About Financial statements: sole traders, manufacturing and clubs in A Level Accounting
Financial statements: sole traders, manufacturing and clubs is one of the 7 main topics in our A Level Accounting (Cambridge (CAIE) 9706) question bank, and about 12% of its real questions come from it. Tayyari Karo has 53 real questions on this topic from 2021 to 2026, from Paper 1, Paper 2, Paper 3, Paper 4; 28 are multiple choice and marked instantly, and the rest are structured questions with a model answer. By difficulty: 26 hard, 23 medium, 4 easy.
Work through the questions below, then open the explanation for each one. Redo the ones you missed a few days later.
Try 8 real questions
These are real past-paper questions. Think of your answer first, then open the explanation.
May/June 2026 · Paper 1 · Financial statements: sole traders, manufacturing and clubs
A sole trader's financial year ends on 31 December.
How is the profit for the year calculated?
- A - net assets at 1 January - net assets at 31 December + drawings for the year
- B - net assets at 1 January - net assets at 31 December - drawings for the year
- C - net assets at 31 December - net assets at 1 January + drawings for the year
- D - net assets at 31 December - net assets at 1 January - drawings for the year
Show answer and explanation
Answer: C. C - net assets at 31 December - net assets at 1 January + drawings for the year
Profit = increase in net assets plus drawings (no capital introduced).
May/June 2025 · Paper 1 · Financial statements: sole traders, manufacturing and clubs
Arnold made drawings: $6 000 (31 Mar), $10 000 (30 Jun), $12 000 (30 Sep), $8 000 (31 Dec). Interest 5% per annum on monthly basis. What is the correct treatment?
- A - $625 added to profit for the year
- B - $625 deducted from profit for the year
- C - $775 added to profit for the year
- D - $775 deducted from profit for the year
Show answer and explanation
Answer: A. A - $625 added to profit for the year
Interest on drawings = ($6 000 x 9/12 + $10 000 x 6/12 + $12 000 x 3/12 + $8 000 x 0/12) x 5% = ($4 500 + $5 000 + $3 000 + $0) x 5% = $12 500 x 5% = $625. Added to profit (treated as income in appropriation). Answer A.
May/June 2024 · Paper 1 · Financial statements: sole traders, manufacturing and clubs
Jamie wants a salary for managing the business, full ownership, and to avoid risk of losing personal assets. Which type of business should Jamie choose?
- A - sole trader
- B - partnership
- C - private limited company
- D - public limited company
Show answer and explanation
Answer: C. C - private limited company
A private limited company provides limited liability (avoiding personal asset risk), while allowing the owner to manage and receive a salary.
October/November 2024 · Paper 1 · Financial statements: sole traders, manufacturing and clubs
A business owner provided the following information at the end of his first year of trading.
Closing inventory $15 000
Total payments to suppliers $60 000
Amount owing to suppliers $5 000
Total receipts from customers $85 000
Amount owed by customers $10 000
What was the gross profit for the year?
- A - $10 000
- B - $15 000
- C - $25 000
- D - $45 000
Show answer and explanation
Answer: D. D - $45 000
Revenue = $85 000 + $10 000 = $95 000. Purchases = $60 000 + $5 000 = $65 000. Cost of sales = $0 + $65 000 - $15 000 = $50 000. GP = $95 000 - $50 000 = $45 000. Answer D.
October/November 2023 · Paper 1 · Financial statements: sole traders, manufacturing and clubs
Sales $1 600 000, debenture interest $60 000, GP margin 20%, opex/revenue 12%, ROCE 16%. Capital employed?
- A - $256 000
- B - $425 000
- C - $800 000
- D - $2 000 000
Show answer and explanation
Answer: C. C - $800 000
GP = $320 000. Opex = $192 000. Profit from operations = $128 000. ROCE = $128 000 / Capital employed = 16%. Capital employed = $800 000. Answer C.
May/June 2021 · Paper 1 · Financial statements: sole traders, manufacturing and clubs
At the end of the year, Barack's draft accounts showed a capital account balance of $4300. His drawings account included a debit entry of $150 for goods taken for his own use. This entry had been recorded at selling price rather than cost price. He sells goods with a mark-up of 50%. What is the correct closing capital account balance?
- A - $4 225
- B - $4 250
- C - $4 300
- D - $4 350
Show answer and explanation
Answer: D. D - $4 350
Goods taken at selling price $150 = cost x 1.50. Cost = $150/1.50 = $100. Drawings overstated by $50, so capital should be $4 300 + $50 = $4 350. Answer D.
May/June 2025 · Paper 3 · Financial statements: sole traders, manufacturing and clubs
(a) Explain why the club spreads life membership fees over ten years.
(b) Calculate the profit/loss from operating the vending machine.
(c) Prepare the income and expenditure account.
(d) Prepare a statement showing changes in the accumulated fund.
(e) Advise whether Meena's offer ($200 000 donation for renaming the club) should be accepted.
Show model answer
(a) Accrual/matching concept applied to match life membership over the years used. The number of years is the club's accounting policy.
(b) Revenue $36 000. Cost of sales: opening $1 680, purchases $20 000, closing ($1 900) = $19 780. Gross profit $16 220. Less rental $9 600. Profit $6 620.
(c) Income: subscriptions $125 300, life membership $1 300, vending profit $6 620 = $133 220. Expenditure: loss on disposal $350, depreciation $9 700, club expenses $65 900, social activities $36 300 = $112 250. Surplus $20 970.
(d) Accumulated fund at 1 Jan: $45 780. Add surplus $20 970 = $66 750.
(e) For: no need to repay, no rent to pay. …
The full model answer is in the app.
October/November 2023 · Paper 2 · Financial statements: sole traders, manufacturing and clubs
(a) Calculate closing inventory at 30 September 2023.
(b) Prepare the statement of profit or loss.
(c) Prepare the statement of financial position.
(d) State four provisions of the Partnership Act 1890.
(e) State three disadvantages of maintaining full accounting records.
Show model answer
(a) $14 400 + $2 720 - $1 850 = $15 270.
(b) Revenue $54 500. Cost of sales: opening $12 030, purchases $46 840, closing ($15 270) = $43 600. GP $10 900. Expenses: insurance $2 720, light/heat $3 880, loss on disposal $120, depreciation $2 120 = $8 840. Profit $2 060.
(c) Non-current assets $19 080. Current assets: inventory $15 270, trade receivables $3 650, other receivables $320 = $19 240. Total $38 320. Equity: opening $33 960, profit $2 060, drawings ($3 850) = $32 170. Current liabilities: bank $1 170, trade payables $4 400, other payables $580 = $6 150. Total $38 320.
(d) Profits shared equally, no interest on drawings, no interest on capital, 5% interest on loans. …
The full model answer is in the app.
