This set has ten original questions, ordered from easier to harder, covering all five lessons in capital and revenue treatment. Questions 1 to 3 practise classification, 4 to 6 practise profit and depreciation figures, and 7 to 10 mix reasoning with calculation.
Work on paper and write out each step as you would in an exam. Use the Show answer line only after you have an answer of your own. All businesses and figures are fictional, in RM.
Questions
1. Kedai Mesra makes four payments: (a) RM 120 to fix a leaking tap; (b) RM 3,800 for a new display fridge; (c) RM 150 for carriage on the delivery of the fridge; (d) RM 410 for the month’s electricity. Classify each as capital or revenue expenditure, and state the cost of the fridge in the ledger.
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(a) Revenue: fixing a tap restores what existed. (b) Capital: a new asset. (c) Capital: carriage inwards brings the fridge to where it can be used. (d) Revenue: a running cost.
Cost of the fridge = 3,800 + 150 = RM 3,950.
2. Kedai Mesra’s bank receipts for the month were: sales RM 2,200; bank loan RM 10,000; cash paid in by the owner RM 5,000; sale of an old display fridge RM 900; commission received RM 300. Find the total revenue receipts and the total capital receipts.
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Revenue receipts: sales and commission = 2,200 + 300 = RM 2,500. Capital receipts: loan, owner’s capital and fridge sale = 10,000 + 5,000 + 900 = RM 15,900.
Check: 2,500 + 15,900 = 18,400, and 2,200 + 10,000 + 5,000 + 900 + 300 = 18,400.
3. Nasi Kita Restaurant paid a contractor RM 9,300 by bank transfer. The invoice shows: repairs to a damaged kitchen door RM 450; installing a new air-conditioning unit where there was none RM 7,800; repainting the dining area RM 1,050. Split the invoice and write the double entry.
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Repairing the door and repainting are revenue: 450 + 1,050 = RM 1,500. The new air-conditioning unit is capital: RM 7,800. Check: 1,500 + 7,800 = 9,300.
Entry: debit Equipment (or Fixtures) RM 7,800; debit Repairs and maintenance RM 1,500; credit Bank RM 9,300. Debits total RM 9,300, equal to the credit.
4. Cempaka Tailors calculated a profit of RM 24,000. It later found that an office computer costing RM 2,500 had been debited to Office expenses. The business depreciates computers at 20% of cost per year, straight-line, for a full year. Find the corrected profit.
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Capital treated as revenue: profit was understated. Add back RM 2,500: 24,000 + 2,500 = 26,500. Depreciation = 20% × 2,500 = RM 500. Deduct it: 26,500 − 500 = RM 26,000.
Check: net change = +2,500 − 500 = +2,000, and 24,000 + 2,000 = 26,000.
5. Bayu Delivery calculated a profit of RM 15,000. RM 800 spent on repairing a van had been debited to Vehicles, and depreciation at 25% of cost had been charged on that RM 800 for the year. Find the corrected profit.
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Revenue treated as capital: profit was overstated. Deduct the repair: 15,000 − 800 = 14,200. The wrongly charged depreciation was 25% × 800 = RM 200, so profit was understated by that. Add it back: 14,200 + 200 = RM 14,400.
Check: net adjustment = −800 + 200 = −600. Vehicles were overstated by 800 − 200 = RM 600, which matches.
6. Laksa Mill buys a machine for RM 36,000. It expects to use it for 8 years and then sell it for RM 4,000. Using the straight-line method, find the annual depreciation and the net book value after 3 years.
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Annual depreciation = (36,000 − 4,000) ÷ 8 = 32,000 ÷ 8 = RM 4,000.
After 3 years, accumulated depreciation = 3 × 4,000 = 12,000. Net book value = 36,000 − 12,000 = RM 24,000.
7. A friend says, “Why depreciate? It would be simpler to charge the whole RM 36,000 as an expense in the year the machine is bought.” Write a short reply that explains why this would give a misleading picture.
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The machine will help earn revenue for eight years, so its cost should be shared across those years. Charging it all in year one would make year one’s profit look far too low and later years look too high. Depreciation matches the cost to the years that benefit.
8. Kedai Anggun’s bank paid-in total for May was RM 36,500: sales RM 18,000; owner’s capital RM 12,000; rent received RM 1,500; loan from a relative RM 5,000. A student used RM 36,500 as income in the profit calculation. Find the correct income and the amount by which profit was overstated.
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Revenue income: sales and rent = 18,000 + 1,500 = RM 19,500. The capital and the loan are capital receipts: 12,000 + 5,000 = RM 17,000.
Profit was overstated by RM 17,000. Check: 36,500 − 19,500 = 17,000.
9. The ledger of Hasan Traders shows: “Paid RM 3,200 to a builder for building work at the shop.” State how it should be treated.
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The wording gives the amount and the payee but not the nature of the work. The missing fact is whether the work restores or maintains the shop, or adds something new.
If it was repainting or fixing damage, it is revenue expenditure: debit Repairs and maintenance RM 3,200. If it was building a new storeroom, it is capital expenditure: debit Buildings RM 3,200. Before depreciation, profit is RM 3,200 lower under the revenue reading and unchanged under the capital reading.
10. Cempaka Tailors first calculated a year’s profit as RM 41,200. Three errors were then found. (i) Installing a new cutting table costing RM 3,000 was debited to Repairs expense. (ii) Repainting costing RM 700 was added to the cost of Premises. (iii) RM 6,000 paid in by the owner was credited to Sales. Depreciation on the cutting table is 10% of cost for a full year. No depreciation had been charged on the repainting. Find the corrected profit.
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(i) Capital treated as revenue, profit understated: add back 3,000. Depreciation on the table = 10% × 3,000 = 300, so deduct 300.
(ii) Revenue treated as capital, profit overstated: deduct 700. No depreciation had been charged, so nothing to reverse.
(iii) Capital credited to Sales, so sales and profit are overstated: deduct 6,000.
| Step | Adjustment | Profit (RM) |
|---|---|---|
| Profit as first calculated | 41,200 | |
| (i) Cutting table | +3,000 | 44,200 |
| (i) Depreciation | −300 | 43,900 |
| (ii) Repainting | −700 | 43,200 |
| (iii) Owner’s capital | −6,000 | 37,200 |
Corrected profit = RM 37,200. Check: total adjustment = +3,000 − 300 − 700 − 6,000 = −4,000, and 41,200 − 4,000 = 37,200.
If you got these wrong
Match the type of error to the lesson that fixes it.
- Wrong classification of a payment (questions 1, 3, 9): revisit classifying a repair versus an asset improvement.
- Receipts treated as income (questions 2, 8): revisit separating a capital receipt from recurring income.
- Profit adjusted in the wrong direction or a figure missed (questions 4, 5, 10): revisit calculating the profit effect of misclassification.
- Depreciation figures or explanation (questions 6, 7): revisit explaining depreciation.
- Guessing or writing “not enough information” (question 9): revisit stating uncertainty when a fact is insufficient.
Record each slip in the mistake log and retest queue and try a fresh question a few days later. The double-entry and ledger trainer lets you rehearse the entries behind questions 3 and 10.
Students who can follow every answer above but still lose the thread in a timed paper often need someone to read their working in real time. That is the kind of work we do in online one-to-one Accounting tuition.