Angels International

College Canal campus, Faisalabad

Ordinary Level
Candidate Name

PRINCIPLES OF ACCOUNTS 7110/02

Paper 02 Mock exam 2012

2 hours

Candidates answer on the Question Paper.

No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

Write your candidate name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for any diagrams or graphs.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.

Answer all questions.

You may use a calculator.

Where layouts are to be completed, you may not need all the lines for your answer.
The businesses mentioned in this Question Paper are fictitious.

At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.

For Examiner’s Use

1

Total

This document consists of 13 printed pages, 6 lined pages and 1 blank page.
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Angels International College Mock Exam 2012

1 Adam is in business buying and selling goods on credit. The following details relate to the
For
account of his customer Eve for the month of July 2011. Examiner’s
Use
$
July 1 Eve owed Adam 200
July 7 Adam sent an invoice to Eve 150
July 16 Adam sent a credit note to Eve 8
July 31 Eve sent Adam a cheque 195
July 31 Adam allowed Eve cash discount 5

REQUIRED

(a) Prepare the account of Eve in the books of Adam. Bring down the balance on
1 August 2011.

Adam
Eve account

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(b) Name the book of prime entry in which Adam would record the transaction of
16 July 2011.

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..................................................................................................................................... [1]

The balances on Adam’ books at 31 July 2011 were as follows:

$
Capital ?
Drawings 8 000
Office furniture 5 000
Provision for depreciation on office furniture 3 200
Inventory 4 150
Bank overdraft 250
Trade payables 2 950
Sundry expenses 10 600
Purchases 32 400
Provision for doubtful debts 350
Revenue (sales) 53 750
Trade receivables 6 250
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Angels International College Mock Exam 2012

REQUIRED
For
Examiner’s
(c) Prepare the trial balance for Adam at 31 July 2011, including the balance on the Use
capital account.

Adam
Trial Balance at 31 July 2011
Dr Cr
$ $

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..................................................................................................................................... [6]

(d) State the item in the trial balance which would include the balance on Eve’s account.

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(e) State two differences between a trial balance and a balance sheet.

1 .......................................................................................................................................

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2 .......................................................................................................................................

..................................................................................................................................... [4]
[Total: 18]

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Angels International College Mock Exam 2012

2 Boris prepared a trial balance on 31 December 2011. The trial balance failed to agree
For
and a suspense account was opened. Examiner’s
Use
It was discovered that all of the errors had been made in one of the trade receivable
accounts, Unilever Ltd.

Details of the account for December 2011 were as follows:

Unilever Ltd account

Date Description Dr Cr Balance

2011 $ $ $
1 December Balance 1 650 Dr
10 December Sales 460 2 110 Dr
13 December Sales returns 60 2 050 Dr
23 December Bank 1 617 433 Dr
23 December Discount 33 466 Dr

The following errors were found:

1 On 10 December goods, list price $800, less 20% trade discount, were sold
to Unilever Ltd. The transaction was correctly recorded in the sales journal.

2 On 20 December a credit sale of goods, $1200, to Unilever Ltd, was correctly

entered in the sales journal, but was posted to the account of M. Hardware Ltd.

3 On 23 December Unilever Ltd paid the balance on 1 December, less 2% cash

discount. The transaction was correctly recorded in the cash book.

REQUIRED

(a) Name the document sent to Unilever Ltd to record the transaction of
13 December 2011.

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..................................................................................................................................... [1]

(b) Name the type of error made on 20 December 2011.

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..................................................................................................................................... [1]

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Angels International College Mock Exam 2012

(c) Prepare the journal entries to correct the errors 1 to 3 above. Narratives are not
For
required. Examiner’s
Use
Journal
Dr Cr
$ $

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(d) Prepare the suspense account, clearly showing the original difference on the trial
balance.

Suspense account

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..................................................................................................................................... [4]

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Angels International College Mock Exam 2012

(e) Calculate the correct balance owed by Unilever Ltd to Boris on 31 December.
For
Examiner’s
.......................................................................................................................................... Use

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(f) Boris uses Information and Communications Technology (ICT) book-keeping software
to prepare her accounts.

State two benefits to Boris from using ICT book-keeping software.

1 .......................................................................................................................................

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2 .......................................................................................................................................

..................................................................................................................................... [4]

[Total: 20]

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Angels International College Mock Exam 2012

3 The treasurer of the Chelsea Sports Club did not keep full accounting records. The following
For
information was available at 31 December 2011: Examiner’s
Use
Cash Book (summary)
$ $
Balance b/d 1 January 2011 105 Purchase of refreshments 19 000
Subscription received: Rent and rates 1 200
– for the year ended 31 Dec 2010 150 Operating expenses 3 750
– for the year ended 31 Dec 2011 3 200 Purchase of equipment 900
– for the year ended 31 Dec 2012 310
Sales of refreshments 25 000 Balance c/d 31 December 2011 3 915
28 765 28 765

Additional information:

1 Balances

1 January 2011 31 December 2011

$ $
Inventory of refreshments 2 200 700
Operating expenses 100 Prepaid 250 Accrued
Equipment (net book value) 3 200 2 700
Subscriptions in advance 175 310
Subscriptions in arrears 270 90

2 Subscriptions not collected for the year ended 31 December 2010 are to be
considered as irrecoverable on 31 December 2011.

REQUIRED

(a) Calculate the accumulated fund at 1 January 2011.

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Angels International College Mock Exam 2012

(b) Prepare the refreshments trading account for the year ended 31 December 2011.
For
Examiner’s
Chelsea Sports Club Use
Refreshments Trading Account for the year ended 31 December 2011.

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(c) Prepare the income and expenditure account for the year ended 31 December 2011.

Chelsea Sports Club

Income and Expenditure Account for the year ended 31 December 2011.

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Angels International College Mock Exam 2012

(d) (i) State the section of Chelsea Sports Club’s balance sheet on 31 December 2011
For
in which subscriptions paid in advance will appear. Give a reason for your answer. Examiner’s
Use
Section: ....................................................................................................................

Reason: ....................................................................................................................

............................................................................................................................. [2]

(ii) State the section of Chelsea Sports Club’s balance sheet on 31 December 2011
in which purchase of equipment will appear. Give a reason for your answer.

Section: ....................................................................................................................

Reason: ....................................................................................................................

............................................................................................................................. [2]

[Total: 24]

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Angels International College Mock Exam 2012

4 The following information relates to the business of Dora, a wholesaler.

For
Examiner’s
$ Use
Revenue (sales) for year ended 30 June 2011 200 000
Inventory 1 July 2010 18 000

At 30 June 2011:
Inventory 36 000
Trade receivables 24 000
Bank overdraft 10 000
Trade payables 40 000

Mark up 25%
Net profit / sales 6%

REQUIRED

(a) Calculate for the year ended 30 June 2011:

(i) Purchases

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(ii) Expenses

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Angels International College Mock Exam 2012

(b) Calculate at the 30 June 2011:

(i) Working capital ratio (current ratio), correct to one decimal place

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(ii) Quick ratio (acid test), correct to one decimal place.

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(c) Explain why the quick ratio (acid test) is a more accurate measure of the
liquidity of a business than the working capital ratio (current ratio).

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(d) State three actions that Dora could take to improve his bank balance.

1 .......................................................................................................................................

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[Total: 18]

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Angels International College Mock Exam 2012

5 Tom and Jerry are in partnership sharing profits and losses in the ratio 2:1. Interest is Examiner’s
Use
allowed on capital at the rate of 4% per annum. Jerry receives a salary of $12 000 per
annum.

The following balances were extracted from the books on 31 March 2011:

$
Capital accounts
Tom 150 000
Jerry 100 000
Current accounts
Tom 15 000 Cr
Jerry 3 500 Dr
Drawings
Tom 15 000
Jerry 15 000
Revenue (sales) 365 000
Inventory at 1 April 2010 53 500
Purchases 173 000
Returns inwards 9 200
Returns outwards 5 500
Carriage 16 500
Administration expenses 25 750
Advertising 23 480
Wages and salaries 66 700
Land and buildings 170 000
Motor vehicles (cost) 75 000
Fixtures and fittings (cost) 50 000
Provisions for depreciation
Motor vehicles 25 000
Fixtures and fittings 24 000
Sundry expenses 10 250
Loan interest paid 2 000
8% Loan repayable 31 March 2018 50 000
Trade receivables 62 500
Provision for doubtful debts 2 000
Trade payables 30 500
Bank 4 380 Cr

Additional information:

1 Inventory at 31 March 2011, $51 450.

2 Carriage is to be apportioned 30% to the collection of purchases and 70% to the

delivery of goods to customers.

3 At 31 March 2011:
Administration expenses, $630, were prepaid.
Wages and salaries, $2700, were accrued.

4 Depreciation is to be charged on:

Motor vehicles at the rate of 20% per annum using the diminishing (reducing)
balance method.
Fixtures and fittings at the rate of 15% on cost using the straight-line method.
5
Tr

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Angels International College Mock Exam 2012

ade receivables include a debt of $2500 which is considered irrecoverable. For

Examiner’s
6 The provision for doubtful debts is to be maintained at 4% of trade receivables. Use

REQUIRED

(a) Prepare the income statement and appropriation account of Tom and Jerry for the
year ended 31 March 2011. [23]

(b) Prepare the balance sheet of Tom and Jerry at 31 March 2011.
The current accounts details may be included within the balance sheet or in account
format outside the balance sheet. [17]

[Total: 40]

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Angels International College Mock Exam 2012

Answer Question 5 on the following pages.

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 Angels International College Mock Exam 2012

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Angels International College Mock Exam 2012

BLANK PAGE

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