Answers

ACCA Certified Accounting Technician Examination – Paper T3 (INT) December 2010 Answers
Maintaining Financial Records (International Stream) and Marking Scheme

Section A

Question No Solution Question No Solution

1 B 11 C
2 B 12 D
3 C 13 D
4 C 14 C
5 D 15 B
6 B 16 D
7 D 17 C
8 A 18 D
9 C 19 B
10 A 20 B

Workings
2 Carrying amount brought forward $237,950
Carrying amount of assets scrapped $(12,890)
Additions $19,500
Depreciation charge $(46,900)
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$197,660
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3 Opening prepayment $820 (Debit entry)

Invoices $19,630 (Debit entry)
Credit notes $(255) (Credit entry)
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$20,195 (Debit entry)
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5 Total of listing $25,627

Balance overcast $(99)
Invoice treated as credit note $178 ($89 x 2)
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Ledger balance $25,706
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6 Invoice is for three months, thus monthly charge is $286.

Accrual is for two months (September and October), thus $572.
An accrual should be reported as a current liability.

9 Balance on trade receivables account $231,860

Less: Balances written off $(2,437)
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Adjusted balance $229,423
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Revised allowance at 0·75% (to nearest $1) $1,721
Allowance brought forward $1,488
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Thus increase in allowance $233
Add balances written off $2,437
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Total charge $2,670
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10 Cost $15,000
Depreciation – y.e. 30 November: 2006 $3,000
2007 $2,400
2008 $1,920
2009 $1,536 $(8,856)
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Carrying amount at date of sale $6,144
Proceeds $5,800
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Thus: Loss $344
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11 As the expenditure has been written off, no depreciation will have been charged in the year to 30 November 2010, thus profit is
overstated by the amount of depreciation which should be charged in that year.
The depreciation charge should be: $5,000 x 80% x 20% = $800.

17 Adjustment required: to remove prepayment $(189)

to create accrual $(189)
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Decrease in profit $(378)
Reported profit $65,285
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Adjusted profit $64,907
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19 Increase in capital $46,975 ($174,529 – $127,554)

Add Drawings $17,150
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$64,125
Less Capital $35,000
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= Profit $29,125
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20 Sales $142,200 at mark-up of 20% = 120% of purchase cost

100
Cost of sales = $142,200 x –––– = $118,500
120
Inventory has decreased by $1,800 ($5,400 – $3,600)
Purchases = $118,500 (Cost of sales)
– $1,800 (Decrease in inventory)
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= $116,700
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Section B Marks

1 (a) A suspense account may be created because:

1 the full details of a transaction are not known. Therefore, it may not be possible to identify both of the
ledger accounts in which entries are required. In order to maintain the double entry, one of the entries
will be made in a suspense account. 1
2 the total of the debit balances does not equal the total of the credit balances on the trial balance. A
suspense account will be opened while the cause of the imbalance is investigated. 1

(b) Depreciation is the means by which the cost of a non-current asset is allocated to each of the accounting
periods in which the asset is used.
The depreciation charge ensures that the profit for each accounting period is calculated on a consistent basis.
(If no depreciation charge was made, profit would only be affected in those years in which non-current assets
are purchased or sold.)
The number of accounting periods over which the cost of a non-current asset is spread is determined by the
useful life of the asset.
As land does not have a finite useful life, it follows that no depreciation charge should be made.
Mark allocation: 1 mark per valid point, to a maximum of 3

(c) When goods are sold on credit, inventory will be reduced by the cost of the items sold. This will be a reduction
in assets.
The value of trade receivables will increase by the sale value of the items.
As the sale value is greater than the cost, the net result is an increase in assets. 1
The profit on the sale will increase capital. 1
Liabilities are unaffected by the transaction. 1

(d) Prudence requires that if the preparer of financial statements is faced with a situation in which judgement is
required and there is a lack of certainty, caution should be exercised. This will mean that income and assets
should not be overstated and liabilities and expenses should not be understated. Another way of putting this
is that a profit should not be anticipated and a loss should be recognised as soon as it is foreseen.
Mark allocation: 1½ marks for each valid point, to a maximum of 3

(e) The periodic weighted average method of inventory valuation calculates a simple average value based on all
transactions during the period. Each time inventory is received, the total volume and the total value of the
receipt is calculated. At the end of the period the unit value is calculated by dividing the total value of all
receipts in the period by the total volume received in the period. (The value and volume of opening inventory
would also be included in the calculation.)
Mark allocation: 2 marks per valid point, for example:
simple average
calculated at end of period
total value divided by total volume
opening inventory included
to a maximum of 4
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2 (a) (i) Bank Account

$ $
(vi) Bank interest 746 Balance (as given) 2,678
(vii) Cheque cancelled 640 (v) Error in cheque 90
(ix) Transfer from deposit 1,500 (ix) Cash withdrawal 600
Balance carried down 482
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3,368 3,368
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Mark allocation:
Balances ½ mark each 1
Bank interest 2
Other entries 1 mark each 4 7
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 Marks
(ii) $
Balance per statement (1,723) overdrawn 1
(iii) outstanding cheques (1,759) 1
(iv) outstanding lodgement 2,820 1
(viii) refund of charges 180 1
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corrected balance (482) overdraft 1 5
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(b) Both balances will be reported in the statement of financial position.

The deposit account balance of $12,750 will be reported as a current asset, and the overdrawn current
account balance of $482 will be reported as a current liability.
Mark allocation: statement of financial position 1
deposit account is current asset 1
current account is current liability 1
corrected balance is reported 1
to a maximum of 3
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3 (a) Usain and Taylor

Partnership Appropriation Account for the year to 30 November 2010
Usain Taylor Total
$ $ $
Profit for year 34,850
Interest on capital (W1) 3,660 2,060 (5,720) 2
Interest on drawings (3,360) (2,880) 6,240 1
Salary 15,000 (15,000) 1
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Residual profit 20,370
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Shared 3:2 12,222 8,148 20,370 2
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Total share of profit for year 27,522 7,328 1 7
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W1 – Interest on capital $
Usain: $37,500 x 8% x 3/12 750
$48,500 x 8% x 9/12 2,910
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3,660
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Taylor: $22,000 x 8% x 3/12 440
$27,000 x 8% x 9/12 1,620
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2,060
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(b) Usain Taylor

$ $
Opening balances 9,438 (1,522) 1
Total share (a) 27,522 7,328 1
Drawings (28,000) (24,000) 1
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Closing balances 8,960 (18,194) 1 4
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(c) Usain Taylor Total

$ $ $
Current accounts 8,960 (18,194) 1
Capital accounts:
Opening balances 37,500 22,000 ½
Capital introduced 11,000 5,000 1
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Closing balances 48,500 27,000 ½
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Total 57,460 8,806 66,266 1 4
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16
 Marks
4 (a) (i) Prepayment
Payment of $1,380 for 1 year = $115 per month
3 months prepaid = $345 1
Credit to income statement
(ii) Inventory write-down
$ $
Cost of damaged items 1,350
Sales value 700
Repair costs (280)
––––
Net realisable value 420 1
––––
Write-down (charge to income statement) 930 1 2
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(iii) Expenditure incorrectly classified
Additional charge to income statement $500 1
(iv) Depreciation
$ $
Cost per trial balance 65,720
Revenue expenditure (500)
–––––––
Corrected cost 65,220 1
Accumulated depreciation 11,840 1
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Net book value 53,380
Depreciation at 20% 10,676 1 3
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Charge to income statement
Summary
$
Charges: write-down of inventory (ii) 930
revenue expenditure (iii) 500
depreciation (iv) 10,676
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12,106
less prepayment (i) 345
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Net charge 11,761 2
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Thus corrected profit = $38,322 – $11,761 = $26,561 1 3
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10

(b) Current assets: $

Inventory ($16,800 – $930) 15,870 1
Trade receivables 86,542 1
Prepayment 345 1 3
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102,757
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(c) $
Bank 6,267
Trade payables 63,829
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70,096 2
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