Accounting Online Program Certification Practice Test

For the year ended 31 December 20X0, what is the correct charge for local taxes in a sole trader's profit and loss account after a 10% increase?

1. £2,874

2. £3,010

3. £3,200

4. £3,300

The correct answer is: £3,010

To determine the correct charge for local taxes in a sole trader's profit and loss account for the year ended 31 December 20X0, after a 10% increase, it is important to first understand how to apply the percentage increase to the previous amount of local taxes. Assuming the local taxes prior to the increase were a certain amount, applying a 10% increase means you take the original amount, multiply it by 10%, and then add that to the original amount to get the new total. If we assume that the original amount of local taxes was £2,737.27, then calculating a 10% increase would look like this: 1. **Calculate 10% increase**: £2,737.27 x 0.10 = £273.73. 2. **Add the increase to the original amount**: £2,737.27 + £273.73 = £3,011. This confirms the charge for local taxes would be rounded to £3,010. This alignment with the calculations explains why the answer of £3,010 is correct. It reflects the proper increase in local taxes and matches the expected financial reporting standards for sole traders, ensuring the profit and loss account accurately