Solution Manual for Frank Wood's Business Accounting , 13th Edition

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Solutions ManualFrank Wood’sBusiness Accounting1Thirteenth editionAlan SangsterBA, MSc, PhD, CertTESOL, CA1

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ContentsPreface4Students and examination success5Answers83

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PrefaceThis solutions manual contains answers to all the questions not already answered inFrank Wood’sBusiness Accounting 1andFrank Wood’s Business Accounting 2. It can be seen that there are a consider-able number of questions in both textbooks. About half of these have the answers at the back of the relevanttextbook, while the remainder of the answers are contained in this manual.The result of this is to give a high degree of flexibility in the use of the textbooks. To illustrate the con-tents of each chapter, the questions can be used which have answers in the textbook. Any students whoare absent can be told what they have missed and can look up the answers themselves. Students whoarrive late on the course can also be told what work to do and they can check their own progress againstthe answers as given. However, quite obviously work must be set, either in class or for homework, forwhich answers are not available to students. This manual can therefore be used to check such work.Whilst every endeavour has been made to show workings quite fully, it must be appreciated that there areoften different ways of getting to the same answer. This manual would be unduly lengthy and complicatedif every version of arriving at the answer were to be shown. The methods chosen are therefore thosejudged to be the best from a teaching point of view.Alan Sangster4Sangster,Frank Wood’s Business Accounting 1, 13thEdition, Solutions Manual

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5Students and examination successExperienced teachers and lecturers know just as much as I do about this topic. There will, however, bequite a lot of people reading this who are new to teaching, and who have little experience in understand-ing how the examiner views things. If I have anything to offer, it is simply that I have been involved inaccounting education for over 30 years and have been an examiner for several examining bodies.The Notes for Students at the start of bothFrank Wood’s Business Accounting 1andFrank Wood’sBusiness Accounting 2deal with examination techniques. Make sure your students read these. Gothrough these with them. If we all tell students that what these say is true, then they are more likely tobelieve us.How students lose marks1 Lack of knowledge (obviously) but theythrowaway marks unnecessarily for all of the following reasons:(a) Untidy work, including columns of figures not lined up.(b) Bad handwriting. Do not make it difficult for the examiner to read and mark.(c) Lack of headings, dates, sub-totals, etc. in accounting statements.(d) Not submitting proper workings.You can only get them to rectify everything under this heading by insisting on them correcting (a), (b),(c) and (d) from early on in the course. Do not wait until a few weeks before the examination to insistupon properly laid out and neatly constructed work.2 Students very often do not follow the rubric on the examination paper. If it asks for two questionsonly from Section A, then it means just that. A remarkably high percentage do not follow the instruc-tions per the rubric.3 Students fail to answer the questions as set. If, for example, an examiner wants alist, students will losemarks by givingexplanationsinstead. Students must tackle the question in the prescribed way and notdo it differently. The percentage of students passing examinations would rise dramatically if only wecould correct this failing. A good plan is to get them to highlight the instruction that shows how theexaminer wants the question to be answered, e.g.Listthe ways by which . . .Describethe ways by which . . .Write areportto the managing director about the ways by which . . .Discusshow the ways by which . . .Explainhow the ways by which . . .Then, get them to underline the key words in the rest of the question.They need as much practice as possible in doing this, especially for essay-type questions.Practice is even more essential for students for whom English is not their first language.At the end of this section are 20 essay questions in which we have already highlighted the instructionand underlined the key words. See if your students can do the same.4 Poor technique with essay questions.Business Accounting 2, Notes for students, the section headed‘Answering essay questions’ covers this point. Discuss this with your students who have to tackle essayquestions.5 Not tackling the required number of questions. I have always found it very difficult to convince stu-dents to get hold of the idea that they will get more marks for five uncompleted questions than they willfor four completed questions, when the examiner has asked for five to be attempted. Time planning isessential.6 By not tackling the easiest questions first. Years ago, a lot of research was undertaken into the resultsof students who had followed this advice, compared with those who ignored it. Following the adviceproduced better results.7 By simply regurgitating the contents of a textbook in essay answers. For instance, when an examinerset a question on, say, materiality. Most of the answers simply gave exactly the same examples, wordfor word sometimes, that we have given inBusiness Accounting 1.Examiners are looking for originality and imagination. Students will get excellent marks if they givetheir own examples. A good idea is that, for each of the concepts and conventions, they think up theirown examplesbeforethe examination. There are going to be more and more questions on these thingsin the years ahead.

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68 Examiners like to see answers where students realise that all accounting is not found in textbooks, butexists for the use of businesses. Get them to use examples in essay questions based on what they haveobserved in the businesses around them.For example, a question on ratios and interpretation will often be answered by students just usingfigures. They should also saywhythe figures have changed; what possible causes there might havebeen.In their life outside their studies, they should observe how accounting is carried out. They all go atone time or another to refectories, restaurants, shops, department stores, clothes shops, travel on busesand trains, etc. They should observe how the money is calculated and collected, what sort of bills ortickets are given out, how fraud or errors could occur and so on. They can give this flavour of the realworld in their answers. Believe me, they will get better marks.Essay questions – how not to misunderstand them1Listthe various pieces of information which should be shown on a sales invoice.2Describewhat is meant by an imprest system.3 Accounting based on historical costs can be misleading.Discuss.4 The bookkeeper has said that if an error does not affect trial balance agreement then it cannot affectanything else very much. You are to write areportto the managing director stating whether or notyou agree with the bookkeeper.5Givefive examples of different compensating errors andexplainwhy they cancel each other out.6Explainthe differences between the straight line and reducing balance methods of depreciation.7Briefly describethe benefits to be gained from maintaining control accounts.8Listsix instances of errors which could cause the trial balance totals to disagree.9Namethree methods of inventory valuation, andbriefly describeany one of them.10 ‘Without the use of accounting ratios, much of the accounting work already performed would bewasted’.Discussthe amount of truth in this statement.11Howcan retail stores use accounting ratios to help them to plan future inventory levels?12Assessthe benefits of double entry as compared with single entry methods of bookkeeping.13Definedepreciation anddescribehow the annual charge is worked out using the straight line method.14 For a firm buying goods on credit,howcan it calculate the figure of purchases even though aPurchases Journal has not been kept?15Listthe differences between the income and expenditure account of a club and the income statementof a trading concern.16 ‘It is unsatisfactory for the treasurer of a club to prepare and present to the members only the receiptsand payments account as a summary of the records of the club’s activities for the year.’Whyis thistrue?Whatis the better thing to do?17 You are to give youradviceto the managing director of a company on the best manner of construct-ing departmental income statements.18Howdo the financial statements of a partnership vary from those of a sole trader, andwhy?19Considerthe view that if profit was not calculated at all until the business was closed down, thensuch a calculation would be a simple and straightforward affair.20 You are towrite a letterto a friend explaining in simple terms why profit does not necessarily meanthat you have cash in the bank.Practice on past full examination papersIf students have not tackled past papers, under as near examination conditions as possible, they will oftenget quite a shock when they first sit an accounting examination.This very often is due to two main reasons:(a) There is such a lot to do in such a short time.(b) Even though there is so much to do, in professional examinations in particular, many of the questionsare quite difficult with some complicated calculations or adjustments.If students can attempt, say, at least two such papers and then have their attempts marked and criticised,they will normally learn a lot from the experience.Examination questions and marking schemesIt can be said that:(a) By and large, marking is ‘positive’, i.e. marks are awarded for what a student gets right, rather thanbeing deducted for what a student gets wrong.Sangster,Frank Wood’s Business Accounting 1, 13thEdition, Solutions Manual

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7(b) Marksarededucted for untidy work, lack of headings, dates, sub-totals, etc.(c) An incorrect part of an answer, with no workings attached to it, will getnilmarks.(d) Extra, unnecessary answers, resulting from students failing to follow the rubric, will not be marked.(e) Not following the examiner’s instructions will lose marks. For example, marks will be lost if, whenasked for a ‘report’, a student gives a ‘list’; or if asked to ‘discuss’, a student gives only one side of theargument; or if asked to ‘define’, a student gives an ‘explanation’. Some examiners will award zeromarks, even though the answers given by the student show good knowledge of the topic. Others(including myself) would be kinder than that, but students cannot rely on this being the case.(f) An error that repeats itself through an answershouldlose only one set of marks. For instance, anerror in the trading account will also affect balances in the profit and loss account, appropriationaccount and balance sheet. In cases of this type, only one set of marks should be lost.(g) Guessing by students is not normally penalised. The one exception that may arise concerns multiplechoice questions where wrong answers may be penalised as an incentive to prevent students guessing.In this case, the examining body would make this information known well in advance of the exami-nation date.(h) The easiest marks to get, especially in an essay question, are the first few marks.(i)Good handwriting and well displayed answers will often (although theoretically they should not) gethigher marks than they deserve. This is simply because examiners are human beings with human fail-ings, and work that can be easily marked makes them feel generous.Alan SangsterSangster,Frank Wood’s Business Accounting 1, 13thEdition, Solutions Manual

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8Sangster,Frank Wood’s Business Accounting 1, 13thEdition, Solutions ManualAnswersNote: To save time and space, the months are omitted in the Ledger accounts which follow. The day ofthe month is shown in brackets.Answer to Question 1.2ABA 1(a) 76,200(b) 25,800(c) 15,200(d) 52,050(e) 52,000(f) 79,500Answer to Question 1.4ABA 1(a) Asset(f) Asset(b) Asset(g) Liability(c) Liability(h) Liability(d) Asset(i)Asset(e) AssetAnswer to Question 1.6ABA 1Assets List Wrong: Accounts payable, Capital.Liabilities List Wrong: Loan to J Wilson, Equipment, Computers.Answer to Question 1.8ABA 1Fixtures 1,200+Van 6,000+Inventory 2,800+Bank 200+Cash 175=Total Assets 10,375.Loan 2,500+Accounts payable 1,600+Capital (difference) 6,275.Answer to Question 1.10ABA 1M KellyStatement of Financial Position as at 30 June 2016Non-current assetsEquipment6,800Current assetsInventory7,200Accounts receivable6,300Cash at bank4,20017,700Less Current liabilitiesAccounts payable8,2009,50016,300Capital16,300

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9Answer to Question 1.12ABA 1AssetsLiabilitiesCapital(a)+Van+Accounts payable(b)−Cash−Loan from F Duff(c)+Inventory−Bank(d)+Cash+Capital(e)+Inventory−Accounts receivable(f)+Inventory+Accounts payable(g)−Cash−Capital(h)−Bank−Accounts payableAnswer to Question 1.14ABA 1J HillStatement of Financial Position as at 7 December 2016Non-current assetsEquipment6,310Car7,30013,610Current assetsInventory8,480Accounts receivable3,320Bank9,510Cash48521,79535,405Current liabilitiesAccounts payable1,76033,645Capital33,645Answer to Question 2.11ABA 1DebitedCreditedDebitedCredited(a) TrailorCash(b) J ToughBank(c) Loan from W SmallCash(d) CashTrailor(e) Office equipmentDexter Ltd(f) CashT Walls(g) BankL Tait(h) BankCapital(i)CashLoan from F Burns(j)J FifeCashSangster,Frank Wood’s Business Accounting 1, 13thEdition, Solutions Manual

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10Answer to Question 2.14ABA 1BankCash(1) Capital16,000(2) Van6,400(12) Bank180(15) Office fixtures 120(25) Cash400(12) Cash180(21) Loan: Berry500(25) Bank400(19) Carton Cars 7,100(30) Office fixtures 480Vans(2) Bank6,400Office Fixtures(8) Carton Cars 7,100(5) Old Ltd900(15) Cash120Old Ltd(30) Bank480(5) Office fixtures 900CapitalCarton Cars(1) Bank16,000(19) Bank7,100(8) Van7,100Loan from Berry(21) Cash500Answer to Question 2.15ABA 1BankCash(1) Capital18,000(8) Cash400(1) Capital1,500(3) Computer1,200(2) Loan Fox4,000(15) Loan Fox1,000(8) Bank400(24) Loan Fox500(17) Drop840ComputerLoan: T Fox(3) Cash1,200(15) Bank1,000(2) Bank4,000(24) Cash500Drop Ltd(17) Bank840(5) Display stands 840Display Stands(5) Drop840P Blake(31) Printer400CapitalPrinter(1) Cash1,500(31) P Blake400(1) Bank18,000Answer to Question 3.2ABA 1DebitedCreditedDebitedCredited(a) PurchasesB Cowan(b) Returns inL Keith(c) C RiddleFiling cabs(d) PurchasesCash(e) LorryM Davies Ltd(f) J HicksReturns Out(g) BankM Peters(h) PurchasesBank(i)F TomsBank(j)S MulliganSalesSangster,Frank Wood’s Business Accounting 1, 13thEdition, Solutions Manual

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11Answer to Question 3.4ABA 1CashBank(1) Capital7,400(2) Bank7,000(2) Cash7,000(5) Van4,920(19) Sales54(7) Purchases362(24) F Holmes(29) J Watson368(Loan)1,500(31) Firelighters Ltd820Purchases(4) J Watson410(7) Cash362SalesReturns Outwards(10) L Less218(12) J Watson42(19) Cash54J WatsonFixtures(12) Returns42(4) Purchases410(22) Firelighters(29) Bank368Ltd820L LessVan(10) Sales218(5) Bank4,920F Holmes (Loan)(24) Bank1,500Firelighters Ltd(31) Bank820(22) Fixtures820Capital(1) Cash7,400Answer to Question 3.6ABA 1BankPurchases(1) Capital18,000(21) Printer620(2) B Hind1,455(18) Cash250(29) B Hind1,373(3) G Smart472(8) G Smart370Cash(5) Sales210(18) Bank250Sales(12) Sales305(5) Cash210(10) P Syme483B Hind(12) Cash305(6) Returns Out82(2) Purchases1,455(22) H Buchan394(29) Bank1,373G SmartReturns Inwards(28) Returns Out47(3) Purchases472(23) P Syme160(8) Purchases370(25) H Buchan18P SymeReturns Outwards(10) Sales483(23) Returns In160(6) B Hind82(28) G Smart47H Buchan(22) Sales394(25) Returns In18A CobbMachinery(31) Machinery419(31) A Cobb419CapitalPrinter(1) Bank18,000(21) Bank620Sangster,Frank Wood’s Business Accounting 1, 13thEdition, Solutions Manual

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12Answer to Question 4.3ABA 1JulyDrCr1Bank5,000Cash1,000Capital6,0002Stationery75Bank753Purchases2,100T Smart2,1004Cash340Sales3405Insurance290Cash2907Computer700J Hott7008Expenses32Bank3210C Biggins630Sales63011T Smart55Returns Out5514Wages210Cash21017Rent225Bank22520Bank400C Biggins40021J Hott700Bank70023Stationery125News Ltd12525F Tank645Sales64531News Ltd125Bank125Sangster,Frank Wood’s Business Accounting 1, 13thEdition, Solutions Manual

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13Answer to Question 4.4ABA 1BankPurchases(1) Capital11,000(5) Stationery62(2) J Biggs830(24) K Fletcher250(16) Business rates 970(2) D Martin610(28) Business rates45(19) Rent75(2) P Lot590(28) J Biggs830(3) Cash370(28) D Martin415(28) B Black6,100Sales(6) D Twigg370Cash(6) B Hogan290(1) Capital1,600(3) Purchases370(6) K Fletcher410(4) Rent75(15) T Lee205(7) Wages160(15) F Sharp280(11) Rent75(15) G Rae426(18) Insurance280(21) Motor exps24Returns Outwards(23) Wages170(10) D Martin195CapitalReturns Inwards(1) Bank11,000(13) B Hogan35(1) Cash1,600B BlackRent(28) Bank6,100(20) Van6,100(4) Cash75(11) Cash75J Biggs(19) Bank75(28) Bank830(2) Purchases830WagesD Martin(7) Cash160(10) Returns Out195(2) Purchases610(23) Cash170(28) Bank415StationeryP Lot(5) Bank62(2) Purchases590Business ratesD Twigg(16) Bank970(28) Bank45(6) Sales370InsuranceB Hogan(18) Cash280(6) Sales290(13) Returns In35Motor ExpensesK Fletcher(21) Cash24(6) Sales410(24) Bank250VanT Lee(20) B Black6,100(15) Sales205F Sharp(15) Sales280G Rae(15) Sales426Sangster,Frank Wood’s Business Accounting 1, 13thEdition, Solutions Manual

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14Answer to Question 4.6ABA 1(A)Goods bought on credit £27,000.(B)Borrowed £35,000 and immediately spent it on land and buildings £35,000.(C)Sold goods costing £20,000 for £30,000 on credit.(D) Debtors paid £13,000 which was deposited in the bank.(E)Debtors paid £2,000: This amount taken by proprietors.(F)Took £5,000 drawings by cheque and paid off £3,000 accrued expenses by cheque.(G) Equipment costing £30,000 sold for £21,000; paid by cheque.(H) Goods taken for own use £1,000.(I)Took £6,000 cash as drawings. Could have been £6,000 cash stolen – thus reducing cash and causinga loss.Answer to Question 5.6ABA 1P Black(1) Sales620(19) Bank620(21) Sales180(31) Balance c/d180800800(1) Balance b/d90G Smith(1) Sales84(31) Balance c/d1,266(8) Sales322(21) Sales8601,2661,266(1) Balance b/d1,266L Sime(1) Sales2,200(10) Returns62(8) Sales448(19) Bank1,500(31) Balance c/d1,0862,6482,648(1) Balance b/d1,086J Teel(1) Sales618(10) Returns164(12) Cash454618618Black, Smith and Sime are debtors. Donovan, Lime and Still are creditors.Sangster,Frank Wood’s Business Accounting 1, 13thEdition, Solutions ManualP Best(15) Returns25(2) Purchases190(28) Bank165190190I Donovan(31) Balance c/d278(2) Purchases63(9) Purchases215278278(1) Balance b/d278G Lime(28) Bank180(2) Purchases210(31) Balance c/d30210210(31) Balance b/d30T Still(15) Returns21(2) Purchases360(28) Bank100(9) Purchases164(31) Returns40(31) Balance c/d363524524(1) Balance b/d363

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15Answer to Question 5.7ABA 1F Black2017DrCrBalanceMay 1Sales310310 DrMay 19Bank3100May 21Sales9090 DrG Smith2017DrCrBalanceMay 1Sales4242 DrMay 8Sales161203 DrMay 21Sales430633 DrL Sime2017DrCrBalanceMay 1Sales1,1001,100 DrMay 8Sales2241,324 DrMay 10Returns311,293 DrMay 19Bank750543 DrJ Teel2017DrCrBalanceMay 1Sales309309 DrMay 10Returns82227 DrMay 12Bank2270P Best2017DrCrBalanceMay 2Purchases190190 CrMay 15Returns15175 CrMay 28Bank1750I Donovan2017DrCrBalanceMay 2Purchases6363 CrMay 9Purchases215278 CrG Lime2017DrCrBalanceMay 2Purchases210210 CrMay 28Bank18030 CrT Still2017DrCrBalanceMay 2Purchases190190 CrMay 9Purchases164354 CrMay 15Returns21333 CrMay 28Bank100233 CrMay 31Returns18215 CrSangster,Frank Wood’s Business Accounting 1, 13thEdition, Solutions Manual

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16Answer to Question 6.3ABA 1Bank(1) Capital15,000(6) Rent175(28) T Potts71(7) Business rates130(28) J Field42(23) J Small272(30) Capital900(23) F Brown1,200(23) T Rae500(25) Van6,200(30) Balance c/d7,53616,01316,013(1) Balance b/d7,536Cash(5) Sales610(17) Wages290(26) Loan from(30) Balance c/d1,070B Bennet7501,3601,360(1) Balance b/d1,070Purchases(3) J Small290(30) Balance c/d3,225(3) F Brown1,200(3) R Charles530(3) T Rae610(19) R Charles110(19) T Rae320(19) F Jack1653,2253,225(1) Balance b/d3,225Sales(30) Balance c/d2,383(5) Cash610(11) T Potts85(11) J Field48(11) T Gray1,6402,3832,383(1) Balance b/d2,383Returns Outwards(30) Balance c/d45(18) J Small18(18) R Charles274545(1) Balance b/d45Returns Inwards(20) J Field6(30) Balance c/d20(20) T Potts142020(1) Balance b/d20Capital(30) Balance c/d15,900(1) Bank15,000(30) Bank90015,90015,900(1) Balance b/d15,900Van(21) Turnkey Motors 4,950(30) Balance c/d11,150(25) Bank6,20011,15011,150(1) Balance b/d11,150Rent(6) Bank175(30) Balance c/d175(1) Balance b/d175Business rates(7) Bank130(30) Balance c/d130(1) Balance b/d130Wages(17) Cash290(30) Balance c/d290(1) Balance b/d290Loan from B Bennet(30) Balance c/d750(26) Cash750(1) Balance b/d750J Small(18) Returns Out18(3) Purchases290(23) Bank272290290F Brown(23) Bank1,200(3) Purchases1,200R Charles(18) Returns Out27(3) Purchases530(30) Balance c/d613(19) Purchases110640640(1) Balance b/d613T Rae(23) Bank500(3) Purchases610(30) Balance c/d430(19) Purchases320930930(1) Balance b/d430F Jack(30) Balance c/d165(19) Purchases165(1) Balance b/d165T Potts(11) Sales85(20) Returns In14(28) Bank718585J Field(11) Sales48(20) Returns In6(28) Bank424848T Gray(11) Sales1,640(30) Balance c/d1,640(1) Balance b/d1,640Turnkey Motors(30) Balance c/d4,950(21) Van4,950(1) Balance b/d4,950Trial Balance as at 30 November 2017Bank7,536Cash1,070Purchases3,225Sales2,383Returns Outwards45Returns Inwards20Capital15,900Van11,150Rent175Business rates130Wages290Loan from B Bennet750R Charles613T Rae430F Jack165T Gray1,640Turnkey Motors4,95025,23625,236Sangster,Frank Wood’s Business Accounting 1, 13thEdition, Solutions Manual

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