ZIMBABWE SCHOOL EXAMINATIONS COUNCIL

General Certificate of Education Ordinary Level

PRINCIPLES OF ACCOUNTS 7112/1

JUNE 2000 3 hours

 Section A

Answer all questions in this section.

1. K. Khumalo started business as an import Merchant on 1 January

1999. The following trial balance was extracted from his books on 31
December 1999.

Dr Cr
$ $
Capital 120 000
Drawings 9 600
Debtors 10 500
Creditors 5 000
Sales 82 550
Purchases 58 000
Customs duty 2 150
Freight charges 2 900
Stationery 500
Rates and insurances 4 750
Bank 400
Salaries and wages 10 000
Sundry expenses 3 000
Bad debts 300
Discounts allowed 200
Discount received 900
Rent received 8 000
Premises 105 000
Fixtures and fittings at cost 1 Jan, 1999 10 800
Bank overdraft 2 350
Cash in hand 700 `
218 800 218 800

The following additional information is to be taken into account:

1. Stock on 31 December 1999 was valued at $5 600.

2. Warehouse wages of $3 000 were included in the amount for
salaries and wages.
3. Stock of stationery on 31 December 1999 was valued at $150.
4. Insurance paid in advance amounted to $250
 5. Depreciation is provided for as follows:

Premises at 2% per annum,

Fixtures and fittings at 5% per annum,

6. A provision for bad debtors of 5% of debtors is to be created.

(a) Prepare the Trading and Profits and Loss Accounts for the year
ended 31 December 1999. [13]

(b) Prepare the Balance Sheet as at that date. [12]

2. The following balance appeared in the ledger of B. Muleya on 1 April

2000.

$
T. Moyo (Debtor) 480
Samba Wholesalers (Creditor) 1 200

During the month of April, the following transactions took place:

April 2. T. Moyo settled his March account in full with a cheque

payment of $450.
4 A cheque was sent to Simba Wholesalers for the amount
owing on 1 April, less 5% each discount.
7 Bought goods on credit from Simba Wholesalers for $1
500, less 25% trade discount.
10 The cheque received from T. Moyo on 2 April was
returned by the bank marked ‘Refer to drawer’. The
discount was disallowed.
14 T.Moyo paid the amount owing in cash.
15 Returned goods with a list price of $100 to Simba
Wholesalers. The goods were bought on 7 April.
20 Sold goods on credit for $500 to T. Moyo.
25 Paid Simba wholesalers $600 by cheque.

Prepare the ledger accounts of:

(a) T. Moyo, [9]

 (b) Simba Wholesalers. [8]

Balance the accounts on 30 April 2000.

Pay special attention to dates and details.

3. (a) Given below is information extracted from the books of F.

Flowers, a furniture dealer:

$
(i) Cost of business premises 300 000
(ii) Legal costs or buying the premises 5 000
(iii) Repairs to office furniture 1 500
(iv) Cost of materials used in extending the buildings 10 000
(v) Cost of re-decorating the premises 15 000
(vi) Carriage costs on furniture bought for resale 3 000
(vii) Purchase of delivery van on credit from City Motors 50 000
(viii) Cost of building on additional toilet 60 000
(ix) Property rates for the year 2 500
(x) Wages of workers engages in extending the building 25 000

You are required to classify the above items (i) to (x) into revenue
expenditure and capital expenditure.

Do not re-write the statement. Number your answers in the same order
as shown in the questions (i) to (x). [10]

(b) Show the journal entries necessary to record the following

transactions for the first week of March 2000 in the books of C.
Davies:

2000
March 1. R. Smart is unable to pay her debt of $500 but
gives a typewriter valued at $350. The balance is
written off as irrecoverable.
3. Bought stationery on credit from Super Books for
$2000.
5. C. Davies took goods valued at $75 out of the
business stock for his own use. [8]
4. C. Mazhambe prepared the following Trial Balance as on 31 March
2000.

Dr Cr
Capital (1 April 1999) 20 000
Drawings 9 000
Fixtures and fittings 5 600
Debtors 9 500
Creditors 4 700
Stock (1 April 1999) 7 900
Cash at Bank 8 640
Sales 96 700
Purchases 65 500
General expense 15 760
121 900 121 400

As the Trial Balance totals did not agree, a Suspense Account was
opened fro the difference. The following errors were later discovered:

1. The purchase of additional fixtures and fittings for $400 had

been posted from the Cash Book to the Purchases Account.
2. The Sales Day Book had been overcast by $200.
3. A sale to B. Lec had been correctly entered in the Sales Day
Book as $227 but was wrongly posted to his account as $272.
4. The purchase of goods from M. Sakala for $250 had been
posted to the wrong side of her account.
5. An item of $148 had been debited twice in the General
Expenses Account.
6. The creditors total of $4 709 had been wrongly entered in the
Trial Balance as $4 700.

(a) Write up the Suspense Account. [3]

(b) Prepare a corrected Trial Balance. [7]
(c) Name any four errors that are not revealed by a Trial Balance.
[4]
 Section B

Answer any two questions from this section.

5. The following information was extracted from the books of S. Mukai:

2000 $
January 1 Total debtors 1 500
January 31 Sales for cash 15 600
Sales on credit 12 500
Total receipts from cash and credit
customers 25 740
Discounts allowed to credit customers 530
Returns from credit customers 1 250
Interest charged on customers’
overdue accounts 80
Bad debts written off 120
Refunds to cash customers 150
Debit balances in the Sales Ledger set
off against Purchases Ledger balances 100
Sales Ledger credit balances 200

(a) Prepare the Sales Ledger Control Account for the month of
January. [11]

(b) Give two advantages of keeping Control Accounts [9]

6. On 31 December 1999, the following balances were extracted from
the books of Toy Products Limited:
$
Stock at 1 January 1999
Raw materials 5 400
Work in progress 4 900
Finished goods 7 200
Sales for the year 69 000
Purchases of raw materials 16 500
Manufacturing wages 19 100
Royalties 2 800
Carriage inwards 700
Factory overheads 17 600
Stock at 31 December 1999
Raw Materials 5 900
Work in progress 5 200
Finished goods 7 950

(a) Prepare the Manufacturing Account for the year ended 31

December 1999 showing clearly within the account the cost of
raw materials consumed, the prime cost and the production cost
of finished goods. [11]

(b) Prepare the Trading Account for the year ended 31 December
1999. [2]
7. On 31 December 1999, T. Posani acquired the business of R Soko.
The Balance Sheet of R. Soko at 31 December 1999 was as follows:

$ $
Land and buildings 140 000 Capital 196 000
Fixtures and fittings 37 500 Trade creditors 10 000
Stock 17 500
Trade debtors 7 000
Cash at bank 4 000
206 000 206 000

T. Posani took over all the assets and liabilities except cash at bank.

The purchase price of the business was $210 000 and this was paid by
cheque on 31 December 1999.

On 1 January 2000, T. Posani invested $2 500 additional cash. He also

brought into the business fixtures and fittings and a motor van valued
at $10 000 and $55 000 respectively.

You are required to show:

(a) a calculation of goodwill, [5]

(b) T. Posani’s Balance Sheet as at 1 January 2000, [6]
(c) a calculation of the current (working capital) ratio at 1 January
2000. [2]