ZIMBABWE SCHOOL EXAMINATIONS COUNCIL

General Certificate of Education Ordinary Level

PRINCIPLES OF ACCOUNTS 7112/1

NOVEMBER 1999 3 hours

Section A
 Answer all questions in this section.

1. Jeffrey and Malcolm are in partnership as general dealers. Their

partnership agreement includes the following provisions:

(i) Profits and losses are to be shared equally.

(ii) Interest is allowed on capital at 10% per annum.
(iii) Interest is charged on drawings at 5% per annum.
(iv) Jeffrey is emitted to a managerial salary of $4 000 per annum.

The following Trial Balance was extracted from the partnership books
on 31 March 1999 after the Trading and Profit and Loss Account had
been prepared:

Dr Cr
$ $
Profit and Loss Account (Net profit for the year) 22 700
Cash at Bank 5 100
Petty Cash 400
Trade debtors 9 200
Trade creditors 6 120
Provision for Bad Debts (31 March 1999) 460
Insurance prepaid 720
Rent owing 960
Salary (Paid to Jeffery during the year) 3 400
Stock (31 March 1999) 7 160
Motor van (cost $50 000) 49 000
Furniture and Fittings (cost $17 000) 13 600
Capital Accounts (1 April 1998): Jeffrey 36 000
Malcolm 32 000
Drawings Accounts: Jeffrey 4 800
Malcolm 5 200
Current Accounts (1 April 1998): Jeffrey 1020
Malcolm 660 ______
99 260 99 260

(a) Prepare the Appropriation Account for the year ended 31 March 1999.
[7]
(b) Prepare the Balance Sheet as at 31 March 1999 showing as much
detail as possible including partners’ Current Accounts details. [17]

2. (a) W. Mwale owns a small hardware shop. In an attempt to

ascertain his profit or loss for the year ended 31 December 1998, he
prepared the following statement:

Trading Statement

$ $ $ $

Opening stock 3 640 Sales 63 900

Less Closing stock 3 420 220 less Purchases 30 900 33 000
Carriage Inwards 1 375 Returns Outwards 630
Carriage Outwards 1 645 Discount Received 1 850
Salaries and Wages 12 000 Less Disc. Allowed 1 395 455
General Expenses 2 450
Rent and Rates 1 575
Electricity 1 285
Shop fixtures 4 400
Drawings 2 850
Profit 6 285 ______
34 085 34 085

You are required to prepare Mwale’s final accounts in proper form to show
his profit or loss for the year. [6]

(b) For each of the transactions given below, name the Subsidiary Book
used, the Account to be debited and the Account to be credited.

Give your answers in the form of a table as shown below.

An example has been done for you.

Example: Bought goods on credit for $800 from J Lunga.

Subsidiary Book Account debited Account credited

Purchases Journal Purchases J Lunga
(i)
(ii)
etc

(i) Bought stationery for $650 on credit from KK Stationers. The

stationery was for resale.
(ii) Received an invoice for $360 from Reliable Transport for carriage on
goods bought.
(iii) The proprietor took $100 from petty cash for private use.
(iv) Paid $450 by cheque to a creditor, ABC Wholesalers.
(v) Disallowed cash discount amounting to $50 in respect of a
dishonoured cheque previously received from a customer, L Mukaro.
(vi) Sold goods on credit to B Bulle for $800 less 24% trade discount.
(vii) Withdrew $600 cash from the bank for office use.
(viii) Received a credit note for $250 from Suppliers Limited for a
reduction in purchase price on soiled goods. [12]

3. S. Ngwenya extracted a Trial Balance on 30 September 1999 which

failed to agree by $450, a shortage on the debit side. A Suspense
Account was opened for the difference.

The following errors were subsequently located:

(i) The purchases day book was undercast by $100.

(ii) No entry was made in the books in respect of goods valued at
$295 returned to Supplies International.
(iii) The Provision for Bad Debts account balance was calculated as
$255 instead of $265.
(iv) A cheque payment of $200 for Ngwenya’s private electricity
bill was posted to the business Electricity Account.
(v) The total of the discount allowed column in the Cash Book
$360 was not posted to the ledger.

(a) Draft journal entries to correct the above errors. (Narrations are not
required). [10]

(b) Prepare the Suspense Account. [2]

(c) State the main purpose of a Trial Balance. [2]

4. (a) On 1 January 1998, the books of Thabani Social Club showed
the following:

Amount owing for subscriptions $360

Subscriptions received in advance $ 90

During 1998 subscriptions received in cash were $2 210. This

amount included $180 for 1999.

On 31 December 1998 subscriptions owing amounted to $240.

You are required to prepare the Subscriptions Account showing

clearly the amount transferred to the Income and Expenditure
Account on 31 December 1998.

Pay special attention to dates and details. [6]

(b) The following information was extracted from the books of N.

Tapfuma, a commuter omnibus operator:

$
Stock of fuel on 1 July 1998 700
Fuel bought for cash during the year 1 900
Purchase of fuel on credit from City Service Station 20 000
Stock of fuel on 30 June 1999 1 100

You are required to prepare the Motor Fuel Account showing clearly
the amount transferred to the Profit and Loss Account on 30 June
1999.

Pay special attention to dates and details. [6]

(c) Give the information represented by each of the following balances

after final accounts have been prepared:

(i) A debit balance in a packing Materials Account.

(ii) A credit balance in a Salaries Account.
(iii) A debit balance in a Bank Account
(iv) A credit balance in a Rent Received Account.
(v) A credit balance in a Provision for Depreciation Account. [5]
 Section B

Answer two questions from this section.

5. The following information was taken from the books of Alpha

Limited:

Authorized and Issued Capital $

500 000 Ordinary Shares of $1 each 500 000

400 000 6% Preference Shares of $1 each 400 000

2 000 8% Debentures of $100 each 200 000

Reserves

General Reserve 20 000

Profit and loss Account, 1 January 1998 22 000

During 1998, an interim dividend of 5 cents per share was paid on

Ordinary Shares.
The net profit for 1998 was $95 600.
On 31 December 1998 the directors recommended that:
(i) the General Reserve be increased to $30 000.
(ii) a full year’s dividend be paid on Preference Shares and a final
dividend of 6 cents per share be paid on Ordinary Shares.

(a) Prepare the Profit and Loss Appropriation Account for the year ended
31 December 1998. [6]

(b) Prepare a Balance Sheet extract showing the details and total of the
shareholders funds. [7]

6. On your answer paper, write down only the word(s) or figure(s)

required to complete each of the following statements:

(a) Interest charged on a debtor’s overdue account is posted to the

_______________ side of his account.
 (b) A machine was purchased for $20 000 on 1 January 1997.
depreciation is charged at 20% per annum using the
diminishing balance method. The depreciation charge for the
year ended 31 December 1996 is $ _______________.

(c) A debit balance in a sole trader’s capital account shows that the
business is __________________.

(d) Sales Ledger balances set off against Purchases Ledger

balances are recorded on the debit side of (i)____________
control Accounts and on the credit side of the (ii)
_____________ Control Accounts.

(e) If a purchase of goods for $980 from a supplier is entered in the

books as $890, this is an error of _______________.

(f) The document issued to a debtor when he pays his account is

called a ______________.

(g) A statement that shows the financial position of a business on a

given date is called a ______________.

(h) If turnover for the year is $60 000 and the Gross Profit for the
same period is $15 000, the margin is (i) ____________ % and
the mark – u is (ii) _______________ %.

(i) In a hardware shop, a delivery van is a (i) ____________ asset

that arises from (ii) _____________ expenditure. [13]

7. Mhofu’s Cash Book showed a bank overdraft of $645 on 30 June

1999 but the bank statement of the same date showed a different balance.

On comparing the Cash Book with the bank statement, the following
discrepancies were noted:

(i) An account of $1 370 paid into the bank had not yet appeared
onteh bank statement.
(ii) Cheques amounting to $860 issued to creditors had not been
presented to the bank for payment.
 (iii) A cheque for $210 received from M. Gufu which had been paid
into the bank had been returned marked “Refer to drawer”. No
action had yet been taken by Mhofu to deal with this item.
(iv) The bank had received by credit transfer (bank giro) $ 90 due to
Mhofu from S and A Consultants.
(v) Cash deposited into the bank amountito $390 had been recorded
in the Cash Book as if it was cash withdrawn from the bank for
office use.
(vi) The following charges raised by the bank had not been recorded
in the Cash Book:
Bank charges $80
Interest on overdraft $55
(vii) The bank had credited Mhofu’s account with $320 in error.

Required

(a) An up-dated Cash Book. [6]

(b) A correctly headed statement to reconcile the adjusted Cash Book

balance with the Bank Statement balance. [7]