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AS Accounting
Unit 1
Past Examination Paper
June 2009
By the end of this lessonBy the end of this lessonHave marked
your answers to all questions
Write notes on areas to improve
Decide on three improvement
targets
You will
(a) Explain three reasons for keeping accounting records.
Q1
6 marks
Possible reasons include:
• Legal requirement – business records are required to be kept for up to 5 years
• Helps preparation – e.g. Double entry entered automatically by one entry
• To determine how profitable a business is
• To help determine a valuation for the business
• To provide record of a transaction that in the future may need clarification
• To keep track of where money is going (to check its not being stolen)
(b) Explain the following termsQ1
6 marks
Accrued expenses: An expense that should have been paid in the current accounting period but has not been paid in that accounting period and therefore is still owing. Treated as a current liability and added onto the expense paid in the Income Statement.
Prepaid expenses: An expense that relates to a future accounting period and that has been paid in the current accounting period. Treated as a current asset and deducted from the expense paid in the Income Statement.
Depreciation: The reduction in the economic value of an asset over time caused by wear and tear or obsolescence. Treated as an expense in the Income Statement and deducted from the asset in the Balance Sheet.
Q2 (a) Enter the difference in the trial balance totals in the suspense account below. Make any necessary entries in the suspense account to correct the errors
Suspense account31 May Dis rec 200
31 May Rent received 700
900
Calculate balance b/d – difference between debit and credit balances
31 May Bal b/d 399
31 May General exps 36
31 May Dis all 65
31 May Wages 200
31 May Drawings 200
900
(1) Need to increase the amount of discount received – Dr Suspense Cr Discount (as dis received is income therefore increase it is achieved by crediting the account)
(3) Discount allowed is an expense account, therefore to increase it we need to Dr dis all Cr Suspense
(4) This error does not affect the suspense account as the correct amounts have been entered, just to the wrong account. The correction will be Dr motor repairs Cr P&M
(5) Rent received is an income account and therefore the entry should have been to credit the account. Thus Dr Suspense 700 Cr rent received 700
(6) Need to remove the entry from the wages account so Dr wages Cr Suspense. Then need to make actual entry Dr drawings (expense a/c) Cr suspense
(2) Expense account undercast by 36 – Dr general expenses Cr Suspense
10 marks
Q2 (b) Complete the following table to identify the amount, if any, by which the net profit of Joshua Rose would be affected by the correction of the errors of page 4
7 marks
Error Increase NP Reduce NP No effect on NP
(1)
(2)
(3)
(4)
(5)
(6)
(1) Discount rec is income, there has been more income therefore NP will increase
(2) The amount of total expenses is to be increased, therefore reducing NP
(3) Discount allowed is an expense, this correction will therefore increase total expenses
(4) No amounts need to be changed, just correction to the t-accounts
(5) Rent received account should have been credited, but it has been debited so we need to credit it by 700 which increase NP as this is income
(6) Cr Wages account, thus increasing total wages amount and total expenses, and reducing NP
2003665
No effect750
200
Q3 (a) Prepare a profit and loss account for Abdul Miraz for the year ended 31 April 2009.
Key points:
• REMEMBER to give final accounts their title...EASY marks!!
• Label TB in qu...Dr column = asset or expense Cr column = liability or income
Profit and Loss account of A Mira for the year ended 30/04/09Gross profit 76510 Discount allowed 310 General expenses 12420 Add accrued 400 12820 Motor expenses 18730 MV depreciation 3280 Rent and rates 24700 Less prepayment 1340 23360 Total expenses 58500New profit 18010
13 marks
Q3 (b) Prepare a balance sheet for A Miraz at 30 April 2009
Key points:
• Current assets need to be in order of inverse liquidity (least liquid first)
Balance sheet of A Miraz at 30 April 2009
ASSETS
Fixed assets
Premises 95000
Motor vehicles 16400
Provision for depreciation (3280+3280) 6560 9840
104840
Current assets
Prepayments 1340
Debtors 8790
Stock 24850 34980
139820
Q3 (b) Prepare a balance sheet for A Miraz at 30 April 2009
21 marks
Balance sheet of A Miraz at 30 April 2009
LIABILITIES
Ownership
Capital 71500
Net profit 18010
Less drawings 18180
71670
Long-term liabilities
Mortgage on premises 37500
Current liabilities
Accruals 400
Bank loan 4100
Bank 14630
Creditors 11860 30990
139820
Key points:
• Drawings need to be increased by £2000, bank needs to be reduced by £2000
• Bank loan is repayable in the next accounting period and therefore is a current liability
(a) Prepare a sales ledger control account for May 2009
9 marks
Q4
Sales Ledger Control a/c
Balance b/d 33459
Sales 48144
Discount received 1136
82739
Returns Inward 1635
Bank 42912
Discount allowed 992
Bank (DC) 169
Contra 214
Balance c/d 36817
82739
(b) Explain how the balance on James Shea’s sales ledger control account verifies the accuracy of his sales ledger.
2 marks
Q4
The total of the individual debtors balances should match with the balance brought down of £36 817 on the sales ledger control account.
(c) Explain two types of error that would not be identified by preparing a sales ledger control account.
6 marks
Q4
Possible errors:
• Error of commission – failure to make the correct entries. Due to (for example) mixing up debtors names ..Harish is mistaken for Harris
• Original error – £200 has been entered in the Sales Day Book (instead of £2000) and the incorrect £200 is also entered in the debtors account
• Error of omission – transaction completely omitted, this would not cause disagreement as no double entry has been made
• Compensating error– by chance two separate mistakes cancel each other out because they happen to be the same number
Remember there are 4 types of error that may not be detected when comparing the sales ledger control account closing balance with the closing total on the debtors schedule