CARIBBEAN EXAMINATIONS COUNCIL
1981
PRINCIPLES OF ACCOUNTS PAPER II GNERAL PROFICIENCY
Answer ALL questions in Section I and TWO questions from Section II.
Begin EACH answer on a separate page
Keep ALL parts of EACH answer together
Silent electronic calculators may be used, but ALL necessary working should be clearly
shown.
SECTION I
Answer all TWO questions in this section.
1.
The following information relating to the year 1980 has been extracted from the
books of Greymares Ltd. All purchases and sales have been entered in personal
accounts in the Purchases Ledger and Sales Ledger respectively.
$
Sales Ledger debtor balances 1 January, 1980
4 491
Purchases Ledger creditor balances 1 January, 1980 3 217
Payment to suppliers
38 496
Receipts from customers (including $76 in respect
of a debt written off as bad in the previous year)
54 642
Purchases
41 742
Returns Outwards
425
Sales
58 127
Returns Inwards
863
Bad Debts written off in the year 1980
1 041
Received from suppliers in respect of overpayment
48
Credit balance on Sales Ledger 31 December, 1980
82
(a)
(b)
Prepare the Sales Ledger control account and the Purchases Ledger
Control account for year ended 31 December, 1980.
( 16 marks)
Explain the reasons for the credit balance recorded on Sales Ledger
control account on 31 December, 1980
( 4 marks)
Jack and John are in partnership operating a boutique sharing profits equally.
Some of their records, vouchers, and books covering the year to 31 December,
1980 were accidentally destroyed, and you are asked to prepare accounts for 1980
from the records that are available. It has been possible to establish the amounts
of the assets and liabilities as follows:
31 December, 1979
Fixed Assets
Stock
Debtors for Sale
Balance at Bank
Creditors for Purchases
Creditors for expenses
Bank payments from Debtors
Payments made to Creditors
$
10 000
3 829
2 961
1 324
2 273
89
-
31 December, 1980
$
See below
4 137
3 128
1 301
2 184
103
53 317
40 510
NOTE:
No fixed assets were acquired in 1980 and none were sold or discarded. They are
to be written down at an annual rate of 5% calculated on the balance at the
beginning of each year.
The total expenses of the business for the year 1980 excluding depreciation are
$8 629.
The Capital of Jack at 31 December, 1979 was $1 000 greater than that of John.
During the year 1980 Jack Withdrew $2 149 and John $2 066 for personal
expenses.
The rate of gross profit earned during 1980 was at the uniform rate of 25% on
sales.
(a)
Prepare a Trading and Profit and Loss Account for the year ended 31
December, 1980 and hence calculate the Net Profit.
(12 marks)
(b)
Prepare a Balance Sheet as 31 December, 1980.
(8 marks)
SECTION II
Answer any TWO questions in this section.
3.
The following Trial Balance was extracted from the books of Alfred Jones, a
trader at 31 December, 1980.
$
$
Capital Account
19 364
Freehold land and building
12 500
Furniture and Fittings
840
Motor cycle (cost 1 January, 1978: $950)
650
Purchases
46 982
Sales
66 649
Rent Received
360
Drawings
3 230
Motor cycle expenses
396
Stock in trade 1 January, 1980
4 988
Bad Debts
422
Provision for Bad Debts 1 January, 1980
226
General expenses
827
Rent and Rates
1 162
Trade Debtors
7 921
Trade Creditors
6 933
Wages and Salaries
8 983
Discounts allowed
2 164
Balance at bank
2 467
93 532
93 532
The following matters are to be taken into account:
(a)
(b)
(c)
(d)
(e)
(f)
Stock in trade 31 December, 1980
5 429
Wages and Salaries accrued 31 December, 1980
198
Rates paid in advance 31 December, 1980
48
Provision for Bad Debts is to be increased by
82
Provide for depreciation on the motor-cycle on the
Basis that it will be in service for four years and will
then be traded in for $350
Part of the building was let to a tenant who on the
31 December, 1980 owed $120
Prepare:
(a)
(b)
a Trading and Profit and Loss Account for the year ended 31 December,
1980.
( 12 marks)
a Balance Sheet for Alfred Jones as at 31 December, 1980
( 8 marks)
4.
The following balances appear in the books of J James, a shopkeeper on 1 May,
1980:
$
Shop furniture and equipment
880
Stock
1 269
A Moss (a debtor)
40
Cash at bank
320
Cash in hand
15
H Titus (a creditor)
16
Open the account in J James books to show these balances and his capital; enter
the following in the appropriate books, post to the ledger and extract a trial
balance on 8 May, 1980.
NOTE:
(i)
(ii)
Opening Journal Entries are not required
Cheques received are paid into the bank immediately
1980
May
Bought on credit from H Titus: Canned goods invoiced $90.00 less
331/3 percent trade discount.
Withdrew from bank for cash $30.00
Received cheques:
(a)
(b)
for sale of Shop Equipment $60.00
from A Moss in settlement of his account less 5% cash
discount
Received a Credit Note from H Titus for one-third of the canned
goods received on May 1, as damaged in transit.
6
A Mosss cheque banked on May 2 returned marked Refer to
drawer
Sold goods for cash $180.00
Paid into bank from cash $200.00
Paid H Titus by cheque the amount owing to him less 5% cash
discount
( 20 marks)
5.
(a)
Explain, with an example, the term error of principle as used in
accounting.
The ABC Company have produced for the year ended 31 December, 1980
a Trial Balance which does not balance. A Suspense account was opened
for the difference. The following errors in the companys books were later
discovered.
(i)
A cheque for $200 received from J Chase a debtor has been posted
Direct to the sales account in the nominal ledger.
(ii)
Discount allowed for the month of June amounting to $500 has not
been posted to the nominal ledger.
(iii)
Sales account in the ledger has been credited with a credit note for
$300 being trade-in allowance given on a machine.
(iv)
The Sales day book has been undercast by $250 and posted to the
debtors account accordingly.
(v)
Goods received from R Wong Ltd on September 30 costing $2 000
Have been included in stock but the invoice has not yet been
received.
(iii)
6.
An invoice for C Harris amounting to $150 for goods purchased
has been omitted from the purchases day book and posted directly
to the purchases account in the nominal ledger but not to Harriss
account in the purchases ledger.
(b)
Make the journal entries to correct these errors
( 16 marks)
(c)
Prepare a statement showing the effect the corrections would have on the
companys profit for the year assuming that the original net profit was
computed as $22 000.
( 4 marks)
(a)
Explain the purpose of a Bank Reconciliation Statement.
(b)
The Cotton Tree Co. Ltd received a Statement of Account from its Bank
showing an overdraft of $960.
( 3 marks)
Comparing the Bank Statement of Account with the Companys Cash
Book the following discrepancies were discovered:
(i)
(ii)
(iii)
(iv)
Bank Charges shown in the Bank Statement for $35 had not been
entered in the Cash Book.
A cheque for $18 had been returned by the bank marked Refer to
drawer, but the appropriate entry in the Cash Book had not been
made.
Three cheques paid to suppliers for $214; $370 and $30 had not
been presented to the Bank.
A deposit of $1 542 had not been entered in the account by the Ba.
Prepare a Bank Reconciliation Statement as at 30 June, 1981.
(c)
( 12 mark)
Make the journal entry to correct the following error:
The Sales day book has been undercast by $250 and posted to the debtors account
accordingly.
( 5 marks)