“A” LEVEL ACCOUNTING

F5 HOLIDAY ASSIGNMENT

PAPERS

1,2&3

Tinofamba nevanofamba
 PAPER 1
1. What is the equation for working capital?
A Capital employed + current assets
B Capital employed + fixed assets
C Capital employed - liabilities
D Capital employed - fixed assets

2. A trial balance failed to agree and the difference was placed in a suspense account.
This was due to discount received of $6 000 posted as discount allowed, and a discount
allowed of $2 500 posted as discount received.
What was the balance in the suspense account?
A $3 500 Cr
B $3 500 Dr
C $7 000 Cr
D $7 000 Dr

3. A building cost $340 000. The accumulated depreciation on the building was $47 600.
It was decided to revalue the building to its market value of $560 000.
What is the balance on the revaluation reserve?
A $172 400 B $220 000 C $267 600 D $512 400
4. An item can be converted easily into cash.
In which section of the statement of financial position would this item appear?
A capital B current assets C current liabilities D non-current assets
5. A company’s financial year ends on 31 December.
At 31 December Year 1 the company carried forward a debit balance of $36 200 on the
rent account.
During Year 2 payments made for 12 months’ rent, to 31 March Year 3, were $157 200.
What is the amount of rent to be charged in the income statement in Year 2?
A $121 000 B $154 100 C $160 300 D $193 400
6. A trader buys inventory costing $6000.
He is entitled to trade discount at 10% and cash discount of 5%. On the same day he
discovers that he can only sell the inventory for $5000.

Which amount should he record as the purchase price of the inventory?

A $5000 B $5130 C $5400 D $6000

7. A business is preparing a bank reconciliation and finds the following.
$
Unpresented cheques 3 190
bankings 1 949
The cash book has a debit balance of $5 000.
Which adjustments should be made to the cash book balance to reconcile it to the bank
statement?
A. minus $3190, minus $1949
B. minus $3190, plus $1949
C. plus $3190, minus $1949
D. plus $3190, plus $1949
8. During the month a company lost a quantity of inventory in a burglary. The table
shows the company’s results for the month.
$
Opening trading inventory, at cost 30 000
Purchases 210 000
Revenue 330 000
Closing trading inventory, at cost 4 000
A gross profit on all sales of 30% has been achieved.
What was the cost of the inventory lost in the burglary?
A $4000 B $5000 C $9000 D $13 000
9. During the financial year a business receives $620 000 from its trade receivables
after allowing cash discounts of $30 000.
At the start of the year trade receivables owed $47 000. At the end of the year trade
receivables owed $40 000.
What was the amount of credit sales made during the year?
A. $613 000 B. $627 000 C. $643 000 D. $657 000
10. A business had a profit for the year of $450 000 before correcting the following
errors.
1 Closing inventory was undervalued by $15 000.
2 Sales returns of $5000 had been recorded as purchases returns.
3 The charge for depreciation was overstated by $20 000.
What was the corrected profit?
A. $435 000 B $445 000 C $475 000 D $495 000
11. Which items appear in the manufacturing account of a business?
1. Closing inventory of finished goods
2. Closing inventory of work in progress
3. Carriage inwards
4. Carriage outwards
A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4

12. The following financial information was provided at 31 December 2012.

$
Purchases 95 000
Returns inwards 3 300
Returns outwards 2 100
Inventory withdrawn for personal use 5 000
Inventory on 31 December 2012 was valued at $1000 more than on 1 January 2012.
What was the cost of sales?
A $85 700 B $86 900 C $89 000 D $97 100
13. A vehicle is sold for $1500. It cost $5000 and $3000 depreciation had been provided
on it.
Which entry is needed to close the disposal account?
debit $ credit $
A. disposal account 500 income statement 500
B. disposal account3500 income statement 3500
C. income statement 500 disposal account 500
D. income statement 3500 disposal account 3500
14. A business is reviewing credit limits for its customers.
What would result in a customer’s credit limit being reduced?
A. Cash discounts are always taken by the customer.
B. Sales have increased to that customer.
C. The customer always pays their debt on time.
D. The customer has lost a major contract.
15. The table shows extracts from the trial balance of a business at 31 December 2012.
$
ordinary share capital 20 000
share premium 40 000
long-term loan (repayable 2022) 30 000
bank overdraft 60 000
4% non-redeemable preference share capital 50 000
7% debentures 2017 70 000
What is the total of non-current liabilities in the statement of financial position?
A $100 000 B $150 000 C $160 000 D $210 000
[Link] main purpose of Accounting Standards is to
A. Set out uniform accounting bases
B. Provide useful information for shareholders
C. Reduce the range and variety of financial accounting practices
D. Prevent unqualified accountants from preparing company accounts

17. Which asset is not normally depreciated?

A Land
B Fixtures
C Buildings
D A revalued property

18. A business valued damaged stock at net realisable value. Which accounting principle
did it apply?
A Consistency
B Prudence
C Going concern
D Materiality

[Link] distinction between capital expenditure and revenue expenditure is important when
A Calculating investment ratio
B Preparing bank accounts
C Preparing control accounts
D Preparing profit and loss accounts
20. A donation to a sports club to help it build a new pavilion will be shown as
A A special fund in the balance sheet
B An addition to accumulated fund
C An addition to surplus of income over expenditure
D An asset in the balance sheet

21. Nomatter purchased a motor van for use in the business from Chipo for $10 million on
credit. She debited the motor expenses and credited Chipo with $10 million. What type
of an error did she make?
A An error of principle
B An error of complete reversal
C An error of commission
D A compensating error

22. Which accounting convention is observed when capitalising a fixed asset bought on hire
purchase?
A Going concern
B Materiality
C Prudence
D Substance over form

23.A rent prepayment of $400 at the end of the year was treated as an accrual in preparing
a trader’s profit and loss account. What was the effect on profit?
A Overstated by $400
B Overstated by $800
C Understated by $400
D Understated by $800

[Link] assets are depreciated in order to

A Make a provision for repairs
B Make cash available to replace fixed assets when necessary
C Show the current market values of fixed assets.
D Charge the cost of fixed assets consumed against the revenue generated

[Link] stock in a business is valued at the lower of cost and net realizable value. The
accounting principle applied is
A Consistency
B Going concern
C Materiality
D Prudence
26. The following information is for a business which lost all its stock in a fire on 10 June
2005.
$
Stock on 30 May 2005 1 300 000
Sales for the period 1-9 June 2005 192 000
Purchases for the period 1-9 June 2005 150 000
What was the value of stock on 9 June 2005, if the business makes a margin of
25%.
A $1 258 000
B $1 294 000
C $1 306 000
D $1 342 000

[Link] appears as a credit in the appropriation account of a partnership?

A interest on capital
B interest on loans
C net profit
D partnership salaries

[Link] would you treat non- purchased goodwill in the amounts of a company?
A do not recognise its existence
B include it in the balance sheet as an asset at valuation
C include it in the balance sheet as an asset to be amortised
D write it off against reserves

[Link] purchases ledger control account for the year showed the following.
$
Opening balances 30 000 Cr
6 000 Dr
Suppliers’ invoices 90 000
Credit notes received 3 000
Discount received 2 000
Sales ledger contra 8 000
Closing balances 35 000 Cr
2 000 Dr
How much cash was paid to creditors during the year?
A $60 000
B $65 000
C $67 000
D $68 000
30. A trial balance failed to agree and the difference was placed in a suspense account. This
was due to discount received of $6 000 posted as discount allowed, and a discount
allowed of $2 500 posted as discount received.
What was the balance in the suspense account?
A $3 500 Cr
B $3 500 Dr
C $7 000 Cr
D $7 000 Dr

31. The following balances are in respect of subscriptions receivable for a sports club 1
January 2007 31 December 2007
$ $
Subscriptions owing 10 000 15 000
Subscriptions in advance 12 000 18 000

If $279 000 was income for the year, how much cash was received for the year
ended 31December year 2?
A $274 000
B $279 000
C $280 000
D $285 000

32.A building cost $400 000 some years ago. At 31 December 2005 its accumulated
depreciation was $50 000. On that date it was revalued to $600 000.
What will be the balance on the revaluation reserve?
A $150 000
B $200 000
C $250 000
D $550 000

[Link] which heading should negative goodwill be included in a company’s balance

sheet?
A capital reserve
B long-term liabilities
C revenue reserve
D share capital
34.A company uses the last in first out {LIFO} method of stock valuation.
During June the following transactions took place:
June 1 Opening stock 100 units at $1,00 per unit
10 Received 150 units at $1,10 per unit
20 Sold 100 units at $2,00 per unit
29 Received 50 units at $1,20 per unit
What is the value of stock on 30 June?
A. $210
B. $215
C. $225
D. $240

35.A business valued damaged stock at net realisable value.

Which accounting principle did it apply?
A. Consistency
B. Going concern
C. Materiality
D. Prudence
 PAPER 2
PAPER 2
INSTRUCTIONS TO CANDIDATES

Answer all questions.

Write your answers in the space provided on the question paper.
All calculations must be shown adjacent to the answer

Calculators may be used.

Total
 QUESTION 1

1. Amirtha commenced business on 1 January 2010. During the first two years of businessthe
following non-current assets were purchased on the dates shown:

Motor vehicles
2010
$
1 January MV1 26 000
1 July MV2 18 000

2011

1 April MV3 24 000

Equipment
2010

1 January EQ1 30 000

2011

1 January EQ2 44 000

Amirtha has a policy to depreciate motor vehicles at 20% per annum on cost (straight
line method) and equipment at 15% per annum on cost (straight line method), rates
being charged for each month of ownership.

REQUIRED

(a) Calculate the total depreciation for each of the years 2010 and 2011.

(i) Motor vehicles

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(ii) Equipment

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Early in 2012, consideration was given to changing to the reducing (diminishing)

balance method, with the following rates applying to the balance at the end of each
year.

Motor vehicles 25%

Equipment 20%

A full year’s depreciation would be charged irrespective of the date of purchase.

REQUIRED

(b) Calculate the total depreciation for each of the years 2010 and 2011, using the
reducing (diminishing) balance method for:

(i) Motor vehicles

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(ii) Equipment.

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 The original profits for the first two years in business were:

2010 $86 000

2011 $94 000

REQUIRED

(c) Prepare a statement to show the revised profits for the years 2010 and 2011, if
the reducing (diminishing) balance method had been used.

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(d) Explain why it is appropriate to use the reducing (diminishing) balance method formotor
vehicles.

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The following information is also available from the books of Amirtha.

1 January 2011 31 December 2011

$ $
Wages 2 040 accrued 2 130 accrued
Insurance 130 accrued 610 prepaid
Rent received 1 490 prepaid 1 320 prepaid

During the year ended 31 December 2011 the following transactions took place.

$
Wages paid 24 100
Insurance paid 1 400
Rent received 14 000

All transactions are through the bank account.

REQUIRED

(e) Prepare the following ledger accounts for the year ended 31 December 2011,
showing the closing entry to the financial statements at the end of the year.
Dates are not required.

(i) Wages account

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(ii) Insurance account

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(iii) Rent received account

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 QUESTION 2

2. During the year ended 31 March 2007 Jeremiah lost money through customers not
paying the amounts due to him. On 1 April 2007 he set up a provision for doubtful
debts account.

REQUIRED

(a) (i) Give one reason why Jeremiah decided to set up this account.

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(ii) Describe two factors Jeremiah might consider when deciding the amount to be
provided for in the provision for doubtful debts account.

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(iii) Explain the difference between the accounting treatment of a bad debt and a
doubtful debt.

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On 1 April 2008, Jeremiah’s provision for doubtful debts account had a balance of
$8000. This consisted of an anticipated loss of $2500 which was the total owed by a
debtor, Uriah, who had been declared bankrupt, and a general provision of $5500,
which was 2½ % of all of his debtors.

On 31 May 2008 Liew, who owed Jeremiah $1200, paid Jeremiah only $0.40 for every
dollar owed. The remainder was written off as a bad debt.

On 30 June 2008, Uriah paid Jeremiah $0.35 for every dollar owed, in final settlement
of his account.

On 28 February 2009 Jeremiah wrote off $300 of overdue debts from various debtors.

On 31 March 2009 Jeremiah’s total debtors amounted to $205 000 and he adjusted his
provision for doubtful debts account to 3 % of that amount.

REQUIRED

(b) Prepare in Jeremiah’s ledgers the following accounts for the year ended
31 March 2009.

(i) Provision for doubtful debts account;

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 (ii) Bad debts account.

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On 31 March 2009 Khalil, whose debt of $3000 had been written off in 2007, after he
unexpectedly left the country, returned and paid the amount due.

REQUIRED

(iii) Prepare in Jeremiah’s ledgers the bad debts recovered account for the year ended
31 March 2009.

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 QUESTION 3

3. A Marie Motiwala’s draft profit and loss account for the year ended 30 April 2008 was
prepared by her new book-keeper and showed a loss of $100 000. The following errors
were then discovered.

1. Capital of $80 000 contributed by Marie Motiwala had been included in sales.

2. Sales returns of $20 000 had been debited to purchases returns.

3. No provision for depreciation on equipment had been charged for the year.
Depreciation should have been provided for using the reducing balance method at
40 % per annum. The book value of equipment at 1 May 2007 was $240 000.

4. Accrued bank interest of $10 000 payable at 30 April 2008 had been omitted from
the accounts.

5. Marie Motiwala’s drawings of $50 000 had been debited to wages.

6. Stock valued at $10 000 at 30 April 2008 should have been valued at $1000.

7. Stock costing $11 000 taken for Marie Motiwala’s personal use during the year had
not been recorded in the accounts.

8. A $20 000 interest free loan to an employee had been debited to the wages
account.

9. $100 000 had been debited to the equipment account. Of this amount, $25 000
should have been debited to equipment repairs.

10. Stock costing $22 000 was delivered to the business on 28 April 2008 and was
included in the end-of-year stocktaking. The invoice was received and entered
into the accounting records on 3 May 2008.
REQUIRED

Prepare a detailed financial statement showing Marie Motiwala’s corrected profit or loss for
the year ended 30 April 2008.

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JR's sales ledger control account balances at 1 March 2008 were as follows.

Dr $340 600 Cr $1 960

During March 2008 the following transactions took place.

$
Credit sales 295 000
Cash sales 219 750
Sales returns from credit customers 6 480
Receipts from debtors 238 600
Discounts allowed 3 500

Additional information for the month of March 2008

1. The receipts from debtors included a cheque for $3600 in full settlement of a debt
of $3800. This was returned by the bank on 28 March marked "insufficient funds".

2. Eva Little and JR both buy from and sell to each other. At 31 March 2008 Eva
owed JR $5000 and JR owed $8600 to Eva. They agreed to offset balances, the
net amount being payable by JR on 31 March 2008.

3. It was agreed that a debt of $2300 from Alice Springs was bad and it was written
off.

4. The total credit balances in the sales ledger control account at 31 March 2008
were $8340.
REQUIRED

(a) Prepare JR's sales ledger control account for the month of March 2008.

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(b) State three possible reasons why a debtor's account might have a credit balance.

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(c) State three reasons for keeping control accounts.

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 QUESTION 4
4. The following is the draft balance sheet of Marshall Klingsman, a sole trader, at 30 April 2011.

Balance Sheet at 30 April 2011

$ $ $
Non-current assets
Buildings at valuation 300 000
Equipment at book value 540 000
Motor vehicles at book value 330 000
1 170 000
Current assets
Inventories 70 000
Trade receivables 19 000
Other receivables 2 000
Cash and cash equivalents 4 000
95 000
Current liabilities
Trade payables 57 000
Other payables 3 000 60 000
Net current assets 35 000
1 205 000
Non-current liabilities
Loan 200 000
Net assets 1 005 000

Financed by:

Capital at start 1 000 000

Add Profit for the year (net profit) 80 000
1 080 000
Less Drawings 75 000
Capital at end 1 005 000

Additional information:

After preparation of the draft balance sheet the following errors were found.

1. Goods in inventory at 30 April 2011, valued at cost $15 000, were found to be
damaged. The estimated net realisable value is $8 000.

2. Loan interest of 4% per annum had been omitted from the accounts.

3. No provision for depreciation on equipment had been made for the year. Depreciation
should have been provided at 5% per annum using the reducing balance method.

4. Motor vehicles are depreciated by 10% per annum. During the year vehicle repairs
of $10 000 had been incorrectly debited to the motor vehicles account.
 5. On 28 April 2011 a credit customer, who owed $3600, was declared bankrupt. It
was decided to write off this amount in full. No record of this has been made in the
accounts.
REQUIRED
(a) Prepare a statement to show the corrected profit for the year (net profit) ended
30 April 2011.

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(b) Prepare the corrected balance sheet at 30 April 2011.

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(c) (i) Explain two differences between cost and net realisable value.

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(ii) Discuss the accounting treatment of the damaged inventory in item 1.

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 PAPER 3

QUESTION 1
1. Bee’s books showed the following information for the month ended 31 August 2014.
$
Sales ledger balances at 1 August 2014 19 012
Credit sales 40 690
Sales returns 240
Cheques received from customers 39 160
Provision for doubtful debts 1 000
Customers’ cheques dishonoured 500
Bad debts 310
Discount allowed 420
Debit balances transferred to the purchase ledger 700
Credit balances in the sales ledger at 31 August 2014 128
All purchases and sales are on credit

a) From the above information, prepare Bee’s sales ledger control account for the
month of August 2014 {9}

b) The total of Bee’s sales ledger balances on 31 August 2014 was $20 433, which differed
from the closing balance in the sales ledger control account. On checking his accounts, he
discovered the following errors:
1. A credit note for $600 from a supplier had been entered in the sales journal.
2. Discount allowed had been understated by $180.
3. Interest on overdue customers” accounts of $136 had not yet been recorded in the
books.
4. An entry of $542 in the sales journal had been omitted from the customer’s account.
5. A sales ledger account had been overstated by $823.
6. A receipt of $416 was posted to the wrong side of the customer’s account.
7. Sales returns of $521 had been recorded in the sales returns journal as $125
i. Beginning with the closing balance calculated in (a), prepare an amended sales
ledger control account. {7}

ii. Prepare a statement in narrative form reconciling the total of the sales ledger
balances with the new control account balance. {10}
 QUESTION 2

2. Musendo Wrestling Club presented the following details for the year ended 31
December 2010.
$
(i) Receipts
Subscriptions 6 000
Bar sales 27 300
Entrance fees 1 200
Gate takings on tournaments 1 800
Sales of programmes 15
(ii) Payments:
Rates 1 200
Bar purchases 21 000
Barman’s wages 2 700
Hire of extra chairs 570
Other tournament expenses 300
Extension to clubhouse (1 April 2010) 12 000
Sundry clubhouse expenses 4 800
(iii) The clubhouse was bought on 1 January 2007 for $21 000. It is depreciated at
10% p.a. on cost.
(iv) Sundry assets and liabilities were:
1 Jan 2010 31 Dec 2010
$ $
Bar inventory 3 015 2 805
Trade payables
-bar purchases 2 760 2 925
-hire of chairs - 120
Prepaid rates 300 375
Clubhouse expenses due 105 135
Cash 945 7 200
Subscriptions in advance 270 360
Subscriptions in arrears 1 920 -

Required
a.) Accumulated fund as at 1 January 2010. {5}
b. Bar trading account for the year ending 31 December 2010 (5)
c. Subscription account (5)
d. Income and expenditure account for the year ended 31 December 2010 (10)
 QUESTION 3

3. The Directors of Power Limited are intending to purchase a soap making machine. There
are five sources of finance under consideration to be used to purchase the required
machinery.

Explain each of the following sources of finance, giving two advantages and two
disadvantages of each source to Power Limited.
a.) Debentures (loan notes) {5}
b.) Convertible loan stock {5}
c.) Hire purchase {5}
d.) Operating lease {5}
e.) Debt factoring {5}

QUESTION 4

4. a. identify any two users of accounting information. {2}

b. Explain the meaning of the following accounting concepts:
i. Going concern concept
ii. The realisation concept
iii. The prudence concept
iv. The consistency concept {8}