Accounting

100 Marks

1 (a)For each of the parts (i) to (x) there are four possible answers, A, B, C and D and 1 mark
each.
(i) At the end of the financial year there was a debit balance brought down on the office
expenses account.

In which section of the statement of financial position will this be recorded?

A capital

B current assets

C current liabilities

D non-current assets

(ii)The following ledger account appeared in the books of a trader.

Rent account
$ $
Jan 1 balance b / d 600 Dec 31 income statement 7250
Dec 31 bank 6300
balance c / d 350
7250 7250

What does the balance on 31 December represent?

A rent payable outstanding

B rent payable prepaid

C rent receivable outstanding

D rent receivable prepaid

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(iii)Karim issued an invoice, a credit note and a receipt.

What has happened?

A Karim purchased goods and paid the supplier immediately.

B Karim purchased goods on credit, made returns to the supplier and paid the balance
due.

C Karim sold goods and received immediate payment from the customer.

D Karim sold goods on credit, received returns from the customer and received the
balance due.
(iv) A trader’s purchases on credit for April amounted to $2000. These purchases were subject
to a trade discount of 10% and also a cash discount of 5% for accounts paid within 30 days.

How much was entered in the purchases journal?

A $1700 B $1800 C $1900 D $2000

(v) A trader provided the following information.

$
1 March purchases ledger control account balance 4 000
31 March purchases journal total 53 000
purchases returns journal total 2 000

cheques paid to suppliers 47 000

discounts received 1 000

What was the purchases ledger control account balance on 31 March?

A $7 000 B $9 000 C $11 000 D $13 000

(vi)Amit depreciates his buildings at the rate of 2% per annum using the straight line method.

He bought land for $200 000. It cost $120 000 to build a warehouse on it. After five years
he sold the warehouse for $299 000.

What was the profit or loss on disposal?

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A $ 9 000 loss
B $ 9 000 profit
C $ 11 000 loss

D $ 11 000 profit

(vii)Which statement is correct?

A cost of goods sold – gross profit – sales returns = revenue

B cost of goods sold – gross profit + sales returns = revenue

C cost of goods sold + gross profit – sales returns = revenue

D cost of goods sold + gross profit + sales returns = revenue

(viii)What is the going concern principle?

A Accounting records are prepared assuming that the business will continue to operate
in the foreseeable future.

B Income and expense should be accounted for in the same way they were accounted
for in previous periods.

C Profit should not be anticipated and losses should be written off as soon as they are
known.

D Revenue and costs should be recognised as they are earned or incurred, not when the
money is received or paid.

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 (ix) The following payments were made when a new machine was purchased.

$
cost of the machine 32 000
charge for delivering the machine 1 800

insurance of the machine 2 000

wages of employees installing the machine 1 300

How much was the capital expenditure?

A $32 000 B $33 300 C $35 100 D $37 100

(x) Why should a manufacturer charge depreciation on her factory equipment?

A to calculate the residual value of the equipment

B to provide for the replacement of the equipment
C to spread the flow of cash over a number of years
D to spread the cost of the equipment over its useful life

(b)Complete the table by placing a tick (✓) to show how Nala should treat each item of her
expenditure.
Capital Revenue
expenditure expenditure
Computer printer paper
Computer equipment
Installation of computer equipment
Motor vehicle
Insurance of motor vehicle
Delivery of motor vehicle

[4]

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(c) Nazmeen receives business documents from her credit suppliers .

(i)Complete the table below by placing a tick (✓) to indicate which document(s) each item
appears on. The first one is completed for you.

Invoice Credit note Statement

of account
A credit purchase ✓ ✓
The balance owing by Nazmeen to a supplier at
the end of the month
A purchases return
Trade discount deducted from list price
Payment made to a credit supplier
[4]

(ii) State two purposes of statement of account. [2]

1.................................................................................................................................................

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2.................................................................................................................................................

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Total=20

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2.

Rai is a trader. He has prepared his trial balance at 31 January 2023. The credit side totalled
$152 more than the debit side. Rai placed the difference in a suspense account.

Rai later discovered the following errors.

1 Wages, $200, had been entered in the cash book but omitted from the wages account.

2 A credit purchase, $247, from Stella, had been debited to Stella’s account and credited
to the purchases account.

3 The rent payable account and the sales account had both been overcast by $100.

4 A cheque for motor expenses, $75, had been debited twice to the motor expenses
account.

5 A payment to Jasper, $196, had been recorded as $169 in Jasper’s account.

(a) Prepare the journal entries to correct errors 1–5. Narratives are not required.[10]

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 Rai
Journal
Error Details Debit Credit
number $ $

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 (b) Prepare the suspense account.

Rai
Suspense account
Date Details $ Date Details $

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[4]
(c) Draft profit is $9,800. Calculate Rai’s profit after correction of errors 1–5.

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Rai’s trial balance was used to check the arithmetical accuracy of the ledger accounts. His journal

was used to correct the errors found.

(d) State:

(i)one other use of the trial balance

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..................................................................................................................................... [1]

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(ii)one other use of the journal.

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3.
Stalla is a sole trader who sells on credit. She maintains a provision for doubtful debts at 4% of
trade receivables.

Stalla’s trade receivables were:

$
At 31 December 2021 75 000

At 31 December 2022 77 000

(a)(i)Prepare Stalla’s provision for doubtful debts account for the year ended 31 December 2022.
Balance the account at 31 December 2022 and bring down the balance at 1 January 2023.

Provision for doubtful debts

account
Date Details $ Date Details $

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[3]

Stalla charges depreciation at 25% per annum, using the reducing balance method. She charges
a full year’s depreciation in the year a vehicle is purchased and none in the year it is sold.

On 31 December 2022, Stalla sold a vehicle for $9500.

The vehicle had cost $16 000 on 1 September 2020.

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 (b) Calculate the gain or loss on disposal of the vehicle.

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(c) A delivery vehicle was purchased by cheque.

(i) state two causes of depreciation. [2]

1....................................................................................................................................................

2....................................................................................................................................................

(ii)State two reasons why the purchase of the delivery vehicle was not recorded in the purchases
ledger control account.

1 ................................................................................................................................................

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2 ................................................................................................................................................

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(iii)State the most appropriate method of depreciation for the new delivery vehicle. [1]

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(d)State three reasons for your answer to (c)iii [3]

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(e)The directors of TC Limited are considering the purchase of various low-value items of office
equipment.

Advise the directors whether or not they should charge depreciation on these items. Justify your
answer by providing two advantages and two disadvantages. [5]

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4

Ravi is a trader. He provided the following information.

2021 $
1 February Sales ledger control account debit balance 12 510

Sales ledger control account credit balance 1 245

2022

31 January Totals for the year:

Credit sales 134 000

Cash sales 4 625
Bank transfers received from credit customers 96 250
Cash received from credit customers 12 890
Returns from credit customers 4 000
Irrecoverable debts written off 9 100
Contra entries 1 677
Discount allowed 4 643
Discount received 2 119
Interest charged on overdue sales ledger accounts 1 104

Sales ledger control account debit balance ?

Sales ledger control account credit balance nil

(a) Prepare Ravi’s sales ledger control account for the year ended 31 January 2022.
Balance the account and bring down the balance on 1 February 2022.

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 Ravi
Sales ledger control account

Date Details $ Date Details $

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[10]

(b) State the accounting principle which is being applied when irrecoverable debts are written
off.
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(c)State two reasons why a credit balance on a sales ledger control account can arise. [2]

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(d)State two advantages of sales ledger control Account. [2]

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(e)

Ravi sends out statements of account to credit customers and charges interest on overdue
accounts. He is concerned about the loss caused to his business by irrecoverable debts. He is
considering employing a part-time credit controller to contact credit customers by telephone and
to start legal action on overdue accounts if necessary. The credit controller would be paid $6800
per annum.

Advise Ravi whether or not he should employ the credit controller. Justify your answer. [5]

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Total =20

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5.

Tadeen and Yadid are lawyers who have been in partnership for many years.

The partners provided the following trial balance at 30 April 2024.

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(a) Prepare the income statement for Tadeen and Yadid for the year ended 30 April 2024.[8]

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 Tadeen and Yadid

Income Statement for the year ended 30 April 2024

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 (b) Prepare the appropriation account for Tadeen and Yadid for the year ended 30 April 2024.

[5]

Tadeen and Yadid

Appropriation account for the year ended 30 April 2024

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(c) State

(i) one reason why the partners might consider reducing their drawings
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(ii) which accounting principle reflects the partners’ intention to continue trading indefinitely.

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The partners employ one lawyer and office staff. The lawyer, Lakia is paid $25 000 but has decided
to leave. Tadeen and Yadid have found a replacement lawyer, Raim. He has worked as a lawyer
for 15 years and is well known in the local area. However, Raim wants to be a partner in the
business rather than an employee and would expect 40% of the residual profit of the partnership
each year.

(d) Advise Tadeen and Yadid whether or not they should offer Raim a partnership. Justify your
answer by providing points for and against offering Raim a partnership. [5]

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Total =20

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