STRICTLY CONFIDENTIAL
B0003/BA212/W1003 - April 2008 - QP
PRINCIPLES OF ACCOUNTING
Section A - Compulsory
Question 1
The following balances were extracted from the books of Nguyen Mai as at 31 December
2006:
Trial balance as at 31 December 2006
Debit Credit
$ $
Capital Account - Nguyen Mai 288,000
Property 226,800
Provision for depreciation - Property 16,920
Office Equipment 31,500
Provision for depreciation - Office equipment 10,080
Purchases 515,700
Sales 606,924
Stock at 1st January 2006 34,020
Debtors 41,580
Creditors 33,570
Vans 40,680
Provision for depreciation – Vans 8,280
Carriage inwards 342
Office expenses 10,044
Rent and rates 10,800
Provision for bad debts 900
Bad debts 2,268
Commission received 540
Wages and Salaries 23,220
Insurance 5,940
Drawings - Nguyen Mai 37,800
Bank 26,280
Loan from Tam 63,000
Interest on loan 4,500
Discount allowed 720
Motor expenses 1,620
Bank fixed deposit 14,400
1,028,214 1,028,214
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Additional Information:
i) Stock as at 31 December 2006 48,240
ii) Salaries outstanding at 31 December 2,340
iii) The Provision for bad debts is to be maintained at 630
iv) The vans are to be depreciated using the straight-line method at the rate of 25%
v) Depreciation is to be provided on the cost of office equipment at 20%
vi) Depreciation on property is to be provided at the rate of 2%
vii) Rent prepaid for the following year amounted to 2,700
Required:
(a) Prepare a Trading, Profit and loss account for the year ended 31st December 2006.
[18 marks]
(b) Calculate the working capital as at 31st December 2006. [8 marks]
Note: detail working must be shown
(c) Explain the term ‘working capital’. [6 marks]
[Total 32 marks]
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Section B
Answer ANY FOUR questions
Question 2
(a) Explain the principle of stock valuation. [4 marks]
(b) Explain the importance of correct valuation of stock. [4 marks]
The opening stock of Eagle Hardware and the related data on purchases and sales for the
month are as follows:
Date Units Unit Cost Price
1-Feb Balance 2,000 $4.00
9-Feb Purchase 2,400 $4.40
15-Feb Sales 1,600
16-Feb Purchase 1,600 $5.00
23-Feb Sales 3,000
25-Feb Purchase 4,000 $5.40
28-Feb Sales 2,000
Required:
(c) Determine the closing stock value at 31 December using the perpetual inventory
system under the weighted average costing method. [9 marks]
[Total 17 marks]
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Question 3
Huong Enterprise is a wholesaler of office supplies. An aging of the company' s debtors on
31st December 2006 and a historical analysis of the percentage of un-collectible debts in each
age category are as follows:
Period debts owing Debts outstanding % doubtful debts
$
Not past due 90,000 2%
Less than 30 days 4,800 5%
31 days to 60 days 3,720 10%
61 days to 90 days 2,280 20%
91 days to 180 days 1,440 30%
181 days to 365 days 960 50%
Over 365 days 360 80%
Required:
(a) Calculate the amount of Provision for doubtful debts as at 31st December 2006.
Note: detail workings must be shown. [4 marks]
Assume that the provision for doubtful debts as at 1st January 2006 was $720.
(b) Show the adjustment in the Provision for doubtful debts account as at 31st December
2006. [4 marks]
(c) Show an extract of the Profit and loss account for the year ended 31st December 2006.
[2 marks]
(d) Show an extract of the balance sheet as at 31 December 2006. [3 marks]
(e) Why is it necessary to provide for provision for doubtful debts? [4 marks]
[Total 17 marks]
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Question 4
(a) Explain the Imprest system. [6 marks]
The following is a summary of the petty cash transactions of San Contractor for May 2006.
Date Transactions $
1-May Received from cashier as petty cash float 500.00
2-May Postages 28.80
3-May Travelling 19.20
4-May Cleaning 24.00
7-May Petrol 35.20
8-May Travelling 40.00
9-May Stationery 27.20
11-May Cleaning 28.80
14-May Postages 8.00
15-May Travelling 12.80
18-May Stationery 14.40
18-May Cleaning 36.80
20-May Postages 20.80
24-May repair for van 68.80
26-May Petrol 28.80
27-May Cleaning 33.60
29-May Postages 8.00
30-May Petrol 22.40
Required:
(b) Enter the above transactions in the Petty cash book and balance the petty cash book at
the end of the month.
Note: use the following headings for the analysis columns
Cleaning
Motor expenses
Postages
Stationery
Travelling
[11 marks]
[Total 17 marks]
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Question 5
Wildcat Trading has the following accounts in its ledger as at 1st February 2007:
$
Bank 24,300
Salaries 1,260 Accrued
Sales 270,000
Capital 234,000
Equipment 45,000
Drawings 27,000
The following transactions occurred during the month:
Date $
5-Feb Paid salaries of staff by cheque 4,160
12-Feb Bought a equipment by cheque 5,120
22-Feb Refund for cash sales 800
25-Feb The owner deposit his soccer winnings 14,080
28-Feb Withdrew cash from bank for personal holiday 2,400
Required:
Record the above transactions in the accounts. You need only to open those accounts as
shown at the beginning of the question. [17 marks]
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Question 6
Identify the accounting concepts and principles that form the basis for each accounting
practice given below.
1) This principle discourages over reporting of assets and revenue.
2) This is an assumption that the life of a business can be artificially divided into periods of
time for reporting purposes.
3) A business uses an appropriate common denominator for measuring and reporting its
business activities.
4) An entity’s business assets, liabilities, revenues and expenses are separate from the
personal assets, liabilities, revenues and expenses of its owner.
5) Recording of significant amounts must strictly be in accordance with accounting
principles and concepts.
6) Fixed assets must be recorded at cost irrespective of its market value.
7) Recording a sale when an exchange of goods has taken place.
8) All cost and expenses that are related to the revenue must be recorded within the same
accounting period.
9) A business must use the same accounting methods and policies from one period to
another.
Note: Write your answer as shown in the example given below.
Item Description Answer
1 This principle discourages over reporting of assets Conservatism
and revenue
[17 marks]
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