aat

AQ2013 Level 3

Prepare final accounts for sole

traders and partnerships
TUTOR QUESTION BANK
QUESTIONS

A AT F S T P : PRE PARE FINA L ACCOUN TS FOR SOLE TRADE RS A ND PAR TNERS HIPS

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assessment materials. The solutions have been prepared by Kaplan Publishing.
Published by
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Unit 2 The Business Centre
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Kaplan Financial Limited, 2015

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K A P LA N P UB L I S HI NG

INTRODUCTION
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This bank contains additional activities graded into two types:

some are designed to help students struggling with a topic (support questions), and

others are designed to challenge the more able student (advanced questions).

The contents page lists the topics which this question bank covers.
These topics broadly correspond with the order of the topics in the text book.

INDEX TO QUESTIONS AND ANSWERS

Support
Question
page

Advanced

Answer
page

Question
page

Answer
page

Chapter 1

Preparation of accounts for a

sole trader

26

12

37

Chapter 2

Partnership accounts

28

16

42

Chapter 3

Incomplete records

32

19

44

KAPLAN PUB LI S H I N G

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A AT F S T P : PRE PARE FINA L ACCOUN TS FOR SOLE TRADE RS A ND PAR TNERS HIPS

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K A P LA N P UB L I S HI NG

SUPPORT QUESTIONS

A AT F S T P : PRE PARE FINA L ACCOUN TS FOR SOLE TRADE RS A ND PAR TNERS HIPS

CHAPTER 1
PREPARATION OF ACCOUNTS FOR A SOLE TRADER
1

NED
A trial balance has been prepared for Ned, a sole trader, business but the following adjustments
are still to be made:
(i)

Depreciation of 980 for fixtures and fittings and 740 for motor vehicles has yet to be
provided for.

(ii)

Receivables total 38,600 but an irrecoverable debt of 1,600 is to be written off. The
opening allowance for doubtful debts is 900 but this is to be adjusted to 2% of the
receivables balance.

(iii)

An accrual for electricity is required of 200 and the advertising balance includes a
prepayment of 40.

(iv)

The closing inventory has been valued at 1,080. However this includes inventory with a
cost of 240 which due to damage can only be sold for 200.

Task:
Prepare the journal entries necessary to record these adjustments.
required.)

(Narratives are not

K A P LA N P UB L I S HI NG

QUESTI ONS

STEVE INMAN
Steve Inman started business on 1 January 20X2 and the following information is available for
the business at 31 December 20X2.
Capital paid in
Receivables (SLCA)
Payables (PLCA)
Sales
Purchases
Drawings
Motor van at cost
Rent and rates
Insurance
General expenses
Wages
Cash at bank
Cash in hand

5,000
6,072
10,680
36,191
19,320
6,120
5,040
2,556
200
4,375
4,994
3,154
40

The motor van has an expected useful life of four years and no residual value.
The closing inventory is valued at 2,460.
Task:
Prepare a statement of profit or loss for the first year of trading and a statement of financial
position as at 31 December 20X2.

KAPLAN PUB LI S H I N G

A AT F S T P : PRE PARE FINA L ACCOUN TS FOR SOLE TRADE RS A ND PAR TNERS HIPS

CHAPTER 2
PARTNERSHIP ACCOUNTS
3

LEN AND FRED

Len and Fred have been in partnership for many years sharing profits and losses in the ratio of
2 to 1. Fred is allowed a salary of 6,000 per annum and interest on capital is paid at 4% per
annum based upon the opening capital balance. Given below is the trial balance of the
partnership after the net profit has been calculated at the year end of 30 September 20X4.
Net profit
Receivables (SLCA)
Payables (PLCA)
Motor vehicles at cost
Accumulated depreciation MV
Fixtures and fittings
Accumulated depreciation FF
Closing inventory
Bank
Cash
Loan
Current accounts
Len
Fred
Drawings
Len
Fred
Capital accounts
Len
Fred

38,000
32,000
21,000
40,000
16,000
22,000
8,000
16,000
5,000
500
10,000
500 (debit)
1,000
17,000
14,000
33,000
20,000

Task:

(a)

Prepare the partnership appropriation account for the year ending 30 September 20X4.

(b)

Prepare the partners current accounts.

(c)

Prepare the statement of financial position of the partnership as at 30 September 20X4.

K A P LA N P UB L I S HI NG

QUESTI ONS

JACK AND JILL

Jack and Jill have been in partnership for a number of years sharing profits and losses equally.
On 30 June 20X1 they decide to admit Ross to the partnership and he will introduce 50,000 of
capital. On the date of admission the capital balances of Jack and Jill were 60,000 and 40,000
respectively and the goodwill at that date was estimated to be 20,000. After the admission of
Ross the partners will share profits and losses in the ratio of 2:2:1.
Task:
Write up the partners capital accounts to reflect the admission of Ross to the partnership.

KAPLAN PUB LI S H I N G

A AT F S T P : PRE PARE FINA L ACCOUN TS FOR SOLE TRADE RS A ND PAR TNERS HIPS

HARRY AND PHIL

Harry, Phil and Jo have been in partnership for a number of years sharing profits and losses in
the ratio of 3:2:1. On 30 June 20X3 Harry is to retire from the partnership. At 30 June 20X3 the
goodwill of the partnership was estimated to be 30,000 and the partners capital and current
account balances were as follows:

Harry
Phil
Jo

Capital

60,000
40,000
30,000

Current

3,200
1,600
4,300

On retirement Harry has agreed to be paid 15,000 of what is owed to him in cash and to leave
the remainder as a loan to the partnership. After Harrys retirement Phil and Jo are to share
profits and losses in the ratio of 2:1.
Task:
Write up the partners capital accounts and current accounts to reflect the retirement of Harry.

K A P LA N P UB L I S HI NG

QUESTI ONS

CHAPTER 3
INCOMPLETE RECORDS
6

CAROLE
A sole trader, Carole, has provided you with the following information about her opening and
closing assets and liabilities:

Inventory
Receivables (SLCA)
Payables (PLCA)
Bank

1 January 20X3

16,500
14,200
10,200
1,400

31 December 20X3

17,100
15,900
8,300
900

During the year cash payments were made for purchases of 58,900 and for expenses of
10,500. Carole tells you that all sales are made at a profit margin of 25%. However she is not
able to tell you how much she took out of the business as drawings.
Task:
What were the drawings for the year?

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A AT F S T P : PRE PARE FINA L ACCOUN TS FOR SOLE TRADE RS A ND PAR TNERS HIPS

ADRIAN
The statement of financial position at 1 April 20X2 of Adrian, a sole trader, showed that he had
net assets totalling 28,900. During the year to 31 March 20X3 Adrian did not keep a full set of
accounting records but he can supply you with the following list of assets and liabilities.
Receivables (SLCA)
Payables (PLCA)
Motor vehicle at carrying value
Accruals
Bank account balance
Cash in till
Fixtures and fittings at carrying value
Computer at carrying value
Prepayments
Inventory
Bank loan

15,400
8,300
9,200
300
5,400
200
8,600
1,500
800
8,200
2,000

Adrian advised you that he withdrew 12,600 of cash for his own use during the year.
Task:
How much profit did the business make in the year ended 31 March 20X3?

K A P LA N P UB L I S HI NG

QUESTI ONS

SUMMARISED CASH BOOK

Given below is the summarised cash book for a sole trader for the year ending 30 June 20X2.
Cash book summary
Cash from receivables

42,600

Payments to suppliers
Payments for expenses
Drawings

22,700
4,300
11,700

The owner can also provide you with details of the assets and liabilities at the start and end of
the year:

Receivables
Payables
Accruals
Inventory

1 July 20X1

6,900
3,800
300
7,200

30 June 20X2

7,200
5,100
700
6,300

Task:
(a)

What is the sales revenue figure for the year?

(b)

What is the purchases figure for the year?

(c)

What is the gross profit for the year?

(d)

What is the net profit for the year?

KAPLAN PUB LI S H I N G

A AT F S T P : PRE PARE FINA L ACCOUN TS FOR SOLE TRADE RS A ND PAR TNERS HIPS

BARNEY
Barney, a sole trader, produced the following list of balances for his business at 31 December
20X3.
Fixtures and fittings
Delivery vans
Cash at bank (in funds)
General expenses
Receivables (SLCA)
Payables (PLCA)
Purchases
Sales revenue
Wages
Drawings
Lighting and heating
Rent, rates and insurance
Capital

6,430
5,790
3,720
1,450
2,760
3,250
10,670
25,340
4,550
15,000
1,250
2,070
?

Task:

10

(a)

From the above list of balances, draw up a trial balance for Barney at 31 December 20X3
and calculate the capital balance at that date.

(b)

If Barney had wrongly classified a wages payment of 500 as drawings, what journal
adjustment would be required, and what would be the effect upon profit for the year?

(c)

If Barney had wrongly classified a cash sale as capital introduced, what journal
adjustment would be required, and what would be the effect upon profit for the year?

K A P LA N P UB L I S HI NG

ADVANCED QUESTIONS

A AT F S T P : PRE PARE FINA L ACCOUN TS FOR SOLE TRADE RS A ND PAR TNERS HIPS

CHAPTER 1
PREPARATION OF ACCOUNTS FOR A SOLE TRADER
10

LAURA
Laura has been in business for some years and has kept her drawings slightly below the level of
profits each year. She has never made a loss, and therefore feels that her business is growing
steadily. You act as her accountant and she has passed you the following list of balances at
30 April 20X7:
000
Capital at 1 May 20X6
228
Drawings
14
Plant at cost
83
Plant depreciation at 1 May 20X6
13
Office equipment at cost
31
Office equipment depreciation at 1 May 20X6
8
Receivables (SLCA)
198
Payables (PLCA)
52
Sales
813
Purchases
516
Returns inwards
47
Discounts allowed
4
Allowance for doubtful debts at 1 May 20X6
23
Administration costs
38
Salaries
44
Research costs
26
Loan to a friend, repayable in 6 months
25
Bank overdraft
50
Irrecoverable debts written off
77
You ascertain that inventory at 1 May 20X6 was 84,000 and inventory at 30 April 20X7 was
74,000. On 1 November 20X6 Laura brought her personal computer, valued at 2,000, from
home into the office; no entries have been made for this.
You are also given the following information at 30 April 20X7:
(i)

Depreciation on plant is charged at 10% per annum on cost.

Depreciation on office equipment is charged at 20% per annum on the carrying value at
the year end.

(ii)

Administration costs include insurance prepaid of 3,000.

(iii)

Salaries accrued amount to 2,000.

(iv)

The research costs are all in relation to pure research and are to be charged to the
income statement as an expense.

(v)

It is agreed that the allowance for doubtful debts figure is to remain at 23,000.

Task:
Prepare the statement of profit or loss for the year ended 30 April 20X7 and the statement of
financial position at that date. Work to the nearest 000.

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K A P LA N P UB L I S HI NG

QUESTI ONS

11

KW ENTERPRISE
Given below is the extended trial balance for KW Enterprise, a sole trader, for the year ended
31 October 20X1:
Description

Ledger balance
Dr

Capital

Purchases

Cr

Dr

Cr

Statement of profit
or loss
Dr

487,360

25,870

Rent

33,000

8,900
2,000

288,330
650
25,870

3,000

36,000

General expenses

87,700

87,700

Motor expenses

28,540

28,540

1,220

Allowance for doubtful debts

Fixtures and fittings (F&F) at cost

300
3,200

1,520

950

2,250

36,000

Accumulated depreciation (MV)

36,000
19,560

4,110
57,020

34,580

Drawings

30,000

Receivables (SL) control account

56,550

Payables (PL) control account

8,553

43,133
30,000

1,020
31,500

Bank

55,530

2,350

33,850

380

10,100

2,700

VAT/sales tax
Suspense

2,700

10,070

350

230

230

Depreciation

12,663

Allowance for doubtful debts

adjustment
Closing inventory IS
Closing inventory SFP

12,663
950

950

29,665

29,665

29,665

Accruals

29,665
3,000

Profit

3,000
28,232

TOTALS

23,670

57,020

Accumulated depreciation (F&F)

Cr

486,490

650

Inventory at 1 November 20X0

Motor vehicles (MV) at cost

Dr

61,280
870

8,900
286,330

Purchase returns

Irrecoverable debts

Cr

Statement of
financial position

61,280

Sales revenue
Sales returns

Adjustments

28,232

651,130

651,130

50,028

50,028

517,755

517,755

208,215

208,215

Task:
You are required to prepare the statement of profit or loss for KW Enterprise for the year ended
31 October 20X1 and the statement of financial position at that date.

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12

SIMPSON
Given below is the trial balance for Simpson as at 30 June 20X8.
Simpson
Trial balance as at 30 June 20X8
Dr

Revenue
Sales returns
Purchases

784,518
5,436
370,215

Purchases returns
Opening inventory

1,447
41,211

Payroll expenses

161,326

General expenses

72,900

Motor expenses

14,633

Irrecoverable debts

4,825

Allowance for doubtful debts

Motor vehicles cost

3,425
37,400

Accumulated depreciation MV
Fixtures and fittings cost

Cr

19,160
46,100

Accumulated depreciation F&F

20,855

Capital account

45,000

Drawings

37,000

Receivables (Sales ledger) control account

70,367

Payables (Purchase ledger) control account

Bank

25,682
26,338

Sales tax

4,529

Closing inventory

54,426

Loss on disposal

3,870

Depreciation expense

54,426

12,995
959,042

959,042

Task:
You are required to prepare the statement of profit or loss for Simpson for the year ended
30 June 20X8.

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K A P LA N P UB L I S HI NG

QUESTI ONS

Simpson
Statement of profit or loss for the year ended 30 June 20X8

Revenue
Opening inventory
Purchases
Closing inventory
Cost of goods sold
Gross profit
Less:
Payroll expenses
General expenses
Motor expenses
Irrecoverable debts
Loss on disposal
Depreciation expense
Total expenses
Profit for the year

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CHAPTER 2
PARTNERSHIP ACCOUNTS
13

TED, IAN AND JANE

Ted, Ian and Jane have been in partnership for a number of years sharing profits in the ratio of
3:2:1. Interest on partners capital accounts is at 5% and Jane is allowed a salary of 10,000 per
annum. During the year ending 31 March 20X3 the partnership made a net profit of 96,000.
The partners capital and current account balances at 1 April 20X2 were as follows:

Ted
Ian
Jane

Capital

50,000
40,000
30,000

Current

1,000
500
200 (debit balance)

The partners drawings during the year were:

Ted
Ian
Jane

42,600
28,200
23,100

Task:

16

(a)

Prepare the partnership appropriation account for the year ended 31 March 20X3.

(b)

Prepare the partners capital and current accounts for the year ended 31 March 20X3.

K A P LA N P UB L I S HI NG

QUESTI ONS

14

RALPH AND HUGH

You have the following trial balance for Ralph and Hugh, who are in partnership running a
business. All the necessary year-end adjustments have been made.
Ralph and Hugh
Trial balance as at 30 September 20X7
Dr

Accruals
Bank

Cr

6,000

5,000

Capital account Ralph

9,500

Capital account Hugh

11,500

Closing inventory
Depreciation charge
Discounts allowed

11,000

11,000

1,800
800

Current account Ralph

2,400

Current account Hugh

1,500

General expenses

16,400

Machinery at cost

15,500

Machinery accumulated depreciation

5,800

Opening inventory

9,800

Prepayments

5,100

Purchases

46,000

Payables (Purchases ledger) control account

Rent

15,900
600

Sales
Receivables (Sales ledger) control account

69,000
17,100

Sales tax
Wages

1,500
5,000
134,100

KAPLAN PUB LI S H I N G

134,100

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A AT F S T P : PRE PARE FINA L ACCOUN TS FOR SOLE TRADE RS A ND PAR TNERS HIPS

Task:
(a)

Upon review of the accounting information, the following errors were identified:
(i)

Inventory which had cost 1,000 had been omitted from the year-end count and
valuation. This inventory was damaged and it was estimated that it could be sold
for only 750.

(ii)

Wages expenses of 1,500 had been wrongly classified as general expenses.

You are required to state the accounting entries required to correct the two errors
identified (explanation is not required).
(b)

Prepare a statement of profit or loss for Ralph and Hughs business for the year ended
30 September 20X7, having made the appropriate accounting adjustments required from
part (a) of this task.

Ralph and Hugh

Statement of profit or loss for the year ended 30 September 20X7

Revenue
Opening inventory
Purchases
Closing inventory
Cost of goods sold
Gross profit
Less:
Payroll expenses
General expenses
Rent
Discount allowed
Depreciation expense
Total expenses
Loss for the year

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K A P LA N P UB L I S HI NG

QUESTI ONS

CHAPTER 3
INCOMPLETE RECORDS
15

MICHAEL
You are working on the accounts of a restaurant business owned by Michael for the year ended
31 October 20X8. There are no credit sales and you have the following additional information
below:
Michael advised you that the balance on his capital account at 31 October 20X7 was 34,350.
Cash and bank summary for the year ended 31 October 20X8

Bal b/d

Cash

Bank

Cash

Bank

550

7,000 Rent

6,500

Payroll expenses
Sales

50,000

Bank

12,000

90,000 Drawings

25,000
20,000

Purchases

4,000

Payables

30,000

Advertising

2,000

Administration

4,800

Cash

12,000

Light and heat

Bal c/d
62,550

11,000

97,000

4,000
6,750

33,500

62,550

97,000

The following balances are also available:

Assets and liabilities at:

31 October 20X7

31 October 20X8

Fixtures and fitting Cost

50,000

Fixtures and fittings Accumulated depreciation

22,000

Not yet available

Inventory

2,500

1,500

Prepayments Rent

2,000

1,000

Payables Purchases

5,000

4,000

700

500

Accruals Light and heat

KAPLAN PUB LI S H I N G

50,000

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Tasks:
(a)

Calculate the total sales for the year ended 31 October 20X8
Account name

Amount

Total
(b)

Prepare the purchases ledger control account for the year ended 31 October 20X8,
showing clearly the credit purchases of materials.

Total
(c)

Total

Calculate the total purchases for the year ended 31 October 20X8
Account name

Amount

Total
(d)

Depreciation is calculated at 20% per annum on a reducing balance basis. Calculate the
revised accumulated depreciation as at 31 October 20X8.
Account name

Amount

Total
(e)

Prepare the rent account for the year ended 31 October 20X8, showing clearly the rent
expense for the year

Total

20

Total

K A P LA N P UB L I S HI NG

QUESTI ONS

(f)

Prepare the light and heat account for the year ended 31 October 20X8, showing clearly
the expense charged to profit or loss.

Total
(g)

Total

Prepare the statement of profit or loss for the year ended 31 October 20X8
Michael
Statement of profit or loss for the year ended 31 October 20X8.

Revenue (part(a))
Opening inventory
Purchases (part (c))
Closing inventory
Cost of goods sold
Gross profit
Less:
Payroll expenses
Light and heat (part (f))
Rent (part (e))
Advertising
Depreciation expense (part (d))
Administration
Total expenses
Loss for the year

KAPLAN PUB LI S H I N G

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A AT F S T P : PRE PARE FINA L ACCOUN TS FOR SOLE TRADE RS A ND PAR TNERS HIPS

(h)

Prepare the statement of financial position as at 31 October 20X8.

Michael Statement of financial position as at 31 October 20X8

Non-current assets

Cost

Depreciation

Carrying value

Fixtures and fittings (part (d))

Current assets
Inventory
Prepayments
Bank
Cash

Current liabilities
Trade payables
Accruals

Net current assets

Net assets
Financed by
Capital account
Balance brought forward
Profit for the year (part (f))
Drawings

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K A P LA N P UB L I S HI NG