Professional Documents
Culture Documents
& Accounts
Level 2
Model Answers
Series 2 2008 (Code 2006)
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Book-Keeping & Accounts Level 2
Series 2 2008
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Page 1 of 11
Page 2 of 11
Book-Keeping & Accounts Level 2
Series 2 2008
QUESTION 1
The Balance Sheet at 31 March 2006 of Jane Hawke included the following entry:
£
Debtors 40,500
Less Provision for doubtful debts 1,215
39,285
The debtors figures before the deduction of provision for doubtful debts were:
£
At 31 March 2007 44,400
At 31 March 2008 39,150
At the end of financial years 2007 and 2008, Jane Hawke made provision for doubtful debts at 4% of
debtors.
REQUIRED
(a) Prepare the following accounts in the ledger of Jane Hawke for the year ended 31 March 2007
and 31 March 2008:
(b) Show the entries for Jane Hawke’s debtors in her Balance Sheet at 31 March 2008. (4 marks)
(d) In March 2008, the bad debts incurred in 2007 are recovered. Show all the journal entries that
would need to be made in Jane Hawke’s books.
(6 marks)
(Total 25 marks)
2006/2/08/MA Page 3 of 11
MODEL ANSWER TO QUESTION 1
(a) (i)
Bad debts
2007 £ 2007 £
Mar 31 Debtors/Balance b/d 1,800 Mar 31 P&L 1,800
2008 2008
Mar 31 Debtors/Balance b/d 2,100 Mar 31 P&L 2,100
(ii)
Provision for doubtful debts
2007 £ 2006 £
Mar 31 Balance c/d 1,776 Apr 01 Balance b/d 1,215
2007
Mar 31 P&L 561
1,776 1,776
2008 2007
Mar 31 P&L 210 Apr 01 Balance b/d 1,776
Mar 31 Balance c/d 1,566
1,776 1,776
2008
Apr 01 Balance b/d 1,566
(b)
Jane Hawke
Balance Sheet extract at 31 March 2008
Current Assets £
Debtors 39,150
Less provision for doubtful debts 1,566
37,584
(c) (i) Bad debts are debts that have proved to be bad and are therefore written off as an expense
in the P & L Account.
(ii) Provision for doubtful debts are debts that are unlikely to be paid and are therefore deducted
from the debtors on the Balance Sheet.
(d)
£ £
Debit Credit
Debtors account 1,800
Bad debts recovered account 1,800
Cash/Bank 1,800
Debtors account 1,800
2006/2/08/MS Page 4 of 11
QUESTION 2
James Gander is a sole trader, whose financial year ended on 30 December 2007.
(1) An amount of £950, for rent receivable, had been credited to the bank account, and debited to
rent receivable account.
(2) A cash payment of £75 for printing and stationery had been completely omitted from the books.
(3) A credit purchase of goods for £100 from Brian Bird had been entered in error in the account of
Barry Brand.
(4) The insurance account had been debited with £340 instead of the correct figure of £430, and the
telephone account had been debited with £540 instead of the correct figure of £450.
(5) The purchase of petrol for £60 had been debited to the Motor Vehicle Account.
(6) A cash sale of £1,100 had been entered in the books as £2,100.
(7) The purchase of a garage for £7,500, for Gander’s home, had been debited to Factory Buildings
account.
REQUIRED
(a) Identify the types of error in items (1) to (7) above. (7 marks)
(b) Prepare journal entries to correct items (1) to (7) above. Narratives are not required. (14 marks)
(c) Explain 4 types of errors that will cause a trial balance NOT to balance. (4 marks)
(Total 25 marks)
2006/2/08 Page 5 of 11
MODEL ANSWER TO QUESTION 2
(a)
1 Reversal of Entry
2 Omission
3 Commission
4 Compensating
5 Principle
6 Original Entry
7 Principle
Dr Cr
£ £
(b) 1 Bank 1,900
Rent Receivable 1,900
4 Insurance 90
Telephone 90
7 Drawings 7,500
Factory Buildings 7,500
(c) 1 Posting 2 debits, or credits, in the ledger instead of one debit and one credit
2 Posting the correct debit entry to a ledger account but posting a different amount on
the credit entry
3 Posting only the debit or credit entry and not completing the double entry
2006/2/08/MS Page 6 of 11
QUESTION 3
On 1 April 2007 Graham Barlow had the following balances in his books:
Premises £140,000; Vehicles £10,200; Equipment £16,400; Debtors £3,100; Bank £2,500; Stock
£19,000.
Graham does not keep proper books of account, but his bank statements covering the period
1 April 2007 to 31 March 2008 showed the following transactions:
In the year ended 31 March 2008, it was discovered that Graham Barlow had paid into the bank all
shop takings apart from the cash used to pay:
At 31 March 2008, £15,200 was owed to suppliers for stock purchased on credit.
The amount owed by debtors is to be treated as a bad debt. There had been no credit sales during
the year.
(i) Depreciation for the year ended 31 March 2008 was 10% for equipment and 25% for
vehicles.
(ii) Stock at 31 March 2008 was valued at £27,240.
REQUIRED
(a) Calculate sales for the year ended 31 March 2008. (6 marks)
(b) Prepare the Trading, Profit & Loss Account for the year ended 31 March 2008.
(19 marks)
(Total 25 marks)
2006/2/08/MS Page 7 of 11
MODEL ANSWER TO QUESTION 3
Sales
(a) £ £
Sales 206,116 Cash 193,000
Drawings 12,000
Sundry expenses 816
Vehicle running exp. 200
Lighting & heating 100
206,116 206,116
(b)
Graham Barlow
Trading, Profit & Loss Account for the year ended 31 March 2008
£ £
Opening stock 19,000 Sales 206,116
Add Purchases (141,000 + 15200) 156,200
175,200
Less Closing stock 27,240
Cost of goods sold 147,960
Gross profit 58,156
206,116 206,116
£ £
Lighting & heating (1,880 + 100) 1,980 Gross profit 58,156
Sundry expenses (1,924 + 816) 2,740
Vehicle running exp (2,040 + 200) 2,240
Sales assistant wages 10,520
Bad debts 300
Depreciation: Vehicles 5,650
Equipment 1,640
Net profit 33,086
58,156 58,156
2006/2/08/MS Page 8 of 11
QUESTION 4
The following debtor account balances appeared in the ledgers of Black & Green Ltd at
30 June 2007:
£
S Brown 12,000
B Grey 9,000
On 1 July 2007, Black & Green Ltd drew the following Bills of Exchange, which were accepted on
2 July 2007:
£
S Brown 12,000 due on 2 September 2007
B Grey 9,000 due on 2 September 2007
On 6 July 2007, Black & Green Ltd discounted the following Bills at their bank:
Net proceeds
£ £
S Brown 12,000 11,700
B Grey 9,000 8,730
It is the practice of the company to show, in the bank account, both the original amount of each
discounted bill and the discount charge.
The Bill drawn on S Brown was honoured at maturity, but the Bill drawn on B Grey was dishonoured.
Black & Green Ltd duly debited the noting charge of £135 to B Grey’s sales ledger account on
2 September 2007.
On 2 September 2007, B Grey accepted a new Bill of Exchange drawn on her by Black & Green Ltd
for £9,495, representing the original account balance, plus noting charges and interest. This Bill was
due on 2 October 2007.
REQUIRED
(a) In the books of Black & Green Ltd, prepare the following accounts in respect of the above
transactions:
(i) S Brown
(ii) B Grey
(iii) Bills Receivable (balanced at 30 September 2007)
(iv) Bank (extract)
(v) Discounting Charges
(vi) Interest Receivable
(21 marks)
In a partnership agreement, you would expect to find information regarding the profit sharing ratio.
REQUIRED
(b) Name 2 items, other than the profit sharing ratio, that you would expect to find in a partnership
agreement.
(4 marks)
(Total 25 marks)
2006/2/08/MA Page 9 of 11
MODEL ANSWER TO QUESTION 4
(a)
(i) S Brown
2007 £ 2007 £
1 July Balance b/d 12,000 2 July Bills Receivable 12,000
(ii) B Grey
2007 £ 2007 £
1 July Balance b/d 9,000 2 July Bills Receivable 9,000
2 Sep Bills Receivable/Bank 9,000 2 Sep Bills Receivable 9,495
2 Sep Bank/noting charges 135
2 Sep Interest Receivable/ 360
Bank interest
18,495 18,495
(iv) Bank
2007 £ 2007 £
6 July Bills Receivable 12,000 6 July Bill discounting charges 300
6 July Bills Receivable 9,000 6 July Bill discounting charges 270
2 Sep Bills Receivable/B Grey 9,000
2 Sep B Grey/noting charges 135
2006/2/08/MS Page 10 of 11
MODEL ANSWER TO QUESTION 4 CONTINUED
Alternative
(iii) Bills Receivable
2007 £ 2007 £
2 July S Brown 12,000 6 July Bank 11,700
2 July B Grey 9,000 6 July Bill discounting charges 300
2 Sep Bank (dishonoured bill) 9,000 6 July Bank 8,730
2 Sep B Grey 9,495 6 July Bill discounting charges 270
2 Sep B Grey (dishonoured bill) 9,000
30 Sep Balance c/d 9,495
39,495 39,495
1 Oct Balance b/d 9,495
(iv) Bank
2007 £ 2007 £
6 July Bills Receivable 11,700 2 Sep Bills Receivable/B Grey 9,000
6 July Bills Receivable 8,730 2 Sep B Grey/noting charges 135
(b)
(1) Amount of capital each partner will introduce