Examiner’s Report and Model Answers for

Book-keeping

FIRST LEVEL
Series 2 (Code 1006) 2000

LCCI Examinations Board

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The London Chamber of Commerce and Industry Examinations Board provides Model Answers to help candidates gain a general understanding of the standard required. The book may not be lent. other than that in which it is published. recording or otherwise without prior written permission of the Publisher. Note LCCIEB reserves the right not to produce an Examiner’s Report. The Board accepts that candidates may offer other answers that could be equally valid. mechanical. no part of this publication may be reproduced. printed and bound by the London Chamber of Commerce and Industry Examinations Board. without the prior consent of the Publisher. 1 . Typeset. stored in a retrieval system or transmitted in any form or by any means. hired out or otherwise disposed of by way of trade in any form of binding or cover. if too few candidates were involved to make an Examiner’s Report meaningful. The contents of this booklet are divided into 5 elements: (1) General Comments – assessment of overall candidate performance in this examination. providing general guidance where it applies across the examination as a whole – reproduced from the printed examination paper – summary of the main points that the Chief Examiner expected to see in the answers to each question in the examination paper – constructive analysis of candidate error. electronic. © LCCI CET 2000 All rights reserved.Book-keeping First Level Series 2 2000 How to use this booklet Examiners’ Reports and Model Answers have been developed by LCCIEB to offer additional information and guidance to Centres. photocopying. resold. either for an examination paper as a whole or for individual questions. teachers and candidates as they prepare for LCCIEB examinations. additional guidance relating to individual questions or to examination technique (2) (3) (4) Questions Model Answers Examiner’s Report (5) Helpful Hints Teachers and candidates should find this booklet an invaluable teaching tool and an aid to success. areas of weakness and other comments that apply to each question in the examination paper – where appropriate.

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It is important. Particular attention should be paid to presentational matters such as ledger account narratives.Book-keeping First Level Series 2 2000 GENERAL COMMENTS The performance at this examination produced a pass rate broadly in line with others in recent series. It is here that a candidate learns the good habits necessary for success not only at this First Level but also at higher levels. The following comments are intended to be of help to both candidates and tutors alike: Each of the 4 set questions should be answered. Even though a candidate may find a particular question difficult. an attempt should always be made at an answer as marks are usually available for such things as headings and preliminary calculations. for example. 3 . Examiners prefer to pass rather than fail a candidate and are always looking for justifying evidence. First Level Book-keeping represents an introduction to the subject. to remember that the narrative in a ledger account indicates where the opposite side of the double entry is to be found. Sloppy and incomplete work will lead to a heavy loss of marks in the examination. An incorrect answer can still earn a substantial proportion of the available marks and it is therefore important for a candidate to show all of their workings and thus enable the Examiner to award those marks. dates and the headings for final accounts.

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record the entries in the accounts of the two debtors and two creditors. (3 marks) (Total 25 marks) (c) 5 . REQUIRED (a) Show the entries for the above transactions in the: (i) (ii) (iii) (b) Purchases Day Book Sales Day Book Sales Returns Day Book (7 marks) From the above transactions. subject to a trade discount of 12 2 %. subject to a trade 1 discount of 10% and a cash discount of 2 2 % for payment within 30 days. Balance the accounts at 30 April Year 9. 4 April 7 April 1 Sold goods on credit to M Foxley at a list price of £320. subject to a trade discount of 12 2 %. The following details are from the books of Delia Tremett: Year 9 2 April Bought goods on credit from County Services at a list price of £480. (15 marks) Show the transfer of the totals of the three Day Books to the respective General Ledger Accounts at 30 April Year 9. at a list price of £480. 20 April 21 April 24 April 29 April 30 April Sold goods to M Foxley at a list price of £600. Bought goods on credit from Kingseast Limited at a list price of £360. Received a cheque from M Foxley in settlement of the invoice dated 20 April. Received a cheque from M Foxley in settlement of the invoice dated 4 April. Sent Kingseast Limited a cheque in settlement of the invoice dated 13 April. She decided to offer to credit customers a cash 1 1 discount of 2 2 % for payment within 14 days of the sale or 1 4 % for payment within 15 to 30 days. subject to a trade discount of 15%.Book-keeping First Level Series 2 2000 QUESTION 1 Delia Tremett commenced in business on 1 April Year 9. 10 April 13 April K Weston returned goods purchased on 7 April with a list price of £80. Sent County Services a cheque in settlement of the invoice dated 2 April. 1 Sold goods on credit to K Weston. subject to a trade 1 1 discount of 15% and a cash discount of 2 2 % for payment within 14 days or 1 4 % for payment within 15 to 30 days.

00 280.00 1.00 738.00 Year 9 10 April 30 April Sales Returns Balance c/d £ 70.00 350.50 497.00 510.00 420.00 790.00 £ 280.00 Bank Discount allowed Bank Discount allowed £ 276.75 790.00 350.210.00 6 CONTINUED ON NEXT PAGE .50 3.Model Answer to Question 1 (a) (i) Year 9 2 April 13 April County Services Kingseast Limited306.00 420.00 420.00 Purchases Day Book £ 432.00 To Purchases Account Sales Day Book (ii) Year 9 4 April 7 April 20 April M Foxley K Weston M Foxley To Sales Account Sales Returns Day Book (iii) Year 9 10 April K Weston To Sales Returns Account £ 70.00 (b) Year 9 4 April 20 April Sales Sales £ Sales Ledger M Foxley Year 9 21 April 21 April 30 April 30 April K Weston Year 9 7 April 1 May Sales Balance b /d £ 420.25 12.00 510.

00 (c) General Ledger Purchases Year 9 30 April Sundries £ 738.80 432.00 Year 9 2 April Purchases £ 432.00 Year 9 13 April Purchases £ 306.00 Sundries £ 1.210.Model Answer to Question 1 continued Purchases Ledger County Services Year 9 29 April 29 April Bank Discount received £ 421.00 306.20 10.65 306.00 Kingseast Limited Year 9 24 April 24 April Bank Discount received £ 298.00 432.35 7.00 7 .00 Sales Year 9 30 April Sales Returns Year 9 30 April Sundries £ 70.

Sales were therefore posted to the credit of the personal accounts and returns and cash received to the debit side. lost 1 mark for each error. Common errors were: (i) Producing ledger accounts in part (a) rather than day books.Examiner’s Report on Question 1 Many candidates provided good answers to this question and as a result they achieved high marks. such as ledger accounts in place of day books or journals. This resulted in the loss of between 1 and 7 marks. This resulted in the loss of the entire 7 marks allowed for the section. will not impress the Examiner but will result in the loss of marks. Simply repeating the name of the account in which the entry is appearing will fail to earn any marks even though the figure being entered is both correct in value and entered on the correct side of the account. Sales and Sales Returns Accounts and. Question 1 Helpful Hints • Candidates must provide the Examiner with what the question requires. (ii) Deducting settlement discount when calculating the value of invoices to be included in the day books. Understand what is required to provide adequate descriptions in ledger accounts. This resulted in the loss of 1 mark for each occurrence. a number of candidates were guilty of reversing entries in the Purchases. however some candidates were guilty of reversing the entries. • 8 . (v) In part (c). This resulted in the loss of all the available 15 marks. Descriptions were often inadequate and this also resulted in the loss of marks. (iii) Part (b) required the posting of the day books to accounts in the Sales Ledger. as a consequence. Offering unrealistic alternatives. (iv) Candidates frequently rounded up cash discount values to produce whole pounds and no pence.

After investigation he found the following errors: (4) (5) (6) (7) REQUIRED Prepare Journal entries. Henry Small. James Moorhead paid a deposit of £4.QUESTION 2 James Moorhead. (5). (25 marks) A payment of £738 to a creditor. goods which had been purchased during Year 5. for his own private use.700 from Cheshunt Motors. had the following transactions during the financial year ended 31 December Year 5. At 31 December Year 5. 9 . at 31 December Year 5. for £510. (2) and (3) to correct. T Larken. had been posted to the debit of Discount Received Account. The total of the discount column on the credit side of the Cash Book. a debtor. £63. paid £270 towards a debt of £630. Rent receivable of £650 for the month of November had been correctly entered in the Cash Book but was posted to the credit of Rent Payable Account.000 by cheque. a trader. (6) and (7). the errors stated in (4). had been posted to another creditor’s account in the name of K Ladburn. The payment by cheque of an invoice for £465 for motor vehicle repairs had been recorded correctly in the Cash Book but had been debited to Motor Vehicles Account. (1) (2) (3) 17 May 23 July 11 Oct Purchased a motor vehicle for £13. without narrations: (a) (b) to record each of the transactions (1). James Moorhead prepared a Trial Balance but it did not balance. the balance of the purchase being on credit. The balance of the debt was written off as irrecoverable. James Moorhead took from stock.

Model Answer to Question 2 James Moorhead Journal Year 5 (1) 17 May Motor vehicle Bank Cheshunt Motors Bank Bad Debts Henry Small Drawings Purchases T Larken K Ladburn Motor vehicle repairs Motor vehicles Discount received (7) 31 Dec Rent payable Rent receivable 650 650 Dr £ 13.700 Cr £ 4.000 9.700 270 360 630 510 510 738 738 465 465 — 126 (2) 23 July (3) (4) (5) (6) 11 Oct 31 Dec 31 Dec 31 Dec 10 .

Common errors made by candidates were: (i) Reversing journal entries and thereby doubling the effect of the original error. A half mark would also have been lost for every other account incorrectly/inadequately named. for example. 1 mark was lost. This would have resulted in the loss of all marks. which simply resulted in the discount not being recorded at all. Question 2 Helpful Hints • • • Questions of this type appear regularly at First Level and candidates should therefore be prepared to tackle them. It is also incorrect to credit the Stock Account. (ii) Incorrect usage of account names. Debt Gone Bad Account. The loss of 1½ marks would have resulted from crediting sales or stock. This was the case in respect of the Discount Received Account where a required credit entry of £63 was incorrectly posted as £63 debit. This resulted in the loss of all the marks available for the entry/entries concerned. It is often useful to draw up simple T accounts that reflect the entry/entries described in the question. 11 . As a result. (iii) Goods removed by an owner for his/her own personal use should be credited to the Purchases Account and not to the Sales Account. (iv) An original entry placed on the wrong side of an account will need to be “doubled up” in order to correct it. Many candidates corrected this error by posting a credit of £63 to the account. Journal entries examine a candidate’s knowledge of double entry without the need to spend time on neatly drawing up ledger accounts. Remember that simply repeating existing incorrect entries will result in a “doubling up” of the error and a heavy loss of marks. (v) Far too many candidates produced ledger accounts rather than journal entries. is not an acceptable alternative for Bad Debts Account and would have resulted in the loss of half a mark.Examiner’s Report on Question 2 Candidates often find questions involving journal entries difficult to tackle but such questions are popular with Examiners. This will help the candidate to understand what entries are needed to correct any errors.

were: Cash Bank £236 (Current Account) £6.800 £ 145 412 £ 980 1.QUESTION 3 On 1 May Year 4. a trader. 12 CONTINUED ON NEXT PAGE . the Cash Book balances of Claire Stewart. and Claire Stewart took advantage of the cash discount available Amount Cash discount Amount owed allowed paid £ £ 22 May 28 May 29 May R Felton K Dougall D Beaney £ 78 800 100 1. on 27 May Claire Stewart drew a cheque for £5.000 on the firm’s Current Account and paid this into the firm’s Deposit Account at the bank.920 560 740 280 1 22% 546 703 273 5% 2 % 1 2 (3) Cash payments 7 May 12 May 14 May 20 May 26 May Stationery Into bank Drawings Into bank Into bank (4) Other payments made by cheque 10 May 30 May Equipment repairs Salaries (5) Cash sales amounted to 11 May 19 May 25 May In addition.500 1. the following transactions took place: (1) Cheques were received from the following debtors who all took advantage of the cash discount available Amount Cash discount Amount owed allowed received £ £ 17 May 21 May 27 May 29 May (2) T Lake W Ruscombe N Paul F Anderson 320 960 240 1.760 1.280 1 22% 312 912 234 1.216 5% 2 % 5% 1 2 Cheques were paid to the following suppliers.154 (Dr) During May Year 4.

bringing down the closing balances. (22 marks) Prepare the Bank Deposit Account for May Year 4 in the General Ledger. On 1 May Year 4 the balance on the Bank Deposit Account was £11.208 (Dr) (3 marks) (Total 25 marks) (b) 13 .QUESTION 3 CONTINUED REQUIRED (a) Write up the 3-column Cash Book of Claire Stewart for May Year 4.

928 6 64 48 1.000 703 273 412 800 100 1.800 234 1.500 546 Cash £ 78 145 Title Case Bank £ 14 CONTINUED ON NEXT PAGE .Model Answer to Question 3 (a) Year 4 CLAIRE STEWART CASH BOOK Discount Allowed £ 1 May 11 May 12 May 17 May 19 May 20 May 21 May 25 May 26 May 27 May 29 May Balance b/d Sales Cash T Lake Sales Cash W Ruscombe Sales Cash N Paul F Anderson 5.154 Year 4 Discount Received £ 7 May 10 May 12 May 14 May 20 May 22 May 26 May 27 May 28 May 29 May 30 May 31 May Stationery Equipment repairs Bank Drawings Bank R Felton Bank Bank Deposit K Dougall D Beaney Salaries Balance c/d 618 37 7 14 1.216 8 1.928 5.800 5.500 912 Cash £ 236 980 800 312 Bank £ 6.896 618 12.760 1.849 126 1 June Balance b/d 4.920 1.896 12.849 58 4.

losing the marks available for each one. Pay attention to dates and brought down balances as these will always attract marks. (v) Failure to bring cash and bank balances down to the beginning of the new period.208 1 June Balance b/d Bank Current Balance b/d £ 11. as a result. (ii) Classifying bank entries as cash entries and vice versa and. Question 3 Helpful Hints • • • Examiners will reward a neat presentation but struggle to award marks where a candidate produces untidy and. This resulted in the loss of up to 3 marks.000 16. (iv) Adding the various discounts allowed and discounts received figures to the net cash received and net cash paid amounts and then entering the resultant gross receipts/gross payments in the cash book. A half mark was lost as a result. unreadable work. (iii) Reversing the entries required to record the three cash/bank contras. Common errors made by candidates were: (i) Poor or incorrect descriptions resulting in the loss of the marks allocated to the entry. thereby losing 1 mark.000 transfer to the firm’s Deposit Account which many candidates recorded as being transferred to drawings. entering up the Deposit Account and. as a result. (vi) Many candidates omitted to tackle part (b) of the question. This resulted in the loss of up to 7 marks. 15 . Remember that the details column must state the name of the account in which the opposite side of the double entry will be found. 1 June.208 Year 4 31 May 16. at times. lost 3 marks. An example of this was the treatment of the £5.Model Answer to Question 3 continued (b) General Ledger Bank Deposit Account Year 4 1 May 27 May 16.208 Examiner’s Report on Question 3 The writing up of a cash book usually proves a popular question with candidates and this question was no exception.208 5.208 Balance c/d £ 16.

000 3.240 3. REQUIRED Prepare for Tim Paradine: (a) a Trading and Profit & Loss Account for the year ended 30 June Year 6 (13 marks) (b) the Balance Sheet at 30 June Year 6.940 £1.620 Cr £ 212. 1 July Year 5 Purchases and sales Returns inwards and outwards Debtors and creditors Bank Cash in hand Fixtures and fittings at cost Provision for depreciation on fixtures and fittings Motor vehicles at cost Provision for depreciation on motor vehicles Discounts Wages and salaries Insurances Motor vehicle running costs Advertising Bad debts written off Provision for doubtful debts Drawings Capital The following points applied at 30 June Year 6: (1) Closing stock valued at cost (2) Wages and salaries accrued (3) Insurance prepaid £13.QUESTION 4 The following Trial Balance was extracted from the books of Tim Paradine at 30 June Year 6: Dr £ Stock.612 147.510 125 21.200 1. (5) It was decided to write off a further £550 as a bad debt and to adjust the provision for doubtful debts to 4% of the remaining balance of debtors.12 2 % on cost Motor vehicles .520 5.790 1.630 3.480 £360 4.350 5.40% on reducing balance. (12 marks) (Total 25 marks) 16 .100 730 15.255 313.640 32.497 73.600 313.350 960 (4) Depreciation was to be provided as follows: 1 Fixtures and fittings .400 36.680 4.380 340 36.497 7.962 8.

720 26.030 13.480 Net Current Assets Financed as follows: Capital Balance at 1 July Year 5 Add Net Profit Less Drawings 17 .400 35.303 79.675 Motor vehicles 11.620 14.520 Accrual (wages and salaries) 1.280 Gross Profit b/d Discount received £ 4.640 33.380 3.800 1.612 Sales Less Returns inwards £ 212.100 1.000 44.200 212.703 74.290 3.820 79.940 134.655 Less Amounts due within 1 year (Current Liabilities) Creditors 8.520 Net Profit 147.255 1.303 15.375 17.720 3.940 34.368 360 5.958 Net book value £ 13.000 57.290 212.400 36.418 148.303 10.195 17.303 74.820 (b) Fixed Assets Balance Sheet at 30 June Year 6 Cost £ Fixtures and Fittings Motor vehicles Current Assets Stock Debtors Less Provision for doubtful debts Prepayment (insurance) Bank Cash 21.630 340 212.962 143.Model Answer to Question 4 (a) Tim Paradine Trading and Profit & Loss Account for the year ended 30 June Year 6 £ Stock.432 Aggregate depreciation £ 8.200 1. 1 July Year 5 Purchases Less Returns outwards Less Stock 30 June Year 6 Cost of goods sold Gross Profit c/d Discount allowed Wages and salaries (+1.745 13.600 £ 73.958 £ 17.320 1.025 18.280 30.790 Advertising Bad debts written off (+550) Provision for doubtful debts 472 Depreciation: Fixtures and fittings 2.510 125 54.090 78.290 78.480) Insurances (-360) Motor vehicle running costs 4.

This resulted in the loss of 1 mark. (iv) Including accruals under Current Assets and prepayments under Current Liabilities/Creditors – amounts due within one year resulted in the loss of 2 marks. This resulted in the loss of up to 3 marks. (vii) The straight line method of calculating depreciation was frequently applied to motor vehicles despite the question stating that the reducing balance method was to be used. This resulted in the loss of up to 2 marks. (v) Those candidates who reflected the adjustment correctly. Balance Sheet (i) (ii) Failure to increase the aggregate depreciation by the amount charged in the Profit & Loss Account resulted in the loss of a maximum of 2½ marks. given trial balance figures. (iii) A large number of candidates added prepayments to. the same mistakes keep recurring. (iv) The Provision for Doubtful Debts was often included at the revised account balance.Examiner’s Report on Question 4 The preparation of final accounts is examined very regularly at this level but. Cost of Sales must be clearly shown or the loss of marks will result. (vi) Discounts allowed and discounts received were often reversed resulting in the loss of 1 mark. Common errors made by candidates at this examination were: Using incorrect titles and thereby losing an easy 1½ marks. and deducted accruals from. It is only the difference between the opening and the closing balance that should appear in the Profit & Loss Account. 18 . This error resulted in the loss of 1 mark. (iii) Omitting to reduce the value of Debtors by the value of the additional bad debt write off resulted in the loss of 1 mark. (ii) The Cost of Goods Sold or. Failure to do so at this examination resulted in the loss of up to 2 marks. frequently omitted to deduct the additional bad debts before calculating the revised provision. The Trading and Profit & Loss Account reports on the results of trading for the year ending whilst the Balance Sheet reports on the value of assets and liabilities at the specific year end date. unfortunately. The same mistake was made in relation to the Provision for Doubtful Debts thus resulting in the loss of 1 mark. Trading and Profit & Loss Account (i) Returns inwards and returns outwards should be deducted from sales and purchases respectively and the result clearly shown as a separate and identifiable figure. alternatively. (v) Failing to show sub-totals for both Current Assets and Current Liabilities resulted in the loss of 2 marks.

Although a horizontal format is acceptable for the Balance Sheet. Accruals and prepayments must be accurately dealt with not only in the Profit & Loss Account but also in the Balance Sheet.Question 4 Helpful Hints • • • Given the popularity of this type of question. The same comment applies to both depreciation and doubtful debts. 19 . Pay close attention to the presentational style used in this model answer. the vertical format allows for the calculation of Net Current Assets and is to be preferred. candidates should thoroughly revise the topic.

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