CHAPTER 8 Practice Questions


Question 11 M. Dinan invested €248,000 in a new business on 01/01/2013. M. Dinan supplied the following information on 31/12/2013:


Current ratio Acid Test Ratio Mark Up


Opening Stock


2:1 1:1


25% 10,000


Stock Turnover (based on average stock) 10 times Debtors Days Creditors Drawings Cash Sales


Total Expenses including Depreciation Depreciation


3 months 16,000 25,000


150,000 40,000 22,500


The following information is relevant: • Depreciation is calculated at 10% of cost per annum. • Current assets are stock, cash and debtors. • Stock drawings €5,000. • Current liabilities consist of creditors and bank of €12,000.


You are required to prepare the: (a) Balance Sheet on 31/12/2013. (b) Trading Profit and Loss Account for year ended 31/12/2013.


Know ratios really well!


Question 12 M. Hayes invested €82,500 in a new business on 01/01/2013. M. Hayes supplied the following information on 31/12/2013:


Current ratio Mark Up


3:1 20%


Stock Turnover (based on average stock) 5 times Closing Stock Creditors Days Debtors


5,000


Drawings Cash


Total Expenses including Depreciation Depreciation Average Stock Credit Purchases


Theory Questions


1 What are incomplete records? 2 What does the term Net Worth mean? 3 What does the term Mark Up refer to? 4 What does the term Margin refer to? 5 Explain the term Accounting Concept. 6 Name two fundamental accounting concepts. 7 What does the term Accrual mean? 8 What does the term Going Concern mean?


9 What does the term Prudence mean?


10 What does the term Consistency mean? 11 Illustrate an accounting concept applying to the accounts of E. Curtin. (Page 109)


12 What additional information would be available if E. Curtin’s accounts were prepared using the ‘double entry’ system? (Page 109)


8


3 months 12,000 20,000 2,500


15,000 4,500 6,000


15,000


The following information is relevant: • Depreciation is calculated at 10% of cost per annum. • Current assets are stock, cash and debtors of €15,000. • Stock drawings €2,000. • Current liabilities consist of creditors and bank.


You are required to prepare the: (a) Balance Sheet on 31/12/2013 (b) Trading Profit and Loss Account for year ended 31/12/2013


Use ratio answers given to help decide what ratio to use.


121


TIP


TIP


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