PAST PAPER EXAM
Multiple choices...
Because motor vehicle is fixed asset.
The joural is where the puchase of fixed asset is to be put in.
Answer the questions...
- An overpayment by a debtor.
- The debtor is paying in advance for goods.
- Cash discount is not deducted before the payment is made.
Jan 1 Balance b/f 55737 Jan 1 Balance b/f 365
Dec 31 Credit sales 340095 Dec 31 Returns inward 6987
Dec 31 Cash book 242 Dec 31 Cashh book 316895
Dec 31 Discount allowed 15419
Dec 31 Purchase ledger setoff 500
Dec 31 Balance c/d 55908
396074 396074
Jan 1 Balance b/d 55908
Debtors
x 100
Credit sales
55908
x 100 = 60 days
340095
The debtor ratio shows that the collection period for debtors was 60 days. Alcatraz will be be satisfied because the figure is greater than the 30 days credit he allows his customers.
If the debtors are not paying on time, it could results in the business suffering cash flow problems or it could increase the number of bad debts.
Therefore, it is very important for the business to monitor the payment period of its debtors
- Limited Company has separate identity from its owners
- Limited Company pays dividends their shareholders
- The owners (shareholders) in a company have limited liability, unlike partnership where each partner is liable for all debts of the partnership.
Nov 1 Balance b/d 500 Nov12 Sales returns 60
Nov 4 Sales 450 Nov24 Bank 475
Nov24Discount allowed 25
Nov30 Balance c/d 390
950 950
Dec1 Balance b/d 390
Current Assets
It is an allowance given to the business in the same trade
It is given to encourage loyalty or bulk buying
It is given to the customers as an incentive to pay their accounts promptly which may reduce the number of bad debts and improve the business's cash flow.
Credit
800
160
640