Q9Statement of profit or loss and SOFP · Standard · Paper 2 style · 7 marks

Hassan's business has the following balances at 31 December 2026. $Inventory 13,400Trade receivables 8,900Bank (in credit) 2,150Rent prepaid 600Trade payables 10,700Wages accrued 850Bank loan 20,000The bank loan is repayable in five equal annual instalments; the next instalment is due on 30 June 2027.

  1. (a) Calculate the total of current assets. [1]
  2. (b) Calculate the total of current liabilities. [2]
  3. (c) Calculate the net current assets (working capital). [1]
  4. (d) State the amount of the loan shown under non-current liabilities. [1]
  5. (e) Explain why the loan is split between current and non-current liabilities. [2]
Show answer
  1. (a) $25,050
    B1 13,400 + 8,900 + 2,150 + 600.
  2. (b) $15,550
    B1 loan instalment 4,000 included; B1 total 10,700 + 850 + 4,000 = 15,550.
  3. (c) $9,500
    B1 25,050 − 15,550 (own figures).
  4. (d) $16,000
    B1 20,000 − 4,000.
  5. (e) The instalment due within the next 12 months is a current liability; the rest is due after 12 months. Splitting it shows the true short-term obligations, so working capital and liquidity are not overstated.
    1 mark: amount due within 12 months is current; 1 mark: gives a true and fair view of liquidity / working capital.
Q10Statement of profit or loss and SOFP · Standard · Paper 2 style · 6 marks

Mei Ling's draft statement of profit or loss for the year ended 31 May 2026 shows gross profit $64,200 and profit for the year $23,900. It was then found that carriage outwards of $1,850 had been included in cost of sales.

  1. (a) Calculate the corrected gross profit and the corrected profit for the year. [2]
  2. (b) Explain why the profit for the year does not change. [2]
  3. (c) Carriage outwards is a cost of delivering goods to customers. Explain why it is not part of the cost of sales. [2]
Show answer
  1. (a) Gross profit $66,050; profit for the year $23,900 (unchanged)
    B1 gross profit 66,050; B1 profit unchanged at 23,900.
  2. (b) Carriage outwards is still an expense; it is only moved from cost of sales to the expenses section, so total costs deducted are the same.
    1 mark: still deducted / still an expense; 1 mark: only its position changes, total deductions unchanged.
  3. (c) Cost of sales includes the cost of buying goods and bringing them to their present location and condition (e.g. carriage inwards). Carriage outwards arises after the goods are sold, in distributing them, so it is a selling and distribution expense.
    1 mark: cost of sales = cost of getting goods into saleable condition/location; 1 mark: carriage outwards is a distribution cost incurred after sale.
Q11Statement of profit or loss and SOFP · Standard · Paper 2 style · 7 marks

Jasper runs a florist's shop in Singapore. For the year ended 31 August 2026 his gross profit was $58,400. Other items for the year were: $Rent received from sub-letting a room 4,800Discount received 760Profit on disposal of a van 350Salaries 21,600Heating and lighting 3,240Depreciation 5,100Loan interest 900Irrecoverable debts 420Increase in provision for doubtful debts 180

  1. (a) Prepare the part of the statement of profit or loss from gross profit to profit for the year. [5]
  2. (b) Explain why the profit on disposal of the van is not included in revenue. [2]
Show answer
  1. (a) Statement of profit or loss (extract) for the year ended 31 August 2026 $ $Gross profit 58,400Add rent received 4,800 Discount received 760 Profit on disposal of van 350 5,910 64,310Less expenses Salaries 21,600 Heating and lighting 3,240 Depreciation 5,100 Loan interest 900 Irrecoverable debts 420 Increase in provision for doubtful debts 180 (31,440)Profit for the year 32,870
    B1 three income items added (5,910); B1 salaries, heating and depreciation; B1 loan interest as expense; B1 irrecoverable debts and increase in provision as expenses; B1 profit 32,870.
  2. (b) Revenue is income from the main trading activity (selling flowers). The van was a non-current asset; the gain on its disposal is incidental, so it is shown as other income after gross profit.
    1 mark: revenue = sales of goods in normal trading; 1 mark: disposal of a non-current asset is not trading, shown as other income.
Q12Statement of profit or loss and SOFP · Challenge · Paper 1 style · 1 mark
  1. (a) The following information is available for a business.Revenue 248,000Sales returns 5,500Inventory at start 21,000Purchases 162,000Purchases returns 3,200Inventory at end 24,600Carriage outwards 2,700What is the gross profit? [1]
Show answer
  1. (a) D $87,300
    Net revenue 242,500; cost of sales 21,000 + 162,000 − 3,200 − 24,600 = 155,200; gross profit 87,300. A wrongly deducts carriage outwards (an expense below gross profit); B adds purchases returns; C ignores sales returns.
Q13Statement of profit or loss and SOFP · Challenge · Paper 2 style · 9 marks

Zainab owns a pharmacy in Peshawar. The following balances were extracted from her books at 31 December 2026. $Revenue 228,600Sales returns 3,100Purchases 141,800Purchases returns 2,700Inventory at 1 January 2026 19,450Carriage inwards 1,650Wages 31,900Rent 12,000Insurance 2,880General expenses 4,370Delivery vehicle at cost 32,000Accumulated depreciation on vehicle at 1 January 2026 12,480Discount received 1,320Additional information:1 Inventory at 31 December 2026 was $22,600.2 During the year Zainab took goods costing $1,200 for her own use. No entry has been made.3 Wages of $600 were owing at 31 December 2026.4 The vehicle is depreciated at 25% per annum using the reducing balance method.

  1. (a) Prepare the statement of profit or loss for the year ended 31 December 2026. [8]
  2. (b) Calculate the carrying amount of the delivery vehicle at 31 December 2026. [1]
Show answer
  1. (a) ZainabStatement of profit or loss for the year ended 31 December 2026 $ $ $Revenue 228,600Less sales returns (3,100) 225,500Less cost of sales Opening inventory 19,450 Purchases (141,800 − 1,200) 140,600 Less purchases returns (2,700) Carriage inwards 1,650 139,550 159,000 Less closing inventory (22,600) (136,400)Gross profit 89,100Add discount received 1,320 90,420Less expenses Wages (31,900 + 600) 32,500 Rent 12,000 Insurance 2,880 General expenses 4,370 Depreciation of vehicle 4,880 (56,630)Profit for the year 33,790
    B1 net revenue 225,500; B1 purchases reduced by 1,200 for goods taken; B1 returns and carriage inwards treated correctly; B1 cost of sales 136,400; B1 gross profit 89,100; B1 wages 32,500 including accrual; B1 depreciation 4,880 on reducing balance; B1 profit for the year 33,790 (own figure).
  2. (b) $14,640
    B1 19,520 − 4,880 = 14,640.
Q14Statement of profit or loss and SOFP · Challenge · Paper 2 style · 8 marks

Omar borrowed $30,000 from a bank on 1 October 2025 at 8% interest per annum. The loan is repayable in five equal annual instalments, the first paid on 30 September 2026. Interest paid during the year ended 30 September 2026 was $1,800, and this was the only interest charged in the draft statement of profit or loss, which showed a profit of $27,400.

  1. (a) Calculate the loan interest for the year and the amount accrued at 30 September 2026. [2]
  2. (b) Show how the loan and the interest appear in the statement of financial position at 30 September 2026. [3]
  3. (c) Calculate the corrected profit for the year. [1]
  4. (d) Explain why the accrued interest must be included even though it has not been paid. [2]
Show answer
  1. (a) Interest $2,400; accrued $600
    B1 30,000 × 8% = 2,400 (the loan was outstanding all year); B1 accrual 600.
  2. (b) Current liabilities: bank loan $6,000; loan interest accrued $600Non-current liabilities: bank loan $18,000
    B1 loan balance 24,000 after first instalment; B1 6,000 current (next instalment); B1 18,000 non-current with accrual 600 as current liability.
  3. (c) $26,800
    B1 27,400 − 600.
  4. (d) The accruals (matching) concept: expenses are recognised in the period in which they are incurred, not when paid. The interest relates to borrowing used during this year, so it is matched against this year's revenue.
    1 mark: accruals/matching concept named; 1 mark: interest was incurred in this period regardless of payment date.
Q15Statement of profit or loss and SOFP · Challenge · Paper 2 style · 7 marks

Rukhsana's capital was $64,300 on 1 April 2025 and $71,950 on 31 March 2026. During the year she withdrew $1,250 cash every month, took goods costing $1,100 for her own use and paid an inheritance of $5,000 into the business bank account.

  1. (a) Calculate the profit for the year ended 31 March 2026. [3]
  2. (b) Expenses for the year were $42,600 and other income was $1,350. Calculate the gross profit. [2]
  3. (c) Rukhsana sells all goods at a mark-up of 25% on cost. Calculate the cost of sales and the revenue. [2]
Show answer
  1. (a) $18,750
    M1 closing capital = opening + capital introduced + profit − drawings; B1 drawings 16,100; A1 profit 18,750.
  2. (b) $60,000
    M1 18,750 + 42,600 − 1,350; A1 60,000.
  3. (c) Cost of sales $240,000; revenue $300,000
    B1 cost of sales 60,000 ÷ 25% = 240,000; B1 revenue 300,000.
Q16Accruals and prepayments · Core · Paper 1 style · 1 mark
  1. (a) [1]
Show answer
  1. (a) C $15,500
    Expense = payments 13,500 + opening prepayment 1,100 (relates to 2026) + closing accrual 900 = 15,500. A deducts the opening prepayment; D deducts the closing accrual.
Q17Accruals and prepayments · Core · Paper 2 style · 6 marks

Sana rents a warehouse for $3,000 per quarter, paid at the end of each quarter (in arrears). Her year ends on 31 December. At 1 January 2026 rent for October–December 2025 was owing. During 2026 she paid $3,000 on each of 4 January, 2 April, 1 July and 3 October.

  1. (a) Prepare the rent payable account for the year ended 31 December 2026, showing the balance brought down on 1 January 2027. [5]
  2. (b) State how the balance on the account is shown in the statement of financial position at 31 December 2026. [1]
Show answer
  1. (a) Rent payable accountDr | Cr------------------------------------+------------------------------------Jan 4 Bank 3,000 | Jan 1 Balance b/d 3,000Apr 2 Bank 3,000 | Dec 31 Profit or loss 12,000Jul 1 Bank 3,000 |Oct 3 Bank 3,000 |Dec 31 Balance c/d 3,000 | 15,000 | 15,000 | 2027 Jan 1 Balance b/d 3,000
    B1 opening accrual 3,000 credit; B1 four payments debited; B1 transfer to profit or loss 12,000; B1 accrual c/d 3,000; B1 balance b/d on credit side.
  2. (b) Current liability: rent accrued $3,000
    B1.
Q18Accruals and prepayments · Standard · Paper 2 style · 6 marks

Tariq's year ends on 31 December. At 1 January 2026 insurance of $1,350 had been prepaid for January–March 2026. On 1 April 2026 he paid an annual premium of $6,000 covering 1 April 2026 to 31 March 2027.

  1. (a) Calculate the insurance expense for the year ended 31 December 2026. [2]
  2. (b) Calculate the insurance prepaid at 31 December 2026. [1]
  3. (c) The bookkeeper charged $7,350 as the insurance expense. State the effect of this on the profit for the year and on current assets. [2]
  4. (d) Name the accounting concept that requires this adjustment. [1]
Show answer
  1. (a) $5,850
    M1 1,350 + 6,000 × 9/12; A1 5,850.
  2. (b) $1,500
    B1 6,000 × 3/12.
  3. (c) Profit understated by $1,500; current assets understated by $1,500 (prepayment omitted).
    B1 profit understated 1,500; B1 current assets understated 1,500.
  4. (d) Accruals (matching) concept
    B1.
Q19Accruals and prepayments · Standard · Paper 2 style · 6 marks

Nadia sub-lets part of her shop. Her year ends on 30 June. At 1 July 2025 the tenant owed $400 rent. During the year ended 30 June 2026 Nadia received $7,400 from the tenant. At 30 June 2026 the tenant had paid $600 in advance.

  1. (a) Prepare the rent receivable account for the year ended 30 June 2026. [4]
  2. (b) State how the rent appears in the statement of profit or loss and the statement of financial position. [2]
Show answer
  1. (a) Rent receivable accountDr | Cr------------------------------------+------------------------------------2025 Jul 1 Balance b/d 400 | 2025-26 Bank 7,4002026 Jun 30 Profit or loss 6,400 |Jun 30 Balance c/d 600 | 7,400 | 7,400 | 2026 Jul 1 Balance b/d 600
    B1 opening debit balance 400; B1 cash received 7,400 credited; B1 income in advance 600 c/d on debit side; B1 transfer to profit or loss 6,400.
  2. (b) Statement of profit or loss: rent received $6,400 shown as other income. Statement of financial position: rent received in advance $600 as a current liability.
    B1 income 6,400; B1 600 current liability.
Q20Accruals and prepayments · Challenge · Paper 2 style · 7 marks

Kareem's year ends on 31 March 2026.Electricity: at 1 April 2025 $520 was owing. Payments during the year were $4,860. In May 2026 a bill of $1,080 was received for the three months ended 30 April 2026.Stationery: at 1 April 2025 unused stationery cost $310. Stationery bought during the year cost $2,240. Unused stationery at 31 March 2026 cost $430.

  1. (a) Calculate the electricity expense for the year ended 31 March 2026. [3]
  2. (b) Calculate the stationery expense for the year. [2]
  3. (c) State how electricity and stationery appear in the statement of financial position at 31 March 2026. [2]
Show answer
  1. (a) $5,060
    B1 accrual 2/3 × 1,080 = 720 (February and March); M1 4,860 − 520 + 720; A1 5,060.
  2. (b) $2,120
    M1 310 + 2,240 − 430; A1 2,120.
  3. (c) Electricity accrued $720 – current liability; unused stationery $430 – current asset (prepayment/other inventory).
    B1 each correct item and classification.
Q21Irrecoverable debts and credit control · Core · Paper 1 style · 1 mark
  1. (a) At 31 December 2026 trade receivables were $48,000. A debt of $2,000 is to be written off. The provision for doubtful debts is to be 5% of the remaining receivables; at 1 January 2026 it was $2,500. By how much will these adjustments reduce profit for 2026? [1]
Show answer
  1. (a) B $1,800
    Irrecoverable debt 2,000; new provision 5% × 46,000 = 2,300, a decrease of 200 (income). Net reduction 2,000 − 200 = 1,800. A bases the provision on 48,000; C charges the full provision instead of the change.
Q22Irrecoverable debts and credit control · Core · Paper 2 style · 6 marks
  1. (a) On 14 March 2026 a customer, P. Mensah, who owed $840, was declared bankrupt. Nothing is expected to be received. Prepare the journal entry to record this. A narrative is not required. [2]
  2. (b) On 20 September 2026 a debt of $560 owed by S. Iqbal, written off in 2024, was received in full by cheque. Prepare the journal entries to record this. A narrative is not required. [3]
  3. (c) State where irrecoverable debts recovered appears in the financial statements. [1]
Show answer
  1. (a) Dr Irrecoverable debts $840Cr Trade receivables – P. Mensah $840
    B1 debit irrecoverable debts; B1 credit P. Mensah (trade receivables).
  2. (b) Dr Trade receivables – S. Iqbal $560; Cr Irrecoverable debts recovered $560Dr Bank $560; Cr Trade receivables – S. Iqbal $560
    B1 reinstate debt (Dr S. Iqbal); B1 Cr irrecoverable debts recovered; B1 Dr Bank, Cr S. Iqbal. (Reinstating the debt keeps a record of the customer's payment history.)
  3. (c) Statement of profit or loss, as other income (added to gross profit).
    B1.
Q23Irrecoverable debts and credit control · Standard · Paper 2 style · 8 marks

Lucy keeps a provision for doubtful debts equal to 4% of trade receivables at the year end. At 1 January 2025 the provision was $1,200. Trade receivables were $36,000 at 31 December 2025 and $29,000 at 31 December 2026.

  1. (a) Prepare the provision for doubtful debts account for the years ended 31 December 2025 and 31 December 2026. [5]
  2. (b) State the entries in the statement of profit or loss for each year. [2]
  3. (c) Show the trade receivables in the statement of financial position at 31 December 2026. [1]
Show answer
  1. (a) Provision for doubtful debts accountDr | Cr--------------------------------------+--------------------------------------2025 Dec 31 Balance c/d 1,440 | 2025 Jan 1 Balance b/d 1,200 | 2025 Dec 31 Profit or loss 240 1,440 | 1,440--------------------------------------+--------------------------------------2026 Dec 31 Profit or loss 280 | 2026 Jan 1 Balance b/d 1,4402026 Dec 31 Balance c/d 1,160 | 1,440 | 1,440--------------------------------------+-------------------------------------- | 2027 Jan 1 Balance b/d 1,160
    B1 opening 1,200; B1 increase 240 credited from profit or loss in 2025; B1 balance 1,440; B1 decrease 280 debited in 2026; B1 closing 1,160.
  2. (b) 2025: increase in provision $240 – expense. 2026: decrease in provision $280 – other income.
    B1 each year.
  3. (c) Trade receivables 29,000 less provision for doubtful debts 1,160 = $27,840
    B1.
Q24Irrecoverable debts and credit control · Standard · Paper 2 style · 7 marks

Ali Hardware analyses its trade receivables by age at 30 June 2026.Age of debt $ Provision %Not yet due 24,000 1%1–30 days overdue 9,500 3%31–60 days overdue 4,200 10%Over 60 days overdue 2,300 25%The over-60-days figure includes $1,100 owed by a customer who has disappeared; this debt is to be written off before the provision is calculated. The provision for doubtful debts at 1 July 2025 was $1,520.

  1. (a) Calculate the provision for doubtful debts required at 30 June 2026. [3]
  2. (b) State the change in the provision and how it is treated in the statement of profit or loss. [2]
  3. (c) Suggest two credit control measures Ali Hardware could use to reduce irrecoverable debts. [2]
Show answer
  1. (a) $1,245
    B1 over-60 balance reduced to 1,200; M1 240 + 285 + 420 + 300; A1 1,245.
  2. (b) Decrease of $275; added to gross profit as other income.
    B1 decrease 275 (own figure); B1 shown as income.
  3. (c) Any two: check credit references before giving credit; set credit limits; send statements and reminders promptly; offer cash discounts for early payment; stop supplying customers who are overdue; use an aged receivables report every month.
    1 mark each for any two valid measures.
Q25Irrecoverable debts and credit control · Challenge · Paper 2 style · 8 marks

At 31 December 2026 Ravi's trade receivables were $62,400 before the following adjustments.1 K. Osei's debt of $1,400 is irrecoverable and is to be written off.2 L. Tan owes $2,000. L. Tan is in financial difficulty, so a provision is to be made for the whole debt.3 A general provision of 3% is to be made on the remaining receivables.The provision for doubtful debts at 1 January 2026 was $2,950. During the year $300 was received from a customer whose debt had been written off in 2025; this had been correctly recorded.

  1. (a) Calculate the total provision for doubtful debts at 31 December 2026. [3]
  2. (b) Calculate the net effect of irrecoverable debts, debts recovered and the provision on the profit for the year. [3]
  3. (c) Calculate the trade receivables figure shown in the statement of financial position. [1]
  4. (d) Explain why L. Tan's debt is provided for but not written off. [1]
Show answer
  1. (a) $3,770
    B1 specific provision 2,000; B1 general 3% × (61,000 − 2,000) = 1,770; B1 total 3,770.
  2. (b) Profit reduced by $1,920 (irrecoverable debts 1,400 + increase in provision 820 − debts recovered 300)
    B1 increase in provision 820; B1 irrecoverable debt 1,400 and recovery 300 included; B1 net reduction 1,920.
  3. (c) $57,230
    B1 61,000 − 3,770.
  4. (d) It is doubtful, not certainly irrecoverable: the debt may still be paid, so prudence requires a provision while the debt remains on the ledger.
    B1.
Q26Adjustments to draft statements · Core · Paper 2 style · 6 marks

Yasmin's draft profit for the year ended 31 October 2026 was $31,600. The following were then discovered.(i) Depreciation of $2,400 on the delivery van had not been charged.(ii) Commission receivable of $650 for October 2026 had not been recorded.(iii) Wages of $900 owing at 31 October 2026 had not been recorded.(iv) Goods costing $400 taken by Yasmin for her own use had not been recorded.

  1. (a) Prepare a statement of corrected profit for the year ended 31 October 2026. [5]
  2. (b) State the effect of item (iii) on current liabilities. [1]
Show answer
  1. (a) Statement of corrected profit $Draft profit 31,600(i) Depreciation of van (2,400)(ii) Commission receivable 650(iii) Wages accrued (900)(iv) Goods for own use (purchases reduced) 400Corrected profit 29,350
    1 mark for each adjustment with the correct sign (4); 1 mark corrected profit 29,350.
  2. (b) Current liabilities increase by $900.
    B1.
Q27Adjustments to draft statements · Standard · Paper 1 style · 1 mark
  1. (a) [1]
Show answer
  1. (a) D $40,300
    Overstated closing inventory overstated profit (−1,500); the accrual adds an expense (−800); the prepayment removes an expense (+600). 42,000 − 1,500 − 800 + 600 = 40,300. A treats the prepayment as an extra expense.
Q28Adjustments to draft statements · Challenge · Paper 2 style · 8 marks

Ibrahim's draft financial statements for the year ended 31 December 2026 show a profit of $48,250 and net current assets of $18,600. The following have not yet been taken into account.(i) Closing inventory includes damaged goods that cost $2,300. They can be sold for $1,500 after repairs costing $200.(ii) A customer owing $700 has been declared bankrupt. The debt has not been written off. The provision for doubtful debts of 2% was calculated on receivables that included this debt.(iii) Rent of $1,800 paid for January–March 2027 was charged as an expense of 2026.(iv) Repairs to the premises costing $1,600 were debited to the premises (non-current asset) account. No depreciation is charged on premises in the year of expenditure.(v) Loan interest of $450 owing at 31 December 2026 has not been recorded.

  1. (a) Prepare a statement of corrected profit for the year ended 31 December 2026. [6]
  2. (b) Calculate the corrected net current assets at 31 December 2026. [2]
Show answer
  1. (a) Statement of corrected profit $Draft profit 48,250(i) Inventory written down to NRV (2,300 − 1,300) (1,000)(ii) Irrecoverable debt written off (700)(ii) Reduction in provision (2% × 700) 14(iii) Rent prepaid 1,800(iv) Repairs charged as expense (1,600)(v) Loan interest accrued (450)Corrected profit 46,314
    B1 NRV 1,300 and write-down 1,000; B1 debt 700 deducted; B1 provision reduced by 14 added; B1 prepayment +1,800; B1 repairs −1,600; B1 interest −450 and corrected profit 46,314.
  2. (b) $18,264
    M1 18,600 − 1,000 − 700 + 14 + 1,800 − 450 (item (iv) affects non-current assets only); A1 18,264.
Q29Inventory valuation (NRV) · Standard · Paper 1 style · 1 mark
  1. (a) [1]
Show answer
  1. (a) C $12,800
    Each line at the lower of cost and net realisable value: X 4,000; Y 2,900; Z NRV 6,400 − 500 = 5,900 (below cost 6,100). Total 12,800. B ignores the selling costs of Z; A uses cost throughout.
Q30Inventory valuation (NRV) · Challenge · Paper 2 style · 7 marks

Grace owns a fashion shop. Her inventory at 31 December 2026 was counted and valued at cost: $54,800. The following were then found.1 Forty jackets costing $45 each are out of fashion. They can be sold through an agent for $38 each; the agent charges 10% commission on the selling price.2 Goods that cost $900 are damaged. After repairs costing $150 they can be sold for $1,000.3 One box of goods costing $1,650 was counted twice.4 Goods costing $2,400 have a net realisable value of $3,100.

  1. (a) Calculate the corrected value of inventory at 31 December 2026. [4]
  2. (b) State the effect of the corrections on gross profit. [1]
  3. (c) Explain why inventory is valued at the lower of cost and net realisable value. [2]
Show answer
  1. (a) Inventory $Value at cost 54,800Jackets: 40 × (45 − 34.20) (432)Damaged goods: 900 − 850 (50)Box counted twice (1,650)Goods with NRV above cost – no change 0Corrected inventory 52,668
    B1 jacket NRV 38 × 90% = 34.20 and write-down 432; B1 damaged goods write-down 50; B1 double count removed; B1 no change for item 4 and total 52,668.
  2. (b) Gross profit decreases by $2,132.
    B1.
  3. (c) Prudence: losses are recognised as soon as they are foreseen, so assets and profit are not overstated. Unrealised profits (NRV above cost) are not recognised until goods are sold (realisation).
    1 mark: prudence – avoid overstating assets/profit; 1 mark: profit not recognised until realised / IAS 2 requirement.

Similar questions

Questions that test the same subtopic in different years, grouped so you can work on one skill at a time.

References only: find each question in its paper (official link where available, otherwise through your school).

Statement of profit or loss and SOFP 7 questions · 4/9 sessions
Accruals and prepayments 9 questions · 7/9 sessions
Irrecoverable debts and credit control 6 questions · 5/9 sessions
Adjustments to draft statements 5 questions · 5/9 sessions
Inventory valuation (NRV) Rare2 questions · 2/9 sessions

Subtopics

Our analysis of how often each subtopic was examined and how many marks it carried, 2022 to May/June 2026.

SubtopicMarks indexedSessions
Statement of profit or loss and SOFP 334/9
Accruals and prepayments 97/9
Irrecoverable debts and credit control 95/9
Adjustments to draft statements 55/9
Inventory valuation (NRV) Rare22/9

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