Prepared by D.

El-Hoss

IGCSE
Accounting
Stock Control
and NRV
www.igcseaccounts.com

All questions are the copyright of Cambridge International Examination Board.

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2
Answer:

3
Answer:

Answer: To set prices OR to compare the cost of manufacturing with the cost of buying the goods in.

Answer: 4200 + 1800 + 5500 = 11 500

4
2

Answer: A. $24 000

Drawins Purchases

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 Business entity

To check for error and if there is error of ommission

A bank statement is a document that shows the cumulative balance of cash in the account, net of all the
preceding transactions, as of the end of each day in the reporting period. It is a financial report containing a
list of all transactions in a bank account over time, usually every month. In addition to deposits, charges,
withdrawals, and balance notes, the statement shows the beginning and ending balances of a given
period¹³.

Answer: (a) Raw materials; work in progress; finished goods/purchased finished goods

(b) Lower of cost and net realisable value

(c)

(d) Business entity

(e) To check for errors and omissions in his books of account

To check the errors in the bank statement
To identify stale cheques
To identify unpresented cheques
To identify amounts not credited
To calculate the correct bank balance in his cash book
To verify the balance in his cash book
To correct/amend his cash book

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Answer: D. $192 000

7
Answer: (a) Any two e.g. plant and equipment, factory premises, office premises, delivery vehicle

(b)

(c) Amount received when a non-current asset is sold

Receipt of a loan
Share issue/capital introduced

(d)

(e) Disposal

(f) Consistency

(g) Historical/only deals with the past

Difficulties of definition
Non-financial aspects
Unable to predict future
Doesn’t identify the cause of a problem

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9
Answer:

10
Answer:

Answer: 30 270/227 000 × 100 = 13.33%

OR
15 270 / 227 000 × 100 = 6.73%

11
Answer: Neighbouring shop may sell different mix of goods with a higher gross profit margin.

Neighbouring shop may have different policies for instance for depreciation.

Illustration with figures e.g. if depreciation rate was 10% then net profit margin would be
3.8% higher.

Neighbouring shop controls expenses better.

Neighbouring shop may own premises and avoid rent payment. Illustration with figures e.g.
rent accounts for 10.57% of revenue.

If using profit after interest also allow Neighbouring shop may have more equity/capital and
not have the interest cost.

Illustration with figures e.g. interest amounts to 6.6% of sales.

Answer: Increase selling prices/increase gross profit margin/reduce cost of sales

Reduce expenses/rent cheaper premises
Find cheaper lenders of finance to reduce interest charges
Review depreciation rate – do fixtures only have a life of 3 to 4 years
Turn overdrafts and short term loans into long term loans to reduce interest rate

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13
Answer: (a)

(b) Any reasonable answer e.g. Theft, pilferage, damage, obsolescence, more/higher sales
activity.

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15
Answer: (a) (i) Cost is the purchase price of the goods plus any additional costs incurred in
bringing the inventory to its present condition and position.
(ii) Net realisable value is the estimated receipts from the sale of the inventory less
any costs of completing or selling the goods.

(b) Inventory should always be valued at the lower of cost and net realisable value
This is an application of the principle of prudence
Over-valuing the inventory causes the profit for the year to be overstated
Over-valuing the inventory causes the current assets to be overstated

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 (c)

(d)

(e) Unsatisfied
Or OF based on answer to (d) (ii)

Not selling goods as quickly as previously

OR OF based on answer to (d) (ii)

(f) Reduce inventory levels

Increase sales activity
Only replace inventory when necessary

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18
Answer: (a)

(b) This is an application of the principle of prudence

Over-valuing the inventory causes the profit for the year to be overstated
Over-valuing the inventory causes the current assets to be overstated

(c)

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10

Answer:

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Answer: (a) Prudence

(b)

(c) Increase selling price

Reduce trade discount allowed to customers
Reduce purchase price
Find cheaper supplier
Obtain better trade discount

12

Answer: A. carriage inwards

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