1

1
(a)The cash book showed a balance in the bank of $1000 Dr. On the same date, the bank
statement showed a balance in the bank of $900 Dr. Which could be the reason for
this difference?
A bank interest received
B payments made directly into the traders bank account
C standing order for property tax paid directly by the bank
D unpresented cheque
(b)What
A
B
C
D

is an income statement (profit and loss account)?

A list of all the assets and liabilities of a business at a particular date.
A list of all the balances in the ledger accounts of a business at aparticular date.
A statement of receipts and payments of a business during a particular period.
A summary of income and expenditure of a business during a particular period.

(c) Which entry is made to reduce a provision for doubtful

account to be debited
A income statement(profit and loss account)
B provision for doubtful debts
loss account)
C provision for doubtful debts
D trade receivables (debtors)

debts?
account to be credited
provision for doubtful debts
income statement (profit and
trade receivables (debtors)
provision for doubtful debts

(d)A sole trader compares his results with those of a similar business. Which shows how
well expenses are being controlled?
A bank balance
B cost of sales
C gross profit
D net profit
(e)Which error will require a correcting entry in a suspense account?
A cash paid to Gideon debited to Gibsons account
B motor vehicles account omitted from the trial balance
C purchase of fixtures for cash debited to the purchases account
D no entry made for cash paid for stationery
(f) Maria maintains a provision for doubtful debts at 5% of the trade receivables (debtors)
at the end of each financial year.
On 31 December 2008 the trade receivables (debtors) owed $25 000 and on 31
December 2009 the trade receivables (debtors) owed $20 000.
How much will appear in Marias income statement (profit and loss account) for the
year ended 31 December 2009?
A $250 credit
B $250 debit
C $1000 credit D $1000 debit
(g)Karls trial balance for 31 December 2009 includes the following balances.
$
Sales
3 200
Inventory (stock) at 1 January 2009
200
Purchases
1 800
Expenses
800
Karls inventory (stock) at 31 December 2009 was $300.
What is Karls net profit for the year?
A $400

B $500

C $700

D $1500

(h)The same accounting treatment should be applied to similar items at all times.
Which accounting principle is being applied?

2
A
B
C
D

consistency
duality
money measurement
prudence

(i) What is cash discount?

A an allowance given to a customer for paying in cash
B an allowance given to a customer for prompt payment
C a deduction from the list price of goods bought by a customer
D a deduction from the list price of goods for bulk buying by a customer
(j) Which type of error is corrected using a suspense account?
A complete reversal
B omission
C principle
D single entry
[10]

2
In the month of April Suman had the following transactions with his customers.
April
3 Cheque received from Ahar
9 Cash sales
12 Cheque received from Bannu
18 Credit note issued to Chango
22 Credit transfer from Dooly
28 Cheque received from Eduardo

$
1500
4000
2000
400
1650
900

REQUIRED
(a)Make the necessary entries in the bank and cash columns on the debit side of
Sumans cash book for the month of April.

Date

Cash Book April 2010

Detail
Cash
Dr $

Bank
Dr $

3
Suman
[10]
(b)In the table below, show how the transaction on 9 April should be posted to the ledger.
Name of account
Dr $
Cr $
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[2]
Suman prepared his trial balance at 30 April 2010 and transferred the difference on the
trial balance to a suspense account.
The balance shown in the bank column in Sumarus cash book at 1 April 2010 was $620
Dr.
He found that this balance was incorrect and should have been $260 Dr.
REQUIRED
(c) Show (with narrative) the journal entry required to correct this error.
Date
Dr$
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..
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Cr$
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...................

[6]
(d)Suman is concerned that some of his customers to whom he has sold on credit may
not be able to pay him.
Suggest two ways in which Suman might be able to encourage his customers to pay
their invoices.
1

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[4]
[Total: 22]

3
Griffin has a car hire business. He hires cars to customers for a fixed period of time. He
buys cars new and keeps them for three years. At the end of the three years a motor
dealer buys the used car in part exchange for a new car.
REQUIRED
(a)In the table below, place a tick under the correct heading to show whether Griffins
receipts are capital or revenue.
Capital
Revenue
Hire charges
Cash discount received from motor
dealer for prompt payment for new car
Part exchange value of used car
[6]
(b)On 1 April 2009 Griffin bought a new car at a cost of $12 000. He charges depreciation
on cars using the reducing balance basis at 30% per annum.
(i) Calculate the depreciation charged in Griffins income statement (profit and loss
account) for the year ended 31 March 2010.
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[3]
(ii)State the net book value of the car to be shown in Griffins balance sheet at 31
March 2010.
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[2]

On 1 April 2010 the car was involved in an accident and was damaged so badly that it
could not be repaired and had to be scrapped. The insurance company paid Griffin $5000
for the scrapped car.
(c) Prepare the disposal of motor vehicles account in Griffins nominal (general) ledger for
April 2010, showing any profit or loss on the disposal.
Disposal of motor vehicles account

[6]
(d)Griffin is finding that the part exchange value being paid by the motor dealer is less
than the net book value after three years.
(i) Comment on the annual rate of depreciation charged by Griffin.
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[2]
(ii)Suggest a different method for charging depreciation on Griffins hire cars. Give one
reason for your answer.
Method: ...........................................................................................................................
....................
Reason: ............................................................................................................................
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[2]
[Total: 21]

4
Monica has a shop. She writes up the books of account herself but is not an experienced
bookkeeper.
Her financial year ends on 28 February.
The trial balance she prepared on 28 February 2011 showed a shortage on the debit side
of $720.
Monica entered this in a suspense account and then prepared a draft income statement
showing a profit for the year of $3600.
The following errors were later discovered.
1
A cheque payment of $460 to repay a loan from Carlo has been correctly
entered in the cash book but $640 has been debited to his loan account.
2
Cash sales of $850 have been completely omitted from the books.
3
A cheque payment for $900 for goods has been entered in the cash book but no
other entry has been made.
4
The purchase of new display shelves for $1200 has been debited to the repairs
account.
REQUIRED
(a) Show the journal entries required to correct the above errors. The date and narrative
are not required.
Dr$
Cr$
Error
1:
.....................................................................................................
.....................
.....................
..................................................................................................... .....................
.....................

6
Error

2:
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Error

3:
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Error

4:
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[8]

(b) Write up the suspense account in Monicas ledger from the above journal entries.
Dates are not required.
Monica
Suspense account

[6]
(c) Prepare a statement to show Monicas profit for the year after correcting the errors 1
4.
Monica
Statement of corrected profit for the year ended 28 February 2011

[6]
[Total: 20]

5
Theba maintains a petty cash book using the imprest system.
REQUIRED
(a)State one reason why Theba maintains a petty cash book in addition to her main cash
book.
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[2]
(b)Explain what is meant by the imprest system of petty cash.
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[2]
Thebas imprest amount is $200.
On 1 April 2012 she had $97 in the petty cash box. On the same day she made a transfer
from the business bank account to restore the petty cash to the imprest amount. On 30
April 2012 Theba had the following petty cash vouchers.
$
April 4
Postage stamps
24
12
Stationery
36
17
Fuel for motor vehicle
38
21
Refund from stationery supplier
4
24
Catering supplies
12
29
Cleaning
70
REQUIRED
(c) Prepare Thebas petty cash book for the month of April 2012. Balance the book on 30
April 2012 and carry down the balance.
Make the entry on 1 May 2012 to restore the petty cash to the imprest amount.

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8
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[12]
(d)From the entries in the petty cash book, record the transactions for the month in
Thebas ledger

Postage and Stationery account

Motor expenses account

Catering supplies account

Cleaning account

[6]
(f) State the amount of petty cash which would be included in Thebas balance sheet
prepared on 30 April 2012.
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[1]
[Total: 23]
6
Sam received a statement of his account with the Eastern Commercial Company at 30
September 2010.
REQUIRED
(a)Give one purpose of sending a statement of account to a customer.
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[2]
Sams statement was as follows.
EASTERN COMMERCIAL COMPANY
STATEMENT OF ACCOUNT
Sam 30 September 2010
Date
Balance$
Sept 1
7
12
19
28
30

Detail
Balance b/f
Sales invoice 301
Sales invoice 330
Sales returns credit note29
Bank Sam
Balance c/f

Dr$

Cr$

400.00
400.00
56.50
456.50
217.00
673.50
16.50
657.00
392.00
265.00
265.00

Terms: 2% discount for settlement within 21 days.

REQUIRED
(b)
(i) State why Sam paid $392 on 28 September when the balance brought forward on 1
September was $400.
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....................................[1]

10
(ii)State whether this payment was for the correct amount. Give a reason for your
answer.
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....................................[1]

On 19 October 2010 Sam deducted the discount offered from the balance on the
statement dated 30 September 2010 and paid the net amount which he considered was
due.
REQUIRED
(c)
(i) Calculate the amount Sam deducted from the balance due at 30 September. Show
your workings.
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............................................................................[3]
(ii)State the net amount which Sam paid on 19 October.
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............................................................................[3]
(d)Show the entries in the Eastern Commercial Companys accounts for the month of
September to record each of the transactions shown in the statement of account.
Balance Sams account at 30 September.

Sam account

Sales account

Sales returns account

Cash book bank columns

11
[10]
(e)Sam wishes to take advantage each month of the discount terms offered by the
Eastern Commercial Company.
Explain how Sam can ensure he obtains the discount each month.
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[2]
[Total: 24]