Exercises 12

MyStudyBro - Revision Exercise Tool
This Revision Handout includes the Questions and Answers of a total of 2 exercises!
Chapters:
Irrecoverable Debts - Unit 1 (Pearson Edexcel)
Page 1 (WAC01 or WAC11) 2018 Autumn
Page 3 (WAC01 or WAC11) 2018 Autumn - Answer
Page 8 (WAC01 or WAC11) 2013 Winter
Page 9 (WAC01 or WAC11) 2013 Winter - Answer
Autumn 2018 www.mystudybro.com Accounting Unit 1
Past Paper This resource was created and owned by Pearson Edexcel WAC01 or WAC11
4 Lohit is in business buying and selling goods on credit. The following information
relates to his bad and doubtful debts for the year ended 31 August 2018.
(1) Balance of Allowance for Doubtful Debts Account on 1 September 2017 was
£1 100
(2) Bad debts
Customer Balance owed Payment received
4 January 2018 Jegan £800 £300
30 March 2018 Smith and Sons £3 000 £0.60 in the £
19 May 2018 Nuri £500 £0.30 in the £
3 June 2018 Ng £250 Nil
(3) Bad debts recovered
The balance of £400 owed by Arca had been written off on 20 July 2016. A cheque
for part payment of the debt was received for £250 on 15 June 2018.
(4) Schedule of trade receivables 31 August 2018
Age of debt Amount Allowance for
doubtful debts
Up to 30 days £12 500 2%
31 – 60 days £6 000 5%
Over 60 days £1 500 20%
12
P54955A
MSB - Page 1
Required
(a) Prepare the following at 31 August 2018, including year-end transfers where
appropriate.
(i) Journal entries, including narratives and bank entries:
• bad debt of Smith and Sons
• recovery of part of the debt written off from Arca.
(8)
(ii) Bad Debts Account
(5)
(iii) Bad Debts Recovered Account
(3)
(iv) Allowance for Doubtful Debts Account.
(4)
(b) Explain four elements of good credit control.
(4)
A friend of Lohit stated, ‘I do not know why you use an allowance for doubtful debts
account. It is better to write off the bad debts when they actually occur.’
(c) Evaluate the friend’s statement.
(6)
(Total for Question 4 = 30 marks)
13
P54955A
MSB - Page 2 Turn over
Past Paper (Mark Scheme) This resource was created and owned by Pearson Edexcel WAC01 or WAC11
Question Answer Mark

Number
4 (a)(i) AO1 (2), AO2 (5), AO3(1)
AO1: Two marks for narratives and
balances without calculation.
A02: Five marks for calculated balances
and correct posting.
AO3: One mark for calculated balances with
correct posting.
(8)
Journal
Date Details Dr Cr
2018 £ £
30 March Bank 1 800 (1) AO3
Bad debts 1 200 (1) AO2
Smith and sons 3 000 (1) AO2
Received part payment of debt, balance written off as irrecoverable. (1) AO1
15 June Bank 250 (1) AO2

Arca 250
Arca 250 (1) AO2
Bad debts recovered 250 (1) AO2
Recovered part of debt from Arca written off as irrecoverable in previous year.
(1) AO1
(8)
MSB - Page 3

Number
4 (a)(ii) AO2 (4), AO3(1)
A02: Four marks for calculated balances
and correct posting to account.
AO3: One mark for transfer to income
statement.
(5)
Bad Debts Account

Date Details £ Date Details £
2018 2018
4 January Jegun 500 (1) AO2 31 August Income 2 300
statement (1of)
AO3
30 March Smith 1 200 (1) AO2
and sons
19 May Nuri 350 (1) AO2
3 June Ng 250 (1) AO2 ____
2 300 2 300

Number
4 (a)(iii) AO1 (1), AO2 (2),
AO1: One mark for narratives and
A02: Two marks for calculated balances
and correct posting.
(3)
Bad Debts Recovered Account

2018 2018
31 Income 250 (1) 15 June Bank/Arca 250 (1) AO2
August statement AO2 (1) AO1
___ ___
250 250
MSB - Page 4

Number
4 (a)(iv) AO1 (2), AO2 (1), AO3(1)
AO1: Two marks for narratives and
A02: One mark for calculated closing
balance and correct posting.
AO3: One mark for calculated income
statement transfer with correct use.
(4)
Allowance for Doubtful Debts Account

2018 2017
31 Income 250 (1of) 1 September Balance 1 100 (1)
August statement AO3 b/d AO1
Balance 850 (1) AO2 ____
c/d
1 100 1 100
2018
1 September Balance 850 (1of)
b/d AO1
MSB - Page 5

Number
4 (b) AO1 (4)
AO1: Four marks for valid points about credit
control.
Valid points may include:

 Before supplying goods on credit a credit
worthiness check should be made of the buyer
 A credit limit should be set based upon the
buyer’s credit worthiness
 Goods should be promptly invoiced
 Statements provided to the buyer on a monthly
basis
 Unpaid debts ‘followed up’ after one month
outstanding
 Constant monitoring of aged debts with personal
contact (telephone call) where debts are up to
two months old
 Restriction of further credit where debts remain
unpaid for well over one month
 Legal intervention only if debt is circa three
months old and no movement towards payment.
(1) AO1 x 4 valid points
NOT
Give cash discount.
Give trade discount.
(4)
MSB - Page 6
Question Indicative Content Mark

Number
4 (c) AO2 (1), AO3 (2), AO4 (3)
Points in favour of allowance for doubtful debts
Ensures that profits are more realistic, because an

allowance will be made of possible bad debts from the
sales of the current period.
Complies with the prudence concept in not overstating

profits.
Points in favour of writing off bad debts as they occur
Will not be based upon estimates, as the allowance

will be.
Based upon actual bad debts if they occur.
Decision
Candidates may be in favour or against the allowance
for doubtful debts. Candidate’s conclusion should be
supported with an appropriate rationale.
NOT
Time consuming. (6)
Easier.
Level Mark Descriptor
0 A completely incorrect response.

Level 1 1-2 Isolated elements of knowledge and understanding which
are recall based.
Generic assertions may be present.
Weak or no relevant application to the scenario set.
Level 2 3-4 Elements of knowledge and understanding, which are
applied to the scenario.
Some analysis is present, with developed chains of
reasoning, showing causes and/or effects applied to the
scenario, although these may be incomplete or invalid.
An attempt at an evaluation is presented, using financial
and perhaps non-financial information, with a decision.
Level 3 5-6 Accurate and thorough knowledge and understanding.
Application to the scenario is relevant and effective.
A coherent and logical chain of reasoning, showing
causes and effects is present.
MSB - Page 7
Winter 2013 www.mystudybro.com Accounting Unit 1
SOURCE MATERIAL FOR USE WITH QUESTION 6
6. Taabu is in business buying and selling goods on credit. The following information relates to her
customers’ accounts for the month of December 2012:
1. Balances at 1 December :
Trade receivables £23 500
Provision for doubtful debts £1 450
2. During December 2012:

Cheques received and banked from trade receivables £32 400
Discount allowed £820
Credit sales £38 000
3. During December, Taabu was informed that one debtor, Taal, would not be able to fully pay his
debt of £350. A payment of £0.40 in the pound was made on 31 December 2012, the balance
of the debt being irrecoverable.
4. A debt owed by Kaab £700, which had been written off in July 2011, was received in
December 2012.
5. On 31 December 2012 a schedule of debtors was prepared and the provision for doubtful debts
was calculated as £1 375.
Required:
(a) Explain:
(i) the term a schedule of debtors

(ii) how the schedule of debtors would be used to calculate the provision for doubtful debts.
(6)
(b) Prepare the Journal entries, including narrative, recording the bad debt recovery from Kaab.
(5)
(c) Prepare, for the month of December, the:
(i) Bad debts account

(3)
(ii) Bad debts recovered account
(4)
(iii) Sales Ledger Control Account showing clearly the balance of debtors at 31 December 2012.
(7)
(iv) Provision for doubtful debts account.

(3)
(d) Evaluate the use of a provision for doubtful debts account by Taabu.
(4)
(Total 32 marks)
Answer space for question 6 is on pages 30 to 33 of the question paper.
P42221A 11 Turn over

MSB - Page 8

Number
5(c)(i) Daywork 2 000hrs x £6 = £12 000 √ = £5 per unit √√ (4)
2 400 units √

Number
5(c)(ii) Alternative Option 1 = £3 per unit √√ (2)

Number
5(c)(iii) Alternative
Option 2 2 000 hrs x £3.5 = 7 000
£1.50 x 3 600 units = 5 400
12 400 √ (4)
Divided by 3 600 √ = £3.44 per unit√√

Number
5(d) The most productive is Alternative Option 1 √√of (2)
Number
5(e) Valid answers may include:
Points for
• Greater production
• Lower unit costs than at present
Points against:
• Quality issues
• Potential accidents
√√ per valid point x 2 points. MAX 1 point for and MAX 1 point (4)
against.

Number
6(a)(i) A schedule of debtors is a summary of all the debtors sums grouped by
age of debt.√√
6(a)(ii)
It is presumed that the older the debt the less likely it is to be paid √√
A projected percentage of non-payment for each age category is
applied and a total provision estimated√√ (6)
MSB - Page 9

Number
6(b) Journal
Dr Cr
£ £
Bank 700 √
Kaab 700 √
Kaab 700 √
Bad debts recovered 700 √
Bad debts recovered 700 √

Income statement 700 √
Being recovery of bad debt from Kaab written off in July 2011 √
MAX 5 x √ (5)

Number
6(c)(i) Bad Debts Account
£ £
Taal 210 √ Income statement √ 210 √
210 210
(3)

Number
6(c)(ii) Bad Debts Recovered Account
£ £
Income statement √ 700 √ Bank (Kaab) √ 700 √
700 700
(4)

Number
6(c)(iii) Sales Ledger Control Account
£ £
Balance b/d 23 500√ Bank 32 400 √
Sales 38 000√ Discount allowed 820 √
Bad debts 210 √
Balance c/d 28 070 √
61 500 61 500
Balance b/d 28 070 √of (if on debit) (7)
MSB - Page 10

Number
6(c)(iv) Provision for Doubtful Debts Account
£ £
Income statement 75 √Balance b/d 1 450 √
Balance c/d 1 375
1 450 1 450
Balance b/d 1 375 √of(if on credit)
(3)

Number
6(d) Valid answers may include:
Points for
• Ensures that profit is not overstated
• Complies with the prudence concept
Points against:
• Only an estimate based upon historical experience
• Actual bad debts may be significantly different from the
estimate
(4)
√√ per valid point x 2 points. MAX 1 point for and MAX 1 point
against.
Do NOT accept:
• Time consuming

Number
7(a) Valid answers may include:
• Decision to cease trading
• Introduction of new partner(s)
• Retirement
• Death
• Action of the courts
• To become a limited company
• No prospect of profit (4)
2 points x √√

Number
7(b) Provisions of 1890 Partnership Act
• Salaries- unless otherwise agreed between the partners no
salaries are payable √√
• Interest on loans- 5% interest is paid to partners on loans
over and above agreed capital √√
(4)
MSB - Page 11

Exercises 12

Uploaded by

Copyright:

Available Formats

Exercises 12

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Exercises 12

Uploaded by

Copyright:

Available Formats

MyStudyBro - Revision Exercise Tool

(Total for Question 4 = 30 marks)

Question Answer Mark

15 June Bank 250 (1) AO2

Question Answer Mark

Bad Debts Account

Question Answer Mark

Bad Debts Recovered Account

Question Answer Mark

Allowance for Doubtful Debts Account

Question Answer Mark

Valid points may include:

(1) AO1 x 4 valid points

Question Indicative Content Mark

Points in favour of allowance for doubtful debts

Ensures that profits are more realistic, because an

Complies with the prudence concept in not overstating

Points in favour of writing off bad debts as they occur

Will not be based upon estimates, as the allowance

0 A completely incorrect response.

SOURCE MATERIAL FOR USE WITH QUESTION 6

2. During December 2012:

(i) the term a schedule of debtors

(c) Prepare, for the month of December, the:

(i) Bad debts account

(iv) Provision for doubtful debts account.

P42221A 11 Turn over

Question Answer Mark

Question Answer Mark

Question Answer Mark

Question Answer Mark

Question Answer Mark

Question Answer Mark

Bad debts recovered 700 √

Question Answer Mark

Question Answer Mark

Question Answer Mark

Question Answer Mark

Question Answer Mark

Question Answer Mark

Question Answer Mark

You might also like