FRA Practice Exam 1 Sarah Glass KW Enterprise

pernickety

Can anyone help with the above FRA practice exam 1 from the FRA workbook? In 1.1 - Your are asked to calculate the credit sales, which I did as below.Then to calculate the total sales in 1.2.

I had calculated the credit sales as follows:-
Receipts from debtors 722800
-debtors from 2003 (52300)
+debtors 2004 59020
TOTAL CREDIT SALES 729520
The above was correct

For 1.2, you are asked to calculate the total sales for the year ended 30 April 2004. There are cash sales showing as being banked to the business bank account of 292180. So therefore my answer to 1.2 is 729520 + 292180 = 1,021700. Now the answer from the answer book for cash sales is 292180-200(a reduction to cash float)? Making the total sales as 1021500?

I had noted that the float was reduced by £200 but the original cash float of£1000 was put in to the cash account in 2003 and shows on the balance sheet information for 2003 as a current asset. You are not given any further information from the 2004 business bank account of a credit to the cash account, nor are you given cash account debits or credits. The original float would have been recorded in 2003 as a debit to the cash account (current asset) and a credit to sales, wouldn't it?therefore the 1000 would have been included in 2003 sales figure?. So why in their answer are they deducting £200 from cash sales in 2004? I would say that the reduction of the cash float should have simply have been a journal/bank transfer from one asset code to another i.e. dr business bank account £200 - cr Cash account £200 and nothing whatsoever to do with altering sales in any wayat all?

Help and comments appreciated.:mad2:

Richard

The way I understood the question was that you are trying to calculate the total sales for the year - you calculated the credit sales in 1.1, then you add this to the cash sales for 1.2. As you can see from the bank account summary, they banked £292,180 and we know from the information that they bank all cash sales. However, as they are reducing the float by £200, they are effectively banking £200 in addition to the cash sales. Therefore, the answer is 729,520 + 292,180 - 200 = £1,021,500.

To answer your question, they aren't deducting £200 from the sales figure - you are deducting it from the bank receipts to establish the sales figure. The double entry for this would have been Dr Bank account 292,180 Cr Sales 291,980 Cr Cash 200.

I hope this makes sense!!

pernickety

Thanks Richard,

I can see where you are coming from, but still don't fully comprehend how they have shown it all. Maybe there is not enough information as to how cash sales may or may not have been recorded or accounted for in the first place. I therefore found it really ambiguous and still do.

They have recorded the cash sales as being debited to the business bank account 292,180, which means that the credit entry would have been to sales, yes? Only if the cash sales had never been accounted for would you dr bank and cr sales with any other amount to increase this figure wouldn't you? At one point I thought this must have been the case, and the monies held in cash float had not been accounted for, but the transaction as cash sales debited of £291,980 with the other debit entry to bank being a journal from cash (the reduction of the asset of the cash float), Am I wrong here? I sincerely hope I do not get such a question in the June exam, because I will be in danger of losing it completely.Exams are stressful enough without such ambiguity! :confused1:

ANNIE

HELP PLZ!SARAH GLASS TASK 1.7 a and b

HI GUYS SARAH IS MAKIN MY WORLD GO ROUND BY WONDERING WHY TH NET PROFIT FIGURE IS DIFFERENT FROM TH CLOSING BANK BALANCE,CUD SUMBODY HELP! RICHARD PLZ U BETER RESCUE ME B4 I GET FIRED!

Richard

Hi Annie,

1.7a is asking for examples of entries on the P&L account, that do not go through the bank account - accruals & prepayments, for example.

1.7b is looking for you to give an example of an entry you would find on the Balance Sheet that won't affect the profit - ie purchase of a fixed asset.