1 2 ‘Amjad is a furniture wholesaler, He maintains a thrée’coiumni cash book. (On 1 March the bank column of his cash book showed a debit balance brought down of $2750. On the same day the bank statement showed a credit balance of $2750. REQUIRED (a) State why the bank statement balance is on the opposite side to that shown in the cash book. The baal Cobre inabhe.. 8th. Lith sa Plesreaeucl. ‘The following transactions took place in March 2017. March 6 Paid $950 by cheque. This included $790 for a new computer system, and the balance was for repairs to existing office equipment Received a cheque from XY Limited for $196 to settle its account atter deducting 2% \4bav ° ao 45 0-490 =160 2 A = L’/ . 21 Paid Furniture Store a cheque for $351 in full settlement of the balance owing of $360 29 Made cash sales, $2148 3bo-2g| a 30 Paid cash into bank, $2000 ‘Amjad received his bank statement for March 2017. ‘The following items appeared on the bank statement but had not been recorded in his accounting records. : s Bank charges 29 Insurance paid directy by the bank 50 credit customer, lis, had paid his account by credit transfer 474 The bank had not yet recorded the transactions which took place on 21 March and 30 March. REQUIRED (b) Complete Amjad's cash book on the page opposite. Balance the cash book and bring down the balances on 1 April 2017. 13]4 (©) Prepare a bank reconciliation statement for Amjad at 31 March 2017 to determine the balance ‘on the bank statement. i Bank Reconciliation Statement at 31 March 2017 Amiad wishes to compare his financial statements with those of another fumiture wholesaler. He has been told that financial statements have limitations and will not reveal everything about the other business. REQUIRED (@)_ Explain why Amjad should consider the following when he is looking a the financial statements of the other business. wa ire Sane2.” Harum is a trader. All goods are bought and sold on credit terms. ‘On 1 March 2017 Kalgi, a credit customer, owed Harum $520. ‘The following took place during March 2017. 280 or ae ‘March 4 Harum sold goods on credit to Kalgi ist price $280, less 20% trade discount 10 Kalgi paid the balance due on 1 March by cheque = BOL6-29 4 12 Kalgi returned goods, list price $120, purchased on 4 March /2 5 x9 6% 2y 18 The bank returned Kalg's cheque received on 10 March because of insufficient funds in his account. 28 Kalai paid $600 in cash (20-24 =U4h 80 Harum wrote off the balance on Kalg's account REQUIRED (2) Name the source document which Harum would use to record the following: Document March 4 Sold goods on credit to Kalgi son Salad. hr 4G... @) 12 Kalgi retumed goods we Name the book of prime (original) entry in which Harum would record the following: Book of prime (original) entry sh.bealk. 6 Taataaaea ata nai E ) i ¢ March 18 The bank returned Kalgi's cheque 2]7 (©) Write up the account of Kalgi as it would appear in the ledger of Harum for the month of March 2017. Harum Kalgi account Details bebamcebal‘The totals of Harum’s trial balance prepared on 31 March 2017 did not agree. Harum recorded the difference in a suspense account. (On checking the accounting records various errors were discovered. REQUIRED {e) Complete the following table to show the entries required to correct each error. The first one has been completed as an example. Entry requited to correct the error Error Debit Credit Account | $ | Account | $ Goods returned, $310, to All, a creit supplier, had been entered into the All 310 | Alam | 310 account of Alam. ‘Wages paid in cash, $1200, had been Sayeed minecch Sot poles wapessocumes 0, | Saree OO, | Aaa. HOD Theta el be goal expenses column in the petty cash book, $48, had not been posted to the general expenses account Wd LZ Thott ete cout ceed column in the cash book, $114, had been debited to the discount allowed 3 account. Saupe Mb. daa | tbl ACHAEA m1 Harum knows that he should consider four objectives when selecting accounting poli REQUIRED () Name four objectives Harum should apply. The first one has been completed as an example. [3] (Total: 22]10 Me and Rafah are in partnership. Their financial year ends on 30 April ‘When they started the business they drew up a partnership agreement which provided for: Interest on capital at 3% per annum Interest on drawings at 4% per annum An annual salary of $6000 for Meena +102 ‘Sharing of residual profts and losses in the ratio 2:1 ‘On 1 May 2016 the balances on the partners’ capital accounts were as follows: Meena Ratah $ s Capital account 40000 20000 — £, Bow, = 30,002 (On 1 November 2016 Ratah introduced a further $10000 into the business as capital The partners agreed that Meena’s salary should be increased by $1000 per annum starting on 1 November 2016. Drawings and interest on drawings during the year ended 30 April 2017 were as follows: Meena Rafah $ $ Drawings 7300 5100 Interest on drawings 292 204 ‘The profit for the year ended 80 April 2017 was $7534, Cum on {ou Sofpoid" REQUIRED: (@) Prepare the profit and loss appropriation account for the year ended 30 April 2017. ‘Meena and Rafah Profit and Loss Appropriation Account for the year ended 0 April 2017 Lf Wey oh Han : Lvbdiark on lapih Maa. Kalas |.2 (b) Prepare the current account of Meena for the year ended 30 April 2017. Balance the account ‘and bring down the balance on 1 May 2017. Meena Current account $ | Date a13 ‘The partners provided the following information. At30 April 2016 At 30 April 2017 4,85:1 1,681 Current ratio Quick (acid test) ratio 10134 0.7831 $ Inventory 19400 Trade receivables 16900 Trade payables 17450 Bank overdraft 4100 REQUIRED (©) Explain why the partners calculated the quick (acid test) ratio as well asthe current ratio. (@) Suggest two reasons for the change in the current ratio. Cla.gefoyn.Possbabaran Ine Qin. aA Re a4 ‘The partners later discovered that no entry had been made for a cheque received from a credit ‘customer for $1800. REQUIRED (€) Calculate the current ratio after this transaction had been recorded in the accounting records. ‘The calculation should be correct to two decimal places. [640209 | 2) (f) Suggest two possible problems the partners may encounter if the working capital is inadequate. (@) Suggest two ways in which the partners could increase the working capitala 15 4 The financial year of Msamati Manufacturing ends on 31 January. “The following is the summarised manufacturing account for the year ended 31 January 2017. $ Prime cost 505650 Factory overheads, 126390 682040 ‘Change in work in progress 12090) Cost of production ee9950 7 REQUIRED © cnn — of te term voll Zt En... Fakes renee de teboe aids mally i caanpenmamneiaiad aieck: XW cs ' ® @ roar Sc el of the term ‘factory overhead: he dies 2 awp A items Jock may included in the factory overheads. ay ae 2 oo ‘ tre eee oteip 3 hopes (ll) State whether the ciosing work in progress was greater or smaller than the opening work in progress, wl]16 ‘Msamati Manufacturing provided the’ following information for the year ended 31 January 2017. $ Revenue 816370 Purchases of finished goods 47200 Commission received 2700 ‘Administration expenses 38160 Selling expenses 28270 Inventory of finished goods 1 February 2016 56120 Office equipment at cost 32000 Delivery vehicles at cost 68000 Provision for depreciation Office equipment 14400 Delivery vehicles 17000 Loan from A1 Loans recelved 1 April2016 15000 ‘AtS1 January 2017 Inventory of finished goods 61940 ‘Commission receivable outstanding 430 Loan interest at 5% per annum is outstanding During the year ended 31 January 2017 the owner of the business took finished goods costing $1620 for his own use. Capes cages onc: ZrCo IS): Comes equipments 15% per annum using the staght ine (equal Instaent) method Delivery vehicles at 25% per annum using the reducing (diminishing) balance method. 6 Foe -P 99>7 REQUIRED (d)_ Prepare the income statement for the year ended 31 January 2017. Msamati Manufacturing Income Statement for the year ended 31 January 2017 $ $18 (@) Explain how the accruals (matching) principle has been applied in the preparation of the income statement. Illustrate your answer by reference to one of the items in your answer to 4(q). The owner of Msamati Manufacturing is disappointed with the results for the year ended 81 January 2017. He is looking for ways to increase the gross profit and profit for the year. REQUIRED (Discuss the possible effects on the gross profit of each ofthe folowing proposals: (0) ingrease the selling price ofthe finished goods WAAL.ARD..B.... PORSEA. bub trish Linol Sheafec Sai DM my pun 2 “Bo aevenul an Greco MNofit (il) reduce the wages of the factory employees (g) Suggest two ways in which the profit for the year could be increased. 2 vn OR MACL...2X Ply RA. [Total: 26) a20 5 Bradley is a wholesaler. His financial year ends on 31 December. On 1 January 2015°Braciey had a delivery vehicle A which had cost $35000 and had been depreciated by $13125. (On 1 October 2015 he purchased delivery vehicle B for $40.000 by cheque. ‘On 1 July 2016 he purchased delivery vehicle C on credit from XZ Motors for $2800. All the delivery vehicles are depreciated by 25% per annum on cost calculated from the date of purchase. REQUIRED (@) Prepare the following accounts for each of the years ended 31 December 2015 and 381 December 2016. Balance the accounts and bring down the balances on 1 January 2016 and 1 January 2017. Bradley Delivery vehicles account Date LAS (Oec824 Provision for depreciation of delivery vehicles account Date Detalis $ | Date Details $ \| Jabanal of |2h75| ir, . [12]22 On 1 January 2017 it was decided that delivery vehicle C (purchased on 1 July 2016) was unsuitable. The delivery vehicle was sold on credit to DDE Transport for $25500. REQUIRED (b) Prepare journal entries on 1 January 2017 to record the disposal of delivery vehicle C. Narratives are not required. Bradley Journal Disposad a el Su Oalwnay. sare Ry ake Bradley makes all purchases on credit terms and selis on both cash and credit terms. Hf credit customers pay their accounts within 30 days they are allowed a cash discount. If the ‘accounts of credit suppliers are paid within 40 days Bradley is entitled to @ cash discount. ‘The following information is available. 31 December 2015 31 December 2016 Payment period for trade payables 41 days 38 days Collection period for trade receivables 34 days 28 daysREQUIRED (©) Suggest two reasons for the change in the trade receivables collection period. 1 FLED Revd ti... RAO. ‘The credit suppliers are proposing to reduce the credit period to 30 days. REQUIRED (©) Suggest two ways in which tis may affect rade. a te pusions howe cbetuce. 2x ee [Total: 24)2 Shiromi is a trader in office equipment. She maintains a full set of accounting records. Shiromi ‘made the following entries in her cash book, purchases journal and purchases returns journal in April 2017. Shiromi ‘Cash Book Discount Received April $ “4. Rent and rates 10 Motor vehicle 18. Lincy 6 24 Gail 90 26 Drawings 30. Balance eld Ts Shiromi Purchases Journal s Lincy Goods 4825 Less Trade discount 285 Gail Goods 4800 Less Trade discount 1200 Total for month, Shiromi Purchases Returns Journal s Lincy Goods 700 Less Trade discount 140 Total for monthREQUIRED (a). Enter the transactions for April in the following ledger accounts. It is not necessary to balance oF total any of the accounts. ‘Shiromi General Ledger fotos oe Date Details $s Date Details $ ehh 423}... ~ = Melo vehi sour Date Details $ Details $ LSM. Sales account a Date Details $s oi Detals S| Date Detals| $ 22.6) CAS non4 Purchases account : Date, fay s Date ] Details, Fea | .AckalValle. | PhGe | 7 Purchases retums account Date Details. $ te al Details | 2S tothe : capone: Discount ecelved account Date Details $ Date Details goke tote Mule... = | Ape os Purchases Ledger Lincy account Details $ oe) Details ar Refwng....| $60 | apa oo Runchmee. Na Ena | eee tees et con | PuScatiet. 6b. Gail account eo 10 Ape Fraels = s Date 50| Rell. AQ, Details anchor5 Shiromi's financial year ends on 30 April. She provided the following information. At 30 April 2016 ‘At30 April 2017 Current ratio 1.49:1 0.92:1 All purchases are made on credit terms and all sales are made for cash. REQUIRED (b) Suggest two reasons for the change in the current ratio. 1 QLONAB 8 Ln endneon ly 2) Shiromi is hoping to increase her working capital and is considering four courses of action. REQUIRED (4) Complete the table by placing a tick (V) in the correct column to show how each course of action would affect Shiromi's working capital. «CA — CL Increase | Decrease | ee ales “Take out a short-term bank loan | Repay a long-term bank loan | | | Sell goods on credit terms instead of for cash ‘Obtain a higher rate of cash discount‘Shiromi bought office equipment on credit. REQUIRED (@) State why this transaction increased Shiromi's current assets, moda), Jers Qavred (A) Suggest two reasons why Shiromi's retum on capital employed (ROCE) was lower on 30 April 2017 than it was on 30 April 2016. HIQhor, Cagitad.2 7 Waheed is @ trader. He maintains a full set of accounting records and prepares control accounts at the end of each month. REQUIRED (2) Name the book of prime (original) entry which Waheed would use to obtain the following information when preparing his sales ledger control account. Book of prime (orginal) erty Discount alowed Cash book Bad debis : = “Gicol tty 2 Returns 4] (b) State the meaning of a contra entry in connection with control accounts, State why may make such an entry. Meaning 2H atts it. Spel. Purchase Loe, Ooidtedl,.. Lermk: ae aia ant Contsl dicey. aie : S “oy core lelbern nem — ‘The sales journal for March a ‘was destroyed, but Waheed was able to provide the following information 2017 $s March 1 Debit balances in sales ledger 2348 Credit balances in sales ledger 140 March 31 Totals for the month Cheques received from credit customers 2145 Cheques paid to credit suppliers 3013 Cheque received from credit customer (included in the cheques received), later dishonoured 350 Discount allowed 55 Discount received 90 Returns by credit customers 276 Returns to credit suppliers 198 Contra entry 182 Bad debts written off 62 April Debit balances in sales ledger 2670 Credit batances in sales ledger 86REQUIRED (©) Select the relevant figures and prepare the sales ledger control account for the month of ‘March 2017. Insert a figure for credit sales. Balance the account and bring down the balances on 1 April 2017. Waheed Sales ledger control account Date Details $ Lhe. 2148 Date Details $ $02... Hoa\, 3. | .2AL sere pert og to) (d) Suggest two reasons why the sales ledger control account had a credit balance on + April 2017.9 ‘Waheed's financial year ends on 31 March. He provided the following information. All goods are bought and sold on credit terms. A cash discount is received from credit suppliers if payment is made within 45 days. A cash discount is allowed to credit customers if payment is made within 30 days. Att March 2016 At31 March 2017 ‘Trade receivables collection period 33 days 29 days ‘Trade payables payment period 44 days 46 days REQUIRED (@) State whether Waheed would be satisfied with the change in the collection period for trade receivables. Give a reason for your answer. saisted? .... Saki stieat : reson Cc. cak..rolsintnn atin fang. .tsraQon (2) (f) State one advantage to Waheed's suppliers of the change in the payment period. Hay,..change..calaraa om. sienalae (g) State one disadvantage to Waheed!'s suppliers of the change in the payment period. Ynlueace iar.) oook..debts. (h)_ Comment on how a collection period of 29 days and a payment period of 46 days may affect Waheed's liquidity position, ae gee teed toate10 The At Sports Club was formed some years ago. The club has 100 members. The annual subscription is $70. ‘A few years ago the club borrowed $3000 from a member at 3% per annum interest. In addition to providing sporting facilities, the club also has a café for members. All supplies for the café are purchased on credit terms, and all sales are made for cash. ‘The following information was available for the year ended 30 April 2017. $ Att May 2016 ‘Amount owing to café suppliers ait Café inventory 298 Loan from member (interest charged at 3% per annum) 3000 ‘Subscriptions in arrears 560 Bank overdraft 3180 Receipts and payments during the year ended 30 April 2017 ‘Subscriptions for the year ended 30 April 2016 560 for the year ended 30 April 2017 6300 for the year ending 30 April 2018 280 Cale sales 2 Payments to café suppliers 3796 F Rates of club premises 960 General club expenses 810 Café wages 4040 Loan interest and repayment of half of the loan, 1520 Purchase of new sports equipment 4000 Proceeds of sale of old sports equipment (book value $580) 430 ‘At 30 April 2017 Bank overdraft 2626 Calé inventory 216 ‘Subscriptions in arrears 700 ‘Amount owing to café suppliers 393REQUIRED (@) Prepare the receipts and payments account for the year ended 20 April 2017. Insert a figure for receipts from café sales. Balance the account and bring down the balance on 1 May 2017. Al Sports Club Receipts and Payments Account for the year ended 30 April 2017 golF ele12 (b) Prepare the café income statement for the year ended 30 April 2017. Al Sports Club Café Income Statement for the year ended 30 April 2017 (c) State the amount of subscriptions which will appear in the income and expenditure account for the year ended 30 April 2017. Give a reason for your answer. amounts .. 2. O22... Reason ... tho'uy, Ye acest... Srbaupions... (d) List five items included in the receipts and payments account which will net appear in the income and expenditure account for the year ended 30 April 2017.14 4 Virat isa trader. His financial year ends on 31 January. He does not maintain a full set of accounting records, He was able to provide the following information at 1 February 2016. $ DCH Premios a cost s8s00 CA Frtures ona tng tos 400 NSPE inventory 700 ade payates 700 , AtTrade receivables 8120 Nn. _LLoan from A Singh 15000 ‘CL Bank overdraft 5300 REQUIRED (a) Calculate Virat's capital at 1 February 2016. During the year ended 31 January 2017: av 9 Virat's drawings amounted to $11 320. N o Virat's personal motor vehicle, valued at $15 200, was transferred into the business. | One third ofthe loan was repaid and it was agreed thatthe balance should be repaid in 2018, Z ~ TH rat compared his assets and tables on 31 January 2017 with those on 1 February 2016 and O found: oo “rede payobies had increased by 6% \ ‘Trade receivables had increased by $3310 ‘ Inventory was valued at the selling price of $12.900 after a mark-up of 20% Qho2 xe Bank overdraft had increased by $3100, Cash in hand amounted to $100 (On 31 January 2017 it was decided to: Write off $130 as irrecoverable from the amount owed by trade receivables at that date. Make a provision for doubtful debts of 2% of the remaining amount, Provide for depreciation of fixtures and fittings at 20% per annum on cost. Provide for depreciation of the motor vehicle at 25% on the valuation when transferred into the business. { gy 0 XBSy. Maintain the premises at cost15 ~~) -REQUIRED (b) Prepare a statement of affairs at 31 January 2017 showing the total capital at that date, Virat ‘Statement of Affairs at 31 January 2017 woter. Uehssbe. JtSto.| Soe | Maes (olen scab ; a cat nd... Uadail Sas - | S26) Bao inet vn | ence | Ph OO fee eee dt Sc) ee, “Ltaly Qual CP Fol OF Veg Bh16 (c)_ Prepare the capital account of Virat for the year ended 31 January 2017 to show the profit or loss for the year. Virat Capital account Details $ Date Details $ sooo | LLG ‘Prous’... |UIBL@ | Flo\. | baa adenceCd| 434/49.01? |... ana Sons fo} Virat was disappointed with the results of his business for the year ended 31 January 2017. He decred to ty to obiain the finance statements of other businesses so that he could compare their results with those of his own business, REQUIRED (d) Explain two factors Virat should consider when comparing his results with those of another et18 5 Heng is a wholesaler. He maintains a full set of double entry accounting records. REQUIRED (@) Name the accounting principle Heng is applying in his accounting records. Duodty om Heng's financial year ends on 31 December. He opened a suspense account on 31,December 2016 and entered a debit balance of $430. REQUIRED (b) State two reasons why it was necessary for Heng to open a suspense account. shai Boda. Cantthagr Z| QM Men 2 to. ane yedhaille Fotatse ddahuot Heng discovered that the following errors had been made in his accounting records, 2) 1 Repairs to office equipment, $281, had been correctly entered in the cash book, but had been entered in the office equipment account. OC 2 Asses inieisuadte AB Steshadbeonovercastby sito, PSL, COs) 3. The balance of the petty cash book, $150, had not been entered in the trial balance. oO < General expenses, $1120, had been correctly entered in the cash book, but had been entered inthe general expenses account as $1210. QO “The total of the discount allowed column in the cash book, $1024, had not been transferred to the discount allowed account in the ledger. so} ~q 6 A cheque, $2060, paid to AK Suppliers, had been debited in the cash book (which had a positive balance) and credited to the account of AK Suppliers. YON 7 The total ofthe purchases returns account, $454, had not been entered inthe trial balance, <REQUIRED (c) Prepare the suspense account in Heng’s ledger to show the required entries. ‘The account should be balanced of totalled as necessary. Heng ‘Suspense account (4) State whether all the errors in Heng’s books have been discovered. Give a reason for your answer. Have all errors been discovered? .. AJ.2 — AEY.@. babncasoite KR COD NE 21 (e) Complete the table to show the effect of each of the errors. Where an error has no effect, write 'No effect’. ‘The first one has been completed as an example. | Error | Proftforthe year | Non-ourrent assets | Currentassets | Curenttiabitties | $ 8 $ $ Dt everstaed | 261 overtatod | Noofect | Noofect | fa 2 | \ooNucél mo looong 429 3 |me [Emo TSotdlon| m0 4 |42 wHtst] mo Ge mo 2 5 Ao Woy Mo IO: MMe: e 6 no BLU | Zobboin| Zod oer | 7 Pees gel eal oe oat -Zodva is a trader. She maintains a full set of accounting records. Her financial year ends on 31 Juy. ‘She provided the following information on 31 July 2017. 1 Noentry has been made for $720 cash received from Brian, a credit customer. The balance of his account is irrecoverable and should be written off, ‘A cheque for $118 was received from AL Stores whose account was written off in 2015. Rent prepaid amounted to $400. One quarter of the rent for the year relates to Zodwa's flat above the business premises. Cormiitonrecetabieourometng enesrted 915 Hioox VSy. ‘The fixtures originally cost $40000 and are to be depreciated by 15% per annum using the reducing (diminishing) balance method. REQUIRED (@) Record this information in the following accounts of Zodwa's ledger at 31 July 2017. Close the accounts by balancing or by making a transfer to an appropriate account. ‘Some entries have already been made in the accounts during the year. Brian account s 1000 |Qoo — Bad debts account Details s Date Details Leth) ig inte JM!) Siren Sale C103 Bad debts recovered account Date Details 42g) Zitowe Malest| 113... Date Details 2017 July 31 | Total paid4 Commission receivable account Detaile =| bee Detals $ os aor? )| A ncone Slabs cy2... | suy sr | rota to ato 800 alone cid. | 16 ~ loko oho 1&2. Provision for depreciation of fixtures account Date, Details $ Date Details s yor as Joya Jaodomca.clal | 1843S + Balance bid 11100 ibenil 10335 [1435 1436 (15) (On 31 July 2017 Zodwa decided to create a provision for doubtful debts. REQUIRED (8) pte the menrng ofthe term provision for doth btn, Bia eolyeals: Amand Lich a bruiaaes tar Core N..fetianah 68 Accouree] bak cbelle (2) (©) Suggest one way in which the amount of a provision for doubitul debts may be determined.5 (d)_ State the double entry required to create a provision for doubtful debts. debit credit ] Trcome stieet | Govisan Fan clouf hot | (2) State how Zodwa would be applying the principle of prudence if she maintained a provision for doubt dots Pookie Qo dhe feen..omg.curent.arcda.are.ncte.. °) ~ (2) (f) State how Zodwa would be applying the principle of accruals (matching) if she maintained a provsion for oubi debts. ie. Sado Ph. Whig Qlowoimery.o.chaale hela. Den the. fom Im lWwhidh thre. Seaane.vmode... which ie could reduce the amount af bad debts. sao (2) (g) Suggest two ways a [Total: 26]6 ‘Mahendra financial year ends on $1 August. He buys and sells on both cash and credit terms and maintains a full set of accounting records. Mahendra prepares contol accounts atthe end of each month REQUIRED: (6) Complete the folowing table. Use a tick (v) to show where each ofthe following ems would ‘appear in Mahendra’s sales ledger control account. I the item does not appear place a tick in the “no entry" column, credit | no entry debit ‘Opening balance owed by credit customers | (~ credit sales m cash sales a provision for doubtful debts nah ‘bad debts written off ‘cach discount allowed to credit customers we trade discount allowed to credit customers Pa contra between sales and purchases ledgers 4 cash received from credit customers 2 @ (b) Name the book of prime (original) entry which Mahendra would use to obtain the following information when preparing his purchases ledger control account. book of prime (original) entry Telus to credit suppliers Purcharsepalunnd (outa 0 discount received @SsklaaaK interest charged by credit supplier Journok contra entry to sales ledger control account | 7OucaQ (4) (©) (State the meaning of a contra entry in connection with control accounts. Appeaas Gan. dab. tsidor Purckane Ceckger Corti R.... ACcounk arol cardi Side. Salon Coden costo i oecouk (ii) State why ‘such an entry may be necessary, 0rd. CohonSals lodges. acct Sa Pibentd7 (4) Suggest two reasons why itis possible to have a debit balance on a purchases ledger control ‘account, oem th samen (On 31 August 2017 Mahendra's trade recelvables amounted to $20520. He allows his credit customers 30 days credit. ‘The sales for the year ended 31 August 2017 were $229000, of which $42300 represented cash ae -4.72.4.000-42 200 REQUIRED (e) (i) State the formula for the calculation of the trade receivables collection period. THe... sacerwablao, BES tt] (li) Calculate the trade reosivables collection period. Round up your answer to the next whole day. Aa XB6S..c Oddo daya.. [2] 840 AIALA... 1 Odage (f) Suggest two ways in Bla ‘Mahendra could improve the trade receivables collection period.Mahendra is allowed 21 days credit by his eredit suppliers. His trade pajables payment period was calculated at 20 days at 31 August 2016 and 30 days at $1 August 2017. REQUIRED ¥ (@) State the formula forthe pie ofthe trade payables payment period. X68. (h)_ Comment on the possible reaction of Mahendra’s credit suppliers to the change in the ratio. [2]10 ‘The financial year of the AS Spoité Ciubend& or''30 September: lin addition to providing sporting facilities, the club also sells sportswear to members. No inventory is held as all goods are bought and sold to order, on a cash basis. ‘The treasurer provided the following information. At 1 October 2016 Equipment at cost Provision for depreciation of equipment ‘Subscriptions owing by members Cash at bank Insurance prepaid Bank loan (repayable 2020) ‘Accumulated fund $ 22000 4400 600 610 60 7000 2 ‘The receipts and payments account for the year ended 30 September 2017 was as follows. Receipts s Balance 1 October 2016 610 Sale of sportswear 3510 Subscriptions 12540 Receipts trom open day 4180 Balance 30 September 2017760 ‘At 30 September 2017 Payments $ Equipment 8000 Purchase of sportswear 2410 Rates and insurance 1500 Expenses of open day 5250 Rent of sports ground 1.800 General expenses. 2640 21.600 11 Subsoriptions owing by members amounted to $240 and subscriptions prepaid by members amounted to $180. 2 Loan interest at 5% per annum was outstanding. XP OOO outelantng., 3. The equipment is depreciated at 20% per annum based on the cost of equipment held at the ‘end of each financial year. REQUIRED (@) Calculate the subscriptions for the year ended 30 September 2017. oS SWOSCUR, tiopailel oe dnp. alto} tla oma.d4ecated." (&) Prepare the income and expenditure account for the year ended 30 September 2017. is Club Income and Expenditure Account for the year ended 80 September 201712 (c) Prepare the statement of financial position at 30 September 2017. Sports Club A Statement of Financial Position at 30 September 2017 So,awo, $ $ GSt..| dep... loh.aa. | 14003 (d) Explain why the outstanding loan interest should not be credited to the loan account. L0.0m.40..0,..10.60..0uddonk. L0cden yadlasok:14 4°” Hanif financial Year ends on 31 July. He provided the following information on 31 July 2017. s Inventory 87500 ‘Trade payables 81500 Trade receivables 156200 Petty cash 100 Bank overdraft 17100 REQUIRED {@) Calculate the current ratio. The calculation should be correct to two decimal places. {b) Comment on your answer to (a). ~fasel’s (©) Calculate the quick rati . The calculation should be correct to two decimal places. ow [2] (@) Suggest two reasons why the quick ratio is lower than it was at the end of the previous financial year. ncnlAire...lua Lnwendang.. 1 vposlues Le,16 {@) Suggest two problems Hanif may encounter if his working capital is inadequate, 1 albnadee Fo. loeel firm. 28a hiatal... Nha ioe: fw fa ppc eg Pa ir) (f) Complete the table by placing a tick (v) in the correct column to show how each of th following transactions would affect the current ratio and the quick ratio. ‘The frst one has been completed as an example. current ratio Quick ratio inerease | decrease | no effect | increase | decrease | no effect Introduce $20000 |, - additional capital ‘obtain short-term v a bank loan $1000 sel hal the inventory at cost a ie | price i | | i Hanif provided the following information for the year ended 81 July 2017. $ Revenue 999750 Cost of eales 765990 Inventory at $1 July 2017 was $15500 more than the inventory at 1 August 2016. REQUIRED (g)_ State the formula for the calculation of the rate of inventory turnover (in times). Pig ula (h) Calculate the rate of inventory tumover (in times). The calculation should be correct to two decimal places. 1 ue dé. .| 9.24200 [238002 (b) Name two uses of the general joumal, apart from opening entries.6 Despite having litle knowiedge of book-keeping, Nabil decided to prepare a trial balance at the end of his financial year on 28 February 2018. ‘The trial balance he prepared, which contains errors, was as follows. Debit Creait $s $ Revenue 119100 Purchases 72000 Capital 155000 Loan — AB Loans ‘80000 Premises 200000 Firtures and fittings 22000 Trade receivables 7600 IA? Trade payables e050 -\S2 Bank overdraft 3950 4 U1? Wages 82800 — \o) 2° General expenses 25400 Inventory 1 March 2017 ‘5500 28 February 2018 6100 Difference on trial balance 13900 E7850 174850 ‘The following errors were later discovered. 1. Nabil's cash drawings, $10000, had been posted to the wages account. 2 No.entry had been made for purchases returns, $150. 3 $140 owed by a credit customer should have been writen off as a bad debt. 4 No entry had been made for bank charges, $210. 5 The balance of the petty cash book, $100, had been omitted from the trial balance.~ REQUIRED (©) Prepare a corrected trial balance at 28 February 2018. Nabil Corrected Trial Balance at 28 February 2018 Revenue Puicranes Capital Loan -AB Loans Premises Fixtures and fittings Trade receivables ‘Trade payables Bank overdraft Wages General expenses inventory | Howch.L4 17 R2COWLNg, Rarthaae 42020)...0kebd Fzaeald, a PMY. Cassa 3 esi0 [13] (Total: 20]Masuma owns a furniture store, She maintains a full set of accounting records, Her financial year ends on 31 March Masuma provided the following information at 31 March 2018. 1 On 1 April 2017 Amina, a credit customer, owed $160. On 1 March 2018 she paid 75% of this and the balance was written off as a bad debt. 2 On 4 January 2018 additional fixtures and fittings, $2000, were purchased on credit from Office Traders, but this transaction was not recorded. 3 The fixtures and fitings are depreciated at the rate of 20% per annum on the cost of equipment held at the end of each financial year. 4 On31 March 2018 the discount columns in the cash book showed the following totals for the iscount column on debit side $55 discount column on credit side $68 ‘These totals had not been transferred to the discount accounts in the ledger. REQUIRED (a) Record this information in the following accounts in Masuma’s ledger at $1 March 2018. ‘Some entries have already been made in the accounts during the year. Close all the accounts by balancing or by making a transfer to an appropriate account. Masuma ‘Amina account Date Details $ Date Details $ 2017 208 Hal. Ike. April 19 Bad debis account Date 2018 Haw, Details Feb 26 | Total written of PL rnanas. Date Details Manat Jocome 5 teller April 1 | Balance bid ; et eee How. Fistutes and fitings account Date Details $ | Date Details 2017 2ol? Provision for depreciation of fixtures ar nd fittings account Date. [2018 Max3l] Details balone.cla 2.200 Date 2017 fon 1 2al4 Details10 Discount allowed account Date Details $ Date Details $ 2018 Jol Feb 28 | Total to date 3590| Moa) 2s Hak do Discount received account L493 Date Details 2018 Feb 28 | Total to date The following account appeared in Masuma’s ledger on. 81 March 2018. Disposal of motor vehicle account Date 2018 Feb 1 Details Motor vehicles $ ‘9500 Date 2018 Feb 1 Mar 31 Details Provision for depreciation of motor vehicles MeVans Income statement Hee3REQUIRED (©) “Explain each enty in the disposal of motor vehicle account " 1@ account in which the double entry would be made for each item. Saas water baton would be debited or credited. February 1 Motor vehicles Explanation ... QY.sQaad oasioty gehen brates February 1 Provision for depreciation of motor vehicles eangn ‘Total capadaks a. dlinpased Lotle..clate. eine ery Fao. February 1 M6Vans Explanation .. March 31 “re sts a Explanation12 ‘a Asim has an advertising agency. His financial year ends on 31 January, He provided the following information on 31 January 2018. $ Capital at 1 February 2017 120000 Drawings 8500 Office equipment at valuation at 1 February 2017 6180 Motor vehicle at cost 15000 Provision for depreciation of motor vehicle 5400 Fees received from clients 28350 ‘Wages of assistant 19000 General expenses 1358 Motor expenses: 970 Rates and insurance 2280 Rent received from tenant 5600 ‘Additional information 1 At81 January 2018 $2400 was outstanding from cients for fees. Motor expenses outstanding amounted to $110. ‘A provision for doubtful debis of 2% of the amount owed by clients should be created. 2 The rates and insurance paid were for a period of 15 months from 1 February 2017. 3. Part ofthe premises were let to a tenant on 1 February 2017 at an annual rent of $4800. 4 One quarter of the motor expenses are for Asim's personal use ofthe motor vehicle, 5 The motor vehicle is to be depreciated at 20% per annum using the reducing (diminishing) balance method. 6 The office equipment was valued at $8500 on 31 January 2018. No office equipment was purchased or sold during the year.13 REQUIRED (@) Prepare Asim’s income statement for the year ended $1 January 2018. Asim Income Statement for the year ended 31 January 2018 $ $ Gees Lcotn..chieuka. 43 . (13)1“ *” (b) State the formula for the calculation of the return on capital employed (ROCE). Cape Lok Qunpleya. (c) Calculate Asim’s return on capital employed (ROCE) using his capital at 1 February 2017. ‘The calculation should be correct to two decimal places. {1} (6) Suggest two reasons why Asim’s return on capital employed (ROCE) is higher than that of Nagid who has a similar business. ica Pace Code yan... (©) Explain why Asim should consider non-financial factors when comparing his financial statements with those of Nagid.15 ‘5 Ravi is a wholesaler. His financial year ends on 31 March. He provided the following information for the year ended 31 March 2018. $ Revenue cash sales 8750 credit sales 34450 Purchases returns 950, Inventory at 1 Apri 2017 2900 Oo 440 _) Waten ano “7982 [oO (lo Inventory at 31 March 2018 was 50% greater than that at 1 April 2017. REQUIRED H3 Loy, =7705 oF (a) Prepare the income statement (trading account section) for the year ended $1 March 2018 to ‘calculate the purchases for the year,16 (C) Suggest two reasons why Rav's rate of inventory turnover is lower than the average for this. ‘Later. 209 act, auly. [2] (@) State ho bai on wich Ravi hou value hig inv Cowen Good. Li (e) Name the accounting principle which Ravi is applying by valuing his inventory on this basis. Padme... 0) (f) Complete the table by placing a tick (v) in the correct column to indicate the’etfect of Ravi overvaluing his inventory at 31 March 2018, ‘The first one has been completed as an example. Overstated | Understated current assets at $1 March 2018 v cost of sales forthe year ended 31 March 2018 eal ‘9f08s profit for the year ended 31 March 2018 — ‘cost of sales for the year ending 31 March 2019 ee profit for the year ending 31 March 2019 i, (4) Ravi is considering ways to increase his gross profit. REQUIRED (g) Complete the table by placing a tick (v) in the correct column to indicate how each of the following proposals would affect Raw's gross profit. Increase | Decrease | No effect Reduce the rate of trade discount ia allowed to crecit customers Reduce the rate of cash discount allowed to crecit customers 2)7 (h) Comment on-the possible effects of Ravi’s proposal to increase the mark-up from 20% to 25%.18 6 The financial year of CD Limited ends on 30 April. The following information was’ provided on 380 April 2018. $ $ Non-ourent asset (book value) 227000 Ordinary share capi Inventory (800000 shares of $0.50) 150000 Trade receivables 22000 Goneralreser May 2017, 30000 Bank 11000 Retained earnings 1 May 2017-6000 Profit for the year ended 30 April 2018 13000 ‘5% Debentures (repayable 2025) 50000 ‘Trade and other payables 40000 REQUIRED {(@) State two citterences between debentures and ordinary shares. 1S () how the general reserve has arisen, TAT tate (©) State two reasons why CD Limited retains some oe each year, Ld, hase. pacf.ul pilaf el19 (d) Complete the table by placing tick(s) (v) in the correct column(s) to indicate where each of the following would be included in the financial statements of CD Limited at 30 April 2018. ‘Some items may appear in more than one statement. The first one has been completed as an example. Income statement Statement of changes in equity 41 September 2017 Repayment of long-term loan 1 November 2017 Payment of half-year interest on debentures 31 December 2017 Payment of interim ordinary share dividend | 30 April 2018 Haif-year interest on debentures accrued ee 30 April 2018 Proposed ordinary share dividend ie 6) CD Limited requires an additional $3000 to pay for an expansion programme. (€) State one advantage to ordinary shareholders if CD Limited raises the money by issuing 1) (f) State one disadvantage to ordinary shareholders if CD Limited raises the money by issuing debentures. retuned.20 ‘The current ratio of CD Limited on 30 April 2018 Wad 1.5874. - ‘The company is enxious to increase this ratio and several proposals are being considered. REQUIRED (G) State the formula fpr the calculation of the current ratio. Cadel PEMA Coste Lobb 7 (h) Complete the table by placing a tick (v) in the correct column to indicate the effect on the current ratio of each proposal ‘The first one has been completed as an example. Increase | Decrease | No effect Sell surplus non-ourrent assets for cash Sel goods on cash tem only we v ‘Obtain a further long-term loan ia Buy additional non-current assets on credit rather than paying immediately Persuade trade receivables to pay haif oftheir debts immediately in return for 3% cash discount NIN instead of after 1 month Pay trade payables after 2 months we 8) (Total: 20)