Form Four

Principles of Accounts

END OF YEAR EXAMINATION

2013

Paper 2

3 hours

INSTRUCTIONS
1. Answer ALL questions in Section I and TWO questions in Section II.

2. Begin answering EACH new question a separate page.

3. Keep ALL parts of EACH answer together.

4. Silent electronic calculators may be used, but ALL necessary workings should be
clearly shown.

5. Each question is worth 20 marks.

6. Use the forms provided.

 Form Four

SECTION ONE
Answer ALL questions in this section.

1. The following Trial Balance (including the heading) has errors.

Trial Balance for year ended December 30, 2011.

Dr. Cr.

$ $

Sales 69 039

Purchases 41 175

Carriage 2 572

Drawings 3 900

Rent 3 311

Salaries and wages 15 375

Bad Debts 438

Provision for bad debts 65

Debtors 6 060

Creditors 3 235

Stock (January 1, 2010) 5 963

Cash at bank 589

Provision for depreciation 9 500

Equipment at cost 29 000

Capital

132 939 83 827

Required: Redraft the Trial Balance correctly and include the capital amount. 8 marks
 Form Four

b) Show the journal entries necessary to record the following items in the books of A. Letton:
(Suitable narrations must be used.)

April 1 Building bought by Letton for $6 000 was returned to the supplier, Steele’s Auto, as it was
the wrong order.

April 5 An electricity bill of $225 for Letton’s home was incorrectly recorded in the books of the
business. The error is now being corrected.

April 10 T. Mc Intyre, a debtor who owed Letton $200, has been declared bankrupt. The court
ordered Mc Intyre to pay $0.50 for every dollar owed. Lettoon received a cheque for the
amount.

April 13 Letton removed stock valuing $650 from the business for her personal use.

April 20 Office Furniture valuing $70 000 bought on credit from Courts Grenada Ltd. A cheque for
$45 000 was made to Courts as down payment. 11 marks

c) Identify one transaction by date which affected the net profit of the business, i.e. increase or
decrease. 1 mark

Total: 20 marks
 Form Four

2. Keanna Forrester is a sole trader. On December 31, 2013, the following balances made up her Trial
Balance.

Keanna Forrester

Trial Balance as at December 31, 2013.

Debit Credit

$ $

Plant and Machinery 7 000

Furniture and Fittings 800

Wages and Salaries 3 500

Bad Debts 600

Returns Inwards 500

Returns Outwards 700

Discount Allowed 140

Discount Received 460

Sundry Debtors 5 400

Sundry Creditors 4 200

Purchases 18 900

Sales 35 640

Cash at Bank 2 500

Cash in hand 460

Rent and Rates 1 200

Stock January 1, 2010 6 500

Capital 6 500

47 500 46 500

The stock at December 31, 2013 was $8 500.

(a) Prepare the Trading and Profit and Loss Accounts for the year ended December 31, 2012.
 Form Four

(b) Prepare Balance Sheet at December 31, 2012. Total: 20 marks

3. (a) Write up J. Findlay’s THREE column cash book from the transactions below, and balance the cash
book appropriately.

2012 April 1 Balances brought forward, cash $350; bank overdraft $5 000.

2 Singh who had an account balance of $8 000 paid in full by cheque, after deducting
5% cash discount.

3 Paid rent by cheque $700.

7 Paid Townsend $970 by cheque, having deducted 3% cash discount.

10 Received a cheque of $3 000 from a friend as a loan.

15 Paid wages in cash $300.

16 Transferred $1 700 from bank to cash.

25 Cash sales $450.

27 Cash withdrawn for personal use $150.

28 Paid in full, Mc Bean’s outstanding balance of $700, less 5% cash discount. 10

marks

(b) (i) Post the following transactions to the Motor Vehicle Account in the books of ‘Sammy’s Ice-cream
Palour.’ (Use correct headings)

2011 June 3 Bought a motor vehicle at a cost of $74 000

Sept. 2 Bought a motor vehicle at a cost of $65 000

Both payments are made by cheque.

2012 Jan. 4 Bought two motor vehicles at a cost of $50 000 each.
ALL payments are made by cheque.

It is the policy of the firm to depreciate its motor vehicles on an annual basis at the
rate of 20 per cent per annum using the Reducing Balance Method.

(ii) Show the Provision for depreciation account for the TWO years and the entry for Motor Vehicles in
the Balance Sheet of December 31, 2012. (Use correct headings) 10 marks

TOTAL: 20 marks
 Form Four

SECTION TWO

Answer any TWO questions in this section.

4. (a) State (i) the most appropriate source document and (ii) the book of original entry which Tod should
use for each of the transactions below. (Write your response on your file paper.)

Transaction Source Document Book of Original Entry

a) M. Tod returned some

goods previously
purchased. They were the
wrong order.

b) Sent a cheque to N.
Harford for goods
purchased.

c) Sold an old computer (no

longer suited for the
business) on credit to
Westmorland Primary
School.

d) A customer returned
damaged goods previously
bought from Tod.

4 marks

(b) On January 1, 2004 the S & S Company had $7 500 balance in its Provision for Bad Debts account. The
company’s policy is to provide 10% of debtors as bad debts provision. The company’s year ended
December 31.

The debtors for the following 3 years were as follows:

December 31, 2004 170 000

December 31, 2005 125 000

December 31, 2006 135 000

Required: Prepare the Provision for Bad Debts account and the Balance Sheet extracts for the three
years. 16 marks

TOTAL: 20 marks
 Form Four

5. The following cash transactions were made by S. Debnath for the month of March:

2013

March 1 Overdrawn balance at bank $700.

Cash balance $300.

March 2 Cash sales amounted to $550.

Paid T. Ali by cheque amount owing of $700 less 5% cash discount.

March 5 Paid sundry expenses of $120 by cash.

March 8 Received cheque for $1 800 from P. Shivers after he had deducted 3% cash discount

to which he is entitled.

Cashed cheque of $1 000 for office use.

March 12 Received a cheque for $680 from S. Thompson in full settlement for goods sold
valued at $700.

March 16 Cash sales amounted to $400.

Wages of $800 paid by cash.

March 20 Cash of $1 000 paid into the bank.

March 27 Cheque of $500 drawn for personal use.

a) Write up the THREE COLUMN Cash Book of S. Debnath. Balance the cash book and bring down the
balances. 10 marks

b) On April 3, 2013, S. Debnath received a bank statement from her bank for the month of March which
showed an overdrawn balance of $1 405. On careful examination, the following discrepancies were
found:

1) The bank had charges of $20 which were not recorded in the Cash Book.

2) The cheque of $1 800 received from P. Shivers on March 8 had been dishonoured.

3) Standing orders for insurance premiums of $700 had been paid by the bank. This had not
been recorded in the cash book.

4) The cheque for $500 drawn for personal use on March 27 was not among the cancelled
cheques returned by the bank with the statement. There was also no record of it on the bank
statement.

i. Update Debnath’s Cash Book, starting with the closing bank balance in her cash book
from (a) above. 5 marks

ii. Prepare Debnath’s Bank Reconciliation Statement as at March 31, 2013. 5 marks

TOTAL: 20 marks
 Form Four

6. (a) The following balances were taken from the books of Antoine Enterprises on July 31 2013.

Antoine Enterprises

Trial Balance As At July 31, 2013.

$

Bank Overdraft 15 000

Bank Savings Account 30 000

Bad Debt 3 500

Cash on hand 2 500

Debtors 25 000

Creditors 53 000

Long Term Loan 22 000

Carriage Inwards 2 800

Carriage Outwards 2 900

Commissions Received 2 200

Commissions Paid 11 200

Equipment 20 000

Motor Vehicle 34 000

Salaries 40 000

Opening Stock 11 500

Purchases 58 000

Sales 120 000

Miscellaneous expenses 18 000

Returns Outwards 1 500

Returns Inwards 1 200

Closing Stock 3 000

Prepare the Trial Balance for Antoine Enterprises including appropriate headings and the amount for
Capital. 15 marks

(b) Give the difference between ‘depreciation’ and ‘accumulated depreciation.’ 1 mark

(c) Which item will be recorded as additional revenue in the enterprise’s Profit and Loss account? 1 mark

(d) Identify the TWO most permanent assets of the enterprise. 2 marks
 Form Four

(e) Which item reduces gross sales in the Trading Account? 1 mark

TOTAL: 20 marks

7. a) Identify the Day Book in which EACH of the following transactions would be recorded:

i. Purchased motor lorry on credit from Fleming’s Auto Ltd.

ii. Sold an old printer for cash to T. Alexander.

iii. Credit note sent to A. Hopkin.

iv. Purchased stock on credit from True Blue Bay Resort for resale.

v. K. Dragon owed the business and migrated. It was decided to write off the amount as a bad debt.

5 marks

b) The following Balance Sheet (including the heading) has errors.

Balance Sheet of Busy Signal for the year ended December 31, 2013.
ASSETS LIABILITIES & CAPITAL

$ $

Drawings 7 800 Creditors 6 570

Debtors 4 120 Land 30 000

Loan(10 years) 20 000 Equipment 28 000

Stock 11 926 Cash at bank 6 178

Capital

105 400 70 648

Redraft the Balance Sheet in classified form and include the Capital amount. 10 marks

c) Draw up a sales invoice for the following transaction.

2012

May 4 To K. Forrester, Lucas Street, St. George’s: 30 rolls white tape, 30 metres green tulle and 6
sheets blue cotton. White tape is sold at $10 per roll, green tulle at $4 per metre and $6 per
sheet. K. Forrester is being allowed 25% trade discount.

These goods are being bought from F. Benjamin of 10 Lower Street, St. Andrew. 5 marks

TOTAL: 20 marks