A municipal council prepares separate accounts for its General Fund and Special Fund. The General Fund records cash receipts of $£70{,}000$, accrued revenue of $£5{,}000$, expenses of $£60{,}000$, and makes an inter‑fund transfer of $£8{,}000$ to the Special Fund. The Special Fund records cash receipts of $£30{,}000$, accrued revenue of $£3{,}000$, expenses of $£20{,}000$, receives the $£8{,}000$ transfer from the General Fund, and also receives a capital grant of $£5{,}000$ that is not part of revenue. (All figures are in thousands of pounds.)

(a) Prepare the consolidated surplus/deficit for the council (ignore the capital grant for the surplus calculation).

(b) Including the capital grant, does the council achieve a total surplus of at least $10\%$ of its total cash receipts? Show your calculations.

(c) If the council aims for a surplus equal to $35\%$ of total cash receipts, how much additional non‑revenue grant would be required?

Question

A municipal council prepares separate accounts for its General Fund and Special Fund. The General Fund records cash receipts of $£70{,}000$, accrued revenue of $£5{,}000$, expenses of $£60{,}000$, and makes an inter‑fund transfer of $£8{,}000$ to the Special Fund. The Special Fund records cash receipts of $£30{,}000$, accrued revenue of $£3{,}000$, expenses of $£20{,}000$, receives the $£8{,}000$ transfer from the General Fund, and also receives a capital grant of $£5{,}000$ that is not part of revenue. (All figures are in thousands of pounds.)

(a) Prepare the consolidated surplus/deficit for the council (ignore the capital grant for the surplus calculation).

(b) Including the capital grant, does the council achieve a total surplus of at least $10\%$ of its total cash receipts? Show your calculations.

(c) If the council aims for a surplus equal to $35\%$ of total cash receipts, how much additional non‑revenue grant would be required?

Accepted Answer

Consolidated surplus (ignoring grant) = £28,000; including grant = £33,000; 10 % target = £10,000 so the target is met; to reach a 35 % surplus (£35,000) an additional grant of £2,000 is required.

Gce Model Questions Vol1 2024 Financial Accounting Question 41

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