LYCEUM INTERNATIONAL SCHOOL

FIRST SEMESTER EXAMINATION - MARCH 2017

PRINCIPLES OF ACCOUNTS
PAPER II
9 (Cambridge)..........

Duration : 2 hours

[Total = 120 marks]

Instructions : Answer ALL questions.

Candidate's name : ........................................................... Admission no : ........................

 1
Grade 9 Principles of Accounts II contd.....
(1) Danbi runs her business from rented premises. The following balances were extracted from
her books on 30 April 2017.
$
Inventory 1 May 2016 4000
Sales 80000
Purchases 62000
Trade receivable (James) 10000
Trade payables 9000
Electricity paid 3000
General expenses 7000
Cash at bank 5000
Drawings 8000
Rent and insurance paid 6000
Equipment at cost 45000
Provision for depreciation of equipment 16000
Capital ?
(a) Using the columns below, prepare Danbi's trial balance as at 30 April 2017, showing
her Capital account balance.
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
(13 marks)
contd.....to page 2
 2
Grade 9 Principles of Accounts II contd.....from page 1
(b) The following transactions related to the account of James for the month ended 31 May 2017.
May 4 Sold goods to James, list price $1500, allowed 15% trade discount.
May 5 James returned goods purchased on 4 May, list price $120.
May 16 James paid the amount owing on 1 May by cheque and was allowed 2% cash
discount.
REQUIRED
(b) Prepare the ledger account of James for the month of May 2017. Balance the account and
bring down the balance on 1 June 2017.

James account
Date Details $ Date Details $

(6 marks)
(c) State two possible reasons why Danbi allowed trade discount to James.
1. ---------------------------------------------------------------------------------------------------
2. ---------------------------------------------------------------------------------------------------
(2 marks)
[Total = 21 marks]
(2) (a) State one reason why a business maintains a provision for doubtful debts.
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
(2 marks)

contd.....to page 3
 3
Grade 9 Principles of Accounts II contd.....from page 2
(b) On 1 April 2016 Hashmi, a trader, had a provision for doubtful debts amounting to $250.
The following transactions took place during the year ended 31 March 2017.
2016
May 1 Sold goods, $100, on credit to Paul
July 31 Received a cheque for $80 from Paul
2017
Jan 31 The amount owing by Paul was written off as a bad debt
Mar 31 The provision for doubtful debts was reduced to $200
Write up the following accounts in Hashmi's ledger for the year ended 31 March 2017.
(show the transfer of appropriate balances to the income statement at the end of the year.)
(i) Paul account
(ii) Bad debts account
(iii) Provision for doubtful debts account
(i) Paul account
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
(3 marks)
(ii) Bad debts account
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
(2 marks)
(iii) Provision for doubtful debts account
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
(3 marks)
contd.....to page 4
 4
Grade 9 Principles of Accounts II contd.....from page 3
(c) Describe two factors Jeremiah might consider when deciding the amount to be provided
for in the provision for doubtful debts account.
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
(2 marks)
(d) Explain the difference between the terms bad debt and a doubtful debt.
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
(2 marks)
[Total = 14 marks]

Part A
(3) Paul draws up his accounts to 31 March each year. He bought a machine on 1 April 2014 for
$12 000. Depreciation is to be charged at 15% per annum using reducing balance method.
(i) Calculate the depreciation charge in his accounts for the year ended 31 March 2015.
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
(1 mark)
(ii) Calculate the depreciation charge in his accounts for the year ended 31 March 2016.
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
(1 mark)
(iii) Calculate the net book value of the machine at 31 March 2016.
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
(1 mark)
(iv) Show the journal entry to enter the depreciation for the year ended 31 March 2015 in
Paul's accounts. A narrative is not required.
The Journal
Debit $ Credit $

(2 marks)
contd.....to page 5
 5
Grade 9 Principles of Accounts II contd.....from page 4
Part B
An extract from Kenneth Bull Ltd's Balance Sheet as at 31 December 2005 showed the following.
Cost Depreciation Net Book
To Date Value
$ $ $
Motor vehicles 560 000 250 000 310 000
During the financial year ended 31 December 2006 the following transactions took place.
[All transactions were by cheque.]
DISPOSALS
Purchase Disposal Original Sale
Date Date Cost Proceeds
1 January 2003 30 September 2006 $ 19 200 $ 2 800

PURCHASE OF MOTOR VEHICLE

Purchase Cost
Date
1 July 2006 $ 26 400

Motor vehicles are depreciated at the rate of 25% per annum using the straight line method.
A full year's depreciation is charged in the year of purchase.
No depreciation is charged in the year of sale.

a) The following ledger accounts for the year ended 31 December 2006, where appropriate
showing the balance carried down to the next financial year. Dates are not required.
(i) Motor Vehicles
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
(4 marks)

contd.....to page 6
 6
Grade 9 Principles of Accounts II contd.....from page 5
(ii) Provision for Depreciation of Motor Vehicles
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
(5 marks)
(iii) Disposal of Motor vehicles
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------
(4 marks)
b) State the meaning of the accounting term depreciation.
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
(2 marks)
[Total = 20 marks]
(4) a) Explain the following accounting terms.
Accrued expenses
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
(2 marks)
b) Prepaid expenses
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
(2 marks)
contd.....to page 7
 7
Grade 9 Principles of Accounts II contd.....from page 6
The following is a summary of information to be entered in the rent and rates expense
account for the year ended 30 November 2011.
£
1 December 2010 Rent accrued brought forward 12 800
1 December 2010 Rates prepaid brought forward 960
30 November 2011 Cheques paid for rent and rates 19 200
30 November 2011 Rent prepaid carried forward 3 200
30 November 2011 Rates prepaid carried forward 800
c) Prepare the rent and rates expense account for the year ended 30 November 2011.
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
(7 marks)
d) In the following table, place a tick () under the most appropriate heading for each item.
Capital Revenue
expenditure expenditure
Rent paid for use of workshop
Purchase of machine for workshop
Installation of machine
Repairs to roof of work shop.
(4 marks)
e) Give an example of
(i) a current asset -----------------------------------------------------------------------------
(ii) a current liability -----------------------------------------------------------------------------
(2 marks)

contd.....to page 8
 8
Grade 9 Principles of Accounts II contd.....from page 7
f) Abdul Answer is a sole trader who keeps a full set of double entry records including a
three column cash book.
The balances on his books on 1 May 2009 included the following:
$
Cash 100
Bank 490 credit
Debtor – Sameen Atif 150
Creditor – Mohsin Ali 320
Abdul's transactions for the month of May 2009 included the following:
May 6 Cash sales, $280, of which $ 200 was paid into the bank on that date.
13 Received a cheque from Sameen Atif in settlement of her account.
18 Paid a cheque to Mohsin Ali in settlement of his account after deducting cash discount
of 2 ½%.
24 Sameen Atif's cheque was dishonoured and was returned by the bank.
30 Paid all the remaining cash into the bank except $50.

REQUIRED : Prepare a three column cash book for the month of May.
Balance the accounts at the end of the month.
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
(8 marks)
[Total = 25 marks]

contd.....to page 9
 9
Grade 9 Principles of Accounts II contd.....from page 8
(5)
P. Day is a merchant dealing in imported goods. The following balances were extracted from
the books of the business on 31 December 2001.
$
Purchases 74 400
Sales 141 600
Sales Returns 4 900
Sundry Expenses 370
Air Freight Charges 6 240
Motor Vehicle Expenses 7 250
Rent and Rates 5 720
Wages 19 600
Loan Interest 300
Loan (repayment due 31 December 2007) 6000
Debtors 15 000
Creditors 6050
Inventory at 1 January 2001 8 540
Fittings and Equipment 5 800
Motor Vehicles 26 400
Drawings 12 000
Capital 35 700
Cash at Bank 2 830
The following additional information is available.
(i) Inventory at 31 December 2001 was valued at 10 750.
(ii) The Rent and Rates amount given above includes rent of 900 paid for the three months
ended 31 January 2002.
(iv) Interest on the loan is at the rate of 10% per annum and has been paid to 30 June 2001.
(v) Motor Vehicles are to be depreciated by 20%. Fitting and Equipment are not depreciated.
(vi) A provision for doubtful debts of 3% of debtors is to be created.
Required :
a) Income Statement for the year ended 31 December 2001.
b) The Statement of financial position as at 31 December 2001.
[Total = 40 marks]

END
Ref : NK