Exercises

MyStudyBro - Revision Exercise Tool
This Revision Handout includes the Questions and Answers of a total of 5 exercises!
Chapters:
Correction of Errors - Paper 1 (Pearson Edexcel)
Page 1 (4AC0) 2017 Winter
Ratios
Page 5 (4AC0) 2017 Winter - Answer

Also Includes:
Ratios
Page 7 (4AC0) 2017 Summer

Page 12 (4AC0) 2017 Summer - Answer
Page 15 (4AC0) 2016 Winter
Page 16 (4AC0) 2016 Winter - Answer
Accounting Concepts

Also Includes:
Accounting Concepts
Winter 2017 www.mystudybro.com Accounting Paper 1
Past Paper This resource was created and owned by Pearson Edexcel 4AC0
12 On 30 September 2016 Ruslan’s purchases ledger control account showed a credit

balance of £5 530. On the same date the total creditors in the purchases ledger
amounted to £4 890.
Following an investigation, Ruslan discovered the following errors and omissions.
1. The list of balances extracted from the purchases ledger omitted a balance of
£290 owed to Anh.
2. Ruslan had purchased goods on credit from Sonh costing £420. These had been
correctly entered in the purchases book but not posted to the account of Sonh.
3. A cash discount received from a supplier, £15, had been recorded correctly in the
cash book but had been entered on the wrong side of the supplier’s account.
4. An allowance for faulty goods received from a supplier, £40, had been correctly
recorded in the purchases returns book but had not been posted to the supplier’s
account.
(a) Complete the table below to reconcile the total of the purchases ledger on
30 September 2016 with the balance of the purchase ledger control account.
(6)
Total of purchases ledger balances
Adjustment
Purchases ledger control account balance
10
MSB - Page 1 *P48370A01020*
On 30 September 2016 the following balances were extracted from Ruslan’s books.
£
Machinery 5 000
Bank overdraft 2 382
Stock 4 238
Debtors 7 622
Creditors 5 530
Cash in hand 211
Provision for doubtful debts 600
Prepayments 250
(b) Prepare an extract from Ruslan’s balance sheet as at 30 September 2016 showing
his working capital.
(10)
Ruslan
Balance Sheet Extract
As at 30 September 2016
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*P48370A01120*
11
MSB - Page 2 Turn over
(c) Using the figures calculated in (b), and stating the formula used, calculate each of
the following ratios to two decimal places.
(i) Current ratio
(2)
Formula Calculation
(ii) Acid test ratio

(2)
Formula Calculation
12
MSB - Page 3 *P48370A01220*
Ruslan provides the following information for the previous financial year.
Current ratio Acid test ratio
Year ended 30 September 2015 2.5:1 1.4:1
(d) Evaluate the liquidity of the business over the two years and discuss the
implications of this for the business’s creditors.
(5)
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(Total for Question 12 = 25 marks)
*P48370A01320*
13
Past Paper (Mark Scheme) This resource was created and owned by Pearson Edexcel 4AC0
Question Answer Mark

Number
12 (a) (6)
Award 1 mark for each correct figure
£
Total of purchases ledger balances 4 890 (1)
Adjustment
1 290 (1)
2 420 (1)
3 (30) (1)
4 (40) (1)
Purchases ledger control account balance 5 530 (1)

Number
12 (b) (10)
Award 1 mark for each correct figure and each correct label
Ruslan
Balance Sheet extract
As at 30 September 2016
£ £ £
Current
assets
Stock 4 238 (1)
Debtors 7 622 (1)
Provision for
doubtful
debts 600
7 022 (1)
Prepayments 250 (1)
Cash in hand 211 (1)
11 721(1of)
Current
liabilities
Creditors 5 530 (1)
Bank 2 382 (1)
overdraft
7 912 (1of)
Working 3 809 (1of)
capital
MSB - Page 5

Number
12 (c) (i) (4)
Current ratio
Current assets/Current 11721/7912 = 1.48:1 (1 of)

liabilities (1)
(ii)
Acid test ratio
Current assets - 11721 – 4238 /7912 = 0.95:1

stock/Current liabilities (1) (1 of)

Number
12 (d) Award (1) mark for identifying that the liquidity position has (5)
deteriorated and a further (1) mark for stating both
benchmark figures.
Award up to (2) marks for the implications for the businesses

creditors.
A final (1) mark can be awarded for an appropriate conclusion.
Sample answer
The businesses liquidity position has deteriorated over the

past two years (1). Both ratios have decreased to below the
benchmark figures of 2:1 for the current ratio and 1:1 for the
acid test (1)
His creditors may be concerned that they will not receive

payment for goods supplied (1) and may refuse to supply
goods in the future (1).
The business must take steps to improve its liquidity position

in order to maintain good relations with its creditors(1)
MSB - Page 6
Summer 2017 www.mystudybro.com Accounting Paper 1

12 On 28 February 2017 the following balances remained in the books of R Hopkins after
the preparation of the trading and profit and loss account for the year.
Capital 10 000
Cash at bank 3 126
Cash in hand 289
Creditors 5 288
Debtors 7 429
Drawings 5 321
Fixtures and fittings (net book value) 1 900
Motor vehicles (net book value) 15 400
Net profit 23 698
Stock 5 521
10
MSB - Page 7 *P48164A01024*

(a) Prepare the balance sheet of R Hopkins as at 28 February 2017.

(4)
R Hopkins
Balance Sheet as at 28 February 2017
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11
MSB - Page 8 *P48164A01124* Turn over

After the preparation of the balance sheet the following errors and omissions were
discovered.
1. No entry had been made in the books for goods, costing £350, taken by
R Hopkins for his own use.
2. The annual charge for depreciation of fixtures and fittings had been omitted.
The policy is to depreciate fixtures and fittings by 25% of the net book value.
3. The purchase of a new motor vehicle on credit from DEF Traders, costing £12 000,
had been omitted from the books.
4. One of the debtors had ceased trading on 31 January 2017 owing £876. This
should have been written off as a bad debt.
5. Motor vehicle running costs for the year totalling £1 500 had been entered in
error in the motor vehicles account.
(b) State the type of error in (5) above.
(1)
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12
MSB - Page 9 *P48164A01224*

(c) Prepare journal entries to correct these errors and omissions. Narratives are not
required.
(10)
The Journal
£ £

13

R Hopkins’ policy is to depreciate motor vehicles at the rate of 25% on a reducing
balance basis, with a full year’s depreciation being charged in the year of purchase.
(d) Calculate the additional amount of depreciation to be charged on motor vehicles
after the above errors and omissions have been corrected.
(3)
................................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
................................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
................................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
................................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
................................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(e) State two accounting concepts that are relevant to the calculation of
depreciation.
(2)
1 ............................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................................................................................................................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2 ............................ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................................................................................................................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
MSB - Page 11 *P48164A01424*

Number
11 (c) Award 1 mark for each correctly stated reason (3)
(max 3)
Sample responses
Purchasing large or bulk quantities
To encourage repeat business
For businesses in the same trade

Number
12 (a) Award 1 mark for each correct figure (4)
R Hopkins
£ £
Fixed assets
Motor vehicles 15 400
Fixtures and fittings 1 900
17 300 (1)
Current assets
Stock 5 521
Debtors 7 429
Cash at bank 3 126
Cash in hand 289
16 365
Current liabilities
Creditors 5 288
Working Capital 11 077(1 of)
28 377(1of)
Financed by
Capital 10 000
Net profit 23 698
33 698
Drawings 5 321
28 377(1)
MSB - Page 12
R Hopkins
£ £
Assets
Non-current assets
Motor vehicles 15 400
Fixtures and fittings 1 900
17 300 (1)
Current assets
Stock 5 521
Debtors 7 429
Cash at bank 3 126
Cash in hand 289
16 365 16 365
Total assets 33665 (1of)
Equity and Liabilities
Equity
Opening balance 10 000
Net profit 23 698
33 698
Drawings 5 321
28 377(1)
Current liabilities
Creditors 5 288
Total equity and liabilities
33665 (1of)

Number
12 (b) (1)
Principle/principle (1)
MSB - Page 13
Question Mark Mark

Number
12 (c) Award marks for correct details and amounts in
combination. (10)
The Journal
Debit Credit
(1) Drawings 350 (1)
Purchases 350 (1)
(2) Profit and 475 (1)

loss
Provision 475 (1)
for
depreciatio
n
(3) Motor 12 000 (1)

vehicles
DEF 12 000 (1)
Traders
(4) Bad debts 876 (1)

Sales 876 (1)
ledger
control
account
(5) Motor 1 500 (1)

vehicle
expenses
Motor 1 500 (1)
vehicle
Number
12 (d) Award mark for correct figures only
(3)
New vehicle 12 000 – expenses 1 500 (1) x 25% (1) =
2 625 (1of)

Number
12 (e) Award (1) mark for each correct response
(2)
Acceptable responses:
Consistency/consistency (1)
Accruals/accruals / Matching/matching (1)
MSB - Page 14
13 At the year end of 30 September 2015 the trial balance of Havisham, a sole trader,
balanced. During the following month the following errors were discovered.
DO NOT WRITE IN THIS AREA
(a) Complete the following table to show the type of error in each case.
(3)
Error Type of Error
A sale of goods on credit, £350, to

Z Malik had not been recorded in the
books.
A cheque received from L Payne,

a debtor, had been entered in the
accounts as £182, instead of the correct
figure of £128.
A payment to R Charles a supplier, £732,

had been entered in the account of
R Charters.
(b) Prepare journal entries to correct these errors. Narratives are not required.
(6)
The Journal
Debit Credit
£ £
(c) State one other use of the general journal in addition to correction of errors.
(1)
. . . . . . . . . . . . .................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................ ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .
13

Number
12 (b)
Award up to 2 marks for comments relative to the
application of the accruals concept in respect of item 4.
Award up to 2 marks for comments relative to the

application of the business entity concept in respect of
item 5.
Award 1 mark for a concluding statement
Sample answer
It was necessary to adjust business rates and insurance

in order to comply with the accruals concept (1). These
adjustments ensure that the business’ profits are not
understated or overstated (1).
It was necessary to adjust the purchases figure by the

amount of stock withdrawn by the owner of the business
in order to comply with the business entity concept (1).
This adjustment ensures that the correct purchases figure
is shown in the trading thus ensuring that a correct gross
profit figure is shown (1).
All of these adjustments also ensure that the balance

sheet of the business shows a true and fair view of the
business’ assets and liabilities (1). (5)

Number
13 (a)
Omission (1)
Original entry (1)
Commission (1) (3)
MSB - Page 16

Number
13 (b)
Debit Credit
£ £
Z Malik 350(1)
Sales 350(1)
L Payne 54 (1)
Bank 54 (1)
R Charles 732 (1)
R Charters 732 (1)
(6)
Award mark only for correct account name and amount

Number
13 (c) Award 1 mark for any acceptable use of the journal.
Sample responses:
Sale or purchase of fixed assets on credit (1)

Writing off bad debts (1)
Opening entries (1)
(1)
MSB - Page 17
mmer 2016 www.mystudybro.com Accounting Paper 1
Paper This resource was created and owned by Pearson Edexcel 4AC0
15 Ellen sublets parts of her premises to several tenants.

On January 1 2015 she had received rent in advance from a tenant, £800, and was

owed rent by another tenant, £200.
During the year she received £13 600 in total from her tenants.
On 31 December 2015 she had received rent in advance from a tenant, £700, and was
owed rent by another tenant, £350.
(a) Prepare the rent received account for the year ended 31 December 2015 showing
the amount transferred to the profit and loss account. Balance the account on
that date and bring the balance down on 1 January 2016.
(7)
Rent Received Account
Date Narrative Amount (£) Date Narrative Amount (£)

After the preparation of the financial statements for the year ended 31 December
2015, Ellen discovered the following errors and omissions.
1 The purchases day book had been overcast by £450.
2 A payment of £732 for staff wages had been completely omitted from the
accounts.
3 Ellen had withdrawn goods, £640, for her own use.
4 The purchase of a new machine, £5 000, had been debited to the motor vehicles
account.
20
*P45581A02024*
mmer 2016 www.mystudybro.com Accounting Paper 1
Paper This resource was created and owned by Pearson Edexcel 4AC0
(b) Complete the following table to show clearly the effect on net profit after these
errors and omissions have been corrected.
(3)
The first one has been completed as an example.
Increase Decrease No effect
1 £450
TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 100 MARKS
21
*P45581A02124*

Number
14 (c) Award up to 2 marks for comments on each method of raising (5)
additional finance. (Max 4 marks).
Award 1 mark for a concluding statement
Sample answers
By issuing additional share capital they would have access to new

capital but may have to pay additional dividends (1). However it
is likely that these additional dividends would be compensated by
the extra profit that this expansion is likely to generate (1).
By issuing debentures they would have to pay additional interest

(1) which would decrease her profit for the year (1). Some form
of security may have to be offered which could affect the
stability of the business (1).
When considering which method to use the directors should

consult with their existing shareholders before making any
commitments (1).

Number
15 (a) Award 1 mark for correct date, narrative and amount. (7)
Rent Received Account

Date Narrative £ Date Narrative £
Jan Balance 200 (1) Jan 1 Balance 800 (1)
1 b/d b/d
Dec Profit and 13 850 Dec Bank 13 600
31 Loss (1) (1 of) 31 (1)
Dec Balance 700 Dec Balance 350
31 c/d 31 c/d
14 750 14 750
Jan Balance 350 (1) Jan 1 Balance 700 (1)
1 b/d b/d

Number
15 (b) (3)
Increase Decrease No
effect
1 £450
2 £732 (1)
3 £640 (1)
4AC0_01
MSB - Page 20 1606
4 _ (1)
4AC0_01
MSB - Page 21 1606
14 Rekha and Ali Shah are in partnership. At the end of their financial year on 31 March
2015 their trial balance failed to agree with a difference of £950 on the credit side.
After an investigation by their accountant the following errors and omissions were
discovered.
1 Rekha had withdrawn goods, costing £250, from the business for her own use. This
sum had been debited to her drawings account but no other entry had been made.
2 Ali had purchased some items of stationery, costing £86, out of his own personal
money, for the business during the year. This transaction had not been recorded
in the books of account.
3 During the year a bad debt of £350, written off in the previous financial year, had
been recovered. This had been debited in both the cash book and bad debts
account.
4 A debit balance of £3 500 shown in Rekhas’s current account at the start of the
year should have been transferred to her capital account. This transfer had not
taken place.
(a) Prepare the journal entries to correct these errors and omissions. Narratives are
not required.
(9)
Debit Credit
£ £
16
MSB - Page 22 *P44292A01620*
(b) Prepare the suspense account.

(5)
Suspense account
Complete the table by putting a cross in the correct box . If you change your mind about an
answer, put a line through the box and then mark your new answer with a cross .
(c) Indicate the effect, if any, on the partnership’s net profit following the correction
of the errors and omissions.
(4)
Error and
Increase Decrease No effect
omission
1
2
3
4
Rekha and Ali are concerned that their partnership profitability is decreasing and
wish to investigate ways in which this could be improved.
(d) (i) State one way in which the gross profit margin could be improved.
(1)
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................................................................................................................................... . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......................................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
(ii) State one way in which the net profit margin could be improved.
(1)
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........................................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......................................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
*P44292A01720*
17
Rekha believes that if the closing stock is valued at selling price, the partnership profit
will increase.
(e) Evaluate this statement, making reference to relevant accounting concepts.
(5)
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........... ............................................................................................................................... .. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... .. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... .. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... .. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... .. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... .. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... .. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... .. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... .. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... .. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... .. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ ............................................................................................................................... . . . . . . . . . . . . . . . . . . . . . .
18
MSB - Page 24 *P44292A01820*

Number
14 (a) Debit Credit (9)
£ £
Suspense 250 (1)
Purchases 250 (1)
Stationery 86 (1)
Ali - Current 86 (1)

account
Suspense 700 (1)
Bad debts 350 (1)

recovered
Bad debts 350 (1)
Rekha – Capital 3 500 (1)

account
Rekha – Current 3 500 (1)

account
MSB - Page 25

Number
14 (b) Suspense account (5)
Purchases 250(1) Balance 950(1)
31 b/f (1)
March
Bad debts
31 350(1)
March
Bad debts 350(1)
31 recovered
March
31 950 950
March
MSB - Page 26

Number
14 (c) Error and Increase Decrease No effect (4)
omission
1  (1)
2  (1)
3  (1)
4  (1)

Number
14 (d i) Increase the selling price of their products without any (1)
subsequent increase in the cost price (1)
OR
Decrease the cost of goods purchased without any
subsequent decrease in the selling price. (1)

Number
14 (d ii) Better control of overheads/ reduce expenses (1) (1)

Number
14 (e) Award (1) mark for confirming that this will increase her (5)
profits.
Award (1) mark for stating how stock should be valued
and (1) mark for identifying that this suggestion would be
in contravention of the prudence concept.
A further (1) mark for stating the effect on both profit and
assets and (1) mark for an appropriate conclusion.
Sample Answer
Rekha is correct in her statement that valuing the closing
stock at selling price will increase her profits as the cost of
sales will be reduced (1). However, stock should be valued
at the lower of cost or net realisable value (1) which is an
application of the concept of prudence (1). By over valuing
the stock both the profit and the assets will be over-valued
(1). Hence Rekha should be advised that her suggestion is
not appropriate (1).
MSB - Page 27

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Page 5 (4AC0) 2017 Winter - Answer

Page 7 (4AC0) 2017 Summer

Page 25 (4AC0) 2015 Summer - Answer

12 On 30 September 2016 Ruslan’s purchases ledger control account showed a credit

Total of purchases ledger balances

Purchases ledger control account balance

(ii) Acid test ratio

Current ratio Acid test ratio

Year ended 30 September 2015 2.5:1 1.4:1

(Total for Question 12 = 25 marks)

Question Answer Mark

Question Answer Mark

Question Answer Mark

Current assets/Current 11721/7912 = 1.48:1 (1 of)

Acid test ratio

Current assets - 11721 – 4238 /7912 = 0.95:1

Question Answer Mark

Award up to (2) marks for the implications for the businesses

A final (1) mark can be awarded for an appropriate conclusion.

The businesses liquidity position has deteriorated over the

His creditors may be concerned that they will not receive

The business must take steps to improve its liquidity position

Cash at bank 3 126

Cash in hand 289

Fixtures and fittings (net book value) 1 900

Motor vehicles (net book value) 15 400

Net profit 23 698

(a) Prepare the balance sheet of R Hopkins as at 28 February 2017.

(Total for Question 12 = 20 marks)

Question Answer Mark

Purchasing large or bulk quantities

To encourage repeat business

For businesses in the same trade

Question Answer Mark

Question Answer Mark

Question Mark Mark

(2) Profit and 475 (1)

(3) Motor 12 000 (1)

(4) Bad debts 876 (1)

(5) Motor 1 500 (1)

Question Answer Mark

Error Type of Error

A sale of goods on credit, £350, to

A cheque received from L Payne,

A payment to R Charles a supplier, £732,

(Total for Question 13 = 10 marks)

Question Answer Mark

Award up to 2 marks for comments relative to the

Award 1 mark for a concluding statement

It was necessary to adjust business rates and insurance

It was necessary to adjust the purchases figure by the

All of these adjustments also ensure that the balance

Question Answer Mark

Original entry (1)

Commission (1) (3)

Question Answer Mark

Question Answer Mark

Sale or purchase of fixed assets on credit (1)

15 Ellen sublets parts of her premises to several tenants.

DO NOT WRITE IN THIS AREA

Date Narrative Amount (£) Date Narrative Amount (£)