0450 Business Studies November 2025 Question Paper 23

1 Sid owns a business selling cars. He operates a petty cash system and maintains the float at $350. The float is restored on the first day of each month from the business bank account.

Sid has provided the following information:

2025

$

April 1 Balance b/d 350

3 Bought petrol 36

4 Bought tea, coffee and juice – for staff 34

9 Paid taxi fare for customer 24

11 Paid AB Autoparts, a credit supplier 78

12 Paid for printer paper 8

14 Paid window cleaner 30

27 Bought train ticket for member of staff 8.50

30 Paid office cleaner 45

REQUIRED

(a) Prepare Sid’s petty cash book for the month of April on page 3. Balance the petty cash book at 30 April 2025 and bring down the balance at 1 May 2025. Restore the float to the agreed level. , , Date Details Total received $Date Details Total paid$ Cleaning $Fuel$ Office expenses $Travel expenses$ Ledger accounts $ April 1 Balance 350 [12] , ,

(b) State the name of the system used to maintain petty cash books [1]

(c) State one advantage of operating a petty cash account [1]

(d) State two reasons why there might be a difference between the balance on the petty cash account and the money in the petty cash box. 1 2 [2]

Sid made the following transactions during the month of May 2025: • withdrew $1500 cash from the business bank account for his own personal use • bought car parts on credit from AB Autoparts. The list price of the parts was$830 but was subject to 20% trade discount.

REQUIRED

(e) Show the journal entries to record these transactions. Narratives are not required.

Sid

Journal Details Debit $Credit$ [4]

[Total: 20] , ,

2 Jenny maintains a full set of accounting records and prepares control accounts at the end of each month. She has provided the following information:

2025

$

January 31 Sales ledger control account balance 1 895 debit

February 28 Totals for the month

Sales journal 42 600

Cash sales 2 300

Sales returns journal 7 300

Bank transfers received from credit customers ?

Discount allowed 1 265

Irrecoverable debts 1 040

Contra entries 2 850

Interest charged on overdue accounts 510

March 1 Sales ledger control account balance 750 credit

REQUIRED:

(a) Prepare Jenny’s sales ledger control account for the month ended 28 February 2025. Balance the account and bring down the balance at 1 March 2025. Jenny Sales ledger control account Date 2025 Details $Date 2025 Details$ [9] , ,

(b) State one advantage of maintaining a sales journal [1]

(c) Complete the following table by indicating the name of the source document that Jenny would use to make entries in her books of prime entry.

State whether the source document is issued or received by Jenny. Book of prime entry Source document Issued or Received Sales journal Purchases returns journal

[2]

(d) State what is meant by the following terms:

(i) cash discount [1]

(ii) trade discount [1]

Jenny has received goods from one of her credit suppliers. When she inspected the goods, she found they were faulty.

REQUIRED

(e) Name the document Jenny would issue to her supplier to record the receipt of these faulty goods [1] , ,

Jenny currently does not maintain a provision for doubtful debts. When all reasonable steps to obtain payment from credit customers have failed, she writes off the debt. Her colleague has advised her that she should create a provision for doubtful debts when she prepares her next set of financial statements.

REQUIRED

(f) Advise Jenny whether or not she should create and maintain a provision for doubtful debts. Justify your answer by providing two arguments for and two arguments against maintaining a provision for doubtful debts [5]

[Total: 20] , ,

3 Rushil is a trader and has provided his statement of financial position at 30 September 2025.

$$

Non-current assets

220 000

Current assets

Inventory 34 000

Trade receivables 44 000

Other receivables 6 500

Cash 8 400 92 900

312 900

Capital and liabilities

Capital – opening balance 199 100

Profit for the year 36 000

235 100

Less: Drawings 12 000 223 100

Non-current liabilities

Long-term bank loan 49 000 49 000

Current liabilities

Trade payables 31 000

Bank 9 800 40 800

312 900

Rushil has provided the following additional information:

1 Inventory at 1 October 2024 was $30 000.

2 The profit for the year in his statement of financial position was after having deducted loan interest charges of $2450.

3 For the year ended 30 September 2025: • sales totalled $482 000 ($387 000 were on credit; the remainder were cash sales) • purchases totalled $310 000 (all on credit). , ,

REQUIRED

(a) Complete the following table. Return on capital employed (ROCE) Answer (correct to two decimal places) Workings Rate of inventory turnover Answer (correct to two decimal places) Workings Trade receivables turnover (days) Answer (round up to the next whole day) Workings Trade payables turnover (days) Answer (round up to the next whole day) Workings Current ratio Answer (correct to two decimal places) Workings

[8] , ,

(b) (i) Suggest two ways that Rushil might improve his return on capital employed (ROCE). 1 2 [2]

(ii) Suggest two ways that Rushil might improve his inventory turnover rate. 1 2 [2]

Included in Rushil’s closing inventory valuation were some items that had been damaged. These were included at a reduced value.

REQUIRED

(c) (i) State why the inventory was included at a reduced value [1]

(ii) Name the accounting principle that is being applied [1]

(iii) Complete the table by indicating with a tick (3) the effect on Rushil’s gross profit of including his damaged inventory at a reduced value. effect on Rushil’s gross profit increase decrease

[1] , ,

Rushil is concerned that his credit customers are taking too long to pay him. He is considering allowing a 2.5% cash discount on all credit sales if paid within 21 days.

REQUIRED

(d) Advise Rushil whether or not he should allow his credit customers a cash discount if they make payment to him within 21 days. Justify your answer with arguments for and against Rushil allowing his credit customers a cash discount if they make payment to him within 21 days [5]

[Total: 20] , ,

4 Talula owns a hairdressing salon. She also rents out part of her property to Sheila, who offers a range of beauty treatments. Talula provided the following information for the year ended 30 September 2025.

$

Salaries 81 500

Electricity charges 23 500

Water charges 4 150

Income from hairdressing 124 700

Insurance 2 067

General expenses 952

Property tax 3 045

Rent received from Sheila 6 400

Additional information:

1 Insurance of $2067 is for the period from 1 October 2024 to 31 October 2025.

2 Sheila commenced renting property from Talula on 1 October 2024. There remains two months of rental payments in arrears.

3 Property tax of $3045 is for the period 1 October 2024 to 31 December 2025.

REQUIRED

(a) Prepare Talula’s income statement for the year ended 30 September 2025. Talula Income Statement for the year ended 30 September 2025 $$ [5] , ,

Talula has been notified by her electricity supplier that costs of electricity will increase by 15% with effect from January 2026.

REQUIRED

(b) Suggest two courses of action that Talula might take to ensure that her profit for the year is not affected. For each course of action, state what impact the course of action might have on Talula’s business. An example has been provided in the table. Suggested course of action Impact on the business Increase service prices Reduced number of customers

[4] , ,

Talula currently operates on a cash only basis. The hairdressers are required to calculate a customer’s bill and to take payment. Talula banks the cash taken twice a week. Over the last year, Talula has received many requests from customers who would prefer to pay using a debit or credit card.

To allow debit and credit card payments, Talula would need to incur the following costs:

Digital cash register $550

Card payment machine (hired) $20 per month

Transaction charge 1.5% of the value of each transaction

REQUIRED

(c) Advise Talula whether or not she should accept card payments. Justify your answer by providing two arguments for and two arguments against Talula accepting debit and credit card payments [5] , ,

Sheila, who rents part of Talula’s premises, has asked Talula if she would be interested in forming a partnership.

REQUIRED

(d) State three advantages for Talula of forming a partnership with Sheila. 1 2 3 [3]

(e) Identify three clauses (other than how profit or loss will be shared) that the partnership agreement should cover if Talula agrees to the partnership with Sheila. 1 2 3 [3]

[Total: 20] , ,