Surname

Centre
No.

Initial(s)

Paper Reference

6 0 0 1

Candidate
No.

0 1

Signature

Paper Reference(s)

6001/01

Examiner’s use only

London Examinations GCE

Team Leader’s use only

Accounting (Modular Syllabus)

Advanced Subsidiary/Advanced Level
Unit 1: The Accounting System and

Costing
Monday 18 January 2010 – Morning
Time: 3 hours

Question Leave
Number Blank

1
2
3
4
5

Materials required for examination

Items included with question papers

6

Nil

Source booklet

7


Instructions to Candidates

In the boxes above, write your centre number, candidate number, your surname, initial(s) and signature.
Answer FIVE questions, choosing TWO from Section A and THREE from Section B.
Indicate which question you are answering by marking the box ( ).
If you change your mind, put a line through the box ( ) and then indicate your new question with
a cross ( ).
All calculations must be shown.
Write your answers in the spaces provided in this question paper.
Do not return the source booklet with the question paper.

Information for Candidates

The marks for individual questions and the parts of questions are shown in round brackets: e.g. (2).
The total mark for this paper is 200.
There are 36 pages in this question paper. Any blank pages are indicated.
Calculators may be used.
The source material for use with questions 1 to 7 is in the enclosed source booklet.

Advice to Candidates

Write your answers neatly and in good English.

Total

This publication may be reproduced only in accordance with
Edexcel Limited copyright policy.
©2010 Edexcel Limited.
Printer’s Log. No.

H36389A

W850/6001/57570 1/1/1/1/

H36389A_Paper_GCE_AS_Accounting_1 1

*H36389A0136*

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03/09/2009 09:14:07

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SECTION A
Answer TWO questions from this section.
If you answer question 1, put a cross in this box (

).

Source material for question 1 is on pages 2 and 3 of the source booklet.
1. (a) Prepare for Highflyer, for the year ended 31 December 2009, the:

(i) manufacturing account

(ii) trading and profit and loss account.

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H36389A_Paper_GCE_AS_Accounting_2 2

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*H36389A036*
H36389A_Paper_GCE_AS_Accounting_3 3

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(b) Prepare the balance sheet as at 31 December 2009.

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H36389A_Paper_GCE_AS_Accounting_4 4

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*H36389A036*
03/09/2009 09:14:08

(c) Calculate for the year the cost of production of one solar powered calculator.

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(2)

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(d) Highflyer’s cost of production includes fixed costs and semi-fixed costs.

(i) Define the terms fixed costs and semi-fixed costs.

(ii) Using the manufacturing account of Highflyer, give one example of a fixed cost
and one example of a semi-fixed cost.

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(6)

*H36389A036*
H36389A_Paper_GCE_AS_Accounting_5 5 

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An overseas supplier of solar powered calculators has offered to supply Highflyer at a
price which is 10% lower than the current cost of production of Highflyer. If Highflyer
accepts this offer, it would close its manufacturing unit and concentrate on the sale of solar
powered calculators.

(e) Evaluate whether Highflyer should accept the offer made by the overseas supplier.

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Q1

(Total 52 marks) 

H36389A_Paper_GCE_AS_Accounting_6 6

*H36389A036*
03/09/2009 09:14:08

BLANK PAGE

*H36389A036*
H36389A_Paper_GCE_AS_Accounting_7 7 

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If you answer question 2, put a cross in this box (

).

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Source material for question 2 is on pages 4 and 5 of the source booklet.
2. (a) Prepare the:

(i) journal entries to correct the errors in the accounts

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H36389A_Paper_GCE_AS_Accounting_8 8

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(ii) suspense account.

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*H36389A036*
H36389A_Paper_GCE_AS_Accounting_9 9 

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(b) Re-draft the trial balance after all errors have been corrected.

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10

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*H36389A01036*
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(c) Prepare the profit and loss account for the year ended 30 November 2009.

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*H36389A01136*
H36389A_Paper_GCE_AS_Accounting_11 11

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11

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(d) Evaluate the role of the trial balance in ensuring that all transactions have been
correctly recorded in the books.

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(8)

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Q2

(Total 52 marks)

12

H36389A_Paper_GCE_AS_Accounting_12 12

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BLANK PAGE

*H36389A01336*
H36389A_Paper_GCE_AS_Accounting_13 13

13

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If you answer question 3, put a cross in this box (

).

Leave
blank

Source material for question 3 is on pages 6 to 8 of the source booklet.
3. (a) Prepare the departmental trading and profit and loss account, in columnar format,
showing clearly the profit or loss for each department for the year ended 31 December
2009. A total column is not required.

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H36389A_Paper_GCE_AS_Accounting_14 14

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*H36389A01536*
H36389A_Paper_GCE_AS_Accounting_15 15

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15

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16

H36389A_Paper_GCE_AS_Accounting_16 16

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*H36389A01636*
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(b) Using the accounts of Chin, explain why each of the following is an application of the
accounting term or concept stated:

Application in accounts

(i) Provision for doubtful debts

Accounting term or concept
Prudence concept

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(4)

Application in accounts

(ii) Cost of sales

Accounting term or concept
Accruals concept

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*H36389A01736*
H36389A_Paper_GCE_AS_Accounting_17 17

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17

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Application in accounts

(iii) Premises extension

Accounting term or concept
Capital expenditure

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(4)

Application in accounts

(iv) Wages

Accounting term or concept
Allocation

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(4)

18

H36389A_Paper_GCE_AS_Accounting_18 18

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*H36389A01836*
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In the years 2007 and 2008, the timber department had made losses. If the losses continue,
Chin would consider closing the timber department.

(c) Evaluate the likely impact on Chin’s business of a decision to close the timber
department.

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(8)

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Q3

(Total 52 marks)
TOTAL FOR SECTION A: 104 MARKS

*H36389A01936*
H36389A_Paper_GCE_AS_Accounting_19 19

19

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SECTION B
Answer THREE questions from this section.
If you answer question 4, put a cross in this box (

).

Source material for question 4 is on pages 9 and 10 of the source booklet.
4. (a) Calculate for both 2008 and 2009 the:

(i) gross profit to sales percentage

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(ii) rate of stock turnover

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20

H36389A_Paper_GCE_AS_Accounting_20 20

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(iii) debtors collection period in days

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(iv) return on capital employed

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*H36389A02136*
H36389A_Paper_GCE_AS_Accounting_21 21

21

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(v) liquid (acid test) ratio.

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(b) Comment upon:

(i) the adequacy of liquidity for Tan’s business

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H36389A_Paper_GCE_AS_Accounting_22 22

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(ii) how Tan might improve the liquidity of his business.

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(c) Evaluate the usefulness of ratios when considering the future of a business.

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Q4

(Total 32 marks)

*H36389A02336*
H36389A_Paper_GCE_AS_Accounting_23 23

23

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If you answer question 5, put a cross in this box (

).

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Source material for question 5 is on page 11 of the source booklet.

5. (a) Calculate the:

(i) total salary and wage cost (including employers’ government taxes) paid by
Smith & Co for one year

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(ii) total cost of operating Smith & Co for one year

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H36389A_Paper_GCE_AS_Accounting_24 24

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(iii) rate to be charged to clients for one hour for the services of:

• a partner
• a junior.

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*H36389A02536*
H36389A_Paper_GCE_AS_Accounting_25 25

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25

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(b) Identify four business activities likely to be undertaken by a partner which would not
be directly charged to a client.

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(c) Evaluate the use of hourly rates as a method of charging clients.

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Q5

(Total 32 marks)

*H36389A02736*
H36389A_Paper_GCE_AS_Accounting_27 27

27

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If you answer question 6, put a cross in this box (

).

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Source material for question 6 is on pages 12 and 13 of the source booklet.
6. (a) Explain why goodwill is not normally recorded in the books of a business.

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(4)

(b) Prepare the:

(i) appropriation account of Chong and Dey for the year ended 30 November 2009

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H36389A_Paper_GCE_AS_Accounting_28 28

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(ii) capital accounts of Chong, Dey and Elva recording the year end appropriations
and the admission of the new partner.

You are required to balance the accounts at 30 November 2009, and again after
the introduction of the new partner.

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*H36389A02936*
H36389A_Paper_GCE_AS_Accounting_29 29

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29

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(iii) balance sheet of the new partnership on 1 December 2009.

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(c) Evaluate the decision to admit a new partner to the business, from the view of Chong
and Dey.

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Q6

(Total 32 marks)
30

H36389A_Paper_GCE_AS_Accounting_30 30

*H36389A03036*
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BLANK PAGE

*H36389A03136*
H36389A_Paper_GCE_AS_Accounting_31 31

31

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If you answer question 7, put a cross in this box (

).

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Source material for question 7 is on page 14 of the source booklet.
7. (a) Explain the term net realisable value.

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(4)

(b) Calculate the:

(i) purchases for the period 1 November to 17 November 2009

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H36389A_Paper_GCE_AS_Accounting_32 32

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(ii) sales for the period 1 November to 17 November 2009

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(6)

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(iii) value of the lost and fire damaged stock.

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(12)

34

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“Valuing stock at net realisable value does not comply with accounting concepts and
conventions.”

(c) Evaluate this view.

........................................................................................................................................

........................................................................................................................................

........................................................................................................................................

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(4)

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Q7

(Total 32 marks)
TOTAL FOR SECTION B: 96 MARKS
TOTAL FOR PAPER: 200 MARKS
END

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Paper Reference(s)

6001/01

London Examinations GCE
Accounting (Modular Syllabus)
Advanced Subsidiary/Advanced Level
Unit 1 – The Accounting System and Costing
Monday 18 January 2010 – Morning

Source booklet for use with Questions
1 to 7.
Do not return this booklet with the
question paper.

Printer’s Log. No.

H36389A

*H36389A*

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W850/6001/57570 1/1/1/1/
This publication may be reproduced only in accordance with Edexcel Limited copyright policy. ©2010 Edexcel Limited.

H36389A_Source_GCE_AS_Accounting1 1

03/09/2009 09:20:45

SECTION A
SOURCE MATERIAL FOR USE WITH QUESTION 1
1. Highflyer manufactures and sells solar powered calculators. The following balances remained in
the books of Highflyer at 31 December 2009.

Purchases of raw materials
Production wages
Office wages
Salaries:

Production manager

Office manager
Rent
Sundry factory expenses
Sales
Carriage outwards
Bad debts
Fixed assets:

Plant and machinery at cost

Fixtures and fittings at cost
Provisions for depreciation on:

Plant and machinery

Fixtures and fittings
Provision for doubtful debts
Debtors
Creditors
Bank overdraft
Capital
Drawings
Stock at 1 January 2009:

Raw materials

Work in progress

Finished goods

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H36389A_Source_GCE_AS_Accounting2 2

£
72 500
109 200
33 450
25 000
17 500
18 000
31 700
350 000
3 800
8 100
68 000
26 000
32 000
7 100
2 900
45 000
36 000
5 350
85 000
20 600
4 700
9 200
25 600 

03/09/2009 09:20:45

Additional information:
• Stock at 31 December 2009:

Raw materials
£3 750

Work in progress
£14 000

Finished goods
£30 400
• Production wages £3 850 are accrued and carriage outwards £650 is prepaid.
• Rent is apportioned on the basis of floor area occupied. Manufacturing occupies 2 000 sq m
and the office occupies 500 sq m.
• Office wages include a £750 interest free loan to a member of the office staff, repayable on
28 February 2010.
• Depreciation is charged as follows:

– plant and machinery, 20% per annum using the straight line method

– fixtures and fittings, 15% per annum using the straight line method.
• On 30 December 2009, a debtor owing £4 000 had ceased trading and the decision was made
by Highflyer to write off the amount as a bad debt. No entries had been made in the books by
31 December 2009.
• The provision for doubtful debts is to be maintained at 6% of the remaining debtors.
• During the year Highflyer manufactured 111 000 solar powered calculators.

Required:

(a) Prepare for Highflyer, for the year ended 31 December 2009, the:

(i) manufacturing account

(ii) trading and profit and loss account.

(21)

(b) Prepare the balance sheet as at 31 December 2009.

(c) Calculate for the year the cost of production of one solar powered calculator.

(d) Highflyer’s cost of production includes fixed costs and semi-fixed costs.

(15)
(2)

(i) Define the terms fixed costs and semi-fixed costs.

(ii) Using the manufacturing account of Highflyer, give one example of a fixed cost and one
example of a semi-fixed cost.
(6)

An overseas supplier of solar powered calculators has offered to supply Highflyer at a price which
is 10% lower than the current cost of production of Highflyer. If Highflyer accepts this offer, it
would close its manufacturing unit and concentrate on the sale of solar powered calculators.

(e) Evaluate whether Highflyer should accept the offer made by the overseas supplier.

(8)

(Total 52 marks)
Answer space for question 1 is on pages 2 to 6 of the question paper.

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H36389A_Source_GCE_AS_Accounting3 3  

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SOURCE MATERIAL FOR USE WITH QUESTION 2
2. The trial balance below was extracted from the books of Khimja on 30 November 2009 following
the preparation of the trading account:



£
£

Gross profit
170 000

Capital
36 000

Wages
39 400

Salaries
80 000

Rent
15 500

General expenses
11 700

Debtors and Creditors
21 300
16 500

Bank
8 100

Stock
19 000

Fixed assets:

Motor vehicles
30 000

Office furniture
18 000

Provisions for depreciation:

Motor vehicles
16 000

Office furniture 9 170

Suspense
4 670
       

247 670 247 670

Following the preparation of the trial balance and the trading account the following errors were
discovered:

• Goods costing £3 500 on sale or return from a supplier, Raihan, had been returned on 1 October


2009. No entry had been made in the books of Khimja to record the return.
The stocktake sheets on 30 November 2009 had been overcast by £500.
A payment for general expenses of £980 had been correctly entered in the bank account, but
had been credited to the general expenses account as £890.
A rent payment of £1 500 had been correctly entered in the bank account, but no entry had been
made in the rent account.
A wage bonus of £3 000 had been correctly entered in the bank account, but had been entered
as £3 300 in the wages account.
A salary bonus of 2% of salaries had been paid, but no entry had been made in the salaries
account.
All fixed assets are depreciated at the rate of 15% using the straight line method. A motor
vehicle purchased on 1 December 2006 for £14 000, was sold on 30 November 2009, a cheque
being received for £4 000. No entries had been made in the books to record the sale. Khimja
uses a disposal account.

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03/09/2009 09:20:45

Required:

(a) Prepare the:

(i) journal entries to correct the errors in the accounts

(ii) suspense account.

(18)
(5)

(b) Re-draft the trial balance after all errors have been corrected.

(c) Prepare the profit and loss account for the year ended 30 November 2009.

(d) Evaluate the role of the trial balance in ensuring that all transactions have been correctly
recorded in the books.
(8)

(12)

(9)

(Total 52 marks)
Answer space for question 2 is on pages 8 to 12 of the question paper.

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H36389A_Source_GCE_AS_Accounting5 5  

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SOURCE MATERIAL FOR USE WITH QUESTION 3
3. Chin is a builders’ merchant with three departments: plumbing, electrical and timber.

The following balances were extracted from the books on 31 December 2009:

£
£

Purchases:

Plumbing
58 000

Electrical
65 000

Timber
55 000

Sales:

Plumbing
110 000

Electrical
148 000

Timber
96 000

Wages:

Plumbing
18 000

Electrical
27 000

Timber
35 000

Managers’ salaries
30 000

Stock at 1 January 2009:

Plumbing
14 000

Electrical
16 700

Timber
18 200

Administration expenses
13 300

Rent and heat
8 500

Vehicle running expenses
20 000

Premises extension
45 000

Fixed assets:

Premises
100 000

Equipment
60 000

Delivery vehicle
16 000

Provisions for depreciation:

Premises
15 000

Equipment
27 000

Delivery vehicle
6 000

Debtors and Creditors
59 000
36 000

Provision for doubtful debts
1 950

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Additional information:

• Stock at 31 December 2009:

Plumbing
£12 800

Electrical
£14 300

Timber
£21 100

During
the
year,
Chin
contracted
a builder to carry out a premises extension. In addition to the

£45 000 paid to the builder, Chin supplied timber costing £5 000 for the extension. No entries
had been made in the books to record the transfer of timber.

• Depreciation is charged on cost using the straight line method, as follows:

– premises at the rate of 2%

– equipment 15%

– delivery vehicle 20%.

A full year’s depreciation is charged on assets owned at the end of the year.

• A provision for doubtful debts is to be maintained at the following rates:

Debtors
Debtors
Rate

1 January
31 December

Plumbing
£10 000
£15 000
5%

Electrical
£18 000
£21 000
3%

Timber
£13 000
£23 000
7%

Managers’
salaries,
administration
expenses,
rent
and
heat,
vehicle
running expenses and

depreciation are apportioned to departments on the most appropriate basis from the following
information:

Plumbing
Electrical
Timber

Staff (number)
3
5
7

Use of administration (%)
35
40
25

Use of delivery vehicle (%)
20
20
60

Use of equipment (%)
25
25
50

Area occupied (sq m)
300
250
450

Required:

(a) Prepare the departmental trading and profit and loss account, in columnar format, showing
clearly the profit or loss for each department for the year ended 31 December 2009. A total
column is not required.
(28)

(b) Using the accounts of Chin, explain why each of the following is an application of the
accounting term or concept stated:

Application in accounts

Accounting term or concept

(i) Provision for doubtful debts

Prudence concept

(ii) Cost of sales

Accruals concept

(iii) Premises extension

Capital expenditure

(iv) Wages

Allocation

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H36389A_Source_GCE_AS_Accounting7 7 

(4)
(4)
(4)
(4) 

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In the years 2007 and 2008, the timber department had made losses. If the losses continue, Chin
would consider closing the timber department.

(c) Evaluate the likely impact on Chin’s business of a decision to close the timber department.

(8)

(Total 52 marks)
Answer space for question 3 is on pages 14 to 19 of the question paper.

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H36389A_Source_GCE_AS_Accounting8 8 

03/09/2009 09:20:46

SECTION B
SOURCE MATERIAL FOR USE WITH QUESTION 4
4. Tan is in business buying and selling goods on credit. He is having difficulty paying his creditors
and the bank refuses to allow him an overdraft. The following information relates to the last two
trading years ended 31 December 2008 and 31 December 2009:



Sales

Cost of sales

Expenses

Net profit

2008
£
400 000
280 000
85 000
35 000

2009
£
380 000
285 000
90 000
5 000

120 000
35 000
40 000
30 000
25 000
150 000
10 000

130 000
40 000
55 000
85 000
25 000
120 000
5 000

Fixed assets
Stock
Debtors
Creditors
10% Loan repayable 2015
Capital
Bank

Additional information:

Stock at 1 January 2008, £30 000.

Required:

(a) Calculate for both 2008 and 2009 the:

(i) gross profit to sales percentage

(ii) rate of stock turnover

(iii) debtors collection period in days

(iv) return on capital employed

(v) liquid (acid test) ratio.

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H36389A_Source_GCE_AS_Accounting9 9

(4)
(4)
(4)
(4)
(4)  

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(b) Comment upon:

(i) the adequacy of liquidity for Tan’s business

(ii) how Tan might improve the liquidity of his business.

(2)
(6)

(c) Evaluate the usefulness of ratios when considering the future of a business.

(4)
(Total 32 marks)

Answer space for question 4 is on pages 20 to 23 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 5
5. Smith & Co is a firm of accountants. The firm employs two grades of accounting staff: partners
and juniors. The firm charges for the services of partners and juniors on the basis of hours worked
in preparing the accounts of clients.

The following information is available:

• Smith & Co employs 2 partners and 3 juniors.

Partners
£40 000
• Salaries paid:

Juniors
£16 000

Smith
&
Co
pays
an
additional
25%
of
salaries
in the form of employers’ government taxes.


• The partners and juniors are supported by one administrative assistant who is paid a wage of
£1 000 per month. To this is added 25% of wages in the form of employers’ government
taxes.

• The administrative assistant spends an equal amount of time supporting each partner and each
junior.

• Other expenses for one year are £35 000. The hourly rate charged to clients for each partner
and each junior would be increased by £7 per hour for these expenses.

• It is estimated that hours chargeable to clients in the year will be:

Partners
1 000 hours each partner

Juniors
1 150 hours each junior

Required:

(a) Calculate the:

(i) total salary and wage cost (including employers’ government taxes) paid by Smith & Co
for one year
(4)

(ii) total cost of operating Smith & Co for one year

(iii) rate to be charged to clients for one hour for the services of:

(2)

• a partner
• a junior.

(14)

(b) Identify four business activities likely to be undertaken by a partner which would not be
directly charged to a client.
(8)

(c) Evaluate the use of hourly rates as a method of charging clients.

(4)

(Total 32 marks)
Answer space for question 5 is on pages 24 to 27 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 6
6. Chong and Dey are in partnership sharing profits and losses 3:2. Interest is allowed on capital at
the rate of 4% per annum and Dey is paid a salary of £7 000 per annum. No interest is charged on
drawings. The following balances remained in the books after the preparation of the trading and
profit and loss account for the year ended 30 November 2009:

Net profit
Drawings:

Chong

Dey
Land and buildings
Office equipment
Debtors
Creditors
Bank
Stock
Prepaid expenses
Accrued expenses
Capital:

Chong

Dey

£
21 000 DR
8 000 DR
14 500 DR
30 000 DR
11 000 DR
6 250 DR
13 750 DR
2 000 DR
13 150 DR
600 DR
750 DR
30 000 DR
20 000 DR

Additional information:

• Chong and Dey operate fluctuating capital accounts.
• On 1 December 2009 Chong and Dey agreed to admit Elva as a partner. Elva would bring the

following assets and liabilities into the partnership on that date:

Delivery vehicle
£6 000

Stock
£8 200

Debtors
£4 000

Creditors
£3 200

Bank cheque
£10 000

• Goodwill was valued by Chong and Dey on 30 November 2009 at £60 000. Goodwill is not to
be recorded in the books of the new partnership.

• It was agreed that Chong would reduce his capital by £15 000, taking this sum by cheque on
1 December 2009.

• The new partnership would share profits and losses in the ratio of Chong, Dey and Elva 2:2:1
respectively.

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Required:

(a) Explain why goodwill is not normally recorded in the books of a business.

(b) Prepare the:

(4)

(i) appropriation account of Chong and Dey for the year ended 30 November 2009

(ii) capital accounts of Chong, Dey and Elva recording the year end appropriations and the
admission of the new partner.

(4)

You are required to balance the accounts at 30 November 2009, and again after the
introduction of the new partner.
(13)

(iii) balance sheet of the new partnership on 1 December 2009.

(7)

(c) Evaluate the decision to admit a new partner to the business, from the view of Chong and
Dey.
(4)
(Total 32 marks)
Answer space for question 6 is on pages 28 to 30 of the question paper.

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SOURCE MATERIAL FOR USE WITH QUESTION 7
7. A fire occurred at the business premises of Leila on 17 November 2009. Leila did not keep her
records at the business premises and can therefore provide the following information:

• Balances at 1 November 2009:

Stock at cost
£14 700

Debtors
£16 650

Creditors
£12 500

Transactions
between
1
November
and
17 November 2009:


Receipts from debtors
£117 400

Payments to creditors
£79 000

Cash purchases
£2 800

Balances
at
17
November
2009:


Remaining stock at
net realisable value
£4 850

Debtors
£19 250

Creditors
£14 700

• Leila uses a ‘mark up’ of 50%

Required:

(a) Explain the term net realisable value.

(b) Calculate the:

(4)

(i) purchases for the period 1 November to 17 November 2009

(ii) sales for the period 1 November to 17 November 2009

(iii) value of the lost and fire damaged stock.

(6)
(6)
(12)

“Valuing stock at net realisable value does not comply with accounting concepts and
conventions.”

(c) Evaluate this view.

(4)

(Total 32 marks)
Answer space for question 7 is on pages 32 to 35 of the question paper.

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