CARIBBEAN E XAM I NAT I O N S COUNCIL

CARIBBEAN SECONDARY EDUCATION CERTIFICATE®

EXAMINATION
‘‘*’’Barcode Area”*”
Front Page Bar Code
08 JANUARY 2020 (a.m.)

FILL IN ALL THE INFORMATION REQUESTED CLEARLY IN CAPITAL LETTERS.

TEST CODE 0 1 2 3 9 0 2 0

SUBJECT PRINCIPLES OF ACCOUNTS – Paper 02

PROFICIENCY GENERAL

REGISTRATION NUMBER

SCHOOL/CENTRE NUMBER

NAME OF SCHOOL/CENTRE

CANDIDATE’S FULL NAME (FIRST, MIDDLE, LAST)

‘‘*’’Barcode Area”*”

D D M M Y Y Y Y
Current Bar Code

DATE OF BIRTH

SIGNATURE __________________________________________________

‘‘*’’Barcode Area”*”
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FORM TP 2020028 JANUARY 2020

CARIBBEAN E XAM I NAT I O N S COUNCIL

CARIBBEAN SECONDARY EDUCATION CERTIFICATE®

EXAMINATION

PRINCIPLES OF ACCOUNTS

Paper 02 – General Proficiency

3 hours

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

1. This examination consist of FIVE questions.

2. Answer ALL questions.

3. Write your answers in the spaces provided in this answer booklet.

4. Do NOT write in the margins.

5. Show ALL working clearly.

6. You may use a silent, non-programmable calculator to answer questions.

7. You are advised to take some time to read through the paper and plan your answers.

8. If you need to rewrite any answer and there is not enough space to do so on the
original page, you must use the extra lined page(s) provided at the back of this
booklet. Remember to draw a line through your original answer.

9. If you use the extra page(s) you MUST write the question number clearly in
the box provided at the top of the extra page(s) and, where relevant, include
the question part beside the answer.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

Copyright © 2019 Caribbean Examinations Council

All rights reserved.
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Write your answers in the spaces provided in this booklet.

1. (a) (i) Suggest ONE reason why a Trial Balance must always be in balance?
One reason is because every debit entry needs to have a credit entry
.................................................................................................................................

.................................................................................................................................
(1 mark)

(ii) Identify TWO errors that are NOT revealed by a Trial Balance.
error of commission and error of omission
.................................................................................................................................

.................................................................................................................................

.................................................................................................................................

.................................................................................................................................
(2 marks)

(b) The following balances were taken from the books of Henry’s Pizza at the beginning and
end of 2019.

1 January 2019 31 December 2019

No. Account Titles
$ $

1 Bank dr 3 800 2 000

2 Cash dr 1 900 500

3 Machinery dr 25 000 23 300

4 Accounts receivable dr 1 850 1 000

5 Loan cr 5 400 3 200

6 Equipment dr 12 500 10 600

7 Accounts payable cr 1 625 1 150

8 Inventory dr 9 000 7 500

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Required

Using the information given on page 4, answer the following questions.

(i) Calculate capital on 1 January 2019 and 31 December 2019.

Capital on 1 January 2019 Capital on 31 December 2019

3800
1900 2000
25000 500
1850 23300
12500 1000
9000 10600
= 54 050 7500
- (5400+1625) = 44900-( 3200+1150)
7025 = 4350
= 47, 025 = 40 550

(4 marks)

(ii) What was the net profit or net loss for the year?
40 550 - 47025 = (6475) net loss
.................................................................................................................................

.................................................................................................................................

.................................................................................................................................

.................................................................................................................................
(2 marks)

(iii) What was the total value of non-current assets at year end?

.................................................................................................................................
23300 + 10600 = 33900

.................................................................................................................................

.................................................................................................................................

.................................................................................................................................
(2 marks)

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(iv) How would inventory at 31 December 2019 be classified on the Statement of
Financial Position (Balance Sheet)?
closing inventory
.................................................................................................................................

.................................................................................................................................
(1 mark)

(v) Which item is a current liability?

accounts payable,
.................................................................................................................................

.................................................................................................................................
(1 mark)

(vi) Calculate the working capital at the start of the year.

9000
1850
3800
1900
= 16500 - 1625
= 14 875

(3 marks)

(vii) In the table in (b) on page 4, Account Titles 1, 2 and 8 are current assets. List the
names of the current assets in order of liquidity.
cash, bank, inventory
.................................................................................................................................

.................................................................................................................................
(1 mark)

(viii) What term describes the reduction in the value of equipment?

Depreciation
.................................................................................................................................

.................................................................................................................................
(1 mark)

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(ix) How much money is owing to the firm at year end?

.................................................................................................................................
1000

.................................................................................................................................
(1 mark)

(x) What term is used to describe the business if it CAN pay its liabilities as and when
due?
liquid
.................................................................................................................................

.................................................................................................................................
(1 mark)

Total 20 marks

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2. Irius owns a souvenir business which bears his own name. On 1 November 2019 his business’ cash
in hand was $1 380 and cash at bank was $ 1 590. During November, the following transactions
occurred.

Date Transaction

Nov 5 Cash sales totalled $1 030.

8 Paid Elwin Ltd $2 660 by cheque, and received a discount of $140.

11 Transferred $980 of the cash on hand to the business’ bank account.

19 Paid business’ telephone expenses, $280 in cash.

Received a cheque from Amed Supplies Ltd in full settlement of its account of
22
$1 300 less a 3% discount for prompt settlement.

24 Irius wrote a cheque for $560 to pay for the electricity bill for his home.

CM Stores was issued a cheque of $3 325 in full settlement of its account of

30
$3 500.

Required

(a) Using the form provided on page 9, prepare the business’ three-column cash book for
November 2019:

• Balance the cash book at month end and bring down the balances into the next period.

• Total the discount columns.

• Enter appropriate folio references in the cash book as if entries had been posted.

Ledger accounts are not required. (19 marks)

(b) What is the significance of the balance on the bank account at the end of the month?

..............................................................................................................................................
It's a bank overdraft

..............................................................................................................................................

.............................................................................................................................................

..............................................................................................................................................
(1 mark)

Total 20 marks

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Dis Cash Bank Dis Cash Bank

Date Particulars Fo Date Particulars Fo
All’d $ $ Rec'd $ $
Nov 1 Bal b/d 1380 1590 Nov 8th Elwin LTD PL 140 2660

Now 5th Cash sales GL Nov 11th c 980

1030 bank

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nov 11th cash 980 Nov 19th tele expenses GL 280
c
nov 22nd amed supplies SL 39 1261 nov 24th drawings GL 560

nov 30th cm stores 175 3325

Bal c/d 2714 Bal c/d 1150

39 2410 3831 315 1260 6545

-9-

6545 2410

Dec 1st Bal b/d 1150 dec 1st bal b/d 2714

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NOTE: Dis All՚d means Discount Allowed
Dis Rec՚d means Discount Received

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3. W. Watson, a sole proprietor, presented the following trial balance at 31 December 2019.

Debit Credit
Account Titles
$ $

Purchases and sales 35 000 43 500

Sales returns and purchases returns 500 620

Opening inventory 10 000

Shop fittings at cost 6 000

Van at cost 4 000

Receivables and payables 800 700

Provision for doubtful debts 80

Electricity 600

Telephone 100

Salaries 3 000

Bad debts 980

Bank 300

Capital 18 180

Drawings 1 800
63 080 63 080

Additional Notes

(i) Closing inventory at 31 December was $12 000.

(ii) Depreciation is to be provided using the straight-line method as follows:

a) Shop fittings at 10% per annum

b) Van at 20% per annum

(iii) Electricity prepaid, $50.

(iv) Telephone account outstanding, $22.

(v) Accrued salaries, $500.

(vi) The provision for doubtful debts must be 15% of receivables.

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Required

(a) In the space provided below, prepare an Income Statement for W. Watson for the year
ended 31 December 2019.
W.Watson
..............................................................................................................................................
Income statement
for the year ended 31 dec 2019
..............................................................................................................................................
$ $ $
..............................................................................................................................................
Sales 43 500
..............................................................................................................................................
sales returns 500
..............................................................................................................................................
Net sales 43 000
..............................................................................................................................................
less: cost of goods sold
opening stock 10,000
..............................................................................................................................................
Purchases 35000
..............................................................................................................................................
less: purchases returns 620
..............................................................................................................................................
cost of goods available for sale 44380
..............................................................................................................................................
12,000
less: closing stock
..............................................................................................................................................
cost of goods sold 32380
..............................................................................................................................................
Gross profit 10620
..............................................................................................................................................
less expenses
..............................................................................................................................................
provision (15% x 800)-80 40
..............................................................................................................................................
electricity (600-50) 550
..............................................................................................................................................
telephone (100+22) 122
..............................................................................................................................................
salaries (3000+500) 3500
..............................................................................................................................................
bad debts 980
..............................................................................................................................................
shop fittings dep 600
..............................................................................................................................................
van dep 800
..............................................................................................................................................
total expenses (6592)
..............................................................................................................................................
Net profit 4028
..............................................................................................................................................

..............................................................................................................................................
(15 marks)

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(b) In the space provided below, prepare an extract of W. Watson’s Statement of Financial
Position (Balance Sheet) to show the Capital section only, as at 31 December 2019.
W.Watson
..............................................................................................................................................
Balance sheet
..............................................................................................................................................
as at 31 dec 2019
..............................................................................................................................................
$
..............................................................................................................................................
financed by:
..............................................................................................................................................
balance at start 18 180
..............................................................................................................................................
add: net profit 4028
..............................................................................................................................................
22 208
..............................................................................................................................................
less: drawings 1800
..............................................................................................................................................
balance at end 20 408
..............................................................................................................................................

..............................................................................................................................................

..............................................................................................................................................
(5 marks)

Total 20 marks

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4. (a) In the space provided below, draw and label a diagram to show the SIX stages of the
accounting cycle for the owner of Ziggy’s Shoe Shop.

Sourcing documents
|
Journalizing the transactions
|
Posting the transactions to the ledgers
|
Extracting a trial balance
|
Adjusting and closing entries
|
Preparing financial statements

(7 marks)
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(b) Identify the type of business organization described in EACH situation below.

(i) A large sized enterprise with many employees and owned by a single person.

Sole trader
.................................................................................................................................
(1 mark)

(ii) Shares in this type of business cannot be sold by shareholders on the stock market.
private limited company
.................................................................................................................................
(1 mark)

(iii) Three friends operate a business in which the actions of one of them is binding on
the other two.
partnership
.................................................................................................................................
(1 mark)

(iv) An organization, operated by members, which provides services to members and

is often financed by donations, fund-raising and subscriptions.

non profit business

.................................................................................................................................
(1 mark)

(c) (i) Identify ONE internal user of accounting information and state how this information
is used by that user.
Employees - to assess the financial health of the
.................................................................................................................................
organization
.................................................................................................................................

.................................................................................................................................

.................................................................................................................................
(2 marks)

(ii) Identify ONE external user of accounting information and state how this information
is used by that user.
Investors - to help decide if the company is worth investing in
.................................................................................................................................

.................................................................................................................................

.................................................................................................................................

.................................................................................................................................
(2 marks)

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(d) Each of the transactions below violates an accounting concept or principle. State the
concept or principle that is being violated.

(i) Mr Peters paid the water bill for his private home and recorded it as a business
expense.
separate entity concept
.................................................................................................................................

.................................................................................................................................
(1 mark)

(ii) Ian, a receivable, is unable to pay due to bankruptcy and the business is likely to
lose $8 000. Management refuses to create a provision for doubtful debts or to
write off this amount as a bad debt.

prudence comcept
.................................................................................................................................

.................................................................................................................................
(1 mark)

(iii) In order to report higher profits for the financial year, management changed its
method of calculating depreciation from the straight line to the reducing balance
method.
consistency concept
.................................................................................................................................

.................................................................................................................................
(1 mark)

(iv) Revenue earned in January 2018 was not recorded until the money was actually
received in the following financial period in January 2019.

accruals concept
.................................................................................................................................

.................................................................................................................................
(1 mark)

(e) With reference to the violation in (d) (ii) above, what is the effect on the Income Statement?
the net profit will be overstated by 8000
..............................................................................................................................................

..............................................................................................................................................

..............................................................................................................................................

..............................................................................................................................................
(1 mark)

Total 20 marks
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5. The accounting department of Janz Place provided the following information from its various
books.

Item January December

No. 2019 2019

1 Credit sales 295 380

2 Credit purchases 162 500

3 Accounts receivable 5 460

4 Accounts payable 4 500

5 Cash and cheques received from accounts receivable 290 650

6 Cash and cheques paid to accounts payable 158 700

7 Discounts allowed 1 890

8 Discounts received 1 940

9 Sales returns 2 200

10 Purchases returns 3 700

11 Interest charged on late payments from credit customers 640

12 Refunds for overpayments from accounts payable 1 240

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(a) Using the information provided on page 16, prepare EACH of the following TWO control
accounts for the year ended December 2019. Total and bring down balances for the start
of the next year.

(i) Sales Ledger Control Account

Particulars Debit Particulars Credit

Balance b/d 5460 cash and cheques 290650

credit sales 295380 discount allowed 1890
Interest charged 640 sales returns 2200
bal c/d 6740

301 480 301 480

bal b/d 6740

(8 marks)

(ii) Purchases Ledger Control Account

Particulars Debit Particulars Credit

cash and cheques paid 158700 bal b/d 4500

discount received 1940 credit purchases 162500
purchases returns 3700 refunds 1240
bal cld 3900
168,240 168,240
bal b/d 3900

(8 marks)

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(b) With reference to the entries made in the control accounts for Janz Place on page 17, what
is the accounting department’s source of entry for EACH of the following items?

Item No. 1

sales journal
..............................................................................................................................................

Item No. 12
cash book
.............................................................................................................................................
(2 marks)

(c) Identify TWO examples of accounting software used for preparing and processing payroll.
TTPAY and gusto
..............................................................................................................................................

.............................................................................................................................................

.............................................................................................................................................

..............................................................................................................................................
(2 marks)

Total 20 marks

END OF TEST

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.

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EXTRA SPACE

If you use this extra page, you MUST write the question number clearly in the box provided.

Question No.

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EXTRA SPACE

If you use this extra page, you MUST write the question number clearly in the box provided.

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EXTRA SPACE

If you use this extra page, you MUST write the question number clearly in the box provided.

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EXTRA SPACE

If you use this extra page, you MUST write the question number clearly in the box provided.

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 CANDIDATE’S RECEIPT

INSTRUCTIONS TO CANDIDATE:

1. Fill in all the information requested clearly in capital letters.

TEST CODE: 0 1 2 3 9 0 2 0

SUBJECT: PRINCIPLES OF ACCOUNTS – Paper 02

PROFICIENCY: GENERAL

REGISTRATION NUMBER:

FULL NAME: ________________________________________________________________

(BLOCK LETTERS)

Signature: ____________________________________________________________________

Date: ________________________________________________________________________

2. Ensure that this slip is detached by the Supervisor or Invigilator and given to you when you
hand in this booklet.

3. Keep it in a safe place until you have received your results.

INSTRUCTION TO SUPERVISOR/INVIGILATOR:

Sign the declaration below, detach this slip and hand it to the candidate as his/her receipt for this booklet
collected by you.

I hereby acknowledge receipt of the candidate’s booklet for the examination stated above.

Signature: _____________________________
Supervisor/Invigilator

Date: _________________________________