I' o r PerJ o rmon ce M ea su rement

ZII/I'B. ABWE SCHOOL EXAMII\ATIONS C OTINICIL

GENERAL CERTIFICATE OF EDUCATION

ADVANCED LEVEL

A LEVEL ACCOUI\TTNG

9197

Question Papers and Expected Answers

ocT 2003 - Nov 2004

 c,I M BAEWE, s cHo o L E KANfIIdATI or{ s c ou F{ {c Itr_,
Gener':rl Ccrtificate of Educatiorr Adyanced Level

ACCOUNTXNG $197 t\
PAPITR-l MultiplcChoice

\\reclnesciay 29 OCTOBEtrt 2003 Aftemoon i hr:ur l5 nrinutes

niinute
Additional nraterials:
Ir4ultiple Chorce ansrver sheet
Sofi. c(ean era-ser
Sol't pencil (rype B or HB is recommendecl)

1 hor,rr l5 rninulcs
I

TUCTIONS TO CANDIDATES

t open this [rooklct until you are told to ok, ,o.i

i

)iotlr l1a1rle, Centre trunrber and candidate number on the answer sheet in the spilcL's plrlvrdcd
t.lris{ras alreacly been clone for you.
l.:;
arc fbrtv questions in this paperj Ans."r,er all questions. F-or each question. thc/e are fp\rr
rle tinsrvers. ,4.., B, C and I), Cl"roose the orie l,ou consider conect
oni r*.,ri.l \'olrr choice in st'lft
I cln tlre sepilraic answcr shect. .!,,,

vcrj, carcfull5, the instructions on the ansrver slrcet.

itr{M Al' toN.FO Xi CA].,l DI DATEfj

conect,lllswer rvill scole one tt:ark.. A nrark rvill rrot bc dedur:tecl flor a \Irrong ans\\ier.
'e
rr:rrgh u,ori.ling shoulcl bc. donc in this boolilet.
i .l

-11;.t1ors :nav bc used.

i{,.

'l-lri:; t1utsiiou
plpcr consists of ! 7 printcrl p:agcs unrtr J [rla:ili pi]llrli.
(l(-,lii,r'i:, ll1 : 2'.irll;ii! ri,, r: l:ic;tcrol [.:l:inrirr;rl jrrrrs (-'or,rrtci].
hi l()i) ;.
.'\ t'ltslt I).*' s1,,ta,,,lcr)t Slt()\\S tltt-.
cIr.irrg..:s irr

{
cilsil.
tl lunds llou .

C ge lring.
t) ,,i'orking cayritll.

\\i lrich rhe lbl lori irrg. ilenrs ls an c\itntple

o l'
ol'iirr ad.jrrsting event occru-ring rlicr tlrc
irlrl utrcc shecl clnte,?

A loss ol'srock thLough tirc

ll purcirase ol'a nerv i,.chic lc
lrrrnknrprcy. ol'a nrljttr tlcbrrir.
I:I) cl-range s in ratcs ol,ior.eigtr
cxi:haugc.
'fhe iable
shou.s rrltoultl.s inclurjerj in a rr.iirl
l.nlan,:r at tlre enrj r>1 l'inancial 1,enr.

Saic:s: caslr 1 00 000

'credit
300 000

Rcttrrns inrvards
B 000
-l'rade
debtors 40 000

I)repaynicuts hy cjel:lols
I 000

Wl:at is the clebtors collcctiorr

pcriod,l

A 37 days
Xl 40 clays
C 50 ci;r.,,s
I) 5 I rlrii,sr
 3
l

During the year a compzuiy sold a t-rxed asset. The following information
is made available :
l

S,
original cost 60 000 i

proceeds fiom sale 24 000 i

I

what was the accumulated depreciarion at tn.

fiot" of sale?
A $32 000
B 000
$36
I

c 000
$40
I

D $4{000 ,

Brian-and chip^o,-having shared profits *na. torl", equally, adrnitted

zeruoto rheir partnership
on I Januarv 2003. r'herealter, the protit strariips roiio ."* to be:
I

Brian 1
**Z,ril \..1 I

a1l
Chipo - ':
'-' '3
I

*---_--r.--.
I

zenzo * I

I
zenzo paid $10 000, of which $6 qoo w'as for tl]recl capital"
Tlie goodwill of thc business r.r,as
valued at $12 000 and vras not to appear i, tr-."il^l^r,r"
rii.-Lt. .sJ=pn,]1" capital ancl currenr
accounts arc maintained,
1

What is the balance Qn Zenzo's ctlrrellt accourlt

rnade? [t*, tt',* entries for iris artmission have lrecn
I

1"
I

A NiI
B $2 000 debit
C $2 000 c-redit
L) $3 000 crcdit

9197i l i{t{){tl
'l''-r r n * i' ,-' r
l
6 The infonnation below relates to Divas (Pvt) Ltd.

Share capital

?;8tf ilil,T,:i"':i.'"11'*rliY,,i11', ffiffiffi

Extract from the lncome statement.

Profit before tax $420 000

Taxation $190 ooo
$230 000
Dividends paid and ProPosed
' Preference $ 10 000
Ordinary $110 000 Sl2A-Agg
Retained income $II]}so

The market price per share is $0'45.

What is the earnings yield?

at
A 32.S5Yo -.'iqu
B 37.45',/',,.
C 39.32o/o
D 40.74V,

7 Valuing closing stock at the lower of cost ancl net realisable vaiue is an appli{)ation of the

i\ consistency concept.
B materiality concePt-
C llloney rileasutement concept'
D prudence concept.

B What et'fect does a paynlenl nrarle by a tra<Je clebtor have.on tire current ratio ald quich rntio
of a conrpany? ''

Current ti'ttio Quick Ratio

A incrcase rjecrease
B increasr: increase
C no ell'ecl clccrcasc
D ntt cftbct no ellcct
a

The following intbrmation was extracted from a company's trial balance

on 3l December 2A02-t

Debit Credit

$ $
Sales Ledger Control Account t6 000 600
Purchases Ledger Control Account 700 17 000
Banli 1.000
Cash 500

What is the total fbr current assets?

A $15 000
B $16 200
c $16 s00
D $17 200

10 All of the follorving are examples ol'non-cash items except

* depreciation.
B decrease in creditors.
C bad debts plovision.
D profit on sale oi fixed a:isets. \
I1 which of tlle following items rvould not appear in the debtors control
accgunt?
A
B
C
discounts allowed .
returns inrvards
provision lbr doubttul clebts
interest charged on overdue. accounts (.
l ",,,,}.

()iqr l\llil)i

l'l'tt lr: lvr l'

 6

LL Jingo Sports Club had the following balances in respect of subscriptions receivable:

I January 2002 3l December 2002

$ $

Subscriptions due 180 60

Subscriptions prepaid i30 50

Cash received during the vear rvas $4 000. What was the income for the year?

A $3 960
B $4 000
c $4040
D $4 oso

lb3 A company started trading in 19g9.

Its bad debts provision account showed the following balances at the year end:

Year $

1999 2 400
2000 2 300
2001 6 000
20a2 8 000

The charges to profit and loss accourrt were rrighest in

- A 1999.
ts 2000.
c 2001.
D 2A02.
-

14 The foltowing is an extract from the balance sheet of ABC

limited on 3l octobe r 2002:

tr
Share capital and reserves
$
000

500 000 ordinary shares of$l each

500'
200 000 7Yo prefercnce shares of $ I each
200
Revaluation reserve 100
Profit and loss account
3q

The comlany also issued t2yo debentures amounting

to $100 000.
The fair valuation of each ordinary share is

- A $1.26.
B $1.66.

$]33:
15
"; A company has prepared dratt accor.rnts for the-year

It has now beeqdiscovered that the following werg

ended 3l December 2002.
not talten inlo consicleration:
q

trade discounts allorved $.100

"cash discounrs received ilioo
prepayment for hn insurance premiurn $iOO

what is the adjustment required to the protit and

ross acc.ount?

A $600 Cr.
B $700 Cr.
C SSO0 Cr.
D $900 Cr.
J

l5 which of thc fbllou'ing itertrs docs not lbrnr part

of a rinrired conrpan;-,s iquity capitiil?
A apset replacerl.rent reser\Ie
B debenture redcrnption reserve
C ordinan, share capital
D prct'ercnce share capitat

()l'tl | l! ar\Lrr

l'l-u rrr t r l: r
 I
tr7 in tlre books of XYZ Ltd, discount allowed of $5 300 was posted as discount received of $3 500
by an inexperienced bookkeeper.

The journal entry needed to correct this error is

A Discount Allowed Account $5 300 Suspense Account $5 300

B Discount Received Account $3 S00 Suspense Account $3 500

C Suspense Account $8 800 Discount Allowed Account $5 300

Discount Received Aicount $3.500

D Discount i,tto**O Account' SS 300 Suspense Account $8 800

Discourt Received Accouht $3 500

At the end of the financial year M and N Ltd had the following items in stock.

Item P a R

s $ s

Cost 2 4qb. 4 000 3 200

Realisable value 2 8001 4 70A 4240
Selling expenses 600 90t) 400

" What is the company's value of closing stock'?

A
'"Br $9 000
$g 200 /
c $9 600
$ 10 200
 9

t9 A manufacturing company has the foilowing barances at its financiar year end:

$
Closing stock of raw materials i
000
Direct maaufacturing wages 5 000
Purchases of raw materials '5 000
Production overheads
2 6oo
Opening work in piogress
2A0
Closing work in progress
300
Opening stock of raw r-naterials :
500

The facrory cost of finished goods pioduced

is

B $1.{ 400.
c $1 1 500.
D $12400.

20 The table shows data made available

by a lirnited company.

At 3l December 2002

$: $
Stock 80 000 90 000
I

Debtors gp 000
60 000
Bank 30 000 40 000
Creditors 70 000 80 000

operating profit before interest and deprec.iation

was sl00 000. The interest and depreciation
charges fbr the year were $ I 0,000
;;T;0 0d;;.ri;.iiu.ry.
what was the ner cash inflor.v from operating
activiiies in 200??

A $80 000
B $120 000
c $t30 000
D $r70 000

9I(i7iI IJ20(ir
]'l lr:-il *r.lr,
 '10
2l Which of the following items is not an exaffrple of a capital
insrrument?

_A debentures issued
B ordinary shares
C preference dividends
D preference shares

22 Which of the following items should not be disclosed

in a published profit and loss statement?

A auditors' fees
B hire of plant
ID depreciation for the year
the average number of employees in a department

23 A company has the following issued share capital,

20 000 Ordinar!, Shares of $ 1 each

l0 000 5oZ Freference Shares Of $0.50 each
- An ordinary dividend of $0.10 per share for the year is recommended.
't
what is the total amount of dividends payable for
the year?

A $2 250
B S2 500
c $7 000
D $20 000

24 A partner withdrew stock costing $10 000 for own

use.

Whatisthecorrectdoubleentryusedtorecordthistransaction?

Debit Credit
A Partner's Drawings Account $10 000 Purchases Account $10 000
B Purchases Account $10 000
Partner's Drawings Account $10 000
C Profii and Loss Account $i0 000, Stock Account $10 000
D Stock Account $10 000 Profit and Loss Accorutt S 10 000

'1 ',,: : ,,
_-", j
l-

11

25 The table shows information relating to Bingaguru Ltd fqr the year ended 31 December 2002.

Debtors at,l January 2002 10 000

Bad ddbts written off sq-0
Cash from credit customers 20 00p
Cash sales s 000
Credit sales 30 000
Increas'i in provision for doubtful debts I 000
Returns inwards 2 000.
t

What is the balance on Bingaguru Ltd's Sales Ledger Control Account at 31 December 2002?

A $16 500
B $17 500
c $21 s00
D $22 s00
a
26 What is the correct double entry for recording the loss arising from the revaluation
of a
prtnership's fixed assets?

Debii Credit

A Capital Aceounts Revaluatioh Account

B Currcnt Accounts Revaluation Account
C Revaluation Account Cqpital Accounts
D Revaluation Aicount Current Accounts

9l97il N2001

[T'ui'n avcr
 L2

27 The follora,ing information felates to Banda's Tuckshop which commenced operiting

on I Januarv,1002.

Capital at i January 2002 20 000

Drawings during the year 1 000.
Gift from fiiencl 6 000
Net profit for the year 11 000

What is the value of the net assets at 3l December 2002? :

. A $30 000
E $36 000 /
c $37 000
D S3g 000 {
I

" 28 ln the books of a sole trader, purchas6 returns of $600 were debited to the creditors,
a
account aF $60. ,

A Suspense AccounPfras created to complete.the trial balance.

l

Whqt is the baiance on the Suspense Account?

A $60 Cr.
B $60 Dr.
C $540 Cr.
D $540 Dr.
'
?g Which of the following items is a product cost under absorption coSting but a period cost un,
nlarginal costing?

. A adniinistrative expenses
B fixed production tverheads
C rarv materials consumed
L) r,ariable production overheads
 l3

30 Below is an extract from Greens limited company,s statements:

Profit on ordinary activities 265 000

Taxation (s0 000)

Profit after tax , - , 215 000

Preference dividends (15000)

| ' :
Ordinary dividends: interim (2S 000)
proposed ir; oo-qi

Retained profit for the year "**

What is the dividenci cover for the ordinary

shares?
'

*A , I.l times \
B 1.3 times
..dilt:.lrvo
e 2.O'tmes
D 2.T times

3I A company with fixed costs totalling $5 000 makes

a profit of $g00 on a rurnover of $I 6 000.
wrat is the brearc-even poipt expressed in terms of sares
varue?

A $10200 - :

B $il 000
g $12207 :
D $t3 793

32 '_..
which investment appraisal technique takes depreciation
into ac,:,,u*i.,i
A iiccounting rate of return -
B discounted cash flow
C internal rate of return
. D pay back period
 1A
l{

33 l'he follorving details relate to a corgpany that manufacrwes three products

Product K L M

$ $ $

Selling price per unit 90 88 64

Unitcosts
Direct rnaterials 40 48 32
Direct labour 12. 18 12
Variable overhead 8 6 4

Material costs are $8. per. kilogram for att products.

Itlmaterial is limited ip supply, which order of priority should the company adopt when
planning its production?

t
First Last
'd'r
A. K L M
B. K M .L

C. L M K
D. M L K

i:l : l;
l 15

3'{ The data relates to Bee vee Ltd which manufacfures and sells a single product.

Opening stock
Sales
Production

Selling-price per unit fu""

Variable production costs per unit );
Fixed producrion overheads incurred SO OOO
Predetermined overhead absorption.rate per
unit iti'
using absorption costing, what is the varue of
crosing stock for the month of April?
A $40 000
B $64 000
c $65 000
D, $80 000

35 'I'he following
budgeted ancr actuar data relates to a manufacfi,ing
company.

Production overhead
$60 000
Direct labour hours.,
11 200

uses an absorption costing system and production

T]'" "o.Tpany -^'- overheads are absorbe6 on a
direct.labour hour basis. '-'",t
Production overheacls during the period
were

A over-absor.bed by $4 444. l

B over-absorbed bv $10 000.

D under-absorbed by Sl0 000.

')191,' thll00.l

l'l'url: ti, r:,r-

,-,ii

16,

36 A company's budget for the production of

Tongolites is shown below,

Budgeted output level

500 units 1 000 units

$ $

Direct rnaterials 10 500 21 000

Production overheads 30 000 40 000

what would be rhe. budgeted production overheads

figure for 900 units?
A $38 000i
B $40 000
c $48 000
D ss+ ooo

37 Puleng Ltd manufaqtures Romanium which involves

one process.'
i
The process costs for June 2003 were: ,

Direct materials 2 500

Direct labour 3,150

Production overhead 3 875

500 units were put into the process. I

Normal loss is 5%o of input and scrapped units sell fbr $ 1 each.

What is the cost_per gnit fbr the output?

A $i9
B $i9.0s
c $20
D s20.27
 l7

38 Leribe Pvt Ltd uses a standard costing system. The following

data is for April 2002:

Stsndard cost per unit Actual cost

Based on a budgeted I 000 units

output of t 200 units produced

Direct labour 1.5 hours @ $l per hour 1550 hours @$2.7,A per hour

What is the labour efficiency variance?

.A $150 adverse ,
B $Y50 favourable
C $465 adverse
D $465 favourable

39 A project has an internal rate of return (lRR) of l2o/oand

the frrm,s costof capital is l4%.

At that cost of capitar, the netpresent varue (Npv) wilr be

,f zero.
B negative.
C positive.
D equal to the internal rate of retum.

40 A project involves an initial outlay of $100'000. The net present

value hai been calculated at
two discount rates as shown below.

Discount rate Net Present Value

:
r0% $6 120
t4% $(3e04)

Estimate the maximum interest rate that the

company should pay if it needs to borrbw money to
finance the project

A 9.8%
B r0%
c t2.44%
 ACCOUNTING

SUBJECT 9197 I

PAPER 1 NOVEMBER 2OO3

1. A

2. c tAS 10

3.c -D
4. C Disposal account
--*-
5.A
6' are prorits after tax and preference
? "ffXlll:
7. D *F tAS2
*
8.D
a

9.D
10. B

11. C

.12. A !
.?

13. C
i4. A Valuation of shares and securities
'15.C --+

16. D
i

17. D
,
1B' B IAS 2 Take the rower figure of each item of
-& stock, between cost and net realizable value
 19. B

20. B b FRS r, rAS 7

'21.c
22. D
23' A Dividend rate apptfecr on the varue
of shares
24. A -F
B
_25.
26. A
. 27. B

28. C

-29. B
6

.t30. c
31. D "--"& Turnover = 5000 + BOO
X

Contribution sales ration x

=O,3625, found by
ing the above equation. Then
carcurateE/E p.int.

32. A
,,,.,ffi

33. B **tr Calculate the contribution per limitinq

(dividins contribr-rtion per
facior bv
demanded per unit)
[;'r;r;;ilI,
rii"or"i ,,rn,,,nn factor

34' c **h' Murtipiy crosing stock (2 000

units) by.fu, cost
of prodr_rction per unit

35. B
36. A *&" Change in output 500 units
Change in O/heacls $10000

400 units X $ZO =$8000

$30000 + $8000 =$38000

overhead per uni r orcrer to ser

m";,::n'#,i?":f#:1",,:

37. B proceeds from sale of

scrap
reduce cost of productiorr
-&
38. B -*@ 3[1550_(1,5x1000)]
39. B \

40. C --&, Calculation of tRR required

r,r, n, ror rnu,
","oouoaro.

a
 Candidate Nanre Centre Number

ZIMBABWE SCHOOL EXAMINATTONS COUNCIL

General Certificate of Education Advanced Level

ACCOUNTII\G 9L97 t2
' PAPER 2 Structured Questions

Thursday 6 NOVEMBER 2003 Afternoon I hour 30 minutes

* Candidates answer on the question paper
Additional magrials:
Supplementary answer paper

TIME I hour 30 minutes

INSTRUCTIONS TO CANDIDATES
* Write i-our name. Centre number and candidate number in the spaces at the top of this page.

.j\nsrver all questions.

Write your answers in the spaces provided on the question p6per. If you require extra paper,
ask the
supervisor for supplenlentary answer paper.
IN FORMATION FOR CANDIDATES
J'he nuntber ol'nrarks is given in brackets
[ ] at rhe end of each question or part question.
You ntay use a calculator.

FOR EXAMINER'S USE

T0TAI

:::-.-_:--1___j..::.__ j.-.:

This qursliolt pxi)(r consisls ,rt'?t\lr inttii*lr,lll-s. -- -

( oir.r'ir,lri. )/iitiltllrrvc Scll,,,rl I .,;trrtlt:ttiL,ii:, ( ,rrrireil. Iil{){).i

i.,'
l'i'u:':
 2

t (e) Define the term depieciation.

For
ExamineSb
Use

t2l
(b) List four.main causes of depreciation of fixtid assets.

a
t4l

- (c) 'What four factors should

!e taken into acc.ount when deciding on the
amount of depreciation to be charged on'a fi)idd asset per **L*t

t4l

9l97il. \10(ll
 3

For
(d) Chitsinde Ltd maintains a fleet of taxis. The tbllowing is an Examiner's
extrict fiom the company's fixed asset register: Use

Taxi Nurnber Date Purchasetl Cost

s

CL 101 I January 1998 "25 600..;

CL i02 I April 1999 , 32 000/
CL 103 1 February 2000. 38 400
CL 104 October ?000 44 800

The tinancial year end of the busirress is 3l December.

It is {:ompany policv to clepreciate the vehicles at the rate of 25% per
aniTnrn on the reducing balance basis. A full year's depreciation is
providerl lbr ir: the year of acquisition but no.depreciation is charged in i
the;"ear of rlisposal. \
* On 1 July 2002, taxi nurnber CL 105 rva-s pur'chased at a cost of $48. 000
Ii:om Karornbe Moiorfr *hu acoepted taxi nurnber CL 101 in part'exchbnge
. lbr $8 500.
ri i
'I'he balance'ol the purchar" pri.* was financect by a.loan fronr Bcnza
Financr:.

(i) f)raiv up the Tirxis Account for the year endecl

3l l)ecenrhe r 2002: '!

ir
(.,

l-1i
(ii) praw up the Taxis provision for Depreciation Actount tr'or'
for the year,ended 3l December ZOti2. Exrminer's
LIse

t4l

.(iii) Draw up the Asset Disposal Account"

l4t

;'.y1,,7,,',..1 1,, I
i_.*.*-.*
 For
Exeminertr
(e) Expiain any three significant difficulties likely to be faced when comparing ' Use
financial results of businesses engaged in the same activity.

t6l
 6

For
(a) What is a Stitement of Affairs? Exominer's
Use

tll
(b) what is the accountiog heatment for each
----- sf -.'- following
-: the " in the year end
financial statements?

Subscriptions in rurears.

trl
Subscriptions paid in advance

t1l

9 tr7,'l N:(xi.t
 :I

(c) 'lhe in rmation For

belorv is a summary of the receipts and payments of Highway
Examincg,s
Charity Club for rhe year ended 3l D6cember 2fjO2. Usc

Llank balancc Purchase tlf drinirs r3 500

(l Jzuruaw 2002) 6 000 Wages (Kiosk attendant) 900
Sale of drinks 30 000 'fypists expenses 600
f)onal.ions receivetl 7 50u Donations to charitie 6 750
Mcmlrcrs' sutrscr.iptio ns : StationcrS' 300
200 I I 200 Fuel cost 2 550
,\
2001 2 400 Electricity for the kiosk 2 500
2@3 500 Groundsnran's wages 1 200
l1
l"
rl, Baiance c/cl 19_{Ug
ii;',,'

i,,ilt'
lri, :.

iliri:\
4?*700* fr*zu.
ixtl:

h'ii
ll:illr
lllrii
lllli Additi orraI infbrmatiorr.
t ),,

'j!l i;

l
i ;i'
li.', subscriptions in arrears at i i Decerpher 2001 and
Ii,ll .
rrerr: $i750 and $l 050 re-spectivcly.'
31 December 2002
it
ir,r,
1i
1
L. Sto,;[rs; o I' rl rr rrks:
lliil
lrl
iir',.

lfr',
l; rt
" i .[*rr*ary 2002 [il (r50
!i
rl,:t
iI,
l:
3l [)rrccnrhcr ?002 $ I 200
ll,j

iii.,
ir'i
lil
_1 . on 3 i
Dccerrrlrer 200 i. rnrllor vchicles r,r,ere valued trt
$75 000 ancl
arc l'u he t]elrrrciutccl ilt 5?.i, tu.illl.rn).
1ler.
.:,
(ii [)r*iurc tlrt Ilrllicshtpcl]l.s' t ,.a.iirrg. l,rtillt ancl
I"oss Accr.,r-r,t lbr tlre veur rrncleti il Dec..,rnber 2()02.
(b) An exa;nple-based question. Candrdates can gtve LEDC or MEDC and
should'address both transport iystems (modes) and networks (inter-
connectivity) proiects, schemes for chosen country' . ,."'"" 'n \..' .. .n.'. .
"-,
Measures may include:

- dualization of highways .

- trolley (roro) system

- electrification of rail

- new bus termini

* new airports and seaports

dredging of waterways

- ringroads and by-passes

- park and ride

- feeder systems

flyovers

- ' mass transit system - tram

ri
t
- sub ways - tubal trains

train buses

double deckers

Credit (1) for I single Points

Credit (2) tor 4 developed measures l8
Assessment-tangible schemes and projects to be evaluated n
General answer max (7)
[Hi

14(a) (i) Core region

- the most economically developed region of a country (1)

includes towns, ports and other industrial areas (1)
- it has the highest standard of living (1)
- has high levels of technology, capital, labour and growth rates (1)
l4

21
 "

(ii) Resource frontier region

,
- areas where resourcas have been discovered or are being
exploited (1)
-examples.aiemineS,touristreSoufce$9tc(1)..
- part of the p"ripnury'oulgenerated e'eonomicdevetogment (1) i3

(!ii) Downwardtransition region

- characterised by stagnant or declining economies (1)
- is part of the periphery (1) t3 (10)
- exhaustion oi primary resources e'g minerals (1)
(b) Show in text nature of imbalances
l5
l5
- regionalpolicy/policies
- how successful iUtheY have been
l5
e.gs may include Venezuela, Brazil, Italy, Costa Rica, Zimbabwe, UK,
(1 5)
France, Sierra Leone
[251

z
{-- i

7)
 8

For
Examiner's
Use

13l

(ii) Draw up the Subscriptions etcount.

*l

9197/l N:0(lj
 9

t5l

(iil) Draft the club's Income and Expenditure Account foi

the year ended
3i Deeember 2002.

!.i-ur-n rivtr'
 l{,

For
Exarninerrs
Use

tsl
(iv) Prepare the crub's Barance :at
sheet as 3l December zo0z.

) 197,1 NlO(_)l
 l1
For
Examinerrs
Use

t7l
Ellipso Ltd plans to manufacture
threc products Eft. Zet and plus
are made from the same raw material. which

The following costs and

revenue per unit are a,tieipated:

EtT Zet Plus

Unit selling price
$43 $s0
Direct material cosr $36
Direct labour cbst
$ls:' $ 10, $o
$1,0 $2s $20

Direct,material costs $30 per

kilograrn.
Direct labour cost is $r0 pu,rro;;:'*'
Direct materials available pai
r*r,f, total
A maxiniurn of r 000 urits p..;;;d*,_can500kg.
'rhe rnonthrv be ,ir,:rd,ced and sorcr per m.nrrr.
rentr:,[ orrhe p,=r.,r!.riJsu
,ou il;;;;;; rares ore $] r 600.
(ir) In productio.. rv'at is t'c r,cani.u
of kt,.t,./irt.ttu,)

ttl
 t2
For
(b) What is the meaning of contribttrioni
,

Examirier's
iJs.

l2l
(c) , Calculare the unit conrribution for
(r) Efi,

121

(ii) Zet,

t2j
 L3

(iii) Plus. For

Examiner's
Use

I
l

t2l

(d) calculate the contribution per unit of direct materiais

for
(i) Efi.

tll
( ii) Zet,

iil
 t4

(iii) Plus. For

Examiner's
Llse

trl
(e) calculate the number of units lbr each product, to be manufactured
to yield rhe highest protit.

()
l()l-.r? l\rr(\()J
lri
ilt
il:r
ir'i

il
[i

15
For
Examiner'
Use

ll?l
 t 16

4 Anne, Betsy and Clara were in partnership sharing profits and losses in the ratio 5:3:2 For
Exanriner's
respectively. They decide to dissolve the partnership when their balance sheet was as Use
followsi

Balanc-e sheet as at 1 April2002

Fixed assets $

Property 37 950
Vehicles 3 565
. Furniture 920
42 435

Clurent assets

Stock 15 640
Debtors l8 285
33 925

Less CurrentLiabilities

Creditors 5 290 2rt 635

7t 070
I

Less Long term liabilitieq

Mortgage loan l-7 25g

53 820

Capital accounts

Anne 26220
Betsy i6 330
CIara 11 270
xJ_&?0"

Additional information:

(i) Clara took over the property at Q40 480 arrcl assuntt'd rc:ipor)sibilirv lbr
tlte mortgage loan. '\ a

(ii) Annc took over part of stock ar $5 520. all the clchturs ll $1() -581) .rnrl
goodrvill at $4 I-ll).

7I'r- I \li rtt-j

 ,L 17

- (iii)' Be,tsy took over one vehicle at For

$l 150, Examiner,s
Use
(iv)- other assets were sold for the friilowing amounts:

Vehicles I 656
Funriture 644
" Stock 9 394

(v) creditors were paid $4 900 in fuil settrernent.

(vi) Anne was allowed $E7"3 for hei services in

connection rvith the dissolution.
Other dissolution expenses w,ere $920.

Prepare:

(a) ]"he Bank Account,

at

isl

-i 't ;'i. r: ', i: :'

J
 l8

(b) The Realisatlon account,

For
Examiner's
Use

li rl

{,li/7 I \il()lti
 L9
For
(c) - The Partners, Caltital accounts in columnar form. Examinerl
Use

t8I
20

For
Exarninerts
Use

tl,
 POS$IBLE ANSWERS

ACCOUNTING 9197 t2

'I

rl t-

NOVEMBER 2OO3
(a) Depreciation is a measure of the wearing out,
consumption or other
loss of varue of a fixed asset whether ariring
irom tne passage of
time, obsolescence through technorogy
cr,ang"s
"ni*rr[ei
A process 6f allocating the useful economic
value of an asset over
Its life (lAS 16).

(b) l2l
- physical deierioration wear and tear, rot,
exposure to elements.
- rust, erosion caused by

- economic factors
- obsorescence, inadequacy of capacity.

- time factor - with respect to assets

with a fixed period of legal life,
e.g; leases, copyrights

- depletion - in respect of a wasting nature, e.g. mines, oir weils.

(c) '- cgst of asset/revalued value of 14l
an asset
- estimated useful life
- estimated residual value
- usage
- matching of cost of earnings ny tne asset
*
(d)
rf Taxi Account
20a2 2002
January 1 Balance 1 40 800 July 1 Disposal 25 600
b/d Dec 31 Balance c/d
July 1 1 63 200
Disposal I 500
Benza
Finance 39 5.00
1 88 800 .1BB BOO
2003
Jan 1 Balance b/d

ii Provision for d reciation - Taxis

2002 2ACI2
July 1 Disposal 17 500 Jan 1 Balance b/d 72 4AO
Dec 31 Balance c/d 81 975 Dec 31
"PJ! 27 A7;5
99 475 es 4z_Q
2003
Jan 1 BaLnce b/d 81 875
14l
 (iii)
Asset Di l Account
2002 2002
'Juty 1 Taxi 25 600 July 1 Prov for dryreciation 17 500
P/L 400 Taxi B 500
26 000 26 000
14l
(e) - Financing structures may be different in terms of size, capital
and long term liabilities, low fixed assets and high labour
content..

- Ihe non-quantifiable factors of eain business, e.g. calibre of

The manageme4t team, location of business, age of the business.

- Accounting practices and policies applied by the business

Might be different.
t6l
2 (a) A statement of affairs is a statement from which the capital of the
proprietqr is deduced by,eliminating liabilities fronl assets.
/"' t1l
(b) Subscription in arrears
- as a current asset in the balance sheet or
s - as and additional incorne item in the lncome and

t1l
Subscription in advance

- as a current liability in the balance sheet or

- as a deduction from iniome in the Income and Expenditure
account. l.

t1l
.iit,
(c) Refreshments' Trading, P/L Account for year ended
31 December 2002
$$
Sales of drinks 30 000
Less cost of sales
lnitial stock 6s0
'1
Furchases ; 13 500
\ 15 150
Less Fin. Stock : (1-200 ) (13 950)

Gross profit 16 050

:
Less drinks - wages 900
Eiectricity 2 500 (3 400)
- Net profit to lncome Staternent 1?_ 650
l3j
(ii) Subscri n Account
Balance b/d 750 cash (2001) 1 2AO
lncome and Expenditure 3 900
f

Balance c/d {2002) 2 qoo

60p (2003) t, jeoo
Balance c/d 1 050
5 250 5 250
Balance b/d 1 050 Balance b/d 600
tsl
(iii) lncome and Expenditure Account for year
ended
31 Deceniber 2002 _

Subs,;riptions
$ $-
Trading 3 900
12 6so
Donations received
7 bOO
24 ooo
Less expenditure
Typist Anr
"*p"r.*,
Donation'iio-cir"ariti"" . ?33
Stationery 300
Fuel costs
2 550
Depreciation 3 750
Groundsman,s wages i:i66 (1s.1so)
Surplus
I 900
(iv) Workings: Accum. Fund at starl t5l
Vehicles
75 000
Bank
6 000
Stock of drinks
1 650
Debtors (subscriptions)
750
.'. Accum. Fund
83 400
 (v) Hiqhwav Gharitv Ctub

Balance sheet as at 31 December 2002

Cost Acc, Deprec. NBV

, Fixed assets 75 000 3 7S0 71 25CI

Current assets
Stock 1 200
Debtors 1 050
(subscriptions)
Cash 19'400
21 650
.

Less C. Liab
Subs in Adv. (600) 21 050
92 300

Accum...fufrti , g3 400
I 900
92 300
7
,, . t7]
3 ' (a) Kevractor '
ll:,U.$:miH',ff.ilxll:lliiliffil&",ll,,on
r A factor restrictihg/restraining the productive

(b) t2l'
Contribution - excess of selling price over the total variable.
rt costs which goes towards meeting the fixed
costs.

- \ marginal income derived through sales over

and obove the variable costs.
. ri"
(c) Unit contribution: 121

Eff Zd ptus
(i) ii)
( (iii)
sales $43 $50 $3'6
LesS: V.C.

D/materials (1S) (10) (6)

Labour (10) (2_5) (?b)
18 15 10
l6l
(d) Contribution per unit of diiect materials.

Efr Let Pt.lS

(i) (ii) (iii)
Unit contribution $18 . $15 , $10
D/materials rlz ks ll3ks Vskg

$36 ier kg $4Q Rerkg $SO per kg

t3l
(e) Given contribution $36 per kg
per key factor
$45.per kg $50 per kg

Ranking "2
t6l
/
production Available Consumed
Balance
Less Plus (1000 x 1 OO0 (200 kg) 300 kg
t/s kg)
D/mat for Eff & Zet 300 kg

j. Less Zet (1000 x V3 kg)

'I

= 333,3 kg
But limited to 300 kg
f900 (300 ks) NtL
i

Optimum product mix - 1000 units of plus 121

{ 900 units of Zet iz:
0 units of Etf l2l-
(a) Bank Account

Realisation 11 684 I Creditors 4 900

Cap-Clara 12742 -l Realisation costs
920
Cap-Betsy 14 007
Cap-Anne 4 seg
24 426 24 426

I5l

6
(b) Realisation Account

Sundry Assets 76 360 Cap - Clara 40 480

Goodwill B 280 Anne 20 240
Cap-Anne 575 Betsy 1 150
Bank-realisation costs 920 Bank 11 684
Creditors 390
Cap - Anne 6 096
Betsy 3 657
Clara 2 438 12 191
86 135 86 135

[11]

fal Accounts

Anne Betsy Clara Anne Betsy Clara

Realis 2.O 240 1 150 40 480 Balanc 26 220 16 330 11 274
ation e b/d
Realis 6 096 3 657 2 438 Mortga 17 254
btion- ge
loss loan
Bank 4 599 14 007 good 4 140 1 656
will
Realis 575
ation
cost
Bank
12742
42918

t8l
9197-02.N03 ANSWERS/
v
I I
 ZIMBABWE SCHOOL EXAMINATIONS COUNCIL
General certificate of Education Advanced Level

ACCOUIYTING 9t97t3"
PAPER 3 Case Study

Friday . 14 NOVEMBER 2003 Morning 2 hours 30 minutes-

Additional materials:
\
Answer paper

TIME 2 hoursS0 minute, .

.
INSTRUCTIONS TO CANDIDATES

wiite.your name, Centre number and candidate nurnber in the spaces provided
on the answer
_ paper/answer booklet.

Answer all questions. .

t
Write.your answers on the separate answer paper provided.
a
If you use moro than one sheet of paper tasten the sheets together.

The number of nrarks is gil'en in brackets

[]at the end.of each cluestion or part question.

All accounting statcmcnts arc to be prcsentc'd in goocl style. workings shoulcl

be, shrlrv..
Question 3(b) nrr-rst be ansrvcred in sentence tbrnr. not in note fomr. with supporting
figur.r. '

Y6u shoutd reeid the Ittstructions at thc top of pa-{e z uitbre

answbring the questions,

You may use a calculator.

\
'l
hc businesscs in tltis tlueslion p*1,,.,'arc intentle-cttp hc'lrctititrus.

I h.is rlucslion p:rpcr consist.s of 8 printcO prgci.

( (rlT \ t rrtlll,/ trtt[tlittrr l' \r, l1111rl l rtrrrrilltlirrp\ (, ()gtrail. N]00.1.

 Instructions

Each scenario in this case study desciibes an event in the lit'e of a business and is tbllowed by a
question. Answer all questions. you arq advised to answer the questions in the order in which
are set.

Scenario l. Tanaka,s business-is converted into a compan-v

Tanaka Enterprises traded as a sole trader for a long time. On I January 2000 the business rvas
transformbd into a company, Tantan Ltd, with an authorised share capiial of $600 000 rnade up
600 000 ordinary shares of $l each. Oniire same date, all asSets an<t'liabitiii*r oli;;.k.
i^i.rl
- with the exception of motor vehicles, were transferred to Tantan Ltcl.
Table I shqws the Balance Sheet of Tanaka Enterprises as at 3 1 December 1g99, j ust before the
takeovdi'

Table 1

Depreciation Net Eook

Yalue
$ $ $

Freehold property 330 000 330 000

Plant and equipment 300 000 80 000
r 120 000
Furniture'and fittings 30 000'
' r5 000 ls 000
Motor vehiclcs l5 000
480 000
Inveshnents
50 000
C.urrent Assets
3s 600
Trade debtors i20 000
Bank \ 49 40Il
205 000
Less CunerrtLiabilitiss
Trade creditors
Accruals

{Q0-ao-o
Capital- Baiance it
1 January 1999
Add Net nrolit

Less Drarvinss
(jlxl_l)ILl)

9 I 9? 'i i.llli() l
 3

Additional information

"
l. Motor vehicles were taken over by
Miss Tanaka at a value of $30 000.
2' Freehold properr5' was taken
over at $3g0 000 while plant and
$ry q00' All other assets **r. equipment was valued at
, i*nrti*a;ffi;an Ltd ar their book vatues. ,

3 '' The iiurchase consideration was

agf,ri q60g
ordinary shares of $1 each to tuisJrunuk;
3, ?00, to be satisfqed by the issue. of 5Q0 000
t;ihi;ew
"& !r^v company.-'Miss Tanaka gave of her
shares to her daugirter. $

Question I
(a) *-.. a Realisation Account showing
,Prepare the transfer of the business on
I January 2000. t6l
(b) Draw ,p Miss Tanaka's capitar Account as at
l ianuary 2000.
t4l
(c). Prepare Tantan Lttrs Barance srreet as at r January
takeover. 2000, soon after ihb
a [1s]

(.,

t
\.

['l'rrrrr ovel.
 _4
Scenario 2. Tantan Ltd values its stock

on 3l December 2000, the annual ,to.k taking exercise

by Tantan Ltd. did not take place
due to staff shortage.As a result, th-e sccountant had to balcu!,ate the
comp&n ,s closing stock
using the information given in Table 2 below.

Table 2

1. Purchasesifor the year totalled $330 000.

2, Sales for the year amounted to Sad OOO.

J. RptuTg outwards amounted to $17 000 whilsi

returns inwards
were $7 200.

Drrring the year goods costing $20 000 were stolen.

company rejected the claim for compeniation.
The irrr*un..

In September 2000 goods costing $7 400.wste found

to
be valueless and therefore destrJyed.
,

S,::*:::*'l,q.llilg0"y::* .jlt on asale or rerum basis ro rvrurenga

Mulinga in November 2000. tri.
2000.
e...a;;;;,ld;;ffiffi[:l
Mark*up is 13 {% on cgst.
t. . r';/'

./Llsl ness.
.rsing
Question 2

(a) calculate the value of the company's closing

stock at cost at 3 1 December 200u
.?
Draw uq a Trading Account for Tantan
[9 Lt^d for the year ended 3l December 2f
(c) \\hat is the"ti*is fbr-stock I,aluation?
 -d
Scenariop r -f, o-^-^
rii Ltd
The directors of Tantan approve 8nd effect s schsme of capital restructuring.

For the past two years, the company has been recording losses and yet
.income in fhe balance thcre is a rcsidue of retained
sheet. Creditors and banks are p-ressing ror *anug-;;;i.h;;;;
p*riury
""a
:oT* forr.n {lapital restructuring. The latest balance sheeiofth. ro*"p*y as at 3l Dece,rber 2002
is shown in Table 3.

Table 3

$ 000 $ 000 $ 000

,

Fixed
----.-9.- Assets

Freehold property 1 400

Plant and equipment 700
Furniture and tittings 2A
2 1,20

Current AsseJs
:
Stock 1 260,
Tr*de debtors 740
2 000
I
Lesq fu e
'i'raclc cleditors
l 660
Bank oVcrdrilft I.120
',,Loan interes[ drre
100
2 880
(
{.880)
I ?,i10
).
* Ot'dUa"r,shilrnes rll'$il clch (r00
Rctairrcd prrrtii,ls
-: " . -140
,\ 7+0
I ()" i, 1 .qlttt stsr:.l'.
'J' _iQQ
I r+q

l ! ut'rl oi'r:t'
 r

Add itional inlbrmati on l

During an eittao'dinary nreeting the shareholtlcrs
passed trre t.ttowin! resolutions:
I
l' Piant and equipnre't r,vas to be revarued
000.
at $540
I
2' srock costing $3 l0 000 was found ro be varueress.
-
3 t

[fr::'*]]::,';il:t"rT.j1:iti,r,'jf;J1h:,"$i:,*;.:l;l*ft ff ,,:xilr[;',;',-,",, "' I

4 r#ll'?ffi".t'1il-,:;ffili:if;ilii.,i1fJJ[:*iil;i:,:;1:x:'.'*, fbr rhree vears,,,o,f
5' immediatery.
The loan iuterest due was to be paid off
t
Bad debts of $ 120 000 were to be ,,vritlen
.U. off. I
'; fl::::llJ:['.Tl:*:H *[::*',:'ff.:-*,]i,flxi:hiiJ;j:':se,,,ing amc,,n,s.,.
I
Question 3 '
.i :t'
[
(a) tht to*putry's balattce slteet soon after
ffiffi the'restructuring scheme. uno*,
",, ,.ri,u,[
(r'})
ffi['JiJ;:r,'J,?,'#l'-:1,1JlJnfi,.?#li,'.1xff.H;::;iJi,lii,,:,,;n:"",,r]ifru,in.u,
computerized accounting sy.stems.
:

i,
t {
I

I
I

I
I

-t
I

I
Scenario 4. Tantan Ltd prepares a cash budget

The company is putting in place a system

of forward planning and on 2g February 2003 the account.s
clerk made available tU1 foitowing information:

1.. Month Credit Cash Credit

Sales Sales Purchases

$ $ s
February (actual) 820 000 . s00000 220 000
March &uageteOy 600 000 410 000 420 000
April (budgered) 200 000 600 000 r 80 000
May (budgettd) 250 000 800 000 240 o_qo

2. ..The actual bank balance on 2g February 2003 is $2Q,g OCIO (creclit).

:

3. .f,rade debtors'aierallowed ong month,s credit.

4' Trqde crbditors arb paid two months

--- purchase.
after No purohasgs..were-marJ.c
r-'Y^rEU
in Januqry -1,.'
;
The 107o loan srock, excruding interest
: due, wilr be paid on r Marcr1.200j.

6, The following are pai{ rnonthly: wages $300 000; adrnilristration

"*9!,lfF
March, the wige $ t 50 000. ,r\frer
bitr i* **p.rted to by ,d rd;r;;;;;;r
.'(r\*rrrrtri
7 ' on I March, all equipment wotrld be rep,laced ar a cost of $500 000.
$300 000 r.vill be allouerj
on the old equipm;ri;[th;;;i;r; by cheque, f)epreciation is arorved ut trrc
",'tlt'brp-ii
8' Rent payabte rvill
i.

be $360 000 for the 1'ear ending 3 r December

200i. pa*ablc i, .l cqrral

/,'/.-l
b'

()
197i I Nl0()_1

I'l'urn u;,tr
 8

Question 4

(a) Prepare a cash Budget for Tantan Ltd for the

three months to 3l May 2003. iq
(b) (i) Discirss the requirements of an effective budgetary
control system. Isl
(ii) State any four possible limitations. on the level of activity
of a business,
rhat could be piincipal budger factors. iogg.r, ,
imitation.
*;t;i;;.;id -.},
t8I

;
 ZIMBABWE SCHOOL EXAMINATIONS COUNCIL
General Certificate of Education Advanced Level

MARKING SGHEME

,1

NOVEMBER 2OO3
t

AGGOUNTIhIG 9197/3
 2 ,
(a) Realisation Account: 1 January 2000

.$
Freehold propefty $
330 000 Trade creditors 127 500
Plant equipment 120 000 Accruals 7 500
Furniture and fittings 15 000 Tanaka-Capital 30 000
Stock 35 600 Tantan Limited 600 000
Ddbtors 120 000
Cash at bank 4elo0
lnvestrnents 50 000
Motor vehicles
Capital - Tanaka "15 000
30 000

(Allitemstobeshownindividuallyforfullmarks). l7l

This is because ledger balances are transferred

one by one tot the realisation account.
(b) Tanaka's Capital rdccount: 1 January 2005
Realisati- $
lVsttor vehicles $
30 000 Balanced b/d 600 000
Ordinary Shares in Tantan 600 ooQ Reaiisation-profit 30 000

630 000
03_8!00
ln Tanaka's capitarbccount, the
narration ordinary share capitar for g600
the debit side is not correct 000_0d on

t3l
 a!
3
(c) Tantan Limited 's Balance sheet as at 1 January 2000

Fixed Assets

lntangible
- goodwitt lwiy
Tangible: Freehold property 300 000
Plant and equipment .75 000
Furniture and fittings
l5_0aa
390 000
480 000
lnvestments
50 000
Current Assets

Stock
35 600
Debtors
rBank
: 120 000
i 49 400
L 205 000
Less: Current liabilities

Trade creditors 127 50A

$ccruals 7 500
1 35 000 70 000
Capitalf nd Reserves
,E4,0-!.qa
SOO O6O ordinary p $1 each fully paid 500 000
Share premium =tlrru. 100 000

The figure 500 000 for the ordinary shares can be left out.
 \-4
Working 1

' Calculation of Goodwill

=) Net assets less purchase price

property
Freehold SO0 OOO

- equipment
Plant and 75 000
fittings
Furniture and 15 000
lnvestments S0 000
Stock 35 600
Debtors 120 000
Bank 49 400
645 000

liabilities
[-ess: Total (135_000) \
assets
Net El !_000-

Goodwill :+ 600 000 -510 000 (4)

90000
. _
lnstead of this arithmetical calculation the answer could have been given as a
Purchase of Business Account as follows: r

Purchase of Business /
$ $
Creditors 127 500 Freehold property 300 000
Accruals 7'500 Plant and Equipment 75 000
Tantan Limited 600 000 Furniture and fitting 15 000
lnvestments 50 000
Stock 35 600
Debtors 120 000
Bank 49 400
Goodwill 90 000
735 00_Q 35 000
\
(4)
ln the Business Pr-lrchase Account the entries were not to be reversed.

fhe Inarks were awarded either in the batance sheet or in the calcr-rlation bLrt not
itr botlr.
 5

;I
.!
I 5
2 (a) computation of closing stock at 31 December 2000

Opening stock 3s 600

Purchases 330 000
Purchases returns
17 000
Sales at cost \ 286 500
Sales returns at cost 5 400
Obsolete stock
7 400
Stolen stoqk
20 000

Net effect +4 500 335 400 330 900

Closing stock

The answer to question.2(a) co_uld be giv-en in the form of a I10I

account as in (b). ln that case the net iares at cost figure of
trading
2811'00 gets
4 marks.

(b) Trading Account for the year ended 31 December 2000

Sales
382 000
Less: Sales returns
7 20A
Net sales/turnover
374 800
Opening stock

Add: Purchases 330 000

Less: Returns outwards 17 000
Net Purchases
.- -i
u3_qaq
348 000
Les*: Stolen stocl< 20 000
Obsolete stock 7 400
Closihg stock 40 100
Cost of sales 281 l_rQ
Gross profit 93 700

[6]
(c) At the Iower of cost and net realizaL:le value
t::21
 6

3- (a) Balanie Sheet after Capital Restructuring

Scheme

$ 000 $ 000 $ 000

Fixed Assets

Freehold property
Plant and equipment 1 14A
Furniture and fittings 5.10
20
1 700
Current Assets

Stock
Trade debtors 950
620
Less: Current Liabilities 1 570

Trade Creditors
Bank overdraft 860
2!_A 1 140 4x0
2 130
Long Term Liabilities

10% Loan Stock

Trade creditors (due after 3 years) 180
560 (740)
1_3W

Ordinary shares of $1 each

Retained earninqs
Capital Reserve

Cash received 1 S00

-240- rOO = 1 160
1 160 - 840 = 320 which pry.
otf part of the loan.
-3 (a) Workings

.Dr Cr
C-a p ita I recon struction 160 000
Plant apd equipment
160 000
Profit and Loss account 310 000
Stock
Bank 1 500 000
Properties . l"'
600 000
Profit and Loss Account
900 000
(ii) Properties 340 000
Cap ital reconstruction
340 000
Creditors
Bank
240 000
Loan interest due 100 000
Profit and Loss Account -__.l.0Q.qgp-
120 000
Debtors,. 4',

120 000
Bank
320 000
(Alternative prssentations of workings acceptable)

(a) Alternative answer

The Journal-

$000
Dr
1 Capital reconstruction
Plant and equipment
2 Capital reconstruction
 8
3 Asset disposal: freehold property
1 000
Freehold property
1 000
,, Provision for depreciaiion: freehold property
! 4sset disposal: freehotO propert;-"'
+bo
400
Bank
1 500
Asset disposal: freehold property
1 500
Asset disposal: freehold property
profit and Loss 900
900
Freehold property
Provision foi depreciation 100
Capital reconstruction 240
340
4 Trade creditors
Bank 240
5 Loan interest 240
" Bank 100
"6 Capital reconstruction
120
100
- Trade debtors
'l 10% loan stock 120
Bank 320
8 Profit and loss 320
, Capital 250
reconstruction
250
 g'
Balance Sheet as at 31 December 2002 (after restructuring)

$000 $000 $000

Fixed Assets
Freehold Proper:ty (-600+SaO) 1 140
Plant and Equipment 540
Furniture and Fittings 20 1 700
CurrentAssets /
Stock (-310) 950
Trade Debtors (-120) 620 1 570
less Current !iabilities
Trade Creditor:s (-800) 860
Bank Overdraft 280 1 '140
Working Capital 430
2 130
Financed by:
Ordinary shares of $1 each i
600
Reserves
790
Sltareholders' Equity 1 390
Lonq Term Liabilities
.1Ao/o Loan Stock (-320) BO
Trade Creditors (Due after 3 years) 560 740
{t
2_ 130

(b) Report on advantages and limitations of cornputerized accounting

systems

- Report to be written in an acceptable formalformat

Speed and accuracy of capturing and calculating data;

- Wholelask approach to processing transactions.

- Limiting cases of fraud and thefts (especially pilferage);

- lnstant access to accounting information
- "\Vhat if?" calculations on alternatives open to managernent
- Computers are aids to instant decision making
(Other reasonable points).

Limitations should include the following.

:
Computers can only process data fed into them.
- Any future changes to business operations/activities will be
expensive in software requirements
- A breakdown in the equiprnent brings business to a halt
- Programmes can be infectediaffected by a virus
- System can be expensive to set up
- Technology is ever changing [1Bl
Total 32
(a) Cash B
U,tl
$ tarl
Receipts

Cash sales 410 I 600 800

Credit sales B2o i 600 __ ?_0!
23o l_-l 2oo _1_Q_0_0
Payments

Purchases (220) (420)

Loan stock (180)
Wages (s00 (330) (363)
Administration (150) (150) (1501
Equipment (200)
Rent (e0)

Net receipts/(payments) 500 67

Balance at start 110 610

Closi balance
_.wJ
(b) --4- of
Req0irements -r an t|
--- effective budgetary contror system
t9]

(i) The structure of the o.rganization must be oiined clearly,

emphasizing areas of responsibirity so that managers can
be
accountable for adverse results from areas under their
control.
(ii) There is need for adequate records of accounts and procedures,
in
order that measurement of performance be reried on.
(iii) Everybody should be allowed ito parlicipate in the budgetary
' process in order to boost morale, hence coordinating
6fforts of
everybody to work towards the budget.
.(iv) Flexibility is of utmost importan.u .6 that plans and objectives
nray
be revised
(v) Budget comnnittee
(vi) Budget manual. \
(vii) Budget period to enable review of bud5;ets.
(viii) cooperation from everyone top management
through middle management",,n."rn"ifrom
to line staff.
(ix) There.must be clearly defined targets and objectives goar
-
definiiion.
' (8r
 11

- Limitation Means -of Overcominq

er L;utnlIlQ Limitati
Ltillttatron

I Market demand for products

or services _ Extra advertising or new product

lncreased mechanization or higher

1 Unavailability o=t st<itteO labour
rates of salaries

Alternative supplies or alternative

2 Unavailability of materials
raw materials

I Factory space Extension or relocating elsewhere

Reducing debt collection period or

4 Cash shortage
issue of capital

ri
/SK
crMyDocuMENTS\MARKTNG.scHElae-gt!zog.tto:
 " ZIMBABWE SCHOOL EXAMINATIONS
COUNCIL
General Certificate of Education Advancecl Level

ACCOUNTING 9197 /l
P.A.PER 1 Multiple Choice

- Thursday 3 JUNE 2004 Afternoon . t hour 15 minutes

Additional materials:
Multiple Choice answer sheet
Soft clean eraser
'
Soft pencii (type B or FIB is recommended)

TIMB t hour 15 minutes

INSTRUCTIONS TO CANDIDATES

Do not open this booklet until you are told to

do so.

wrile your name, centre number and candidate number

unless this has already been done for
on' the
t'^v wruvYvr
answer sheet
D*w!L ,in the spaces provided
a
you..
There are forty questions in this paper.
Answer all questions. For each question there are
possible answers, A, B,c and n. ihoose four
the orie vou conria..
pencil on the separate answer sheet. "oo..i-uriJ;;ffi;;;; r'n"i.Jtr rrn
"r.,
R.eacl very carefully the instructions on the answer -
sheet.

INFORMATION FOR CANDIDATES

Each correct answer will score one mark. A mark will not be deducted for
a wrong answer.
Any rough working should be done in this booklet.

Calculators may be used.

TIiis question paper .onrirti

Copyright: Zinrbabwe School Examinations Council.

J2004.

'i:,Zli,iSEt'J2(rii I

[Turn over
Provisions are amounts set aside out of profits
to provide for the following except

IB depreciation of fixed assets.

cish for buying fixed assets.
ID possible losses caused by bad debts.
'
liabilities, the arnotrnts, oi *rrirrr cannot
bd estimated with substa:rtial accuracy.

which of the following wourd not appear in a sares ledger control account?

A discounts allowed
B returns in'wards
C provision for doubtful debts
D cash received from cred.it customers

The'following information relates to Fibs Ltd's

Plant and Machinery Account at 3l Dece*i",
2003.

$
glosing balance ZZZ9OO

*si:?tffigiHffi-
newplantac{uired iiiii
91 000

pne of the machines was revalued from $3g 000

to $50 000 during the year.
what is theopening barance:for the plant and
machingrr, at sqst, orr , ,un
* 2003.

B $13g 000 ',

c $153 000
D $200 000

The cash book (bank colual) o-f Lillys

Ltd had a credit balance of $s 0oo. There
of $2 000 not yet cleared' The bank statement were deposits
showed a credit transfgr sooo not yet in the
cash book.
"i
\Mhat.is the balance on the bank statement?

A $3 600 credit
B $3 600 debit
C $6 400 credit
D $6 400 debit

9197/l J200,i
 3

5 - The table shows information about subscriptions in the books of a social club.

Subscriptions due on 1 January 2003 3 000

Subscriptions in advance on 1 January 2003 2340
Subscriptions received during the year t5 670
Sr.rbscriptions due on 31 December 2003 340

What is the income credited to Income and Expenditure Account for the year?

A $ls 3s0
B $ls 990
c $16 670
D $18 3s0

6 M buys goods from and sells goods to Y. On 31 January 2004,M owed y $1 200 while y
owed M $3000.. -An agreement is in force for the Sales Ledger and Purchases Ledger balances-
to be off'set so that only one payment ismade. il _\

'
Il
Which double entry effects the oftset in M,s books?

A Purchases Account
Sales Account

ts Purchases Ledger Control

. Sales Ledger Control

C Sales Leclger Control

Purchases Ledger Contr.ol

D Purchases Ledger Control

Sales Ledger Control
 7 a*iv Oonu,ion received by a ciub
for a specific purpose is
A credited to the Donation
Sp-ecial Fund Account.
B " uedited to the Ir.;;.;;Henditure Account.
C debited to the oonution
Ir#r., Fund
D debited ro the In.orr.;;j;iienaitureAccount.
Account.
In a partnership business, plofit
on revaluation should be

I credited to iapital accounts.

I &i;;-;capitat accounts.
I
D
credited to current accounts.
debited,o.ro.;;u;;;;;;;:'

760 were included twice

IffilffH:Ti::$,1' in a manuracturing account.
rhe errect of

increase the prime cost

*
g mcrease the production
by $6 760.
cost by $6 ZOO.
reduce the pnme cost by
y: reduce the total factory
$6 760.
over.heads by $6 ZOO.
ry- Danda Ltd,s final accoru:ts
showed a net profit of
$46 g00. It was discovered
sttck had been overcast by that tr:e ope,ing
$4 620 and the.clorins;;.ffi;,ii} u"aercast by $ztao.
Vdhat is the effect, on
the net profit, of correcting
the errors?
A netprofit decreases by $1 g60.
B net profit in.r.urobf
$i g60 il
I
C net profit decreases b;t;
3;ij

-11 Share premium can be

used for the following except
a
A writing off preliminary expenses.
B providing cash for aiviaenA
c paying up unissuea rt urr. nu*.n,.
as fury paid
D- providing *nf pr*rnium payabte;rirt" bo,us shares.
ffimption of shares.
LZ How can a business increase
its quick asset ratio?

A increase creditors
B increase clebtors
C increase stock
D reduce baik balance

9197i1 J200.1
13 What is convertible loan stock?

{I a loan wtrich can be cashed anytime

B goods lent to the company for resale
c a loan which may be exchanged for shares at a future date
D preference shares which may be converted into ordinary shares

L4 + rent prepaymi:nt of $250 was treated as an accrual in preparing a sole trader's

profit anrl loss
account. The draft net profit figure was $7 200j - What woula Ue tire net profit
when-the error is
corrected?

A $6 700
B $6 9s0
c $7 4so
D $z 700

15 In a cash flow statement, which item will be an adjustment to operating profits

to arive u,.urt
flow from operating activities?

. A tax payable
B interest payabie

D changes in stock levels

16 * Information from Tee Pee partnership's accounts is shown in the

table below

$
net loss before interest t2 460
interest on partner's loan to the firrn 2 000
interest on capital accounts . ...'
1 000
drawings 7.000

which loss figure is to'be appropriated between the partners?

A $9 460
B $12460 ' i

c $14 460
D $ls 460
77 Wirich accottnting concept explains the capitalisation of developrnelt costs?

A matching
B pmdence
C business entity
l) substaircc ovcr lorm

! I q7l I l:.1tr) I

j -lt;i'', irr'
 6

"18 Which goodwill is not recorded

in the Uut*.. sheet?

A negative goodwill
B positive goodwill
purchased goodwill
ID - non purchaied goodwill

19 The non-payment ofdebenture

interest at the close of business
of at the agreed date has the effect

d'

increasing the
* increasing the
net profit.
I increasing the
debentures.
ID increasing the
bank balance.
current liabilities..

20 Buildings of chako Ltd had anoriginal

cost of.$100 000, and an accumulared
$20 000 on 1 January 2003. Drt;;;;oofo;th.;;;;; $7 z4a.
depreciation of
l
On 31 December 2003 the asset
was revalued to $ 105 000. What
is the profit on revaluation?
A- $s 000
B, $12240

D $32240

2l Ndoro and Mhako are in p*nt:^lil

lhfryprgntl anj rosses equalry. They each contributed
capital of $56 0003nd have agreea.io'aamiiil;"
the ratio 2:2:1 respectively. -- .''-."-^'-'::-oo the partnerrr,ip.- profits are to be shareii in

Goodwiil is valued at $30 000 but it

is, not to be retained in the books. :

what rvill be the balance on Ndoro?s

capital account after the admission
of Sadza?
A $s6 000
jB $se 000
c
' D $65 000
$71 000

7zA sole trader can best improve his working capital

in the short tenn by
\
A paying back loans
B decreasiug the rate of stock turnover.
C dispo'sing of some surplus fixed
assets.
t) reducing the debtor colrection p.rioJuy
offering discor-urts.

I i 97,'l J200,1
 7

?1 l-he table sbows current assets and current liabilities of Tomtbm

Ltd,
"-

$
stc'lck 50 000
clebtors 250 000
dividends payable 20 000
trade creditors 180 000
short-term investments s0 000
prepaynrents 10 00p
taxation 30 000
bank overdraft 40 000

What is the current ratio?

A 1.1s
B 1.3
C 1.5
tr) )

24 $Arich t-rf the foilowing violates the prudence.concept?

,,.,i
', ''

1 irriting off development cost against profits

B increase in provisi.on for bad und aouitful debts
understating-depreciation of plant and machinery
I
D valuing stock at the lower of cost uno net r.ari iiarcvalue

,< Which of the lbllowing statements is not true?

A A share must have a face value.

B There are only two classes of share capital.
C Shares can be issued at a discount or premium.
D Authorised share capital is higher o, ih. same as issued
share capital.

f .i)7i 1_'lrtit.l
i-f iri-li c,
 I
76 The table shows extracts from a company,s proht
and Loss Accounts for 2002 and
2003.

2002 2003

$ s

sales 25 000 s0 000

cost ofsales 7 500 17 000

What might explain the change in

the profit rnargin?

A cheaper suppliers
ts a cut in salli price
C an increase in sales price
D the loss ofa riajor Justomer

27, 'fhe net assets of a business are valued at $1g0

000. The business is sold to a limited
fot $250 000. The purchase pri.. ir:to company
$1 each fully paid. : U. ;J[j;; the issue of 200 000 orclinary ufrur", oi

Each of the shar.es is issued at

A par va,lue. ; t,

B a premium of lOc. \
C a premium of 25c.
D a premium of 35c.

28 Which is a source of cash?

A bonus issue
B rights issue
C in-crease in debtors
D profit on disposal of motor vehicle

,)11);/r r)ri,r r
 9

29 A' limited company intends to purchase a sole trar1er's business for $290 000.

'l'he following information is extracted. from tiie books of the sole trader prepared for the
puryose of the acquisition.

$
Fixed assets at cost 340 000
. Frovision for depreciation to date 120 000
Net current assets 100 000

What is the value of goodwill?

A $30 000 negative

B S30 000 positive
C S1SO OOo negative
D $i50 000 positive'

30 The infonnation below relates to Jong Jong Ltd.

r

.r Ordinary shares of
\_rrqmary snares or bu.)u fully pald
each, ruIIy
$0.50 eacn, paid $1s0
utI)u
i uuu
000
10% preference shares of$1 each, fully phia $eO OOO
,'
On 31 December 2003 Jong Jong Ltd. had a dividend yield of 1.25%and market price per
share of $4.00. ' ,
I

What was the?ividend percentage declared on ordinary shares?

A 14Y."
B 20%
c 32%
D 40%

l)f }7iI.Il/)i;+
''i-
l . i :'ir ol o: r
 10

31 A company has tire following share capital structure:

Ordinary shares $0.50 each, fully paid $200 000

8% Pr6ference Shares $1.00 eacir,-fully paid $100 000

An extract from its profit ,rra tJss appropriation account is shown below:

s$
Net profit for the year 6g 000

less Preferencedividend g 000

Ordinary dividend 30 000

' .

38 000
Retained profits
fin00
-:--
What is the earnings per share?

" d 7.5c
B
.tllTci15c
D 2t.5c

32 Muyamba Social club had the fbllowing assets and liabilities as

at 3l May 2003.
$

Buildings 40 000
Pool tables 3 000
10% debentures (investment) , 4 500.
unpaid
Bar supplies 6 400
advance
Subscriptions in 400
Bank overdraft Z jOO

What was the club,s accumulateci funrl,l

A $32200
B $38 200
c $39 200
D $43 200

9197/t J2()0.!
 't
33 Bindo Ltd, manufactures and sells a single pioduct whose price and cost structure are shown
below.

Selling price per unit $20

Variable costs per unit $1s

Budgeted fixed costs are $100 000 for a standard, production of 40 000 units.

How much profit or loss can be generated if 50 000 units are produced and sold?
\
A $125 000loss
B S125 000 profit
C $150 000 loss
5150 000 profit

34 Pumula Ltd would want {o invest in a project. The following information

is made available.

Cost of Capital Net Present Value

r0% _ +$2 341

t5% -s 846

What is ihe internal rate of return l

A 6.4%
B rr.3%
c 13.6%
D 16.3%

35 which of the following is not an advantage of the payback method?

A Calculation of net cash flows is objective.

B It takes into account the time value of money.
C Short.payback period benefits a finn,s liquidity.
D It indicates the project which is at risk foi the ieast time befcrrb the initiat
outlay has
" been recouped. (

9i !)7/t Ji004

f'l'r: r'n ol'cr i

I
i
 13
38 Simba Ltd uses the standard costing systerit. 'During the month of May 2003 the follo,,ving
information was provided,

Standard cost per unit Actual cost of 12 500

based on a budgeted units produced
output of 12 000 units

Direc[material 6.1 metres @ $5.50 per 73 7 50 metres costing

metre 5427 7s0

Direct labour 2.75 hours @ $15 per 31 250 hours @$16.20

hour per hour

what is the difference between the standard and actual direct laboru costs of produclng
12 500 urits?

oA $3 125 adverse
B $9'375 favourable
*C $10 250 favourable
D $1 I 250 adverse

39 What may cause an idverse sales volume variancq,?

A a change in custo-mer taste

B a decrease in inflationary rate
C an increase in customers, disposable income
D an increase in the price of a substitute product

40 What is a principal budget factor?

A A factor which prevents changes in selling price.

B A factor which influences changes in the fiied costs.
C A factor which influences changes in the variable costs.
D A factor which constrains a business from achieving set objectives.

9197,/t 1200{
 L2
36 zedLtd manufactures tluee products x,
Y and z. The labour hours are limited to 250.
The table shows information about
tfr. ttr." products.

Product
x Y Z
Labour hours O.r *il 3 2 7
$8 $8 $16
Maximum demand. (units,1
s00 500 500

To maximize profits, which order

of priority shourd the company adopt?

A XY Z
B ZXY
C XZY
D YI'Z
37 Damba Ltd provided the following
- information for March 2004:
Budgeted overhead expenditure g32 000
Budgeted output
8 000 units
. oveltreaa.urirpti"n rate
Actual output $4 Per unit
Actuar .*r["ai*re equaried the budget.o
u,.J.llflffil'
what is the under or over recovery
of overheads for March 2004?

I
B
240 undelrecovery
240 overrecovery
C 242underr..ou.ry
D zeio over and underrecovery

!)i ili I It;.t4

 ACCOUN'rIhIG

SUBJECT 9197
Paper 1
Juhe 2004

1. B
I

'2. t
2 B *-F found Uy Oruring up a plant and machinery account.
^4. D

5. A Subscriptions account
-Bb.
6, B *& Balance owed by y, $1 800 will rernain due in the
Sales Ledger Control account
.1
t. A

8. A --SF- Profit is of a none revenue nature

*
L D

10. D *& Both errors resultetj in C.O.S being overstafed

by
$7 380, GP ancJ Np understatecl b|-*r**.umount.-
11, B

12. B *& Stock exbluded in calculating quick ratio.

Other 2 options have opposite'effect.
13. C

14. D

15. D **&F Operating profit is profit before interest charges.

''!.r I
1e. '*& lnterest clr partners, loans to ilre firm is a normal
trading expense ancl not an appropriation of profits.
at ::

.'., 17. A
r . -r :i;'.i,

,
'"P,xil1i
*i:.J: ,-r
18 D -^""I.\,,
L{' IAS 38
,8;
:. itr; .

r i;1r':i.:ri
",1;!: :

+'..
{
.la

il.
, i-!i'.'
ii+il.''
r;!-'
l,

19, D
20. D NBV at date of varuation was $72 760
-p
21. B
22. C a\

- 23' B Consider all current assets and all current liabilities as

-F shown bry the table.

24.Ci
25. B

26. B

'27 . C --& * i** -- $1,25. Then finct the share premium,

200 000

ol
29' A -b - Total net assets = $320 which is highpr tharr
, purchase price.
C)00,

30. A **F Let r be the cleclared %

*[gt-] = 1,Zila/oand then finct .r
i \4/
i
31" B -*&t Divide earning;s by number of ordinary slrares.
t:

32. B -+ 10% debentures ls an asset to the club

33 D --&. B/E vdtue = $_l!Lg!q

5

= 20 000 units
 I

I
I
I

EXcess 30 000.x $S = $1S0 000

[Based on marginal costing approach]

- 34. C --+ capitar investment appraisar techniques,

35. B
'36' B --}' Determine the contribution per limiting factor and rank

37. A --9> OAR (Budgeted output _ actual output)

38' B -& Standard labour costs of producing 12 S00 units is

. 12 500x2,75hrs xglS =$51S 625.

39' A The other 3 options cause a favourable sales volume

-+ vanance.

40. D
c:91 97-01 J04/s!

l*,

I
 Candidate Name

t--- Candidate
T _-"'.
l.J r n11

'-l
1,t.,

_l
ZIMBABWE SCIIOOL EXAMINATIONS
General Certificate of
COUN{I} 1,
Education Atlvanced Level

ACCOUNTING
PAPER2 Structured 9197 t2
Questions

Tuesday ISJUNE 2OO4 Morning I hour 30 nrinutes

/)
Candidates answer on the question
paper
Additional materials:
Supplemenftry answer paper

TIME I hour 30 minutes

INSTRUCTIONS TO CANDIDATES
write your ni*"' centre number and
candidate- number in the spaces
at the top of this pagc.
Answer all questions,

writt your answers in{'t" provided on the question paper.

'pu..s If you require
'vYq'L s^ua
extra paper, ask the
I
superfttror for suppremenh;
answer paper.
INFORMATION FOR CANDIDATES
The number of marks is given
in brackets [ ] at the end of each question
or part question.
You may use a calculator.

EOR EXAMIIYEII'S USE

This question pu@Aprg*

rrrt I ruler! 1r.:',1,:
Oopyright: Zimbab.,ve School Exarninatic;;rs
Ct;uncil , i2cf.1
l:,lv{. j EC J2(,r) i
 1
2

Answer all questions

{n) state any three reasons forkeeping conhol

accounts.
fr
Uta

i3l

" (tr)) Name two books of prirne entry usecl

in posting figrues to the purchases
* I.,edger Cpnhnl Account. .

r\
I

%
I

i2l
 .\

3
(c) The fbilorving bara,ces were extracted.
from the
g'r! books
vvv&r of Isheanesu-fratling Foq
fbr the year ended 3l October 2003: Yhqri*Imfu
lJsil

Noven'rbq I Sales ledger: balances;b/f

Dr.
$
44 m0
Furchases ledger balances
Cr. I 800
b/f Dr:. 800
Cr. 12 400
October,3l Average monthly totals of:

,.f Cash purchases

60 000
Cash sales
r24"000
Sales day book
paynaent to creditors s3 000
B0 000
Sales returns book
6 400
Cash receipts from debtors
45 200
Cash paym.ents to suppliers
77 000
Discouuts * dc,bi!
6 200
| - credit
i 400
Dislronoured ctreoues
' Interqst charged by the business
6 600
o ovflrdue debts
on
2 000
s ',)
Total bad debts rvritten off e.,:nountr:d
to 28 800
ledger baiances oTfset oguinrrprrchases
,Sa]es r -'- ledger
balances were 4 400
Credit balances on purchases lerJger
accounts at
3l October 2003 were
Debit balances on sales ledger accoqnts 10 000
at
31 October 2003 we"ge
56 600
use the abor'e informatiori to prepare
the sares Ledger control
Ac,count fbr the year ended 3 i O.ltober
?.003.

,fi

9\91,'.).]t,)tt\
 lor
nr*Jl
Ih

t6l
(rI) E:rplain the meaning of each of the following pluases
as used in Accounting:

(i) Arccounting policy

''12)
(ir) Ordinary activities

t2l

91?7.12 Jli)0.1
(iii) Extraordinary items
[r
EFnhrrl
Ihc

t2I

(ry) Fundarnental errors

t2l

lr
i\

,i97n t20a1
 ..i)
6
rFq
lnmac*r
(e) State any two circumstances under which an enterprise call change I Ucn
an accounting PolicY.

t4:t

2 (*) State tlryo dittbrences between direct costs aud factory overheads giving
' an example of each.

13l
 ,f,
7

Bc
(b) The following information was extracted n-.'FiJ!
from the books of Siyatotoba IIto
L1d, a candle manufacturer, for the year
ended 31 December 2003:

$
000

Purchase of raw materials

2s0
Fuel and tight ?
t4
Salaries administration
l1
Carriage inwards .

6
Rent and rates
Sales
16'
492
Retums, inweuds
4
General administration expenses
l5
Repfirs to plant and machinery
3

Stocks at 1 January 2003: ,

Raw materials
10
Work-in-progress
Finished goods
I
.tJ Sundry creditors
7i
Capital 3l
,r 450
Salesmen's salaries
9
Freehold premises
400
Plant and machinery
Debtors
78t
,20
Cash
' ' t3
Wages.
30'
Additional infgrmation

(i) Stocks at 3 1 December 2003:

Raw materials
$20 000
Work-in-progress
$12 000,
Finished goods
$18 000
(ii) Fuel and light in alIear.s
$6 000
Rent and rates prepaid
$2 000
Market value of finished goods
$300 000
(iii) Plant and Machinery is depreciated at the
rate of l0o,,t per irnn:tm
using the straight-line rretirod. .

,1..)7,,: JtOrl1

!'[':.:in olrr
 (iv) Manufacturing consumes 60% of fuel and light.
For
nqdd!
aa Th
(v) Rent and rates for trading operations amount to 30%.

(vi) Of the total wages, productive wages are.J16 000.

\,
(i) Draw up the Manufacturing Account for Siyatotoba Ltd for the year ended
31 December 2003.
 9

S@
Elrrtrhrt
Ih

_ tl3l
(ii) " and profit and Loss
ii'B:::ffiJ?3;l: Account for the year ended

ir l9:,2 iti)04
 l0
fot
hiadr
Uro

tel

(c) Identify any three possible reasons why a manufacturing division

may end up with a manufacturing loss.

t3l

9 r9?i:, J200,t
 l1
3 Mwenda Ltd manufactures plastic containers
in two consecutive processes, A and B. nr
The costs for May 2003 weie as follows: nq".Ek(b
Ih

Cost element

Direct materials 15 000 10 000 5 000

Conversion cost 11 200 B 000 3 200

Both processes have direct materials, input.

Process A

The input tbr process o of materlal zeno. Alt units are 100% comprete,
1P.-og
Process B

'The input for process B is 700 litres

of materiar pino. output is t 000 plastic
of work-in-progresr.;ti; *; io% .o*ptete
h#ilTiHt.fltf:its as regards

No losses arise in both processes.

(a) Explain the phrase equivalent production

units.

_-- tzl

t.a-
i .r I-); li i;
 t2
fq
(b) Calculate the tota!cost per unit. Irrilfrrd!
Ih

' [7)

9 I 97n J2C04
(c) (D Calculate the cost of work_in_progress.
fc
nErhnJt
th

l2l
(it) Calculate the cost of completed units.

[1]
 14
\
(d) Prepare the procbss account for
)

!a
ItrytFfi
Th
Process A

t3l
Process B

t5l
 15

(e) Distinguish a by_product from rc

a waste product. lMdr
Iho

tl l

9 197 t1. J2t)t.,,

{ tr'ur':'l *.,,er
 \ 16
Bor
4 (a) Explain Single Entry Accounting- EEiilidl
Iho

tu
(b) After a fire destroyed some of the originat records for Mhlanga Ltd,
the fotlowing information relating to the year ended 3l March 2004
was available:

Sales * $750 000

Stock"(3l March 2004) $ 53 600
. Fixed assets fi00 000
Debtors $.42 000
Mark-up t:' 25Yo
.' Operating costs/Sales t lsYt
. ttet protVsales i 5i/o 'l
. Stock turnover rate 15
Acid test r4tio 1.5:1
Closing bank balance $s4 000

The company is financed mainly by ordinary shares of $1 each.

During the year, the company issued 7%o convertible loan stock for
,\ $14 000 cash. The loan is repayable on 31 December 2009.

(r) What is convertible loan stock?

t2l
 L7

(ii) Ltd's Trading and Profit and Loss

Fqr
liutrntoar*
?iilJi#ffXi*" Accounr for the year enderr Uuo

lril

()
l i) i, ), i-l i)ri i

ii': . , r,r,

F-
 1B

&s
R"qfitct
(iii) Draw up the Balance Sheet as at 31 March 2004. Irr!

i10l
 t9
fffi
(c) Explain the matching concept. ErruiihlNh
IIro

12)
(d) How has th",.*ut:Slg.-concepr been applied
in the above financial
staremenrs (i.e, a(b) (ii) and (iii))?

I2l
(e) state three advantages of doubre entry
over singre entry accounting.

far
l-)l
?t:,

Fd
Ml
Uo
j

i'
i_ zTMtsABWE SCHOOL EXATVilNATIONS COUNCTL
II Generar certificate of Education Advanced Lever

POSSIBLE ANSWERS

ACCOUNTING 9197 t2

JUNH 2OO4
1. (a) Locating errors, detecting fraud, provision of total debtors and
creditors' balances. t3l
(b) Returns outwards journal, cashbook, purchases journal, general
journal. l?j
(c) Control Account

Balance b/d 44 000 Balance b/d 't 800

"
SaJes 636 000 Ret. lnwards 76 800
Beink 79 200 Cash 542 4AO
lnterest on debts 24 000 Disc. Allowed 74 400
Balance c/d 98 000 Set off 4400.
Bad debts 28 800
Balance 56 600"
785 200 785 200

t6l
(d) (i) Accounting policy
The specific principle, bases, conventions, rules and
practices adopted by an enterprise in preparing and
presenting fi nancial statements.

(ii) Ordinary activities

Activities undertaken by an enterprise as part of its business
: and such related activities in which the enterprise engages in
furtherance of, incidental to or arising from these activities.

(iii) Extraordinary items

. lncome or expense items arising from events/transactions
that are clearly distinct from the ordinary activities of the
enterprise and are not expected to recur frequenily.

'
-(iv) Fundamental errors
Errors discovered iri the current period that are of surch
significance that the financial statements of one or more
prior periods can no longer be considered to have been
reliable at the date of theirissue.
.
t8l

(e) Policy changes can be made

(i) if required by statue (taw)

(ii) if required by an accounting standard setting body
 (lii) if the change wirr resurt
in a
presentation of events. more rerevanvreriabre
i u' 'u, v,,

2. (a) D-irect costs can b-e traced

to the item. being manufactured,
direct materiars whereas i";t;ry e.g.
;;erheadJ."nnoi L* traced to the
item being manufactur"o,-"s. ir.io.V
power.
Direct costs vary with production
revers
may be fixed over a given producttn whereas fixed overheads
range.
(b) (i) Manufacturing Account for year t3l
.: r uecember 2003
ended
Raw materials $ ---$--
___
- 1 January 2003
10 000
Purchase;
Carriage inwards 250 ooo
, 6000
Final stock
,:1 . 266 000
(20 ooo)
cost of raw materiars used
qs=rJ 246 000
Direct taUouir_rv,,q,u
cost
Prime 16 000
overheads
Factory 262 ooo
rates
- rent and g 800
tight
- fuel and
12 000
- rppairs - plant
-wages 3 000
- oepCiation: prant 'ffi 46_600
Add: w.i.p. (11rc2 3oB 600
;i:;'(3i;;?/03)
goods diBb
Less:
Production cost of complete (4 ooo)
304 600
Market value of completeO gJoJs ^,300 000
Gross loss on manufacture
4 600
[13]
( ii)
ror yea r e nded
Ii'Sg[Jl'j::',^ccount

rSales $
Less sales returns 492 000
(4 000)
lnitial siock 488 000
7 000
Market value of goocls
300 00c
 307 000
Final stocl< fi_g 0aa) (2Bg 000)
Gross profit 199 000
Less expenses
- fuel and light B 000
- administraition salaries 11 000
- rent and rates 4 200
- general admirr expenses '15 000
- salesman's salary I 000 g7_2AA.
Net profit 151 800
Less manufacturing loss (4 600)
Overall net profit 147 200
tel

(c) - Wastage of raw materials

- Expensive factory labour
- Use olfaultyiageing machinery
t3l
(a) This is the quality of produced units arrived at by converting worl<-
in-progress into finished equivalents to enable the units cost to be ,

obtained, e.g. I 000 units which are 60% cornplete = 5 4000

equivalent units
t21
(b) Calculating total cost per r-rnit.

Total Completed Total Unit

Cost Units Equiv. Cost
Units

15 000 10,00

Gohversion costs 11 200

500 x 0,8

Calculation of cost of w.i"p.

D/mat (500 x 10) $5 000

Conversion costs (a00 x 8) $3 200
$B 200
12.1
(ri) Cr:st r:f cornplete units.
1 000 x 11;'18 * $18 q00
t1l
 Process'A
D/mat (zero) 10 0C0 TFrocess B 1B 000
Conversion costs B 000
1B 000
18 000

Process B t3l
Process A 1B 000 Completed 1B 000
units
D/mat (Pinc) 5 000 w.i.p. B 200
Conversion costs 3 200
26 2AO
26 200

(d) By-products have a minor sares varue

whereas waste product .rntu,
actually yield a negative varue it has
to be orsposeJ'of at some
cost

4. (a) single entry i1l

- any system of accounting failing short of doubre
accounting entry
- any system of.accounting which
ignores the two ford
aspect for each transaction.

(b) convertible loan stock t1I

" (i) - funding obtained or secured by an entity
earning a fixed rate
of return for the render, entifling"the
render to exercise an
option to convert the loan into some
or after a specified date. - other
-r' 'e\, form
'v.r' of sec[rrity on

tzl
( ii)

Sales $
Less: cost or sales 750 000
lnitialstock
Purchases 26 40a
627 200
653 600
Final stock
(53 600) (600 000)
Gross profit
'i50 000
l-ess operational costs
(f i2 500)
Net profit
37 500
l8l
 (iii) Balance sheet as at 31 March 2004

' Fixed Assets ,100

000

,
Current Assets

3:"0T.,
Bank
;;33S
54 000
1+e 60o
Less: Creditors (64 000) BS 600
1 85 600

Financed by:
Ordinary share capital 134 1OO
Refained profits 37 500
171 600

Loan 14 ooo
1 85 600

[10]
(c) Matching concept - revenues and costs for a given accounting
period must be set against each other in order to ascertain the

*
t"lhted surplus or deficit. r nt,*ry.

(d) t2l
# Application of matching concept

- sales given arose through relevant costs; i.e. cost%f sales -

hence the elimination of final stock in determining related profit.
- Comparing gross profit against operating costs.
l2l
(e) Advantages of double entry over sing entry:

(i) a complete view of the financial transaction is captured

(ii) double entry lends itself to easy checking of errors via the trial
t-ralance '
(iii) internal checks are possible.
t3j
91 97-02.JO4 answers/gm

i
 ZT1VIBABWE SqgOOL EXAMINATIONS
General Certific:rte
COUh{CIL
of Education Advanced Level

ACCOUNTING
PAPER 3 Case Studf 9197 /3

Friday 18 JTJNE 2004 Morning 2 hours 30 minutes

Additional materials:
Ansrver paper

TIME 2 hours 30 minutes

INSTRUCTIONS TO CANDIDATBS

write your name, centre number and candidate

number in the oPquuJ
spaces provided
./aper/answer booklet. Pruvrur on the answer

Answer all questions. -'| I

a
Write $our answers on the separate answer
paper orolia.o.
'a
If you us* more than one sheet of paper fasten the sheets together.

INFORMATION FOR CANDIDATES

The number otl marks is given in brackets

[ ] at the-end of each question or part question.
All accounting statements are to be presented in good style. workings should be shown.

* Questions 3 and 4(b) must be answered in sentence lbrm,

not in note form, with supporting figures.
You shouldread the lnstructions at tire
top of page 2 before answering thc questions.

You rnay use a calculator.

The businesses in this question paper

arre intended to be fictitious.

'i'his question paqrr:r consist.s

uf tlr.i,fi",l m;;*l tr blank parlr.
Copy,rrght: Z irnbab.v,: Sc hoo i l,r: r.il i rrat i,,, rs r-lor_rrc i I J?()0,1.

'l'u -ri ul'er

f
 2
Each scenario in this case study describes an event
in tlie life of a business and is followed by a
question. Answer alr questions. The
Questions srrould be answered in the order in which they
are set.

Scenario l: Muswe and Chinyanga admit a new pnntner,

Muswe and chinyanga were in partnership in tlre retail

sector for many years. They prepared
their financial statements up to 30 september every y'.ur
on 1 April zo'or ih.y ogr..d to admit
Dehwe as a partner.
i .

fabte 1(a) shows the partnership's list of balances extracted

on 30 Septem6er, 2001. Further
information given in Trtble l$f and the additio-"r
i"i"r**ion will enable you ro prepare the
financial statements.

Table 1(a)

Cr

$
Capital accounts: Muswe
113 40ri
Chinyanga
79 800
Dehwe (Cash introduced)
48 900

Muswe
122A0
Chinyanga
10 300

Muswe 12 600
Chinyanga 8 400
Dehwe 6 300
Gross profit
Freehold premises at cost 357 000
280 000
Fixtures and fittings at cost
84 000
Motor vehicles at cost
105 000
Discounts
7 350 4 200
Provisionfordepreciation 0l/10/2000:
Fixfures and tittings
25 200
l\4otor vehicles
Cash at bank
52 500
l0 050
Stock at 30/09i2001
-3i roo
Rates
21 000
Wages and salaries
75 600
Motor vehicie expelues
37 800
Postage and stationei-y
10.500
Debtors and creditors
2B 400 _1_{_6-00
7-18-U{i 713 i00
 3

Table I (b)
'fhe put,ership
a_greement tor Muswe ancr Crrirryange
1u.:-r',i,Jecr that

(i) intelest is to b.e allowed on partners' capital

rrccourrts at the rat*e of tsw p",
ailntlm while interest on each partner's
trtat drar,vings is charg,e6 at llvr.
(ii) the residue of profits is to rre shared:
Muswe crrinyanga
{; }.
Dehwe was attrrnitted on the folloiving terms:

(0 Goodwill is to be valuecl at $63 000. No gooriwill

accounr is to be maintained
o
the partnership books.
(ii) Dghye to rnaintain capitai irr the sum
]9 of $39 900 after the acljustrnent for
goodwill has heen effecterJ.

(iii) Interest rates on capital and rlrawirrgs

are to be maintained.
+ ?1 \
(lv) Profits and losses are to bc sharedl Musrve
{; Chinyanga f and Dehwe
},

Additional infr:rmation:

i The gross nrr:t1t i11o be apportionecl on

the basis of sales. sales for the h3!{year
30 september 2001 *.r* hbtz 000 out ended
of total sales of $l 020 000.
2 All other revenues altcr, expenses acorue on au
egen trasis througlr.out the year..
3 Depreciation should be providcd for as
fbllows:

Fixtures and fittings 10% per arnum on

cost
h4otor vehick:s 25tl,o per rrrrrru c,n
cost.

Que'stion I
(n) Prepare profit ancr [r:ss anir appi.opr.iati*u
{*rc(-!unts rrrr trre trvri pa|tnersliip1
[27]
(ir) $rrile up the pai'tirer:s' ca1;ir.ll a,ci currerit flccorfirts
i, ilx: leriger.
Ii o]
(c) Piepare tire b;.;la.ce slicci as at 30 septernber.
200x.
i8l
-

Scenario 2: The partners decide to forrn a company.

Muswd, chinyanga and Dehwe decided to transforrn

the partnership into a limited compary,
G-otora (Pvt) Ltd. The-company was formed
on 1 octob,* 2002, on the basis
of the balance sheet of the partnership at 30 september
zooi srro*"'r"'i^[i. z below.

Table 2

$ 5
Fixed assets
Freehold premises at cost 2g0 000
fixtrue^s cost
and fittings at t 12 000

Motor vehicles at cost 145 000

IeSs: Accumulated depreciation l1S 000 30 000
77 2oo
assets
cfrrrent
*Stock zs g9o
Debtors
Eank barance l|ili
.
less: Curnenfiiabilities
62 000

Creditors
workingcapital , ff39 200
z2goo
^ Aoqooa

Capital accounts: Muswe 100 g00 .,',

Chinyanga 93 100
^ Dehwe 39200 233 100
Current accounts:Muswe 37 200
Chinyanga 3;;;;
Dehwe * 30 400 J llelgg
340 000
Loan from Dehwe at 10% per annum
60 000
{00im
 5

Additional inlbrmation:

1' The profit and loss sharing

ratiris had since changed
to 2:l:2 respectivery.
2' The purchase consideration
wari::lir.fi-.a by the issue to the
shares of $ i each and suffici.ni partners of 300 000 ordinary
loan as he had received from
tx a.u."iirr.rio gir" Dehwe the sarue retum on his
the partnership
3' All assets and riabilities werg.taken
over by Gotora (pfi) Ltd,
Question 2

(a) Prepare the reaiisation account

to record the transfer of the
Gotora (pvt) Ltcl. business to

t6l_
G't Prepare the opening balance
sheet of Gotora (pyt) Ltd
as ar I october 2002.
t3l
(c)
:lilTy rhree disadvanrages a partn.r.rrip has compared
COmpany. r---.-* with limited
"^r'r !.a rurrrt
t3l
*
scenario 3: sharehorders intend to form
a pubric company,
The Shareholders of Gotora
(Pvt) Ltd want to change
They consult an accountant the cornpany into a public
on the issue and he uarliro company.
public company has to if,"m that once it is registered,
make publi. ,.rtoin inro.,r,uiio;;;* a
itserf and its operations.
:
Question 3
With reference to a public limited
company:
(a) outline the disclosure requirements
rerating to fixed assets,
(bi tl (}l
what would be the contenrs
of the aqclitor,s report?
t8I

') I 1)7i:i .l.ti)r) I

scenario 4: Gotora (pvt) l,td wants to purchase a rnanufacturing
prant.
Gorora (pvr) Ltc
*T,:j:-.-xy::Ll:: or.roion.
has identifirJ t*o -. ;;nufacturing sector. rhe compa,y,s
ffffji#anaser fp.s or rnr.r,ino, rr*.ry a ,,,is
r;; wrrich rhey musr
The two machines
assets will be provided ll.*mep.ipurchase price of $100 000 000. Depreciation on rhese
1*,. at20%
u** ;il;;ilffi;st
following ut" ih" t*pttttJpn*"irod,?iro* over a period of five years. .rhe
of tf,e tw. machines over the
"u.t, five year period.
Year A. B

$000 $000
I
10 000 16 000
2
15 000 2s 000
3
20 000 35 000
4
,30 000 l0 000
5
5 000 s 000
The opportunity cost of
capital is l5%. The folldwing cliscounr
rates apply:
Yqrr fiaA 30a/o

I 0.870 0.769
2
0,7s6 , 0.592
3
0.658 0.455
4 0.572
5
0.350
0.497 0.269
Question 4

(a) For each of the t*o *u.hines calculate:

(D the accounting rate of rerurn (ARR),

\'-
----' ,I
{iil the
the
period of payback,
net pr.r.nt value (NpV),
I

Iii?
I

(iv) the intemal rate of retum

1l'Rn;. To calculate the II{R useJhe formula on page
il
I

7, I

I
 /-\
IRR = X + lO , p I
o.,,/
\
[rhere X'= the rate yielding a positive
NpV
the differe.ce between the
rate yielding
-o a p.siti,, e Np\r a,d
the rate yielciing a negative
p: the positive NpV
NpV
n= ihe negative NpV
I i(;l
(b) which of the two manufacturing plnnts
should the firm purchase?
Explain firllv
r) tel
 ZIMBABWE scHool ExAMrNArrbrus Gffiuhdffi ilr- '
General Cenificate of Education Advanced Level

MARKING
)
SCHEME

JUNE 2OO4

AGCOU[-{TIh{G $1S7/3
 2

(a) Profii and L.oss Account for the six months ended

31/03/2001 30/09/2001
+b
a'
$$
Gross profit '142 800 214 200
A{el: Othei'revenLle
[Jiscq:unts receLved 2 100 ____alqa
Total revenue 144 900 216 300
L.qSS: Operating expenses:

Discounts allorryecl 3 675 3 675

Depreciation: Fixtr-rres and fittings 4 200 4 200
h/lotor vehicles 13 12s 13 125
Ral:es 10 500 10 500
Wages arrcl salaries 37 800 37 800
IMotor vehicle exilenses 18 900 1B 900
Postagq and stationery 5-e5-p- s)3 450 5 250 93 450
lrlet profit Ij1 450 '122 850 Ir
l}
I l2l
Adcl: lnterest on drawings: c

$ $ $ $ E

Muswe 630 630 c

Chinyanga 42A_ 420
Deinare 1 050 630 1 680
52 500 124 530
r(l
IJ
i=.tgl. lirtcr'est cin ca1:ital:
Muswe I 505 B 955
ChinyanSa 5 985 6 210
Ddrr'.r,,e
{-br;idrre of profits sharerj: -- -_.c. l{_:1qa__-_ 2 es_3__-_ _.lg 159
38 010 106 372
L

trJ
l,/lr.iswe (213 -t 4i7t 25 340 60 784
Chinyanga (1 13 -r 2171 12 670 30 392
Dehwe(117) l 38-0:lo- 15 196 :106 372 l:
 Capital Accounts

oduriii
$$
alances cld
I 000 Balances b/d 1 13 400 79 s00
800 39 900 Bank
48 900
_"*_g*0qg_**p_q00
g3-S'.99"_m gq_egg,
Balance b/d 119 400 82 800 39 900
:)
Current Accounts t7t

M
$ g, lvr

Ings 12 600 B 400

$
6 300 Balances
$$ $

rest
b/d , 12200 10 300
Interest on
wrngs 1 260 840
capital 17 460 12 195 2 993 or 2 992.50
630
?t'lc8S 6
Shares of
101 924 56 317 11 259 profits
15 196
,39_fl!.9
!sl
Balances 101 924 56 317 1,! 259
b/d

Capital Accounts t3l

C D
C D
$ $ $
$
36 000 1B 000 I 000 Balances 113400 79 800
$
I
I
b/d
iBalances 119400 82 BOO 39 900 Bank
hro 48 900
I

Goodwill 42 0a0 21 000

x
- j{.p=000
$gggq {B.gq.p

vluswe and chinlranga get their

nrarks for goodwill provided both entries 171
are present
 (c) - Balance Sheet as at 30_09-2001

Fixed assets
$
Gost Depreciation Net
$ $ $
Freehold premises
280 000 280 000
Fixtures and fittings 84 000 33 60; 50 400
Motor vehicles
__igp- qqq_ _ 78 7so 26 25a
Current assets -* @:
Stock
31 100
Debtors 28 400
Cash at bank 10 050 69 550
Less current liabil ities

Creditors
14 600
Working capital
'-,p4_95Q
Financed by: 4l_saa
Capital acgounts: Muswe 119400
Chinyanga 82 BOO
Dehwe 39 900 242 100
Current accounts: Muswe 101 924
Chinyanga 56 317
Dehwe 11 259 169 500
&_q0.9
- t8l
{a)
Total 45 marks
: Realisation
2002 2002
$
October 1 Freehold premises 280 000 October 1 Creditors
$
Fixtures and fittings 39 200
- 67 20A Gotora Ltd 375 000
Motor vehicles 30 000 Capital: Muswe
Stock 10 000
25 890 Chinyanga 5 000
Debtors 21 840 Dehwe 10 000
Bank 14 270
{lg?30- $ga0g
l'lo aSgregali;i: lf iterls since li:rlger Llalances are transferreci indivicuaiiy io realisation acccrLtflt
t7l
t--,
Ii .i
I iO, ,Batance sheet as at october
ll tober 22AO2

a
$ -$
fixed assets at valuation:
$
I
I ireehold premises 280 q00
I fixtures and fittings 67 200
vehictes
30 000 377 2oo
I i,otor
assets:
I iurrent
II b,".n
Debtors
2si 890
Beo
21I 840
Ill prnr. B4O
14I 270
z7o 62 000

I i-ess current liabilities

I treditors 39 2oo
1r

tl
I

I
UVorking

tinanced
capital

by:
22 BAO_

4!!:_0..Q_Q

I lrrdinary shares of $1 each 300 000

I l0apital r.eserue 25 000
I

ll
ishareholders,equity s25 000
I l8% Debentures
75 000
400 e._
000

t2
The disadvaqtages stated shourd
ould include:
ir
I ,u,l,t,
| **l unrimited tiabirity

disagreements between parl

I I rrtners
difficutty of admitting new pa
I I cannot raise capital so easih
,artnefs
ily
I i
I liloE: Do not accept _ cannot
c sell shpres to the public
lin number of partners limited to 20.

tl
Ii i otal
r?t
L'J ]

[121

l,,l
lr
ll
l1
I

I
 6

3 (a) The balance sheet shows fixed assets at net book value.

The note to the balance sheet relating to fixed assets must show th€ aggregate cost or
- revaluation, where appropriate, atthe beginning of tlre year. Additioni Ouring the year
should be shown at cost. The original cost or.ievaluatilns of assets sold or
othenryise disposed of during the year must be disclosed. lncreasesidecreases
on revaluation must also be disclosed.

The aggregate depreciation must be shown for each type of asset at the beginning.
of the year. ln addition the aggregate depreciation of issets sold or otherwlse
disposed of during the year must be revealed. The depreciation charge for the year
and the aggregate depreciation at the end of the year also need-to be disclosed.
'I
Finally the net book value of each class of fixed asset must be shown
at the erid of
the year.
lJlaximum 110]
(b) The auditors' rdport to the shareholders, not to the directors. They must satisfy
themselver{ that proper accounting records have been maintained and that the
financial statements at the end of the year are based on those records. They have
to state whether in their opinion the financial statements have been prepared in
* accordance with the-law. They have to state whether the income statement gives
a
true and fain view of the profit or loss and whether the balance sheet gives-a true
and fair vrew of the financial position of the company at that date.
Maximum t8I
Total 18 nlarks
{ (a} (i)
C
A B
ARR (Based on initial investment) 160/o 18.2%
OR ARR (Based on average investment) 32% 36.4%
(Accepted either the ARR based on the initial investmerrt or the average
investnrent.
The question does not specify)
14l
A B
(ii) Paybaek 2.875 years 2.35 years
or 2 years 10% rnonflrs 2 years 4 2115 montlis
or 2 yearg 319 days 2 years 126 days
t4l
- (iii) N. P.V. $19 905 000 $31 1 '15 000 t4l
(iv) IRR 23.9% 28.5o/o t4l
Maxinrr"rm 16 rnarks
 ZIMBABWE SCHOOL EXAMINATIONS COUNCIL
General Certificate of Education Advanced Level

ACCOUI.{TING 9L97 tl
PAPER 1 Multiple Choice

Thwsday 28 OCTOBEI{ 2004 Afternoon t hour 15 minutes

materials:
-Additional
Multiple Choice answer sheet
Soft clean eraser
Soft pencil (Upe B or HB is recommended)

TIME I hour 15 minutes

INSTR.UCTIONS TO CANDIDATES

Do not open this booklet until you are told

to do so.

Writ*e your name, Centte number an,l candirJate

number on the answer sheet in the spaceqprovideri
rurless this has already been done fo.r you.
t
Ther.1
3re
forty questions in this paper. Answer all questions. For each question
possible answers, A, B, C and n. ihoose there are four
the one ryou
vs consid
vvlt er conectand recorci y'ur ch.ice in soft
pencil on the sepaxate answer sheet.

Read very carefuily the instructions on thelnswer

sheet.

INFORMATION FOR. CANDIDATES C

Each correct answer will score on. **rk. A nrark will not be deducted for a lwong
;
answer.
Any rough working should be done in this booklet.

Calculators may be used.

This question paper consists of l2 piintetl pages.

Copyright: Zimbabwe School E,ranrinatir-lns Council, N2004.

ar.,r,roa n,ron.,
[Turn r;l c r'
(b) The firm should purchase machine B. Machine B has the higher accounting rate of
return, which meand the return on firm's investment is better.

Machine B also has a shorter pavback period than tnachine A. Thrs means that the firm
recoups its initial investment earlier than if they bought machine A. This quick return
may also enhance company grourth.

The net present value of machin,e B is higher than that of machine B some 11 000 000.
Hence it is clear that machine B must be the firm's choice. The advantage of this
method of capital expenditure appraisal is that it takes into account the time value of
money. A return on an asset of $11 000 000 in terms of today's dolla:.s is a significant
achievement which is a great return on the asset.

The internal rate of return which is the true inierest rate on the investment is higher for
machine B than it is for machine A by some 5 percentage points. On the basiJof the
lRR, therefore, machine B is the obvious choice.
Maximum tgl
)'
/sK
which ot'the fbllor'r'ing items rt'.uld not
normally be classified as aclministration expenses?
''
* i:1ll.t:1,ecror.s sara^,
ID contputer rcpairs and maintenance costs
legal tces tbr rhe purchasc,of a buiiding

The critries to record goods w'ithdraun

by a soie tracler as a present to his daughter
are
Debit Credit
A Drawings Account
B Gifts Account * Purchases Account
Purchases Account
C Purchases Account
Drawings Account
D Purchascs ./rccount
Gifts Account
.)
The fbllowing inlbrmation relates to
chilamba Limited for the year ended 31
December 2()03:

$
Debtors: January 200J
75 000
Decernber 200j
Cash sales 78 000
527 000
Credit sales
71.5 000
Discounts allorved
31 500
Discounts received
42 800
Bad de6is wriuen c.rtJ'
21 000

The provision lor'trati crebts was retained

at 5% of totar debtor_s.

How rnuch cash uias rcceil.ecl lioni debrors cluring

the year?

A $s27 000
B $6s9 500
c sr 136 500
D sl 1e2 500

whar is thc correct treatnient of bad ticbts

recovered in the fiual accounts of a business?

A a credit in the profit and loss account

B a debit in the prolrt and loss account
C a credii in the treicling alccoLtnt
D a debit in the tracling account
 3

5 During 2003, Dr Kondo collected $142 600 from his patients and paid $55 470 in expenses.
The following balances were exkacted from his booki:

I January 2003 31 December 2003

$ $

.
i l'^tr -\ Fees receivable 9 250 t5 927
iA,,h.\ Prepaid fees "2840, 1620
Accrued expenses 3 435 2 108
Prepaid expenses
- 1 917 t 774

Which of the following statements is not correct?

A Aicrued expenses of $2 108 appeared as a current liability in the balance sheet at

31 December 2003. ,

B Fees revenue of $ 150 497 was credited to the profit and loss u".o{*, for the year 2003.
C Frepaid fees of $t 620 appeared as a cument liability in the balance sheet at
' 31 Decernber 2003.
. D Total expenses for 2003 were $56 654.

The following information was extracted from the records for Kushinga enterprises.

Fixed a$sets, at cost:

$u
1 January s60 000
*
31 December J40 000
Provision for depreciation: IJanuary 300 000
*
31 December 270 000

Drring the year:

t Expenditure on new fixed asset$ 520 000

a
Loss on disposal of old assets 100 000
a
Depreciation provided 150 000

What were the proceeds fiom the disposal of fixed assets?

A $60 000
E 5210 000
c $260 000
D $48U 000
 7 The existence of a credit
balance in a debtor's account
might be explained by the
A failure to post from the r;algl
reluas book to the debi,,1.,s account.
B granting of a sales ai."o*,
to the debtor.
c posting of discountr utt"*.a
to the o"uio* control A,ccount
D return of goods uy o a*ltor
after he had paid for thenr"
twice.

ti*: --Tation extracted from a bonrrol accounr

33: at the end of 2003.

Discounts received $
5 62s
aConha with Debtors Conhoi Account 6 000
Bank
Credit purchases I 19 2s0
Balance at 3l December 124 800
2003
t9 380

WIGI was the opening balance

at I January 2003?
A, $13 305
B $13 45s
c $25 4ss
D $36 sss

I failed
to asree bv $q 200. whi;h
*r*:i.ffie of rhe-folrowing could account
for this

A for $4 200 froni chitimbire

*#T" was posred to chitemer.,u
i..o*t in the sares
E An amount of $4 200 paid to Chitima
c A peffv tu-ttt *itrtotuJJJrl2"l00 *u,was creclited. to his purchases
Ledger Account.
D An asser purchase id0-;;;;rffi#il'i*.hur*,
a.uit.;';; Mir.*uaneous Expenses Account.
"iit Account.
10 The credit balance ol the
Creditors Control Accerurt is
individuat balances in the $5 000 less tiran tt. totui of the
il;h;;;_lJag"..
which of thc fo*owing errors
courd ocr;s11n1for this diffbre,ce?
A
leclger account with a debit balance of $5 000 tras
fifi[t"tts been treated as a credit
fi /L credit note to lhe value of
'l-he $2 500 has been omittecr froin a purchases
C total oflcontra enr-ries *guirrt reciger agcount.
tt 'l',ie J.bior acccrurts is cverstatert by
puchu.r;es jr,ur-nsl tras blen $2 :oo.
o:u*r"our by $5 0r)0,

l')l ),r:r;,1
 5

11 Dybe and Mpofu were partners sharing profits in the ratio

3:1. Mpofu decides tr leave the
partnership. His capitat account balance is $20 000 and
his current account has a credit balance
of $200. Partnership goodwill is estimated to be $4 000 and it is not
recorded in the books.

The amount due to Mpofu is

A $19 8_00.
B $20 200.
C $20 800.
D $21 200.

L2 What is the double entry used to record interest

due on partners' drawings?

Debit Credit
A Appropriation Account Current Accounts
ts Curent Accounts Appropriation Account
.DC Drawings Accounts
f)rawings Accounts
Current Accounts
Interest Payable Account

13 Hwuyadzo Hardware had the following inventory

at 31 December 2003.

Purchase Production Expected Sales

Stock price costs incurred selling costs value

$ $ s s
Bolts ,l gl6 I 680 384 4 640
I{uts
R"ivets
7 488 2 184 120 9 $2
1 160 68q ?32 ? 048
10 624 sis4 ru ra32a
\Wrat was the value of stock sho,,yn in the
balance sheet at 31 Decernber 2003?

A $10 624
B $.14 984
c $ts 168
D $15 720

14 Which formula can be used to calculate net prolit?

Closing capital + clrawings * capital adcled * opening

tB capital.
Ciosing capital - driiwings * capital aclciecj
- opening capital.
Opening Lapital + clrawings
!, - capital aclcied .. closing capital.
n Opcning capital * cira,,vings _ capitai added
- clcsing capital.

'rllllii.rlr,,:
 \-)

15 Which of the following pairs of itenrc Eue both on the same side of a Trial Balance?
A Defened. income and deferred expenditue ,
B Discounts received and discounts allowed
Carriage inwards and earriage outwards
ID Returns inwards and returns outwar.ds

l6 when a club recognises subscripticins in arrears,

which accounting concept is it following?

A Accruals
B Consistency
C Going concern
D Prudence

t7 A listed t'*pq{ jordinary share capital consists of 10 rnillion shares

of 50 cents each, issued
at a premium of 20 cents per share. The
shares are currentty being trar1eJ aigo .*nt, each
the Zirnbabwe Stock Exchange. At the end on
of 2003, the compuny declared - irrrr'"rol;;';"
dividend.

what was the totar dividends paid to ordinary shareholders?

A $600 000
"B $840 000
q $1 0s0 000
D $t 200 000
- 'r '

18 The following can be uses of the share premium

account exccpt the , r

A issue of bonus shares

! puy-.rriof ordinary dividends.
ID writing off of preliminary expenses.
writing off of premium on reiemption of shar.es,
':
19 A cornpany with an existing issuecl share capital of 400 000 $l ordinary
- five rights issue at $ 1'20 per share. This shares made a one*for-
*uu lut*. followed by a one-fur-three bonus issue.
what wili be the balance on the shue capital
Account after these transactions?

A $480 000
x] $496 000
C $640 000
D $768 000

9l 9li I I'12{tr:J'1
 7

20 A sole trader'sb_uliness is acquired by a limited company for $150 000 although its net assets
are valued at $175 000. The company will pay $60 000 in cash and issue 72 000 ordinary

. What is the premium per share?

A $0.2s
B $0.60
c $1.08
d D $1.43_
.
21 Posso Ltd is being sued by Brian Mutare, a formeir managing director, who was dismissed on
I ,lanuary 2004. Banda, the company's lawyer, thinks Moti.. will win damages of abcrut $15
million. 1

'',:. Il preparing financial statements for the year ended 31 December 2003, the company sSould
,
;)
'i''
deal with the case as

A a contingent liability which should be.disclosed in a note.

. B a contingent loss'which shoutd be accrued.
C anon-adjusting post balance sheet event.
D an adjustiqg post balanbe sheet event.

22 The goodwill of a business can be estimated by finding the difference

between the value of the
business as a whole and the aggregate value oiits sepirable
net.assets.

pany's financial statements?

A It should be amortised through the profrt and loss account over its useful life.
B It rhould be carried down in-the baiance sheet as u p".**.niffi. "-^* '^^-
C Ii should be eliminated from the accounts immediaiely on acquisition against renerves.
D It should neverbe recorded.

23 which of the foliowing is not part of shareholdem, equity?

A. preference share capital

B ordinary share capital i
C revaluation reserve
D share premium

.r I lirl ;.1:i.r..l
j-1',!, !r r' r.,.:,
: .l r. J'
a

?4 Makombe, a sole trader, maintains a constant gro'ss

profit margin af 20%.

P*-ng that purchases of $90 000 will be rv-'s*vu *r

vv required in order to increase stoclr
.
'*l*::xpects
levels by $10 000. .

What sales revenue is she expecting?

A $96 000
B $100 000
c $108 000
D $112 s00

25 A company's net profit in 2003 was $192 000. Depreciation

for the year was $33 600. other
data were:

At 3l December 2002
- At 31 December 2003

$i $
* Stock
176 000
Debtors 68 000 50 400
Bant< . 26400 :' : 169 600
Creditors s7 600 69 600
ffhat was the net cash flow generated by operating
activities?
A $143 200
B $173 600
c 200
$207 ;
D $210400 :

26 A company's profit after tax w.1$r! oz million.

Its issued share capital comprises
500 000 $1 ordinary shares and 20cr 00d
ilr;ilference shares of $t each.
If the price/eamings ratio is 12, what is the market value
of each ordinary share?
A $171.77
B. $240.00
c $240.48
D $240.96

t)t'it/'.
21 " Which item must be shown separately on the face of the balance shbet?

A Intangible assets
B Work in progress
C Trade debtors
D Taxation

28 During the year ended 31 December 2003, Meys, sold goods worth $416 000. Sales were made
at an evep rate throughout the year, exc'ept for March and October when monthly sales were
50% more than other months.

What were the sales in March?

A s32 000
B $34 667
C $48 000
D $52 000
a
29 Which transacfion will result in an increase in capital employed?

A disposal ofa fixed asset at book value

B increasing the provision for bad debts
C receipt ofcash from a debtor
1) receipt of a long-term loan

30 A company may improve its gearing by

A retaining profit.
B issuing debentures.
C issuing preference shares.
D incurring a bank overdraft.

31 lJndcr marginal costing, the cost of factory rent is

p:'ime cost product cost

A lrlo i\o
BNo Yes
C Yes No
D ., Yes 'Y,CS

t\
i
 10

1'! The following informutinn i, avaiiable frorn the

records of Shingai Manulacturing Ltd.
which absorbs overheads on the basis of direct labour
hours.

Budgeted overhead cost $s00 000

Actual overhead cost $s1s 000
Budgeted direct labour hours 200 000
Actudl direct labour hours 2i0 000
Based on this information, overheacls would be

A over-absorbedby $10 000.

B over-absorbed by $15 000.
C under-absorbed by $10 000.
D under-absorbed by $15 000.

The total budgeted Expenditure for l7 000 units was

$58 500, and $59 875 for I7 500 units.

Fixed costs are estimated to be

A $1 1 7s0.
.E $24 000.
C $s7 12s.
D $s8 84s.

34 How can the break-even point of a business be lowered?

A by increasing its fixed costs

B by increasing its budgeted sales
C by ilecreasing its unitselling prices
D by decreasing its unit variable costs

A standard cost is

A always greater than actual cost.

B a target cost fbr the period ahead,
C a cost that rvill produce maximum protit.
D the aveiage cost of production in the last period.
 11

,.
3si The standard material content of product
X is 19Ig
500 units of producr X were **ufr.tur.J tqq 00 per kg. During september,
u,ing tO 'u OOO tg which had a c'st value
of$59 295 "i*uiEriufs
\\,'hat were the material price and usage
variances?

Material price Material usage

'yariance
varianae
I

$705 adverse $3 000.adverse

$7"05 favoqrabl[.*,," S$ry{l,adverse
$1 005 adversb' $300 favourable
$ I 005 favourabie $300 adverse

:'t t
product with a marginai cost of
:;:;1:" iiffi."tf:::1*T;;..,nu,, $3 ancr a seriing price

What levei o f sales r,vill produce

a profit
r- of $ iS OOnf
*
;.--
A. $i20 000 ., .

B $40 000
(-- $100000
D $120 000

Marginal costing gives a dif{brent profit

to absorption costing when

$ ail production costs are fixed.

t all production costs u.. u*iuUt".
opening and closing stoct. are different.
:n thcre are rrot opening or closing
;;.il:'

3r'I
f,y"*::1:l
16 i'0, I.llC i'llr\rl.r l,yt I B% and the firm,s cosr of capitat is 10%.
r,Viii be"r Using a discount rate of

A zcro. \
Ii iregarive.
(l positive.
n) equ;r to tire IR_R..

1,)1.:
 12

Choto Limited uses 6kg of raw materials to manufacture a single product. The following
information was taken from its records.

Budget Actual
2003 2002

Sales 10 000 units 8 000 units

Closing stocks:
\
Rawrnaterials kg
4 500 500 kg -

. Finished goods 1 000,units 3 00irunits

What are the pudgeted purchases of raw materials for 2003?

A 44000kg
B 52000kg
t,

e 60 000 kg 'ii

D 68 000kg
t
, :'

9rt?/r Nt00.1
 ACCOUilITING

- SUBJECT 9197

Paper 1
November 2004

1. D
2,A
3. B :--F Debtors ControlAcc6unt

.4. A
5. D -F totalexpenses for 2003 were $S4 286

6. A .+ Cost of fixed assets disposed was $340 000 whilst

accumulated depreciation at date of disposal was
$1g0 000.
7. t)

.B' C
,
I
9.D

10. A
11. D
12. B
13' B *F Take the lower figure between the cost arrcl NRV
, stock item. (lAS2).
of each

'14. A

15' C *-& Carriage inwarcj.s. is a purchasing expense whilst carriage

outwards is a seiling expense henie both have a debit
balance.
16. A

17. A -+ t2yox(lo obo ooox 0,5)

18. B , --> As per Companies Act

19. C
20. A zz ooo ordinary shares of $1 each should yierd $90 000.

21. B SSAP18, IAS

22. D -> IAS 38

2i. A
24. B -> Let opening stock be .x
Closing Stock = x+1-0 000
;. C.A.S = r+90 000-(r*10 000)
Then solve xdnd calculate C.O.S; mark up and gross
profit.
a
25. C -} FRSI, IAST

26. B -> Calculate EpS.

Then Market Value

= PE ratio
EF'S

.i.

27. A ,

28' -+ rares for the other 10 months except March

fl;:r".ff
.'. 10x+Z(ffix)= Totat Sates

Then solve for x.

150-
...,, xxabove = March sales
100
29' D -tr First two options will decrease C/E. Third option has no
effect.

31. A --> Fixed costs are period costs under marginal costing.

32. A -> Calculate predetermined OAR.

Apply this rate on Actual houis.

Deduct Actual cost from the above result.

33. A -F Change in units = S00

Resultant change in eipenditure $1 375. Calculate the

variable cost per unit.

Total costs - Variable costs = Fixed costs.

"34. D

ts. B

AP \
36. B -tr Material price = 10 000r'd
-5,9295J
\
= $ 705 Favorable.

'(\
Material usage = ol gitoo-,0fr0
'll \/ |

= $3 000 Adverse

3t. c --F sares rever = Itgg_.!$tpp[

Contribution
38. C stock fi-gures will have different values under both
methocrs.

39. A

40. B Purchases = Quantity by production +

quantity required by cloSing stock - quantity already
available. nq-l:--
Candidate Name

ZIMBABWE SCIIOOL EXAMINATIONS COUNCIL

General Certilicate of Education Advanced Level

ACCOT]NTING 9197 t2
PAPER 2 Stuctured Questions I
I

Monday. 8 NOVEMBER 2004 A rternoon I hour 30 minutes

Candidates ansryer on the question paper
Additional materials:
Supplementary answer paper

TIME I hour 30 minutes

INSTRUCTIONS TO CAFIDIDATES
Write your name, Cenhe number and candidate number in the
spaces at the tqp of this page.
Ahswer all questions.
Write your answers in flte sPapes provided on the question paper.
If you require extra paper,
ask the supervisor for supplementary answer paper.

INFORMATION FOR CANDIDATES

The number of marks is given in brackets
[ ] at the end ofeach question or part question.
You may use a calculator.

FOR EXAMINER'S USE

This question paper consists of I6 printed pages.

Copyright: Zimbabwe Schcol F,xaminations Council. N200,1

oz$"isIc ].i2004
['I'urn ovr:r'
 2

(a) State three types of errors For

which affect tial balance agreement
example in each case. and grve one Examiner's
Use

t6I
a
(b) Mangena Ltd took out.a trial
barance on 31 March 2001

$:::ri::"ff1;,Hn*ff
d;"iH;;ilffi which failed to agree,
illt,I,.n,,Account_was

Subsequent investi gations

uncovered the following
erors:
(i) Discounts allowed of $430
had been entered in the
Account- Discounts Received

(ii) A creditor for $350 had been

omittedfrorthe schedure of creditors, the
total of which had been inctuae;
tr,h; t iar uarun.* ur;;. creditors.
(iii) A billTor insurance anrounting
to $670 was discovered in
a f,ihg kay.
(iv)
harr been brought down
*#$il3i}i$ff1:*,,.,u,"r
,:.
on rhe wrons

(v) The purchase of furnitirle roi

$ 10 000 hacr bee* entered
Depreciarion on r"*i,*. is in the purchases
carculated at i0% on rhe year
ffinHt. end

L i (r 7/l i.j.,.,,..t
 3

(l) Draft tu.io:f4 enEies required to correct the above

errors. Narratives
For
Examiner's
are not reqfiired. Use

t7l

9 t97l? t'12c04

li'f ui": r,i -'r

 4
(ii) Write up the Suspense Account.
For
Examiner's
Use

qr) 'state two alternative

methods of accounting for an unexplained
bn the suspense Account if final balar,.ee
accounts are tq be prepared?

q
197,,2 I'i2{,(Jd
 5
2 (a) Distinguish between the skaight line and reducing balance methods of For
calculating depreciation of fixed assets. Examiner's
Use

&) The{ollowing is &e draft balance sheet of Chidembo Ltd as ar 30 September

4K
,-,.T(
\ Fixed Assets
.B.V
Freehold land and buildings
Plant end equiprnent
Motor vehicles

Current Assets
Stock 420
Trade debtors 230
Prepayments 1,0
Cash at bank
Less Current liabilities
Trade creditors 190
Accruals 3[J
Nct current assets
500
960
I inz:;rced hy
(-trdinary Shares of $ I each
450
Ileserves
Share Premium Accurrrrt 100
Capital Redcmption l(usrrrc 300
Piofit and Loss Account. i"l 0 __ii_a
g_60.

9l9J/l:.lr)(r.1

J1[ur.n
 After the above draft balance sheet had been For
complete{, the foilowing Examiner's
discoveries were made: Use

(t) The revaluation of freehord rand and buildings

ut szso 000 on
28 September 2002 had not been recorded. "

" (ii) Plant and equipment had been depreciated

at fiyion the reducins . ,,J
balance basis when the suaight rine meth;J;h;;rd
h*;ffi;..i. +-

(iii) Goods
ttl selling price of $15 000 had been sent on a sale
or return
basis to P' Shoko. These were recora*o uu
u rale in the accounts. Shoko
had not indicated an intention to keep tfr. gooa.

Note: The normal mark-up c,n cost is25%.

(iv) A bonus issue ofone ordinary share for every three

ordinary shares
currentry held had hot been recorded.. After
ihe bonusi**irr.'L*p*v
shoirli *ui"tuit **i**'n*xibility iri the use
of their resources.
(v) No enkies had been made to record a dividend
of l0% declared on the
o revised sharehording at frre end of the y"*.
ih.r. has.been-nointerim
dividend.
a
Prepare the balance sheet of chidembo
the above matters have been taken into
Ltd; at 30 september 2002 after
account.

9i97,1l.j2r_,.r,j
 7

For
Examiner's
Usr:

tl'
1-

[20]
919712 ti20r)4
 8

(c) Distinguish between capital rgserves For

and revenue reserves. Ilxarniner's
lJse

ogi [(r]

(a) State five provisions that are

norrhatly found in a partnership
Agre.rr,*t.

_ __ Isl

9 i i; r,2 l.,l(1,),i
 9

For
(b) Rudo, Chipo and Tsitsi were in partnershrp as beaufy consultants, sharing profits Examin,,lr':
Use
and losses in the ratio 2 :2 : I respectively, The following balances, among
others, were exEacted from theirbooks on 31 December ZAAZ.

Capital , Current
Account Account
$ .,$
Rudo 40 000 2 400 Cr
Chipo 30 000 600 Dr
Tsitsi 20 000 1 800 Cr

On I January 2003 Chipo retired from the partnership and Ngoni was admiued
as
3 partner.

Goodwill ,nu, Julu..l at $30 000. The foliowing were the agreed valuations of
some of their assets on the retirement of Chipo:

6 Book Value Agreed yalue

* Freehold premises 000
$100 $l1g 000
Stock $12 000 $10 000
Plant and equipment $140 000 $l4t 000
A provision for bad and doubtful debts of 5%lof <lebtors, n ho stood at $40 000
on that day, was to be created.

chipo was paid the whole amount due to her orr retiremenr.

Additional inlj.rnnation:

l. Ngoni was to contribute $28 000 in capir*r, incluciing her share of

gooduill
'). Prt,lllr. r')'.1 losses ar t tt-r bc. :.,lr,rr,:d cqualll .

3. tr,r i,r(';,."'', ir to bc allovrcil tln llx.:J..., [,,,,,r.:i.-1..qrrsrnl ballrnces at l0% pcr

;1+).* g1', i

'1. Irllurt]t ri:tr,: h,-'e hlr,.lt:,.1 ,,rr.lr;ltvings at 59/o

i,er annunt. lhe drawings for
thc..e, .,r..rc: I(rr,l,, \l(, {)r1{), Iritsi $ll UUi) arrLl Ngoni $g 0(i0.

5. lturlo i:; lrr be r:r".{il;t<l '.rirfr .r ';;llar.,, of !i.] ()fX) per annum.
.j'}rc
{1 tt,-'1 f , ,iit !rr1 i* ne !\- pirll r)ri'rr}irir lirr t}ic year crrdeti J I Decemtrcr
:'oi)l \^.i,,11)..].r:,t ,, . /,.,..
/tri ::,-ilirl
i-i :ilr i;','r-'r
 10
(i) Prepare the partners' capitar accounts
in corumnar
I January 2003, bringing down the new Uutanc"s fbrm, on For
*;;;;pr"priate. Examiner's
Use

(_

(ii) Prepare the profit and Loss

Appropr:iation Account of the new
parrnership for the year ende,l
ir 6_..*ilffi;;.
 11

For
Exarniner's
Use

(iii) Prepare the partners' curent accounts,

in columnar form for t'e same
year.
a

t6l
r

t2
For
(a) State three differences between absorption costing and marginal (variable) Examiner's
costing. Use

(b) Bindu Limited is a manufacturing company. The company provided the

following information for the two yeari ended 30 Juni zooi ana 2003.

2002 2003
Units Units
Sales 4 200 4 400
Production 4 500 4 800:

$ $\
Selting price per unit :
47 51
Direct materials per unit t0 t2
Direct labour per unit ' l5 18
Variable production overhead per unit 7 9
Fixedcosts: Manufacturing 36 000 43 200
Adminisrative and rnarketing ll 400 13 680

There were no opening stocks of finishecl goocls in the year ended 30 June 2A02.
Stocks are valued on a first in, first out basis.

, I97/2 Nti)0.;
 13

For
' (i) calculate the closing.stock for each year using both the absorption Examiner's
costing method and the marginal costing *.ttiod. . Use

tel

'r 1 1712 i.jl,,'1,1

 t4
- For
(ir) Prepare comparative profit statements for the two years using absorption Examiner's
costing. Use
 15

For
(iii) Prepare comparative profit statements for the two years using marginal Examiner's
costing. Use

Is]

9 I 97i7 i'illfl(.r,1
 For
Examiner's
Use

9 19712 1.1200.1
 ZIMtsABWH SGHOOL EXAMIF,IATIONS C$I"J NCIK
General certificate pf Education i\dvancecr Lever

POS$IBLE ANSWERS

ASCOUNTING 9X S7/?

NffiVffirud!ffiffim 2mffi,s

I
 ta) -failure to complete double entry
-using two different figures to comprete
croubre entry
-making tvyo entries on one side oi the ledger
-transferring wrong barances from the redg;to
the triar barance
-transferring correct ledger balance to ihJwrong
sicle of the trial
balance
)
I6l
(b) The journal ,

1. Discouni alloweci 430

Discount Received 430
Suspense
2. Suspense 350
860
3. lnsurance 670
lnsurance Cornpany
4. Rates
480
670

5. Fur-niture
10 000
480
Purchases
10 0c0
Profit and Loss
prov for depreciaiion 1 000
1 000
- furniture
.l7l
'(ii) se Account

Balance bld qq0 Disc. Altowed

Creditors balance 430
350 Disc. Received 430
Rates . 4BO
_1*350 1 35Q
(iii) write it off in the profit an Loss Account or t5l
transfer it to the
Balance sheet as,a cu.rent asset (Debit
-\ nui*""ior e current
l-.iability (credit balancer.
t2l

L. (a) $TRAIGHT LINE METI{OD l20l

REDUCING BALAhiCF
METI-IOD
- charges the same arnount - the anrount of clepiecirriion
of depreciation every year decreases every year
- simpler to use - not as sinrple use
- seems to assr:nre llre - attenrpts to matcl-i ilre cost
asset earns the sante of ciepreciation to ti-re ai,nount
amotrni of r.oven'"tlf cvcrv of revenr_re earrie,J Lry il-re
) t:clt ^.--
..1\\tJi ^J,
 (conirnued)

- the tofal eost of using the tries to even out the total cost
asset, i,e. dgpreciation, of using the asset, i:e.
repairs and maintenance, depreciation, repairs and
increases every year as maintenance over its useful
the asset grows. Life.
t6I
(b) Workings
(i) Land and buildings 50 000
Prov for deprec - land and buildings 10 000
Asset Revaluation R.eserve 60 000

(ii) P/L 10 000

prov for deprec
- prant and equip 10 000

(iii) Stock tz boo

P/L 3 000
P. Shoko - debtors 15 000

(iv) Capital redemption reserve 1 50 000

Bonus lssue 50 000
, 1

1 50 000
Ordinary Share Capital '150 000
(v) P/L 60 000
Proposed dividends 60 000
t-

c
i9
$
Ordinary share capital 600 000

Share premium 1 00 000

Asset revaluation reserve 60 000
Capital redemption reserve 1 50 000
Profit and loss 37 00Q 347 000
947 000
Represented by:
Fixed Assets
Land and buildings 250 000
Plant and equipment 300 000
Less. Acc. Depreciatir:n (130 000) 170 000
Motor vehicles 1 B0 000
Less. Acc Depreciation GI_AM] 90 000 510 000
 (continued)

Current assets
Stock 432 000
21 5 000
Prepayments '10 000
Bank 60 000 717 000

Less: Current Liabiities

Creditors 1 90 000
Accruals 30 000
Proposed dividencls qLaqa (280 000) 437'000
- 947 000
t29l
(c) Revenue Reserves Capital Reserves
- created voluntarily out of - created under the provisions
trading profit by debiting p/L of the Companies Act and by
Appropriation tuC and case law
crediting reserve accounts
- can be distributecl as cash - cannot be distributed as cash
dividends dividends
.used
for purposes for wrrich - uses specified by raw
they were created or at flre
discretion of the directors

3. (a) The amount of capitar to be provided t6l

'-' by each partner.
The profitiloss sharing ratio 'i
The interest rate if any on capitar, drawings. sararies,
if any,
payable tr: partners
The interest rate on partners, loans*to thefirm
Arrangements on ilre retirement/admissiori of a partner/setflement
of disputes.

(b) ital Accounts l5l

Ngoni Rudo Chipo Tsitsi Ngoni
Balance 40 000 30 000 20 0i0
Cirrrent b/d
Bank .
4 000 28 000
Bairk 10 000 Goodwill 2 000 12000
Gcodvyill lQnnn 1B 000 adj.
adl Revaluati 6 000 6 00n
Balanco cn

28 000
Baiance
b/cl
19 000 18 000

t8l
 Alternatives
(.; Accounts
I Rudo Chipo Tsitsi Ngoni ll I Rudo-T Cr,rpo- Tsitsi
Current 600 aoooo 3oooo 20 000
Ngoni
Bank :
I

I 41 400 LB:fl""oro I I 28 0Lr0

Goodwilt I roooo I
10 000 10ooo. rzooo rzooo
adi i ll ff:.*',, I I
6 000
Batance I as ooo 1S 000 18000 ll Revaluation loooo loooo 3 000
58 000 48 000 29 000 28 000 ll I sa ooo I aB 0oo 23 000 ?B 000
Balance b/d I 48 000 19 000 1B 000

OR if goodwill is not written off i

Ca Accountrs
Rudo Chipo Tsitsi Ngoni Rudo Chipo Tsitsi Ngoni
ent 600 Balance b/d 40 000 30 000 20 000
Bank
Bank 47 400 Goodwill 28 000
Balance c/d 58 000 29 000 28 000 Revaluation 12 000 12000 6 000
6 000 6 000 3 000
5B 48 000 29 000 28 000 58 000 48 000 29 000 000

(ii) Profit and Loss Approp. A/C for the year ended
31 December 2003
profit
Net 72700
Add int. on
e Drawings Rudo B0O
r Tsitsi 600
Ngoni 400 1 qgO
Less int. on
Capitat Rudo 4 800
Tsitsi 1 900 ,

Ngoni 1 800
Salary Rudo E 000 (11_500)
63 000
Shar"e of proflts Rudo (1/3 21 000 )
Tsitsi (1/3) 21 000
, Ngoni (1/3) 21 000 rcr 000)
t4l
OR
Net pr-ofit TZZ0O
Add int. on
Drawings Rudo B0O
Tsitsi 600
Nlgoni 4q0 1 800

Less int. on
il 5oo
Capital * Rudo 5g00
 (continued)
Tsiti;i 2 900
Ngoni' 2 800
Salary Rudc 3 000
ru!_qq)
60 000
share of profits Rudo (U3)' 20 000
(
Tsitsi (1/3 ) 20 009
Ngoni (li3 ) ?fl 0oo re0._008)

Current Accounts
Rr,rdo Tsitsi Ngoni I Rr-rdo
Drawings
lnt. on drawings
16 000 12 000 B 000 Balanceb/cl lZ+oo
800 600 400 lnt. on capitat | + aoo
Balance c/d
salary I s ooo
14 400 12 '100 14 400 share of profits I zt ooo
31 200 700 22 BO0 3't 200
Balance b/d 14 ,100

OR t6l
Current Accounts
Rudo Tsitsi Ngoni
Drawings 't6 000 Rudr-r
12 000 B 000 Balance b/d
lnt. on drawings 2 400
800 600 400 lnt on capital
Balance c/d 5 80C
salary
14 400 Share of profits

Balance b/d

(a)
Absorption costing Marginal Costihg
- Fixed production overheads are - Excludes fixed rnanufa_
included in finibhed goods stock cturing overheads frorn stock
valuation
- Deternrines gross margin by - Deterrnines contributiorr l;ly
subtracting cost from siles'
deductirrg all variable
costs from sales
- Calculates net profit by excluding - Calculates net profit by
all administrative and marketing subtrasting all fixecl costs
overheads regardless of ilreir from contribution
behavior
regardless of their nature
- ls good for strategic decision - ls good for tactical decisiorr
mal<ing
making
- Good for product pricing - Not so good for procjuct pricing
I() I
(b) Absorption costing per unit 2002 2003
$ $
Direct material 10 12
Direct labour 15 1B
Variahle production overhead 7 o
Fixed production overheacl 8: I
40 48
x300i x700
1.2 000 33 600
l3l i4l
Margir[al Costing per unit 2002 2003

Direct material
$ -$
10 12
Direct labour 4q
tv 1B
Variable production overh6acl *..7 _ .9
32x300 39x700
I 600 27 300
t1l t1l
(c) (i) Absorption Costing

Profit Statement for year ended

30June2002 30June2003
$ $ $
Sales 1 97 400 224 40O
Less cost of sales
0pening stock 12 000
D/material 45 000 57 60C)
D/labour 67 500 86 400
Var. olheads 31 500 43 200
Fixed o/heads 36.000 43 e00
1 B0 000 242 400
LessFin.Stock (12 000) (168 000) (33 600) (208 800)
Gross margin 29 400 '15 600
Less admin & (11 400) (13 680)
marketing
Net profil 1B 00Q 1 920
tsl
 ( ii) Marginal costing

$ $
Sales 197 "aoo 22.4 400
Less var costs
0pening stock I 600
D/materials 45 000 57 600
D/labour 67 500 86 400
Var. o/heads 31 500 43 200
Var. cost of goods 1 44 000 1 96 800
available
Less closing stock (9 600) (134 400) (27 300) (1 69 500)
Contribution 63 000 54 900
Less fixed stock:
Manufacturing 36 000 43 200
Admin & marketing 11 400 (47 400) '13 680 5_q_qeq
Net profit/loss 15600 fl_g8q)
t5l
91 97-02.N04 ANSWERS/grn

a
 --1
- E,}lVtrLBAtsWE SCHOOL TIXAIVIINATIONS COUN{]{L .t
Certificate of trlducrtion Advanced Lcvel
Generatr

/.q"CCOUNTING 9 L97/3
PAPEI{ 3 Case Study

N'Iontlay 15 NOVEMIIER 2004 h,torning 2 hours 30 rninute:i

Acld itional materials;

' ,\nsvlcr paper
t
:[].h{n 2 horrrs ;r0 rninutes L,.
I N $'[IdU{:T[CINS TO CANDIDATNS
,

Write Y(11:r rlame, Centre number ancl candicJate nurnber in the spaces provicled ori tlis
eflswer
pai:,.: ria nsrver booklet.
c

Ans',v*.:r ali quer;tigris.

a
s/rlte yilur finswers o, the separate an$wer
rxrper provicled.

Ii }''ou use nl'.rre than one :sheet of paper tasten the shects together.

INIIORPIA'I'ION F'OII CANDIDATBS :

'['he nunrbei:
o['mat!<s i.s given in biackets [ ] at the end of each questiril or part q,."lr:stio*.
.

'lrli acct:urrling statentents are to tre presented in good style. Workings shoulcl be shrrri.tr.

Qiresiions ?,3(t) and 3(c) mu.tt be &ilsw<]rcd in s,:nrcncc-form, rir;i in note lbrn, rvith sr.ipporting
i ii_grrr es.

l'ou shor-rlclrcael thc lnst.nu:ticns at the rop of pag4e 2 bef'ore answerinlr ihe questions.

You iri;i,,, irse a ,:alculiibr.

The brrsirrcsrcri ir tiris qucstion piiljci. rr,rc iukrnilsrl t3 be [ictitioLis

 2
Instructions

stucly on pages 2 to 6 describes a series of events

lhe 91se in the life of sa L,usiness.
L lrdrrrvJr' The qutrsllUl
r lts questi,ns
should be answered in the order in which they are
set. .
I Scenurio 1

'I'he partnership
of chipo and Nyasha has been iu the business c,i'nranu.Iacturing
desks for many years. on 30 september 2001 the
readi*g
fbllowing trial tralance was extr*cted
frorn the partnership books.

Capital accounts, 1 October 2000: Chipo 25() 00(l

Nyasha ?00 000
Curent accounts, I October 20t10: Chipo
20 000
Drawings:
Nyastra I 000
Chipo l8 000
Nynsha 16 00q
Premises at cost
r Provision for depreciation
200 000
Ilant and equipment at cost 12 000
- Pi.ovision for depreciation
360 000
Motor vehicles at cost 108 000
240 000
Provision for depreciatibn
Debtors and creditors 101 760
45 600 70 000
Rarv ma.terial purchases
560 000
Sales of finished goods
1 40$ ri00
Direct lahour
320 L)00
Stocks at I October 2000:
Raw materials
60 000
Work in progress
48 000
Finistred goods (100 pr;,r,
.66 000
Production or,,erheads: Fixed
64 000
Variable 52 0r)0
h:direct rriaterials
Selling and arJminist-rative expenses
2 t 60[)
38 400
Balance at Lran-k
3216{)
Pror.ision for Coubtful debts
Fiovisiorr for uru.eaii sec1 profrl I 000
(, Oil(J
1La1.es
irtsuranc'.:s
160u0 i

'r ooo I
-*_.L*---_-_-__
2 1.?i:=i.(,11= :=_1. a=r=t i..i Olt
 3

The iollorving matters are to be taken into account when preparing the financial statementr:

(i) The provision for doubtful debts is t6 be adjusted to 2 ,t% of thedebtors at 30

Septenrber, 2001

(ii) All stocks are vaiued on a FIFO basis. Raw material stocks at 30 September 2001
were $44 000 while woik in'progress was valued at $36 000. Output is hansferreo
fi'om the factory to the warehouse at manufacturing cost plus 1Q%. During the year
1 600 desks were manufactured and 1 559 desks were sold.
F

- (iii) There was a prepayment of $1 000 and an accrual of $3 000 on rates and insurances
accounts respectively at 30 September 2001. These costs are shared 80% to the
. factory and 20% to general administration.

(i') Depreciation is to be provided on fixed assets at the following annual rates:

Pretirises on cost
2%o
Plant and equipment 10%o on cost
' Motor veh.icles - za% on the reducing balance basis
Depreciation on premises is to be shared 60%, to the factoq4 40% to general
adrninistration
Motor vehicles are used exch;sively by the sales departnent

(v) Tlre partnership agreement provided for the .following: '

(i) interest on capital ancl current accounts is to be credited or chargecl at lryyo
per annum
(2) partnership salaries: Chipo $20 000; Nyasha $lg 000.
(3) , the residue of profits is to be shared equally.

Clucstion I

Pre llarc

(a) thcpartnershipmanufacturing, trading and profit and loss and appropriation

lrccount:; for tire yeeu ended 30 September 2001.
[20]
(b) thc pafine rs' current acoourts in the iedger 1br the same year,
tsl
(c) r hillan,-'c shci:t as at -10 Septernher 20f)l
t7)
 Scenario 2

At a recently held business seminar the partners heard of IAS

I which
deals with fir.nclanre*tal
'accounting principles' Among them arJ going concein, consistency, accruals
an<J. materiality.

Question 2

(a) Iixplain clearly the meaning of each of these four accclunting

concepts or
principles.
I l2l
(b) Explain how each of these four'principles has been
of the financial statements of chipo and Nyashu. -"---
applied in the preparatiorr
tB.I
Sr:enario 3
,.,

At the end of 2002 chipo and Nyasha decide to find out how they are perforrning
to the general performan.e of the whote inclustry. 'l'he relative
following are stunmaries of the
income statement for 2002 and the balance sheei
at trr..no of 2002.

Income statement for the year ended 30 septernrter

2002.

r Sales (all on credit) $

Llss cost of sales 1 s00 000

e00 009
Gross profit
Less expenses 600 000
Net profit .{59_aag
lt0_0@
 5

Balance Sheet as at 30 September 2002

$
IiIgd aBsEIp at net book value 500 000
egrrenllssstr
Stocks: Raw rnaterials 6s 000
Work in progress 70 000
Finished goods 75 000
Dchtors 100 000
Bank balance 20 000 330 000

I.ess Cuqgnt Jiabilities

Creditors 72 0A0
Accr.ued expenses
Wortrring caBital
30!q 76 000
25{-AAg
L5{_000
Financed
_ .-+++ hv
Capital accounts: Chipo 2s0 000
Nyasha ?.00 000 450 000
Current accounts: Chipo 160 000
Nyasha 144 000 304 000
754 000

.'\veia-ge ratios for the whole industry have been

calculated as follor,vs:

(i) gross profit percentage 50%

(ii) net profit percentage . t5%

(iii) return on capital employed (ROCE) using
fixed assets plus working capital 2s',th

(iv) debtors' collection periocl 20 days

(v) current ratio 2:l

(vi) acid tcsr ratirr 0.9:1

(vii.1 r.itilisation of fixecl assets

4 times
(.!ucstion 3

(al Caiculal"e th'.. sanre ratir:s fr-,r tiie partncrship t7]

(b) Comnrent on thc perfbnnan,:c ol'tlie parlncrship, in as {-ar as profitabiliq,
anii li,luidiiy {.rr{r.:oncei.nt:d,. reiati,ue i, uverag*-indLrstry ratios,
ti0]
, i. j l:,i,ti,: rrir,l i:<l:ilj1 iIt-1tr ]i1ti1ali,.,r::. .rl- .,r-.{l{lltn.qiilr; pi1[]615 li:., a bl:; jS iOr
.i..,.. ,.r1,. i;t.; t-,,,1,,,:.:!,1-,ilr..r,j't li,.t., ltl] iifiil;
1
ii;,
Scenariu ,l

n:flffi1tffi,::X':triJ:'*;H $.tH:&'ture
conseqaentrv ar rhe beginning or2003
thcy

Tlre standard cost card for a read.ing desk

i,cludecl trre firiowing:
Dired materials 2m3 of timber at $150/mj
Dirt:ct labour $300
4| hours at g80 pir hour

?Xt:::i*r:"1,0,3,ii,;ffi :5',if .H:'r_o_lo,*,.:':L_r.ictu*d

Aetual expenditure was as follorvs:
5 750mr timber at $g51 000
10 500 direct labour hours at
$892 500

QuCstion 4

Calculate:

(a) (i) the total direct material codt variance

. (ii) the direct nraterialprice vadance

tiii) the direct material usage

-r,ariance i6l
(b) (i) the total direct labour cost variance

(ii) the direct labotu rate variatce

(iii) the direct labour efficiencl. variance.

t6l
(c) (i) state tlvo fbctors i.vhich wourd
contribute to each or.the ftrlrorvirrg:

A favourabie rnaterial price variance,

An adverse labour rate variance,

A favourable iabour efficiency variance,
rRt
l.'-l
(ir) State five benefits <llusing a standartl
cost systern.
t5l
-'4
UIMtsABWE SCI{OOL f;XAMINATiO[qS CCIIJNCI[-.
General Certificate of Education Advanceci Level

MAR.KIhilG SffiHHIVIE

NOVETUBER.2OO4

ACCSUISTIhIffi s,,1 s7/3

t
 2

(a) Manufacturing Trading and Profit and Loss Account for the-year cnded 30
September 2001.
'6
o
Stock of raw nraterials 01/'10/2000 60 000
Add: Purchases 560
*-o2b 000
orio
Less stock of raw materials 30/09/2001 44 000
Cost of raw"materials consumecl - 576 boo
Direct labour 320 000
Prime cost 896 000

Factory overhead expenses

lndirect materials 21 600

Premises 2 400
Plant and equipment 36 000
Production overheads: Fixed 64 000
Varia$le 52 000
Rates 12 000
insurance '
g 600 197 600
Ci-rrrent manufactr-rring costs 1 093 000
Add:Work in progress 01/10/2000 48,000
-----
1 141 600
Less: Work in progress 30/09/2001 36 000
Production cost of goods completed 1 105 600
Manufacturing profit c/d 110 560
Market value of goods manufactured c/d 12to ji,s)Il
Sales 1 406 600
Less: cost of sales
Stock of finished goods 01/10/2000 66 000
Add Market value of goodb manufactured b/d I ?1q :l(io
Cost of goods available for sale 1 282 160
Less Stock of finished goods 30/09/2001 1*2sa-455
168 145
-__.....1 l1_ Q_l-s_ "-
Gross profit
Depreciation : Premises 1 600
Motor vehicles 2.7 648
Rates 3 000
lnsurances 2 400
lncrease in-p+ovision for doubtful debts 't40
Selling and administrati're expenses 38 4"00 / J I('ri1
Net profit on trading 165 267
Add manufacturing profit b/d 110 560
Le-ls-: lncreasc in provision for unrealiseci profit 4 JOi.) 106 19i5
Totai net prcfil ?71 4i)2
Continued
 $ $,
Add lnterest on current account: Nyasha
800
272 262
,
Less lnterest on current account: Chipo 2 000
lnterest on capital: Chipo 25 000
Nyasha 20 000 47 000
Salaries: Chipo
-*:20 "
000-
Nyasha 1B 000 38 000 85 000
Residue or" profits shared:
187 262
Chipo 93 631
Nyasha 93 631 197 262

Maximum 20 marks

(b) CURRENT ACCOUNTS

Chipo Nyasha Chipo Nyasha

$$ $$
b/d
Balance B 000 Balance b/d 20 000
lnterest on lnterest on
a/c
current g 00 current a/c
2 000
Drawings 000
18 16 000 Salaries 20 000 18 000
Balances c/d 142 631
lnterest on capital 25 000 20 000
160 631
106 831 Shares of profits 93 631 93 631
131 631
_loQ 631 131_6_31
::*_:E=,:.&-.s_-i-.
Balances b/d 142631 106 831

Maximum 5 marks

-
 4

(c) Balance Sheet as at 30 Septernber 2001

$$ $
Fixed assets Cost Depreciation Net
Premises
PIarrt and equipment
200 000 16 000 184 000
Motor vehicles
360 000 144 000 216 000
_ *-_ ?1_0" 00q*- 12e 408 110 592
-_ --_g!! !!g-__*28e ab8 " 510 592
Current assets
Stocks: Raw materials
Finislied goods 44 000
:
114 015
Less provision for r_inrealised profit
_ Work in progress - --_- 10,;)"Qg '103 650

Debtors 36 000
Less provision for doubtful clebts 45.600
Prepayments 1 140 44 460
Balance at bank 1 000

Less current liabilifies 261 870

Creditors
Accruals 70 000
Working capital _*q_q.qq_ 73 000
1BB ti70
*-6ee
46r-
Financed by
Capital accounts: Chipo
Nyasha 250 000
200 000 450 000
Currentaccounts: Chipo
142 631
Nyasira
.--"----6eb
aoZ
Maximum 7 nrarkC
(a) Goins concern - Also known as c-ontinuity
""Jffi ;;#:*-
of erctivity
is assumed to have an indefinite rife ,nr*r,
.i*u,
otlrerwise. Accr:rciingly fixecl assets ,r" ,ho*" evicrence shows
in the accounts at cost
less aggregate deprec:iation, stock at cost
or net rearisabre varue,
wirichever is the lower etc. lf eviclence exists
that flre operations of the
business are cotning to an encl then each
asset has to be shown ai its
d is posa r var r-r e/cxit va ri.: e/N RV/recove
rab ts amou nt

i3l

Ccnsis;teilc1, -. -l-lris sii-,:lrl,7 rnoans tirat :,1cco,-inting

accr:ttniii r!J tt,::iir-:rj rntrsl l;e ilppliccl i.t s;r-rbsccll
poIicies fctIie;,.vi:rj il r;rIi_.
rerrt i:r:cr:r.rirtin:'1 pciil,-il. ;l
 .5

change catl oniy be made for compelling reasons, i.e. if it gives a trur:r arrrj
fairer view of profitability and financial position. 'l-lris tacilitates comparison
of the results of the business from one period to the next.
- t3l
Accruals or matching concept means that in the calculation of profits
and losses we match the revenues earned with the exfenses irrcurrerj for
the same period, not cash receipts or payrnents. lt is possirrre rhal
payments for expenses are-made in a period diflerent fronr that in wlrich
they are incurred.
t3l
Materiality * there are items which are not bought for resale but for use
and would therefore qualify for treatment as fixed assets, e.g. paper clips
ancl ashtrays. Btlt the Cost of sr.rch items is insignificant and would
norrnally be expdnsed in the period of purchase. Material items woulcl br:
maintained as fixecl assets and their use accounted for as depreciation.
"-"
i.r i
lnsignificant losses should not have resources usecl to investigate tlrem.
as tlris would bB uneconomic. Figures can be rounded off to the nearest
1000 dollars in big firms without material misstatement of profitabilit.v ancl
financial position.

suh total X2 *rrfrt

(b) Goirrg concern: Fixed assets have beern shown in the balance sheet at
cost less aggregate depreciation. All stocks have been shown at cost in
the financial statements.
l2I
Consistency: Premises have been depreciated on cost as has been p,lant
and equipment. The firm continues to rlepreciate rnotor vehicles on the
reducing balance basis. Factory output continues to be tr;lnsferred to the
warehouse at cost plus '10% for factory profit. Stocks lrave been
'ralur:d
on a FIFO basis.

Accruals: An accrual was brought into the relevant period,

tt'
f.! !

asi was il'*

prepayment. The cost of using fixed assets in the form of ck:precratiorr
has been rnatched against tlre incorne generatecj by tliose assets. I--rrcn
the calculation of cost of sales, which inclurdecl opening stock ancJ
excludes closing stock, is observing this principle.
tzl
Mlateriality - Fixed assets have been maintainecl as such ancl their use
writren of as depreciation. All Consumables were written off in the financial
stertenrents and were not capitalised.
t23
Subtotal li mar.!,rs
Total 20 nrari'i:;
 gross Profit
3 (a) (i) x 100
sales

600 000
x 1oo
I soo ooo

40%

net profit
(ii) x 1oo
sales

1 50 000
Tsoooooxloo
10%

(iii) - net Profit x 1oo

captralemployed

1 s0 000
Ts4oooxloo
19.9%, 19.89 or 2.0%

('v) q9!r9l:-x
, -Credit Sales 1oo
I
I
100 000
x 100
1 500 000

I
24.3 days or 2{33 days
i
(v) assets: current liabilities
Current
:
330000 : 76 000
4.3 : 1or
4 :.. .l or
4.34 1 .:

The current ratio can be expressed as 434ok,4 times, 4.34

tirne s, ,r, + ,,,1
4.34 since 4 divided by 1 is 4
 i

current liabilities
120000 : 76 000
' 1.6 . 1

1.58 : 1
But not z 1

The acid test can also be expresseci as 15g%, 1 .58 times or 1 .58
1,6,

(v!i) -Utilization of fixed assets =

sales
fixed assets

1 500 000
500 000

E 3 times

{ nrark for each correct ratio = I marks

(b) The partnership appears to fare worse relative to the industry
as a whole
as far as profitability-and liquiclity are concerned. While
the fiross anJ net
profit percentages of the whole inclustry are s0%
and 15% rJspe;r-ly il;
partnership could only manage 40% and 10%. There
appears to be
insufficiency in the contror system of.the partnership
ft,*
a return on capitalemployed, which is lower by s.1% cornpared
partnership ha,s
to the.
indr-rstry average. This also suggests less efficien"f
in utiiising resou;ces
The current ratio of the whole industry iq within acceptable
linrits as is th*
acid test ratio. ln contrast the ratios of.th* partnersh'ip are
too high at
4.3: 1 and 1.G:1 respectively. This suggests mismonrg;r"nr-oi'r'"rnrr.u,,
by the firm. ln summary, the partners'riip has a lot oiwork
to clo befort: ii
can catch up with the rest of the industr:y in lerms of profitability
and
liquidity.

lVlaximum '!0 nnarks.

(b) The accuracy of accounting ratios depencls on the quarity
of the
inforrnation from which they are calculated

The effect of window dressing.

Ratios can only be usecl to compare like wiflr like.

Ratios tend to ignore the time factor in businesses wlrcse levels

of
operations fluctuate with the seasons.
 s

Based on historical figures, with no adjustment for inflation.

Ratios only show the results of carrying on business. ;Ihey do 6ot ilcjiczll:
the causes of poor perl'crmance.
(.) t"
Further investigation is required.

Ratios do not show qualitative aspects of business, e.g. quality of

management, labour relations, etc.

Any 3 well explained limitations will score fuil marks = 6 marl<s.

.'

l'otal 23 rnarku.
(a) (i) rotaldirectil?l{iffst variance

= 2 S00 x2x150 - 851 000

= [i3,'33*t51
ooo
?

. (ii) Direct material price variance

il = (sP _ AP) A0
=- (1S0 _ 148) 5750
= $11500F Z

, irr) Direct material usage variancg

t
= (SO_AO) Sp ,

(5 000 _ 5750) 150

= $112 500 A z

(b (i) rorar
'[iilJ*Ti:iJJiriance
= 2500x4.5x80-Bg2S00
7500
, .,L'L' F
I_

(ii) Direct variance

ff;Tiffi
= _
(80 85) 10 500
$52 500 A 2

:''"'*irJh?fifllT""
 '9
. (c) (i) Favour.able niaterial price vai-lanc _e_

Purchasing in large quantities ane getting quant.ity cliscolints

Purchasing inferior materials
Glut of materials on the m.arket, etc

An adverse material usaqe varianq5i

lnferior quality leading to greater u,astage
use of unsuitable equiprnent learJirrg to greater lvastaS;e
Theft of material that goes Lrnnoticed
Deliberate waste of materials, etc

Ari adyelse labour rate variancg

f)vertime premiums
Employing a higher grade of labour than requirrlrj
comprornises with labour unions ais the firm cannot set ii.r o,,r,,,rr
rates unilaterally, etc*

AIaysu rable absusfiigc n qu_yauuqe_

I
---_.--
tJsing high quallty materials
High grade or quality of labour
High morale among workers, etc
Accept reasonabG an=*"rs

(2x4=Smarks)
(ii) is a yardstick against which costs can be nreasured
Ihgl*
settiqg standards entails determining the best rnatei-ials ancl
production methocls leading to savings of money
A target of efficiency is set for emprolees niotivatir:n
Cost consciousness is stimulated
-
Control is simplified.
It is easier to trace costs to procructsicost centr+:s
Budgets are easier to prepare
It enables management by exception
It is an essential aspect of responsibilily zrccountin.r;
(Accept other valid points.)

1 mark each up to a rnaximum of 5 points S marks

=

/slK Totai 25 rnai'ics

llrrll / 0L)Ci_rMElJ I li,NlAii KINC.S,lHE i\,,1E-9197-03 N04