Fundamentals July 2012 - PDF

8/12/2019 Fundamentals July 2012 - PDF

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ICSA, 2012 Page 1 of 8

Subject no. 50A

Certificate in Offshore Finance and Administration

Accounting FundamentalsJuly 2012

Tuesday morning 10 July 2012 Time allowed: 2 hours

Do not open this examination paper until the presiding officer or an invigilator tellsyou to.

You must not take this paper out of the examination room.

This examination paper is divided into three sections. You must attempt all parts of Question1 in Section A, all questions in Section B, and two questions only in Section C.

Section A carries 20 marks (2 marks for each part of Question 1). Section B carries 30 marks(6 marks for each question). Questions in Section C each carry 25 marks.

You should allow yourself approximately 20 minutes in total to answer the questions inSection A, 40 minutes in total to answer the questions in Section B and 30 minutes for eachof the questions attempted in Section C.


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Section A Answer al l parts of Question 1. Select only o n e of the options A, B, C or D for each part.

1. (i) The bookkeeper at Good Hope Designs incorrectly posted a payment of 125 toSafeguard Insurance as a debit to finance charges. This is an example of whichone of the following errors?

A. Compensation

B. Commission

C. Principle

D. Omission

(ii) Which one of the following types of organisation is listed on the stock market?

A. Private limited companyB. Sole trader

C. Partnership

D. Public limited company

(iii) Which one of the following is a bedrock concept of accounting?

A. Going concern

B. Prudence

C. Money measurement

D. Duality

(iv) The sales ledger control account is also known as:

A. Creditors control account

B. Debtors control account

C. Sales daybook

D. Sales returns daybook


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(v) On 1 April 2012, Annie Smart purchased a computer for her business and paidby cheque. What was the impact on the accounting equation?

Increase Decrease

A. Fixed asset Current asset

B. Current asset Fixed asset

C. Fixed asset Capital

D. Fixed asset Current liability

(vi) Which one of the following is an example of a current liability?

A. Drawings

B. Owners capital

C. A prepayment

D. An accrual

Questions (vii) to (x) relate to the car repair and servicing business of SamStrong (Sam) for the accounting year 1 July 2011 to 30 June 2012.

(vii) During the year, Sam paid one month s rent for his home from the business. Howshould this payment be shown in his financial statements?

A. As an expense in the profit and loss account.

B. As a debtor in the balance sheet.

C. As a deduction from capital in the balance sheet.

D. As a current liability in the balance sheet.

(viii) Sam had a turnover of 120,000 during the year. The gross profit margin was25% and the operating costs were 12,000. What w as Sams operating profitmargin for the year?

A. 25%

B. 15%

C. 10%

D. 7.5%


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The following extract from Sams business balance sheet at 30 June 2012 relatesto questions (ix) and (x):

Current AssetsInventory 16,000Debtors 9,500Bank 3,250

Current LiabilitiesTrade Creditors 11,500

(ix) What was the current ra tio for Sams business as at 30 June 2012?

A. 1.11:1

B. 2.5:1

C. 4.59:1

D. 5.98:1

(x) What was the acid test (quick ratio) for Sams business as at 30 June 2012?

A. 1.11:1

B. 2.5:1

C. 4.59:1

D. 5.98:1

(Total: 20 marks)


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Section B Answer all f i v e questions.

2. Explain how the following are used in book-keeping:

(i) Purchase returns day book.

(ii) Petty cashbook.

(iii) Sales ledger.(6 marks)

3. Identify and explain three sources of income shown in the financial statements of clubsand societies.

(6 marks)

4. Explain the similarities and differences between a bad debt and a provision for a

doubtful debt. (6 marks)

5. In your answer booklet, draw the table below and complete the ledger entriesnecessary to record the three stages in accounting for the disposal of a fixed assetbefore any surplus or deficit can be transferred to the income statement.

No. Debit Credit1

2

3

(6 marks)

6. Fay Starr began a cake making business on 1 April 2012. Her business transactions forthe first month were as follows:

5 Apr Fay opened her business bank account with a deposit of 5,425 from herpersonal account.

6 Apr She purchased some equipment at a cost of 2,655 on credit from CaterersEnterprise.

9 Apr Fay baked six dozen cup-cakes for resale.

24 Apr Bank agreed an overdraft limit of 7,500.

For each date, state the double entry required to record the business activity for themonth of April 2012.

(6 marks)

(Total: 30 marks)


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Section C Answer tw o questions only.

7. (a) Explain the purpose of the trial balance within the accounting system.(7 marks)

(b) Identify and explain six errors a trial balance cannot detect.(18 marks)

(Total: 25 marks)

8. The extracts from the financial statements of Minus Zero plc for the year ended 30June 2012 are provided below:

Minus Zero plc2012

Sales 90,000Cost of sales 58,500Gross profit 31,500Operating profit 16,200Retained profit for the year 8,220Non current assets 25,000Inventory 4,200Receivables 12,329Cash at bank 2,150Payables 8,190Total equity 31,489

Required

(a) Calculate the solvency of the company using two suitable ratios.(4 marks)

(b) Explain what the results of both ratio calculations you completed in (a) tell usabout the assets and liabilities of the company.

(4 marks)

(c) Identify, calculate and comment on the working capital management of thecompany using three suitable ratios.

(12 marks)

(d) Outline and comment upon two problems encountered when using accountingratios.

(5 marks)

(Total: 25 marks)


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9. The following trial balance was prepared from the ledger balances of J Chivers, tradingas Chivers Sportswear (Chivers), for the year ended 30 June 2012:

Trial balance for Chivers as at 30 June 2012

Sales 195,000

Sales returns 11,010Purchases 96,000Purchase returns 766Debtors 12,113Provision for doubtful debts 600Creditors 7,886Long term loan 7,319Bank overdraft 9,218Office & factory rent 12,660Opening stock 3,834Plant and machinery at cost 92,022

Accumulated depreciation as at 30 June 2011 14,271Office furniture at cost 10,988

Accumulated depreciation as at 30 June 2011 1,099Carriage in 288Carriage out 219Travelling expenses 1,316

Administration 7,503Repairs 191Salaries 50,970Telephone 3,014

Drawings 18,205Discounts allowed 3,440Capital 87,614

323,773 323,773

Notes to the trial balance:

(i) Stock at 30 June 2012 was 2,955.

(ii) Accrued expenses at 30 June 2012 were travel expenses 1,155 and telephone

318.

(iii) Office & factory rent includes 1,600 for the first quarter of 2012.

(iv) A total of 2,113 has to be written off as bad debt.

(v) The provision for doubtful debt has to be 10% of the debtors balance.

(vi) Plant and machinery is depreciated on the reducing balance basis at 25% perannum. Office furniture is depreciated at 10% on original cost.

(continued)


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Required

(a) Prepare a trading, profit and loss account for Chivers for the year ended 30 June2012.

(13 marks)

(b) Prepare a balance sheet for Chivers as at 30 June 2012.(12 marks)

(Total: 25 marks)

The scenarios included here, except where expressly identified, are entirely fictional. Any

resemblance of the information in the scenarios to real persons or organisations, actual or perceived, is purely coincidental.


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Fundamentals July 2012 - PDF