Write your name and admission number here

Name Admission Number

THIRD TERM TEST

(JULY 2023)
GRADE AS
ACCOUNTING – PAPER 2
……………./………… 2023 Time: 1 Hour 30 Minutes

Name Signature

Setter Ms.R. Hashwathi MARKS:….…%

Moderator Ms.A.Shiamala

Question Marks
Instructions
• Use black/blue ink or ball-point pen.
• Fill in the boxes at the top of this page with
your name and admission number.
• Answer the questions in the spaces
provided.(if not use the foolscap paper)

Information
• The mark for each question is shown in
brackets. (Use this as a guide as to how much
time to spend on each question.)

Advice
• Read each question carefully before you
start to answer it.
• Check your answers if you have time at the
end.
• Without sufficient working, correct answers
may be awarded no marks.

Total

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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS
 • Answer all questions

1. Hamid and Jamila have been in partnership for several years and do not have a partnership agreement.
They do not maintain full accounting records.

a. (i) State two disadvantages to Hamid and Jamila of trading as a partnership rather than as sole traders.
(02 Marks)
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(ii) State three items other than the profit and loss sharing ratio which may be included in a partnership
agreement. (03 Marks)

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Additional information
The partners have provided the following information for the year ended 31 December 2020.
At 31 December At 1 January
2020 2020
Administrative expenses owing - 472
Administrative expenses prepaid 291 -
Furniture and fittings at carrying value 26 580 24 720
Inventory 9322 7430
Insurance prepaid - 390
Trade receivables 12 930 14 380

During the year ended 31 December 2020

$
Irrecoverable debt written off 336
Receipts from trade 164 650
receivables
Return inwards 1 084

All sales are made on credit.

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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS
b. Calculate the revenue for the year ended 31 December 2020. (03 Marks)
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Additional information
The following information is also available for the year ended 31 December 2020.

$
Administrative expenses paid 8 228
Insurance paid 1 090
Purchase of additional furniture and fittings 4 500
Purchases of goods for resale 112 152
Receipts from the disposal of furniture and fittings 575
Rent of business premises 14 500
Staff wages 10 230

All goods are sold with a mark-up of 50%.

During the year Hamid took goods for his own use but no record was made of their value.
Furniture and fittings with a carrying value of $800 were disposed of during the year.

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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS
c. Prepare the partnership statement of profit or loss for the year ended 31 December 2020. (14 Marks)
Hamid and Jamila
Statement of profit or loss for the year ended 31 December 2020
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Additional information

Hamid and Jamila have been advised that their business could be improved if they were to keep full
accounting records. They are considering two options.
Option 1: To employ a part-time book-keeper at a salary of $5000 per year.
Option 2: To purchase a new computerised accounting package to maintain all the financial records. This
will cost $12 000 and will be written off over 5 years. Hamid has said he will loan $12 000 to the business,
but will require interest of 5% per year on the loan.

d. (i) Calculate Jamila’s share of profit or loss for both Option 1 and Option 2. (03 Marks)
Option1…………………………………………………………………………………………………………
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Option2…………………………………………………………………………………………………………
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(ii) Advise the partners which option they should choose. Justify your answer. (05 Marks)

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(Q1 Total 30 Marks)

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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS
2. Sergio is a sole trader. His book-keeper prepares regular bank reconciliation statements.

a. State two benefits of preparing regular bank reconciliation statements. (02 Marks)
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Additional information
Sergio is preparing his financial statements to 31 May 2020.
His bank statement shows the following for the first week of June 2020:
Date Details Debit Credit Balance
2020 $ $ $
31 May Balance 12 350 Debit
1 June Cash and cheques banked 1211 11139 Debit
2 June Cheque 1681 527 11 666 Debit
Cheque 1682 361 12 027 Debit
Cash and cheques banked 2170 9 857 Debit
3 June Cheque 1683 1 260 11 117 Debit
4 June Standing order adjustment 225 10 892 Debit
6 June BACS Sofia 536 11 428 Debit
7 June Balance 11 428 Debit

The following information is also available.

1.The deposits on 1 June and 2 June both relate to amounts received and recorded by Sergio in his cash book
for the month of May.
2. The last cheque that Sergio issued in May 2020 was number 1683.
3. The adjustment on 4 June 2020 related to a standing order debited by the bank in error on 27 May 2020.
4. On 5 June 2020 Sergio received a letter from the bank that had been delayed in the post. The letter stated
that on 29 May 2020
• Bank charges of $90 and bank interest of $120 had been debited to his account
• An amount of $360 had been received electronically from Alvaro, a credit customer.

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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS
b. Prepare Sergio’s bank reconciliation statement at 31 May 2020 to show the balance in the cash book
before it is updated. (07 Marks)
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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS
Additional information
Sergio’s bank manager has asked Sergio to repay the overdraft within the next three months.
Sergio has identified two possible options.
Option 1: Miguel, a close friend, would provide Sergio with a loan of $10 000 repayable in five annual
instalments of $2500.
Option 2: Sergio could take a seven-year bank loan from another bank for $16 000. This bank would require
annual interest of $1000 and security for the loan.

c. Explain the benefits and drawbacks to Sergio of each option. (06 Marks)
Option 1
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Option 2
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(Q2 Total 15 Marks)

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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS
3. Myra owns a delivery business. The following information is available about her business’s delivery
vehicles.
Vehicle Date of purchase Cost $
A 1 August 2017 30 000
B 1 February 2018 36 000
C 1 June 2019 39 000

Vehicles are depreciated using the straight-line method at 20% per annum. Depreciation is charged on a
month-by-month basis. The business’s financial year end is 31 December.

REQUIRED
a. Calculate the balance on the provision for depreciation of vehicles account at 31 December 2019.
(05 Marks)
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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS
Additional information
On 1 March 2020, Vehicle A was sold in part exchange for Vehicle D. Vehicle D cost $42000 of which
$29200 was paid by cheque.
REQUIRED
b. Prepare the vehicle disposal account. (5 Marks)
Vehicle disposal account
$ $

c. Prepare the provision for depreciation of vehicles account for the year ended 31 December 2020.
(05 Marks)
Provision for depreciation of vehicle account
$ $

(Q3 Total 15 Marks)

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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS
4. K Limited produces goods at two sites and uses marginal costing.
At one site the company makes a single product. The following details are available.

Maximum capacity $14500 units per month

Fixed costs $216000 per month

Unit selling price $90

Direct materials per unit $25
Direct labour per unit $36
Other variable costs $11

REQUIRED
a. Calculate the break-even point per month in units. (02 Marks)
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b. Define the term ‘margin of safety (02 Marks)

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Additional information
The directors have decided to make the following changes:
1 - Reduce selling price by 2%.
2 - Introduce a sales commission of $2 per unit on every unit sold in excess of 5000 units per month.
3 - Purchase direct materials in bulk and obtain a trade discount of 20%.
Buying direct materials in bulk will increase storage costs by $4000 per month.
Demand will be 98% of factory capacity.

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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS
 c. Prepare a marginal costing statement to show the monthly profit based on these changes. (06 Marks)
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d. Explain two advantages of using a system of marginal costing. (04 Marks)

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Additional information
At its other site the company makes three products: Product X, Product Y and Product Z. The following
details are available.
Product X Product Y Product Z
Contribution per unit $15 $20 $27
Machine hours per unit 1.5 2.5 3
Maximum monthly output in 600 300 200
units

Fixed costs per month are $14100.

Each month the company plans to work to full capacity producing the maximum output of each product.
In August 2021 only two-thirds of the month’s machine hours will be available.

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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS
REQUIRED
e. Calculate the machine hours available in August 2021. (02 Marks)
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Additional information
The company has a regular order to supply one major customer with 50% of the output of each product per
month.
Two options are being considered to deal with the shortage of machine hours.
Option 1: The finance director has recommended the company makes the maximum profit possible in
August 2021 and if necessary not complete all of the major customer’s order.
Option 2: The sales director has recommended that the company should ensure it fulfils the major
customer’s order.

REQUIRED
f. Calculate the profit or loss for August 2021 based on:

Option 1 (04 Marks)

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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS
Option 2 (05 Marks)
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g. Advise which option the company should choose. Justify your advice by discussing both options.
(Consider both financial and non-financial factors.) (05 Marks)
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(Q4 Total 30 Marks)

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OASIS INTERNATIONAL SCHOOL ACCOUNTING - AS