Accounting procedures Banker

1. (a) A customer who owes Shazia $480 has left the country and the debt will not be paid. Which entries record writing off the debt?A Debit irrecoverable debts, credit the customer's accountB Debit the customer's account, credit irrecoverable debtsC Debit provision for doubtful debts, credit irrecoverable debtsD Debit irrecoverable debts, credit sales [1]

1. (a) Explain the difference between an irrecoverable debt and a doubtful debt. [2]
2. (b) State two reasons why a business creates a provision for doubtful debts. [2]

Rizwan Stores owed a supplier $2,000 and was declared bankrupt. The supplier received a final payment of 30 cents for every $1 owed. The rest is irrecoverable.

1. (a) Calculate the amount to be written off as irrecoverable. [1]
2. (b) State the entries in the supplier's books for the cash received and the amount written off. [2]

1. (a) At 31 December 2025 a business had trade receivables of $48,000. It keeps a provision for doubtful debts of 3% of trade receivables. The provision brought forward was $1,200. What is the effect on the income statement for 2025?A expense of $240B income of $240C expense of $1,440D expense of $2,640 [1]

Before adjustments, a furniture wholesaler had trade receivables of $62,500 on 30 June 2026. A debt of $2,500 is to be written off. The provision for doubtful debts is to be kept at 4% of the remaining trade receivables. The provision on 1 July 2025 was $2,100.

1. (a) Calculate the provision for doubtful debts required at 30 June 2026. [2]
2. (b) Calculate the change in the provision and state whether it is income or an expense in the income statement. [2]
3. (c) Calculate the net trade receivables shown in the statement of financial position. [1]
4. (d) Name the accounting principle applied when making the provision. [1]

A printing firm in Colombo created a provision for doubtful debts on 31 December 2024 of 5% of trade receivables, which were $30,000. On 31 December 2025 trade receivables were $26,000 and the rate stayed at 5%.

1. (a) Calculate the amount charged to the income statement for the year ended 31 December 2024. [1]
2. (b) Calculate the provision required at 31 December 2025 and the amount shown in the income statement for 2025, stating whether it is income or an expense. [3]
3. (c) State the balance on the provision for doubtful debts account brought down on 1 January 2026 and its side. [1]

In the year ended 31 March 2025 Kamila wrote off a debt of $650 owed by Wahid. In January 2026 Wahid paid the full $650 by cheque.

1. (a) State the two entries needed to reinstate the debt. [2]
2. (b) State the entries to record the receipt of the cheque. [1]
3. (c) Explain why the debt is reinstated in Wahid's account before the receipt is recorded. [2]
4. (d) State the effect of the recovery on the profit for the year ended 31 March 2026. [1]

Tahir's draft profit for the year ended 30 September 2026 was $41,800. Trade receivables at that date were $35,900, before writing off a debt of $900. The provision for doubtful debts, previously $1,050, is to be 2.5% of the remaining trade receivables.

1. (a) Calculate the new provision for doubtful debts. [2]
2. (b) Calculate the corrected profit for the year. [3]

A wholesaler of solar panels in Lagos bases its provision for doubtful debts on the age of each debt. At 31 December 2025:Debts up to 30 days old: $18,000 (provision 1%)Debts 31–60 days old: $7,500 (provision 4%)Debts over 60 days old: $2,400 (provision 10%)

1. (a) Calculate the provision for doubtful debts required at 31 December 2025. [3]
2. (b) The provision on 1 January 2025 was $900. State the amount and effect on the profit for 2025. [1]
3. (c) Suggest two ways the business could reduce its irrecoverable debts in future. [2]

1. (a) A bakery bought an oven for $24,000. It is expected to last 5 years and then be sold for $4,000. What is the annual depreciation charge using the straight-line method?A $4,000B $4,800C $5,600D $20,000 [1]

1. (a) Define depreciation. [1]
2. (b) State three causes of depreciation. [3]
3. (c) Name the accounting principle applied when depreciation is charged in each year an asset is used. [1]

A car repair workshop values its loose tools each year. On 1 April 2025 the tools were valued at $2,600. During the year tools costing $900 were bought. On 31 March 2026 the tools were valued at $2,850.

1. (a) Calculate the depreciation of loose tools for the year. [2]
2. (b) State why the revaluation method is suitable for loose tools. [1]

Rashid & Co sold a delivery vehicle for $5,900 by cheque. The vehicle had cost $18,000 and accumulated depreciation on it was $11,200.

1. (a) Calculate the net book value of the vehicle at the date of sale. [1]
2. (b) Calculate the profit or loss on disposal. [2]
3. (c) List the entries in the disposal account. [3]

On 1 January 2025 a laboratory in Karachi had equipment at cost of $40,000. On 1 July 2025 it bought more equipment for $12,000. Depreciation is 10% per annum on cost, calculated monthly from the date of purchase.

1. (a) Calculate the depreciation charge on equipment for the year ended 31 December 2025. [3]
2. (b) State how the equipment is shown in the statement of financial position, if accumulated depreciation at 31 December 2025 is $19,600. [2]

1. (a) A machine was bought on 1 January 2023 for $15,000. It is depreciated at 20% per annum using the reducing balance method. What is the depreciation charge for the year ended 31 December 2025?A $1,920B $2,400C $3,000D $7,680 [1]

A textile mill bought a machine on 1 January 2023 for $32,000. Depreciation is 25% per annum by the reducing balance method; the financial year ends on 31 December, and no depreciation is charged in the year of sale. The machine was sold on 1 January 2026 for $14,200.

1. (a) Calculate the depreciation for each of the years 2023, 2024 and 2025. [3]
2. (b) Calculate the profit or loss on disposal. [2]
3. (c) State the entry for the profit on disposal in the disposal account and in the income statement. [1]

Danish bought a delivery van for $50,000. He is choosing between the straight-line method (useful life 6 years, residual value $8,000) and the reducing balance method at 30% per annum.

1. (a) Calculate the depreciation for the first two years under each method. [4]
2. (b) State the difference in total profit for the first two years if reducing balance is used. [1]
3. (c) Advise Danish which method to use. Justify your answer. [3]

On 1 April 2025 a dental clinic paid $3,600 for one year's insurance. Its financial year ends on 31 December.

1. (a) Calculate the insurance expense for the year ended 31 December 2025. [2]
2. (b) State the amount and classification of the prepayment in the statement of financial position at 31 December 2025. [2]
3. (c) Name the accounting principle that requires this adjustment. [1]

1. (a) During the year ended 31 December 2025 Hira paid rent of $9,600. This included $800 for January 2026. There was no prepayment or accrual at the start of the year. What is the rent expense in the income statement for 2025?A $8,800B $9,600C $10,400D $800 [1]

A transport company had wages owing of $1,200 on 1 July 2025. During the year ended 30 June 2026 it paid wages of $46,300. On 30 June 2026 wages owing were $1,750.

1. (a) Calculate the wages expense for the year. [2]
2. (b) List the entries in the wages account for the year, including the balances. [3]

Mariam lets part of her warehouse to a tenant. On 1 January 2025 the tenant had paid $500 in advance for 2025. During 2025 Mariam received $7,200 from the tenant. On 31 December 2025 the tenant owed $300.

1. (a) Calculate the rent receivable shown in the income statement for 2025. [3]
2. (b) State how the $300 is shown in the statement of financial position at 31 December 2025. [1]
3. (c) Explain how rent received in advance would be shown in a statement of financial position. [1]

Javed's draft profit for the year ended 31 March 2026 was $28,400. He had not recorded the following:1 Electricity owing $6402 Insurance paid in advance $4203 Commission receivable owed to him $350

1. (a) Calculate the corrected profit for the year. [4]
2. (b) Calculate the effect of the three items on total current liabilities. [1]

1. (a) A shop has an item in inventory that cost $500. It can be sold for $620 but only after repairs costing $150. At what value should the item be included in closing inventory?A $470B $500C $620D $350 [1]

A bookshop valued its closing inventory at 31 March 2026 as $26,200 instead of the correct $25,000.

1. (a) State the effect of the error on gross profit for the year ended 31 March 2026. [1]
2. (b) State the effect of the error on gross profit for the year ended 31 March 2027. [1]
3. (c) State the effect on the current assets at 31 March 2026. [1]
4. (d) State the basis on which inventory should be valued. [1]

A sports shop in Sialkot has the following inventory at 31 December 2025:Item A: cost $2,400; expected selling price $3,100Item B: cost $1,800; slightly damaged, expected to sell for $1,500 after repairs of $200Item C: cost $950; expected selling price $1,100

1. (a) Calculate the value of each item and the total value of closing inventory. [4]
2. (b) Name the accounting principle applied and explain why it is applied. [2]

Rabia owns a clothing shop in Lahore. Her financial year ended on 30 June 2026. On that date she counted the following inventory.Lawn suits: 120 suits. Cost price Rs 2,400 each plus carriage inwards of Rs 50 each. Normal selling price Rs 3,800 each.Leather sandals: 80 pairs. Cost price Rs 1,750 each plus carriage inwards of Rs 30 each. They were damaged by a water leak. After repairs costing Rs 150 per pair they can be sold for Rs 1,600 per pair.Wool shawls: 45 shawls. Cost price Rs 3,200 each (no carriage). They will be sold through an agent for Rs 4,000 each; the agent takes a commission of 10% of the selling price.Rabia's bookkeeper had valued all the inventory at cost including carriage inwards.

1. (a) State the rule used to value inventory at the end of a financial year. [1]
2. (b) Calculate the correct value of Rabia's closing inventory on 30 June 2026. Show your workings for each item. [4]
3. (c) Calculate the effect on Rabia's gross profit for the year of the bookkeeper's valuation, stating whether gross profit was overstated or understated. [2]
4. (d) Name the accounting principle that is applied when inventory is reduced to its net realisable value. Explain why this principle is applied. [2]

A pharmacy's year ended on 31 December 2025, but its inventory count was not done until 4 January 2026, when inventory at cost was $18,600. Between 1 and 4 January:- goods were sold for $2,000 (selling price is cost plus 25%)- goods costing $900 were received from suppliers- a customer returned goods sold for $250

1. (a) Calculate the cost of goods sold between 1 and 4 January. [1]
2. (b) Calculate the value of inventory at 31 December 2025. [4]

1. (a) Which of the following is capital expenditure for a printing company?A repairs to a printing pressB installation cost of a new printing pressC ink used during the yearD insurance of the factory [1]

A restaurant in Karachi has the following items. Classify each as capital expenditure, revenue expenditure, capital receipt or revenue receipt.

1. (a) Buying a new delivery motorcycle. [1]
2. (b) Fuel for the delivery motorcycle. [1]
3. (c) Money received from selling an old oven. [1]
4. (d) Rent received for letting a room above the restaurant. [1]
5. (e) Wages of the staff who built a new storeroom extension. [1]
6. (f) Repainting the dining room. [1]

Kashif bought a van for his courier business. The invoice showed:Van $28,000; delivery charge $350; painting the business name on the van $400; road licence for the first year $450; insurance for the first year $1,100; first tank of fuel $90.

1. (a) Calculate the total capital expenditure. [2]
2. (b) Calculate the total revenue expenditure. [2]
3. (c) State the effect on profit if the whole invoice were treated as capital expenditure. [1]

On 1 January 2025 Farah bought a computer for her office for $3,600 and debited it to office expenses. Office equipment is depreciated at 25% per annum on cost.

1. (a) Calculate the effect of the error on the profit for the year ended 31 December 2025. [3]
2. (b) State the effect on non-current assets in the statement of financial position at 31 December 2025. [1]
3. (c) Explain why it is important to distinguish between capital and revenue expenditure. [2]