ACCOUN'rIhIG

SUBJECT 9197
Paper 1
Juhe 2004

1. B
I

'2. t
2 B *-F found Uy Oruring up a plant and machinery account.
^4. D

5. A Subscriptions account
-Bb.
6, B *& Balance owed by y, $1 800 will rernain due in the
Sales Ledger Control account
.1
t. A

8. A --SF- Profit is of a none revenue nature

*
L D

10. D *& Both errors resultetj in C.O.S being overstafed

by
$7 380, GP ancJ Np understatecl b|-*r**.umount.-
11, B

12. B *& Stock exbluded in calculating quick ratio.

Other 2 options have opposite'effect.
13. C

14. D

15. D **&F Operating profit is profit before interest charges.

''!.r I
1e. '*& lnterest clr partners, loans to ilre firm is a normal
trading expense ancl not an appropriation of profits.
at ::

.'., 17. A
r . -r :i;'.i,

,
'"P,xil1i
*i:.J: ,-r
18 D -^""I.\,,
L{' IAS 38
,8;
:. itr; .

r i;1r':i.:ri
",1;!: :

+'..
{
.la

il.
, i-!i'.'
ii+il.''
r;!-'
l,

19, D
20. D NBV at date of varuation was $72 760
-p
21. B
22. C a\

- 23' B Consider all current assets and all current liabilities as

-F shown bry the table.

24.Ci
25. B

26. B

'27 . C --& * i** -- $1,25. Then finct the share premium,

200 000

ol
29' A -b - Total net assets = $320 which is highpr tharr
, purchase price.
C)00,

30. A **F Let r be the cleclared %

*[gt-] = 1,Zila/oand then finct .r
i \4/
i
31" B -*&t Divide earning;s by number of ordinary slrares.
t:

32. B -+ 10% debentures ls an asset to the club

33 D --&. B/E vdtue = $_l!Lg!q

5

= 20 000 units
 I

I
I
I

EXcess 30 000.x $S = $1S0 000

[Based on marginal costing approach]

- 34. C --+ capitar investment appraisar techniques,

35. B
'36' B --}' Determine the contribution per limiting factor and rank

37. A --9> OAR (Budgeted output _ actual output)

38' B -& Standard labour costs of producing 12 S00 units is

. 12 500x2,75hrs xglS =$51S 625.

39' A The other 3 options cause a favourable sales volume

-+ vanance.

40. D
c:91 97-01 J04/s!

l*,

I
 ACCOUilITING

- SUBJECT 9197

Paper 1
November 2004

1. D
2,A
3. B :--F Debtors ControlAcc6unt

.4. A
5. D -F totalexpenses for 2003 were $S4 286

6. A .+ Cost of fixed assets disposed was $340 000 whilst

accumulated depreciation at date of disposal was
$1g0 000.
7. t)

.B' C
,
I
9.D

10. A
11. D
12. B
13' B *F Take the lower figure between the cost arrcl NRV
, stock item. (lAS2).
of each

'14. A

15' C *-& Carriage inwarcj.s. is a purchasing expense whilst carriage

outwards is a seiling expense henie both have a debit
balance.
16. A

17. A -+ t2yox(lo obo ooox 0,5)

18. B , --> As per Companies Act

19. C
20. A zz ooo ordinary shares of $1 each should yierd $90 000.

21. B SSAP18, IAS

22. D -> IAS 38

2i. A
24. B -> Let opening stock be .x
Closing Stock = x+1-0 000
;. C.A.S = r+90 000-(r*10 000)
Then solve xdnd calculate C.O.S; mark up and gross
profit.
a
25. C -} FRSI, IAST

26. B -> Calculate EpS.

Then Market Value

= PE ratio
EF'S

.i.

27. A ,

28' -+ rares for the other 10 months except March

fl;:r".ff
.'. 10x+Z(ffix)= Totat Sates

Then solve for x.

150-
...,, xxabove = March sales
100
29' D -tr First two options will decrease C/E. Third option has no
effect.

31. A --> Fixed costs are period costs under marginal costing.

32. A -> Calculate predetermined OAR.

Apply this rate on Actual houis.

Deduct Actual cost from the above result.

33. A -F Change in units = S00

Resultant change in eipenditure $1 375. Calculate the

variable cost per unit.

Total costs - Variable costs = Fixed costs.

"34. D

ts. B

AP \
36. B -tr Material price = 10 000r'd
-5,9295J
\
= $ 705 Favorable.

'(\
Material usage = ol gitoo-,0fr0
'll \/ |

= $3 000 Adverse

3t. c --F sares rever = Itgg_.!$tpp[

Contribution
38. C stock fi-gures will have different values under both
methocrs.

39. A

40. B Purchases = Quantity by production +

quantity required by cloSing stock quantity already
-
available. nq-l:--
j

i'
i_ zTMtsABWE SCHOOL EXATVilNATIONS COUNCTL
II Generar certificate of Education Advanced Lever

POSSIBLE ANSWERS

ACCOUNTING 9197 t2

JUNH 2OO4
1. (a) Locating errors, detecting fraud, provision of total debtors and
creditors' balances. t3l
(b) Returns outwards journal, cashbook, purchases journal, general
journal. l?j
(c) Control Account

Balance b/d 44 000 Balance b/d 't 800

"
SaJes 636 000 Ret. lnwards 76 800
Beink 79 200 Cash 542 4AO
lnterest on debts 24 000 Disc. Allowed 74 400
Balance c/d 98 000 Set off 4400.
Bad debts 28 800
Balance 56 600"
785 200 785 200

t6l
(d) (i) Accounting policy
The specific principle, bases, conventions, rules and
practices adopted by an enterprise in preparing and
presenting fi nancial statements.

(ii) Ordinary activities

Activities undertaken by an enterprise as part of its business
: and such related activities in which the enterprise engages in
furtherance of, incidental to or arising from these activities.

(iii) Extraordinary items

. lncome or expense items arising from events/transactions
that are clearly distinct from the ordinary activities of the
enterprise and are not expected to recur frequenily.

'
-(iv) Fundamental errors
Errors discovered iri the current period that are of surch
significance that the financial statements of one or more
prior periods can no longer be considered to have been
reliable at the date of theirissue.
.
t8l

(e) Policy changes can be made

(i) if required by statue (taw)

(ii) if required by an accounting standard setting body
 (lii) if the change wirr resurt
in a
presentation of events. more rerevanvreriabre
i u' 'u, v,,

2. (a) D-irect costs can b-e traced

to the item. being manufactured,
direct materiars whereas i";t;ry e.g.
;;erheadJ."nnoi L* traced to the
item being manufactur"o,-"s. ir.io.V
power.
Direct costs vary with production
revers
may be fixed over a given producttn whereas fixed overheads
range.
(b) (i) Manufacturing Account for year t3l
.: r uecember 2003
ended
Raw materials $ ---$--
___
- 1 January 2003
10 000
Purchase;
Carriage inwards 250 ooo
, 6000
Final stock
,:1 . 266 000
(20 ooo)
cost of raw materiars used
qs=rJ 246 000
Direct taUouir_rv,,q,u
cost
Prime 16 000
overheads
Factory 262 ooo
rates
- rent and g 800
tight
- fuel and
12 000
- rppairs - plant
-wages 3 000
- oepCiation: prant 'ffi 46_600
Add: w.i.p. (11rc2 3oB 600
;i:;'(3i;;?/03)
goods diBb
Less:
Production cost of complete (4 ooo)
304 600
Market value of completeO gJoJs ^,300 000
Gross loss on manufacture
4 600
[13]
( ii)
ror yea r e nded
Ii'Sg[Jl'j::',^ccount

rSales $
Less sales returns 492 000
(4 000)
lnitial siock 488 000
7 000
Market value of goocls
300 00c
 307 000
Final stocl< fi_g 0aa) (2Bg 000)
Gross profit 199 000
Less expenses
- fuel and light B 000
- administraition salaries 11 000
- rent and rates 4 200
- general admirr expenses '15 000
- salesman's salary I 000 g7_2AA.
Net profit 151 800
Less manufacturing loss (4 600)
Overall net profit 147 200
tel

(c) - Wastage of raw materials

- Expensive factory labour
- Use olfaultyiageing machinery
t3l
(a) This is the quality of produced units arrived at by converting worl<-
in-progress into finished equivalents to enable the units cost to be ,

obtained, e.g. I 000 units which are 60% cornplete = 5 4000

equivalent units
t21
(b) Calculating total cost per r-rnit.

Total Completed Total Unit

Cost Units Equiv. Cost
Units

15 000 10,00

Gohversion costs 11 200

500 x 0,8

Calculation of cost of w.i"p.

D/mat (500 x 10) $5 000

Conversion costs (a00 x 8) $3 200
$B 200
12.1
(ri) Cr:st r:f cornplete units.
1 000 x 11;'18 * $18 q00
t1l
 Process'A
D/mat (zero) 10 0C0 TFrocess B 1B 000
Conversion costs B 000
1B 000
18 000

Process B t3l
Process A 1B 000 Completed 1B 000
units
D/mat (Pinc) 5 000 w.i.p. B 200
Conversion costs 3 200
26 2AO
26 200
(d) By-products have a minor sares varue
whereas waste product .rntu,
actually yield a negative varue it has
to be orsposeJ'of at some
cost

4. (a) single entry i1l

- any system of accounting failing short of doubre
accounting entry
- any system of.accounting which
ignores the two ford
aspect for each transaction.

(b) convertible loan stock t1I

" (i) - funding obtained or secured by an entity
earning a fixed rate
of return for the render, entifling"the
render to exercise an
option to convert the loan into some
or after a specified date. - other
-r' 'e\, form
'v.r' of sec[rrity on

tzl
( ii)

Sales $
Less: cost or sales 750 000
lnitialstock
Purchases 26 40a
627 200
653 600
Final stock
(53 600) (600 000)
Gross profit
'i50 000
l-ess operational costs
(f i2 500)
Net profit
37 500
l8l
 (iii) Balance sheet as at 31 March 2004

' Fixed Assets ,100

000

,
Current Assets

3:"0T.,
Bank
;;33S
54 000
1+e 60o
Less: Creditors (64 000) BS 600
1 85 600

Financed by:
Ordinary share capital 134 1OO
Refained profits 37 500
171 600

Loan 14 ooo
1 85 600

[10]
(c) Matching concept - revenues and costs for a given accounting
period must be set against each other in order to ascertain the

*
t"lhted surplus or deficit. r nt,*ry.

(d) t2l
# Application of matching concept

- sales given arose through relevant costs; i.e. cost%f sales -

hence the elimination of final stock in determining related profit.
- Comparing gross profit against operating costs.
l2l
(e) Advantages of double entry over sing entry:

(i) a complete view of the financial transaction is captured

(ii) double entry lends itself to easy checking of errors via the trial
t-ralance '
(iii) internal checks are possible.
t3j
91 97-02.JO4 answers/gm

i
 ZIMtsABWH SGHOOL EXAMIF,IATIONS C$I"J NCIK
General certificate pf Education i\dvancecr Lever

POS$IBLE ANSWERS

ASCOUNTING 9X S7/?

NffiVffirud!ffiffim 2mffi,s

I
 ta) -failure to complete double entry
-using two different figures to comprete
croubre entry
-making tvyo entries on one side oi the ledger
-transferring wrong barances from the redg;to
the triar barance
-transferring correct ledger balance to ihJwrong
sicle of the trial
balance
)
I6l
(b) The journal ,

1. Discouni alloweci
430
Discount Received 430
Suspense
2. Suspense 350
860
3. lnsurance 670
lnsurance Cornpany
4. Rates
480
670

5. Fur-niture
10 000
480
Purchases
10 0c0
Profit and Loss
prov for depreciaiion 1 000
1 000
- furniture
.l7l
'(ii) se Account

Balance bld qq0 Disc. Altowed

Creditors balance 430
350 Disc. Received 430
Rates . 4BO
_1*350 1 35Q
(iii) write it off in the profit an Loss Account or t5l
transfer it to the
Balance sheet as,a cu.rent asset (Debit
-\ nui*""ior e current
l-.iability (credit balancer.
t2l

L. (a) $TRAIGHT LINE METI{OD l20l

REDUCING BALAhiCF
METI-IOD
- charges the same arnount - the anrount of clepiecirriion
of depreciation every year decreases every year
- simpler to use - not as sinrple use
- seems to assr:nre llre - attenrpts to matcl-i ilre cost
asset earns the sante of ciepreciation to ti-re ai,nount
amotrni of r.oven'"tlf cvcrv of revenr_re earrie,J Lry il-re
) t:clt ^.--
..1\\tJi ^J,
 (conirnued)

- the tofal eost of using the tries to even out the total cost
asset, i,e. dgpreciation, of using the asset, i:e.
repairs and maintenance, depreciation, repairs and
increases every year as maintenance over its useful
the asset grows. Life.
t6I
(b) Workings
(i) Land and buildings 50 000
Prov for deprec - land and buildings 10 000
Asset Revaluation R.eserve 60 000

(ii) P/L 10 000

prov for deprec
- prant and equip 10 000

(iii) Stock tz boo

P/L 3 000
P. Shoko - debtors 15 000

(iv) Capital redemption reserve 1 50 000

Bonus lssue 50 000
, 1

1 50 000
Ordinary Share Capital '150 000
(v) P/L 60 000
Proposed dividends 60 000
t-

c
i9
$
Ordinary share capital 600 000

Share premium 1 00 000

Asset revaluation reserve 60 000
Capital redemption reserve 1 50 000
Profit and loss 37 00Q 347 000
947 000
Represented by:
Fixed Assets
Land and buildings 250 000
Plant and equipment 300 000
Less. Acc. Depreciatir:n (130 000) 170 000
Motor vehicles 1 B0 000
Less. Acc Depreciation GI_AM] 90 000 510 000
 (continued)

Current assets
Stock 432 000
21 5 000
Prepayments '10 000
Bank 60 000 717 000

Less: Current Liabiities

Creditors 1 90 000
Accruals 30 000
Proposed dividencls qLaqa (280 000) 437'000
- 947 000
t29l
(c) Revenue Reserves Capital Reserves
- created voluntarily out of - created under the provisions
trading profit by debiting p/L of the Companies Act and by
Appropriation tuC and case law
crediting reserve accounts
- can be distributecl as cash - cannot be distributed as cash
dividends dividends
.used
for purposes for wrrich - uses specified by raw
they were created or at flre
discretion of the directors

3. (a) The amount of capitar to be provided t6l

'-' by each partner.
The profitiloss sharing ratio 'i
The interest rate if any on capitar, drawings.
sararies, if any,
payable tr: partners
The interest rate on partners, loans*to thefirm
Arrangements on ilre retirement/admissiori of partner/setflement
a
of disputes.

(b) ital Accounts l5l

Ngoni Rudo Chipo Tsitsi Ngoni
Balance 40 000 30 000 20 0i0
Cirrrent b/d
Bank .
4 000 28 000
Bairk 10 000 Goodwill 2 000 12000
Gcodvyill lQnnn 1B 000 adj.
adl Revaluati 6 000 6 00n
Balanco cn

28 000
Baiance
b/cl
19 000 18 000

t8l
 Alternatives
(.; Accounts
I Rudo Chipo Tsitsi Ngoni ll I Rudo-T Cr,rpo- Tsitsi
Current 600 aoooo 3oooo 20 000
Ngoni
Bank :
I

I 41 400 LB:fl""oro I I 28 0Lr0

Goodwilt I roooo I
10 000 10ooo. rzooo rzooo
adi i ll ff:.*',, I I
6 000
Batance I as ooo 1S 000 18000 ll Revaluation loooo loooo 3 000
58 000 48 000 29 000 28 000 ll I sa ooo I aB 0oo 23 000 ?B 000
Balance b/d I 48 000 19 000 1B 000

OR if goodwill is not written off i

Ca Accountrs
Rudo Chipo Tsitsi Ngoni Rudo Chipo Tsitsi Ngoni
ent 600 Balance b/d 40 000 30 000 20 000
Bank
Bank 47 400 Goodwill 28 000
Balance c/d 58 000 29 000 28 000 Revaluation 12 000 12000 6 000
6 000 6 000 3 000
5B 48 000 29 000 28 000 58 000 48 000 29 000 000

(ii) Profit and Loss Approp. A/C for the year ended
31 December 2003
profit
Net 72700
Add int. on
e Drawings Rudo B0O
r Tsitsi 600
Ngoni 400 1 qgO
Less int. on
Capitat Rudo 4 800
Tsitsi 1 900 ,

Ngoni 1 800
Salary Rudo E 000 (11_500)
63 000
Shar"e of proflts Rudo (1/3 21 000 )
Tsitsi (1/3) 21 000
, Ngoni (1/3) 21 000 rcr 000)
t4l
OR
Net pr-ofit TZZ0O
Add int. on
Drawings Rudo B0O
Tsitsi 600
Nlgoni 4q0 1 800

Less int. on
il 5oo
Capital * Rudo 5g00
 (continued)
Tsiti;i 2 900
Ngoni' 2 800
Salary Rudc 3 000
ru!_qq)
60 000
share of profits Rudo (U3)' 20 000
(
Tsitsi (1/3 ) 20 009
Ngoni (li3 ) ?fl 0oo re0._008)

Current Accounts
Rr,rdo Tsitsi Ngoni I Rr-rdo
Drawings
lnt. on drawings
16 000 12 000 B 000 Balanceb/cl lZ+oo
800 600 400 lnt. on capitat | + aoo
Balance c/d
salary I s ooo
14 400 12 '100 14 400 share of profits I zt ooo
31 200 700 22 BO0 3't 200
Balance b/d 14 ,100

OR t6l
Current Accounts
Rudo Tsitsi Ngoni
Drawings 't6 000 Rudr-r
12 000 B 000 Balance b/d
lnt. on drawings 2 400
800 600 400 lnt on capital
Balance c/d 5 80C
salary
14 400 Share of profits

Balance b/d

(a)
Absorption costing Marginal Costihg
- Fixed production overheads are - Excludes fixed rnanufa_
included in finibhed goods stock cturing overheads frorn stock
valuation
- Deternrines gross margin by - Deterrnines contributiorr l;ly
subtracting cost from siles'
deductirrg all variable
costs from sales
- Calculates net profit by excluding - Calculates net profit by
all administrative and marketing subtrasting all fixecl costs
overheads regardless of ilreir from contribution
behavior
regardless of their nature
- ls good for strategic decision - ls good for tactical decisiorr
mal<ing
making
- Good for product pricing - Not so good for procjuct pricing
I() I
(b) Absorption costing per unit 2002 2003
$ $
Direct material 10 12
Direct labour 15 1B
Variahle production overhead 7 o
Fixed production overheacl 8: I
40 48
x300i x700
1.2 000 33 600
l3l i4l
Margir[al Costing per unit 2002 2003

Direct material
$ -$
10 12
Direct labour 4q
tv 1B
Variable production overh6acl *..7 _ .9
32x300 39x700
I 600 27 300
t1l t1l
(c) (i) Absorption Costing

Profit Statement for year ended

30June2002 30June2003
$ $ $
Sales 1 97 400 224 40O
Less cost of sales
0pening stock 12 000
D/material 45 000 57 60C)
D/labour 67 500 86 400
Var. olheads 31 500 43 200
Fixed o/heads 36.000 43 e00
1 B0 000 242 400
LessFin.Stock (12 000) (168 000) (33 600) (208 800)
Gross margin 29 400 '15 600
Less admin & (11 400) (13 680)
marketing
Net profil 1B 00Q 1 920
tsl
 ( ii) Marginal costing

$ $
Sales 197 "aoo 22.4 400
Less var costs
0pening stock I 600
D/materials 45 000 57 600
D/labour 67 500 86 400
Var. o/heads 31 500 43 200
Var. cost of goods 1 44 000 1 96 800
available
Less closing stock (9 600) (134 400) (27 300) (1 69 500)
Contribution 63 000 54 900
Less fixed stock:
Manufacturing 36 000 43 200
Admin & marketing 11 400 (47 400) '13 680 5_q_qeq
Net profit/loss 15600 fl_g8q)
t5l
91 97-02.N04 ANSWERS/grn

a
 ZIMBABWE scHool ExAMrNArrbrus Gffiuhdffi ilr- '
General Cenificate of Education Advanced Level

MARKING
)
SCHEME

JUNE 2OO4

AGCOU[-{TIh{G $1S7/3
 2

(a) Profii and L.oss Account for the six months ended

31/03/2001 30/09/2001
+b
a'
$$
Gross profit '142 800 214 200
A{el: Othei'revenLle
[Jiscq:unts receLved 2 100 ____alqa
Total revenue 144 900 216 300
L.qSS: Operating expenses:

Discounts allorryecl 3 675 3 675

Depreciation: Fixtr-rres and fittings 4 200 4 200
h/lotor vehicles 13 12s 13 125
Ral:es 10 500 10 500
Wages arrcl salaries 37 800 37 800
IMotor vehicle exilenses 18 900 1B 900
Postagq and stationery 5-e5-p- s)3 450 5 250 93 450
lrlet profit Ij1 450 '122 850 Ir
l}
I l2l
Adcl: lnterest on drawings: c

$ $ $ $ E

Muswe 630 630 c

Chinyanga 42A_ 420
Deinare 1 050 630 1 680
52 500 124 530
r(l
IJ
i=.tgl. lirtcr'est cin ca1:ital:
Muswe I 505 B 955
ChinyanSa 5 985 6 210
Ddrr'.r,,e
{-br;idrre of profits sharerj: -- -_.c. l{_:1qa__-_ 2 es_3__-_ _.lg 159
38 010 106 372
L

trJ
l,/lr.iswe (213 -t 4i7t 25 340 60 784
Chinyanga (1 13 -r 2171 12 670 30 392
Dehwe(117) l 38-0:lo- 15 196 :106 372 l:
 Capital Accounts

oduriii
$$
alances cld
I 000 Balances b/d 1 13 400 79 s00
800 39 900 Bank
48 900
_"*_g*0qg_**p_q00
g3-S'.99"_m gq_egg,
Balance b/d 119 400 82 800 39 900
:)
Current Accounts t7t

M
$ g, lvr

Ings 12 600 B 400

$
6 300 Balances
$$ $

rest
b/d , 12200 10 300
Interest on
wrngs 1 260 840
capital 17 460 12 195 2 993 or 2 992.50
630
?t'lc8S 6
Shares of
101 924 56 317 11 259 profits
15 196
,39_fl!.9
!sl
Balances 101 924 56 317 1,! 259
b/d

Capital Accounts t3l

C D
C D
$ $ $
$
36 000 1B 000 I 000 Balances 113400 79 800
$
I
I
b/d
iBalances 119400 82 BOO 39 900 Bank
hro 48 900
I

Goodwill 42 0a0 21 000

x
- j{.p=000
$gggq {B.gq.p

vluswe and chinlranga get their

nrarks for goodwill provided both entries 171
are present
 (c) - Balance Sheet as at 30_09-2001

Fixed assets
$
Gost Depreciation Net
$ $ $
Freehold premises
280 000 280 000
Fixtures and fittings
84 000 33 60; 50 400
Motor vehicles
__igp- qqq_ _ 78 7so 26 25a
Current assets -* @:
Stock
31 100
Debtors 28 400
Cash at bank 10 050 69 550
Less current liabil ities

Creditors
14 600
Working capital
'-,p4_95Q
Financed by: 4l_saa
Capital acgounts: Muswe 119400
Chinyanga 82 BOO
Dehwe
39 900 242 100
Current accounts: Muswe 101 924
Chinyanga 56 317
Dehwe 11 259 169 500
&_q0.9
- t8l
{a)
Total 45 marks
: Realisation
2002 2002
$
October 1 Freehold premises 280 000 October 1 Creditors
$
Fixtures and fittings 39 200
- 67 20A Gotora Ltd 375 000
Motor vehicles 30 000 Capital: Muswe
Stock 10 000
25 890 Chinyanga 5 000
Debtors 21 840 Dehwe 10 000
Bank 14 270
{lg?30- $ga0g
l'lo aSgregali;i: lf iterls since li:rlger Llalances are transferreci indivicuaiiy io realisation acccrLtflt
t7l
t--,
Ii .i
I iO, ,Batance sheet as at october
ll tober 22AO2

a
$ -$
fixed assets at valuation:
$
I
I ireehold premises 280 q00
I fixtures and fittings 67 200
vehictes
30 000 377 2oo
I i,otor
assets:
I iurrent
I
I b,".n
Debtors
2si Beo
890
21I 840
Ill prnr. B4O
14I 270
z7o 62 000

I i-ess current liabilities

I treditors 39 2oo
1r

tl
I

I
UVorking

tinanced
capital

by:
22 BAO_

4!!:_0..Q_Q

I lrrdinary shares of $1 each 300 000

I l0apital r.eserue 25 000
I

ll
ishareholders,equity s25 000
I l8% Debentures
75 000
400 e._
000

t2
The disadvaqtages stated shourd
ould include:
ir
I ,u,l,t,
| **l unrimited tiabirity

disagreements between parl

I I rrtners
difficutty of admitting new pa
I I cannot raise capital so easih
,artnefs
ily
I i
I liloE: Do not accept _ cannot
c sell shpres to the public
lin number of partners limited to 20.

tl
Ii i otal
r?t
L'J ]

[121

l,,l
lr
ll
l1
I

I
 6

3 (a) The balance sheet shows fixed assets at net book value.

The note to the balance sheet relating to fixed assets must show th€ aggregate cost or
- revaluation, where appropriate, atthe beginning of tlre year. Additioni Ouring the year
should be shown at cost. The original cost or.ievaluatilns of assets sold or
othenryise disposed of during the year must be disclosed. lncreasesidecreases
on revaluation must also be disclosed.

The aggregate depreciation must be shown for each type of asset at the beginning.
of the year. ln addition the aggregate depreciation of issets sold or otherwlse
disposed of during the year must be revealed. The depreciation charge for the year
and the aggregate depreciation at the end of the year also need-to be disclosed.
'I
Finally the net book value of each class of fixed asset must be shown
at the erid of
the year.
lJlaximum 110]
(b) The auditors' rdport to the shareholders, not to the directors. They must satisfy
themselver{ that proper accounting records have been maintained and that the
financial statements at the end of the year are based on those records. They have
to state whether in their opinion the financial statements have been prepared
in
* accordance with the-law. They have to state whether the income statement gives
a
true and fain view of the profit or loss and whether the balance sheet gives-a true
and fair vrew of the financial position of the company at that date.
Maximum t8I
Total 18 nlarks
{ (a} (i)
C
A B
ARR (Based on initial investment) 160/o 18.2%
OR ARR (Based on average investment) 32% 36.4%
(Accepted either the ARR based on the initial investmerrt or the average
investnrent.
The question does not specify)
14l
A B
(ii) Paybaek 2.875 years 2.35 years
or 2 years 10% rnonflrs 2 years 4 2115 montlis
or 2 yearg 319 days 2 years 126 days
t4l
- (iii) N. P.V. $19 905 000 $31 1 '15 000 t4l
(iv) IRR 23.9% 28.5o/o t4l
Maxinrr"rm 16 rnarks
UIMtsABWE SCI{OOL f;XAMINATiO[qS CCIIJNCI[-.
General Certificate of Education Advanceci Level

MAR.KIhilG SffiHHIVIE

NOVETUBER.2OO4

ACCSUISTIhIffi s,,1 s7/3

t
 2

(a) Manufacturing Trading and Profit and Loss Account for the-year cnded 30
September 2001.
'6
o
Stock of raw nraterials 01/'10/2000 60 000
Add: Purchases 560
*-o2b 000
orio
Less stock of raw materials 30/09/2001 44 000
Cost of raw"materials consumecl - 576 boo
Direct labour 320 000
Prime cost 896 000

Factory overhead expenses

lndirect materials 21 600

Premises 2 400
Plant and equipment 36 000
Production overheads: Fixed 64 000
Varia$le 52 000
Rates 12 000
insurance '
g 600 197 600
Ci-rrrent manufactr-rring costs 1 093 000
Add:Work in progress 01/10/2000 48,000
-----
1 141 600
Less: Work in progress 30/09/2001 36 000
Production cost of goods completed 1 105 600
Manufacturing profit c/d 110 560
Market value of goods manufactured c/d
12to ji,s)Il
Sales 1 406 600
Less: cost of sales
Stock of finished goods 01/10/2000 66 000
Add Market value of goodb manufactured b/d I ?1q :l(io
Cost of goods available for sale 1 282 160
Less Stock of finished goods 30/09/2001 1*2sa-455
168 145
-__.....1 l1_ Q_l-s_ "-
Gross profit
Depreciation : Premises 1 600
Motor vehicles 2.7 648
Rates 3 000
lnsurances 2 400
lncrease in-p+ovision for doubtful debts 't40
Selling and administrati're expenses 38 4"00 / J I('ri1
Net profit on trading 165 267
Add manufacturing profit b/d 110 560
Le-ls-: lncreasc in provision for unrealiseci profit 4 JOi.) 106 19i5
Totai net prcfil ?71 4i)2
Continued
 $ $,
Add lnterest on current account: Nyasha
800
272 262
,
Less lnterest on current account: Chipo 2 000
lnterest on capital: Chipo 25 000
Nyasha 20 000 47 000
Salaries: Chipo
-*:20 "
000-
Nyasha 1B 000 38 000 85 000
Residue or" profits shared:
187 262
Chipo 93 631
Nyasha 93 631 197 262

Maximum 20 marks

(b) CURRENT ACCOUNTS

Chipo Nyasha Chipo Nyasha

$$ $$
b/d
Balance B 000 Balance b/d 20 000
lnterest on lnterest on
a/c
current g 00 current a/c
2 000
Drawings 000
18 16 000 Salaries 20 000 18 000
Balances c/d 142 631
lnterest on capital 25 000 20 000
160 631
106 831 Shares of profits 93 631 93 631
131 631
_loQ 631 131_6_31
::*_:E=,:.&-.s_-i-.
Balances b/d 142631 106 831

Maximum 5 marks

-
 4

(c) Balance Sheet as at 30 Septernber 2001

$$ $
Fixed assets Cost Depreciation Net
Premises
PIarrt and equipment
200 000 16 000 184 000
Motor vehicles
360 000 144 000 216 000
_ *-_ ?1_0" 00q*- 12e 408 110 592
-_ --_g!! !!g-__*28e ab8 " 510 592
Current assets
Stocks: Raw materials
Finislied goods 44 000
:
114 015
Less provision for r_inrealised profit
_ Work in progress - --_- 10,;)"Qg '103 650

Debtors 36 000
Less provision for doubtful clebts 45.600
Prepayments 1 140 44 460
Balance at bank 1 000

Less current liabilifies 261 870

Creditors
Accruals 70 000
Working capital _*q_q.qq_ 73 000
1BB ti70
*-6ee
46r-
Financed by
Capital accounts: Chipo
Nyasha 250 000
200 000 450 000
Currentaccounts: Chipo
142 631
Nyasira
.--"----6eb
aoZ
Maximum 7 nrarkC
(a) Goins concern - Also known as c-ontinuity
""Jffi ;;#:*-
of erctivity
is assumed to have an indefinite rife ,nr*r,
.i*u,
otlrerwise. Accr:rciingly fixecl assets ,r" ,ho*" evicrence shows
in the accounts at cost
less aggregate deprec:iation, stock at cost
or net rearisabre varue,
wirichever is the lower etc. lf eviclence exists
that flre operations of the
business are cotning to an encl then each
asset has to be shown ai its
d is posa r var r-r e/cxit va ri.: e/N RV/recove
rab ts amou nt

i3l

Ccnsis;teilc1, -. -l-lris sii-,:lrl,7 rnoans tirat :,1cco,-inting

accr:ttniii r!J tt,::iir-:rj rntrsl l;e ilppliccl i.t s;r-rbsccll
poIicies fctIie;,.vi:rj il r;rIi_.
rerrt i:r:cr:r.rirtin:'1 pciil,-il. ;l
 .5

change catl oniy be made for compelling reasons, i.e. if it gives a trur:r arrrj
fairer view of profitability and financial position. 'l-lris tacilitates comparison
of the results of the business from one period to the next.
- t3l
Accruals or matching concept means that in the calculation of profits
and losses we match the revenues earned with the exfenses irrcurrerj for
the same period, not cash receipts or payrnents. lt is possirrre rhal
payments for expenses are-made in a period diflerent fronr that in wlrich
they are incurred.
t3l
Materiality * there are items which are not bought for resale but for use
and would therefore qualify for treatment as fixed assets, e.g. paper clips
ancl ashtrays. Btlt the Cost of sr.rch items is insignificant and would
norrnally be expdnsed in the period of purchase. Material items woulcl br:
maintained as fixecl assets and their use accounted for as depreciation.
"-"
i.r i
lnsignificant losses should not have resources usecl to investigate tlrem.
as tlris would bB uneconomic. Figures can be rounded off to the nearest
1000 dollars in big firms without material misstatement of profitabilit.v ancl
financial position.

suh total X2 *rrfrt

(b) Goirrg concern: Fixed assets have beern shown in the balance sheet at
cost less aggregate depreciation. All stocks have been shown at cost in
the financial statements.
l2I
Consistency: Premises have been depreciated on cost as has been p,lant
and equipment. The firm continues to rlepreciate rnotor vehicles on the
reducing balance basis. Factory output continues to be tr;lnsferred to the
warehouse at cost plus '10% for factory profit. Stocks lrave been
'ralur:d
on a FIFO basis.

Accruals: An accrual was brought into the relevant period,

tt'
f.! !

asi was il'*

prepayment. The cost of using fixed assets in the form of ck:precratiorr
has been rnatched against tlre incorne generatecj by tliose assets. I--rrcn
the calculation of cost of sales, which inclurdecl opening stock ancJ
excludes closing stock, is observing this principle.
tzl
Mlateriality - Fixed assets have been maintainecl as such ancl their use
writren of as depreciation. All Consumables were written off in the financial
stertenrents and were not capitalised.
t23
Subtotal li mar.!,rs
Total 20 nrari'i:;
 gross Profit
3 (a) (i) x 100
sales

600 000
x 1oo
I soo ooo

40%

net profit
(ii) x 1oo
sales

1 50 000
Tsoooooxloo
10%

(iii) - net Profit x 1oo

captralemployed

1 s0 000
Ts4oooxloo
19.9%, 19.89 or 2.0%

('v) q9!r9l:-x
, -Credit Sales 1oo
I
I
100 000
x 100
1 500 000

I
24.3 days or 2{33 days
i
(v) assets: current liabilities
Current
:
330000 : 76 000
4.3 : .l1or
4 : or
4.34 .. 1 .:

The current ratio can be expressed as 434ok,4 times, 4.34

tirne s, ,r, + ,,,1
4.34 since 4 divided by 1 is 4
 i

current liabilities
120000 : 76 000
' 1.6 . 1

1.58 : 1
But not z 1

The acid test can also be expresseci as 15g%, 1 .58 times or 1 .58
1,6,

(v!i) -Utilization of fixed assets =

sales
fixed assets

1 500 000
500 000

E 3 times

{ nrark for each correct ratio = I marks

(b) The partnership appears to fare worse relative to the industry
as a whole
as far as profitability-and liquiclity are concerned. While
the fiross anJ net
profit percentages of the whole inclustry are s0%
and 15% rJspe;r-ly il;
partnership could only manage 40% and 10%. There
appears to be
insufficiency in the contror system of.the partnership
a return on capitalemployed, which is lower by s.1%
ft,* partnership ha,s
cornpared to the.
indr-rstry average. This also suggests less efficien"f
in utiiising resou;ces
The current ratio of the whole industry iq within acceptable
linrits as is th*
acid test ratio. ln contrast the ratios of.th* partnersh'ip
are too high at
4.3: 1 and 1.G:1 respectively. This suggests mismonrg;r"nr-oi'r'"rnrr.u,,
by the firm. ln summary, the partners'riip has a lot oiwork
to clo befort: ii
can catch up with the rest of the industr:y in lerms of profitability
and
liquidity.

lVlaximum '!0 nnarks.

(b) The accuracy of accounting ratios depencls on the quarity
of the
inforrnation from which they are calculated

The effect of window dressing.

Ratios can only be usecl to compare like wiflr like.

Ratios tend to ignore the time factor in businesses wlrcse levels

of
operations fluctuate with the seasons.
 s

Based on historical figures, with no adjustment for inflation.

Ratios only show the results of carrying on business. ;Ihey do 6ot ilcjiczll:
the causes of poor perl'crmance.
(.) t"
Further investigation is required.

Ratios do not show qualitative aspects of business, e.g. quality of

management, labour relations, etc.

Any 3 well explained limitations will score fuil marks = 6 marl<s.

.'

l'otal 23 rnarku.
(a) (i) rotaldirectil?l{iffst variance

= 2 S00 x2x150 - 851 000

= [i3,'33*t51
ooo
?

. (ii) Direct material price variance

il = (sP _ AP) A0
=- (1S0 _ 148) 5750
= $11500F Z

, irr) Direct material usage variancg

t
= (SO_AO) Sp ,

(5 000 _ 5750) 150

= $112 500 A z

(b (i) rorar
'[iilJ*Ti:iJJiriance
= 2500x4.5x80-Bg2S00
7500
, .,L'L' F
I_

(ii) Direct variance

ff;Tiffi
= _
(80 85) 10 500
$52 500 A 2

:''"'*irJh?fifllT""
 '9
. (c) (i) Favour.able niaterial price vai-lanc _e_

Purchasing in large quantities ane getting quant.ity cliscolints

Purchasing inferior materials
Glut of materials on the m.arket, etc

An adverse material usaqe varianq5i

lnferior quality leading to greater u,astage
use of unsuitable equiprnent learJirrg to greater lvastaS;e
Theft of material that goes Lrnnoticed
Deliberate waste of materials, etc

Ari adyelse labour rate variancg

f)vertime premiums
Employing a higher grade of labour than requirrlrj
comprornises with labour unions ais the firm cannot set ii.r o,,r,,,rr
rates unilaterally, etc*

AIaysu rable absusfiigc n qu_yauuqe_

I
---_.--
tJsing high quallty materials
High grade or quality of labour
High morale among workers, etc
Accept reasonabG an=*"rs

(2x4=Smarks)
(ii) is a yardstick against which costs can be nreasured
Ihgl*
settiqg standards entails determining the best rnatei-ials ancl
production methocls leading to savings of money
A target of efficiency is set for emprolees niotivatir:n
Cost consciousness is stimulated
-
Control is simplified.
It is easier to trace costs to procructsicost centr+:s
Budgets are easier to prepare
It enables management by exception
It is an essential aspect of responsibilily zrccountin.r;
(Accept other valid points.)

1 mark each up to a rnaximum of 5 points S marks

=

/slK Totai 25 rnai'ics

llrrll / 0L)Ci_rMElJ I li,NlAii KINC.S,lHE i\,,1E-9197-03 N04