AC191 Autumn 2011 FINAL

HETAC / LJMU
BA (Hons) in Accounting and Finance

BA (Hons) in Business Studies
BA (Hons) in Marketing
AUTUMN 2011 EXAMINATIONS
Module Code: AC191

Module Description: Accounting
Examiner: Mr. Neil Dunne
Ms. Georgina Skehan
Internal Moderator: Ms. Margaret O’Keeffe
External Examiner:
Date: to be confirmed
Time: to be confirmed
INSTRUCTIONS TO CANDIDATES
Time allowed is 2 hours
Answer:
Section A: Answer question 1, 30 marks
Section B: Answer question 2, 35 marks
Section C: Answer any ONE question, 35 marks
Total 100 marks
Section A
This question is compulsory and must be answered
(Answer sheets are provided for this question at the back of the exam paper)
Question 1
Section A consists of 10 multiple-choice questions, each question has 4 possible answers.

There is ONLY ONE correct answer in each part. Each correct answer is worth 3 marks.
i. A credit note is issued by you:
A. When you return goods to a supplier
B. When goods are returned to you
C. To assist in credit control
D. To order goods from a supplier
ii. A trial balance is extracted from:
A. The statement of financial position
B. The Income statement
C. The purchases day books
D. The ledger accounts
iii. A business has a bank overdraft of €350 and €50 cash in hand at the end of the
accounting period. What balances will be brought down at the start of the next
accounting period?
A. Dr Bank Cr Cash
B. Cr Bank Dr Cash
C. Dr Bank Dr Cash
D. Cr Bank Cr Cash
iv. Which of the following is a current liability?
A. Trade receivables
B. Inventory
C. Bank overdraft
D. Cash in hand
v. The double entry for receipt of cash from trade receivables is:
A. Debit sales Credit trade receivables
B. Debit trade receivables Credit cash
C. Debit cash Credit sales
D. Debit cash Credit trade receivables
vi. When a proprietor takes cash from the business till for his/her personal use the double
entry is:
A. DR Drawings CR cash
B. DR cash CR bank
C. DR cash CR Drawings
D. DR bank CR cash
vii. When goods are taken out of the business for personal use by the owner of the
business, these will be recorded as:
A. Drawings
B. An expense
C. Inventory
D. A liability
viii. Capital expenditure is
A. The extra capital paid in by the proprietor
B. The costs of running the business on a day-to-day basis
C. Money spent on buying non-current assets or adding value to them
D. Money spent on selling non-current assets
ix. Which of the following is a current asset?

A. Bank deposit account
B. Buildings
C. Equipment
D. Bank overdraft
x. When a new motor vehicle is purchased by cheque what is the double entry?
A. Dr Motor vehicle a/c Cr Bank
B. Dr purchases Cr Bank
C. Dr Bank Cr Inventory
D. Dr Bank Cr Purchases
Section B
This question is compulsory and must be answered
Question 2
The following trial balance has been taken from the books of Wisteria Ltd for the year ended
31st December 2010.
Dr Cr
€ €
Ordinary share capital 460,000

Buildings (cost €900,000) 720,000
Machinery (cost €75,000) 60,000
Retained profits 31 December 2009 140,800
Opening inventory 1 January 2010 85,500
Purchases 555,500
Carriage in 1,500
Sales 1,000,500
Returns in 7,500
General expenses 35,000
Directors remuneration 140,000
Wages and salaries 135,000
Rent 9,000
Insurance 4,000
Electricity 6,500
Advertising 4,500
Motor expenses 2,500
Bad debts 2,000
Accounts receivable 90,300
Accounts payable 80,500
Allowance for bad debts 5,000
Bank 98,000
7% Debentures 300,000
Ordinary dividend paid 10,000
Debenture interest paid 20,000
________ ________
1,986,800 1,986,800
________ ________
The following additional information is also available at 31st December 2010:
1. Closing inventory is valued at €95,500.
2. As at 31st December 2010, there were audit fees outstanding of €6,000.
3. Tax on profits of €30,000 is to be provided for.
4. The allowance for bad debts should be adjusted to 7% of accounts receivable.
5. Depreciation is to be provided as follows:
a. Buildings at 2% straight line.
b. Machinery at 10% straight line.
6. A provision for any outstanding debenture interest should be made.
Required
A. Prepare an Income Statement for the year ended 31st December 2010. 20 marks
B. Prepare a Statement of Financial Position as at 31st December 2010 15 marks
Total: 35 marks
Section C
Answer any ONE question
Question 3
The following information has been extracted from the books of R. Smith Ltd for the year
ended 31 December 2010.
Income statement of R Smith Ltd

2010
€ €
Sales 900,000
Less cost of goods sold
Opening stock 40,000
Purchases 470,000
Less Closing stock (43,000) 467,000
Gross Profit 433,000
Less Expenses
Administration 90,000
Selling & Distribution 60,000 150,000
Net Profit 283,000
Statement of Financial Position of R Smith Ltd

2010
€ €
Non-Current Assets 655,000
Current Assets
Stock 43,000
Debtors 90,000
Bank 40,000
173,000
Total Assets 828,000
Equity and liabilities

Ordinary Share Capital 395,000
Retained profits 283,000
678,000
Current Liabilities
Creditors 150,000
Total Equity and Liabilities 828,000

Requirement:
Calculate the following ratios for the year ended 31/12/2010 and briefly comment on the
results obtained.
A. Current Ratio
B. Acid Test Ratio
C. Gross Profit Margin
D. Net Profit Margin
E. Stock Turnover
F. Debtor Days
G. Creditor Days (Total 35 Marks)
Question 4
In the books of Supermarket Ltd, show the journal entries necessary to record the following
items which occurred in 2010:
 15 Jan Bought a car on credit from VW Garage for €35,000.
 15 Feb Bought equipment on credit from White Ltd for €10,000.
 25 Mar The owner takes goods costing €90 out of the business
without paying for them.
 5 May Some of the equipment bought from White Ltd worth

€500 is found to be unsuitable and is returned to them for full
allowance.
 16 July Some time ago Supermarket Ltd paid an insurance bill thinking
that it was all in respect of the business. Having now discover that
€150 was in fact for the private house.
 20 Aug The owner introduces €20,000 of his own savings into the
business.
 28 Sep A debt owning to us by R Ryan (a customer) of €200 is written

off as a bad debt.
 10 Oct Supermarket Ltd is owed €450 by T Smith. He is declared

bankrupt and Supermarket Ltd receive €120 if full settlement of the
debt.
 15 Nov Cash drawings by owner €230

 6 Dec Bought machinery on credit from Red Ltd for €1,600.
(Total 35 Marks)
Answer Sheet
Question 1
Question Answer
10

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HETAC / LJMU

BA (Hons) in Accounting and Finance

AUTUMN 2011 EXAMINATIONS

Module Code: AC191

Section A consists of 10 multiple-choice questions, each question has 4 possible answers.

i. A credit note is issued by you:

A. When you return goods to a supplier

B. When goods are returned to you

C. To assist in credit control

D. To order goods from a supplier

ii. A trial balance is extracted from:

A. The statement of financial position

B. The Income statement

C. The purchases day books

D. The ledger accounts

A. Debit sales Credit trade receivables

B. Debit trade receivables Credit cash

C. Debit cash Credit sales

D. Debit cash Credit trade receivables

A. The extra capital paid in by the proprietor

B. The costs of running the business on a day-to-day basis

C. Money spent on buying non-current assets or adding value to them

D. Money spent on selling non-current assets

ix. Which of the following is a current asset?

A. Dr Motor vehicle a/c Cr Bank

Ordinary share capital 460,000

Income statement of R Smith Ltd

Statement of Financial Position of R Smith Ltd

Non-Current Assets 655,000

Equity and liabilities

Total Equity and Liabilities 828,000

 15 Jan Bought a car on credit from VW Garage for €35,000.

 15 Feb Bought equipment on credit from White Ltd for €10,000.

 5 May Some of the equipment bought from White Ltd worth

 28 Sep A debt owning to us by R Ryan (a customer) of €200 is written

 10 Oct Supermarket Ltd is owed €450 by T Smith. He is declared

 15 Nov Cash drawings by owner €230

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