2

Part A Multiple Choice

Record the answers in the space immediately following this section

1 The profit for the year is calculated as

A the amount of money taken out of the business by the owner during the year
B the cash in the business bank account
C the difference between sales and cost of sales
D sales revenue less cost of sales and expenses

2 Accrued expenses are considered as

A Asset B Liability
C Gain D Income

3 Which one of the following will appear on the credit side of a trial balance?

A interest paid B motor vehicles at cost

C rent paid D sales

4 Fatima bought goods from Miriam at a total list price of $2000. Miriam allows her customers
a trade discount of 10% and cash discount of 2%.
What was the amount of the invoice?

A $1 760 B $1 764 C $1 800 D $1 960

5 List the order in which the documents are used when goods are purchased on credit?

A cheque, invoice, order B cheque, order, invoice

C order, invoice, cheque D invoice, order, cheque

6 Cash discount is defined as?

A an allowance given to a customer for paying in cash

B an allowance given to a customer for prompt payment
C a deduction from the list price of goods bought by a customer
D a deduction from the list price of goods for bulk buying by a customer

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7 Which would appear on a bank statement?

A cheques issued but not yet presented B cheques paid but not yet credited

C dishonoured cheques D lost cheques

8 Moni’s bank statement showed a credit balance of $ 600 on 31 August 2016. Later the
following were found:
Bank charges not included in the cash book $ 20.
Unpresented cheques not included in the bank statement $ 150.
Find the value of Cash book as it would appear in Moni’s Statement of Financial position
A $450 current asset
B $580 current asset
C $620 current liability
D $750 current liability

9 Zafar runs a transport business and has a fleet of motor vehicles.

Which is a liability to Zafar?

A depreciation of motor vehicles for the year

B motor vehicle expenses outstanding

C motor vehicle insurance paid in advance

D stock of fuel for motor vehicles

10 Identiy the element which will appears in a Statement of financial position of a sole trader?

A drawings B equipment repairs

C gross profit D opening inventory
[Total 10]
Answers for Part A Multiple Choice

1 2 3 4 5 6 7 8 9 10

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Part B Structured Questions

1 On 1 April 2011 Lynne purchased two motor vehicles for business use on credit from Veena
Motors Limited. The vehicles cost $24 000 each.

Depreciation is charged on the motor vehicles at 10% per annum using the diminishing (reducing)
balance method. A full year’s depreciation is charged in the year of purchase but no depreciation is
charged in the year of sale.

On 23 January 2013 one of the motor vehicles was sold for $6 500.

REQUIRED

(a) Show the journal entry to record the purchase of the motor vehicles on 1 April 2011.
Dates and narratives are not required
Journal

Debit Credit
$ $

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[2]
(b) Prepare the provision for depreciation account for the years ended on 31 March 2012
and 31 March 2013.
Provision for Depreciation account

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(c) Prepare the disposal account.

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Disposal account

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(d) State two other methods of depreciation.

(1) ……………………………………………………………………………………………………………

(2) ………………………………………………………………………………………………………….[2]

(e) State which of the above methods of depreciation would be most appropriate to use for each
of the following non-current assets.

1 Computer equipment : ….……………………………………………………………………

2. Buildings: ……………………………………………………………………………………..

3 Loose tools: ………………..………………………………………………………………. [3]

[Total: 16]

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2 The financial year of Virat ends on 31 August. He sells on credit terms and maintains a
provision for doubtful debts

REQUIRED

(a) Explain the difference between Bad debts and Provision for doubtful debts

…………………………………………………………………………………………………………

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………………………………………………………………………………………………………[2]

(b) Suggest two ways in which Virat could reduce the possibility of bad debts.

1………………………………………………………………………………………………………

2……………………………………………………………………………………………………[2]

Virat provided the following information.

$
On 1 September 2015
Provision for doubtful debts 10 000

During the year ended 31 August 2016

Debts written off 15 000

On 31 August 2016
Trade receivables 80 000

On 31 August 2016 it was decided to write off $2 500 owed by Sachin. The provision for
doubtful debts was adjusted to 5% of the remaining trade receivables

REQUIRED
(c) Prepare the following the ledger accounts for the year ended 31 August 2016

(i) Bad Debt Account

Date $ Date $

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(ii) Provisional for doubtful debt

Date $ Date $

[6]

(d) Prepare an extract from the statement of financial position on 31 August 2016 to show the
trade receivables.
Virat
Extract from Statement of Financial Position at 31 August 2016

………………………………………………………………………………………………………

…………………………………………………………………………………………………………

………………………………………………………………………………………………………[3]

[Total: 13]

3 Minal is a trader. She maintains a full set of accounting records. Her financial year ends on 31
December.
Following are the balances on 1 January 2017

Stationery account (Dr) $ 300

Trade payable: Dhoni stationers account owing $115
Commission receivable account owing $1 600

Minal ’s transactions for the year ended 31 December 2017 included the following
$
Jan 20 Paid cash for stationery 200
Feb 25 Received commission by cheque 1 980
Mar 28 Paid Dhoni Stationers, by cheque, the balance due on 1 Jan
June 10 Received commission by cheque 2 100
Oct 30 Purchased stationery on credit from Dhoni Stationers 350
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Nov 11 Returned damaged stationery to Dhoni Stationers 100

On 31 December 2017
Inventory of stationery 250
Commission receivable outstanding 1 650

REQUIRED
(a) Enter the transactions in the following accounts in the ledger of Minal for the year ended
31 December 2017.
Make the transfers to the income statement. Balance the accounts and bring down the
balances on 1 January 2018.
Minal
Stationery account
Date $ Date $

[6]

Trade payables Dhoni Stationers account

Date $ Date $

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[5]
Commission receivable account

Date $ Date $

[6]

(b) Name the ledger in which the commission receivable account would appear.

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

(c) Name the section of the statement of financial position on 31 December 2018 in which the
balance on the commission receivable account would appear. Give a reason for your answer.

Section of statement of financial position ..................................................................................

Reason ......................................................................................................................................

...................................................................................................................................................

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

[Total: 20]

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4 Laurel started a business on 1 April 2016. On that day he introduced the following into the
business:
Inventory $15 000, office furniture $2000, and cash $4000, of which $500 was kept on hand for
petty cash and the balance, $3500, was paid into a business bank account.
On the same day his cousin Hassan paid $3000 into the business bank account as a loan to
the business.

REQUIRED
(a) Show the opening journal entry to record these transactions. A narrative is not required.
Laurel
Journal
Dr Cr

$ $

[6]

Additional Information

Laurel’s transaction during April 2016 included the following

April 2. Sold half inventory for $10 000 by cheque

5. Purchase goods from Hardy for $ 5 000 and paid by cheque.

7. Laurel paid wages by cash $ 2 000

8. Cash sales $ 2 500

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(b) Prepare Laurel’s Cash Book on the page opposite and Balance the Cash Book & bring down the balances on 1 May 2016

Laurel
Cash Book
Date Details Discount Cash Bank Date Details Discount Cash Bank
allowed received

……… ………………... …….. …….. …….. …….. …………………. ……….. ……... ……...

……… ………………... …….. …….. …….. …….. …………………. ……….. ……... ……...

……… ………………... …….. …….. …….. …….. …………………. ……….. ……... ……...

……… ………………... …….. …….. …….. …….. …………………. ……….. ……... ……...

……… ………………... …….. …….. …….. …….. …………………. ……….. ……... ……...

……… ………………... …….. …….. …….. …….. …………………. ……….. ……... ……...

……… ………………... …….. …….. …….. …….. …………………. ……….. ……... ……...

……… ………………... …….. …….. …….. …….. …………………. ……….. ……... ……...
[8]
[Total14]

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5 John is a trader. The following balances were extracted from his books 31 August 2006

Purchase 68 000 Revenue 125 000

Wages and Salaries 24 000 Discount received 800

Rent and rates Paid 8 500 Rent received 1 000

Insurance 2 500 Trade payable 4 500

Carriage on purchase 1 500 Bank overdraft 1 500

Sundry expenses 10 000 Capital at 1 Sep 2005 30 000

Trade receivable 11 500 Return outward 3 000

Inventory on 1 Sep 2005 10 300

Fixtures and Equipment at cost 10 000

Drawings 18 000

Return Inward 1 500

165 800 165800

Additional information:

1. Inventory on 31 Aug 2006 was $12 000

2. On 31 August 2006 rates prepaid $500

3. Wages and Salaries of $2 500 were accrued on 31 Aug 2006

4. Accountancy fees of $1 500 for the year accrued on 31 Aug 2006

5. A provision for doubtful debts of 5% on Trade receivable on 31st Aug 2006 to be created

6. Fixtures and equipment are to be depreciated by $2 000 a year

Required
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(a) Income statement for the year ending 31 August 2006

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(b) Statement of financial position on year ended 31 August 2006

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[Total 27]

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