1 On 1 January 20X5 a company purchased some

plant. The invoice showed:

£
Cost of plant 48,000
Delivery to factory 400
One year warranty covering breakdown during 20X5 800
49,200
Modifications costing £2,200 were necessary to enable the plant to be installed.
What amount should be capitalised for the plant in the company's accounting
records?
A £51,400
B £48,000
C £50,600
D £48,400
2 Billy and Charlie are in partnership together sharing profits equally. They each invested
£20,000 and £30,000 respectively in the business and Billy later made a loan of
£5,000 to the business. The loan is outstanding throughout the year to 31 March
20X6. Interest is charged on capital and loans at 5% per annum and is credited to
current accounts.
The balances on the partners' current accounts at 1 April 20X5 were £15,500 for Billy and
£12,700 for Charlie. The partnership made a profit of £32,000 for the year
ending 31 March 20X6, before accruing for any interest.
What is the balance on the partners' current accounts at 31 March 20X6?

Billy Charlie
A £31,50 £28,700
0
B £31,37 £28,825
5
C £31,62 £28,825
5
D £31,25 £28,950
0
3 At 30 June 20X2 a company had £1 million 8% loan notes in issue, interest
being paid half-yearly on 30 June and 31 December.
On 30 September 20X2 the company redeemed £250,000 of these loan notes at
par, paying interest due to that date.
On 1 April 20X3 the company issued £500,000 7% loan notes at par, interest
payable half-yearly on 31 March and 30 September.
What figure should appear in the company's statement of profit or loss for finance
costs in the year ended 30 June 20X3?

ICAEW 2021 Chapter 15: Sole trader and partnership financial statements under UK GAAP 147
 A £88,750
B £82,500
C £65,000
D £73,750

4 A company's policy for depreciation of its plant and machinery is to charge

depreciation monthly at 20% per year on cost. The company's plant and machinery
account for the year ended 30 September 20X4 is shown below:
PLANT AND MACHINERY

20X3 20X4
1 Oct Balance (all plant 40,000
purchased after20X0) 200,000 210,000
20X4
1 Apr Cash purchase of plant 50,000
250,000 250,000

What should be the depreciation charge in the statement of profit or loss for plant and
machinery (excluding any profit or loss on the disposal) for the year ended 30
September 20X4?
A £43,000
B £51,000
C £42,000
D £45,000

5 Zenia plc is preparing its financial statements for the 12 month reporting period
ended 31 August 20X6, having prepared an initial trial balance which includes
the following balances:
£
Accruals at 1 September 20X5 948
Interest paid 2,733
Of the accruals at 1 September 20X5, £362 related to interest payable. At 31 August
20X6 accruals will include £419 related to interest payable.
What will be the finance cost included in Zenia plc's statement of profit or loss for
the 12 month reporting period ended 31 August 20X6?
A £2,204
B £2,676
C £2,733
D £2,790
6 Morse plc has the following note to its statement of financial position relating to
plant and machinery as at 31 May.

ICAEW 2021 Chapter 15: Sole trader and partnership financial statements under UK GAAP 147
 20X 20X
7 6
£ £
Cost 110,000 92,000
Accumulated depreciation 72,000 51,000
Carrying amount 38,000 41,000

During the year to 31 May 20X7, the following transactions occurred in relation to
plant and machinery:
Additions £39,000
Loss on disposals £2,000
Depreciation charge £27,000
What were the proceeds from disposals of plant and machinery received by Morse
plc in the year to 31 May 20X7?
A £7,000
B £8,000
C £13,000
D £17,000
7 At 1 April 20X8 the share capital and share premium of a company were as follows:
£
Share capital – 300,000 equity shares of 25p each 75,000
Share premium 200,000
During the year ended 31 March 20X9 the following events took place:
1. On 1 October 20X8 the company made a 1 for 5 rights issue at £1.20 per share.
2. On 1 January 20X9 the company made a 1 for 3 bonus issue using the share premium to
do so.
What is the correct balance on the share capital account at 31 March 20X9?
A £90,000
B £120,000
C £360,000
D £480,000

8 Anaconda plc acquired a machine on 31 March 20X4, its year end, for £196,600. It
made a bank transfer to the seller totalling £110,000 and traded in an old machine
with a carrying amount at that date of £34,400. This machine had cost £60,000. A
further sum of £42,000 was then due to the supplier of the machine as the final
payment.
The entry made in the accounting records in respect of this transaction was to debit
the suspense account with £152,000, credit cash £110,000 and credit other payables

ICAEW 2021 Chapter 15: Sole trader and partnership financial statements under UK GAAP 147
 £42,000.
Which of the following journal entries is required to correctly reflect the
purchase and disposal in Anaconda plc's accounting records?
A Debit Machine – cost £196,600, Debit Machine – accumulated depreciation
£34,400, Credit Disposal £79,000, Credit – suspense £152,000
B Debit Machine – cost £136,600, Debit Machine – accumulated depreciation
£34,400, Credit Disposal £19,000, Credit – suspense £152,000
C Debit Machine – cost £196,600, Debit Machine – accumulated depreciation
£25,600, Credit Disposal £70,200, Credit – suspense £152,000
D Debit Machine – cost £136,600, Debit Machine – accumulated depreciation
£25,600, Credit Disposal £10,200, Credit – suspense £152,000

9 A sole trader prepares financial statements each year to 31 May. His rent is payable
quarterly in advance on 1 January, 1 April, 1 July and 1 October. Local property
taxes are paid each year in two equal instalments on 1 April and 1 October.
His annual rental for the calendar years 20X6 and 20X7 was £4,800 and £5,400
respectively but on 1 January 20X8 this was increased to £6,600 per annum. Local
property tax for the last three years has been as follows:
£
Year commencing 1 April 20X6 3,600
Year commencing 1 April 20X7 3,900
Year commencing 1 April 20X8 4,500

In preparing his financial statements for the year ended 31 May 20X8, the charge
to the profit and loss account from his rent and local property tax account would
be:
A £9,900
B £10,100
C £10,200
D £10,300

10. A company is preparing its financial statements for the year ending 31 March
20X7. The initial trial balance has the following figures relating to tax:
£
Income tax payable at 1 April 20X6 14,300
Income tax paid during the year ended 31 March 20X7
12,70
0 The estimated income tax liability for the year ended 31 March 20X7 is
£15,600.
What is the income tax figure for inclusion in the company's statement of profit or
loss for the year ended 31 March 20X7?
ICAEW 2021 Chapter 15: Sole trader and partnership financial statements under UK GAAP 147
 A £12,700
B £14,000
C £17,200
D £28,300
11 The directors of Ellen Ltd are considering whether any impairment has arisen in
respect of its plant and machinery in the year ended 31 March 20X2. Which of the
following are indicators that an impairment of plant and machinery may have
occurred:
1 There have been technological advances which means the plant and machinery
is not as efficient as that currently available
2 The market capitalisation of Ellen Ltd is above the value of its non-current assets
3 The plant and machinery are being used to produce a new product
which is generating more sales than the previous product
A 1 only
B 1 and 2 only
C 2 and 3 only
D 1, 2 and 3

12 Layla plc is preparing its financial statements for the year ended 31 August 20X6. The
initial trial balance shows the following balances:
£
Prepayments at 1 September 20X5 1,012
Insurance expense 3,400
Of the prepayments at 1 September 20X5, £450 related to insurance. At 31 August
20X6 prepayments will include £515 related to insurance.
What amount will be included in Layla plc's statement of profit or loss for the year
ended 31 August 20X6 in respect of insurance expenses?
A £3,495
B £3,897
C £2,903
D £3,335

13. An asset was purchased by Prance plc on 1 January 20X1 for:

£
Cost 1,000,000
Annual licence fee 15,000
Total 1,015,000

ICAEW 2021 Chapter 15: Sole trader and partnership financial statements under UK GAAP 147
 The business adopts a date of 31 December as its reporting year end.
The asset was traded in for a replacement asset on 1 January 20X4 at an agreed value of
£500,000.
It has been depreciated at 25% per annum on the reducing-balance method.
What figure is included regarding this disposal in the statement of profit or loss for
the year ended December 20X4?
A £25,000 profit
B £78,125 profit
C £62,500 loss
D £250,000 loss
14. Which of the following may appear as current liabilities in a company's statement of financial
position?
1 Loan due for repayment within one year
2 Taxation
3 Warranty provision

A 1, 2 and 3
B 1 and 2 only
C 1 and 3 only
D 2 and 3 only
15 Camelia plc is preparing its financial statements for the year ended 30 June 20X9. Its
initial trial balance shows the following balances:
£
Accruals at 1 July 20X8 948
Distribution costs paid 130,647

Of the accruals at 1 July 20X8, £586 related to distribution costs. At 30 June

20X9 the equivalent figure is £654 for distribution costs.
What amount for distribution costs should be shown in Camelia plc's statement of
profit or loss for the year ended 30 June 20X9?
A £129,407
B £130,579
C £130,715
D £131,887
16 Which of the following statements about intangible assets in public company financial
statements are correct?
1 Internally generated goodwill should not be capitalised.

ICAEW 2021 Chapter 15: Sole trader and partnership financial statements under UK GAAP 147
 2 Purchased goodwill should normally be amortised through the statement of
profit or loss.
3 Development expenditure must be capitalised if certain conditions are
met.
1 and 3 only
1 and 2 only
2 and 3 only
1, 2 and 3
17 Which of the following journal entries may be accepted as being correct according to
their narratives?
Debit Credit
£ £
1. Wages account 38,000
Purchases account 49,000
Buildings account 87,000
Labour and materials used in construction of extension to factory
2. Directors' personal accounts Director A
30,000
Director B 40,000
Directors' remuneration 70,000
Directors' bonuses transferred to their accounts
3. Sales
10,000
Trade receivables 10,000
Correction of £10,000 received from credit customer recorded as cash sale
4. Trade receivables
2,000
Suspense account 2,000
Correction of misposting of discount received from supplier
A. Option 1
B. Option 2
C. Option 3
D. Option 4

18 At 30 June 20X5 Meredith plc had the following balances:

£m
Equity shares of £1 each 100
Share premium 80
During the year ended 30 June 20X6, the following transactions took place:
1 September 20X5: A 1 for 2 bonus issue of equity shares, using the share premium. 1
January 20X6: A 2 for 5 rights issue at £1.50 per share, taken up fully paid.

ICAEW 2021 Chapter 15: Sole trader and partnership financial statements under UK GAAP 147
 What are the balances on each account at 30 June 20X6?

Share Share premium

capital
£m £m
A 210 11
0
B 210 60
C 240 30
D 240 80

19 In the year to 31 March 20X2 Kable had the following capital structure:
£
200,000 equity shares of 25p each 50,000
Share premium 70,000

On 15 March Kable paid an equity dividend of 15p per

share. What is the total dividend paid by Kable?
A £7,500
B £30,000
C £50,000
D £72,000

20. Gina, Hardeep and Iona are in partnership, preparing their accounts for the year
to 31 December each year.
The profit-sharing arrangements are as follows:
Until 30 June 20X3: annual salaries Hardeep: £40,000, Iona: £20,000, balance to be
split 3:1:1.
From 1 July 20X3 salaries to be discontinued, profit to be divided 5:3:2.

The profit for the year ended 31 December 20X3 was £400,000 before charging
partners' salaries, accruing evenly through the year and after charging an expense of
£40,000 which it was agreed related wholly to the first six months of the year.

ICAEW 2021 Chapter 15: Sole trader and partnership financial statements under UK GAAP 147
 How should the profit for the year be divided among the partners?

Gina Hardeep Iona

A £182,000 £130,000 £88,000
B £200,000 £116,000 £84,000
C £198,000 £118,000 £88,000
D £180,000 £132,000 £88,000
21 At 30 June 20X2 Brandon plc's capital structure was as follows:
£
500,000 equity shares of 25p each 125,000
Share premium 100,000
In the year ended 30 June 20X3 the company made a 1 for 2 rights issue at £1 per
share and this was taken up in full. Later in the year the company made a 1 for 5
bonus issue, using the share premium for the purpose.
What was Brandon plc's capital structure at 30 June 20X3?

Equity share Share premium

capital
A £450,000 £25,000
B £225,000 £250,000
C £225,000 £325,000
D £212,500 £262,500

22 At 1 July 20X4 Xando plc's capital structure was as follows:

£
Share capital 1,000,000 shares of 50p each 500,000
Share premium 400,000
In the year ended 30 June 20X5 Xando plc made the following share issues:
1 January 20X5:
A 1 for 4 bonus issue.
1 April 20X5:
A 1 for 10 rights issue at £1.50 per share.
What will be the balances on the company's share capital and share
premium at 30 June 20X5 as a result of these issues?
 Share capital Share premium
A £687,500 £650,000
B £675,000 £375,000
C £687,500 £150,000
D £687,500 £400,000

23 What does GAAP stand for?

A. Generally Agreed Accounting Policies
B. Generally Accepted Accounting Policies
C. Generally Agreed Accounting

£
24 A company has the following capital structure:

200,000 shares of 25p 50,000

Share premium 75,000
It makes a 1 for 5 rights issue at £1.25, which is fully taken up by the shareholders.
What is the balance on the share premium account following the rights issue?
A £35,000
B £75,000
C £85,000
D £115,000
25 The equity section from the statement of financial position for
Bowden Ltd as at 31 December 20X6 is as follows:

£'000
Equity
Share capital: equity shares of 50p each 5,000
Share premium 900
Retained earnings 6,300
Total equity 12,200

The company decides to make a 1 for 5 bonus issue of shares on 30 June 20X7.
What will be the balances on the company's share capital and
share premium at 30 June 20X7 as a result of these issues?
 Share capital Share premium
A £5,900,000 £nil
B £6,000,000 £nil
C £5,900,000 £900,000
D £4,100,000 £900,000

26 Monksford plc is preparing its financial statements for the year ended
31 December 20X1. Its initial trial balance shows the following
balances:
£
Income tax payable at 1 January 20X1 2,091 20X0
income tax paid in 20X1 (as finally agreed with HMRC) 1,762
The estimated income tax due for the year ended 31 December 20X1 is £2,584.

What is the income tax expense to be included in Monksford plc's

statement of profit or loss for the year ended 31 December 20X1?
A £1,269
B £2,255
C £2,584
D £2,913

27 A sole trader prepares financial statements each year to 31 May. His

rent is payable quarterly in advance on 1 January, 1 April, 1 July and
1 October. Local property taxes are paid each year in two equal
instalments on 1 April and 1 October.
His annual rental for the calendar years 20X6 and 20X7 was £4,800
and £5,400 respectively but on 1 January 20X8 this was increased to
£6,600 per annum. Local property tax for the last three years has been
as follows:
£
Year commencing 1 April 20X6 3,600
Year commencing 1 April 20X7 3,900
Year commencing 1 April 20X8 4,500

In preparing his financial statements for the year ended 31 May

20X8, the charge to the profit and loss account from his rent and
local property tax account would be:
 A £9,900
B £10,100
C £10,200
D £10,300
28 Curtis and Sillett are in partnership, sharing profits 3:2 and
preparing their accounts to 30 June each year.
On 1 January 20X6, McAllister joined the partnership, and from that
date the profit sharing ratio became Curtis 50%, Sillett 25% and
McAllister 25%, after providing for salaries for Sillett and McAllister of
£20,000 and £12,000 per annum respectively.
The partnership profit for the year ended 30 June 20X6 was £480,000,
accruing evenly over the year.
What are the partners' total profit shares for the year ended 30 June 20X6?

Curtis Sillett McAllister

A £256,000 £162,000 £62,000
B £248,000 £168,000 £64,000
C £264,000 £166,000 £66,000
D £264,000 £156,000 £60,000

29 Wonka plc has the following ledger account balances as at 1 September 20X5:

Share capital (£0.50 equity shares) £200,000

Share premium £20,000
Retained earnings £793,442
On 1 November 20X5 Wonka plc made a 1 for 4 rights issue at £4.50 per share.
On
31 August 20X6 it made a 2 for 1 bonus issue. Profit for the year to 31 August
20X6 was
£100,000.
What are the balances on the three ledger accounts as at 31 August 20X6?
A Share capital £1,500,000, Share premium £Nil, Retained earnings
£813,442
B Share capital £750,000, Share premium £Nil, Retained earnings
£813,442
C Share capital £750,000, Share premium £420,000, Retained earnings
 £393,442
D Share capital £1,500,000, Share premium £Nil, Retained earnings
£393,442

30. Touch plc is finalising certain figures that will appear in its
financial statements as at 30 April 20X7. Relevant initial trial
balance figures are as follows:
£
Trade and other payables (excluding interest payable) 246,800
6% debentures as at 1 May 20X6 400,000
Touch plc issued 6% debentures of £120,000 at par on 1 February 20X7,
repayable at par in 10 years' time. No interest was outstanding at 1 May 20X6, and
the company paid interest in respect of debentures of £24,000 in the period to 30
April 20X7.
What amount for trade and other payables (including interest payable) should be
shown in Touch plc's statement of financial position as at 30 April 20X7?
A £222,800
B £246,800
C £248,600
D £272,600

31 A sole trader prepares financial statements each year to 31 May. His rent is
payable quarterly in advance on 1 January, 1 April, 1 July and 1 October. Local
property taxes are paid each year in two equal instalments on 1 April and 1
October.
His annual rental for the calendar years 20X6 and 20X7 was £4,800 and £5,400
respectively but on 1 January 20X8 this was increased to £6,600 per annum. Local
property tax for the last three years has been as follows:
£
Year commencing 1 April 20X6 3,600
Year commencing 1 April 20X7 3,900
Year commencing 1 April 20X8 4,500

In preparing his financial statements for the year ended 31 May

20X8, the charge to the profit and loss account from his rent and
local property tax account would be:
A £9,900
B £10,100
 C £10,200
D £10,300

32 Alice and Betty are in partnership, sharing profits and losses in the ratio
2:1. Their year end is 30 June.
On 1 January 20X4 Cath joined the partnership and the new profit
sharing ratio became Alice 50%, Betty 30% and Cath 20%.
The profit for the year ended 30 June 20X4 was £520,000, after charging an
expense of
£40,000 which related to the first six months of the year. The
remainder of the profit accrued evenly over the year.
What is Betty's total profit share for the year ended 30 June 20X4?
A £173,333
B £156,000
C £164,666
D £164,000

33. A company's plant and machinery ledger account for the year ended 30
September 20X2 was as follows:
PLANT AND MACHINERY

£ £
20X1 20X2
1 Oct Balance 381,200 1 Jun Disposal account–
cost of asset sold 36,000
1 Dec Cash – addition at cost 18,000 30 Sep Balance 363,200
399,200 399,200
The company's policy is to charge depreciation at 20% per year on the straight-line
basis.
What is the journal entry to record the depreciation charge in the statement
of profit or loss for the year ended 30 September 20X2?
A. Debit Accumulated depreciation £84,040, Credit Depreciation expense
£84,040
B. Debit Depreciation expense £84,040, Credit Accumulated depreciation
£84,040
C. Debit Accumulated depreciation £76,840, Credit Depreciation expense
£76,840
D. Debit Depreciation expense £76,840, Credit Accumulated depreciation
 £76,840
34 At 31 December 20X1 the capital structure of a company was as follows:
£
100,000 equity shares of 50p each 50,000
Share premium 180,000
What is the company's capital structure at 31 December 20X2?

Equity share Share premium

capital
A £130,000 £173,000
B £105,000 £173,000
C £130,000 £137,000
D £105,000 £137,000

35 A gas accrual for £400 at the reporting date was treated as a prepayment
in a sole trader's financial statements. As a result the profit was:
A understatedby£800
B understatedby£400
C overstated by £800
D overstated by £400

36 The trial balance of Albion plc, a manufacturer, as at the year end 30

April 20X4 included the following items:
1 Depreciation of delivery vehicles
2 Delivery inwards
In the statement of profit or loss depreciation of delivery vehicles should
be included in the heading:
A Cost of sales
B Administrative expenses C Distribution costs
D Finance costs
In the statement of profit or loss delivery inwards from suppliers should be included
in the heading:
E Cost of sales

F Administrative expenses

G Distribuion cost
 H Finance cost
37 At 30 September 20X6 Bake plc's equity was as follows:
£
Equity shares of 50p each 450,00
0
Share premium 80,000
Retained earnings 676,000
In the year ended 30 September 20X7 Bake plc made a 1 for 3 bonus
issue which was partly paid out of share premium. Retained earnings
were £754,000 at 30 September 20X7 after Bake made a profit of
£213,000.
What was the total dividend paid in the year ended 30 September 20X7?

A £15,000
B £65,000
C £205,000
D £361,000
38 In a partnership, interest on partners' drawings affects:
A net profit available for appropriation only
B the cash position only
C neither net profit available for appropriation nor the cash position
D. both net profit available for appropriation and the cash position
39 Indicate whether the following statements are true or false.
Creditors falling due after more than one year are equivalent to current liabilities.
A True
B False
Non-current assets are equivalent to fixed assets. C True
D False
40 Teacup Ltd uses the first-in, first-out (FIFO) method to value its stocks
of finished goods. At 1 January there were stocks of 25 units that had
cost £54 each. During January the following transactions occurred:
8 January 10 units were sold for £62 each
15 January 10 units were purchased for £55 each
22 January 10 units were sold for £62 each
What was the value of Teacup Ltd's closing stock at 31 January?
A £815
B £810
 C £825
D £820

The following information is relevant for questions 41 and 42

Lisa, Mary and Olga are in partnership, sharing profits and losses in the ratio
30%, 30%, 40%. Their agreement states that Olga and Lisa are to receive
annual salaries of £20,000 and £35,000 respectively. Interest credited on
capital is 5% and interest charged on drawings is 10%. The following
information is relevant.
£
Capital accounts at 31.12.X5
Lisa 500,000
Mary 400,000
Olga 300,000
Current accounts at 31.12.X4
Lisa 300,000
Mary 150,000
Olga 400,000
Drawings on 31.12.X5
Lisa 70,000
Mary 35,000
Olga 40,000
Assume that drawings were made on the first day of the year for the
purposes of calculating interest.

Net profit for the year ended 31.12.X5 was £1,350,000.

42 What is Olga's total share of the profit for the year ended 31.12.X5?
A £391,350
B £427,850
C £529,000
D £530,800
43 What is the closing balance on Mary's current account at 31.12.X5?
A £390,500
B £391,350
C £506,350
D £541,350
44 A plant account is shown below:
PLANT

£ £
20X2 20X2
1 Jan Balance (plant 1 Oct Disposal account -
purchased 20X0) 380,000 cost of plant sold 30,000
1 Apr Cash – plant 51,000 31 Dec Balance 401,000
purchased
431,000 431,000
The company's policy is to charge depreciation on plant monthly at 20% per year
on the straight-line basis.
What should the company's plant depreciation charge be in the statement
of profit or loss for the year ended 31 December 20X2?
A £82,150
B £79,150
C £77,050
D £74,050
45 Declan and Indiah are in partnership, sharing profits 3:2.
On 1 July 20X4 Calum joins the partnership. Under the new partnership
agreement profits will be shared by Declan, Indiah and Calum 5:3:2
respectively with the following annual salaries.
Indiah £40,000 pa Calum £48,000 pa
Profit accrues evenly over the year. The partnership profit at 31 December
20X4 was
£450,000.
At 31 December 20X4 how should the profits be allocated?

Declan Indiah Calum

A £229,500 £165,900 £54,600
B £236,500 £160,900 £52,600
C £225,000 £135,000 £90,000
D £225,500 £164,300 £60,200
39. At 30 June Temso plc's equity was as follows:
20X8 20X9
 £ £
Equity shares of 25p each 100,000 125,000
Share premium 100,000 75,000
Retained earnings 267,000 299,000
In the year ended 30 June 20X9 Temso plc made a 1 for 4 bonus issue.
Profits for the year were £44,000.
What was the total dividend paid in the year?

A £12,000
B £13,000
C £37,000
D £76,000

46 Preston, after having been a sole trader for some years, entered into
partnership with Alex on 1 July 20X2, sharing profits equally.
The business profit for the year ended 31 December 20X2 was
£340,000, accruing evenly over the year, apart from a charge of £20,000
for an irrecoverable debt relating to trading before 1 July 20X2 which it
was agreed that Preston should bear entirely.
How is the profit for the year to be divided between Preston and Alex?

Preston Alex
A £245,000 £95,000
B £250,000 £90,000
C £270,000 £90,000
D £255,000 £85,000
Xavier and Yanis are in partnership, sharing profits in the ratio 2:1
and preparing their financial statements to 30 June each year.
On 1 January 20X4 Zena joined the partnership, and it was agreed that
the profit-sharing arrangement should become Xavier 50%, Yanis 30%
and Zena 20%.
The profit for the year ended 30 June 20X4 was £540,000, after charging an
expense of
£30,000 which it was agreed related to the period before 1 January 20X4.
The profit otherwise accrued evenly over the year.
What is X's total profit share for the year
ended 30 June 20X4? A £305,000
B £312,500
 C £315,000
D £295,000
47 The following balances have been extracted from Saracen
Ltd's trial balance at 31 December 20X8:

Debit Credit
£ £
Retained profits at 1 January 20X8 4,695,600
10% debentures issued in 20X5 1,300,000
Debenture interest paid 65,000
Operating profit for the year ended 31 December 20X8 is £520,000.
Corporation tax for the year has been estimated at £156,000.
What is the figure for retained profits in Saracen Ltd's balance sheet
as at the year end, 31 December 20X8?
A £4,929,600
B £4,994,600
C £5,059,600
D £5,215,600

48 Gordon, Hilary and Indi are in partnership, sharing profits in the ratio 3:1:1, after
charging salaries of £20,000 per year each for Hilary and Indi. On 1 January 20X4
they agreed to change the profit-sharing ratio to 3:2:1 and to discontinue Hilary's
salary. Indi's salary continued unchanged. The partnership profit for the year ended
30 June 20X4 was
£380,000, accruing evenly over the year.
How should the £380,000 profit be divided among the partners?

Gordon Hilary Indi

A £192,000 £104,000 £84,000
B £192,500 £103,333 £84,167
C £209,000 £101,333 £69,667
D £179,000 £111,333 £89,667
49 In a partnership, interest on partners' drawings affects:
A net profit available for appropriation only
B the cash position only
C neither net profit available for appropriation nor the cash position
D both net profit available for appropriation and the cash position
50 Which of the following equations represents the closing capital of a sole trader?
 A Opening capital – capital introduced + profit – drawings
B Opening capital – capital introduced – profit + drawings
C Opening capital + capital introduced + profit – drawings
D Opening capital + capital introduced – loss + drawings

51 The current account of a partner has been written up as follows.

CURRENT ACCOUNT
£ £
Interest on capital 2,800 Balance b/d 270
Salary 1,500 Drawings 6,200
Balance c/d 10,870 Profit share 8,700
15,170 15,170
The balance brought down is entered correctly and the other entries are all
correct in amount.
What is the correct balance carried down?
A A debit balance of
£1,530
B A debit balance of
£6,530
C A credit balance of
£7,070
D A credit balance of
£16,470
52 A local taxes prepayment of £475 at the reporting date was treated as an accrual in
preparing a trader's profit and loss account. As a result, his profit was:
A understated by £950
B overstated by £950
C understatedby£475
D overstated by £475
53 The net assets of Walter's business decreased by £11,025 over the year to 31 October
20X7. During that year he had paid in additional capital of £14,000, drawn £875 in cash
each month and, on one occasion, taken goods costing £2,625 for his own use.
The loss made by the business for the year ended 31 October 20X7 was:
A £10,150
B £11,900
C £21,525
D £25,025
54 Harry has been unable to calculate his business' profit or loss for the year ended 31
December 20X8 as fire destroyed most of his accounting records. He has,
however, been able to provide the following information.
1 Net assets at 31 December 20X7 were £23,000 and £32,500 at 31 December
20X8.
2 He introduced capital during the year of £4,000 cash.
3 He took cash drawings of £2,500 and goods with a selling price of
£800. The cost of the goods was £750.
What was Harry's profit or loss for the year ended 31 December 20X8?
A £8,750 profit
B £(1,750) loss
C £9,800 profit
D £(2,750) loss

55 Alexander's net assets have increased by £127,000 over the year. He took
drawings of
£47,000 and paid in the proceeds from a personal property sale
amounting to £25,000. His net profit for the year was:
A £55,000
B £105,000
C £149,000
D £199,000
56 A business has net assets of £286,400 on 31 January 20X6 and had net
assets of £266,800 on 31 January 20X5. During the year the owner of
the business:
1 took goods for his own use which cost £10,000 and had a market value of
£14,000;
2 introduced capital of £50,000; and
3 withdrew £30,000 as salary. The profit for the year was:
A £9,600
B £30,400
C £70,400
D £109,600
57 Which two of the following would be classified as current liabilities in
the balance sheet of a sole trader?
A Owner's capital
B Accrued interest charges
C Drawings
D Bank overdraft
E Income tax payable

58 Sayhan, Errol and Alev are in partnership, preparing financial

statements as at 31 August each year and sharing profits 4:3:1.
Sayhan retired on 30 April 20X2, and Errol and Alev continued,
sharing profits 3:1 respectively.
Goodwill as at 30 April 20X2 (not to be retained in the accounts) was
valued at £50,000. The net entry to Errol's capital account to include and
then eliminate goodwill is:
A Debit £6,250
B Debit £18,750
C Credit £6,250
D Credit £18,750
59 Samantha has discovered the following errors and omissions in her accounting
records:
1 A cheque for £180 from a customer has been returned unpaid by
the bank. No entries have been made in the accounting records for
the return of the cheque.
2 An invoice for £12 was raised by the bookkeeper and entered into
the accounting records by the computerised accounting system;
however, it was later discovered that it should have been a credit
note.
Which of the following journals will be entered in Samantha's
nominal ledger accounts in order to correct these items?
A Debit Debtors £156, Debit Sales £24, Credit Cash £180
B Debit Cash £180, Credit Debtors £156, Credit Sales £24
C Debit Debtors £168, Debit Sales £12, Credit Cash £180
D Debit Bad debts expense £180, Debit Debtors £24, Credit Cash £180, Credit
Sales £24
60 Which three of the following could be found in the financial
statements of a partnership?
A Fixed assets
B Share premium
C Drawings
D Dividends paid

E Profit for the year

61 Sunil started business on 1 December 20X3 with cash of £5,000. He has not yet
prepared a full set of financial statements. As at the end of his first reporting
period, 30 November 20X4, he has cash at bank of £1,726. He made sales of
£33,498 during the period and paid expenses in cash of £19,385. He has no
outstanding creditors at the end of the period, and has no fixed assets or stock, but
one customer owes him £2,387.
Assuming Sunil made no other capital injections but took drawings of £15,000 in
the period, identify his profit for the 12 month reporting period to 30 November
20X4 and his net assets at the end of the period on an accrual basis.
A Net profit of £11,726, net assets of £1,726
B Net profit of £14,113, net assets of £4,113
C Net profit of £11,726, net assets of £4,113
D Net profit of £14,113, net assets of £1,726
62 In relation to accounting for partnerships, which two of the following
statements are true? A Goods taken by a partner from the business are
treated as drawings.
B Interest on drawings by a partner is income in the partnership's profit and loss
account.
C Interest on a partner's loan capital is income in the
partnership's profit and loss account.
D Drawings by a partner are credited in the current account.
63 In the absence of a partnership agreement, no salaries are due to partnersSayhan,
Errol and Alev are in partnership, preparing financial statements as at 31 August
each year and sharing profits 4:3:1. Sayhan retired on 30 April 20X2, and Errol
and Alev continued, sharing profits 3:1 respectively.
The business's profit for appropriation, evenly over the 12 months to 31 August
20X2, was £121,248. For the year to 31 August 20X2 Errol's profit share is:
A £30,312
B £45,468
C £60,624
 D £90,936

64 Helen, John and Chris are in partnership, preparing financial statements as at 31

January each year and sharing profits 5:3:2. Helen retired on 30 September 20X6,
and John and Chris continued, sharing profits 5:3 respectively. Goodwill as at 30
September 20X6 (not to be retained in the accounts) was valued at £50,000.
The net entry to John's capital account to include and then eliminate goodwill is:
A Debit £3,750
B Debit £16,250
C Credit £3,750
D Credit £16,250
65 The following balances have been extracted from Saracen
Ltd's trial balance at 31 December 20X8:

Debit Credit
£ £
Retained profits at 1 January 20X8 4,695,600
10% debentures issued in 20X5 1,300,000
Debenture interest paid 65,000
Operating profit for the year ended 31 December 20X8 is £520,000.
Corporation tax for the year has been estimated at £156,000.
What is the figure for retained profits in Saracen Ltd's balance sheet
as at the year end, 31 December 20X8?
A £4,929,600
B £4,994,600
C £5,059,600
D £5,215,600
66 Ines, Alex and Sebastian are in partnership sharing profits 3:2:1.
Each partner has a combined capital and current account, which
at 1 July 20X7 were as follows:

Ines £10,490
Alex £12,020
Sebastian £20,170
During the year to 30 June 20X8 the partnership made profits of
£87,750, and each partner took drawings of £7,500. On 30 June 20X8
Alex retires. The partners value goodwill at
 £60,000 at that date, but do not wish this valuation to remain in the
accounts. Ines and Sebastian will continue in partnership, sharing profits
equally.
What is the balance on Sebastian's capital and current
account on 1 July 20X8? A £46,865
B £14,795
C £53,770
D £7,295
67 A sole trader prepares financial statements each year to 31 May. His
rent is payable quarterly in advance on 1 January, 1 April, 1 July and
1 October. Local property taxes are paid each year in two equal
instalments on 1 April and 1 October.
His annual rental for the calendar years 20X6 and 20X7 was £4,800
and £5,400 respectively but on 1 January 20X8 this was increased to
£6,600 per annum. Local property tax for the last three years has been
as follows:
£
Year commencing 1 April 20X6 3,600
Year commencing 1 April 20X7 3,900
Year commencing 1 April 20X8 4,500

In preparing his financial statements for the year ended 31 May

20X8, the charge to the profit and loss account from his rent and
local property tax account would be:
A £9,900
B £10,100
C £10,200
D £10,300
68 Randolph started a trading business on 1 May 20X4 with capital of
£40,000. In his first year of trading he made a net profit of £117,000,
selling goods at a mark-up on cost of 60%. He injected additional capital
of £30,000 in the year and withdrew a monthly amount of £3,200 for his
living expenses. He also took drawings from stock of goods with a
resale value of
£7,200. He had no stock at the year end.
What were Randolph's net assets
at 30 April 20X5? A £141,400
 B £144,100
C £144,280
D £179,300
69 Mushtaq, a sole trader, has the following information at the start and end
of his second year of trading.

At 31 At 1
December January
20X0 20X0
£ £
Fixed assets (net book value) 46,000 39,400
Stock 18,900 15,600
Trade debtors 8,400 11,500
Trade creditors 7,500 10,200
Cash in hand 6,400 6,600
During 20X0 Mushtaq introduced £3,000 capital. He took stock for his own use that
cost £500, and paid himself £750 per month.
What is Mushtaq's profit or loss for 20X0?
A £15,800 profit
B £2,800 loss
C £16,300 profit
D £18,800 profit

70. What journal is necessary to record interest payable on partners' drawings?

A Debit Partners' drawings accounts, Credit Partners' current accounts
B Debit Profit and loss appropriation account, Credit Partners' drawings account
C Debit Partners' drawings accounts, Credit Interest payable account
D Debit Partners' current accounts, Credit Profit and loss appropriation account

71. Hope and Charity are partners sharing residual profits in the ratio 3:2:1. The partnership
agreement provides for interest on capital at the rate of 8% per annum and a salary for Hope
of £8,000 per annum. The partnership made a profit in the year totalling £3,960 and the
balances on partners' capital accounts throughout the year were: Faith £20,000; Hope
£15,000; Charity £12,000. What is Charity's share of residual profits or losses for 20X5?
A £1,300 loss
B £Nil
C £340 loss
D £655 profit
72. In relation to accounting for partnerships, which two of the following
statements are true?
A Goods taken by a partner from the business are treated as drawings.
B Interest on drawings by a partner is income in the partnership's profit and loss account.
C Interest on a partner's loan capital is income in the partnership's profit and loss account.
D Drawings by a partner are credited in the current account.
E In the absence of a partnership agreement, no salaries are due to partners