Capital and revenue expenditure and receipts — Paper 1 · IGCSE Accounting (9-1) 0985

14 A business had a new extension to its workshop premises. It incurred the following expenditure. $ building cost 65 000 legal fees 1 800 air conditioning system for the original workshop 2 300 air conditioning system for the new workshop extension 1 100 decorating the original workshop 1 400 decorating the new workshop extension 800 What was the total capital expenditure of the business? A $67 900 B $70 200 C $71 000 D $72 400

1 marks

Answer: C

This question in 0985/11 May/June 2020

15 The following payments were made when a new machine was purchased. $ cost of the machine 32 000 charge for delivering the machine 1 800 insurance of the machine 2 000 wages of employees installing the machine 1 300 How much was the capital expenditure? A $32 000 B $33 300 C $35 100 D $37 100

1 marks

Answer: C

This question in 0985/12 May/June 2020

15 A trader debited the cost of repairing office equipment to the office equipment account. How did this error affect the financial statements? profit for non-current the year assets A overstated overstated B overstated understated C understated overstated D understated understated

1 marks

Answer: A

This question in 0985/12 Oct/Nov 2020

11 What is the effect of treating an item of capital expenditure as revenue expenditure? 1 Cost of non-current assets is overstated. 2 Cost of non-current assets is understated. 3 Depreciation for the year is overstated. 4 Depreciation for the year is understated. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

1 marks

Answer: D

This question in 0985/11 May/June 2021

15 Which statements about capital expenditure are correct? 1 It is money spent on day-to-day business operations. 2 It is money spent on purchasing non-current assets. 3 It is recorded in the statement of financial position. 4 It includes expenses relating to non-current assets. A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4

1 marks

Answer: C

This question in 0985/12 May/June 2021

16 Nia sold equipment with a net book value of $200. The proceeds of the sale, $250, were credited to the sales account and debited in the cash book. What was the effect of this error on Nia’s gross profit and profit for the year? gross profit $ profit for the year $ A overstated 50 overstated 50 B overstated 200 understated 250 C overstated 250 overstated 200 D understated 250 understated 200

1 marks

Answer: C

This question in 0985/12 May/June 2021

13 A trader has purchased new business premises. What are examples of capital expenditure? 1 cost of heating and lighting the new premises 2 cost of purchasing the new premises 3 legal costs of purchasing the new premises 4 office furniture purchased for use in the new premises A 1 and 2 only B 1, 2 and 4 C 2, 3 and 4 D 3 and 4 only

1 marks

Answer: C

This question in 0985/12 Oct/Nov 2021

10 After the preparation of Abdul’s draft financial statements, two errors were discovered. The purchase of a machine by bank transfer, $5000, was omitted from the accounts. The purchase of a motor vehicle, $15 000, was entered in the motor vehicle repair account. What effect will correcting these errors have on the non-current assets and the working capital? non-current assets working capital $ $ A increase 15 000 decrease 5000 B increase 15 000 no effect C increase 20 000 decrease 5000 D increase 20 000 no effect

1 marks

Answer: C

This question in 0985/11 May/June 2022

14 The following payments were made by John when he purchased a machine. $ purchase of machine 10 000 delivery charge 1 200 insurance 800 installation charge 900 pre-paid maintenance charge 400 How much should have been debited to the machinery account? A $10 900 B $11 200 C $12 100 D $12 500

1 marks

Answer: C

This question in 0985/11 May/June 2022

8 After the preparation of Abdul’s draft financial statements, two errors were discovered. The purchase of a machine by bank transfer, $5000, was omitted from the accounts. The purchase of a motor vehicle, $15 000, was entered in the motor vehicle repair account. What effect will correcting these errors have on the non-current assets and the working capital? non-current assets working capital $ $ A increase 15 000 decrease 5000 B increase 15 000 no effect C increase 20 000 decrease 5000 D increase 20 000 no effect

1 marks

Answer: C

This question in 0985/12 May/June 2022

11 Maria’s draft income statement for the year ended 31 March 2022 showed a profit for the year of $38 750. On 31 December 2021, Maria received a 5% bank loan of $4800 which was incorrectly treated as a revenue receipt. In error, a whole year’s interest on the bank loan was included in the draft income statement for the year ended 31 March 2022. What was the correct profit for the year ended 31 March 2022? A $33 770 B $34 130 C $43 370 D $43 730

1 marks

Answer: B

This question in 0985/12 May/June 2022

12 Hamid purchased a motor vehicle from an overseas motor manufacturer. Which expenditure relating to the motor vehicle is capital expenditure? A delivery charge B insurance C petrol D replacement tyres

1 marks

Answer: A

This question in 0985/12 Oct/Nov 2022

4 Ted, a manufacturer, purchased a machine on credit from T Limited. How did Ted record this? account debited account credited A T Limited machinery B T Limited purchases C machinery T Limited D purchases T Limited

1 marks

Answer: C

This question in 0985/11 May/June 2023

9 After completing the trial balance, it was found that an amount of $4000 for motor vehicle repairs had been entered in the motor vehicle account. Which type of error is this? A commission B compensating C omission D principle

1 marks

Answer: D

This question in 0985/11 May/June 2023

15 A trader’s expenditure during the year includes the following amounts. $ redecoration of premises 5 000 insurance of motor vehicles 2 000 purchase of machinery 10 000 How much should the trader charge to her income statement for the year? A $7000 B $10 000 C $12 000 D $17 000

1 marks

Answer: A

This question in 0985/11 May/June 2023

14 A wholesaler had the following transactions. sold goods, $30 000, on credit received cheque, $12 000, from sale of old fixtures at book value How would these amounts be classified? revenue receipt capital receipt $ $ A nil 42 000 B 12 000 30 000 C 30 000 12 000 D 42 000 nil

1 marks

Answer: C

This question in 0985/12 May/June 2023

15 A trader debited the cost of repairing office equipment to the office equipment account. How did this error affect the financial statements? profit for non-current the year assets A overstated overstated B overstated understated C understated overstated D understated understated

1 marks

Answer: A

This question in 0985/12 May/June 2023

3 A trader, Karim, purchases a new vehicle by cheque. He will use the vehicle to deliver goods to his customers. How should Karim record this transaction in his books? account to account to be debited be credited A bank motor vehicles B bank purchases C motor vehicles bank D purchases bank

1 marks

Answer: C

This question in 0985/12 Oct/Nov 2023

14 Samir runs a car hire business. He received cash payments for car hire. He also received the proceeds from the sale of an old vehicle. Which type of receipts were they? proceeds from car hire sale of an old vehicle A capital capital B capital revenue C revenue capital D revenue revenue

1 marks

Answer: C

This question in 0985/11 May/June 2024

14 The cost of repairs to machinery was debited to the machinery account. What was the effect of this error? non-current assets profit for the year A overstated overstated B overstated understated C understated overstated D understated understated

1 marks

Answer: A

This question in 0985/12 May/June 2024

14 Hamid owns a grocery store. He bought a motor vehicle, $2000, and fuel, $50. Both of these amounts were incorrectly debited to the purchases account. What was the effect of this error on the income statement for the year? gross profit motor vehicle expenses $ $ A overstated 2000 overstated 2050 B overstated 2050 overstated 50 C understated 2000 understated 2050 D understated 2050 understated 50

1 marks

Answer: D

This question in 0985/12 Oct/Nov 2024

9 After calculating his profit for the year, Yui discovered the following errors. 1 A purchase of a new motor vehicle for $3200 was debited to motor expenses. 2 The purchases account was overcast by $500. What was the effect on the profit for the year after correcting these errors (ignore depreciation)? A It decreased by $2700. B It decreased by $3700. C It increased by $2700. D It increased by $3700.

1 marks

Answer: D

This question in 0985/11 May/June 2025

14 What is the effect of incorrectly treating expenses as capital expenditure? income statement profit for the year expenses total A overstated overstated B overstated understated C understated understated D understated overstated

1 marks

Answer: B

This question in 0985/11 May/June 2025

10 Miguel’s cash book showed a debit bank balance of $4220. He later discovered the following errors. 1 A cheque for $200, issued for the purchase of office equipment, had been recorded in error in the office expenses account. 2 Bank charges of $30 had been recorded in the cash book as $70. What was the effect of these errors on his statement of financial position? non-current assets (cost) current assets A overstated by $200 no effect B understated by $200 no effect C understated by $200 overstated by $30 D understated by $200 understated by $40

1 marks

Answer: D

This question in 0985/12 May/June 2025

14 When Mark started a car repair business, he purchased premises and equipment. Two years later, he spent $5000 on building an extension, $600 on new equipment and $750 on repainting the original premises. By how much will the non-current assets increase because of these transactions (ignore depreciation)? A $5000 B $5600 C $5750 D $6350

1 marks

Answer: B

This question in 0985/12 May/June 2025