Paper Reference(s)

6001/01
London Examinations GCE
Accounting (Modular Syllabus)
Advanced Subsidiary/Advanced Level
Unit 1 – The Accounting System and Costing
Monday 18 January 2010 – Morning

Source booklet for use with Questions

1 to 7.

Do not return this booklet with the

question paper.

*H36389A*
Printer’s Log. No.

H36389A Turn over

W850/6001/57570 1/1/1/1/

This publication may be reproduced only in accordance with Edexcel Limited copyright policy. ©2010 Edexcel Limited.

H36389A_Source_GCE_AS_Accounting1 1 03/09/2009 09:20:45

 SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Highflyer manufactures and sells solar powered calculators. The following balances remained in
the books of Highflyer at 31 December 2009.

£
Purchases of raw materials 72 500
Production wages 109 200
Office wages 33 450
Salaries:
Production manager 25 000
Office manager 17 500
Rent 18 000
Sundry factory expenses 31 700
Sales 350 000
Carriage outwards 3 800
Bad debts 8 100
Fixed assets:
Plant and machinery at cost 68 000
Fixtures and fittings at cost 26 000
Provisions for depreciation on:
Plant and machinery 32 000
Fixtures and fittings 7 100
Provision for doubtful debts 2 900
Debtors 45 000
Creditors 36 000
Bank overdraft 5 350
Capital 85 000
Drawings 20 600
Stock at 1 January 2009:
Raw materials 4 700
Work in progress 9 200
Finished goods 25 600

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H36389A_Source_GCE_AS_Accounting2 2 03/09/2009 09:20:45

 Additional information:
• Stock at 31 December 2009:
Raw materials £3 750
Work in progress £14 000
Finished goods £30 400
• Production wages £3 850 are accrued and carriage outwards £650 is prepaid.
• Rent is apportioned on the basis of floor area occupied. Manufacturing occupies 2 000 sq m
and the office occupies 500 sq m.
• Office wages include a £750 interest free loan to a member of the office staff, repayable on
28 February 2010.
• Depreciation is charged as follows:
– plant and machinery, 20% per annum using the straight line method
– fixtures and fittings, 15% per annum using the straight line method.
• On 30 December 2009, a debtor owing £4 000 had ceased trading and the decision was made
by Highflyer to write off the amount as a bad debt. No entries had been made in the books by
31 December 2009.
• The provision for doubtful debts is to be maintained at 6% of the remaining debtors.
• During the year Highflyer manufactured 111 000 solar powered calculators.
Required:

(a) Prepare for Highflyer, for the year ended 31 December 2009, the:

(i) manufacturing account

(ii) trading and profit and loss account.

(21)

(b) Prepare the balance sheet as at 31 December 2009.

(15)

(c) Calculate for the year the cost of production of one solar powered calculator.
(2)

(d) Highflyer’s cost of production includes fixed costs and semi-fixed costs.

(i) Define the terms fixed costs and semi-fixed costs.

(ii) Using the manufacturing account of Highflyer, give one example of a fixed cost and one
example of a semi-fixed cost.
(6)

An overseas supplier of solar powered calculators has offered to supply Highflyer at a price which
is 10% lower than the current cost of production of Highflyer. If Highflyer accepts this offer, it
would close its manufacturing unit and concentrate on the sale of solar powered calculators.

(e) Evaluate whether Highflyer should accept the offer made by the overseas supplier.
(8)

(Total 52 marks)

Answer space for question 1 is on pages 2 to 6 of the question paper.

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 SOURCE MATERIAL FOR USE WITH QUESTION 2

2.
The trial balance below was extracted from the books of Khimja on 30 November 2009 following
the preparation of the trading account:

£ £
Gross profit 170 000
Capital 36 000
Wages 39 400
Salaries 80 000
Rent 15 500
General expenses 11 700
Debtors and Creditors 21 300 16 500
Bank 8 100
Stock 19 000
Fixed assets:
Motor vehicles 30 000
Office furniture 18 000
Provisions for depreciation:
Motor vehicles 16 000
Office furniture 9 170
Suspense 4 670        
247 670 247 670

Following the preparation of the trial balance and the trading account the following errors were
discovered:

• Goods costing £3 500 on sale or return from a supplier, Raihan, had been returned on 1 October
2009. No entry had been made in the books of Khimja to record the return.
• The stocktake sheets on 30 November 2009 had been overcast by £500.
• A payment for general expenses of £980 had been correctly entered in the bank account, but
had been credited to the general expenses account as £890.
• A rent payment of £1 500 had been correctly entered in the bank account, but no entry had been
made in the rent account.
• A wage bonus of £3 000 had been correctly entered in the bank account, but had been entered
as £3 300 in the wages account.
• A salary bonus of 2% of salaries had been paid, but no entry had been made in the salaries
account.
• All fixed assets are depreciated at the rate of 15% using the straight line method. A motor
vehicle purchased on 1 December 2006 for £14 000, was sold on 30 November 2009, a cheque
being received for £4 000. No entries had been made in the books to record the sale. Khimja
uses a disposal account.

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H36389A_Source_GCE_AS_Accounting4 4 03/09/2009 09:20:45

 Required:

(a) Prepare the:

(i) journal entries to correct the errors in the accounts

(18)

(ii) suspense account.

(5)

(b) Re-draft the trial balance after all errors have been corrected.
(12)

(c) Prepare the profit and loss account for the year ended 30 November 2009.
(9)

(d) Evaluate the role of the trial balance in ensuring that all transactions have been correctly
recorded in the books.
(8)

(Total 52 marks)

Answer space for question 2 is on pages 8 to 12 of the question paper.

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 SOURCE MATERIAL FOR USE WITH QUESTION 3

3. Chin is a builders’ merchant with three departments: plumbing, electrical and timber.

The following balances were extracted from the books on 31 December 2009:

£ £
Purchases:
Plumbing 58 000
Electrical 65 000
Timber 55 000
Sales:
Plumbing 110 000
Electrical 148 000
Timber 96 000
Wages:
Plumbing 18 000
Electrical 27 000
Timber 35 000
Managers’ salaries 30 000
Stock at 1 January 2009:
Plumbing 14 000
Electrical 16 700
Timber 18 200
Administration expenses 13 300
Rent and heat 8 500
Vehicle running expenses 20 000
Premises extension 45 000
Fixed assets:
Premises 100 000
Equipment 60 000
Delivery vehicle 16 000
Provisions for depreciation:
Premises 15 000
Equipment 27 000
Delivery vehicle 6 000
Debtors and Creditors 59 000 36 000
Provision for doubtful debts 1 950

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H36389A_Source_GCE_AS_Accounting6 6 03/09/2009 09:20:46

 Additional information:

•
Stock at 31 December 2009:
Plumbing £12 800
Electrical £14 300
Timber £21 100
• During the year, Chin contracted a builder to carry out a premises extension. In addition to the
£45 000 paid to the builder, Chin supplied timber costing £5 000 for the extension. No entries
had been made in the books to record the transfer of timber.
• Depreciation is charged on cost using the straight line method, as follows:
– premises at the rate of 2%
– equipment 15%
– delivery vehicle 20%.
A full year’s depreciation is charged on assets owned at the end of the year.
• A provision for doubtful debts is to be maintained at the following rates:
Debtors Debtors Rate
1 January 31 December
Plumbing £10 000 £15 000 5%
Electrical £18 000 £21 000 3%
Timber £13 000 £23 000 7%
• Managers’ salaries, administration expenses, rent and heat, vehicle running expenses and
depreciation are apportioned to departments on the most appropriate basis from the following
information:
Plumbing Electrical Timber
Staff (number) 3 5 7
Use of administration (%) 35 40 25
Use of delivery vehicle (%) 20 20 60
Use of equipment (%) 25 25 50
Area occupied (sq m) 300 250 450

Required:

(a) Prepare the departmental trading and profit and loss account, in columnar format, showing
clearly the profit or loss for each department for the year ended 31 December 2009. A total
column is not required.
(28)

(b) Using the accounts of Chin, explain why each of the following is an application of the
accounting term or concept stated:

Application in accounts Accounting term or concept

(i) Provision for doubtful debts Prudence concept

(4)

(ii) Cost of sales Accruals concept

(4)

(iii) Premises extension Capital expenditure

(4)

(iv) Wages Allocation

(4)

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 In the years 2007 and 2008, the timber department had made losses. If the losses continue, Chin
would consider closing the timber department.

(c) Evaluate the likely impact on Chin’s business of a decision to close the timber department.
(8)

(Total 52 marks)

Answer space for question 3 is on pages 14 to 19 of the question paper.

H36389A 

H36389A_Source_GCE_AS_Accounting8 8 03/09/2009 09:20:46

 SECTION B

SOURCE MATERIAL FOR USE WITH QUESTION 4

4. Tan is in business buying and selling goods on credit. He is having difficulty paying his creditors
and the bank refuses to allow him an overdraft. The following information relates to the last two
trading years ended 31 December 2008 and 31 December 2009:

2008 2009
£ £
Sales 400 000 380 000
Cost of sales 280 000 285 000
Expenses 85 000 90 000
Net profit 35 000 5 000

Fixed assets 120 000 130 000

Stock 35 000 40 000
Debtors 40 000 55 000
Creditors 30 000 85 000
10% Loan repayable 2015 25 000 25 000
Capital 150 000 120 000
Bank 10 000 5 000

Additional information:

Stock at 1 January 2008, £30 000.

Required:

(a) Calculate for both 2008 and 2009 the:

(i) gross profit to sales percentage

(4)

(ii) rate of stock turnover

(4)

(iii) debtors collection period in days

(4)

(iv) return on capital employed

(4)

(v) liquid (acid test) ratio.

(4)

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 (b) Comment upon:

(i) the adequacy of liquidity for Tan’s business

(2)

(ii) how Tan might improve the liquidity of his business.

(6)

(c) Evaluate the usefulness of ratios when considering the future of a business.
(4)

(Total 32 marks)

Answer space for question 4 is on pages 20 to 23 of the question paper.

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H36389A_Source_GCE_AS_Accounting10 10 03/09/2009 09:20:46

 SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Smith & Co is a firm of accountants. The firm employs two grades of accounting staff: partners
and juniors. The firm charges for the services of partners and juniors on the basis of hours worked
in preparing the accounts of clients.

The following information is available:

•
Smith & Co employs 2 partners and 3 juniors.
•
Salaries paid: Partners £40 000
Juniors £16 000
• Smith & Co pays an additional 25% of salaries in the form of employers’ government taxes.
• The partners and juniors are supported by one administrative assistant who is paid a wage of
£1 000 per month. To this is added 25% of wages in the form of employers’ government
taxes.
• The administrative assistant spends an equal amount of time supporting each partner and each
junior.
• Other expenses for one year are £35 000. The hourly rate charged to clients for each partner
and each junior would be increased by £7 per hour for these expenses.
• It is estimated that hours chargeable to clients in the year will be:
Partners 1 000 hours each partner
Juniors 1 150 hours each junior

Required:

(a) Calculate the:

(i) total salary and wage cost (including employers’ government taxes) paid by Smith & Co
for one year
(4)

(ii) total cost of operating Smith & Co for one year

(2)

(iii) rate to be charged to clients for one hour for the services of:

• a partner
• a junior.
(14)

(b) Identify four business activities likely to be undertaken by a partner which would not be
directly charged to a client.
(8)

(c) Evaluate the use of hourly rates as a method of charging clients.

(4)

(Total 32 marks)

Answer space for question 5 is on pages 24 to 27 of the question paper.

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 SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Chong and Dey are in partnership sharing profits and losses 3:2. Interest is allowed on capital at
the rate of 4% per annum and Dey is paid a salary of £7 000 per annum. No interest is charged on
drawings. The following balances remained in the books after the preparation of the trading and
profit and loss account for the year ended 30 November 2009:

£
Net profit 21 000 DR
Drawings:
Chong 8 000 DR
Dey 14 500 DR
Land and buildings 30 000 DR
Office equipment 11 000 DR
Debtors 6 250 DR
Creditors 13 750 DR
Bank 2 000 DR
Stock 13 150 DR
Prepaid expenses 600 DR
Accrued expenses 750 DR
Capital:
Chong 30 000 DR
Dey 20 000 DR

Additional information:

•
Chong and Dey operate fluctuating capital accounts.
•
On 1 December 2009 Chong and Dey agreed to admit Elva as a partner. Elva would bring the
following assets and liabilities into the partnership on that date:
Delivery vehicle £6 000
Stock £8 200
Debtors £4 000
Creditors £3 200
Bank cheque £10 000
• Goodwill was valued by Chong and Dey on 30 November 2009 at £60 000. Goodwill is not to
be recorded in the books of the new partnership.
• It was agreed that Chong would reduce his capital by £15 000, taking this sum by cheque on
1 December 2009.
• The new partnership would share profits and losses in the ratio of Chong, Dey and Elva 2:2:1
respectively.

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H36389A_Source_GCE_AS_Accounting12 12 03/09/2009 09:20:46

 Required:

(a) Explain why goodwill is not normally recorded in the books of a business.
(4)

(b) Prepare the:

(i) appropriation account of Chong and Dey for the year ended 30 November 2009
(4)

(ii) capital accounts of Chong, Dey and Elva recording the year end appropriations and the
admission of the new partner.

You are required to balance the accounts at 30 November 2009, and again after the
introduction of the new partner.
(13)

(iii) balance sheet of the new partnership on 1 December 2009.

(7)

(c) Evaluate the decision to admit a new partner to the business, from the view of Chong and
Dey.
(4)

(Total 32 marks)

Answer space for question 6 is on pages 28 to 30 of the question paper.

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 SOURCE MATERIAL FOR USE WITH QUESTION 7

7. A fire occurred at the business premises of Leila on 17 November 2009. Leila did not keep her
records at the business premises and can therefore provide the following information:

•
Balances at 1 November 2009:
Stock at cost £14 700
Debtors £16 650
Creditors £12 500
• Transactions between 1 November and 17 November 2009:
Receipts from debtors £117 400
Payments to creditors £79 000
Cash purchases £2 800
• Balances at 17 November 2009:
Remaining stock at
net realisable value £4 850
Debtors £19 250
Creditors £14 700
• Leila uses a ‘mark up’ of 50%
Required:

(a) Explain the term net realisable value.

(4)

(b) Calculate the:

(i) purchases for the period 1 November to 17 November 2009

(6)

(ii) sales for the period 1 November to 17 November 2009

(6)

(iii) value of the lost and fire damaged stock.

(12)

“Valuing stock at net realisable value does not comply with accounting concepts and
conventions.”

(c) Evaluate this view.

(4)

(Total 32 marks)

Answer space for question 7 is on pages 32 to 35 of the question paper.

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H36389A_Source_GCE_AS_Accounting14 14 03/09/2009 09:20:46

 Paper Reference(s)

6001/01
London Examinations GCE
Accounting (Modular Syllabus)
Advanced Subsidiary/Advanced Level
Unit 1 – The Accounting System and Costing
Friday 21 May 2010 – Morning

Source booklet for use with Questions

1 to 7.

Do not return the insert with the

question paper.

*M36983A*
Printer’s Log. No.

M36983A Turn over

W850/6001/57570 1/1/

This publication may be reproduced only in accordance with Edexcel Limited copyright policy. ©2010 Edexcel Limited.

36983A_Source_Booklet_GCE_Accoun1 1 16/11/2009 13:12:49

 SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Georgia and Harriet are in partnership, sharing profits and losses equally. No interest is paid on
capital or charged on drawings. No salaries are paid to the partners.

On 30 April 2009, the capital account balances of the partners were:

Capital accounts: Georgia £35 000

Harriet £15 000

On 1 May 2010 Georgia and Harriet agreed to admit Ionna as a partner. It was agreed that:

(i) Ionna would bring £15 000 cash into the partnership.

(ii) Goodwill was valued at £50 000.

(iii) Goodwill would not be retained in the books of the new partnership.

(iv) No interest would be paid on capital.

(v) Interest would be charged on drawings at the rate of 5% on balances at the end of the year.

(vi) Salaries would be paid to: Harriet £9 000 and Ionna £6 000.

(vii) Profits and losses would be shared: Georgia two fifths; Harriet two fifths; Ionna one fifth.

M36983A 

36983A_Source_Booklet_GCE_Accoun2 2 16/11/2009 13:12:49

 At the end of the first year of trading, on 30 April 2010, with the exception of the capital accounts,
the following balances remained in the books of the partnership after the preparation of the trading
account.
£
Gross profit 63 270
Carriage inwards 340 CR
Carriage outwards 4 650
Insurance 1 800
Rent 8 500
Rent receivable 1 500
Motor vehicles running expenses 9 180
Motor vehicles (Cost £16 000) 10 000
Office equipment (Cost £11 000) 9 800
Wages and salaries 17 000
Sundry expenses 6 750
Loan interest paid 1 000
8% Loan repayable 30.4.2015 20 000
Provision for doubtful debts 3 800
Stock at 30 April 2010 52 000
Debtors 26 000
Creditors 17 690
Bank 9 500 DR
Current accounts at 1 May 2009
Georgia 430 CR
Harriet 1 850 DR
Drawings Georgia 1 000
Harriet 10 000
Ionna 3 000

The following information is available for the year ended 30 April 2010:

(i) Insurance includes an annual fire insurance renewal of £1 200 paid on 1 January 2010.

(ii) Rent receivable of £500 is outstanding.

(iii) Wages and salaries includes drawings of £5 000 made by Ionna which had been incorrectly
posted to the wages and salaries account.

(iv) Depreciation is charged at the rate of 25% on motor vehicles using the reducing balance
method and 20% on office equipment using the straight line method.

(v) The provision for doubtful debts is to be maintained at 4% of debtors.

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 Required:

(a) Prepare for the year ended 30 April 2010 the:

(i) capital accounts of Georgia, Harriet and Ionna

(7)

(ii) profit and loss account of the partnership

(15)

(iii) profit and loss appropriation account

(6)

(iv) current accounts of Georgia, Harriet and Ionna.

(6)

(b) Prepare the balance sheet of the partnership as at 30 April 2010.

(10)

Ionna considered setting up business as a sole trader before agreeing to join the partnership of
Georgia and Harriet.

(c) Evaluate the decision of Ionna to join the partnership of Georgia and Harriet as an alternative
to opening a new business of her own, as a sole trader.
(8)

(Total 52 marks)

Answer space for question 1 is on pages 2 to 8 of the question paper.

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 SOURCE MATERIAL FOR USE WITH QUESTION 2

2. Jaida is in business buying and selling goods on credit. On 31 March 2010, Jaida extracted a trial
balance for the business which failed to agree, the debit total of balances exceeding the credit total
of balances by £1 750. A suspense account was opened to record the difference.

Jaida then prepared the draft trading and profit and loss account for the year, before locating the
errors, which had resulted in the suspense account balance.

The draft trading and profit and loss account prepared on 31 March 2010 was as follows:

Jaida – Trading and Profit and Loss Account for the year ended 31 March 2010

£ £
Sales 133 000
Sales returns 6 500
126 500
Opening stock 12 900
Purchases 62 000
74 900
Closing stock 13 500
Cost of sales 61 400
Gross profit 65 100
Less
Wages 35 000
Operating expenses 28 900
Depreciation on motor vehicle 3 200
Bad debt 600
Provision for doubtful debts 550
68 250
Net loss 3 150

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 After the preparation of the draft trading and profit and loss account, the following errors were
located:

(i) A sale of goods £2 300 on credit to Salem, had been recorded in the sales account as £230.

(ii) Sales returns £170 had been correctly recorded in the account of the debtor, but had been
credited as £150 in the sales returns account.

(iii) Purchases included a cash payment of £450 for operating expenses.

(iv) Stock at 31 March 2010 contained one stock sheet valued at the list price of £6 000, including
the ‘mark up’ of 25%.

(v) The calculation and recording of wages for the year was incorrect. The following actual
payments were made to Jaida’s three staff members:

Ahmed Paid an annual salary of £12 000 plus a bonus of £500.

Beena Paid a monthly salary of £750 plus a commission of 5% of sales. Average
monthly sales were £8 000.
Chandra Paid an hourly rate of £3 per hour for 40 hours per week, 52 weeks per
year. Average overtime worked for 50 weeks of the year was 6 hours at
time and a half.

(vi) During the year operating expenses of £5 000 for repairing the vehicle, were recorded in the
vehicle asset account. Depreciation was charged on the balance of the vehicles account at the
year end at the rate of 20% on cost using the straight line method.

(vii) The provision for doubtful debts on 1 April 2009 was £550 and this was entered in the draft
profit and loss account.

(viii) During the year, debts of £600 were written off as bad debts. On 31 March 2010 the debtors
balance was £18 700 and it was decided to write off an additional £1 200 as bad debts and to
maintain the provision for doubtful debts at 4% of the remaining debts. This adjustment had
not been made.

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 Required:

(a) Prepare the:

• journal entries recording the correction of the errors and transfers in (i) to (viii) (narratives
are not required)
• suspense account following the correction of the errors in (i) to (viii).
(20)

(b) Prepare for Jaida, for the year ended 31 March 2010, the:

(i) Stock account

(4)

(ii) Provision for doubtful debts account

(4)

(iii) Motor vehicles account

(4)

(c) Re-draft the trading and profit and loss account following correction of the errors in (a).
(8)

(d) Explain the accounting concept of materiality.

(4)

(e) Evaluate whether it is useful for Jaida to prepare the draft trading and profit and loss account
when the trial balance contains a suspense account.
(8)

(Total 52 marks)

Answer space for question 2 is on pages 9 to 15 of the question paper.

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 SOURCE MATERIAL FOR USE WITH QUESTION 3

3. Soller Products makes two products: the Standard and the Super. The following information is
available for the year ended 30 April 2010.

(i) Both products use the same raw material. On 1 May 2009, the stock of raw material was
5 000 units at a value of £10 per unit.
(ii) During the year, 40 000 units of raw material were issued to production and the following
purchases of raw material were made:

May – July 12 000 units @ £12

August – October 10 000 units @ £13
November – January 15 000 units @ £12
February – April 8 000 units @ £11

Stock is valued using the First In First Out (F.I.F.O) method based upon periodic valuation.

(iii) One unit of raw material will make either one Standard or one Super.
(iv) During the year 25 000 Standards and 15 000 Supers were produced.
(v) The factory has two production lines, one to make the Standard and one to make the Super.
Twenty production staff made Standards and fifteen production staff made Supers.
(vi) Manufacturing wages are paid on the basis of day-work rate plus bonus.
• All production staff work 40 hours per week for 50 weeks of the year and are paid at a rate
of £5 per hour.
• A bonus payment of £1 for each Standard produced is shared amongst the Standard line
workers.
• A bonus payment of £1 for each Super produced is shared amongst the Super line
workers.

(vii) Factory overheads were allocated to the production lines of the Standard and the Super on the
following basis:
Standard Super Total
£ £ £
Management salaries 160 000 50 000 210 000
Premises costs 100 000 80 000 180 000
Depreciation 70 000 40 000 110 000

(viii) Work in progress:

1 May 2009 30 April 2010

£ £
Standard 50 000 25 000
Super 30 000 15 000

(ix) The Standard was sold for £35 per unit and the Super for £50 per unit. All units produced
during the year were sold and there were no stocks of finished goods at the start or end of the
year.

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 Required:

(a) Prepare for the year ended 30 April 2010, the manufacturing account, in columnar format,
showing the:
• prime cost of producing the Standard and the Super
• manufacturing cost of producing the Standard and the Super.
(16)

(b) Calculate:

(i) the cost of manufacturing:

• one Standard
• one Super
(4)

(ii) the total annual gross profit from sales of the:

• Standard
• Super
(4)

Soller Products is considering ceasing production of the Standard which it considers to be

unprofitable. The Production Manager is concerned at this development and believes that if
overheads were apportioned to production lines, instead of being allocated, this would show
that the Standard was profitable.

Additional information:
Standard Super
Employees (number) 20 15
Floor area occupied (sq m) 2 500 3 500
Equipment value (£’000) 10 000 12 000

(c) Calculate, with overheads apportioned instead of allocated, the:

(i) total overhead which would be charged to each production line

(8)

(ii) total annual gross profit from sales for each production line.
(4)

(d) (i) Distinguish between apportionment of overheads and absorption of overheads.

(4)

(ii) Explain the circumstances in which there would be over absorption of overheads.
(4)

(e) Evaluate whether Soller Products should cease the production of the Standard.
(8)

(Total 52 marks)

Answer space for question 3 is on pages 16 to 22 of the question paper.

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 SECTION B

SOURCE MATERIAL FOR USE WITH QUESTION 4

4. White Lightning is a popular music band recording albums and performing at concerts. On 1 April
2009, the band started the White Lightning Fan Club with £1 000 cash which was paid into a bank
account.
The following is the summarised information for the year ended 31 March 2010.
(i) Fans were asked to register ‘on-line’ and were then sent a membership pack and an invoice for a
£10 subscription for the year. The number of fans registering ‘on-line’ was 2 000. At 31 March
2010, subscriptions from 400 fans were in arrears and 75 fans had paid their subscriptions in
advance for a second year.
(ii) The fan club decided not to write off any subscription debts as bad debts.
(iii) A fan club secretary was appointed on 1 April 2009 at a salary of £8 000 per annum. Other
expenses paid were: telephone and postage £3 600, rent £2 000 and general office expenses
£1 850. At 31 March 2010, £250 was owing for a telephone bill.
(iv) Office furniture and a second hand photocopier were purchased on credit on 1 April 2009 for
£4 000. During the year £3 000 was paid to the creditor. It is estimated that the office furniture
and the second hand photocopier will have a life of 5 years, and a residual value of £600.
(v) A monthly newsletter was circulated to all members at a cost of £1 080.
(vi) During the year the fan club raffled two tickets to a White Lightning concert. The cost of the
tickets was £280 and 400 fans entered the raffle each paying £1 for a raffle ticket.
(vii) The fan club offered autographed copies of the band’s latest album. The club purchased
300 albums at a cost of £12 each. During the year the club sold 280 of the autographed albums
at £15 each.

Required:

(a) Prepare for the White Lightning Fan Club the:

(i) receipts and payments account for the year ended 31 March 2010
(8)

(ii) income and expenditure account for the year ended 31 March 2010 showing clearly the
profit or loss made on the raffle of concert tickets and the sales of the band’s album
(12)

(iii) balance sheet as at 31 March 2010.

(8)

(b) Evaluate the decision of the fan club not to write off any bad debts.
(4)

(Total 32 marks)

Answer space for question 4 is on pages 24 to 28 of the question paper.

M36983A 10

36983A_Source_Booklet_GCE_Accoun10 10 16/11/2009 13:12:50

 SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Kerry is considering starting a business making vehicle trailers. He has carried out market research
and has determined that there is a market for inexpensive Budget vehicle trailers and also high
quality Superior vehicle trailers. He has decided to specialise in one type of trailer only, either the
Budget or the Superior. His market research has revealed the following:

Budget Superior
Sales per annum 50 20
Retail price £1 700 £3 800
Costs:
Raw materials
List price £200 £300
Trade discount on materials 20% 10%
Labour
Hours per trailer 64 130
Rate per hour £5 £6
Overheads
Marketing £19 000 per annum
Administration £30 000 per annum
Equipment Cost £12 000, life 5 years, residual value £2 000

Required:
(a) (i) Explain the term fixed cost.
(2)
(ii) Give one example of a fixed cost to be incurred by Kerry’s business.
(2)
(b) Calculate for Kerry, the cost of making:
(i) one Budget vehicle trailer
(9)
(ii) one Superior vehicle trailer.
(9)
(c) Calculate for Kerry, the total profit if he specialises in making the:
(i) Budget vehicle trailer
(3)
(ii) Superior vehicle trailer.
(3)
To start the new business making vehicle trailers, Kerry would need to leave his employment as an
accounts manager earning £15 000 per annum.
(d) Evaluate the decision of Kerry to leave his employment to start the new business, and advise
him which vehicle trailer, if any, he should make.
(4)

(Total 32 marks)

Answer space for question 5 is on pages 29 to 33 of the question paper.

M36983A 11  Turn over

36983A_Source_Booklet_GCE_Accoun11 11 16/11/2009 13:12:50

 SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Panjit is in business buying and selling goods on credit. He is concerned that, although his business
is making a good profit, his balance at the bank is not increasing. The following information is
available:

(i) Summarised transactions for the year ended 31 March 2010

£
Receipts from debtors 151 000
Payments to creditors 99 000
Fixed assets purchased 18 000
6% Loan taken out by Panjit 10 000
Expenses paid 25 000
Drawings 43 000

(ii) Asset and liabilities

31 March 2009 31 March 2010

£ £
Bank 3 000 ?
Debtors 15 000 12 000
Creditors 22 000 7 000
Stock 25 000 26 000
Prepaid expenses 4 000 2 000
Fixed assets 40 000 45 000
6% Loan – 10 000

(iii) Credit purchases for the year ended:

31 March 2009 31 March 2010

£ £
80 000 84 000

M36983A 12

36983A_Source_Booklet_GCE_Accoun12 12 16/11/2009 13:12:50

 Required:

(a) Distinguish between the profitability and the liquidity of a business.

(4)

(b) Calculate the bank balance at 31 March 2010.

(6)

(c) Calculate for both the years ended 31 March 2009 and 31 March 2010, the:

(i) Current ratio

(6)

(ii) Liquid (acid test) ratio

(6)

(iii) Creditors payment period (in days)

(6)

(d) Evaluate the liquidity of Panjit’s business.

(4)

(Total 32 marks)

Answer space for question 6 is on pages 34 to 39 of the question paper.

M36983A 13  Turn over

36983A_Source_Booklet_GCE_Accoun13 13 16/11/2009 13:12:50

 SOURCE MATERIAL FOR USE WITH QUESTION 7

7. Capela is a general trader. She has been busy with the business and has not maintained the debtors
and creditors personal accounts for April 2010. All other entries have been made in the accounts.

Capela wishes to complete her accounts for April 2010. She has extracted a trial balance at 30 April
2010 with the exception of the balances for debtors and creditors, although she is aware that there
are some errors in the accounts.

The following balances were available at 30 April 2010:

£
Total creditors at 1 April 2010 9 730
Total debtors at 1 April 2010 14 250
Purchases on credit 12 420
Cheques received 25 000
Returns outwards 380
Discount received 460
Debtor cheque returned dishonoured 600
Discount allowed 160
Sales on credit 28 310
Cheques paid 13 500
Returns inwards 250
Purchases for cash 5 350
Bad debt written off 800
Provision for doubtful debts 750

The following errors have been discovered in the books:

(i) a credit note £750 for goods returned to Capela, had not been entered into the accounts
(ii) discount received of £95 had been claimed in error by Capela
(iii) invoices for credit purchases of £2 500, had not been entered into the accounts
(iv) a debtor who owed £600 has now been declared bankrupt.

Required:

(a) Explain two limitations of the trial balance.

(4)

(b) Prepare, incorporating any adjustments for errors and showing the balance at 30 April 2010,
the:

(i) purchases ledger control account

(10)

(ii) sales ledger control account.

(14)

(c) Evaluate the contribution of control accounts in ensuring that the debtors and creditors accounts
are always accurate.
(4)

(Total 32 marks)

Answer space for question 7 is on pages 40 to 43 of the question paper.

M36983A 14

36983A_Source_Booklet_GCE_Accoun14 14 16/11/2009 13:12:50

 Paper Reference(s)

6001/01
London Examinations GCE
Accounting (Modular Syllabus)
Advanced Subsidiary/Advanced Level
Unit 1 – The Accounting System and Costing
Monday 17 January 2011 – Afternoon

Source booklet for use with Questions

1 to 7.

Do not return this booklet with the

question paper.

Printer’s Log. No.

H37994A Turn over

*H37994A*
W850/6001/57570 1/1/1/

This publication may be reproduced only in accordance with Edexcel Limited copyright policy. ©2011 Edexcel Limited.
 SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. The Worle Social Club offers a range of activities to members, and a cafeteria as a meeting place
for refreshments.

Each member pays a subscription of £40 per annum and membership of the club was 500 members
in 2010.

Receipts and Payments Account for the year ended 31 December 2010

£ £
Balance b/d 1 720 Refreshment purchases 15 200
Membership subscriptions for the Wages and salaries 30 000
year ended 31 December: Electricity 1 500
2009 640 Rates 2 850
2010 17 200 Sundry expenses 6 250
2011 1 680 Loan interest paid 800
Refreshment sales 55 940 Building works 20 000
8% Bank loan receipt 25 000 Equipment purchase 8 700
Sale of equipment 3 500 Balance c/d 20 380
105 680 105 680

Additional information:

(i) Subscriptions:
• On 31 December 2009, 20 members had not paid their membership subscriptions for
2009
• On 31 December 2009, 56 members had paid in advance for 2010
• All subscriptions for 2009 which were unpaid on 31 December 2010 are to be considered
irrecoverable and written off as bad debts
• On 31 December 2010, 14 members had not paid their membership subscriptions for
2010.
(ii) Expenses are to be apportioned to the cafeteria trading account at the rate of:
• 40% wages and salaries
• 20% electricity
• 20% rates.
(iii) The additional 8% Bank loan was taken out on 1 April 2010.
(iv) Building works were undertaken during the year. An extension to the clubhouse was built at a
cost of £15 000 and the existing clubhouse was redecorated at a cost of £5 000.
(v) The equipment sold in 2010 was purchased on 1 June 2007 at a cost of £6 400.
(vi) A full year’s depreciation is charged on all assets owned on 31 December at the following
rates:
• Clubhouse 2% per annum using the straight line method
• Equipment 25% per annum using the reducing balance method.

H37994A 2
 (vii) Other balances:
31 December 2009 31 December 2010
£ £
Clubhouse (cost £50 000) 35 000 ?
Equipment (cost £30 000) 15 000 ?
Subscriptions in arrears ? ?
Subscriptions in advance ? ?
Stocks of refreshments 8 600 7 450
Creditors for refreshment purchases 1 400 870
Rates accrued 200 –
Rates prepaid – 450
8% Bank loan 10 000 35 000
Accumulated fund 47 280 ?

Required:

(a) Explain two differences between a receipts and payments account and an income and
expenditure account.
(4)

(b) Prepare for the year ended 31 December 2010, the:

(i) Subscriptions account

(7)

(ii) Cafeteria trading account

(7)

(iii) Income and expenditure account.

(16)

(c) Prepare the balance sheet at 31 December 2010.

(10)

Worle Social Club is considering offering a 10 year membership to existing members for £250,
starting in 2011.

(d) Evaluate, from the perspective of Worle Social Club, whether it should offer a 10 year
membership for £250.
(8)

(Total 52 marks)

Answer space for question 1 is on pages 2 to 6 of the question paper.

H37994A 3 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 2

2. The fixed assets recorded on the balance sheet of Maruf Garage at 31 December 2009 were as
follows:
Cost Provision for Net book
Depreciation value
£ £ £
Land and buildings 120 000 12 000 108 000
Motor vehicles 24 000 11 000 13 000
Equipment 43 000 20 500 22 500
Loose tools 8 500 5 000 3 500
195 500 48 500 147 000

The depreciation policy of Maruf Garages is:

• Land is not depreciated. Buildings are depreciated at the rate of 2% per annum on cost.
• Motor vehicles at the rate of 25% per annum using the reducing balance method.
• Equipment at the rate of 10% per annum using the straight line method.
• Motor vehicles and equipment are charged with a full year’s depreciation in the year of
purchase. No depreciation is charged in the year of sale.
• Loose tools are revalued at the end of each year.
During the year ended 31 December 2010, the following changes occurred to the fixed assets:
(i) On 1 January 2010 the cost of the land owned by Maruf Garage was £60 000.
On 1 June 2010, half of the land was sold for £80 000.
(ii) A new breakdown truck was purchased on 1 March 2010 for £30 000. The purchase was paid
for by part-exchange of the old breakdown truck, with the balance paid by cheque. The old
breakdown truck cost £16 000 on 1 September 2007. The agreed part-exchange value of the old
breakdown truck was £6 000.
(iii) Equipment costing £3 500 was purchased on credit, on 1 August 2010.
(iv) Additional loose tools were purchased, for cash, throughout the year, with a combined value of
£1 200. On 31 December 2010 the loose tools were re-valued at £4 300.

H37994A 4
 Required:

(a) Explain two reasons why a business should record depreciation in the annual accounts.
(4)

(b) Prepare, for the year ended 31 December 2010, the:

(i) motor vehicle account

(ii) motor vehicle provision for depreciation account

(iii) motor vehicle disposal account.

(14)

(c) Prepare the extracts in the:

(i) profit and loss account for the year ended 31 December 2010, showing the depreciation
and the profit/loss on sale of fixed assets

(ii) balance sheet at 31 December 2010, showing the fixed assets section.
(14)

The owner of Maruf Garage has suggested revaluing the remaining half of the land to
£80 000 in the balance sheet.

(d) State two accounting concepts that do not support the owner’s suggestion.
(4)

(e) (i) Distinguish between capital expenditure and revenue expenditure.

(ii) Advise, stating clearly your reasons, whether each of the following is capital expenditure
or revenue expenditure:

• installation of new equipment

• repairs to equipment.
(8)

(f) The owner of Maruf Garage has stated that “by charging annual depreciation, the business will
have sufficient cash to replace the fixed assets at the end of their useful life.”

Evaluate this statement.

(8)

(Total 52 marks)

Answer space for question 2 is on pages 8 to 13 of the question paper.

H37994A 5 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 3

3. Athula is in business as a sole trader. On 31 December 2010, the following balances were extracted
from her books:

£
Sales 265 000
Purchases 110 000
Stock 37 500
Staff salaries 47 500
Wages 36 300
Rent and rates 7 500
Heat and light 9 650
Marketing expenses 10 000
General expenses 5 250
Goodwill 60 000
Land and premises (Cost £80 000) 74 500
Motor vehicles (Cost £30 000) 20 000
Fixtures and fittings (Cost £20 000) 14 000
Creditors 31 200
Debtors 40 000
Bank overdraft 4 000 CR
Drawings 28 500
Current account 500 CR
Capital account 200 000

Additional information at 31 December 2010:

(i) Athula maintains separate capital and current accounts.

(ii) Stock £50 500.
(iii) Staff salaries included £6 000 drawings paid to Athula.
(iv) Wages £450 were accrued.
(v) Rent and rates for 3 months of the year remained accrued.
(vi) Marketing expenses £1 750 were prepaid.
(vii) Depreciation is charged as follows:
• Premises at the rate of 2% per annum straight line method. No depreciation is charged on
the land which is valued at £25 000
• Motor vehicles at the rate of 25% per annum, reducing balance method
• Fixtures and fittings at the rate of 10% per annum, on cost, using the straight line
method.
(viii) A provision for doubtful debts is to be created at the level of 5% of debts less than 6 months
old, and 15% of debts over 6 months old. One quarter of the debts are over 6 months old.

H37994A 6
 Required:

(a) Prepare for the year ended 31 December 2010, the:

(i) trading and profit and loss account

(ii) current account of Athula.

(18)

On 1 January 2011, Athula admitted Chandra as a partner into her business. Chandra brought the
following assets and liabilities into the new partnership business at the agreed valuations of:
£
Goodwill 15 000
Motor vehicle 8 000
Stock 12 000
Creditors 6 000
Bank loan (repayable 31.12.2015) 5 000
Bank 15 000

It was also agreed that:

• profits and losses would be shared in the ratio 2:1 respectively to Athula and Chandra
• goodwill would not be retained in the books of the new partnership.

(b) (i) Explain the accounting term goodwill.

(2)

(ii) State two accounting concepts which advise that goodwill should not be retained in the
books.
(4)

(c) Prepare journal entries, with suitable narratives, at 1 January 2011 to record the:

(i) entry of Chandra into the partnership

(ii) removal of goodwill from the books of the partnership.

(8)

(d) Prepare the opening balance sheet of the new partnership at 1 January 2011.
(12)

(e) Evaluate the decision of Athula to admit Chandra as a partner.

(8)

(Total 52 marks)

Answer space for question 3 is on pages 14 to 19 of the question paper.

H37994A 7 Turn over

 SECTION B

SOURCE MATERIAL FOR USE WITH QUESTION 4

4. Classic Design is a business providing marketing design services. On 1 December 2010 the
following balances were extracted from the books:

£
Capital 150 000
Premises 120 000
Fixtures and fittings 24 000
Provisions for depreciation on:
premises 5 000
fixtures and fittings 6 000
Debtors 17 500
Creditors 8 500
Bank 8 000 DR

For the month of December the following summarised transactions occurred:

(i) Credit sales of £28 000 were invoiced to customers.

(ii) Debtors paid cheques for £24 300 after being allowed £250 discount for prompt
settlement.
(iii) Additional fixtures and fittings were purchased for £4 000 on credit.
(iv) Operating expenses of £4 750 were paid by cheque.
(v) Design materials of £1 350 were purchased on credit.
(vi) After receiving £150 discount for prompt settlement, creditors were paid £6 200 by
cheque.
(vii) Bank charges of £600 were charged to the bank account.
(viii) Wages of £12 000 were paid by cheque.

Required:

(a) Prepare the trial balance at 31 December 2010.

(20)
Additional information at 31 December 2010:

• Operating expenses of £1 600 were accrued.

• Depreciation is charged using the straight line method at the rate of:
(i) Premises 2% per annum
(ii) Fixtures and fittings 15% per annum.

(b) Prepare the profit and loss account for the month of December 2010.
(8)

(c) Evaluate the statement that “if the trial balance for Classic Design balances, this ensures that
the books of accounts are accurate”.
(4)

(Total 32 marks)

Answer space for question 4 is on pages 20 to 23 of the question paper.

H37994A 8
 SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Athina is in business manufacturing clothing. She uses job costing when preparing quotations for
manufactured goods.

A customer has requested a quotation for the manufacture of 100 dresses, which has been given the
job number 792.

The following information is available for job 792:

(i) Raw material for one dress will be 2 metres of cloth. The following is the stock card for
cloth:

1 July Opening stock 350 metres @ £7 per metre

4 September Issued 200 metres
7 October Receipts 100 metres @ £8 per metre
18 November Issued 100 metres
8 December Receipt 100 metres @ £9 per metre

Athina uses the perpetual inventory, First In First Out (F.I.F.O) method when valuing stock.
In addition to the cloth for the dresses, Athena will purchase buttons and decorations at a trade
cost of £2.40 for one dress. Athena will add a handling charge of 25% to the cost of the buttons
and decorations.

(ii) Direct labour cost will be:

Department Production time Rate
Cutting and machining 2 hours per dress £6 per hour
Finishing and packaging ½ hour per dress £4 per hour

(iii) Overheads are charged to each job at the rate of £6 per direct labour hour.

(iv) A profit margin of 25% is charged on all jobs undertaken.

H37994A 10
 Required:

(a) (i) Distinguish between perpetual inventory and periodic inventory in stock valuation.
(4)

(ii) Explain two characteristics of job costing.

(4)

(b) Prepare the quotation for Job 792, showing the price to be charged to the customer for 100
dresses. The quotation should show clearly the:

(i) raw material cost

(ii) labour cost
(iii) total quotation price.
(20)

Athina is considering changing the method of remuneration for the Cutting and Machining
Department from payment by day rate to payment by piecework.

(c) Evaluate the use of piecework as a method of remuneration for the Cutting and Machining
Department.
(4)

(Total 32 marks)

Answer space for question 5 is on pages 24 to 27 of the question paper.

H37994A 11 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 6

6. The following information is available from the accounts of Rupa for the year ended 30 November
2010.

On 1 December 2009 the following account balances were in the books:

£
Electricity 250 CR
Marketing expenses 720 CR
Provision for doubtful debts 2 000 CR

(i) The electricity account records show the following:

Cheque payments £
7 December 2009 250
14 March 2010 425
7 June 2010 385
26 September 2010 190

Refund by cheque

8 July 2010 65

On 30 November 2010 it was estimated that £170 was owing for electricity.

(ii) Marketing expenses records show the following:

Cheque payments £

20 December 2009 General marketing expenses 1 800

18 April 2010 Marketing brochures 600
10 July 2010 General marketing expenses 1 350
1 October 2010 Advertising campaign (for 3 months) 1 200

On 30 November 2010 it was estimated that the following were prepaid:

• Half of the marketing brochures purchased on 18 April 2010 remained.
• The proportion of the advertising campaign unused.
(iii) A provision for doubtful debts was to be maintained from the following schedule of debtors:

Age of Debt (months) Debtors 30 November 2010 (£) Provision (%)

0–3 months 15 000 5

3–6 months 6 000 10
Over 6 months 2 000 20

H37994A 12
 Required:

(a) Suggest three advantages of applying accounting concepts when preparing the final accounts
of a business.
(6)
(b) Prepare the following ledger accounts for the year ended 30 November 2010. Each account
should include the transfer to the profit and loss account for the year, and the balance to be
carried down.

(i) Electricity account

(ii) Marketing expenses account
(iii) Provision for doubtful debts account.
(22)
(c) Evaluate the role of social accounting in decision making for a business.
(4)

(Total 32 marks)

Answer space for question 6 is on pages 28 to 30 of the question paper.

H37994A 13 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 7

7. Andeas and Dimitris each have a business buying and selling goods on credit. The summarised
trading and profit & loss accounts and balance sheets for both businesses are as follows:

Trading and profit & loss accounts for the year ended 30 September 2010.

Andeas Dimitris
£ 000 £ 000

Sales 1 000 1 000

Opening stock 80 70
Purchases 680 600
760 670
Closing stock 120 50
640 620

Expenses 170 280

Depreciation 110 40
Loan interest 20 –

Net profit 60 60
1 000 1 000

Balance sheets at 30 September 2010.

Andeas Dimitris
£000 £000

Fixed assets 300 100

Stock 120 50
Debtors 80 60
Bank – 30
500 240

Creditors 100 70
Bank overdraft 60 –
Long term loan 200 –
Capital 140 170
500 240

H37994A 14
 Required:

(a) Explain why it is essential that a new business has good short term liquidity.
(4)

(b) Calculate for each business the:

(i) gross profit to sales percentage

(ii) rate of stock turnover
(iii) return on capital employed
(iv) liquid (acid test) ratio
(v) debtors’ collection period (in days).
(20)

(c) State, giving one reason for each answer, which of the businesses of Andeas or Dimitris has
the better:

(i) profitability
(ii) liquidity.
(4)

(d) Evaluate the usefulness of accounting ratios in assessing the success of a business.
(4)

(Total 32 marks)

Answer space for question 7 is on pages 32 to 35 of the question paper.

H37994A 15
 Paper Reference(s)

6001/01
London Examinations GCE
Accounting (Modular Syllabus)
Advanced Subsidiary/Advanced Level
Unit 1 – The Accounting System and
Costing
Tuesday 10 January 2012 – Afternoon

Source booklet for use with

Questions 1 to 7.

Do not return the insert with the

question paper.

Printer’s Log. No.

P40325A Turn over

*P40325A*
W850/6001/57570 1/1/1/1

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2012 Pearson Education Ltd.
 SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Toyndon Products is in business manufacturing chairs in its factory. It also purchases finished
goods for resale. The following trial balance was extracted from the books on 31 December 2011.

Dr Cr
£ £
Capital 70 000
Drawings 27 200
Light, heat & power 7 500
6% Bank loan (Repayable 31.12.2015) 100 000
Wages:
Factory 86 000
Administration 22 500
Salaries:
Factory management 45 000
Administration 58 000
Marketing 78 000
Inventory (stock) 1 January 2011:
Raw materials 17 000
Finished goods 28 000
Purchases of:
Raw materials 95 000
Finished goods 80 000
Direct factory costs 8 500
Rent & rates 15 000
General expenses:
Factory 16 500
Administration 15 600
Revenue (sales) 600 000
Non-current (fixed) assets:
Plant and equipment 150 000
Office equipment 60 000
Provision for depreciation on
non-current (fixed) assets:
Plant and equipment 50 000
Office equipment 10 000
Trade receivables (debtors) 48 000
Trade payables (creditors) 36 500
Provision for doubtful debts 1 800
Bank 10 500

868 300 868 300

P40325A 2
 Additional information at 31 December 2011:

(i) Inventory (stock): Raw materials £13 000; Finished goods £33 000.
There was no Inventory (stock) of work in progress at 1 January 2011 or 31 December 2011.

(ii) Factory wages owing were £2 000.

(iii) Light, heat & power and rent & rates were apportioned between the factory and administration
in the ratio 4:1.

(iv) The 6% Bank loan had been taken out on 1 January 2010. No interest had been paid on the loan
for the year 2011.

(v) Depreciation is to be charged as follows:

Plant and equipment – 25% per annum using the reducing balance method

Office equipment – 15% per annum using the straight line method.

(vi) The provision for doubtful debts is to be maintained at 5% of outstanding trade receivables
(debtors).

(vii) During the year 20 000 chairs were manufactured by Toyndon Products and these units were
transferred to finished goods at factory cost.

Required:

(a) (i) Prepare the manufacturing account for the year ended 31 December 2011.
(12)

(ii) Calculate the cost of producing one chair.

(2)

(b) Prepare the:

(i) statement of comprehensive income (trading and profit and loss account) for the year
ended 31 December 2011
(15)

(ii) statement of financial position (balance sheet) at 31 December 2011.

(15)

An overseas manufacturer has approached Toyndon Products and offered to supply the chairs
currently manufactured at 5% below the manufacturing costs of Toyndon Products.

(c) Evaluate, from the perspective of Toyndon Products, the offer of the overseas manufacturer.
(8)

(Total 52 marks)

Answer space for question 1 is on pages 2 to 5 of the question paper.

P40325A 3 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 2

2. The following trial balance was prepared by an inexperienced book-keeper for Begum on
30 November 2011. The trial balance is incorrectly drafted, and subsequently further errors were
discovered requiring correction by journal.

Trial balance at 30 November 2011

£ £
Dr Cr
Capital 25 000
Drawings 4 500
Revenue (sales) 101 600
Purchases 46 500
Purchase returns 3 250
Sales returns 6 800
Discount allowed 6 500
Discount received 4 000
Wages 27 500
General expenses 9 400
Cash deposited at bank 14 000
Trade receivables (debtors) 9 800
Trade payables (creditors) 13 870
Motor vehicles 40 000
Motor vehicles – provision for depreciation 14 500
Suspense 70 980
199 100 199 100

Subsequently the following errors were discovered:

(i) In November Begum had brought a motor vehicle £5 000 and paid £5 000 of personal funds
into the business bank account. No entries had been had been made in the books to record this
transaction.

(ii) Discount received of £650 had been posted to the debit of the discount allowed account. The
entry in the cash book was correct.

(iii) Drawings made by Begum of £3 000 have been entered in the wages account.

(iv) Payment of £1 750 from a credit customer, Nahir, had been correctly entered in the bank, but
no entry had been made in the account of Nahir.

(v) A payment by cheque for general expenses £1 850 had been correctly recorded in the bank
account. The entry had been recorded in the general expenses account as £1 580.

(vi) In November, Begum sold a motor vehicle by cheque for £4 900. The vehicle had cost £12 000
in September 2009. At the date of the disposal the accumulated depreciation was £5 250. No
entries had been recorded in the books.

P40325A 4
 Required:

(a) Distinguish between a compensating error and an error of reversal.

(4)

(b) Prepare journal entries to correct the errors (i) to (vi) above. Narratives are not required.
(18)

(c) Redraft the trial balance after the correction of all errors.
(16)

(d) Prepare the following ledger accounts for the year ended 30 November 2011:

  ‡ 0RWRUYHKLFOHDFFRXQW
  ‡ 0RWRUYHKLFOHGLVSRVDODFFRXQW
(6)

(e) Evaluate the usefulness of preparing a trial balance at the end of an accounting period.
(8)

(Total 52 marks)

Answer space for question 2 is on pages 6 to 11 of the question paper.

P40325A 5 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 3

3. Tang Manufacturing has two production departments: Machining and Assembly: and two service
departments: Administration and Maintenance. Budgeted overheads have been allocated and
apportioned to the four departments as follows:

£
Machining 40 000
Assembly 50 000
Administration 15 000
Maintenance 10 000

The budgeted use of the two service departments has been estimated as follows:

Machining Assembly Administration Maintenance

Administration 40% 40% - 20%
Maintenance 60% 25% 15% -

Additional information:

Machining Assembly
Budgeted machine hours 6 000 -
Budgeted direct labour hours - 8 000

Actual machine hours 6 600 -

Actual direct labour hours - 7 250
Actual overhead cost £42 500 £68 250

Required:

(a) Explain the term semi-fixed cost, giving an example of a semi-fixed cost.
(4)

(b) Distinguish between allocation and apportionment in overhead recovery.

(4)

(c) Re-apportion the overheads of the service departments to the production departments using the
continuous allotment method.
(14)

(d) (i) Calculate for the machining and assembly departments the overhead absorption rates.
(6)

(ii) Calculate the actual under or over absorption of overhead for the year.
(10)

(e) Calculate the overhead to be charged to a quotation requiring 12 hours of machining and 25
hours of assembly.
(6)

(f) Evaluate the use of separate overhead recovery rates for the machining and assembly departments
as an alternative to calculating a single recovery rate for the business as a whole.
(8)
(Total 52 marks)
Answer space for question 3 is on pages 13 to 16 of the question paper.

P40325A 6
 SECTION B
SOURCE MATERIAL FOR USE WITH QUESTION 4

4. Dhanisha is in business buying and selling goods on credit. She has not maintained proper
accounting records throughout her first year of business, which ended on 31 December 2011.

Dhanisha has provided the following summarised information for the year ended
31 December 2011 from her memory and from notes that she has made:

(i) Dhanisha commenced business on 1 January 2011 with an inventory (stock) £ 7 500 and
£3 500 in the bank.

(ii) Purchases £48 000 of goods for resale were made on credit, and £5 000 of the goods were
unsold on 31 December 2011. Dhanisha had paid cheques to trade payables (creditors) of
£34 250.

(iii) Revenue (sales) of £96 000 on credit, £6 000 of which were returned to Dhanisha. Trade
receivables (debtors) paid cheques £71 000.

(iv) Dhanisha rented premises for £7 000 per annum payable 6 months in advance. Six-monthly
(half-yearly) payments were made on 2 January 2011, 30 June 2011 and 25 December 2011.

(v) Other expenses paid by cheque were: telephone and broadband £6 800, general expenses
£2 750. On 31 December 2011, £750 was owing for general expenses.

(vi) Non-current (fixed) assets were purchased on 1 January 2011 for £ 20 000 and on 30 June 2011
for £8 000. During the year Dhanisha paid trade payables (creditors) £24 000 by cheque for
these non-current (fixed) assets. Depreciation is to be charged at the rate of 15% per annum
proportionate to the period of ownership in the year.

(vii) Personal drawings of £12 500 were made by cheque.

Required:

(a) Prepare for Dhanisha the:

(i) cash book (bank columns only) for the year ended 31 December 2011
(8)

(ii) statement of comprehensive income (trading and profit and loss account) for the year
ended 31 December 2011.
(10)

(iii) Statement of financial position (balance sheet) at 31 December 2011.

(10)

(b) Evaluate Dhanisha’s decision not to maintain a formal set of accounting records.
(4)

(Total 32 marks)
Answer space for question 4 is on pages 17 to 20 of the question paper.

P40325A 7 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Rahman is in business as an electrician.

The following information is available for his business:

 ‡ +HZRUNVKRXUVSHUZHHNIRUZHHNVSHU\HDU
 ‡ 5DKPDQKDVWKHREMHFWLYHWRHDUQ SHUDQQXPE\FKDUJLQJFXVWRPHUVIRUKLVODERXU
 ‡ 7KHRYHUKHDGVRIWKHEXVLQHVVDUHHVWLPDWHGWREH SHUDQQXP
 ‡ 5DKPDQHVWLPDWHVWKDWKHVSHQGVRIKLVWLPHGRLQJZRUNWKDWFDQEHFKDUJHGWRFXVWRPHUV
 ‡ 7KHWRWDOFRVWRIHDFKMRE ODERXUPDWHULDOVDQGRYHUKHDGV LVPDUNHGXSE\

Required:

(a) Describe two characteristics of job costing.

(4)

(b) Calculate the hourly rate that Rahman must charge customers to achieve annual earnings of
£20 000 and recover the overheads of the business.
(8)

Rahman is preparing a quotation for a job. This job will:

  ‡ FRVW LQPDWHULDOV
  ‡ WDNHKRXUVWRFRPSOHWH

(c) Prepare a quotation for this job.

(8)

(d) State four activities carried out by Rahman in his business which will not be charged directly
to customers.
(8)

(e) Evaluate the system of costing customers’ orders using labour and overhead hourly rates.
(4)

(Total 32 marks)

Answer space for question 5 is on pages 21 to 23 of the question paper.

P40325A 8
 SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Costas operates a business buying and selling goods on credit. On 1 January 2009 he put a plan
into operation to double his revenue (sales) over a three-year period. The following information is
available:

Year ended
31 December 2011
£
Revenue (sales) 800 000
Cost of sales 560 000
Opening inventory (stock) 30 000
Purchases 570 000
Closing inventory (stock) 40 000
Trade receivables (debtors) 50 000
Trade payables (creditors) 100 000
Bank overdraft 20 000
Capital and non-current (long term) liabilities 100 000

The following information is also available for the years ended 31 December 2009 and
31 December 2010:

Year ended Year ended

31 December 2009 31 December 2010
Revenue (sales) £400 000 £600 000
Percentage gross profit to sales 40% 35%
Inventory (stock) turnover 9 times 12 times
Current ratio 2:1 1.3:1
Liquid (acid test) ratio 0.75:1 0.50:1
Trade payables (creditors) payment period 36 days 48 days
Trade receivables (debtors) collection period 35 days 29 days
Capital and non-current (long term) liabilities £100 000 £100 000

P40325A 10
 Required:

(a) Calculate for the year ended 31 December 2011 the:

(i) Percentage gross profit to revenue (sales)

(3)

(ii) Inventory (stock) turnover

(3)

(b) (i) Comment upon the trend for the ratios in (a)(i) and (ii) above.
(2)

(ii) Suggest two possible reasons for the significant increase in revenue (sales) over the three
years.
(2)

(c) Calculate for the year ended 31 December 2011 the:

(i) Current ratio

(3)

(ii) Liquid (acid test) ratio

(3)

(iii) Trade payables (creditors) payment period

(3)

(iv) Trade receivables (debtors) collection period.

(3)

(d) State whether the changes in the payment and collection periods over the three years will
benefit the business.
(2)

(e) Suggest two possible courses of action, from the information provided and your calculations,
that Costas could take to improve his liquidity position.
(4)

(f) Evaluate whether Costas doubling his revenue (sales) in three years has been beneficial for his
business.
(4)

(Total 32 marks)

Answer space for question 6 is on pages 24 to 26 of the question paper.

P40325A 11 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 7

7. Sifat owns a retail shop. On 31 October 2011 the shop was broken into and goods were stolen. Sifat
needs to calculate the value of the goods stolen.

The following information is available for the month of October 2011:

(i) Revenue (sales) were £92 000 and sales returns £2 000.

(ii) Purchases:
£
Purchase returns 1 980
Discount received 3 250
Payments to trade payables (creditors) 50 500
Cash purchases 16 600
Trade payables (creditors) balance 1 October 2011 12 500
Trade payables (creditors) balance 31 October 2011, after the theft 9 570

(iii) £
Inventory (stock) 1 October 2011 17 200
Remaining inventory (stock) 31 October 2011 7 850

(iv) Sifat applies a 25% mark up to sell his goods

Required:

(a) Prepare the purchases ledger control account for the month of October 2011, showing the value
of the purchases in this account.
(10)

(b) Calculate the total value of the purchases for the month of October 2011.
(2)

(c) Prepare the statement of comprehensive income (trading account) for the month of October
2011, showing the value of the closing inventory (stock) before the goods were stolen.
(12)

(d) Calculate the value of the inventory (stock) stolen on 31 October 2011.
(4)

(e) Evaluate the use of control accounts in ensuring that the books are accurate.
(4)

(Total 32 marks)

Answer space for question 7 is on pages 27 to 29 of the question paper.

P40325A 12
 Paper Reference(s)

6001/01
London Examinations GCE
Accounting (Modular Syllabus)
Advanced Subsidiary/Advanced Level
Unit 1 – The Accounting System and
Costing
Tuesday 15 May 2012 – Morning

Source booklet for use with

Questions 1 to 7.

Do not return the insert with the

question paper.

Printer’s Log. No.

P40265RA Turn over

*P40265RA*
W850/6001/57570 1/1/1/1/1

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2012 Pearson Education Ltd.
 SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Aysha, Bashu and Christine are in partnership retailing electrical goods. They share profits and
losses in the ratio 2:2:1. Christine is entitled to a salary of £7 000 per annum. No interest is paid on
capital. Interest is charged at the rate of 5% per annum on the drawings for the year. The following
trial balance was extracted from the books for the year ended 31 March 2012:

Dr Cr
£ £
Goodwill 30 000
Inventory 1 April 2011 40 000
Salaries and wages 29 500
Sundry expenses 8 500
Rent and rates 9 000
Bank loan interest paid 3 000
Trade receivables 28 500
Trade payables 23 200
Cash 4 200
5% Bank loan – Payable 31 March 2020 80 000
Non-current assets at cost:
Land and buildings 70 000
Delivery vehicles 20 000
Fixtures and fittings 8 000
Provisions for depreciation:
Delivery vehicles 9 000
Fixtures and fittings 6 400
Provision for doubtful debts 900
Revenue 265 100
Purchases 191 000
Capital accounts at 1 April 2011:
Aysha 30 000
Bashu 20 000
Christine 10 000
Current accounts at 1 April 2011:
Aysha 3 500
Bashu 4 300
Christine 700
Drawings:
Aysha 4 000
Bashu 4 000
Christine 2 000

452 400 452 400

P40265RA 2
 Additional information at 31 March 2012:
(i) Inventory valuations Original Replacement Market
cost cost value
£ £ £
Washing machines 9 000 10 500 10 800
Televisions 16 000 16 000 20 000
Microwaves 7 500 7 000 6 000

(ii) Goodwill is no longer to be recorded in the books.

(iii) Salaries and wages contains the £7 000 salary already paid to Christine.

(iv) Sundry expenses prepaid £750.

(v) Rent and rates owing £3 000.

(vi) The 5% Bank loan was taken out on 1 April 2011.

(vii) Depreciation is to be charged as follows:

No depreciation is charged on the land and buildings
Delivery vehicles – 20% per annum using the reducing balance method
Fixtures and fittings – 10% per annum using the straight line method.

(viii) Trade receivables of £3 500 are considered irrecoverable. The provision for doubtful debts is
to be maintained at 5% of the remaining trade receivables.

Required:

(a) Prepare the:

(i) statement of comprehensive income including the appropriation of profit/loss for the year
ended 31 March 2012
(17)

(ii) statement of financial position at 31 March 2012.

(13)

(b) Explain how inventory should be valued where the original cost, replacement cost and market
value are at different valuations.
(4)

(c) Prepare for the year ended 31 March 2012 the:

(i) capital account of Christine

(4)

(ii) current account of Christine.

(6)

(d) Evaluate the partners’ decision to not record goodwill in the books.
(8)
(Total 52 marks)
Answer space for question 1 is on pages 2 to 7 of the question paper.

P40265RA 3 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 2

2. Dalfor is in business buying and selling household goods. He uses ratio analysis to evaluate the
success of his business. The following balances were extracted from the books on 29 February 2012:
£
Revenue – cash 50 000
credit 250 000
Purchases – cash 45 000
credit 225 000
Inventory – 1 March 2011 60 000
29 February 2012 90 000
Capital 275 000
Expenses paid 35 000
Accrued expenses 10 000
Trade receivables 30 000
Trade payables 35 000
Cash 150 000
10% Bank loan – Repayable 31 July 2015 100 000
Non-current assets 150 000

Additional information:

(a) The 10% bank loan was taken out in January 2010.

(b) The accounting ratios for the two previous years were:
Year ended Year ended
28 February 28 February
2010 2011

(i) gross profit as a percentage of revenue 30% 25%

(ii) profit for the year as a percentage of revenue 20% 12%

(iii) inventory turnover 6 times 4.8 times

(iv) return on capital employed 10% 8%

(v) current ratio 4:1 5:1

(vi) liquid (acid test) ratio 3:1 3.5:1

(vii) trade payables payment period 65 days 60 days

(viii) trade receivables collection period. 70 days 68 days

P40265RA 4
 Required:

(a) Distinguish between profitability and liquidity.

(4)

(b) Calculate for the year ended 29 February 2012 the:

(i) gross profit as a percentage of revenue

(2)
(ii) profit for the year as a percentage of revenue
(2)
(iii) inventory turnover
(3)
(iv) return on capital employed
(3)
(v) current ratio
(3)
(vi) liquid (acid test) ratio
(3)
(vii) trade payables payment period
(3)
(viii) trade receivables collection period.
(3)

(c) Suggest two likely reasons for the trend over the three-year period in each of the following
ratios:

(i) Inventory turnover

(ii) Return on capital employed
(iii) Current ratio.
(12)

Dalfor is considering expanding his business by opening a new store in another town.

(d) Advise Dalfor, using the ratios calculated in (b) above, on how his business might be viewed
by potential:

(i) investors
(ii) creditors.
(6)

(e) Evaluate Dalfor’s decision to use only accounting ratios to review his business.
(8)

(Total 52 marks)

Answer space for question 2 is on pages 8 to 12 of the question paper.

P40265RA 5 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 3

3. The Treasurer of Sidly Tennis Club maintains a set of full double entry records. The following
information is available for the year ended 30 April 2012:

(i) Cash Book Summary

£ £
Subscriptions for previous year 300 Balance b/d 900
for current year 3 700 Leasehold purchase 30 000
for next year 700 Wages 5 200
6% Bank loan 25 000 Equipment 6 400
Sale of tennis balls 1 550 Sundry expenditure 3 800
Donations 4 800 Purchase of tennis balls 1 200
Sales of annual dinner tickets 2 900 Rental of hall for annual dinner 560
Balance c/d 9 710 Deposit for annual dinner 600
48 660 48 660

(ii) Balances at:

1 May 2011 30 April 2012
£ £
Leasehold –15 years - 30 000
Equipment 12 200 ?
Equipment – provision for depreciation 2 400 ?
Inventory of tennis balls 750 630
Subscriptions in arrears 500 900
Subscriptions in advance 1 400 700
Accrued sundry expenses 1 150 2 650
6% Bank loan - 25 000
Trade payable - 1 950
(caterer for annual dinner)

(iii) On 30 April 2012 the following errors were found in the books:

1. During the year equipment which had cost £1 200 on 1 April 2009 was sold for £900. No
record of the sale had been made in the books.
2. Wages, £300, had been credited to the wages account.
3. A deposit of £600 paid to the caterer for the annual dinner had been recorded correctly in
the cash book but had been recorded in the caterer’s account as £150.

(iv) The leasehold and the 6% bank loan were taken out on 1 May 2011.

(v) Subscription to the Sidly Tennis Club is £100 per annum. All subscriptions not received from
the previous year were considered irrecoverable and were written off.

(vi) Depreciation is charged on:

 equipment at the rate of 15% per annum using the straight line method on all equipment
owned at the end of the year
 the leasehold at an appropriate rate.

P40265RA 6
 Required:

(a) (i) Explain the accounting concept of historic cost.

(2)

(ii) Give one example where the Sidly Tennis Club has applied this accounting concept.
(2)

(b) Prepare the trial balance at 1 May 2011 showing the value of the accumulated fund.
(5)

(c) Prepare the journal entries to correct the errors in (iii). Narratives are not required.
(9)

(d) Prepare for the year ended 30 April 2012 the:

(i) subscriptions account

(7)

(ii) income and expenditure account showing clearly the profit or loss on the annual dinner
and the sale of tennis balls.
(19)

(e) Evaluate the financial position of the Sidly Tennis Club.

(8)

(Total 52 marks)

Answer space for question 3 is on pages 13 to 17 of the question paper.

P40265RA 7 Turn over

 SECTION B
SOURCE MATERIAL FOR USE WITH QUESTION 4

4. Zaman is in business buying and selling goods on credit. He maintains a full set of double entry
records. The following information relates to the month of March 2012:

1. On 1 March 2012 Zaman was owed the following by his debtors:

£
Fahi 1 500
Shirin 500
Marvan 800
Jegan 2 900

2. Sales were made by Zaman as follows:

Fahi 6 March Goods with a list price of £1 200, allowed 20% trade discount
Marvan 15 March Goods with a list price of £700, allowed 10% trade discount
Cash sales 20 March £500
Fahi 26 March Goods with a list price £300, but no discount.

3. Sales returns:
Fahi 9 March Goods supplied on 6 March with a list price of £200

4. Zaman received the following payments by cheque:

Fahi 10 March The balance owing on 1 March less 2% cash discount
Jegan 14 March £2 000 less 3% cash discount

5. On 13 March Zaman was informed that Shirin had been declared bankrupt and a payment of
£0.40 in the £1 was received in final settlement of the debt.

Required:

(a) Zaman divides his ledger into three sections – general ledger, purchases ledger and sales ledger.
Explain two advantages of dividing the ledger into three sections.
(4)

(b) Prepare the following ledger accounts in the books of Zaman:

(i) Fahi account

(8)

(ii) Shirin account

(2)

(iii) sales ledger control account.

(14)

(c) Evaluate the use of control accounts in a business.

(4)

(Total 32 marks)
Answer space for question 4 is on pages 18 to 19 of the question paper.

P40265RA 8
 SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Nalin Manufacturing produces two types of handbag, the standard and the deluxe. There are two
production lines, one line produces the standard and one line produces the deluxe. The following
information relates to the month of April 2012:

(i) During April 2 500 standard and 1 000 deluxe handbags were manufactured.

(ii) Both production lines use the same raw material. The record of raw material showed the
following:

1 April Balance 500 metres @ £12 per metre

3 April Receipt 1 000 metres @ £14 per metre
7 April Issue 800 metres
15 April Receipt 500 metres @ £16 per metre
18 April Issue 800 metres

Nalin Manufacturing issues raw material using the First In First Out (F.I.F.O.) method of
inventory valuation.

During April, £13 000 of the raw material was used on the standard production line and the
remainder on the deluxe production line.

(iii) The standard production line employs 20 workers and the deluxe production line employs 30
workers. Each worker is paid a basic rate of £5 per hour and works 46 hours per week for
4 weeks in April. Forty hours per week will be at the basic rate and six hours per week at time
and a half.

(iv) A royalty of £1 per handbag is paid for the standard and £2 per handbag for the deluxe.

(v) Production overheads were:

£
Managers’ salaries 8 000
Rent and rates 5 600
Equipment depreciation 6 000
Canteen costs 5 500

Overheads are to be apportioned to the two production lines on the most appropriate basis. The
following information is available:

Standard Deluxe
Floor area (sq m) 400 300
Equipment value (£000) 160 80
Employees (number) 20 30

(vi) The value of work in progress was:

Standard Deluxe
£ £
1 April 2012 7 300 7 550
30 April 2012 5 300 10 000

P40265RA 10
 Required:

(a) Explain the accounting term prime cost.

(4)

(b) Prepare the departmental manufacturing account for the month of April, showing the cost
of manufacture of the standard and deluxe production lines. You are advised to prepare the
account in columnar format.
(24)

(c) Evaluate the use of First In First Out (F.I.F.O.) as a method of valuing raw material issues.
(4)

(Total 32 marks)
Answer space for question 5 is on pages 20 to 22 of the question paper.

P40265RA 11 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Seema owns a business retailing computer equipment. Her trial balance on 1 March 2012 was as
follows:

Dr Cr
£ £
Capital 60 000
Non-current assets 45 000
Provision for depreciation on non-current assets 24 000
Inventory 28 000
Trade payables 20 000
Trade receivables 23 000
Cash/Bank 8 500
Rent accrued 500
104 500 104 500

During the month ended 31 March 2012 the following were the summarised transactions for
Seema’s business:

1. Revenue sales of computers were £95 000 of which £19 000 were for cash and the remainder
were on credit. Seema uses a mark-up of 25% on all sales
2. Purchases of £76 000 were all on credit
3. Debtors paid £70 000 less a 2% cash discount
4. Creditors were paid £65 000 less a 4% cash discount
5. Seema brought additional non-current assets worth £8 000 into the business from her own
private resources
6. The quarterly rent of £1 500 was paid by cheque
7. Invoices for sundry expenses £4 700 were received for the month. Cheques for £3 500 were paid
to the suppliers of sundry expenses.

Required:

(a) (i) Explain the accounting concept of accrual

(2)

(ii) Explain, using the example of the quarterly rent in 6 above, how the amounts recorded in
the cash book, trial balance and statement of comprehensive income for March 2012 will
differ.
(6)

(b) Prepare Seema’s trial balance at 31 March 2012. Clearly show all workings.
(20)

(c) Evaluate the usefulness of the trial balance in ensuring the accuracy of the books.
(4)

(Total 32 marks)
Answer space for question 6 is on pages 23 to 25 of the question paper.

P40265RA 12
 SOURCE MATERIAL FOR USE WITH QUESTION 7

7. Zoe started a taxi business on 1 January 2009. The following information relates to the vehicles
account in the non-current assets:

1 January 2009 Purchased Vehicle A by cheque for £6 000

1 April 2010 Purchased Vehicle B on credit from Soames Garages for £8 000
1 July 2010 Purchased Vehicle C by cheque for £10 000
1 July 2011 Purchased Vehicle D for £9 000 giving in part exchange Vehicle B at an agreed
valuation of £5 400. The balance of the purchase price was paid by cheque.

Zoe has the following depreciation policy:

 Vehicles are depreciated at the rate of 20% per annum using the straight line method
 Depreciation is charged on vehicles purchased or sold during a year in proportion to the months
of ownership.

Required:

(a) Explain:

(i) the accounting concept of going concern

(2)

(ii) why the accounting concept of going concern is important when charging depreciation in
the financial statements.
(2)

(b) Prepare a table showing the depreciation charged on each of the vehicles A, B, C and D, in
each of the years 2009, 2010 and 2011.
(8)

(c) Prepare the following for the year ended 31 December 2011:

(i) Vehicle account

(ii) Vehicle – Provision for depreciation account
(iii) Vehicle disposal account.
(10)

(d) (i) Distinguish between capital expenditure and revenue expenditure.

(2)

(ii) State, giving your reasons, whether the following would be capital expenditure or
revenue expenditure:
 Vehicle tax for Vehicle A
 A new engine for Vehicle A.
(4)

(e) Evaluate Zoe’s choice of the straight line method as a basis for charging depreciation on
vehicles.
(4)

(Total 32 marks)
Answer space for question 7 is on pages 26 to 28 of the question paper.

P40265RA 13
 Paper Reference(s)

6001/01
London Examinations GCE
Accounting (Modular Syllabus)
Advanced Subsidiary
Unit 1 – The Accounting System and
Costing
Tuesday 8 January 2013 – Afternoon

Source booklet for use with

Questions 1 to 7.

Do not return the insert with the

question paper.

Printer’s Log. No.

P42221A Turn over

*P42221A*
W850/6001/57570 1/1/1/1/1/e2

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2013 Pearson Education Ltd.
 SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Organic Farm Shop has three departments: greengrocery, bakery and The Café. The following
balances were extracted from the books for the year ended 31 December 2012:

£
Revenue:
Greengrocery 190 000
Bakery 96 000
The Café 81 000
Inventory 1 January 2012:
Greengrocery 8 150
Bakery 4 700
The Café 850
Purchases:
Greengrocery 126 000
Bakery 60 500
The Café 40 250
Wages:
Greengrocery 32 000
Bakery 21 000
The Café 16 000
Manager’s salary 18 350
Electricity and gas 9 820
General running expenses 2 750
Rent (for 9 months) 8 100
Refurbishment costs of The Café 15 000
Non-current assets at cost:
Equipment 20 000
Fixtures and fittings 10 000
Provisions for depreciation:
Equipment 8 000
Fixtures and fittings 2 000
Trade receivables 32 000
Trade payables 46 870
Bank 43 000 Dr
Capital 60 000
Drawings 16 800
Provision for doubtful debts 1 400

P42221A 2
 Additional information at 31 December 2012:

1. Inventory:
Greengrocery £9 450
Bakery £3 600
The Café £1 100

2. During the year, goods were transferred to The Café from the other two departments.
The value, at cost, of the transfers was: Greengrocery £5 700, Bakery £4 300.

3. General running expenses prepaid £250.

4. The refurbishment costs of The Café consisted of new fixtures and fittings £10 000 and
redecoration £5 000.

5. On 1 December 2012 the owner of Organic Farm Shop purchased the shop premises from
Global Property for the purchase price of £250 000. On the same day a 6% Bank loan was
received from Ascot Bank for £200 000, repayable on 30 November 2022. The Bank also
charged an arrangement fee of £4 250 for the loan. No entries had been made in the books to
record these transactions.

6. Depreciation is to be charged on all non-current assets owned at the end of the year, on the
following basis:
Shop premises No depreciation
Equipment 30% per annum reducing balance method
Fixtures and fittings 10% per annum straight line method

7. A debt owed to Organic Farm Shop of £800 was considered irrecoverable. A provision for
doubtful debts is to be maintained at the rate of 5% on the remaining debts.

Required:

(a) Prepare the:

(i) Journal entries to record the purchase of the shop premises in 5. above. Narratives are not
required
(6)

(ii) Departmental Trading Account of Organic Farm Shop showing the profit/loss of each
department for the year ended 31 December 2012
(8)

(iii) Statement of Comprehensive Income for the business as a whole for the year ended
31 December 2012
(16)

(iv) Statement of Financial Position at 31 December 2012.

(14)

(b) Evaluate the owner’s decision to purchase the shop premises as an alternative to renting.
(8)
(Total 52 marks)
Answer space for question 1 is on pages 2 to 7 of the question paper.

P42221A 3 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 2

2. The following balances were in the ledger of Arpan on 1 January 2012:

£
Sundry expenses 600 Dr
Premises repairs 250 Dr
Rent receivable 300 Dr

The following were the transactions for the year ended 31 December 2012. All payments and
receipts were made by cheque:

1. Sundry expense payments:

£
14 May Paid 500
30 October Paid 900 for the six months to 31 March 2013

2. Premises repairs payments:

£
8 January Paid 450
1 April Paid 900
18 August Paid 875

On 31 December 2012 it was estimated that £340 was owing for premises repairs.

3. Rent receivable:
£
6 February Received 1 200
26 June Received 900

The rent receivable for the year was £1 600.

Required:

(a) Explain the meaning of the debit balance on the Rent receivable account on 1 January 2012.
(4)
(b) Prepare the following accounts for the year ended 31 December 2012, including the appropriate
transfer to the financial statements:

(i) Sundry expenses account

(4)
(ii) Premises repairs account
(4)
(iii) Rent receivable account.
(4)

P42221A 4
 On 1 January 2012 Arpan had the following additional balances in his ledger:
£
Machine at cost 36 000
Machine – provision for depreciation ?

All machinery was purchased on 1 January 2010 and has a residual value of £2 000. Arpan has
depreciated his machinery over a five-year period using the straight line method.

He has decided to change his method of depreciation to 25% per annum reducing balance, backdated
to the date of machine purchase. The change and adjustment are to be recorded in the Statement of
Comprehensive Income for the year ended 31 December 2012.

On 1 April 2012 a new machine was purchased:

£
Cost 8 000
Installation 1 600
Staff training 2 000
Annual machine insurance 00 400
12 000

He charges a full year’s depreciation on machines in the year of purchase.

Required:

(c) State one accounting concept which:

(i) supports the change of depreciation method proposed by Arpan

(ii) does not support the change of depreciation method proposed by Arpan.
(4)
(d) Distinguish between capital expenditure and revenue expenditure.
(4)
(e) State, giving your reasons, whether each of the following is capital expenditure or
revenue expenditure:

       
         
(4)
(f) Calculate, showing clearly all workings, the:

(i) adjustment required to the provision for depreciation on the machines to

31 December 2011 to account for the change in depreciation method

(ii) depreciation charge on all the machines for the year ended 31 December 2012.
(8)
(g) Prepare, for the year ended 31 December 2012, the:
(i) Machinery account
(3)
(ii) Machinery – provision for depreciation account.
(5)
(h) Evaluate Arpan’s decision to change the basis of charging depreciation on machines
from the straight line method to reducing balance method.
(8)
(Total 52 marks)

Answer space for question 2 is on pages 8 to 16 of the question paper.

P42221A 5 Turn over
 SOURCE MATERIAL FOR USE WITH QUESTION 3

3. Xevena commenced business on 1 January 2012 buying and selling goods on credit. She commenced
business with fixtures and fittings £2 000 and bank £10 000.

She has little accounting knowledge, but has prepared a draft Statement of Comprehensive Income
for the year ended 31 December 2012:
£ £
Revenue 110 000
Less
Purchases 103 500
Less Purchase returns 0(2 300)
101 200
Less Inventory (at selling price) (20 000)
(81 200)
Gross profit 28 800
Plus other income:
Sale of fixtures and fittings 1 200
Rent receivable 31 000
31 000
Less expenses:
Carriage of goods 3 600
Rent and rates 4 000
Wages 6 000
General running expenses 4 550
Purchase of fixtures and fittings 2 800
Purchase of motor van 009 000
(29 950)
Profit for the year 001 050

P42221A 6
 Additional information:

1. Revenue included goods with a selling price of £2 000 sent to a customer on ‘sale or return’.
On 31 December 2012 the customer had not advised an intention to keep or return the goods.
The transaction had been recorded as a credit sale.
2. Xevena used a 25% mark up on cost throughout the year.
3. Half of the fixtures and fittings brought into the business on 1 January 2012 were sold during
the year for £1 200. Additional fixtures and fittings were purchased during the year.
4. Part of the premises were sub-let on 1 July for a rent receivable of £1 000 per 3 months.
5. One third of the carriage related to collecting purchases and two thirds to deliveries to
customers.
6. General running expenses included £750 prepaid, but did not include £470 owing.
7. During the year Xevena paid suppliers by cheque £93 030 and received a discount of £1 870.
8. Other balances on 31 December 2012:
£
Motor van (at valuation) 7 500
Fixtures and fittings (at valuation) 3 400
Trade receivables 12 870
Trade payables ?
Bank overdraft 18 450
Drawings 4 800

Required:

(a) Explain the following accounting concepts. For each concept give one example from the draft
Statement of Comprehensive Income prepared by Xevena and from the additional information
given, where the concept has not been correctly applied:

(i) Realisation
(3)
(ii) Accrual (matching)
(3)
(iii) Going concern.
(3)

(b) Redraft the corrected Statement of Comprehensive Income after taking into account the
additional information given for the year ended 31 December 2012.
(14)

(c) Prepare the Purchases Ledger Control Account, calculating the trade payables balance at
31 December 2012.
(6)

(d) Prepare the Statement of Financial Position at 31 December 2012.

(15)

(e) Evaluate the use of accounting concepts when preparing financial statements.
(8)
(Total 52 marks)

Answer space for question 3 is on pages 17 to 21 of the question paper.

P42221A 7 Turn over

 SECTION B
SOURCE MATERIAL FOR USE WITH QUESTION 4

4. Molara commenced business on 1 January 2012 with inventory £12 000 and bank £25 000. She also
had a five-year 8% bank loan of £15 000 and trade payables of £3 000.

Her objectives for the first year of trading were to:

           

       !
  "             #      $ 

The following information is available for the year ended 31 December 2012:

1. Revenue (sales) £140 000, gross profit £36 000.

2. Purchases £119 000.
3. Non-current assets purchased £15 000 with £3 000 charged as depreciation.
4. Other expenses paid including bank loan interest, £22 000, of which £2 000 was prepaid.
Other expenses accrued were £1 000.
5. Drawings £8 000.
6. Other balances at 31 December 2012:
Trade receivables £7 000
Trade payables £10 000
Bank £1 000
Inventory ?

Required:

(a) Explain the term profitability.

(4)
(b) Prepare the Statement of Comprehensive Income for the year ended 31 December 2012,
showing clearly the:

(i) value of the inventory at 31 December 2012

(ii) profit for the year.
(6)
(c) Calculate the percentage return on capital employed for the year.
(3)

(d) Prepare the Statement of Financial Position at 31 December 2012.

(9)
(e) Calculate the:
(i) current ratio
(ii) liquid (acid test) ratio.
(6)
(f) Evaluate the success of Molara in achieving her financial objectives for the year.
(4)
(Total 32 marks)

Answer space for question 4 is on pages 22 to 26 of the question paper.

P42221A 8
 SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Fahl Manufacturing has a machine shop producing products for the building industry. The machine
shop contains six machines, each producing a different product.

The following information relates to one of the machines, Machine 107:

  &  ' *

Cost £90 000
Delivery £2 000
Installation £8 000
  +          !;    #    
  <     =  > !>    
  @      K!;     K      < 
remainder of the time is idle time
   K !>>  >    Q  ! >
  V   # K  $

Additional machine shop information:

      Q  Y  

     Q    
       Z  
  [#  Z
  [#     \
  <     $

Required:

(a) Calculate, for Machine 107, for the year ended 31 December 2012, the:

(i) total overhead cost

(8)
(ii) overhead cost per hour of operating Machine 107.
(4)

(b) Explain the term labour productivity.

(4)

Machine 107 requires one machine operator who is paid on a daywork basis and works 40 hours
per week for 50 weeks per year. The rate is £6 per hour and output for the year is 2 400 units.

It has been proposed that the machine operator of Machine 107 should be paid by a bonus scheme
in future. The two alternatives are:

Alternative Option 1 Payment for each unit completed. The rate would be £3 per unit. Output
for the year is estimated to be 4 800 units.

Alternative Option 2 A bonus consisting of an hourly payment of £3.50 per hour for all hours
worked, plus £1.50 per unit produced. Output is estimated to be 3 600
units.

P42221A 9 Turn over

 Required:

(c) Calculate, the labour cost per unit, for the following three payment options:

(i) Current daywork payment

(4)
(ii) Alternative Option 1
(2)
(iii) Alternative Option 2.
(4)

(d) Identify the most productive of the three payment options for Fahl Manufacturing.
(2)

(e) Evaluate, from the perspective of Fahl Manufacturing, the use of a bonus scheme for
remunerating the operator of Machine 107.
(4)
(Total 32 marks)
Answer space for question 5 is on pages 27 to 29 of the question paper.

P42221A 10
 SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Taabu is in business buying and selling goods on credit. The following information relates to her
customers’ accounts for the month of December 2012:

1. Balances at 1 December :
Trade receivables £23 500
Provision for doubtful debts £1 450

2. During December 2012:

Cheques received and banked from trade receivables £32 400
Discount allowed £820
Credit sales £38 000

3. During December, Taabu was informed that one debtor, Taal, would not be able to fully pay his
debt of £350. A payment of £0.40 in the pound was made on 31 December 2012, the balance
of the debt being irrecoverable.

4. A debt owed by Kaab £700, which had been written off in July 2011, was received in
December 2012.

5. On 31 December 2012 a schedule of debtors was prepared and the provision for doubtful debts
was calculated as £1 375.

Required:

(a) Explain:

(i) the term a schedule of debtors

(ii) how the schedule of debtors would be used to calculate the provision for doubtful debts.
(6)

(b) Prepare the Journal entries, including narrative, recording the bad debt recovery from Kaab.
(5)

(c) Prepare, for the month of December, the:

(i) Bad debts account

(3)
(ii) Bad debts recovered account
(4)

(iii) Sales Ledger Control Account showing clearly the balance of debtors at 31 December 2012.
(7)

(iv) Provision for doubtful debts account.

(3)

(d) Evaluate the use of a provision for doubtful debts account by Taabu.
(4)
(Total 32 marks)
Answer space for question 6 is on pages 30 to 33 of the question paper.

P42221A 11 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 7

7. Martina and Naju have been in partnership for many years sharing profits and losses in the ratio 2:1.
They decided to close the business on 31 December 2012. The partnership assets and liabilities at
31 December 2012 were:

£
Premises 60 000
Motor vehicles 14 000
Fixtures and fittings 9 400
Inventory 18 700
Trade receivables 12 400
Trade payables 10 000
Accrued expenses 1 100
Bank loan 10 000
Bank overdraft 400
Capital accounts:
Martina 50 000
Naju 40 000
Current accounts:
Martina 4 400 Cr
Naju 1 400 Dr

Additional information at 31 December 2012:

1. Premises were sold to Highton & Co for £65 000.

2. The partners took the motor vehicles at valuation: Martina £4 500, Naju £7 000.
3. Fixtures and fittings and the inventory were sold for £21 000.
4. A bad debt of £400 was written off the trade receivables and 2.5% cash discount was allowed
on the remaining debts.
5. Accrued expenses were paid in full and trade payables were paid less 2% cash discount.
6. The Bank loan was repaid.
7. Dissolution expenses were £2 700.
8. A settlement cheque was paid to each of the partners from the bank account.

P42221A 12
 Required:

(a) State two reasons why a partnership may dissolve.

(4)

(b) Explain how the provisions of the 1890 Partnership Act apply to partners’:

(i) salaries
(ii) interest on loans.
(4)

(c) Prepare, at 31 December 2012, the partnership:

(i) Dissolution account

(9)

(ii) Capital accounts of Martina and Naju

(4)

(iii) Bank account.

(7)

(d) Evaluate the need for a partnership agreement.

(4)
(Total 32 marks)
Answer space for question 7 is on pages 34 to 36 of the question paper.

P42221A 13
 Paper Reference(s)

6001/01
London Examinations GCE
Accounting (Modular Syllabus)
Advanced Subsidiary
Unit 1 – The Accounting System and
Costing
Wednesday 15 May 2013 – Morning

Source booklet for use with

Questions 1 to 7.

Do not return the insert with the

question paper.

Printer’s Log. No.

P42291A Turn over

*P42291A*
W850/6001/57570 1/1/1

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2013 Pearson Education Ltd.
 SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Avar is in business wholesaling high quality clothing. She does not maintain a full set of accounts
but does maintain a bank account together with other memorandum records. The following
information is available for the year ended 30 April 2013:

1. Bank account
£ £
Cash sales banked 13 100 Balance b/d 6 000
Cheques from customers 65 300 Payments to suppliers 46 200
Sale of fixtures and fittings 600 Loan repayment 2 000
Fixtures and fittings 8 200
Wages 24 000
Rent and rates 6 600
Balance c/d 17 300 Sundry expenses 3 300
96 300 96 300
Balance b/d 17 300

2. Avar paid the following from cash sales before banking:

£
Wages 4 800
Cleaning of premises 6 000
New computer 1 800
Drawings 5 000

3. Contained within the wages recorded in the bank account were £2 500 of Avar’s drawings.

4. Other balances:

At 1 May 2012 At 30 April 2013

£ £
Inventory 17 750 20 350
5% Bank loan 10 000 8 000
Trade receivables 23 400 29 600
Trade payables 19 000 21 800
Wages prepaid 850 -
Wages accrued - 1 450
Computer equipment (at valuation) 5 000 5 100
Fixtures and fittings (at valuation) 11 000 14 000

5. The 5% bank loan was taken out on 1 November 2011. Repayment is by five equal annual
amounts on 1 November of each year. No interest has been paid on the outstanding loan for the
year ended 30 April 2013.

6. The Bank Statement received from the bank showed an entry of £620 for bank overdraft
charges. No entries for these charges had been made in Avar’s bank account.

P42291A 2
 7. During the year a debtor who had bought goods in September 2012 was unable to pay her debt.
Avar received a cheque for £800 in February 2013, being a payment of £0.25 for every £1 of
debt. The balance was immediately written off as irrecoverable.

8. A 5% provision for doubtful debts is to be created on trade receivables at 30 April 2013.

Required:

(a) Calculate Avar’s:

(i) capital at 1 May 2012

(3)

(ii) revenue (sales) for the year ended 30 April 2013

(5)

(iii) purchases for the year ended 30 April 2013.

(3)

(b) Prepare the Wages account for the year ended 30 April 2013.
(6)

(c) Prepare the:

(i) Statement of Comprehensive Income for the year ended 30 April 2013
(15)

(ii) Statement of Financial Position at 30 April 2013.

(12)

(d) Evaluate whether a sole trader such as Avar should maintain a full set of double entry accounts.
(8)

(Total 52 marks)

Answer space for question 1 is on pages 2 to 8 of the question paper.

P42291A 3 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 2

2. Giant Burgers is in business manufacturing and selling packs of vegetable burgers. The following
balances were available for the year ended 30 April 2013:

£
Purchases of raw materials 62 000
Production wages 280 000
Salaries – Production management 53 000
Administration staff 84 500
Machinery and equipment repairs 28 650
Packaging 27 000
Marketing 52 900
Rent and rates 22 000
Electricity and gas 15 500
Sundry expenses – Production 18 750
Administration 26 000
Non-current assets (at cost):
Machinery and equipment 125 000
Fixtures and fittings 80 000
Provisions for depreciation:
Machinery and equipment 75 000
Fixtures and fittings 14 000
Inventory at 1 May 2012:
Raw materials 4 500
Work in progress 6 000
Finished goods 12 000 packs of 24 000

Additional information at 30 April 2013:

1. Inventory: Raw materials £7 500

Work in progress £4 000
Finished goods 18 000 packs at transfer value

2. On 1 January 2013 packaging was purchased for £12 000. Half of this packaging remained on
hand at 30 April 2013.

3. Electricity and gas of £500 is accrued. Marketing of £1 800 is prepaid.

4. Rent and rates, electricity and gas are to be apportioned 70% to production and 30% to
administration.

5. Depreciation is charged as follows:

Machinery and equipment 30% per annum reducing balance method

Fixtures and fittings 15% per annum straight line method.

6. During the year 288 000 packs of vegetable burgers were produced and transferred to finished
goods at an agreed transfer value of £2 per pack.

P42291A 4
 7. Giant Burgers markets vegetable burgers for £3 per pack. Sales were made to three types of
customer and were as follows:

Farmers’ markets 66 000 packs at £3 per pack

Sales on internet 140 000 packs at £3 per pack less 10% trade discount
Tulip Supermarkets 76 000 packs at £3 per pack less 25% trade discount

Required:

(a) Prepare the Manufacturing Account for the year ended 30 April 2013, clearly showing the
profit or loss on manufacture.
(14)

(b) Calculate, for the year ended 30 April 2013, the:

(i) Prime cost of producing one pack of vegetable burgers

(3)

(ii) Production cost of producing one pack of vegetable burgers.

(3)

(c) State one reason why Giant Burgers may wish to transfer production to finished goods at an
agreed transfer price.
(2)

(d) Prepare the Statement of Comprehensive Income for the year ended 30 April 2013.
(18)

(e) Explain why the depreciation recorded in the Statement of Comprehensive Income is an
example of both the going concern and the consistency accounting concepts.
(4)

Tulip Supermarkets has offered to double its order to 152 000 packs next year if Giant Burgers
increases the trade discount on the total order to 35%.

(f) Evaluate this offer from Tulip Supermarkets.

(8)

(Total 52 marks)

Answer space for question 2 is on pages 9 to 15 of the question paper.

P42291A 5 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 3

3. The following balances remained in the books of Arena Sports Club after completion of the Income
and Expenditure Account for the year ended 30 April 2013:

£
Accumulated fund 25 400
Surplus of income over expenditure 900
Clubhouse (at cost) 30 000
Provision for depreciation of clubhouse 4 200
Equipment (at cost) 4 500
Provision for depreciation of equipment 1 100
Subscriptions in arrears 220
Subscriptions in advance 1 400
Trade payables 8 700
Inventory of refreshments 1 700
Bank 5 100 Dr
Other payables – sundry expenses 600
Suspense account 780 Dr

After completion of the Income and Expenditure Account the following were discovered:

1. A payment of £790 to a creditor, Eastern Drinks, had been correctly recorded in the Bank
Account, but had been recorded as £610 in the Eastern Drinks Account.

2. An entry for cash sales of refreshments, £1 850, had been correctly entered in the Revenue
(Sales) Account, but recorded as £1 250 in the Bank Account.

3. A credit purchase of equipment from ESB Sports, £1 500, had been omitted from the books.
Depreciation of £300 would be chargeable at 30 April 2013 on this equipment.

4. A cheque for £100 for a subscription paid in advance had been dishonoured by the Bank.

5. An invoice from Mali Supplies for sundry expenses, £3 090, was received on 5 May 2013. The
sundry expenses related to the year ended 30 April 2013.

6. A stock sheet of refreshments, £630, had been omitted from the inventory count (stock take)
on 30 April 2013.

Required:

(a) Prepare the Journal entries to correct items (1) to (6) above. Narratives are not required.
(14)

(b) Calculate the revised surplus/deficit for the year ended 30 April 2013.
(6)

(c) Prepare the Statement of Financial Position at 30 April 2013.

(15)

P42291A 6
 The Committee of Arena Sports Club has decided to offer a 10 year membership at the rate of £700
per member in the year ending 30 April 2014. The current annual membership subscription is £100
per member.

It is estimated that the offer will be accepted by 30 members, who have not yet paid their annual
subscriptions for the year ending 30 April 2014.

(d) Calculate the net effect that this proposal would have upon the:

(i) subscriptions recorded in the Income and Expenditure Account for the year ending
30 April 2014
(ii) bank balance recorded in the Statement of Financial Position at 30 April 2014.
(4)

(e) Prepare the 10 year Membership Subscription Account as it will appear for the year ending
30 April 2014.
(5)

(f) Evaluate the Committee of Arena Sports Club’s decision to offer a 10 year membership for
£700.
(8)

(Total 52 marks)

Answer space for question 3 is on pages 16 to 20 of the question paper.

P42291A 7 Turn over

 SECTION B

SOURCE MATERIAL FOR USE WITH QUESTION 4

4. Ashraf, Bashar and Chung are in partnership. The partnership agreement states:

 Interest is charged on drawings at the rate of 4% per annum

 Interest is paid on capital at the rate of 6% per annum
 Chung is entitled to a salary of £16 000 per annum
 The residue of profits or losses is shared in the ratio 4:2:3.

The following information is available for the year ended 31 March 2013:

1. Balances 1 April 2012:

Capital accounts Current accounts

£ £
Ashraf 25 000 1 420 Cr
Bashar 15 000 860 Cr
Chung 50 000 200 Dr

2. Drawings (excluding salary paid) for the year:

£
Ashraf 9 000
Bashar 3 500
Chung 4 000

3. Halfway through the year, on 30 September 2012, Chung decided to reduce his involvement in
the partnership. The partners agreed that:

 Chung would reduce his capital to £30 000, withdrawing £8 000 by cheque. The other
£12 000 would remain in the partnership as a loan receiving 5% interest per annum
 Chung would no longer receive a salary
 The new ratio for sharing profits and losses would be 2:2:1
 All partners would continue to be charged interest on drawings at the rate of 4% per annum
and receive interest on capital at 6% per annum.

4. The profit for the year was £30 140, after charging interest on the loan from Chung. The profit
was generated evenly throughout the year.

P42291A 8
 Required:

(a) Explain how a loan made by a partner, over and above the agreed capital, will be treated in the
financial statements.
(4)

(b) Prepare, for the year ended 31 March 2013, the:

(i) appropriation section of the Statement of Comprehensive Income

(15)

(ii) Capital Account of Chung

(3)

(iii) Current Account of Chung.

(6)

(c) Evaluate the need for a partnership agreement.

(4)

(Total 32 marks)

Answer space for question 4 is on pages 21 to 24 of the question paper.

P42291A 9 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Home Oil buys and sells heating oil. The following purchases and sales of oil took place in the three
months ended 31 March 2013:

1 January Balance b/d 8 000 litres @ £0.80 per litre

January Purchases 15 000 litres @ £1.00 per litre

Sales 12 000 litres

February Purchases 15 000 litres @ £1.25 per litre

Sales 16 000 litres

March Purchases 12 000 litres @ £1.50 per litre

Sales 8 000 litres

Additional information for the three months ended 31 March 2013:

1. Home Oil marked up the cost of the heating oil to cover distribution costs and administration
costs. Home Oil sold to customers at the following rates:

January £1.50 per litre

February £1.75 per litre
March £2.00 per litre

2. Home Oil uses the First In First Out (FIFO) perpetual inventory method of inventory valuation

3. Distribution costs were £4 750. Administration costs were £8 300.

P42291A 10
 Required:

(a) Distinguish between inventory rotation and inventory valuation.

(4)

(b) Calculate the value of the closing inventory at 31 March 2013.

(6)

(c) Prepare the Statement of Comprehensive Income for the three months ended 31 March 2013.
(10)

Home Oil has been considering changing the method of inventory valuation to Last In First Out
(LIFO) perpetual inventory.

(d) (i) Calculate the value of the inventory at 31 March 2013 if the Last in First Out (LIFO)
perpetual inventory method had been used.
(6)

(ii) State the effect on the gross profit if Home Oil had used the Last In First Out (LIFO)
method.
(2)

(e) Evaluate the potential effect of the change to Last In First Out (LIFO) perpetual inventory.
(4)

(Total 32 marks)

Answer space for question 5 is on pages 25 to 28 of the question paper.

P42291A 11 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Shopalot purchased a building which it converted into a shopping centre with ten separate shops of
equal floor area. The building also has walkways and seating areas between the shops.

On 30 April 2013 Shopalot completed its first year of trading. The following information is available:

1. Purchase price of the building £500 000

Conversion of the building £200 000
Purchase of computer network £150 000

2. On 1 May 2012, Shopalot invested £400 000 cash and obtained a 10 year 8% Bank loan of
£550 000. Interest is charged on the loan on 30 April each year.

3. Nine of the ten shops were rented out throughout the year. The tenth shop was unoccupied
throughout the year.

4. Shopalot received the following income:

 Rental of £4 000 per quarter (three months) per shop

 A service charge of £1 500 per quarter (three months) per occupied shop for security and
cleaning
 2% of the revenue (sales) of each shop

5. The total revenue (sales) of the nine occupied shops for the year was £1 350 000.

6. Depreciation was charged as follows:

 Building – 2% per annum straight line method

 Conversion of building – equal instalments over a 10 year period
 Computer network – 30% reducing balance method

7. Other expenses paid:

£
Security 30 000
Cleaning 21 000
Administration 24 500
Electricity 9 700
Government rates 17 500

8. On 30 April 2013 the following were owing to Shopalot:

 Rent by two shops for the last quarter (three months) of the year
 Service charge by two shops for the last quarter (three months) of the year

9. On 30 April 2013 the following was owed by Shopalot:

 Government rates £9 000.

P42291A 12
 Required:

(a) Prepare for Shopalot, for the year ended 30 April 2013, the:

(i) Statement of Comprehensive Income

(12)

(ii) summarised Bank Account.

(8)

(b) Prepare the Statement of Financial Position extract, showing the Non-current Assets and
Current Assets sections only.
(4)

(c) Calculate the return on capital employed for Shopalot.

(4)

(d) Evaluate the financial position of Shopalot.

(4)

(Total 32 marks)

Answer space for question 6 is on pages 29 to 32 of the question paper.

P42291A 13 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 7

7. Adnam buys and sells goods on credit. The following balances were available at 31 March 2013:

£
Capital 35 000
Inventory 37 000
Trade payables 35 000
Trade receivables 13 000
Non-current assets 25 000
Bank overdraft 5 000

Adnam used a mark-up of 50% for the year ended 31 March 2013.

Required:

(a) Calculate the:

(i) Current ratio

(3)

(ii) Liquid (acid test) ratio.

(3)

(b) Comment upon the adequacy of the ratios in (a) above.

(2)

P42291A 14
 Creditors are threatening to withhold supplies of inventory unless Adnam reduces his debt to them.
He proposes the following actions:

Action 1 Hold a sale of inventory by reducing his mark-up to 25%. He estimates that revenue
(sales) will be £20 000, half of which will be on credit and half paid by cheque.

Action 2 Offer trade receivables at 31 March 2013 a cash discount of 10%. He estimates that
trade receivables of £5 000 will accept the offer.

Action 3 Pay trade payables valued at £12 000, less 5% cash discount.

Required:

(c) Complete the following chart in the answer booklet, showing the effect of each of these actions
upon the:

(i) Current Assets

(ii) Current Liabilities

Current Assets Current Liabilities

plus/minus/no effect Value (£) plus/minus/no effect Value (£)

Action 1

Action 2

Action 3

(12)

(d) Prepare the Statement of Financial Position extract at 31 March 2013 of Adnam, showing the
(i) Current Assets and (ii) Current Liabilities if all the Actions 1 to 3 were implemented.
(8)

(e) Evaluate the financial position of Adnam after implementing all the Actions 1 to 3.
(4)

(Total 32 marks)

Answer space for question 7 is on pages 33 to 36 of the question paper.

P42291A 15
 Paper Reference(s)

WAC01/01
Pearson Edexcel
International Advanced Level
Accounting (Modular Syllabus)
Unit 1 – The Accounting System and
Costing
Friday 10 January 2014 – Morning

Source booklet for use with

Questions 1 to 7.

Do not return the insert with the

question paper.

Printer’s Log. No.

P43182A Turn over

*P43182A*
W850/WAC01/57570 1/1/1/1/1/1/1/1

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2014 Pearson Education Ltd.
 SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Anthi and Keri started a partnership on 1 January 2013. On that date the partners placed the
following assets and liabilities into the business:

Anthi
Goodwill £75 000
Delivery vehicle £9 000
Inventory £16 000
Trade receivables £7 000
Trade payables £15 000
Keri
Land and building £80 000

Additional information:

(1) The partnership agreement stated that:

• Goodwill would not be maintained in the books of the partnership
• Interest on capital would be paid at the rate of 5% per annum
• Anthi would receive a salary of £15 000 per annum
• Profits and losses would be shared three fifths Anthi, two fifths Keri
• All appropriations would be recorded in a current account for each partner.

(2) On 1 July 2013, Keri paid an additional £20 000 capital into the business bank account.

(3) The partnership received a £50 000, 8% bank loan on 1 April 2013. The loan is repayable in
five equal annual instalments on the 1 April of each year. The first repayment will be made on
1 April 2014.

(4) Balances, other than partners’ capital and current accounts, at 31 December 2013 were:
£
Inventory 63 000
Gross profit 103 350
Land and buildings (at cost) 80 000
Delivery vehicles (at cost) 19 000
Fixtures and fittings (at cost) 14 000
Trade payables 25 900
Trade receivables 18 300
8% Bank loan 50 000
Cash and bank 7 800
Wages and salaries 47 000
Bank loan interest 2 000
Delivery vehicle expenses 12 250
Carriage inwards 500 Cr
Sundry expenses 21 900
Drawings: Anthi 5 500
Keri 6 000

P43182A 2
 (5) At 31 December 2013:
• Wages and salaries includes the £15 000 salary paid to Anthi
• Delivery vehicle expenses of £650 were prepaid
• No depreciation is to be charged on land and buildings
• An additional delivery vehicle was purchased on 1 July 2013. Depreciation is to be
charged at the rate of 20% per annum using the reducing balance method. Depreciation is
charged pro rata to the months of ownership in the year of purchase.
• Fixtures are to be depreciated at the rate of 10% per annum using the straight-line method.
The fixtures and fittings were purchased on 1 January 2013 and the residual value will be
£2 000
• A bad debt of £800 was to be written off as irrecoverable. A provision for doubtful debts
is to be created at 4% of remaining debts.

Required:

(a) Prepare the Journal at 1 January 2013, including narratives, to:

(i) open the books of the partnership

(3)

(ii) remove goodwill from the books of the partnership.

(3)

(b) Prepare for the year ended 31 December 2013, the:

(i) Statement of Comprehensive Income and Appropriation Account

(15)

(ii) Capital accounts of the partners

(4)

(iii) Current accounts of the partners.

(4)

(c) Prepare the Statement of Financial Position at 31 December 2013.

(15)

(d) Evaluate the decision of the partners to not charge depreciation for land and buildings.
(8)

(Total 52 marks)

Answer space for question 1 is on pages 2 to 8 of the question paper.

P43182A 3 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 2

2. Gary is a sole trader. He rents a shop at Easton Golf Course where he is also a golf instructor. His
inventory count (stock take) at 31 December 2013 was valued at £15 600. On inspection of his
inventory records he discovered that:

(1) Golf equipment costing £900 had been omitted from the inventory count.

(2) An inventory sheet had been over cast by £750.

(3) Golf clothing costing £1 000 had been damaged and could now only be sold at half of the cost
price.

(4) Golf equipment with a selling price of £1 200, on sale or return to a member, had not been
included in the inventory count. The member had not stated an intention to buy or return the
goods.

(5) Golf equipment with a selling price of £525 had not been included in the inventory count.

Gary marks up all golf clothing and golf equipment by 50%.

Required:

(a) Calculate the corrected value of the inventory at 31 December 2013 after the above adjustments
(1) to (5) are made.
(10)

The Cash Book (Summary) for Gary for the year ended 31 December 2013 was as follows:

Cash Book (Summary)

£ £
Balance b/d 1 680 Payments to suppliers 38 900
Receipts from customers 52 960 Playing fees paid to the Course 25 000
Playing fees collected 28 800 Fixtures and fittings 400
Course salary received 4 500 Rent 1 900
Golf tuition fees 8 250 Heat and light 1 760
Drawings 29 500
Balance c/d 5 690 Sundry expenses 4 420

101 880 101 880

Balance b/d 5 690

P43182A 4
 Additional information:

(1) Gary collects playing fees on behalf of the Course and keeps 5% of all playing fees collected.
The balance of 95% has to be paid to the Course.

(2) Easton Golf Course pays Gary a salary of £5 000 per annum.

(3) Gary keeps all the profit from the sale of golf clothing and golf equipment.

(4) Easton Golf Course charges Gary a rent of £2 150 per annum for the shop.

(5) Balances at: 1 January 31 December

2013 2013
£ £
Fixtures and fittings (at valuation) 1 700 1 650
Inventory 12 850 ?
Trade receivables 6 170 6 330
Trade payables 6 700 9 350
Prepaid heat and light 300 -
Accrued heat and light - 460

Required:

(b) Calculate the capital of Gary at 1 January 2013.

(3)

(c) Prepare the:

(i) Statement of Comprehensive Income for the year ended 31 December 2013
(13)

(ii) Statement of Financial Position at 31 December 2013.

(12)

(d) Calculate for Gary, the current ratio at:

(i) 1 January 2013

(3)

(ii) 31 December 2013.

(3)

(e) Evaluate the liquidity of Gary’s business.

(8)

(Total 52 marks)

Answer space for question 2 is on pages 9 to 16 of the question paper.

P43182A 5 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 3

3. Vaso Technology manufactures components for the electronics industry. The following balances are
available from the books on 31 December 2013:

£
Inventory 1 January 2013:
Raw materials 30 000
Work in progress 52 000
Finished goods 78 000
Purchases of raw materials 195 000
Production wages 134 000
Packaging 25 000
Management salaries:
Production 85 000
Office 106 000
Production equipment (at cost) 110 000
Production equipment provision for depreciation 46 000
Premises rent 30 000
Sundry expenses 24 000
Revenue (sales) 650 000
Office computers (at cost) ?
Office computers provision for depreciation ?

Additional information at 31 December 2013:

(1) Vaso Technology values the inventory on the First In First Out (FIFO) basis.

The following summary relates to the raw materials:

1 January 2013 Inventory 15 000 items @ £2 each
January – June Purchases 30 000 items @ £2.50 each
July – December Purchases 40 000 items @ £3 each
January – December Issues 60 000 items

Work in progress was valued at £49 000

Finished goods were valued at £63 000

(2) Production wages accrued £6 500.

(3) Packaging is 70% direct and 30% indirect.

(4) Premises rent and sundry expenses are to be apportioned 75% to production and 25% to the
office.

(5) Depreciation is charged on production equipment at the rate of 25% per annum reducing
balance method.

(6) Vaso Technology transfers production to finished goods at £5 per item. During the year 96 000
items were completed and transferred.

P43182A 6
 Required:

(a) Prepare the Manufacturing Account for the year ended 31 December 2013.
(18)

The following information relates to the office computers:

1 January 2011 Purchased office computers for £20 000

30 June 2013 Sold office computers costing £6 000 for £2 500
1 October 2013 Purchased office computers for £8 000 paying by cheque

Vaso Technology has the following depreciation policy:

• Office computers are depreciated at the rate of 20% per annum using the straight-line method
• Depreciation is charged pro rata to the months of ownership in the year of purchase or sale
• Vaso Technology uses a disposal account for the sale of office computers.

(b) Prepare the following ledger accounts for the year ended 31 December 2013:

(i) Office Computers Account

(6)

(ii) Office Computers Provision for Depreciation Account.

(8)

(c) Prepare the Statement of Comprehensive Income for the year ended 31 December 2013,
showing clearly the gross profit and the profit for the year.
(12)

(d) Evaluate the use of the straight-line method of depreciation for office computers.
(8)

(Total 52 marks)

Answer space for question 3 is on pages 17 to 22 of the question paper.

P43182A 7 Turn over

 SECTION B

SOURCE MATERIAL FOR USE WITH QUESTION 4

4. Ranatunga maintains double-entry records and also control accounts.

(1) On 1 January 2013 he had the following balances on his Purchases Ledger Control Account:

£430 Dr
£78 000 Cr

(2) Ranatunga extracted the following balances from his Ledger on 31 December 2013:

£
Cheques paid to suppliers 497 000
Refund from supplier 4 000
Discount received 8 200
Cash purchases 24 600
Sales ledger contra/Purchases ledger contra 2 150
Credit purchases 505 000
Returns outwards 15 600

(3) After extracting the balances in (2) above, the following errors were discovered:

• A discount received of £200 had been debited to the Discount Received Account
• A purchase of goods from Archana, £750, had been correctly entered in the Purchases Day
Book but had been recorded in Archana’s account at £570
• The Purchases Day Book had been undercast by £2 500
• A purchase from C. Vissing, £300, had been entered into the account of B. Vincent.

(4) On 1 January 2014 the Purchases Ledger Control Account had the following balances:

£650 Dr
? Cr

Required:

(a) Prepare the Journal correcting the errors in (3) above. Narratives are not required.
(8)

(b) Prepare the Purchases Ledger Control Account for the year ended 31 December 2013, following
the correction of all errors.
(16)

(c) Suggest two possible reasons for a debit balance in the Purchases Ledger Control Account.
(4)

(d) Evaluate the use of control accounts.

(4)

(Total 32 marks)
Answer space for question 4 is on pages 23 to 25 of the question paper.

P43182A 8
 SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Simply Luxury is a business with a Head Office and three stores: East Town, Weststead and
Northerton. For many years the cost of operating the Head Office has been allocated to the three
stores on a set basis.
The following information is available for the year ended 30 November 2013:
(1) Draft financial statement:
East Town Weststead Northerton Head Office
£000’s £000’s £000’s £000’s
Profit before
Head Office costs 750 260 500 -
Less Set
Head Office costs (500) (350) (482) (1 332)
Profit/(loss) after
Head Office costs 250 profit (90) loss 18 profit

(2) Head Office overheads costs were:

Marketing £180 000
Premises running costs £180 000
Management salaries £900 000
Depreciation £72 000
£1 332 000
(3) Other information:
East Town Weststead Northerton
Staff (number) 22 5 9
Floor area (sq m) 700 500 600
Computers & fixtures (£000’s) 18 6 12
Sales revenue (£000’s) 1 500 600 900

Required:

(a) Distinguish between allocation and apportionment as used in overhead recovery.

(4)

Simply Luxury is considering allocating Head Office overheads for each store on the most appropriate
basis.
(b) (i) Using the most appropriate basis, calculate the Head Office overheads for each store.
(16)
(ii) Calculate the revised profit/loss for each store for the year.
(8)
It has been suggested that the profit for the year of Simply Luxury would increase if the Weststead
store is closed.

(c) Evaluate this statement.

(4)
(Total 32 marks)
Answer space for question 5 is on pages 26 to 30 of the question paper.

P43182A 9 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Nemesh is considering the purchase of the Value Store. The following information relates to the
Value Store for the last financial year:

£
Inventory 1 December 2012 30 000
Inventory 30 November 2013 25 000
Revenue (sales) 325 000
Purchases 245 000
Expenses (including depreciation) 65 000

Required:

(a) Calculate, for the year ended 30 November 2013, the:

(i) Percentage mark-up

(4)

(ii) Profit for the year as a percentage of Revenue (Sales).

(4)

The owner of the Value Store had stated that he planned to use a mark-up of 25% for the year.

(b) Suggest two possible reasons for any variance in the mark-up between planned and actual.
(4)

The purchase price of the business is £200 000. Nemesh would fund the purchase by using his
£100 000 personal savings plus a £100 000 8% bank loan. He estimates that his expenses for the
first year of trading would be £60 000 (including depreciation and bank loan interest).

(c) (i) Distinguish between owner’s capital and capital employed.

(4)

(ii) State the formula used when calculating return on capital employed.
(3)

(iii) Calculate the return on capital employed if Nemesh purchases the Value Store.
(4)
Nemesh finds that the net tangible assets of the business are £150 000.

(d) (i) Name the term used to describe the £50 000 that Nemesh must pay above the value of the
net tangible assets.
(1)

(ii) Explain two reasons why Nemesh might make this payment to the seller.
(4)

(e) Evaluate whether Nemesh should purchase the Value Store.

(4)
(Total 32 marks)
Answer space for question 6 is on pages 32 to 35 of the question paper.

P43182A 10
 SOURCE MATERIAL FOR USE WITH QUESTION 7

7. The Treasurer of the Bourne Cricket Club extracted the following balances from the Club’s books
on the 31 December 2013, before completing the Income and Expenditure Account:

£
Accumulated fund 30 200
Subscriptions 8 850
Competition fees received 1 000
Purchases of refreshments 14 650
Sales of refreshments 30 250
Clubhouse (at cost) 35 000
Equipment (at cost) 4 800
Provision for depreciation – equipment 3 200
Wages and salaries 18 950
Other expenses 10 550
Trade payables 9 850
Bank overdraft 600

Additional information:

1. The books contained the following errors and omissions:

(i) Donations received of £250 had been recorded as subscriptions
(ii) Equipment costing £1 800 with a carry over (net book value) of £700 was sold in December
for £800. The receipt was by cheque. No entries had been made in the books to record this
transaction.

Required:

(a) Prepare the Trial Balance of Bourne Cricket Club at 31 December 2013, after all adjustments
have been made.
(16)
Additional information:

Subscriptions paid in advance and in arrears at 31 December 2013:

Paid in advance £1 410 In arrears £1 360

(b) (i) Prepare the Subscriptions Account for the year ended 31 December 2013.
(8)

(ii) Explain why subscriptions require adjustment for sums paid in advance and in arrears.
(4)

The Committee of the Bourne Cricket Club has been considering offering a five-year membership
at a discount as an alternative to the current annual membership. The Treasurer informed members
at the Annual General Meeting that in his opinion the five-year discounted membership would bring
no benefits to the Club.

(c) Evaluate the Treasurer’s statement.

(4)
(Total 32 marks)
Answer space for question 7 is on pages 36 to 39 of the question paper.

P43182A 11
 Paper Reference(s)

WAC01/01
Pearson Edexcel
International Advanced Level
Accounting (Modular Syllabus)
Unit 1 – The Accounting System and
Costing
Friday 10 January 2014 – Morning

Source booklet for use with

Questions 1 to 7.

Do not return the insert with the

question paper.

Printer’s Log. No.

P43182A Turn over

*P43182A*
W850/WAC01/57570 1/1/1/1/1/1/1/1

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2014 Pearson Education Ltd.
 SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Anthi and Keri started a partnership on 1 January 2013. On that date the partners placed the
following assets and liabilities into the business:

Anthi
Goodwill £75 000
Delivery vehicle £9 000
Inventory £16 000
Trade receivables £7 000
Trade payables £15 000
Keri
Land and building £80 000

Additional information:

(1) The partnership agreement stated that:

• Goodwill would not be maintained in the books of the partnership
• Interest on capital would be paid at the rate of 5% per annum
• Anthi would receive a salary of £15 000 per annum
• Profits and losses would be shared three fifths Anthi, two fifths Keri
• All appropriations would be recorded in a current account for each partner.

(2) On 1 July 2013, Keri paid an additional £20 000 capital into the business bank account.

(3) The partnership received a £50 000, 8% bank loan on 1 April 2013. The loan is repayable in
five equal annual instalments on the 1 April of each year. The first repayment will be made on
1 April 2014.

(4) Balances, other than partners’ capital and current accounts, at 31 December 2013 were:
£
Inventory 63 000
Gross profit 103 350
Land and buildings (at cost) 80 000
Delivery vehicles (at cost) 19 000
Fixtures and fittings (at cost) 14 000
Trade payables 25 900
Trade receivables 18 300
8% Bank loan 50 000
Cash and bank 7 800
Wages and salaries 47 000
Bank loan interest 2 000
Delivery vehicle expenses 12 250
Carriage inwards 500 Cr
Sundry expenses 21 900
Drawings: Anthi 5 500
Keri 6 000

P43182A 2
 (5) At 31 December 2013:
• Wages and salaries includes the £15 000 salary paid to Anthi
• Delivery vehicle expenses of £650 were prepaid
• No depreciation is to be charged on land and buildings
• An additional delivery vehicle was purchased on 1 July 2013. Depreciation is to be
charged at the rate of 20% per annum using the reducing balance method. Depreciation is
charged pro rata to the months of ownership in the year of purchase.
• Fixtures are to be depreciated at the rate of 10% per annum using the straight-line method.
The fixtures and fittings were purchased on 1 January 2013 and the residual value will be
£2 000
• A bad debt of £800 was to be written off as irrecoverable. A provision for doubtful debts
is to be created at 4% of remaining debts.

Required:

(a) Prepare the Journal at 1 January 2013, including narratives, to:

(i) open the books of the partnership

(3)

(ii) remove goodwill from the books of the partnership.

(3)

(b) Prepare for the year ended 31 December 2013, the:

(i) Statement of Comprehensive Income and Appropriation Account

(15)

(ii) Capital accounts of the partners

(4)

(iii) Current accounts of the partners.

(4)

(c) Prepare the Statement of Financial Position at 31 December 2013.

(15)

(d) Evaluate the decision of the partners to not charge depreciation for land and buildings.
(8)

(Total 52 marks)

Answer space for question 1 is on pages 2 to 8 of the question paper.

P43182A 3 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 2

2. Gary is a sole trader. He rents a shop at Easton Golf Course where he is also a golf instructor. His
inventory count (stock take) at 31 December 2013 was valued at £15 600. On inspection of his
inventory records he discovered that:

(1) Golf equipment costing £900 had been omitted from the inventory count.

(2) An inventory sheet had been over cast by £750.

(3) Golf clothing costing £1 000 had been damaged and could now only be sold at half of the cost
price.

(4) Golf equipment with a selling price of £1 200, on sale or return to a member, had not been
included in the inventory count. The member had not stated an intention to buy or return the
goods.

(5) Golf equipment with a selling price of £525 had not been included in the inventory count.

Gary marks up all golf clothing and golf equipment by 50%.

Required:

(a) Calculate the corrected value of the inventory at 31 December 2013 after the above adjustments
(1) to (5) are made.
(10)

The Cash Book (Summary) for Gary for the year ended 31 December 2013 was as follows:

Cash Book (Summary)

£ £
Balance b/d 1 680 Payments to suppliers 38 900
Receipts from customers 52 960 Playing fees paid to the Course 25 000
Playing fees collected 28 800 Fixtures and fittings 400
Course salary received 4 500 Rent 1 900
Golf tuition fees 8 250 Heat and light 1 760
Drawings 29 500
Balance c/d 5 690 Sundry expenses 4 420

101 880 101 880

Balance b/d 5 690

P43182A 4
 Additional information:

(1) Gary collects playing fees on behalf of the Course and keeps 5% of all playing fees collected.
The balance of 95% has to be paid to the Course.

(2) Easton Golf Course pays Gary a salary of £5 000 per annum.

(3) Gary keeps all the profit from the sale of golf clothing and golf equipment.

(4) Easton Golf Course charges Gary a rent of £2 150 per annum for the shop.

(5) Balances at: 1 January 31 December

2013 2013
£ £
Fixtures and fittings (at valuation) 1 700 1 650
Inventory 12 850 ?
Trade receivables 6 170 6 330
Trade payables 6 700 9 350
Prepaid heat and light 300 -
Accrued heat and light - 460

Required:

(b) Calculate the capital of Gary at 1 January 2013.

(3)

(c) Prepare the:

(i) Statement of Comprehensive Income for the year ended 31 December 2013
(13)

(ii) Statement of Financial Position at 31 December 2013.

(12)

(d) Calculate for Gary, the current ratio at:

(i) 1 January 2013

(3)

(ii) 31 December 2013.

(3)

(e) Evaluate the liquidity of Gary’s business.

(8)

(Total 52 marks)

Answer space for question 2 is on pages 9 to 16 of the question paper.

P43182A 5 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 3

3. Vaso Technology manufactures components for the electronics industry. The following balances are
available from the books on 31 December 2013:

£
Inventory 1 January 2013:
Raw materials 30 000
Work in progress 52 000
Finished goods 78 000
Purchases of raw materials 195 000
Production wages 134 000
Packaging 25 000
Management salaries:
Production 85 000
Office 106 000
Production equipment (at cost) 110 000
Production equipment provision for depreciation 46 000
Premises rent 30 000
Sundry expenses 24 000
Revenue (sales) 650 000
Office computers (at cost) ?
Office computers provision for depreciation ?

Additional information at 31 December 2013:

(1) Vaso Technology values the inventory on the First In First Out (FIFO) basis.

The following summary relates to the raw materials:

1 January 2013 Inventory 15 000 items @ £2 each
January – June Purchases 30 000 items @ £2.50 each
July – December Purchases 40 000 items @ £3 each
January – December Issues 60 000 items

Work in progress was valued at £49 000

Finished goods were valued at £63 000

(2) Production wages accrued £6 500.

(3) Packaging is 70% direct and 30% indirect.

(4) Premises rent and sundry expenses are to be apportioned 75% to production and 25% to the
office.

(5) Depreciation is charged on production equipment at the rate of 25% per annum reducing
balance method.

(6) Vaso Technology transfers production to finished goods at £5 per item. During the year 96 000
items were completed and transferred.

P43182A 6
 Required:

(a) Prepare the Manufacturing Account for the year ended 31 December 2013.
(18)

The following information relates to the office computers:

1 January 2011 Purchased office computers for £20 000

30 June 2013 Sold office computers costing £6 000 for £2 500
1 October 2013 Purchased office computers for £8 000 paying by cheque

Vaso Technology has the following depreciation policy:

• Office computers are depreciated at the rate of 20% per annum using the straight-line method
• Depreciation is charged pro rata to the months of ownership in the year of purchase or sale
• Vaso Technology uses a disposal account for the sale of office computers.

(b) Prepare the following ledger accounts for the year ended 31 December 2013:

(i) Office Computers Account

(6)

(ii) Office Computers Provision for Depreciation Account.

(8)

(c) Prepare the Statement of Comprehensive Income for the year ended 31 December 2013,
showing clearly the gross profit and the profit for the year.
(12)

(d) Evaluate the use of the straight-line method of depreciation for office computers.
(8)

(Total 52 marks)

Answer space for question 3 is on pages 17 to 22 of the question paper.

P43182A 7 Turn over

 SECTION B

SOURCE MATERIAL FOR USE WITH QUESTION 4

4. Ranatunga maintains double-entry records and also control accounts.

(1) On 1 January 2013 he had the following balances on his Purchases Ledger Control Account:

£430 Dr
£78 000 Cr

(2) Ranatunga extracted the following balances from his Ledger on 31 December 2013:

£
Cheques paid to suppliers 497 000
Refund from supplier 4 000
Discount received 8 200
Cash purchases 24 600
Sales ledger contra/Purchases ledger contra 2 150
Credit purchases 505 000
Returns outwards 15 600

(3) After extracting the balances in (2) above, the following errors were discovered:

• A discount received of £200 had been debited to the Discount Received Account
• A purchase of goods from Archana, £750, had been correctly entered in the Purchases Day
Book but had been recorded in Archana’s account at £570
• The Purchases Day Book had been undercast by £2 500
• A purchase from C. Vissing, £300, had been entered into the account of B. Vincent.

(4) On 1 January 2014 the Purchases Ledger Control Account had the following balances:

£650 Dr
? Cr

Required:

(a) Prepare the Journal correcting the errors in (3) above. Narratives are not required.
(8)

(b) Prepare the Purchases Ledger Control Account for the year ended 31 December 2013, following
the correction of all errors.
(16)

(c) Suggest two possible reasons for a debit balance in the Purchases Ledger Control Account.
(4)

(d) Evaluate the use of control accounts.

(4)

(Total 32 marks)
Answer space for question 4 is on pages 23 to 25 of the question paper.

P43182A 8
 SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Simply Luxury is a business with a Head Office and three stores: East Town, Weststead and
Northerton. For many years the cost of operating the Head Office has been allocated to the three
stores on a set basis.
The following information is available for the year ended 30 November 2013:
(1) Draft financial statement:
East Town Weststead Northerton Head Office
£000’s £000’s £000’s £000’s
Profit before
Head Office costs 750 260 500 -
Less Set
Head Office costs (500) (350) (482) (1 332)
Profit/(loss) after
Head Office costs 250 profit (90) loss 18 profit

(2) Head Office overheads costs were:

Marketing £180 000
Premises running costs £180 000
Management salaries £900 000
Depreciation £72 000
£1 332 000
(3) Other information:
East Town Weststead Northerton
Staff (number) 22 5 9
Floor area (sq m) 700 500 600
Computers & fixtures (£000’s) 18 6 12
Sales revenue (£000’s) 1 500 600 900

Required:

(a) Distinguish between allocation and apportionment as used in overhead recovery.

(4)

Simply Luxury is considering allocating Head Office overheads for each store on the most appropriate
basis.
(b) (i) Using the most appropriate basis, calculate the Head Office overheads for each store.
(16)
(ii) Calculate the revised profit/loss for each store for the year.
(8)
It has been suggested that the profit for the year of Simply Luxury would increase if the Weststead
store is closed.

(c) Evaluate this statement.

(4)
(Total 32 marks)
Answer space for question 5 is on pages 26 to 30 of the question paper.

P43182A 9 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Nemesh is considering the purchase of the Value Store. The following information relates to the
Value Store for the last financial year:

£
Inventory 1 December 2012 30 000
Inventory 30 November 2013 25 000
Revenue (sales) 325 000
Purchases 245 000
Expenses (including depreciation) 65 000

Required:

(a) Calculate, for the year ended 30 November 2013, the:

(i) Percentage mark-up

(4)

(ii) Profit for the year as a percentage of Revenue (Sales).

(4)

The owner of the Value Store had stated that he planned to use a mark-up of 25% for the year.

(b) Suggest two possible reasons for any variance in the mark-up between planned and actual.
(4)

The purchase price of the business is £200 000. Nemesh would fund the purchase by using his
£100 000 personal savings plus a £100 000 8% bank loan. He estimates that his expenses for the
first year of trading would be £60 000 (including depreciation and bank loan interest).

(c) (i) Distinguish between owner’s capital and capital employed.

(4)

(ii) State the formula used when calculating return on capital employed.
(3)

(iii) Calculate the return on capital employed if Nemesh purchases the Value Store.
(4)
Nemesh finds that the net tangible assets of the business are £150 000.

(d) (i) Name the term used to describe the £50 000 that Nemesh must pay above the value of the
net tangible assets.
(1)

(ii) Explain two reasons why Nemesh might make this payment to the seller.
(4)

(e) Evaluate whether Nemesh should purchase the Value Store.

(4)
(Total 32 marks)
Answer space for question 6 is on pages 32 to 35 of the question paper.

P43182A 10
 SOURCE MATERIAL FOR USE WITH QUESTION 7

7. The Treasurer of the Bourne Cricket Club extracted the following balances from the Club’s books
on the 31 December 2013, before completing the Income and Expenditure Account:

£
Accumulated fund 30 200
Subscriptions 8 850
Competition fees received 1 000
Purchases of refreshments 14 650
Sales of refreshments 30 250
Clubhouse (at cost) 35 000
Equipment (at cost) 4 800
Provision for depreciation – equipment 3 200
Wages and salaries 18 950
Other expenses 10 550
Trade payables 9 850
Bank overdraft 600

Additional information:

1. The books contained the following errors and omissions:

(i) Donations received of £250 had been recorded as subscriptions
(ii) Equipment costing £1 800 with a carry over (net book value) of £700 was sold in December
for £800. The receipt was by cheque. No entries had been made in the books to record this
transaction.

Required:

(a) Prepare the Trial Balance of Bourne Cricket Club at 31 December 2013, after all adjustments
have been made.
(16)
Additional information:

Subscriptions paid in advance and in arrears at 31 December 2013:

Paid in advance £1 410 In arrears £1 360

(b) (i) Prepare the Subscriptions Account for the year ended 31 December 2013.
(8)

(ii) Explain why subscriptions require adjustment for sums paid in advance and in arrears.
(4)

The Committee of the Bourne Cricket Club has been considering offering a five-year membership
at a discount as an alternative to the current annual membership. The Treasurer informed members
at the Annual General Meeting that in his opinion the five-year discounted membership would bring
no benefits to the Club.

(c) Evaluate the Treasurer’s statement.

(4)
(Total 32 marks)
Answer space for question 7 is on pages 36 to 39 of the question paper.

P43182A 11
 Paper Reference(s)

WAC01/01
Pearson Edexcel
International Advanced Level
Accounting (Modular Syllabus)
Unit 1 – The Accounting System and
Costing
Wednesday 14 May 2014 – Morning

Source booklet for use with

Questions 1 to 7.

Do not return the insert with the

question paper.

Printer’s Log. No.

P43179RA Turn over

*P43179RA*
W850/WAC01/57570 1/1/1/1/1/1/1/2

This publication may be reproduced only in accordance with Pearson Education Ltd copyright policy. ©2014 Pearson Education Ltd.
 SECTION A

SOURCE MATERIAL FOR USE WITH QUESTION 1

1. Marianna owns an information technology consultancy business, advising customers on computer

hardware and software. The following balances were extracted from her books on 31 March 2014.

£
Revenue from consultancy 295 000
Commission received from software sales 45 600
Staff wages and salaries 154 000
Drawings 32 000
Rent and rates 36 000
Heating and electricity 6 300
Trade receivables 34 000
Trade payables 7 700
Internet and communication charges 5 800
Cash and bank 4 450 Dr
Marketing expenses 55 000
Disposal account 6 250 Cr
Non-current assets (at cost):
Fixtures and fittings 60 000
Computer equipment 76 000
Motor vehicles 90 000
Provisions for depreciation:
Fixtures and fittings 18 000
Computer equipment 40 000
Motor vehicles 36 000
6% Bank loan (repayable on 31 March 2020) 50 000
Capital 55 000

P43179RA 2
 Additional information at 31 March 2014:

(1) A customer was invoiced £7 500 for consultancy on 28 March 2014. This had not been
recorded in the books.

(2) During the year only 9 months’ rent and rates had been paid.

(3) Marketing expenses of £2 800 were pre-paid.

(4) The bank loan interest for the year is owing.

(5) Depreciation is to be charged as follows:

Fixtures and fittings at the rate of 15% per annum straight line
Computer equipment at the rate of 25% per annum reducing balance
Motor vehicles at the rate of 20% per annum straight line.

(6) Trade receivables of £1 500 are irrecoverable. A provision for doubtful debts of 5% of
remaining debts is to be created.

(7) On 1 April 2013 there was a credit balance on the Commission Received for Software
Sales Account of £600. During the year cheques totalling £45 000 were received from
the software company. On 31 March 2014 £2 900 commission was owed to Marianna by the
software company.

Required:

(a) Prepare the Commission Received on Software Sales Account for the year ended
31 March 2014, showing the transfer to the Statement of Comprehensive Income.
(6)

(b) Prepare the Statement of Comprehensive Income for the year ended 31 March 2014.
(16)

(c) Prepare the Statement of Financial Position at 31 March 2014.

(16)

Marianna is considering a major expansion of her business with the help of a new 10-year bank
loan of £200 000. The terms of the new bank loan are that repayment will be by 10 equal annual
instalments.

(d) Explain the treatment in the Statement of Financial Position for the:

(i) existing £50 000 6% bank loan (repayable on 31 March 2020)

(3)

(ii) proposed new bank loan of £200 000.

(3)

(e) Evaluate the use of accounting concepts in the preparation of financial statements.
(8)

(Total 52 marks)
Answer space for question 1 is on pages 2 to 8 of the question paper.

P43179RA 3 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 2

2. Leung buys and sells office furniture. The following information relates to his last two financial
years ended 30 April 2013 and 30 April 2014.

Statement of Comprehensive Income for the year ended

30 April 2013 30 April 2014
£ £
Revenue 700 000 750 000
Cost of sales (420 000) (500 000)
Gross profit 280 000 250 000
Less
General expenses (200 000) (200 000)
Loan interest (12 000) (12 000)
Depreciation (40 000) (30 000)
Profit for the year 28 000 8 000

Additional note:
80% of revenues for both years were on credit.

Statement of Financial Position at

30 April 2013 30 April 2014
£ £
Non-current assets
Cost 200 000 150 000
Accumulated depreciation (120 000) (90 000)
Carry over 80 000 60 000

Current assets
Inventory 105 000 80 000
Trade receivables 135 000 55 000
Cash and bank - 65 000
320 000 260 000
Capital and equity
Capital 1 May 2013 64 000 50 000
Profit for the year 28 000 8 000
92 000 58 000
Drawings (42 000) (8 000)
Capital 30 April 2014 50 000 50 000

Non-current liabilities
8% Loan 150 000 150 000
Current liabilities
Trade payables 60 000 60 000
Bank overdraft 60 000 -
320 000 260 000

P43179RA 4
 Required:

(a) Calculate the following ratios for both the years ended 30 April 2013 and 30 April 2014:

(i) Gross profit as a percentage of revenue

(ii) Percentage return on capital employed
(iii) Trade receivables collection period (in days)
(iv) Current ratio
(v) Liquid (acid test) ratio
(24)

(b) Suggest two possible reasons for the change in the gross profit as a percentage of revenue in
the year ended 30 April 2014.
(4)

(c) (i) Explain the term return on capital employed.

(4)

(ii) Comment upon the percentage return on capital employed for Leung’s business.
(2)

(d) (i) Explain the term idle funds.

(3)

(ii) Comment upon the liquidity ratios calculated for Leung’s business.
(3)

(e) State four reasons why Leung’s cash and bank balance has increased during the year ended
30 April 2014.
(4)

(f) Evaluate the financial position of Leung’s business for the year ended 30 April 2014.
(8)

(Total 52 marks)

Answer space for question 2 is on pages 9 to 14 of the question paper.

P43179RA 5 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 3

3. Rakib’s bookkeeper prepared the following Trial Balance at 30 April 2014. Rakib identified errors
in both the Trial Balance preparation and the information from which it had been prepared.

Trial Balance at 30 April 2014

Dr Cr
£ £
Purchases 70 550
Revenue 150 000
Trade receivables 9 980
Trade payables 6 750
Rent 4 500
Bank overdraft 1 500
Other expenses 8 390
Wages 50 000
Discount allowed 900
Discount received 1 570
Non-current assets (at cost):
Equipment 16 000
Motor vehicles 26 000
Provisions for depreciation:
Equipment 8 000
Motor vehicles 20 000
Inventory 1 May 2013 8 610
Capital 10 000
218 800 173 950

The following errors were subsequently found:

(1) Purchases of £3 800 from Titan Supplies had been received on 20 April 2014. No entries had
been made in the books.
(2) The Sales Day Book had been over-cast by £2 400.
(3) A payment of £900 to Patil, a creditor, had been posted to the account of Batik.
(4) Other Expenses of £300 had been debited to the Equipment Account.
(5) Discount received of £470 had been correctly entered in the Cash Book, but had been debited
to the Discount Received Account.
(6) A payment of £850 for rent had been entered on the credit side of the Rent Account as £580
but entered correctly in the Cash Book.
(7) A motor vehicle with a cost of £14 000 and accumulated depreciation of £11 200 was sold with
a cheque received for £4 000. No entries had been made in the books.

P43179RA 6
 Required:

(a) (i) Explain the difference between an error of commission and an error of principle.
(4)

(ii) Identify one error from (1) to (7) which is an example of an:

• Error of commission
• Error of principle.
(2)

(b) Prepare the Journal entries to correct the errors (1) to (7). Narratives are not required.
(18)

(c) Prepare the corrected Trial Balance at 30 April 2014.

(20)

(d) Evaluate the usefulness to a business of preparing a trial balance.

(8)

(Total 52 marks)

Answer space for question 3 is on pages 15 to 20 of the question paper.

P43179RA 7 Turn over

 SECTION B

SOURCE MATERIAL FOR USE WITH QUESTION 4

4. Hasibul and Iffath are in partnership. The following balances were extracted from their books at
31 March 2014.

£
Capital:
Hasibul 50 000
Iffath 80 000
Current accounts:
Hasibul 500 Dr
Iffath 6 500 Cr
Drawings:
Hasibul 25 000
Iffath 16 000
Non-current assets (at cost) 120 000
Provision for depreciation of non-current assets 20 000
Trade payables 19 000
8% Bank loan 15 000
Cash and bank 10 000 Dr
Inventory 31 500
Trade receivables 27 000
Profit for the year 39 500

Additional information:

The Partnership Agreement of Hasibul and Iffath stated that:

1. profits and losses are shared in the ratio 2:1

2. interest is allowed on capital at the rate of 5% per annum
3. salaries are paid as follows: Hasibul £7 000 Iffath £5 000

P43179RA 8
 Required:

(a) Prepare the:

(i) Appropriation Account for the year ended 31 March 2014

(5)

(ii) Current Accounts of Hasibul and Iffath.

(6)

On 1 April 2014 Hasibul and Iffath admitted Jila as a partner. The following was agreed:

1. Profits and losses would be shared in the ratio 2:2:1

2. The goodwill of Hasibul and Iffath was valued at £120 000 on 31 March 2014. It was agreed
that goodwill would NOT remain in the books of the new partnership
3. Non-current assets costing £30 000 were sold for their carry over (net book) value of
£21 000. Payment to the partnership was half by cheque and half on credit
4. Jila would bring capital of £40 000 into the new partnership; £20 000 in cash and £20 000 in
inventory
5. The 8% Bank loan was repaid

Required:

(b) Prepare the Goodwill Account at 1 April 2014.

(5)

(c) Prepare the Statement of Financial Position for the new partnership at 1 April 2014.
(12)

Jila had been trading as a sole trader before joining the partnership.

(d) Evaluate Jila trading in a partnership compared with being a sole trader.
(4)

(Total 32 marks)

Answer space for question 4 is on pages 21 to 26 of the question paper.

P43179RA 9 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Aminath commenced business as a self-employed electrician on 1 February 2013. The following

information is available for the year ended 31 January 2014:

• Raw materials costing £90 000 were used on customers’ jobs in the year. Aminath marks-up
raw materials by 20% before charging them to customers

• Aminath worked 50 hours per week for 50 weeks of the year

• 60% of the hours worked by Aminath were charged to customers

• Overhead costs were:

Advertising £8 500
Rent of premises £10 000
Motor vehicle running costs £11 300

• Aminath charged customers at the rate of £30 per hour to recover his labour and overheads
costs

Required:

(a) Explain the following terms, giving an example of each:

(i) Fixed cost

(ii) Semi-fixed cost
(iii) Variable cost
(9)

(b) Calculate Aminath’s profit/loss for the year ended 31 January 2014.
(9)

(c) Prepare a job cost quotation for a customer where:

Raw materials cost Aminath £1 200

Chargeable hours 20
(4)

(d) Identify three business duties or tasks undertaken by Aminath that are not directly chargeable
to the customer.
(6)

Aminath is considering charging customers separate recovery rates for labour and overhead costs.

(e) Evaluate the use of separate recovery rates for labour and overhead costs.
(4)

(Total 32 marks)

Answer space for question 5 is on pages 27 to 31 of the question paper.

P43179RA 10
 SOURCE MATERIAL FOR USE WITH QUESTION 6

6. Apostolou started business in 1 May 2013 buying and selling sports shoes. He did not maintain
double entry accounts but provides the following information for the year ended 30 April 2014:

1. He started business on 1 May 2013 with inventory £5 000, bank £ 1 000 and trade payables of
£4 500.
2. Cash sales were £18 500 and credit sales were £65 000. During the year trade receivables paid
£55 600. This included a receipt of £600 as final settlement on a debt of £2 300. The remainder
of the debt was irrecoverable.
3. Purchases of £49 000 were made on credit. Goods costing £1 900 were returned to suppliers.
During the year trade payables were paid £43 000.
4. Inventory at 30 April 2014 was £15 000.
5. Fixtures and fittings were purchased for £6 000 by cheque. On 30 April 2014 these were valued
at £5 200.
6. Expenses for the year:
Rent £5 000 paid to 31 July 2014
Wages £17 450
Sundry expenses £4 600 paid to 31 March 2014
Sundry expenses owing for April 2014 £650
7. Apostolou had drawn £7 500 during the year for his own use.
8. All receipts were banked and all payments were made through the bank account.

Required:

(a) Prepare for Apostolou the:

(i) summarised Bank Account for the year ended 30 April 2014
(9)

(ii) Statement of Comprehensive Income for the year ended 30 April 2014
(8)

(iii) Statement of Financial Position at 30 April 2014.

(11)

(b) Evaluate the need for Apostolou to include a provision for doubtful debts when preparing his
financial statements.
(4)

(Total 32 marks)

Answer space for question 6 is on pages 32 to 36 of the question paper.

P43179RA 11 Turn over

 SOURCE MATERIAL FOR USE WITH QUESTION 7

7. Varsini Transport delivers goods nationwide. The following information relates to the delivery
vehicles owned by Varsini Transport.

1 April 2011 Purchased delivery vehicle A £20 000

1 July 2012 Purchased delivery vehicle B £18 000

1 April 2013 Purchased delivery vehicle C £25 000

30 June 2013 Purchased delivery vehicle D for £28 000 giving delivery vehicle A in
part exchange

Varsini Transport has the following depreciation policy:

• Delivery vehicles are depreciated at the rate of 20% per annum using the straight line method
• Depreciation is charged on delivery vehicles purchased and sold during the year on a pro rata
basis according to the months of ownership
• All sales of delivery vehicles are recorded through a disposal account
• All payments and receipts for delivery vehicles are by cheque

Required:

(a) Complete the following table in your answer book showing the depreciation charged on
delivery vehicles in each of the years ending 31 March 2013 and 31 March 2014.

Year ended Delivery Delivery Delivery Delivery Total

vehicle A vehicle B vehicle C vehicle D
£ £ £ £ £

31 March 2013

31 March 2014

(6)

(b) Prepare for the years ended 31 March 2013 and 31 March 2014 the:

(i) Delivery Vehicles Account

(8)

(ii) Provision for Depreciation of Delivery Vehicles Account.

(8)

P43179RA 12
 Varsini Transport had the following costs in the year ended 31 March 2014:

1. Writing the sign of the business on new delivery vehicles

2. Replacement tyres
3. Installing satellite navigation into each delivery vehicle

(c) Identify whether each of the costs above is capital expenditure or revenue expenditure. State
the reason for your answer.
(6)

(d) Evaluate the suitability of the straight line method when depreciating delivery vehicles.
(4)

(Total 32 marks)

Answer space for question 7 is on pages 37 to 41 of the question paper.

P43179RA 13
 Pearson Edexcel
International Advanced Level

Accounting (Modular Syllabus)

Unit 1 – The Accounting System and Costing

Tuesday 6 January 2015 – Afternoon Paper Reference

Source booklet for use with Questions 1 to 7. WAC01/01

Do not return the insert with the question paper.

Turn over

P45047A
©2015 Pearson Education Ltd.

1/1/2/2
*P45047A*
 SECTION A
SOURCE MATERIAL FOR USE WITH QUESTION 1
1 Kokila is in business as a trader of mobile phones. She does not maintain a full set
of accounts but does maintain a bank account together with other memorandum
records. The following information is available for the year ended 31 December 2014:

1. Bank Account
£ £
Balance b/d 2 600 Payments to suppliers 85 700
Cash sales banked 45 300 Bank loan repayments 6 300
Cheques from customers 95 250 and interest
Commission received 3 400 Rates and insurance 5 300
Sundry expenses 10 500
New office computer 4 000
Delivery expenses 15 670
Balance c/d 19 080
146 550 146 550
Balance b/d 19 080
2. Kokila made cash sales of £84 000 in the year. Before banking the cash, she paid
the following expenses and took her cash drawings:

£
Wages 14 250
Rent 6 000
Sundry expenses 6 950
Drawings 11 500
3. Other balances:

At 1 January 2014 At 31 December 2014

£ £
Inventory at cost 9 800 8 200
Trade receivables 12 400 13 500
Trade payables 8 750 11 150
Warehouse fixtures (at valuation) 15 000 13 800
Office computers (at valuation) 24 000 25 000
Commission receivable due – 800
Wages accrued 750 500
Rates and insurance prepaid 1 100 1 700
Bank loan 20 000 15 000

2
P45047A
 4. The inventory at cost on 31 December 2014 contained a batch of phones costing
£1 500 which are damaged and will require repairs costing £150. After repair the
phones will have a resale value of £1 350.
5. All bank loan interest for the year has been paid.
6. Kokila is concerned about possible bad debts. She has decided to create a
provision for doubtful debts based upon the age of her trade receivables.

Age of debt Amount Percentage

(Months) £ allowance (%)
Over 6 months 500 40
3 to 6 months 2 500 10
1 to 3 months 4 000 5
Up to 1 month 6 500 2
(a) Calculate Kokila’s capital at 1 January 2014.
(4)
(b) Prepare the:
(i) Statement of Comprehensive Income for the year ended 31 December 2014
(22)
(ii) Statement of Financial Position at 31 December 2014.
(14)
Kokila is considering maintaining full double entry accounts in the next accounting year.
(c) State four advantages to Kokila of maintaining full double entry accounts.
(4)
A friend of Kokila, who is an accounting student, has recommended that she depreciates
her warehouse fixtures and office computers using the straight line method of
depreciation.
(d) Evaluate whether Kokila should change her method of depreciation from
revaluation to the straight line method.
(8)

(Total for Question 1 = 52 marks)

Answer space for question 1 is on pages 2 to 8 of the question paper.

3
P45047A
Turn over
 SOURCE MATERIAL FOR USE WITH QUESTION 2
2 Chai is a trader of children’s clothing. His business has two departments:
• sales to retailers
• on-line sales through his website direct to customers.
The following information is available for the year ended 31 December 2014:

£
Revenue: Sales to retailers 240 000
On-line sales 150 000
Inventory 1 January 2014 76 000
Purchases 244 000
Carriage in 22 000
Postage of on-line sales 6 000
Maintaining website for 1 700
on-line sales
Salaries: Sales to retailers 12 000
On-line sales 9 500
Premises rent 10 000
Premises running costs 5 500
Depreciation on computers 8 400
and fixtures
Selling expenses 7 800
Bad debts on sales to retailers 5 100
Additional information for the year
1. Other balances at 31 December 2014:

£
Inventory 60 000
Trade receivables 32 000
Trade payables 56 000
Cash and bank 48 000
2. Chai has calculated that £90 000 of the cost of sales relates to on-line sales.
3. The floor areas occupied are: sales to retailers 3 000 sqm: on-line sales 2 000 sqm.
4. Computers and fixtures used: sales to retailers £40 000: on-line sales £30 000.
5. All sales to retailers are on credit. All on-line sales are cash with order.

4
P45047A
Required:
(a) Prepare the Departmental Statement of Comprehensive Income for the year
ended 31 December 2014, in columnar format, showing the profit or loss for the
year of sales to retailers, on-line sales, and the business as a whole.
(24)
(b) Calculate the departmental gross profit as a percentage of revenue for:
(i) sales to retailers
(ii) on-line sales.
(6)
(c) Suggest one possible reason for the difference between the gross profit as a
percentage of revenue for sales to retailers and on-line sales.
(2)
(d) Calculate the departmental profit for the year as a percentage of revenue for:
(i) sales to retailers
(ii) on-line sales.
(6)
The market for sales to retailers is not increasing, but the market for on-line sales has
been increasing rapidly. Chai is considering expanding his on-line sales business, but has
been advised by a friend about ‘overtrading’.

Required:
(e) Calculate, at 31 December 2014, the:
(i) the trade receivables collection period for sales to retailers.
(ii) current ratio for the whole of Chai’s business.
(6)
(f ) Evaluate Chai’s proposal to expand his on-line sales business.
(8)

(Total for Question 2 = 52 marks)

Answer space for question 2 is on pages 9 to 14 of the question paper.

5
P45047A
Turn over
 SOURCE MATERIAL FOR USE WITH QUESTION 3
3 Miguel owns a construction business which hires equipment to customers. The
following balances were recorded in his books on 31 December 2014:

£
Income from hire of equipment to customers 573 000
Wages and salaries 185 000
Rent and rates 30 000
Administration expenses 17 500
Marketing expenses 42 750
Delivery expenses 61 200
Servicing and repair of equipment 89 750
Bad debts 11 000
Fixtures and fittings at cost 110 000
Fixtures and fittings provision for depreciation 27 000
Equipment at cost 285 000
Equipment provision for depreciation 125 000
Non-current asset disposal account 4 500 Cr
Additional information 31 December 2014
1. Wages and salaries were prepaid £1 300.
2. Servicing and repairs of equipment £3 200 were outstanding.
3. Depreciation is charged as follows:
• fixtures and fittings 15% on cost
• equipment at 25% by the diminishing balance method.
Required:
(a) Prepare the Statement of Comprehensive Income for the year ended
31 December 2014.
(11)
(b) (i) Distinguish between capital expenditure and revenue expenditure.
(4)
(ii) State, giving your reasons, whether each of the following is capital
expenditure or revenue expenditure:
• servicing and repair of equipment
• purchase of new equipment
• purchase of second hand equipment.
(6)

6
P45047A
Miguel owns a Mobile Crane which is a piece of equipment. The details of the Mobile
Crane are as follows:

1 January 2012 Purchased Mobile Crane £60 000

1 January 2012 Delivery of Mobile Crane £4 000
30 June 2014 Sold Mobile Crane £35 000
Miguel has the depreciation policy, that non-current assets sold in a year will be
depreciated pro-rata to the months of ownership.
(c) Prepare for the years ended 31 December 2012, 31 December 2013 and
31 December 2014 the:
(i) Mobile Crane Account
(ii) Mobile Crane Provision for Depreciation Account.
(11)
Miguel has purchased a new piece of equipment, the Trench Digger. The following
information is available:

£
Depreciation for the year 21 000 per annum
Operator wages 100 per day hired
Delivery costs to site 200 per contract
Servicing and repair 3 000 per annum
Overheads 15 000 per annum

Profit mark-up 20%

The Trench Digger will be hired to customers at a rate per day. Miguel estimates that the
Trench Digger will be used on 80 different contracts per year and hired to customers for a
total of 200 days per year.
(d) Calculate the:
(i) total cost per year of operating the Trench Digger
(ii) rate per day charged to customers, including the profit mark-up of 20%.
(12)
Miguel stated that “If we allow the correct depreciation on a piece of equipment, this will
always ensure that we have the cash for a replacement when it is worn out”.
(e) Evaluate this statement.
(8)

(Total for Question 3 = 52 marks)

Answer space for question 3 is on pages 15 to 23 of the question paper.

7
P45047A
Turn over
 SECTION B
SOURCE MATERIAL FOR USE WITH QUESTION 4
4 The following ledger account was recorded in the books of Downtown Traders at
30 November 2014.

Petrus Account
2014 £ 2014 £
1 Nov Balance b/d 6 000 5 Nov Bank 5 850
5 Nov Discount allowed 150 19 Nov Sales returns 530
18 Nov Sales 3 000 30 Nov Balance c/d 5 170
23 Nov Sales 2 400
11 550 11 550
1 Dec Balance b/d 5 170
On inspecting of the books, the following errors were discovered in the account of Petrus:
1. On 5 November Petrus had paid the balance of his account and had deducted
2½% cash discount which had been credited to the discount allowed account.
2. A trade discount of 15% should have been deducted from the sales made on
18 November.
3. The sales returns on 19 November were correctly recorded in the Sales Returns
Account as £350, but were recorded in Petrus’s Account as £530.
4. The sales recorded on 23 November were sales made to Potter and Co, which
had been incorrectly posted to the account of Petrus.
5. A refund of £50, for overpayment, was made to Petrus by cheque on
28 November, but no entries had been made in the books.

Required:
(a) Prepare the Journal entries to correct the errors in (1) to (5) above. Narratives are
not required.
(10)
(b) Update the Petrus Account in the books of Downtown Traders after the correction
of all errors.
(10)
(c) Name and explain four types of error that would not be revealed by a trial
balance.
(8)
(d) Evaluate the use of a suspense account when preparing a trial balance.
(4)

(Total for Question 4 = 32 marks)

Answer space for question 4 is on pages 24 to 27 of the question paper.

8
P45047A
 SOURCE MATERIAL FOR USE WITH QUESTION 5
5 Ryman is a manufacturer of wooden products. The following information is available
for the month of November 2014:
1. Raw materials inventory at 1 November 2014 200 cubic metres @ £100 per cubic metre
2. Purchases of raw materials: 3 November 150 cubic metres @ £120 per cubic metre
15 November 80 cubic metres @ £140 per cubic metre
23 November 100 cubic metres @ £150 per cubic metre
3. During the month of November 400 cubic metres were issued to production.
Ryman uses the First In First Out (F.I.F.O) method of inventory valuation.
4. The factory production line employed 24 workers each of whom worked 180
hours in the month. 160 hours per worker were paid at normal time and 20 hours
per worker were paid a rate of time and a half. Production workers were paid £8
per hour for normal time.
5. General expenses for production were £12 000 of which 30% were direct and 70%
were indirect.
6. The factory manager was paid £3 500 and 2 supervisors were paid £2 500 each.
7. The rent of the factory premises was £2 000.
8. Depreciation on machinery was £4 500 and machinery repairs were £3 000.
9. Work in progress was £1 000 greater on 30 November than on 1 November.
10. Finished goods are transferred to the warehouse at a value of £150 000.
Required:
(a) Prepare the Manufacturing Account for the month of November 2014.
(20)
(b) Explain how a provision for unrealised profit would be treated by a manufacturer.
(4)
(c) Explain the following methods of remuneration:
(i) day-work
(ii) piecework.
(4)
Ryman is considering remunerating their factory production line workers by piecework.
(d) Evaluate Ryman remunerating their factory production line workers by piecework
(4)

(Total for Question 5 = 32 marks)

Answer space for question 5 is on pages 28 to 32 of the question paper.

9
P45047A
Turn over
 SOURCE MATERIAL FOR USE WITH QUESTION 6
6 Chok and Tamar are in partnership sharing profits and losses equally. On
30 November 2014 their Statement of Financial Position was as follows:

Chok and Tamar

Statement of Financial Position at 30 November 2014

£ £
Non-current Assets
Premises 60 000
Fixtures and fittings 26 000
86 000
Current Assets
Inventory 28 500
Trade receivables 32 400
Bank 5 600
66 500
152 500
Capital
Chock 40 000
Tamar 40 000
80 000
Current Liabilities
Trade payables 42 500
Non-current Liabilities
Bank loan 30 000
152 500

On 1 December 2014 Chok and Tamar admitted Lai as a partner and the following was agreed:
1. The goodwill of Chok and Tamar was valued at £120 000.
2. Tamar would reduce his capital by £20 000, receiving this sum by cheque.
3. Lai would bring the following assets into the new partnership:

£
Delivery vehicle 15 000
Inventory 16 000
Bank 25 000
4. Half of the bank loan would be repaid.
5. Profits and losses would be shared by Chok, Tamar and Lai in the ratio 2:1:1.
6. Goodwill would not be recorded in the books of the new partnership.

10
P45047A
Required:
(a) Prepare the:
(i) Capital Accounts of Chok, Tamar and Lai
(12)
(ii) opening Statement of Financial Position for the new partnership at
1 December 2014.
(16)
(b) Evaluate the introduction of a new partner into the business.
(4)

(Total for Question 6 = 32 marks)

Answer space for question 6 is on pages 33 to 37 of the question paper.

11
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 SOURCE MATERIAL FOR USE WITH QUESTION 7
7 The following summary financial statements were prepared by Biman for his business.
Biman has limited accounting knowledge.
Biman
Statement of Comprehensive Income for the year ended 30 November 2014

£ £
Revenue 115 000
Less cost of sales (63 000)
Gross profit 52 000
Less
General expenses 15 000
Depreciation 9 000 (24 000)
Profit for the year 28 000

Statement of Financial Position at 30 November 2014

£
Non-current Assets
Premises 90 000
Equipment 27 000
Staff skill 15 000
132 000
Current Assets
Inventory 20 000
Trade receivables 18 000
Bank 11 000
181 000
Equity and Capital
Capital 95 000
Profit for the year 28 000
123 000

Current Liabilities
Trade payables 58 000
181 000

12
P45047A
Biman failed to apply the correct accounting principles and concepts to the following:
1. The revenue contains a sum of £6 000 for goods on credit, sale or return. On
30 November 2014 the customer had not returned the goods or stated his
intention to buy them. Biman uses a 50% mark up on goods.
2. General expenses of £15 000 were paid by cheque. On 30 November 2014, there
was £3 200 owing and £450 was prepaid.
3. When calculating the depreciation on equipment Biman changed the method of
depreciation from 20% diminishing balance to 10% straight line. On 1 December
2013 the equipment was purchased new and cost £30 000.
4. Biman had increased his capital by valuing the skill of his staff at £15 000.
5. Premises costing £80 000 had been included in the financial statements at the
market value of £90 000. The correct depreciation on premises was charged.
6. Biman had removed the provision for doubtful debts of £1 500 from the accounts.
Required:
(a) Name the accounting principle or concept that has not been correctly applied in
each of (1) to (6) on page 12.
(12)
(b) Redraft the corrected financial statements of Biman for the year ended
30 November 2014, in order to comply with the accounting concepts that you
have identified. You should show your workings.
(16)
(c) Evaluate the use of accounting principles and concepts.
(4)

(Total for Question 7 = 32 marks)

Answer space for question 7 is on pages 38 to 42 of the question paper.

13
P45047A
 Pearson Edexcel
International Advanced Level

Accounting (Modular Syllabus)

Unit 1: The Accounting System and Costing

Tuesday 12 May 2015 – Morning Paper Reference

Source Booklet WAC01/01

Do not return the insert with the question paper.

Turn over

P44821A
©2015 Pearson Education Ltd.

1/2/2/1/1
*P44821A*
 SECTION A
SOURCE MATERIAL FOR USE WITH QUESTION 1
1 The following trial balance was extracted from the books of Tolbury Golf Club at
30 April 2015:
Dr Cr
£ £
Revenue: Restaurant Sales 175 000
Subscriptions 225 000
Interest receivable 4 200
Donations 12 000
Restaurant inventory 1 May 2014 7 000
Purchases of supplies for restaurant 57 500
Wages: Restaurant 35 000
General 96 000
Salaries: Restaurant 27 500
General 64 000
Electricity: Restaurant 8 500
General 19 200
Insurance 5 750
Golf course maintenance 64 850
Bad debts: Subscriptions 11 000
Provision for doubtful debts on subscriptions 2 500
Clubhouse (at cost) 280 000
Equipment (at cost) 200 000
Fixtures and fittings (at cost) 100 000
Provisions for depreciation:
Clubhouse 84 000
Equipment 120 000
Fixtures and fittings 50 000
Trade receivables 1 450
Trade payables 21 250
Bank savings account 90 000
Cash and bank 26 200
Accumulated fund 400 000
1 093 950 1 093 950

2
P44821A
 Additional information at 30 April 2015:
1. Restaurant inventory £6 500.
2. Insurance prepaid £2 500.
3. Interest receivable owing £1 200.
4. Subscriptions: paid in advance £16 500: in arrears £27 500.
5. Depreciation is charged as follows:
Clubhouse at the rate of 2% per annum straight line
Equipment at the rate of 20% per annum reducing balance
Fixtures and fittings at the rate of 10% per annum straight line.
6. One quarter of the depreciation on equipment and half of the depreciation on
fixtures and fittings are to be charged to the restaurant.
7. The provision for doubtful debts on subscriptions is to be increased to £3 000.
Required:
(a) Prepare the:
(i) Restaurant Trading Account for the year ended 30 April 2015
(10)
(ii) Income and Expenditure Account for the year ended 30 April 2015
(18)
(iii) Statement of Financial Position at 30 April 2015.
(16)
(b) Evaluate the usefulness of a provision for doubtful debts on subscriptions.
(8)

(Total for Question 1 = 52 marks)

Answer space for question 1 is on pages 2 to 7 of the question paper.

3
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 SOURCE MATERIAL FOR USE WITH QUESTION 2
2 Andreas extracted a trial balance on the 31 March 2015 which failed to agree. He then
prepared a Draft Statement of Comprehensive Income. After preparation of the Draft
Statement of Comprehensive Income the following balances remained in the books:
Dr Cr
£ £
Profit for the year 9 680
Wages accrued 500
Heat and light accrued 590
General expenses prepaid 750
Computer maintenance accrued 350
Provision for doubtful debts 2 300
Non-current assets (at cost):
Leasehold on buildings 100 000
Computers 24 000
Fixtures and fittings 12 500
Provisions for depreciation:
Leasehold on buildings 50 000
Computers 14 000
Fixtures and fittings 10 000
Trade receivables 31 800
Trade payables 27 500
Inventory 31 March 2015 16 100
Cash and bank 1 990
Capital 75 000
Suspense 2 780
189 920 189 920

On inspection of the books, Andreas found the following errors:

1. Wages of £1 250 had been entered correctly in the Wages Account, but had been
recorded in the Bank as £2 150.
2. Discount allowed £940 had been credited to the Discount Allowed Account.
3. The Leasehold on buildings is a 25 year lease, no depreciation had been charged
in the Statement of Comprehensive Income.
4. A new computer costing £1 600 had been posted to the Computers Maintenance
Account. Depreciation of 25% of cost per annum had not been charged in the
Statement of Comprehensive Income.
5. A cheque receipt of £480 from a debtor, Fung, had been omitted from the books.

4
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 Required:
(a) Prepare the:
(i) Journal entries to correct the errors (1) to (5). Narratives are not required
(12)
(ii) Suspense Account after the correction of the errors (1) to (5).
(4)
(b) Calculate the profit for the year after the correction of all errors.
(10)
(c) Prepare the Statement of Financial Position at 31 March 2015, after the correction
of all errors.
(18)
(d) Evaluate the usefulness of draft financial statements, before the correction of
errors.
(8)

(Total for Question 2 = 52 marks)

Answer space for question 2 is on pages 8 to 14 of the question paper.

5
P44821A
Turn over
 SOURCE MATERIAL FOR USE WITH QUESTION 3
3 Nural is considering buying a restaurant. He has found two restaurants that are for
sale, each at a purchase price of £100 000. Nural has sufficient funds available to
purchase one of the restaurants. The two restaurants are the:
1. Garden Restaurant – Opened nine years ago, the Restaurant is in an area of the
Town Centre which has many other competing restaurants
2. New Restaurant – Opened one year ago, the Restaurant is in a residential area on
the outskirts of the Town.
The following summarised information is available:
Statements of Comprehensive Income for the year ended 31 March 2015
Garden Restaurant New Restaurant
£ £
Revenue 270 000 140 000
Cost of sales (108 000) (70 000)
Gross profit 162 000 70 000
Wages (80 000) (17 000)
General expenses (50 000) (30 000)
Depreciation - Lease (25 000) -
Depreciation - Fixtures and fittings (1 000) (1 000)
Profit for the year 6 000 22 000
Statements of Financial Position at 31 March 2015
Garden Restaurant New Restaurant
£ £
Non-current Assets (carry over value)
Leasehold on premises 25 000 -
Freehold premises - 60 000
Fixtures and fittings 1 000 10 000
26 000 70 000
Current Assets
Inventory 12 000 4 000
Trade receivables 8 000 5 000
Cash and bank 2 000 6 000
48 000 85 000
£ £
Capital at 1 April 2014 47 000 73 000
Profit for the year 6 000 22 000
53 000 95 000
Drawings (20 000) (15 000)
33 000 80 000
Current Liabilities
Trade payables 15 000 5 000
48 000 85 000

6
P44821A
 Additional information:
1. All purchases are on credit, and for the year ended 31 March 2015 these were:
• Garden Restaurant £110 000
• New Restaurant £70 000.
Required:
(a) Calculate for the Garden Restaurant and for the New Restaurant the following :
(i) gross profit as a percentage of revenue
(ii) return on capital employed percentage (using the closing capital)
(iii) current ratio
(iv) trade payables payment period (in days)
(v) non-current assets to revenue ratio
(vi) value of the goodwill included in the purchase price of £100 000.
(24)
(b) Suggest two possible reasons for the differences between the ratios for the
Garden Restaurant and for the New Restaurant under each of the following
headings:
(i) Profitability
(ii) Liquidity
(iii) Use of assets.
(12)
(c) Explain the importance to Nural of calculating the non-current assets to revenue
ratio.
(4)
(d) Suggest four non-financial factors that Nural should consider before making a
decision to purchase either the Garden Restaurant or the New Restaurant.
(4)
(e) Evaluate which restaurant, if any, Nural should purchase.
(8)

(Total for Question 3 = 52 marks)

Answer space for question 3 is on pages 15 to 20 of the question paper.

7
P44821A
Turn over
 SECTION B
SOURCE MATERIAL FOR USE WITH QUESTION 4
4 The following balances were extracted from the books of Promita for the month of
February 2015:
Opening balances on 1 February
Sales ledger control account £32 500 Dr
£950 Cr
Provision for doubtful debts £1 300
Additional information for the month of February 2015:
1. Totals for the month of February
£
Sales day book 66 580
Cash sales 3 000
Sales returns day book 2 060
Cheques from trade receivables 55 900
Dishonoured cheque 3 360
Refund to trade receivable by cheque 190
Discount allowed 1 620
Bad debt written off 900
2. There was no credit balance on the Sales Ledger Control Account at 28 February
2015.
3. The bad debt written-off in February related to the debt of Chumi, who was only
able to pay £600 of his debt. The balance was irrecoverable.
4. The provision for doubtful debts is to be maintained at 4% of trade receivables at
28 February 2015.

8
P44821A
 Required:
(a) Distinguish between bad debts and a provision for doubtful debts.
(4)
(b) Suggest two possible reasons for the opening credit balance on the Sales Ledger
Control Account at 1 February 2015.
(2)
(c) Prepare the:
(i) Sales Ledger Control Account for the month of February 2015
(10)
(ii) journal entry recording the writing off of the bad debt of Chumi
(6)
(iii) Provision for Doubtful Debts Account for the month of February 2015.
(6)
(d) Evaluate the use of control accounts.
(4)

(Total for Question 4 = 32 marks)

Answer space for question 4 is on pages 21 to 24 of the question paper.

9
P44821A
Turn over
 SOURCE MATERIAL FOR USE WITH QUESTION 5

5 Khin manufactures bicycle frames from metal tubing. The following information
relates to the month of March 2015:
1. Each bicycle frame requires 3 metres of metal tubing.
2. The inventory of metal tubing at 1 March 2015 was 600 metres costing £1.20 per
metre.
3. Receipts of metal tubing for March:
3 March 1 800 metres @ £1.30 per metre
17 March 1 500 metres @ £1.50 per metre
4. Issues of metal tubing to production for March:
5 March 2 000 metres
20 March 1 000 metres
5. Khin uses the perpetual inventory Last In First Out (L.I.F.O) method of valuation.
6. 5% of the total raw material issued to production in March was wasted.
7. The production line has 12 employees. Each employee worked 185 hours in
March. Employees worked:
• 160 hours at standard time of £4 per hour
• 20 hours at time and a half
• 5 hours at double time.
8. Expenses for March were £3 800 of which 40% were direct and 60% were indirect.
9. There was no work in progress at the beginning or end of the month.

10
P44821A
 Required:
(a) Calculate the value of the closing inventory of metal tubing at 31 March 2015.
(10)
(b) Prepare the Prime Cost section of the Manufacturing Account for the month
ending 31 March 2015.
(12)
(c) Calculate for March 2015, the:
(i) number of bicycle frames manufactured
(3)
(ii) prime cost per bicycle frame manufactured.
(3)
(d) Evaluate the use of Last In First Out (L.I.F.O) as a method of valuing inventory.
(4)

(Total for Question 5 = 32 marks)

Answer space for question 5 is on pages 25 to 29 of the question paper.

11
P44821A
Turn over
 SOURCE MATERIAL FOR USE WITH QUESTION 6
6 Poon and Quan are in partnership sharing profits and losses in the ratio 2:1. The
following is their summary Statement of Financial Position at 28 February 2015:
£
Non-current Assets (book value)
Motor vehicles 25 000
Fixtures and fittings 9 000
34 000
Current Assets
Inventory 36 000
Trade receivables 46 000
Bank 2 000
118 000
Capital:
Poon 60 000
Quan 40 000

Current Liabilities
Trade payables 18 000
118 000
On 28 February 2015 Poon retired from the business and Quan continued in business
as a sole trader. The following was agreed:
• Goodwill was valued at £60 000, and this would remain in the books of Quan
• Poon would take one of the motor vehicles at the book value of £10 000
• Inventory was re-valued at £30 000
• All other assets and liabilities were transferred at book value
• Poon would leave £50 000 in the business as a loan for 5 years. The balance owing
to him would be paid by cheque.
On 1 March 2015 Quan obtained a £30 000 8% business bank loan.

12
P44821A
 Required:
(a) Where there is no partnership agreement, state how the following would be
treated:
(i) Partners’ salaries
(ii) Partners’ loans
(iii) Share of profits or losses
(vi) Interest on drawings
(4)
(b) Prepare the:
(i) Capital Accounts of Poon and Quan
(8)
(ii) Bank Account
(5)
(iii) Quan’s opening Statement of Financial Position at 1 March 2015.
(11)
(c) Evaluate the decision of Quan to keep goodwill in his books.
(4)

(Total for Question 6 = 32 marks)

Answer space for question 6 is on pages 30 to 34 of the question paper.

13
P44821A
Turn over
 SOURCE MATERIAL FOR USE WITH QUESTION 7
7 There was a fire at the business premises of Lucia on 20 April 2015. Lucia did not keep
full accounting records, but is able to provide the following information:
• Balances at 1 April 2015:
Inventory at cost £25 000
Trade receivables £18 000
Trade payables £15 500
• Transactions between 1 April and 20 April 2015:
Receipts from trade receivables £138 000
Payments to trade payables £69 000
Cash purchases £25 800
• Balances at 20 April 2015:
Remaining inventory at cost £14 300
Trade receivables £20 000
Trade payables £16 700
• Lucia uses a ‘mark-up’ of 40%.
Required:
(a) Explain the:
(i) accounting term net realisable value.
(4)
(ii) effect on the financial statements if the closing inventory is overvalued.
(4)
(b) Calculate the:
(i) purchases for the period 1 April to 20 April 2015.
(5)
(ii) revenue for the period 1 April to 20 April 2015.
(4)
(c) Prepare the trading account for the period 1 April to 20 April 2015 showing the
value of the inventory remaining and the value of the inventory destroyed.
(11)
“It would be more appropriate for Lucia to record the inventory at market value in
her books.”
(d) Evaluate this statement.
(4)

(Total for Question 7 = 32 marks)

Answer space for question 7 is on pages 35 to 38 of the question paper.

14
P44821A
 Pearson Edexcel
International Advanced Level

Accounting (Modular Syllabus)

Unit 1: The Accounting System and Costing

Thursday 14 January 2016 – Morning Paper Reference

Source booklet for use with Questions 1 to 7. WAC01/01

Do not return the insert with the question paper.

Turn over

P46929RA
©2016 Pearson Education Ltd.

2/1/1/1/1/1/1
*P46929RA*
 SECTION A
SOURCE MATERIAL FOR USE WITH QUESTION 1
1 Kiddy Kit is a manufacturer of children’s clothing. The following trial balance was
extracted from the books on 31 December 2015:
Dr Cr
£ £
Revenue 700 000
Purchases of raw materials 164 800
Manufacturing wages 147 000
Production management salaries 67 000
Administrative management salaries 96 100
Inventory at 1 January 2015:
Raw materials 32 600
Work in progress 51 500
Finished goods 17 500
Direct production expenses 19 000
Indirect production expenses 16 200
General expenses 27 400
Marketing costs 44 500
Rent and rates 60 000
Non-current assets (at cost)
Manufacturing equipment 206 000
Office fixtures 80 000
Provisions for depreciation:
Manufacturing equipment 154 000
Office fixtures 32 000
Trade receivables 72 000
Trade payables 64 200
Provision for doubtful debts 2 700
Capital 160 000
Drawings 27 800
Bank 16 500
1 129 400 1 129 400

2
P46929RA
 Additional information at 31 December 2015
(1) Inventory:
Raw materials £31 400
Work in progress £48 700
Finished goods £15 500
(2) Manufactured goods are transferred from manufacturing to finished goods at an
agreed transfer price of £5 per item. During the year ended 31 December 2015 a
total of 98 000 items were transferred to finished goods.
(3) Depreciation is charged as follows:
• manufacturing equipment at the rate of 25% per annum reducing balance
• office fixtures at the rate of 15% on costs.
(4) 70% of the rent and rates is apportioned to manufacturing.
(5) General expenses owing £1 100.
(6) The provision for doubtful debts is to be maintained at 5% of trade receivables.
(7) The owner of Kiddy Kit withdrew £1 500 by cheque for his private use on
30 December 2015. No entries had been made in the books.
Required:
(a) Prepare the:
(i) Manufacturing Account for the year ended 31 December 2015
(16)
(ii) Statement of Comprehensive Income for the year ended 31 December 2015
(14)
(iii) Statement of Financial Position at 31 December 2015.
(14)
An overseas supplier has offered to manufacture all the children’s clothing for Kiddy
Kit at the rate of £5 per item of clothing.
(b) Evaluate whether the owner of Kiddy Kit should accept the offer from the
overseas supplier.
(8)

(Total for Question 1 = 52 marks)

Answer space for question 1 is on pages 2 to 8 of the question paper.

3
P46929RA
Turn over
 SOURCE MATERIAL FOR USE WITH QUESTION 2
2 The following summary information relates to the business of Baako for the two years
ended 31 December 2014 and 31 December 2015.
Statement of Comprehensive Income for the years ended
31 December 31 December
2014 2015
£ £
Revenue 300 000 400 000
Cost of sales (200 000) (240 000)
Gross profit 100 000 160 000
Wages (48 000) (62 000)
Depreciation (8 000) (10 000)
Marketing (2 000) (42 000)
Loan interest - (2 000)
Other expenses (12 000) (12 000)
Profit for the year 30 000 32 000

Statement of Financial Positions at

31 December 31 December
2014 2015
£ £
Assets
Non-current assets 175 000 204 000
Inventory 15 000 25 000
Trade receivables 110 000 80 000
Bank - 55 000
300 000 364 000
Liabilities
Capital 200 000 200 000
Long term bank loan - 100 000
Trade payables 30 000 64 000
Bank overdraft 70 000 -
300 000 364 000

4
P46929RA
 Additional information
(1) Inventory on 1 January 2014, £10 000.
Required:
(a) Calculate for both the years ended 31 December 2014 and 31 December 2015
the:
(i) Gross profit as a percentage of revenue
(ii) Rate of inventory turnover
(iii) Profit for the year as a percentage of revenue
(iv) Return on capital employed.
(24)
(b) Give one possible reason for the change between the years ended
31 December 2014 and 31 December 2015:
(i) Gross profit as a percentage of revenue
(ii) Rate of inventory turnover
(iii) Return on capital employed.
(6)
Between 31 December 2014 and 31 December 2015 the bank balance increased from
an overdraft of £70 000 to a positive balance of £55 000.
(c) State four reasons for the improvement in the bank balance at 31 December 2015.
(4)
(d) Calculate the current ratios at both 31 December 2014 and 31 December 2015.
(6)
(e) Comment on the size of the current ratio in each of the two years.
(4)
On 1 January 2015 Baako had set new business objectives for the year. These were to:
• Increase revenue
• Increase profitability
• Improve liquidity.
Required:
(f ) Evaluate the success of Baako in achieving her new business objectives for the
year ending 31 December 2015.
(8)

(Total for Question 2 = 52 marks)

Answer space for question 2 is on pages 9 to 14 of the question paper.

5
P46929RA
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 SOURCE MATERIAL FOR USE WITH QUESTION 3
3 Taavi and Garcia are partners in a restaurant business. They share profits and losses
in the ratio 2:1. Interest is allowed on capital at the rate of 5% per annum and Garcia
receives a partnership salary of £7 500. There is no interest charged on drawings. The
following information is available for the year ended 31 December 2015:
£
Wages 7 400
Rent and rates 4 000
Heat and light 3 650
General expenses 4 250
Restaurant refurbishment 8 500
Revenue 70 000
Purchases 22 750
Returns outward 2 100
Inventory 1 January 2015 1 500
Fixtures and equipment (cost) 35 000
Provision for depreciation
Fixtures and equipment 10 000
Capital: Taavi 40 000
Garcia 30 000
8% Loan Taavi 20 000

Additional information
(1) Inventory at 31 December 2015, £1 750.
(2) £5 000 of the restaurant refurbishment was for the purchase of new fixtures and
equipment. The remainder was for redecoration of the premises.
(3) Fixtures and equipment are depreciated at the rate of 15% per annum straight line.
(4) The 8% loan from Taavi was made to the partnership on 1 July 2015.
Required:
(a) (i) Distinguish between capital expenditure and revenue expenditure.
(4)
(ii) Explain the correct accounting treatment for the restaurant refurbishment.
(4)
(b) Prepare the Statement of Comprehensive Income and Appropriation Account for
the year ended 31 December 2015.
(16)

6
P46929RA
 Before preparing the partnership Statement of Financial Position, Taavi and Garcia
check the accuracy of the Purchases Ledger and the Sales Ledger by preparing
Control Accounts. The following information is available for the year:
(1) Balances at 1 January 2015
Dr Cr
£ £
Purchases Ledger 150 2 900
Sales Ledger 3 300 -
(2) In the year the following transactions took place:
£
Purchases on credit 19 500
Cash purchases 3 250
Sales on credit 32 000
Cash sales 38 000
Payments to credit suppliers 15 680
Receipts from credit customers 27 930
Dishonoured cheques from credit customers 580
Discount allowed 630
Discount received 1 320
Returns outwards to credit suppliers 2 100
Refund from credit supplier for overpayment 270
Debit balance on Sales Ledger
transferred to the Purchases Ledger 1 400
(3) Balances at 31 December 2015
Dr Cr
£ £
Purchases Ledger 300 2 320
Sales Ledger 5 920 -
Required:
(c) Explain the accounting term Purchases Ledger.
(2)
(d) Prepare for the year ended 31 December 2015, the:
(i) Purchases Ledger Control Account
(ii) Sales Ledger Control Account.
(18)
(e) Evaluate trading as a partnership rather than a sole trader.
(8)

(Total for Question 3 = 52 marks)

Answer space for question 3 is on pages 15 to 20 of the question paper.

7
P46929RA
Turn over
 SECTION B
SOURCE MATERIAL FOR USE WITH QUESTION 4
4 Carlos is a trader buying and selling goods. He does not maintain a full set of double
accounting records but has provided the following information at 31 December 2015:
(1) Bank Account
£ £
Balance b/d 1 700 Cheques to trade payables 42 500
Cheques from trade receivables 45 300 Rent 2 500
Sale of non-current asset 2 500 Refund to trade receivable 900
Commission receivable 2 700 Premises maintenance 7 200
Cash banked from sales 9 000 Advertising 4 800
Balance c/d 3 400 General expenses 6 700
64 600 64 600
Balance b/d 3 400
(2) Balances:
1 January 31 December
2015 2015
£ £
Non-current assets (at valuation) 20 000 18 000
Trade receivables 15 400 27 900
Trade payables 29 800 21 000
Prepaid rent 500 1 000
Accrued wages 1 200 1 600
Inventory 32 000 25 700
(3) During the year ending 31 December 2015, Carlos made the following payments
in cash before banking the cash from sales:
£
Drawings 11 000
Wages 8 900
Purchase of non-current asset 4 000
Inventory purchase 5 300

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 Required:
(a) Prepare the Statement of Financial Position at 1 January 2015 showing the
opening capital.
(4)
(b) Calculate for the year ended 31 December 2015 the:
(i) revenue for the year
(6)
(ii) purchases for the year.
(5)
(c) Prepare the Statement of Comprehensive Income for the year ended
31 December 2015.
(13)
(d) Evaluate Carlos’ decision not to maintain a full set of books.
(4)

(Total for Question 4 = 32 marks)

Answer space for question 4 is on pages 21 to 25 of the question paper.

9
P46929RA
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 SOURCE MATERIAL FOR USE WITH QUESTION 5
5 Paco drives a taxi which he owns. The following information is available for the year
ended 31 December 2015:
(1) The taxi was purchased on 1 January 2015 at a cost of £30 000. Paco estimates
that it will have a life of 5 years and that he will then sell the taxi for £12 000. He
will use the straight line method of depreciation.
(2) To operate the taxi Paco paid a government licence of £700 for the year.
(3) Insurance was £4 000 for the year.
(4) Maintenance and servicing was £500 for the year.
(5) The taxi uses diesel which costs £1.20 per litre. The taxi uses 1 litre of diesel
per 10 kilometres.
(6) During the year Paco drove customers in his taxi for 40 000 kilometres.
(7) Paco charged customers £0.55 per kilometre.
Required:
(a) (i) Distinguish between fixed costs and variable costs.
(4)
(ii) Identify for Paco’s taxi:
• one example of a fixed cost
• one example of a variable cost.
(2)
(b) Calculate for the year ended 31 December 2015, the:
(i) Total cost of operating the taxi
(8)
(ii) Total cost per kilometre of operating the taxi
(3)
(iii) Profit for the year made by Paco.
(3)
A friend has advised Paco that he should use another method to depreciate his taxi.
(c) Explain how Paco would calculate depreciation using the following methods:
(i) Revaluation
(4)
(ii) Reducing balance.
(4)
(d) Evaluate the use of the straight line method to depreciate Paco’s taxi.
(4)

(Total for Question 5 = 32 marks)

Answer space for question 5 is on pages 26 to 30 of the question paper.

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P46929RA
 SOURCE MATERIAL FOR USE WITH QUESTION 6
6 Cade is in business buying and selling goods on credit.
His draft profit for the year ended 31 December 2015 had been calculated at £37 000
before taking the following in to account:
(1) No adjustment had been made for prepaid expenses, £1 360, and expenses
owing, £2 100, at the end of the year.
(2) In previous years motor vehicles had been depreciated at the rate of 20% per
annum using the reducing balance method. At 31 December 2015, motor vehicles
had a carry-over (net book value) of £30 000 before applying this method. The
method of depreciation that had been charged this year was the revaluation
method. The motor vehicles had a revaluation of £28 000.
(3) The provision for doubtful debts balance of £3 800, had not been adjusted.
Cade should maintain the provision for doubtful debts at 5% of his £68 000
trade receivables.
(4) The Statement of Comprehensive Income had been credited with £5 000
representing the increased skills of the staff.
(5) The closing inventory had been included in the financial statements at selling
price of £24 000. Cade uses a 50% mark up on cost.
(6) Cade had included his drawings of £3 200 as an expense in the Statement of
Comprehensive Income.
Required:
(a) Name the accounting concept or convention which has not been complied with
in each of (1) to (6) above.
(12)
(b) Calculate the revised profit for the year following the correction of (1) to (6)
above.
(16)
(c) Evaluate the use of accounting concepts or conventions.
(4)

(Total for Question 6 = 32 marks)

Answer space for question 6 is on pages 31 to 33 of the question paper.

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 SOURCE MATERIAL FOR USE WITH QUESTION 7
7 The following balances remained in the books of Fabron after he had prepared his
Statement of Comprehensive Income for the year ended 31 December 2015.
Balances at 31 December 2015
Dr Cr
£ £
Profit for the year 33 900
Trade receivables 18 900
Trade payables 9 950
Motor vehicles (at cost) 34 600
Fixtures and fittings (at cost) 11 500
Provisions for depreciation:
Motor vehicles 13 700
Fixtures and fittings 6 800
Inventory 16 000
Other receivables: Prepaid rent payable 250
Other payables accrued 1 400
Bank 700
Capital 20 000
Drawings 3 800
85 750 85 750
On further inspection of the books the following errors were found:
(1) A debtor, Walford Manufacturing, had been declared bankrupt owing Fabron
£3 270. The debt is irrecoverable but no entries have been made in the books.
(2) Bank charges, £76, had been omitted from the books.
(3) The prepaid rent payable, £250, had been incorrectly calculated, and this should
be £600.
(4) Motor vehicle repairs, £2 500, had been entered into the Motor Vehicle Account.
Depreciation had been charged on this sum at the rate of 20% on cost.
(5) Fabron paid the insurance on his private home using a business cheque, £265. No
entries had been made in the books.
Required:
(a) Explain why the correction of some, but not all errors, require the use of a
suspense account.
(4)
(b) Prepare the journal entries to correct the errors (1) to (5) above. Narratives are
not required.
(12)
(c) Prepare the Statement of Financial Position (Extract) at 31 December 2015
showing the assets of the business after the correction of all errors.
(12)
(d) Evaluate the preparation of financial statements when there are still errors in
the books.
(4)
(Total for Question 7 = 32 marks)
Answer space for question 7 is on pages 34 to 37 of the question paper.
12
P46929RA
 Pearson Edexcel
International Advanced Level

Accounting
Paper 1: The Accounting System and Costing

Tuesday 17 May 2016 – Afternoon Paper Reference

Source Booklet WAC11/01
Do not return this source booklet with question paper.

Turn over

P49575A
©2016 Pearson Education Ltd.

1/1/1/1/1/1/1/1
*P49575A*
 SECTION A
Answer BOTH questions in this section.
1 Azlina and Siti are in partnership retailing clothing. Their partnership agreement
states that:
• The agreed capital is: Azlina £50 000 and Siti £25 000.
• Profits and losses will be shared equally.
• Salaries will be paid: £5 000 per annum to Azlina and £5 000 per annum to Siti.
• Interest on capital is allowed at the rate of 5% per annum.
• There will be no interest charged on drawings.
• Azlina made a loan to the business of £20 000 on 1 January 2014. Interest is payable
at the rate of 8% per annum. The loan is repayable in full on 31 December 2016.
The following balances were extracted from the books on 31 March 2016:
£
Capital accounts 1 April 2015:
Azlina 50 000
Siti 25 000
Current accounts 1 April 2015:
Azlina 400 Dr
Siti 200 Cr
Drawings (excluding salaries paid):
Azlina 4 000
Siti 1 500
Non-current assets (at cost):
Freehold premises 128 000
Delivery vehicles 12 000
Fixtures and fittings 14 000
Provisions for depreciation:
Delivery vehicles 8 400
Fixtures and fittings 5 600
Loans:
8% Loan from Azlina 20 000
5% Bank loan (repayable 1 January 2018) 40 000
Inventory 1 April 2015 19 500
Trade receivables 7 500
Trade payables 9 800
Bank overdraft 9 520
Revenue 117 300
Purchases 54 000
Purchase returns 1 700
Commission receivable 900
Rates 4 750
Wages and salaries 24 500
Electricity and water 8 150
Sundry expenses 10 300
Allowance (Provision) for doubtful debts 180

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 Additional information at 31 March 2016
(1) Inventory £13 800
(2) Wages and salaries include the salaries paid in full to the partners.
(3) Rates £250 were prepaid and electricity £600 was owing.
(4) No interest has been paid on the 8% loan from Azlina or the 5% bank loan for
the year.
(5) Depreciation is to be charged as follows:
• no depreciation on the freehold premises
• delivery vehicles at the rate of 25% per annum reducing balance
• fixtures and fittings at the rate of 10% per annum straight line.
(6) The allowance (provision) for doubtful debts is to be maintained at 4% of trade
receivables.
Required
(a) Prepare for the partnership the:
(i) Statement of Profit or Loss and Other Comprehensive Income (including an
appropriation section) for the year ended 31 March 2016
(18)
(ii) Current accounts of the partners for the year ended 31 March 2016
(6)
(iii) Statement of Financial Position at 31 March 2016.
(14)
The business premises of Azlina and Siti are located in a retail area that is growing
in popularity with shoppers. Azlina and Siti have plans to take advantage of this
popularity by expanding their business in the next financial year. They propose to:
(1) Undertake building work to expand the sales area available.
(2) Substantially increase the level of inventory in the business.
(3) Redecorate the premises.
(4) Employ an additional sales assistant.
(5) Purchase an electronic bar code system for inventory.
(b) State whether each of the above proposals is capital expenditure or revenue
expenditure.
(5)
To finance the expansion of the business Azlina and Siti will have to obtain finance in
the form of additional bank loans.
(c) Evaluate whether Azlina and Siti should expand their business.
(12)

(Total for Question 1 = 55 marks)

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2 Holborn Products manufactures parts for the motor industry. The following balances
were extracted from the books on 30 April 2016.
£
Inventories at 1 May 2015:
Raw material 23 400
Work in progress 52 000
Finished goods 72 000
Purchases of raw materials 97 800
Carriage inwards 8 450
Manufacturing wages 81 400
Production management salaries 59 500
Non-current assets:
Manufacturing equipment
Cost 280 000
Provision for depreciation 160 000
Computing equipment
Cost 150 000
Provision for depreciation 90 000
Computing technician wages 40 000
Factory consumables 45 200
Rent and rates 16 000
Electricity and water charges 15 600
General expenses 21 000
Property maintenance expenses 11 000
Provision for unrealised profit 12 000

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 Additional information at 30 April 2016
(1) Inventories:
Raw materials £16 950
Work in progress £58 000
Finished goods £90 000
(2) Manufacturing wages of £2 600 were owing.
(3) All of the costs of computing are charged 60% to manufacturing and 40% to
administration.
(4) Depreciation is charged on all non-current assets using the reducing
balance method:
(i) manufacturing equipment at the rate of 20% per annum
(ii) computing equipment at the rate of 30% per annum.
(5) Factory consumables of £35 300 are direct.
(6) Half of the general expenses relate to manufacturing.
(7) Property maintenance expenses of £1 800 are owing.
(8) Rent and rates, electricity and water, property maintenance expenses are
allocated 75% to manufacturing and 25% to administration.
(9) Production is transferred to finished goods at cost plus 20%.
Required
(a) Prepare, for the year ended 30 April 2016, the:
(i) Manufacturing Account
(21)
(ii) Provision for Unrealised Profit on Manufactured Goods Account
(5)
(iii) Manufacturing Wages Account.
(5)

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 The owner of Holborn Products is proposing changes to the way in which financial
statements are prepared. There are four proposals.
Proposal 1
Include a sum for the skill of the workforce as a non-current asset in the Statement of
Financial Position.
Proposal 2
Charge the full cost price of non-current assets to the year in which they are
purchased.
Proposal 3
No longer provide for unrealised profit by removing the provision for unrealised
profit on manufactured goods from the accounts.
Proposal 4
Charge the drawings of the owner to the Statement of Profit or Loss and Other
Comprehensive Income.
(b) State, giving reasons for your answer, an accounting principle or concept that
would not be complied with if each of the proposals 1, 2, 3 and 4
were introduced.
(12)
(c) Evaluate the use of International Accounting Standards (IAS) in the preparation of
financial statements.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

6
P49575A
 SECTION B
Answer THREE questions from this section.
3 Channa commenced business as a market trader on 1 May 2015. His capital was an
inventory of £4 000 and cash from an 8% bank loan of £5 000 repayable in 2018.
The following balances were extracted from the books at 30 April 2016.
£
Revenue 90 000
Purchases 60 000
Wages 12 000
General expenses 8 200
Rental of market stall 7 200
Fixtures and fittings 2 500
Additional information at 30 April 2016
(1) Inventory £6 000
(2) General expenses included £200 for bank loan interest.
(3) Fixtures and fittings were valued at £1 700.
Required
(a) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the
year ended 30 April 2016.
(5)
(b) Calculate the:
(i) rate of inventory turnover
(3)
(ii) net profit for the year as a percentage of revenue.
(3)
Channa has been offered shop premises and is considering moving his business from
market trading to a shop. To assist him to make that decision the following estimates
were made for the year ended 30 April 2017:
• Revenue volume would increase by 331/3%. Selling prices would also be increased
by 20%.
• The inventory on 30 April 2017 would be £12 000.
• The rate of inventory turnover would be 8 times for the year.
• The rent of the shop would be £18 200 per annum.
• Wages and general expenses would rise by 25%.
• Additional fixtures and fittings costing £18 500 would be purchased. At the end of
the year all fixtures and fittings would have a value of £15 000.
• To finance the move to the shop the 8% bank loan would be increased to £25 000.

8
P49575A
 (c) Prepare the Forecast Statement of Profit or Loss and Other Comprehensive
Income for the first year of trading in the shop ending 30 April 2017.
(10)
(d) Calculate the forecast net profit for the year as a percentage of revenue.
(3)
(e) Evaluate whether Channa should move his business into the shop premises.
(6)

(Total for Question 3 = 30 marks)

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4 The following is a schedule of non-current assets from the records of Jabir.

Non-current Balances at 1 May 2015 For the year ended 30 April

assets 2016
Cost Provision for Additions at Disposals at
depreciation cost cost
£ £ £ £
Land and
85 000 8 000 20 000 -
buildings
Computers 30 000 9 200 10 000 5 000
Fixtures and
9 500 4 300 1 500 -
fittings

The depreciation policy of Jabir is as follows:

• No depreciation is charged on land, which cost £35 000. Depreciation is charged
on buildings at the rate of 2% per annum using the straight line method.
• Computers are depreciated at the rate of 20% per annum using the straight
line method.
• Fixtures and fittings are depreciated at the rate of 10% per annum using the
straight line method.
• A full year’s depreciation is charged in the year of addition (purchase).
• A half year’s depreciation is charged in the year of disposal (sale).

10
P49575A
 Additional information
(1) All non-current asset additions were paid for by cheque.
(2) All disposals were transferred to the Disposals Account.
(3) The computer disposed of in the year had been purchased on 1 January 2014.
Required
(a) Explain why Jabir needs to charge depreciation on his non-current assets.
(4)
(b) Calculate the depreciation to be charged on the computers for the year ended
30 April 2016.
(2)
(c) Prepare, for the year ended 30 April 2016, the:
(i) Computers Account
(5)
(ii) Computers – Provision for Depreciation Account.
(5)
(d) Complete in the question paper the extract from the Statement of Financial
Position at 30 April 2016 for the non-current assets.
(8)

Accumulated
Non-current assets Cost Carrying value
depreciation

£ £ £

Land and buildings

Computers

Fixtures and fittings

Total

(e) Evaluate Jabir’s depreciation policy for computers.

(6)

(Total for Question 4 = 30 marks)

11
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5 Hiruni makes parts for washing machines. Her largest contract is to supply part PNC3
to a major manufacturer, Wash the World.
The following information is available for part PNC3:
• Manufacture of part PNC3 is in batches of 200
• Raw materials cost £303.70 per batch
• Direct labour per batch – 30 hours Assembly
20 hours Finishing
Direct labour is paid at the rate of £5 per hour for Assembly and £4 per hour
for Finishing
• Overheads:
£
Rent and rates 16 000
Employment insurance 9 000
Premises maintenance 12 000
Management salaries 18 000
There are three departments, two production departments, Assembly and Finishing
and one service department, Administration
Additional information
Assembly Finishing Administration
Floor area occupied (sq m) 4 000 2 400 1 600
Direct labour hours (per annum) 9 200 5 600 3 200
Administration costs are reapportioned to the production departments on the basis
of 50% to Assembly and 50% to Finishing.
Overheads are recovered on the basis of direct labour hours
• Mark-up
Hiruni adds 15% to production cost for her profit.
Required
(a) Explain the terms:
(i) semi-fixed cost
(2)
(ii) semi-variable cost.
(2)
(b) Explain the difference between allocated overheads and apportioned
overheads.
(4)

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 (c) Calculate the:
(i) total overhead for each of the three departments
(7)
(i) overhead recovery rate to be used in each of the Assembly and
Finishing Departments.
(2)
(d) Calculate the selling price of one part PNC3.
(7)
Hiruni has been requested by Wash the World to reduce the price of part PNC3 from
the existing £5 per part to £4 per part.
(e) Evaluate whether Hiruni should meet Wash the World’s request to reduce her
selling price for part PNC3.
(6)

(Total for Question 5 = 30 marks)

13
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6 Dula prepared draft financial statements that showed a profit of £72 000 for the year
ended 30 April 2016. On further inspection the following errors were discovered:
(1) The entries for a credit sale of goods to Ruwan, £750, had been reversed in
the books.
(2) Some goods had been shown in the closing inventory count at their retail value
of £1 350. All goods are marked-up by 50%.
(3) Motor vehicle expenses of £400 had been recorded in the Motor Vehicles
Account. Depreciation of £80 had been charged wrongly in the draft financial
statements.
(4) Rent receivable of £2 300 had been correctly entered in the Bank Account and
debited to the Rent Receivable Account.
(5) Dula had paid herself a salary of £6 100, which had been recorded in the
Wages Account.
Required
(a) State four types of error that will not affect the balancing of the books.
(4)
(b) Prepare the journal entries to correct the errors (1) to (5). Narratives are
not required.
(12)

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 (c) Complete the table, in the question paper, showing the revised profit for the year
after the correction of all errors.
(8)

Draft profit for the year 72 000

Increase Decrease
Profit Profit

Error £ £

The entries for a sale of goods to

(1) Ruwan, £750, had been reversed in
the books
Some goods had been shown
in the closing inventory count
(2)
at their retail value of £1 350. All
goods are marked-up by 50%
Motor vehicle expenses of £400
had been recorded in the Motor
(3) Vehicles Account. Depreciation of
£80 had been charged wrongly in
the draft financial statements
Rent receivable of £2 300 had
been correctly entered in the Bank
(4)
Account and debited to the Rent
Receivable Account
Dula had paid herself a salary of
(5) £6 100, which had been recorded
in the Wages Account.
Total increase profit and decrease
profit

Revised profit for the year

A friend of Dula has advised her that the use of an information and communications
technology (ICT) accounting software package would avoid errors and provide many
other benefits.
(d) Evaluate the use of information and communications technology (ICT) accounting
software packages.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

15
P49575A
 Pearson Edexcel
International Advanced Level

Accounting (Modular Syllabus)

Unit 1: The Accounting System and Costing

Tuesday 17 May 2016 – Afternoon Paper Reference

Source booklet for use with Questions 1 to 7. WAC01/01

Do not return the insert with the question paper.

Turn over

P46516A
©2016 Pearson Education Ltd.

2/1/1/1/1/1/1
*P46516A*
 SECTION A
SOURCE MATERIAL FOR USE WITH QUESTION 1
1 Oaktree Garage has two departments: Motor vehicle repairs; Car sales. The following
balances were extracted from the books on 30 April 2016:
£
Revenue: Motor vehicle repairs 266 000
Car sales 520 000
Inventory 1 May 2015: Motor vehicle parts 14 500
Cars for sale 135 000
Purchases: Motor vehicle parts 150 750
Cars for sale 417 750
Repair mechanic’s wages 42 000
Car sales staff salaries 31 000
Administrative salaries 25 000
Non-current assets (at cost):
Motor vehicle repair equipment 80 000
Car sales showroom fixtures 32 000
Administrative fixtures 20 000
Provisions for depreciation:
Motor vehicle repair equipment 68 000
Car sales showroom fixtures 18 000
Administrative fixtures 11 000
Rent of premises 40 000
Advertising costs 34 000
General expenses 10 000
Trade receivables 27 800
Trade payables 41 000
Provision for doubtful debts 2 000
Bank 12 200 Dr
5% Bank loan – repayable 31 July 2016 30 000
Capital 150 000
Drawings 34 000
Additional information at 30 April 2016:
(1) Inventory: Motor vehicle parts £21 000
Cars for sale £116 000
(2) Motor vehicle parts purchased for £3 250 were used to repair cars to be sold. All
remaining purchases of motor vehicle parts were used in the repair of customers’
vehicles.
(3) Repair mechanic’s wages of £5 800 were used to repair cars to be sold. All the
remaining repair mechanic’s wages were used in the repair of customers’ vehicles.
(4) Depreciation is charged as follows:
• Repair equipment at the rate of 20% per annum reducing balance
• Car sales showroom fixtures at the rate of 10% per annum straight line
• Administrative fixtures at the rate of 20% per annum straight line.

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 (5) Advertising costs include a payment of £6 000 for an advertising campaign from
1 March to 31 August 2016.
(6) The following expenses are to be apportioned:

Motor vehicle
Car sales
repairs

Administrative costs 60% 40%

Rent of premises 30% 70%

Advertising costs 25% 75%

General expenses 55% 45%

(7) No interest on the 5% Bank loan had been paid in the year. The loan was obtained
in 2013 to purchase motor vehicle repair equipment.
(8) Trade receivables contains a debt for £1 400 for a motor vehicle repair, which is
considered irrecoverable.
Required:
(a) Prepare the:
(i) Departmental Statement of Comprehensive Income, in columnar format, for
the year ended 30 April 2016, showing the profit for the year in each of the
two departments
(29)
(ii) Statement of Financial Position at 30 April 2016.
(15)
The owner of Oaktree Garage is considering closing the Car Sales Department and
concentrating on motor vehicle repairs. He has received an offer of £30 000 to rent
the car sales showroom.
(b) Evaluate whether the owner of Oaktree Garage should accept the offer of £30 000
to rent the car sales showroom.
(8)

(Total for Question 1 = 52 marks)

Answer space for Question 1 is on pages 2 to 6 of the question paper.

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 SOURCE MATERIAL FOR USE WITH QUESTION 2
2 Kewstoke Engineering manufactures products for the building industry. It has two
production departments: machining and assembly: and two service departments:
drawing office and administration. Kewstoke Engineering uses job costing to prepare
customers’ quotations.
The following information is available for the year ended 30 April 2016:
(1) All raw materials are ordered for each job undertaken. The customer is charged
the cost of the raw materials plus 20%.
(2) Labour hour rates are charged on the following basis:
Machining – Machine hours, at the rate of £15 per machine hour
Assembly – Based on each employee being paid £5 per hour plus 40% employer
costs. Employees work 70% of their time on jobs that are charged
directly to customers.
(3) Total overheads for each department:
£
Machining 35 000
Assembly 25 000
Drawing office 20 000
Administration 10 000
The use of the two service departments has been estimated as follows:

Machining Assembly Drawing office Administration

Drawing office 40% 30% - 30%

Administration 50% 30% 20% -

Annual hours for each department that can be charged to customers’ jobs were:
Machining Department 4 600 machine hours per year
Assembly Department 2 800 labour hours per year
(4) Kewstoke Engineering adds a 25% mark-up to the production cost when
providing a quotation to customers.

4
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 Required:
(a) Explain the term job costing.
(2)
(b) (i) Calculate the Assembly Department labour hour rate to be charged to
customers’ jobs.
(4)
(ii) State four duties or activities that might be undertaken by an Assembly
Department employee that could not be charged directly to the customer.
(4)
(c) Reapportion the overheads of the service departments to the production
departments using the continuous allotment method.
(14)
(d) Calculate the overhead recovery rate, to the nearest pence, for the:
(i) Machining Department
(ii) Assembly Department.
(6)
Speedy Builders has requested a quotation for some building components. Kewstoke
Engineering has calculated that the job will require:
Raw materials costing Kewstoke Engineering £1 800
Machining Department, 90 machine hours
Assembly Department, 140 labour hours.
(e) Prepare the quotation to be sent to Speedy Builders.
(14)
Kewstoke Engineering is considering changing the remuneration method for
employees in the Machining Department from day rate to piecework rate.
(f ) Evaluate the possible change to payment by piecework rate in the Machining
Department.
(8)

(Total for Question 2 = 52 marks)

Answer space for Question 2 is on pages 7 to 13 of the question paper.

5
P46516A
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 SOURCE MATERIAL FOR USE WITH QUESTION 3
3 Waban prepared draft financial statements for the year ended 31 March 2016, which
showed a draft profit for the year of £43 750. His draft financial statements were
prepared by a Trainee Accountant. The trial balance failed to agree and contained
ledger accounts with the following errors:
(1) Cash sales of £850 had not been recorded in the books.
(2) A purchase invoice for £490 had been correctly recorded in the account of Chitta
Products, but had been recorded in the Purchases Day Book as £940.
(3) A motor vehicle, purchased during the year for £8 000, had been debited to the
Motor Expenses Account. Depreciation on the motor vehicle should have been
charged at the rate of 25% using the straight line method.
(4) Interest receivable, £630, was correctly entered in the Cash Book, but had been
debited to the Interest Receivable Account.
(5) Electricity supplied by Dalha Electric, £345, had been recorded in the Electricity
Account and Dalha Electric Account as £145.
(6) No debit entry had been made for general expenses of £65.
(7) The debt of Habib, £4 100, was now considered irrecoverable. No entries had
been made in the books.
(8) Purchases returns to Taj, £85, had been entered in the account of Raj.
Required:
(a) Briefly explain two actions that Waban could take when his trial balance failed
to balance.
(4)
(b) Prepare the Journal entries to correct the errors in (1) to (8) above. Narratives are
not required.
(18)
(c) Prepare the Suspense Account showing the original difference in the trial balance
on 31 March 2016.
(4)
(d) Starting with the draft profit for the year of £43 750, calculate the revised profit
for the year showing the effect of each error.
(18)
(e) Evaluate preparing draft financial statements from books containing errors.
(8)

(Total for Question 3 = 52 marks)

Answer space for Question 3 is on pages 14 to 20 of the question paper.

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 SECTION B
SOURCE MATERIAL FOR USE WITH QUESTION 4
4 Kyrenia is considering the purchase of a shoe shop. She has found two businesses
that are for sale, Amble Footwear and Posh Shoes. The following information is
available for the year ended 31 March 2016:
Amble Footwear Posh Shoes
£ £
Revenue 120 000 125 000
Purchases 70 000 74 000
Inventory 1 April 2015 15 000 17 000
Inventory 31 March 2016 25 000 16 000
Profit for the year 10 000 15 000
Trade receivables 8 000 2 000
Trade payables 20 000 6 000
Cash 4 000 1 000
Non-current assets 63 000 88 000
Capital at 31 March 2016 80 000 100 000
Purchase price of business 90 000 115 000
Required:
(a) State four non-financial factors that Kyrenia should consider before purchasing a
business.
(4)
(b) Calculate for each business the:
(i) gross profit as a percentage of revenue
(ii) inventory turnover
(iii) return on capital employed (based on closing capital)
(iv) current ratio
(v) value of goodwill in the purchase price of the business.
(24)
(c) Evaluate which of the two businesses Kyrenia should purchase.
(4)

(Total for Question 4 = 32 marks)

Answer space for Question 4 is on pages 21 to 24 of the question paper.

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 SOURCE MATERIAL FOR USE WITH QUESTION 5
5 The following information is available for the Topton Sports Club for the year ended
30 April 2016.
(1) Summary of receipts and payments:
£
Subscriptions received 24 900
Wages and salaries 8 550
Insurance 1 100
Electricity 690
Bank interest received 70
General expenses 3 400
Sale of sports equipment 1 700
Purchase of sports equipment 8 500
(2) Balances at:
1 May 2015 30 April 2016
£ £
Bank 1 600 Dr ?
Subscriptions in advance 2 100 1 450
Subscriptions in arrears 560 300
Wages and salaries accrued 880 -
Wages and salaries prepaid - 750
Electricity accrued - 220
Clubhouse (at cost) 40 000 ?
Sports equipment (book value) 20 000 ?
(3) £320 of the subscriptions in arrears on 1 May 2015 were collected. The remainder
of the subscriptions in arrears on 1 May 2015 were written off as irrecoverable.
(4) Depreciation is charged on all non-current assets owned at the end of the year on
the following basis:
Clubhouse 2% per annum using straight line
Sports equipment 25% per annum using reducing balance.
Required:
(a) Prepare, for the year ended 30 April 2016, the:
(i) Receipts and Payments Account
(6)
(ii) Subscriptions Account
(10)
(iii) Income and Expenditure Account.
(12)
Topton Sports Club is proposing to offer a five-year membership at a discounted rate.
(b) Evaluate the proposal to offer a five-year membership at a discounted rate.
(4)
(Total for Question 5 = 32 marks)

Answer space for Question 5 is on pages 25 to 29 of the question paper.

8
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 SOURCE MATERIAL FOR USE WITH QUESTION 6
6 Baba is the owner of a delivery business. The following balances were in her books on
1 March 2015:
£
Non-current assets (at cost)
Delivery vehicles 98 000
Office fixtures 61 000
Provisions for depreciation:
Delivery vehicles 33 000
Office fixtures 17 800
Baba’s depreciation policy is:
• Delivery vehicles at the rate of 20% per annum reducing balance
• Office fixtures at the rate of 15% per annum straight line
• A full year’s depreciation is charged in the year of purchase
• No depreciation is charged in the year of sale
• All disposals are recorded in a single non-current asset disposal account.
Additional information for the year ended 29 February 2016:
(1) Delivery vehicles with a cost of £18 000, and accumulated depreciation of £9 000,
were sold by cheque for £8 400 during the year.
(2) Delivery vehicles costing £24 000 were purchased during the year, paying by cheque.
(3) Office fixtures costing £12 000, and with an accumulated depreciation of £5 400,
were sold for £400 cash.
(4) Additional office fixtures were purchased at a cost of £21 000, paying by cheque.
Required:
(a) Explain why Baba needs to charge depreciation on non-current assets for the year.
(4)
(b) Calculate, for the year ended 29 February 2016, the depreciation of the:
(i) Delivery vehicles
(ii) Office fixtures.
(7)
(c) Prepare, for the year ended 29 February 2016, the:
(i) Delivery Vehicles Account
(ii) Delivery Vehicles – Provision for Depreciation Account
(iii) Disposal Account for all non-current assets.
(17)
Baba records computers in her office fixtures account. She is concerned that each
year she scraps computers that still have a significant book value.
(d) Evaluate Baba’s current policy of including computers as office fixtures.
(4)
(Total for Question 6 = 32 marks)

Answer space for Question 6 is on pages 30 to 34 of the question paper.

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 SOURCE MATERIAL FOR USE WITH QUESTION 7
7 Molara and Zanita are partners in a clothing retail business. Profits and losses are
shared in the ratio 3:2. Interest is allowed on capital at the rate of 5% per annum and
charged on drawings at the rate of 8% per annum. Molara and Zanita each receive a
salary of £5 000 per annum.
The following information is available for the year ended 30 April 2016:
(1) On 1 November 2015, Molara reduced her capital by £20 000, receiving a cheque.
(2) On 1 November 2015, Zanita provided a £40 000 5% long-term loan to the
partnership.
(3) Balances at 30 April 2016:
£
Capital Account – Molara 30 000
Zanita 50 000
Current Account – Molara 500 Dr
Zanita 3 000 Dr
Drawings – Molara 9 500
Zanita 10 500
Partnership salaries paid: – Molara 5 000
Zanita 5 000
5% long-term loan – Zanita 40 000
Profit for the year 25 000
Required:
(a) State two advantages of trading as a partnership.
(2)
(b) Describe how the interest on the 5% long-term loan would be recorded in the
Statement of Comprehensive Income of Molara and Zanita.
(2)
(c) Prepare, for the year ended 30 April 2016, the:
(i) Appropriation Account
(12)
(ii) Capital Account of Molara
(3)
(iii) Current Account of Zanita.
(9)
(d) Evaluate the need for a formal partnership agreement.
(4)

(Total for Question 7 = 32 marks)

Answer space for Question 7 is on pages 35 to 38 of the question paper.

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P46516A
 Pearson Edexcel
International Advanced Level

Accounting
Paper 1: The Accounting System and Costing

Wednesday 12 October 2016 – Morning Paper Reference

Source Booklet WAC11/01

Do not return this source booklet with the question paper.

Turn over

P48250A
©2016 Pearson Education Ltd.

1/1/1/1
*P48250A*
 SECTION A
Answer BOTH questions in this section.
1 Weston Airways operates an airline service between cities using two 15-seater aircraft.
The following balances were recorded in the books on 30 September 2016:

£
Revenue from passenger sales 1 500 000
Salaries: Aircrew 275 000
Administration 82 000
Landing charge expenses 90 000
Fuel 140 000
Ground services expenses 210 000
Non-current assets (cost):
Aircraft 600 000
Computers and fixtures 58 000
Provisions for depreciation:
Aircraft 500 000
Computers and fixtures 18 000
Aircraft maintenance 315 000
Marketing 70 000
Administration expenses 145 000
Rent 50 000
6% Bank loan (repayable 30 June 2020) 200 000
Bank loan interest 9 000
Trade receivables 47 000
Trade payables 59 000
Cash and bank 486 000 Dr
Capital 300 000

Additional information at 30 September 2016

(1) Accruals:
• aircrew salaries £13 000
• fuel £20 000
(2) Marketing includes £20 000 for a campaign to run from 1 July 2016 to
31 December 2016.
(3) Some bank loan interest was outstanding. The bank loan commenced
1 October 2015.
(4) Depreciation is charged as follows:
• aircraft at the rate of 8% per annum using the straight line method
• computers and fixtures at the rate of 20% per annum using the reducing
balance method.
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 Required
(a) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the
year ended 30 September 2016.
(14)
(b) Prepare the Statement of Financial Position at 30 September 2016.
(14)
The owner of Weston Airways is aware that its two existing aircraft are old and need
replacing.
The owner proposes to replace the two existing aircraft with two larger 20-seater
aircraft for the year ended 30 September 2017.
The projections for the replacements are as follows:
 •  assenger numbers will increase by 10%. Market research shows that each
p
passenger will also pay 8% more to fly in the new aircraft
• the aircraft will use 30% less fuel
• aircraft maintenance will be 40% less
• ground services expenses will rise by 20%
• all other expenses will remain unchanged
• the two existing aircraft will be sold for £100 000 each.
There are two proposals for financing the two replacement aircraft.
Proposal 1
Purchase the two aircraft at a cost of £900 000 each. The aircraft will depreciate at
8% per annum using the straight line method. Weston Airways would take out an
additional £1 500 000 8% bank loan to finance the aircraft.
Proposal 2
Hire the two aircraft for a period of 12 years at a charge of £125 000 per annum for
each aircraft. Weston Airways would not have to charge annual depreciation or take
out an additional bank loan.
Required
(c) Complete the table in your Question Paper showing the changes to the profit or
loss for the year ended 30 September 2017 using:
(i) Proposal 1
(8)
(ii) Proposal 2.
(7)
(d) Evaluate the two proposals and make a recommendation to the owner of Weston
Airways.
(12)

(Total for Question 1 = 55 marks)

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2 The following balances remained in the books of Bani on 30 September 2016. Bani
knows that there are some errors in the books and that she will need to open a
suspense account.

£
Revenue (credit sales) 62 300
Returns inwards 1 150
Inventory 5 350
Purchases 25 100
Trade receivables 6 750
Trade payables 8 200
Non-current assets (cost) 25 000
Provision for depreciation 7 500
General expenses 9 300
Bad debts 450
Rent receivable 1 400
Bank overdraft 600
Drawings 6 460

Required
(a) Prepare the trial balance of Bani at 30 September 2016 including the Suspense
Account.
(15)
On inspection of the books Bani found the following errors:
(1) Goods purchased for £950 had been recorded as £590 in the Purchases Account.
(2) Rent receivable, £400, had been correctly recorded in the Rent Receivable
Account, but no entry had been made in the Bank Account.
(3) General expenses of £65 had been credited to the General Expenses Account.
(4) Drawings of £50 had been recorded in the Drawings Account as £500

Required
(b) Prepare the:
(i) Journal entries to correct the errors (1) to (4) (narratives are not required)
(8)
(ii) Suspense Account after completion of the Journal entries.
(5)
Bani has been advised that there may still be some errors in her books that will not be
revealed by the trial balance.
(c) Name and explain three types of error that will not be revealed by the trial
balance.
(9)

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 Bani prepared a Trade Receivables Control Account to check the closing balance of
her trade receivables.
Using relevant balances from the trial balance, together with the following information:

£
Trade receivables 1 October 2015 5 630
Receipts from credit customers by cheque 59 580

Required
(d) Prepare the Trade Receivables Control Account.
(6)
Bani does not have an allowance for doubtful debts in her books. She records bad
debts when they occur.
(e) Evaluate Bani’s policy of recording bad debts when they occur.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

5
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 SECTION B
Answer THREE questions from this section.
3 Agara is considering the purchase of a retail clothing business, Every Day Wear.
The following were the summarised financial statements of Every Day Wear for the
year ended 30 September 2016.
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 September 2016

£
Revenue 150 000
Cost of sales 90 000
Expenses 53 000
Depreciation 5 000
Bank loan interest 4 000
Loss for the year (2 000)

Statement of Financial Position at 30 September 2016

£
Non-current assets (carrying value) 40 000
Inventory 63 000
Trade receivables 27 000
Total assets 130 000

Capital 60 000
Bank loan (repayable 2020) 40 000
Trade payables 25 000
Bank overdraft 5 000
Total capital and liabilities 130 000

Required
(a) Calculate the following ratios:
• gross profit as a percentage of revenue
• percentage return on capital employed
• current ratio
• liquid (acid test) ratio.
(8)

6
P48250A
 Additional information
Industry average for the year ending 30 September 2016:
• gross profit as a percentage of revenue 30%
• percentage return on capital employed 8%
• current ratio 1.80:1
• liquid (acid test) ratio 0.85:1
Required
(b) Explain one possible reason for the difference between each of the ratios
calculated in (a) and the industry average.
• Gross profit as a percentage of revenue
• Percentage return on capital employed
• Current ratio
• Liquid (acid test) ratio
(8)
(c) State four non-financial factors that Agara should consider in the possible
purchase of Every Day Wear.
(4)
The current owner of Every Day Wear has stated that he will sell the business to Agara
for £85 000
(d) (i) Define the accounting term goodwill.
(2)
(ii) Calculate the value of the goodwill that Agara would pay if he agreed the
asking price of £85 000 for Every Day Wear.
(2)
(e) Evaluate whether Agara should purchase Every Day Wear.
(6)

(Total for Question 3 = 30 marks)

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4 The following information is available for the Sandy Bay Social Club for the year
ended 31 August 2016.
(1) Annual subscriptions:

1 September 31 August
2015 2016
£ £
• balances subscriptions in advance 350 530
subscriptions in arrears 900 700
  • during the year annual subscriptions received and banked were £4 250
  • £630 of the subscriptions in arrears at 1 September 2015 were received, the
balance was irrecoverable.
(2) Life membership subscriptions:
• balance 1 September 2015 £30 400
• during the year life membership subscriptions received and banked were £1 600
• the Sandy Bay Social Club transfers 10% of the Life Membership Subscription
Account balance at the end of the year to the Income and Expenditure Account.
(3) Balances at 31 August 2016:

£
Subscriptions in advance 530
Subscriptions in arrears 700
Life membership subscriptions ?
Clubhouse (at book value) 55 000
5% Bank loan (repayable 30 June 2025) 6 000
Trade payables 825
Bank 1 950 Dr
Accrued expenses 235

8
P48250A
 Required
(a) Explain two differences between the Receipts and Payments Account and the
Income and Expenditure Account.
(4)
(b) Prepare for the year ended 31 August 2016, showing the appropriate transfer to
the Income and Expenditure Account, the:
(i) Subscriptions Account
(5)
(ii) Life Membership Account.
(5)
(c) Calculate the Accumulated Fund at 31 August 2016.
(2)
(d) Prepare the Statement of Financial Position at 31 August 2016.
(8)
(e) Evaluate the case for the club offering life membership.
(6)

(Total for Question 4 = 30 marks)

9
P48250A
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5 Martino has been asked to make recommendations for the purchase and network
rental of mobile phones.
He has obtained the following information from three suppliers:

Mobile phone Monthly contract

Company Call costs
purchase price network rental
2 pence (£0.02) per minute for
£50 per month the first 500 minutes per month.
National
£120 for a period of 12 10 pence (£0.10) per minute for
Telecom
months. all minutes over 500 minutes per
month.
£10 per month
One2one 15 pence (£0.15) per minute for all
£260 for a period of 20
Link minutes per month.
months.
£45 per month
8 pence (£0.08) per minute for all
Speed Call £90 for a period of 15
minutes per month.
months.

Additional information
(1) Mobile phones purchased will have no resale value at the end of the contract
period.
(2) Mobile phones are only required by two managers, whose projected usage is:
• Sales Manager – 600 minutes per month
• Purchasing Manager – 300 minutes per month.

10
P48250A
 Required
(a) Explain the difference between variable and fixed costs.
(4)
(b) Give one example of a variable cost and a fixed cost from the purchase or
network rental of mobiles phones.
(2)
(c) Complete the table in your Question Paper showing the cost per month for
the usage of a mobile phone from each supplier for the Sales Manager and the
Purchasing Manager.
(16)
(d) Recommend which supplier of mobile phones is the most cost effective for the:
• Sales Manager
• Purchasing Manager.
(2)
The business is considering apportioning the cost of mobile phones between
its departments.
(e) Evaluate the proposal of apportioning business mobile phone costs.
(6)

(Total for Question 5 = 30 marks)

11
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6 Palak has reviewed his policy for the depreciation of computers. He has decided to
change from the straight line method to the reducing balance method. He provided
the following information:
(1) Purchased computers on 1 October 2013 at a cost of £25 000
(2) His policy for depreciating computers for the years ended 30 September 2014 and
30 September 2015 was to depreciate at the rate of 10% per annum using the
straight line method.
(3) His policy for depreciating computers for the year ended 30 September 2016
will be to depreciate at the rate of 20% per annum using the reducing balance
method.
(4) The difference due to the change in depreciation method on computers for the
years ended 30 September 2014 and 30 September 2015 will be charged to the
Statement of Profit or Loss and Other Comprehensive Income for the year ended
30 September 2016.
Required
(a) Explain the difference between capital expenditure and revenue expenditure.
(4)
(b) Explain how capital expenditure will be treated in the financial statements.
(4)
(c) Identify one accounting concept that:
(i) supports a change in the method of depreciation on computers
(1)
(ii) does not support a change in the method of depreciation on computers.
(1)
(d) Calculate the:
(i) difference due to the change in method of depreciation on computers for the
years ended 30 September 2014 and 30 September 2015
(6)
(ii) depreciation on computers for the year ended 30 September 2016.
(2)
(e) Prepare the Computers – Provision for Depreciation Account for the years ending
30 September 2014, 30 September 2015 and 30 September 2016.
(6)
(f ) Evaluate Palak’s decision to change the method for depreciating computers from
the straight line method to the reducing balance method.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

12
P48250A
 Pearson Edexcel
International Advanced Level

Accounting (Modular Syllabus)

Unit 1: The Accounting System and Costing

Wednesday 12 October 2016 – Morning Paper Reference

Source booklet for use with Questions 1 to 7. WAC01/01

Do not return the insert with the question paper.

Turn over

P50676A
©2016 Pearson Education Ltd.

1/1/1/1/1
*P50676A*
 SECTION A
SOURCE MATERIAL FOR USE WITH QUESTION 1
1 The Morfar Hotel is located in a scenic area of the country. The following balances
were extracted from the books on 30 September 2016.
£
Non-current assets:
Land and buildings 400 000
Hotel equipment 50 000
Fixtures and fittings 60 000
Provisions for depreciation:
Land and buildings 52 000
Hotel equipment 34 000
Fixtures and fittings 20 000
Refurbishment (see (1) below) 80 000
Revenue:
Restaurant 76 000
Hotel 215 000
Restaurant inventory 1 October 2015 5 700
Restaurant purchases 31 250
General expenses 37 500
Laundry expenses 60 000
Staff wages:
Restaurant 18 000
Hotel 93 000
Electricity and water 9 000
Rates 14 500
Trade receivables 45 000
Trade payables 64 450
Provision for doubtful debts 3 700
Capital 150 000
Drawings 9 700
6% Bank loan (repayable 2035) 300 000
Cash and bank 1 500 Dr
Additional information
(1) The refurbishment consisted of:
£
Building an extension to the lounge 40 000
Redecoration of the bedrooms 15 000
Hotel equipment repair 5 000
New fixtures and fittings 20 000
80 000

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 (2) Restaurant inventory at 30 September 2016, £4 450
(3) General expenses include a payment of £17 400 interest on the bank loan.
(4) Rates of £1 400 were prepaid.
(5) Laundry expenses of £2 000 were owing.
(6) 25% of both the laundry expenses and depreciation on fixtures and fittings are
allocated to the restaurant.
(7) Depreciation is charged on all non-current assets owned at the end of the year as
follows:
(i) Land was valued at £150 000 and is not depreciated. Buildings are depreciated
at the rate of 2% per annum on cost
(ii) Hotel equipment at the rate of 25% per annum reducing balance
(iii) Fixtures and fittings at the rate of 15% per annum straight line.
(8) The provision for doubtful debts is to be £5 000 at 30 September 2016.
Required:
(a) State, giving your reasons, whether each of the following refurbishments will be
capital expenditure or revenue expenditure:
• building an extension to the lounge
• redecoration of the bedrooms
• hotel equipment repair
• new fixtures and fittings.
(8)
(b) Prepare for the year ended 30 September 2016 the:
(i) Restaurant Trading Account
(8)
(ii) Statement of Comprehensive Income.
(14)
(c) Prepare the Statement of Financial Position at 30 September 2016.
(14)
(d) Evaluate the decision to charge depreciation on the buildings.
(8)

(Total for Question 1 = 52 marks)

Answer space for Question 1 is on pages 2 to 8 of the question paper.

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 SOURCE MATERIAL FOR USE WITH QUESTION 2
2 The following trial balance for Puteri was prepared by an inexperienced bookkeeper
on 31 August 2016. The trial balance was incorrectly drafted and further errors were
discovered requiring correction by journal entries.
Puteri
Trial balance at 31 August 2016
Dr Cr
£ £
Revenue 100 000
Purchases 52 000
Returns outward 4 600
Returns inward 7 500
Discount allowed 8 600
Discount received 5 200
Wages 33 900
General expenses 14 350
Capital 20 000
Drawings 6 500
Bank overdraft 8 000
Trade receivables 10 350
Trade payables 19 300
Computers 35 000
Computers – provision for depreciation 000 000 15 200
166 600 173 900
Required:
(a) Name and explain three types of error that would not be revealed by a trial balance.
(6)
(b) Redraft the trial balance placing the difference in a Suspense Account.
(10)
The following errors were discovered requiring correction by journal entries:
(1) Purchases of £6 300 had been recorded in the day book as £3 600
(2) Discount received of £600 had been posted to the debit side of the Discount
Allowed Account. The entry in the cash book was correct.
(3) Drawings of £2 500 have been entered in the Wages Account.
(4) A payment to Ning, a supplier, of £1 750, had been correctly entered in the
Bank Account, but no entry had been made in the account of Ning.
(5) A payment by cheque for general expenses of, £730, had the entries reversed in the books.
(6) Sales of goods to Wei of, £850, had been recorded in the Revenue Account, but no
entry had been made in the account of Wei.
(7) In August, Puteri sold a computer for £2 000, which had cost £11 000. Payment
was made by cheque. At the date of the disposal the accumulated depreciation
was £7 800. No entries had been recorded in the books.
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 Required:
(c) Prepare the:
(i) journal entries to correct the errors (1) to (7). Narratives are not required
(19)
(ii) Suspense Account after the correction of all errors.
(5)
(d) Prepare the Computer Disposal Account including the end of period transfer.
(4)
(e) Evaluate the usefulness of preparing a trial balance at the end of an accounting
period.
(8)

(Total for Question 2 = 52 marks)

Answer space for Question 2 is on pages 9 to 14 of the question paper.

5
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 SOURCE MATERIAL FOR USE WITH QUESTION 3
3 Aish is in business as a sole trader retailing mobile phones. Aish has not maintained
a full set of double entry books. The following information is available for the year
ended 30 September 2016.
(1) Sales were both for cash and on credit. Where sales have been made on credit,
these have been invoiced to customers.
(2) On 1 October 2015 Aish had an inventory of 200 mobile phones in his shop,
which cost £50 each. Purchases throughout the year were on credit at £50 for
each mobile phone.
During the year Aish purchased mobile phones every quarter (three months) on
credit.

Purchases Sales

First quarter 110 phones 140 phones

Second quarter 250 phones 130 phones

Third quarter 140 phones 190 phones

Fourth quarter 130 phones 140 phones

(3) During the year there were 8 mobile phones stolen from his shop.
(4) 20 mobile phones became obsolete and were each sold for £60 cash. All
remaining mobile phones were sold at the rate of £150 each.
(5) 100 mobile phones were sold on credit during the year. All remaining sales were
for cash.
(6) During the year Aish received a discount of £900 from suppliers for prompt
payment.
(7) The following payments were made in cash in each of the 52 weeks of the year
from the cash till:
£
Rent of shop 200
Sales assistant’s wages 300
Drawings 90

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 (8) After deducting the cash expenditure in (7), all cash takings were paid into the
bank. The following analysis of the bank account is available:
£
Receipts
Cash sales 41 320
Credit sales receipts 16 500
Payments
Telecom expenses 4 750
Electricity 2 300
General expenses 8 350
Suppliers of mobile phones 27 650
Shop fixtures 1 300
(9) Other assets and liabilities were valued as follows:
1 October 30 September
2015 2016
£ £
Shop fixtures 9 400 9 100
Telecom expenses accrued 350 500
Electricity prepaid 70 110
General expenses accrued 900 –
General expenses prepaid – 250
Trade receivables 7 350 ?
Trade payables 6 500 ?
Required:
(a) Calculate the value of the:
• purchases for the year ended 30 September 2016
• sales revenue for the year ended 30 September 2016
• inventory at 30 September 2016.
(8)
(b) Prepare for Aish the Statement of Comprehensive Income for the year ended
30 September 2016.
(17)
(c) Prepare control accounts to establish the value at 30 September 2016 of the:
• trade receivables
• trade payables.
(11)
Aish does not maintain a full set of double entry books.
(d) Explain four advantages for Aish of maintaining a full set of double entry books.
(8)

7
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 Aish currently rents his shop premises. The shop premises will shortly be for sale for
£150 000
(e) Evaluate whether Aish should consider purchasing the shop premises when they
become available for sale.
(8)

(Total for Question 3 = 52 marks)

Answer space for Question 3 is on pages 15 to 19 of the question paper.

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 SECTION B
SOURCE MATERIAL FOR USE WITH QUESTION 4
4 Hottenham United is a football club in the National League. On 1 October 2015 it
started a supporters club with £5 000 cash, which was paid into a bank account.
The following is the summarised information for the year ended 30 September 2016.
(1) Supporters were required to join the club via the internet and were then sent
a membership pack and an invoice for a £15 subscription fee for the year. The
number of supporters joining was 3 500. At 30 September 2016, subscriptions
from 300 supporters were in arrears and 200 supporters had paid their
subscriptions in advance for a second year.
(2) The supporters club decided to write off any subscriptions not paid by
30 September 2016 as bad debts.
(3) A supporters club secretary was appointed on 1 October 2015 at a salary of
£15 000 per annum. Expenses paid by cheque were: telephone and postage
£4 000, rent £3 000, general office expenses £1 850
(4) At 30 September 2016, £500 was prepaid for rent and £300 was owed for general
office expenses.
(5) On 1 October 2015 office furniture was purchased for £1 200 cash. A computer
and photocopier were purchased on the same date for £5 500 on credit from
Office Supplies. It is estimated that the office furniture will have a life of 10 years.
The computer and photocopier were valued at £4 000 on 30 September 2016.
(6) During the year a cheque of £5 000 was paid to Office Supplies.
(7) A monthly supporters newsletter was circulated to all members at an annual cost
of £9 000 for printing and delivery.
(8) During the year the supporters club raffled two tickets to a Hottenham United
cup tie. The cost of the tickets was £200 and 450 supporters entered the raffle
each paying £1
Required:
(a) Prepare for the Hottenham United Supporters Club for the year ended
30 September 2016:
(i) Receipts and Payments Account
(8)
(ii) Income and Expenditure Account showing clearly the profit or loss made on
the raffle of the cup tie tickets.
(12)
(b) Prepare for Hottenham United Supporters Club the Statement of Financial
Position at 30 September 2016.
(8)

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 (c) Evaluate the subscription debts policy of the Hottenham United Supporters Club.
(4)

(Total for Question 4 = 32 marks)

Answer space for Question 4 is on pages 20 to 23 of the question paper.

11
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 SOURCE MATERIAL FOR USE WITH QUESTION 5
5 Hutton Manufacturing makes two products: the Standard and the Deluxe. The
following information is available for the year ended 30 September 2016.
(1) The Standard and Deluxe products use the same raw material. On 1 October 2015,
the inventory of raw material was 6 000 units at a value of £12 per unit.
(2) During the year the following purchases of raw material were made:
Oct–Dec 10 000 units @ £13
Jan–Mar 8 000 units @ £14
Apr–Jun 14 000 units @ £15
Jul–Sept 7 000 units @ £16
(3) During the year, 37 000 units of raw material were issued to production. Inventory
is issued to production using the First In First Out (FIFO) method and the closing
inventory is valued on a periodic basis.
(4) One unit of raw material will make either one Standard product or one Deluxe
product. During the year, £350 000 of raw materials were used in the production
of the Standard product.
(5) During the year, 30 000 Standard products and 10 000 Deluxe products were
produced.
(6) The factory has two production lines, one to make the Standard product and
one to make the Deluxe product. Twenty five production workers made Standard
products and 10 production workers made Deluxe products.
(7) Manufacturing wages are paid on a day-work rate plus bonus basis. Production
workers were employed 40 hours per week for 50 weeks of the year. The rate of
pay was £5 per hour. A bonus payment of £1 per product was paid to the workers
on the production line for the output produced by that line.
(8) Manufacturing overheads were allocated to the production lines of the Standard
product and the Deluxe product on the following basis:
Standard Deluxe Total
£ £ £
Management salaries 145 000 100 000 245 000
Premises costs 100 000 80 000 180 000
Depreciation 60 000 60 000 120 000
(9) Work in progress:
Standard Deluxe
£ £
1 October 2015 65 000 25 000
30 September 2016 40 000 14 000
(10) The Standard product was sold for £40 and the Deluxe product for £50.

12
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 Required:
(a) Prepare for the year ended 30 September 2016, in columnar format, the
Manufacturing Account. The three columns should be headed Standard product,
Deluxe product and Total.
(14)
(b) Calculate the cost of producing:
• one Standard product
• one Deluxe product.
(4)
Hutton Manufacturing is considering stopping production of the Deluxe product
which it considers to be unprofitable. The Production Manager is concerned at this
development and believes that if overheads were apportioned to production lines,
instead of being allocated to production lines, this would show that the Deluxe
product was profitable.
Additional information
Standard Deluxe
• Employees (number) 25 10
• Floor area occupied (sq m) 4 500 1 500
• Equipment value (£’000) 150 90
(c) Calculate the total overhead that would be charged to each production line
if overheads were apportioned instead of being allocated.
(8)
(d) Calculate the increase or decrease in the cost of one Deluxe product if overheads
were apportioned to production lines as calculated in (c).
(2)
(e) Evaluate whether Hutton Manufacturing should stop production of the Deluxe
product.
(4)

(Total for Question 5 = 32 marks)

Answer space for Question 5 is on pages 24 to 29 of the question paper.

13
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 SOURCE MATERIAL FOR USE WITH QUESTION 6
6 Gupta prepares a Statement of Comprehensive Income at the end of each month.
The following information is available from his books for the month of August 2016.
(1) On 1 August 2016 the following account balances remained in the books:
£
General expenses 230 Cr
Rent receivable 800 Dr
Provision for doubtful debts 4 000 Cr
(2) The general expenses records show the following:
Cheque payments £
2 August 525
18 August 495
26 August 310
Refund by cheque
9 August 60
On 31 August it was estimated that £325 was owed for general expenses.
(3) Rent receivable records show the following:
Cheque receipts £
5 August 500
20 August 1 000
The rent receivable for August was £2 000
(4) A provision for doubtful debts is to be maintained from the following schedule of
trade receivables:
Age of debt Trade receivables Provision
(months) (£) (%)
0–1 23 000 4
1–3 16 500 10
Over 3 4 250 20
A debt from a customer sold goods two months ago for £600, is now considered
irrecoverable.

14
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 Required:
(a) Explain the meaning of a Debit balance on the Rent Receivable Account on
1 August.
(4)
(b) Prepare the following ledger accounts for the month of August 2016.
Each account should include the appropriate transfer to the Statement of
Comprehensive Income. The ledger accounts should be balanced and the balance
brought down.
• General Expenses Account
• Rent Receivable Account
• Provision for Doubtful Debts Account
(16)
(c) Explain how the following accounting concepts would be applied when
preparing a Statement of Comprehensive Income. Give one example for each
concept:
• accrual
• going concern
• consistency
• prudence.
(8)
(d) Evaluate the use of principles and concepts in accounting.
(4)

(Total for Question 6 = 32 marks)

Answer space for Question 6 is on pages 30 to 34 of the question paper.

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 SOURCE MATERIAL FOR USE WITH QUESTION 7
7 Ng has been in business for many years buying and selling goods on credit. He is
having difficulty in meeting the payments to his trade payables and the bank refuses
to allow him an overdraft. The following information relates to the last two trading
years ended 30 September 2015 and 30 September 2016.
30 September 30 September
2015 2016
£ £
Revenue 300 000 420 000
Cost of sales 150 000 210 000
Expenses (including loan interest) 130 000 170 000
Net profit for the year 20 000 40 000

Non-current assets 60 000 95 000

Inventory 30 000 24 000
Trade receivables 20 000 40 000
Bank 20 000 1 000
Trade payables 30 000 50 000
10% loan (long term) 50 000 40 000
Capital 50 000 70 000
Additional information
Inventory at 1 October 2014, £20 000
Required:
(a) Calculate for the years ended 30 September 2015 and 30 September 2016 the:
• percentage gross profit to revenue
• rate of inventory turnover
• return on capital employed
• trade receivables collection period in days
• current ratio
• liquid (acid test) ratio.
(24)
(b) State four ways in which Ng could improve his bank balance.
(4)
(c) Evaluate the financial position of Ng.
(4)

(Total for Question 7 = 32 marks)

Answer space for Question 7 is on pages 35 to 38 of the question paper.

16
P50676A
 Pearson Edexcel
International Advanced Level

Accounting
Paper 1: The Accounting System and Costing

Monday 9 January 2017 – Morning Paper Reference

Source Booklet WAC11/01

Do not return this source booklet with the question paper.

Turn over
Turn over

P48340A
©2017 Pearson Education Ltd.

1/1/1/1/1
*P48340A*
 SECTION A
Answer BOTH questions in this section.
1 Elodie and Harsha are partners in a transport delivery business. Their partnership
agreement states that:
• profits and losses will be shared equally
• salaries will be paid £8 000 per annum to Elodie and £12 000 per annum to Harsha
• interest on capital is allowed at the rate of 5% per annum
• interest on drawings is charged at the rate of 10% per annum.
The following balances were available at 31 December 2016:

£
Revenue 525 000
Commission receivable 16 500
Trade receivables 38 000
Allowance for doubtful debts 1 400
Trade payables 26 000
Bank overdraft 9 200
Driver’s wages 185 000
General expenses 67 000
Management salaries 56 000
Non-current assets (cost):
Delivery vehicles 140 000
Computers and equipment 50 000
Provisions for depreciation:
Delivery vehicles 50 000
Computers and equipment 20 000
Capital accounts:
Elodie 40 000
Harsha 50 000
Current accounts:
Elodie 4 000 Cr
Harsha 8 300 Dr
Drawings (excluding partners’ salaries):
Elodie 23 000
Harsha 28 500
Rent and insurance 15 800
Premises repairs 24 000
Delivery vehicle fuel 106 500

Additional information at 31 December 2016

(1) Rent £500 was prepaid and insurance £1 250 was owing.
(2) Management salaries include the salaries paid in full to both partners.

2
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 (3) On 15 December 2016 Delivery Vehicle B was traded in and replaced by Delivery
Vehicle F. The balance of the purchase price for Delivery Vehicle F was on credit
from Speed Garage.
No entries had been made in the books.
The details for Delivery Vehicle B and Delivery Vehicle F were:

Cost Accumulated Total purchase Trade-in value

depreciation to price
1 January 2016
£ £ £ £

Sold
14 000 5 000 – 4 000
Delivery Vehicle B

Purchased
– – 25 000 –
Delivery Vehicle F

(4) Depreciation is to be charged as follows:

• delivery vehicles at the rate of 20% per annum reducing balance
• computers and equipment at the rate of 20% per annum straight line
• no depreciation is charged on non-current assets in the year of purchase
• a full year’s depreciation is charged on non-current assets in the year of sale.
(5) The allowance for doubtful debts is to be maintained at 5% of trade receivables.

Required
(a) Prepare for the year ended 31 December 2016 the:
(i) Delivery Vehicles Account
(4)
(ii) Delivery Vehicles Disposal Account.
(4)
(b) Prepare for the partnership the:
(i) Statement of Profit or Loss and Other Comprehensive Income (including an
appropriation section) for the year ended 31 December 2016
(17)
(ii) Current Accounts of the partners for the year ended 31 December 2016
(6)
(iii) Statement of Financial Position at 31 December 2016.
(12)
Elodie and Harsha are considering admitting Aja as a partner.
(c) Evaluate the possible admission of Aja as a partner.
(12)

(Total for Question 1 = 55 marks)

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2 Wright Household, a retailer, has three departments:
• Furniture
• Carpets
• Café.
The following balances were extracted from the books at 31 December 2016:
£
Revenue:
Furniture 450 000
Carpets 300 000
Café 50 000
Cost of sales:
Furniture 190 000
Carpets 140 000
Café 30 000
Wages:
Furniture 80 000
Carpets 50 000
Café 20 000
Management salaries 65 000
Delivery vehicle expenses 26 000
Heat and light 10 800
Redecoration of building 13 500
Rates for building 18 900
General expenses 64 000
Non-current assets (cost):
Land and building 260 000
Delivery vehicle 25 000
Fixtures and equipment 40 000
Provisions for depreciation:
Land and building 52 000
Delivery vehicle 5 000
Fixtures and equipment 21 000

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 Additional information at 31 December 2016
(1) A purchase of carpets, £11 000, had been recorded in error as a purchase of
furniture for resale.
(2) Wages accrued: Furniture £3 000, Carpets £5 000
(3) Rates for building of £900 were prepaid.
(4) Depreciation is to be charged as follows:
• no depreciation is charged on the land cost of £80 000. Depreciation is
charged on the buildings at the rate of 2% straight line
• delivery vehicle at the rate of 25% per annum reducing balance
• fixtures and equipment at the rate of 15% per annum straight line.
(5) Provide for a:
• doubtful debt of £4 000 for carpets supplied to a customer
• legal claim of £600 for an injury to a customer in the café.
(6) Departmental data:

Furniture Carpets Café

Staff employed (number) 10 7 3

Delivery vehicle use (%) 70 30 Nil

Floor area occupied (sq m) 1 000 600 200

Fixtures and equipment cost (£) 8 000 10 000 22 000

Required
(a) Prepare the Departmental Statement of Profit or Loss and Other Comprehensive
Income, in columnar format, for the year ended 31 December 2016.
(35)
The owner of Wright Household is considering closing the café as he believes that the
department makes a loss.
(b) Evaluate the closure of the café.
(12)

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 Wright Household remunerates its staff on a day work basis. It is considering changing
this method of remuneration to a group bonus scheme for each department.
(c) Explain the terms:
(i) day work
(2)
(ii) group bonus scheme.
(2)
(d) State two advantages for Wright Household of remunerating staff by day work.
(2)
(e) Advise whether a group bonus scheme would be appropriate for the café staff.
(2)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

6
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 SECTION B
Answer THREE questions from this section.
3 Protea Venture Capital is considering the purchase of Zollar Power. The following
information is available:

Zollar Power
Summary Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 November 2016

£ £
Revenue 750 000
Cost of sales 300 000
Wages and salaries 240 000
Bank loan interest 25 000
Marketing 40 000
Depreciation 40 000
Rent 15 000
General expenses 75 000
735 000
Profit for the year 15 000

Additional information at 30 November 2016

(1) Bank loan £250 000
(2) Capital £550 000

Required
(a) Calculate for Zollar Power the:
(i) gross profit as a percentage of revenue
(2)
(ii) profit for the year as a percentage of revenue
(2)
(iii) percentage return on capital employed.
(2)

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 If Protea Venture Capital purchased Zollar Power it would:
• invest an additional £250 000 in the business at the start of the year and repay the
bank loan in full
• increase marketing expenditure by £31 000 per annum, which will increase sales
volume by 20%
• increase the volume of purchases in line with sales, however lower quality goods
will be purchased for resale, saving 10% on all purchases made
• make 15 staff redundant saving £90 000
• reduce general expenses by £15 000

Required
(b) Prepare the Projected Statement of Profit or Loss and Other Comprehensive
Income for the year ended 30 November 2017.
(10)
(c) Calculate for the year ended 30 November 2017 the projected:
(i) profit for the year as a percentage of revenue
(2)
(ii) percentage return on capital employed.
(2)
(d) Explain the term social and ethical accounting.
(4)
(e) Evaluate the proposal of Protea Venture Capital for the purchase of Zollar Power.
(6)

(Total for Question 3 = 30 marks)

9
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4 Sanith prepared a trial balance on 30 November 2016 that failed to agree. In checking
his transactions for the month of November, he found that the account of one of his
suppliers, Kamila, contained errors. The account was recorded as follows:

Kamila Account

2016 £ 2016 £
8 November Purchases 1 400 1 November Balance b/d 8 000
15 November Bank 5 600 15 November Discount 400
30 November Balance c/d 1 930 20 November Returns 530
8 930 8 930
1 December Balance b/d 1 930

On inspection of the books Sanith found the following errors:

(1) Purchases of £1 400 had been correctly entered in the Purchases Account but
debited to the account of Kamila.
(2) Discount received of £400 on 15 November had been credited to the account of
Kamila. Other entries for this transaction were correct.
(3) A credit purchase of goods from Kamila on 18 November, £2 100, had been
posted to the account of Robson.
(4) A return of goods, £350, to Kamila on 20 November had been correctly recorded
in the book of prime entry. This had been recorded in Kamila’s account as £530
(5) A payment of £1 500 made by cheque to Kamila on 25 November was omitted
from the books.

Required
(a) Prepare the journal entries to correct the errors (1) to (5) in the books.
Narratives are not required.
(10)
(b) Complete the account of Kamila in your question paper, showing the additional
entries required to correct the errors.
(10)
(c) Explain the difference between an:
(i) error of compensation and an error of reversal
(2)
(ii) error of principle and an error of commission.
(2)
(d) Evaluate the use of the trial balance.
(6)

(Total for Question 4 = 30 marks)

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P48340A
5 Falgu commenced business as a builder on 1 December 2015. The following
information is available for the year ended 30 November 2016:
• raw materials costing £80 000 were purchased and used
• Falgu marks up all raw materials by 15%
• Falgu worked 50 hours per week for 50 weeks of the year
• 80% of the hours worked by Falgu were charged to customers
• overhead costs were:
Rent of premises £1 000 per month
General expenses £13 500 per year
Motor vehicle running costs £8 500 per year
• Falgu charged a rate to customers of £25 per hour to cover his labour
and overheads.

Required
(a) Explain the difference between mark-up and margin.
(2)
(b) State whether the following costs would be fixed, semi-fixed, semi-variable or
variable, giving your reason for each:
(i) raw materials
(2)
(ii) rent of premises
(2)
(iii) telephone costs (included in general expenses).
(2)
(c) Calculate Falgu’s profit or loss for the year ended 30 November 2016.
(8)
Falgu has decided to charge a rate to customers in the future that will provide him
with a profit for the year of £40 000.
(d) Calculate the hourly rate that Falgu would need to charge to customers.
(4)
(e) Prepare a quotation for a customer where:
Raw materials purchase price £1 100
Falgu’s hours worked 35 hours
(4)
Falgu is considering the use of information and communications technology (ICT) to
operate his business.
(f ) Evaluate the use of information and communications technology (ICT) to operate
Falgu’s business.
(6)

(Total for Question 5 = 30 marks)

11
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6 Raegan buys and sells clothing on credit. She does not maintain a full set of books
but the following information is available for the year ended 31 December 2016.
(1) Cash Book (summary)

£ £
Receipts from credit customers 47 200 Balance b/d 750
Cash sales banked 8 300 Payments to credit suppliers 35 000
Commission receivable 5 000 Purchase of computers 7 400
Balance c/d 280 Wages by cheque 9 000
General expenses 8 630
60 780 60 780
Balance b/d 280

(2) Balances at:

1 January 2016 31 December 2016

£ £
Trade receivables 5 750 4 400
Trade payables 2 750 6 100
Inventory 10 920 9 350
Computers and fixtures (carrying value) 15 000 17 500
General expenses 450 Accrued 920 Prepaid
Commission receivable – 600 Accrued

(3) Cash sales were banked after payment of the following:

£
Wages 10 350
Drawings 10 500
Purchase of fixtures 6 000
Purchase of goods 2 000

(4) Fixtures were sold, on credit, in December for £1 300 at carrying value.

12
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 Required
(a) Explain the difference between:
(i) capital expenditure and revenue expenditure
(2)
(ii) capital and capital employed.
(2)
(b) Calculate for the year ended 31 December 2016 the:
(i) revenue
(4)
(ii) purchases
(3)
(iii) depreciation on computers and fixtures.
(4)
(c) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the
year ended 31 December 2016.
(9)
(d) Evaluate the need to maintain double entry records in a business.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

13
P48340A
 Pearson Edexcel
International Advanced Level

Accounting
International Advanced Subsidiary
Paper 1: The Accounting System and Costing

Tuesday 16 May 2017 – Afternoon Paper Reference

Source Booklet WAC11/01

Do not return this Source Booklet with the question paper.

Turn over

P49576A
©2017 Pearson Education Ltd.

1/1/1/1/1/e2
*P49576A*
 SECTION A
Answer BOTH questions in this section.
1 Amsha owns a plumbing business that installs and maintains plumbing systems in
properties.
The following balances were available from his books on 31 March 2017.
£
Purchase of raw materials 88 100
Plumbing technicians’ wages 139 200
Management salaries 75 000
Bank and cash 3 100 Dr
Inventory 1 April 2016 17 500
Trade payables 45 700
Trade receivables 70 000
Capital 65 000
Motor vehicle expenses 45 000
Electricity and gas 5 700
Rent of premises 32 000
Marketing expenses 65 000
Revenue 525 000
8% bank loan (repayable 31 May 2017) 60 000
Bank loan interest paid 3 000
Non-current assets (cost):
Motor vehicles 180 000
Office equipment 40 000
Loose tools 38 000
Provisions for depreciation:
Motor vehicles 72 000
Office equipment 25 000
Loose tools 8 000
Allowance for doubtful debts 900
Additional information at 31 March 2017
• Inventory £20 800
• A purchase of raw materials on credit of £2 500 made on 29 March 2017 had not
been recorded in the books.
• Management salaries include drawings of £18 000 paid to Amsha.
• Rent of premises of £4 000 was prepaid and marketing expenses of £1 900 were
owing.
• The 8% bank loan was taken out on 1 April 2016.
• Depreciation is charged as follows:
Motor vehicles at the rate of 20% per annum straight line
Office equipment at the rate of 15% per annum straight line
Loose tools by revaluation. At the year end the value was £18 000
• The allowance for doubtful debts is to be maintained at 3%.

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 Required
(a) Prepare the:
(i) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 31 March 2017.
(17)
(ii) Statement of Financial Position at 31 March 2017.
(13)
Amsha is considering the hourly rates that he will charge in the next financial year for
his plumbing technician services. He provides you with the following information.
• Amsha will continue to employ 12 plumbing technicians each of whom is
provided with a motor vehicle in order to undertake their work.
• Each plumbing technician will be paid wages of £10 000 per annum.
• Amsha will pay employment taxes at 20% of the plumbing technicians’ wages.
• All of the motor vehicle depreciation relates to motor vehicles used by plumbing
technicians.
• Motor vehicle expenses for each vehicle will be £4 000 per annum.
• Loose tools depreciation is charged equally to the 12 plumbing technicians and is
estimated to be the same in the next financial year.
• Amsha applies a mark-up of 35% on costs for overheads and profit.
• Each plumbing technician works 45 hours per week for 50 weeks per year. Amsha
estimates that 80% of the hours worked are undertaking work that is directly
charged to the customer.
Required
(b) Calculate the:
(i) total cost (including overheads and profit) of employing one plumbing
technician for the next financial year
(7)
(ii) hourly rate that Amsha should charge customers in the next financial year for
plumbing technician services.
(2)
Amsha remunerates his plumbing technicians on a day work basis. He is considering
changing the method of remuneration to a group bonus scheme.
(c) Explain how a group bonus scheme would operate.
(4)
(d) Evaluate, from Amsha’s perspective, the use of a group bonus scheme for
remunerating the plumbing technicians.
(12)

(Total for Question 1 = 55 marks)

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2 The following balances were extracted from the books of Aviana Gym Club on
30 April 2017.
£
Members’ subscriptions 5 300
Income from rental of equipment 1 050
Refreshment sales 2 400
Refreshment purchases 960
Non-current assets (cost):
Gym equipment 8 500
Office fixtures 3 000
Provisions for depreciation:
Gym equipment 2 500
Office fixtures 800
Rent of premises 2 000
Heating and lighting 1 100
Trade payable – refreshments 570
Sundry expenses 1 600
Cash 80
Bank overdraft 4 000
Gym equipment maintenance 950
Inventory of refreshments 1 May 2016 480
Required
(a) Using only the above list of balances, prepare the Trial Balance at 30 April 2017
and show the value of the accumulated fund.
(10)
Additional information at 30 April 2017
• Members had prepaid subscriptions of £350. Subscriptions in arrears were £230.
It was agreed that £140 of the subscriptions in arrears was now irrecoverable and
would be written off.
• A purchase of refreshments, £60 on credit, had been omitted from the books.
• Depreciation is charged on all non-current assets owned at the end of the year as
follows:
– gym equipment 20% per annum reducing balance
– office fixtures 10% per annum straight line.
• On 25 March 2017, gym equipment that had cost £1 500, and had a carrying
value of £600, was sold for £800 cash. On 30 March 2017, new gym equipment
costing £4 600 was purchased by cheque. No entries had been made in the books
to record these transactions.
• Inventory of refreshments was £570.

4
P49576A
 Required
(b) Explain two differences between a trial balance and a statement of financial
position.
(4)
(c) Prepare for the year ended 30 April 2017 the:
(i) Subscriptions Account
(5)
(ii) Gym Equipment Account
(4)
(iii) Gym Equipment - Provision for Depreciation Account
(4)
(iv) Refreshment Trading Account
(3)
(v) Income and Expenditure Account.
(7)
(d) Prepare an extract of the Statement of Financial Position at 30 April 2017 showing
the assets of the Aviana Gym Club.
(6)
The Management Committee of the Aviana Gym Club is proposing to purchase its
own gym premises rather than renting premises.
(e) Evaluate the proposal of the Management Committee.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

5
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 SECTION B
Answer THREE questions from this section.
3 Gihan is a retailer who buys and sells goods. The following information was available
for the month of April 2017.
• Balances of the Trade Receivables Control Account on 1 April 2017 were:
£
3 450 Dr
50 Cr
• Summary of transactions for April 2017 (before corrections):
£
Sales: Cash 1 900
Credit 7 830
Sales returns 470
Discount allowed 520
Cheques received from trade receivables 6 695
Refund to credit customer by cheque 210
Interest charged on overdue account 95
• On inspection of the books, Gihan found the following errors in the account of
Mille Street Stores:

– a return of goods, £70, from Mille Street Stores had not been recorded in the
books

– trade discount had been allowed by Gihan on a sale of goods at the rate of
25%. The sale should have been allowed trade discount at the rate of 10%.
Mille Street Stores were charged £225 after trade discount

– Gihan’s Trade Receivables Ledger on 30 April 2017 (before correction of Mille

Street Stores Account) contained the following balances:

Dr Cr
£ £
Muttiah 1 000 -
Nalak - 150
Southsyde Trading 2 300 -
Mille Street Stores 700 -

6
P49576A
 Required
(a) Explain how the Trade Receivables Ledger differs from the Sales Day Book.
(4)
(b) Prepare the journal entries to correct the two errors. Narratives are not required.
(6)
(c) Calculate the corrected closing balance on the account of Mille Street Stores at
30 April 2017.
(4)
(d) Prepare the Trade Receivables Ledger Control Account for the month of April 2017.
(10)
(e) Evaluate the usefulness of preparing control accounts.
(6)

(Total for Question 3 = 30 marks)

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4 Easi Spend’s summarised Statement of Financial Position at 1 May 2016 was:
Assets £
Non-current assets 30 000
Inventory 40 000
Trade receivables 25 000
Bank 5 000
100 000
Capital and liabilities
Capital 85 000
Trade payables 15 000
100 000
Required
(a) Explain the importance of liquidity to a business.
(4)
(b) Calculate for Easi Spend, at 1 May 2016, the:
(i) current ratio
(2)
(ii) liquid (acid test) ratio.
(2)
The following information related to the year ended 30 April 2017.
• Sales of £135 000 were all made on credit.
• Purchases of £72 000 were all made on credit.
• The average inventory for the year was £32 500
• Cheque receipts from trade receivables were £123 000
• Cheque payments to trade payables were £80 000
• Expenses of £33 000 were paid by cheque.
• Depreciation on non-current assets for the year was £4 500
Required
(c) Complete in the question paper the summarised financial statements for the year
ended 30 April 2017.
(10)
(d) Calculate, for the year ended 30 April 2017, the:
(i) inventory turnover
(2)
(ii) trade receivables collection period
(2)
(iii) trade payables payment period.
(2)
(e) Evaluate the liquidity position of Easi Spend at 30 April 2017.
(6)

(Total for Question 4 = 30 marks)

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5 John purchased the Sunshine Villa, a property that he rents to customers for holidays.
The Sunshine Villa, including furniture and equipment, was purchased on
1 May 2016 for £200 000. John used £60 000 of his own savings and a 4% bank loan
of £140 000, repayable in 20 years, to fund the purchase.
After the first year of trading ended on the 30 April 2017, the following
information is available.
• There were 20 bookings in the year, for a total of 250 days, at a rental of £125 per
day.
• In addition to the interest on the bank loan, the costs of the Sunshine Villa were:
– Electricity £50 every month plus £20 per day when the villa is rented
– Water and gas £200 per month
– Cable TV and internet £75 per month
– Insurance £800 per annum
– Management and marketing costs £1 000 per annum plus £50 per booking
– Repairs and maintenance £100 per month plus £100 per booking
– Villa cleaning £100 per booking.
• The furniture and equipment is valued at £30 000, half of which will need to be
replaced in 5 years and half will need to be replaced in 10 years.
Required
(a) Explain the terms:
(i) fixed cost
(2)
(ii) semi-fixed cost.
(2)
(b) Explain, with the use of appropriate accounting concepts and conventions, how
the furniture and equipment depreciation will be charged to the total cost of the
Sunshine Villa for the year.
(4)
(c) Calculate for the Sunshine Villa, for the year ended 30 April 2017, the:
(i) total costs
(10)
(ii) profit or loss
(3)
(iii) return on capital employed.
(3)
Before purchasing the Sunshine Villa a friend of John advised him of alternative
investments for his savings. The friend advised that he could have deposited the
money in a bank and obtained interest of 3% per annum.
(d) Evaluate John’s decision to purchase the Sunshine Villa.
(6)

(Total for Question 5 = 30 marks)

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6 Banwell Products manufactures goods using steel. The price of steel is currently
variable.
The following information is available for the year ended 31 March 2017.
• Raw material:
Inventory 1 April 2016 120 tons at £800 per ton

Date Receipts Issues

April – June 2016 80 tons at £750 90 tons

July – September 2016 70 tons at £700 60 tons

October – December 2016 100 tons at £650 80 tons

January – March 2017 60 tons at £600 70 tons

Banwell Products issues raw materials to production using the First In First Out
(FIFO) perpetual inventory valuation method.
• Wages and salaries:
Manufacturing machinist wages £93 000
Production management salaries £84 000
Indirect manufacturing wages £16 800
Administration wages and salaries £102 000
Manufacturing assembly wages £83 500
Manufacturing assembly wages prepaid at 31 March 2017 £6 500
• Other costs and expenses:
Depreciation on manufacturing equipment £45 000
Depreciation on administration equipment £16 000
Rent of premises £37 000
Rent owing at 31 March 2017 £5 500
(80% of the rent relates to the factory)
Insurance £40 000
Insurance prepaid at 31 March 2017 £5 000
(60% of the insurance relates to the factory)
Marketing expenses £60 000
• Inventories at: 1 April 2016 31 March 2017
Raw materials To be calculated To be calculated
Work in progress £55 000 £47 300
Finished goods £82 000 £73 000
• Banwell Products transferred production to finished goods at an agreed value of
£640 000

10
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 Required
(a) Calculate the value of the inventory of raw materials at 31 March 2017 using the
First In First Out (FIFO) perpetual inventory valuation method.
(4)
(b) Prepare the Manufacturing Account for the year ended 31 March 2017.
(14)
(c) Explain how the following would be accounted for in the Statement of Financial
Position at 31 March 2017:
(i) manufacturing assembly wages prepaid
(2)
(ii) depreciation for the year on manufacturing equipment
(2)
(iii) provision for unrealised profit on manufacture.
(2)
The business is considering changing its method of valuing raw materials inventory
to Last In First Out (LIFO).
(d) Evaluate the use of Last In First Out (LIFO) as a method of valuing the inventory of
raw materials.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

11
P49576A
 Pearson Edexcel
International Advanced Level

Accounting
International Advanced Subsidiary
Paper 1: The Accounting System and Costing

Thursday 19 October 2017 – Morning Paper Reference

Source Booklet WAC11/01

Do not return this Source Booklet with the question paper.

Turn over

P50730A
©2017 Pearson Education Ltd.

1/1/1/1/1/1/1/1/1/1
*P50730A*
 SECTION A
Answer BOTH questions in this section.
1 Aaron and Bitan are in partnership, sharing profits and losses equally.
On 31 July 2016, the capital account balances of the partners were:
Aaron £50 000
Bitan £75 000
On 1 August 2016, Aaron and Bitan agreed to admit Chaman as a partner.
A Partnership Agreement was prepared as follows:
• Chaman would bring assets of £35 000 into the partnership.
• Goodwill was valued at £40 000
• Goodwill would not be retained in the books of the new partnership.
• No interest would be paid on capital.
• Interest would be charged on drawings at the rate of 5% on balances at the end
of the year.
• Salaries would be paid to Bitan £15 000 and Chaman £12 000
• Profits and losses would be shared: Aaron two-fifths ( 2/5 ); Bitan two-fifths ( 2/5 )
and Chaman one-fifth ( 1/5 ).

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 At the end of the first year of trading, on 31 July 2017, the following balances
excluding the capital accounts remained in the books of the partnership.
£
Current accounts - 1 August 2016
Aaron 1 300 Dr
Bitan 900 Cr
Drawings - Aaron 8 000
Bitan 21 000
Chaman 16 000
Revenue 377 500
Purchases 183 200
Non-current assets (cost):
Land and buildings 100 000
Motor vehicles 80 000
Office equipment 40 000
Provision for depreciation:
Land and buildings 4 000
Motor vehicles 24 000
Office equipment 10 000
Wages and salaries 56 500
General expenses 31 000
Allowance for doubtful debts 1 500
Inventory 1 August 2016 36 500
Carriage inwards 10 300
Carriage outwards 7 450
Insurance 3 650
Rent 12 000
Rent receivable 1 750
Motor vehicles expenses 9 800
Trade receivables 48 000
Trade payables 42 050
Bank 5 000 Dr
8% bank loan (repayable December 2025) 50 000
Bank loan interest paid 2 000

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 Additional information at 31 July 2017
• Inventory £40 000
• Insurance includes the annual motor vehicle renewal of £1 200 paid on
1 February 2017.
• General expenses of £4 000 were prepaid.
• Rent receivable of £750 is outstanding.
• The 8% bank loan was taken out in 2015.
• Drawings included the payment of the partner’s salaries.
• Depreciation is charged at the rate of:
• 2% per annum on the cost of land and buildings
• 20% per annum on motor vehicles using the reducing balance method
• 15% per annum on office equipment using the straight line method.
• The allowance for doubtful debts is to be maintained at 5%.
Required
(a) Prepare, for the year ended 31 July 2017, the:
(i) capital accounts of Aaron, Bitan and Chaman
(5)
(ii) Statement of Profit or Loss and Other Comprehensive Income (including the
appropriation of profit or loss)
(20)
(iii) current accounts of Aaron, Bitan and Chaman.
(6)
(b) Prepare the Statement of Financial Position at 31 July 2017.
(12)
Chaman considered setting up business as a sole trader before agreeing to join the
partnership of Aaron and Bitan.
(c) Evaluate Chaman’s decision to join the partnership of Aaron and Bitan as an
alternative to opening a business as a sole trader.
(12)

(Total for Question 1 = 55 marks)

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2 Marvan extracted a trial balance on 31 August 2017. The trial balance failed to
balance so Marvan opened a Suspense Account to record the difference.
On inspection of the books and draft financial statements, Marvan discovered the
following errors:
(1) The Sales Day Book had been under-cast by £3 250
(2) Purchases on credit from Gayesha of £850, had been recorded in the ledger
account of Gihan.
(3) On 31 August 2017, a page from the inventory count (stock-take), for a total of
£900, had been omitted.
(4) Discount allowed of £280 had been credited to the Discount Allowed Account.
(5) Rent of £6 000 had been paid for the period 1 May - 31 October 2017. The
full amount had been charged to the Statement of Profit or Loss and Other
Comprehensive Income.
(6) Telephone expenses of £750 had been correctly recorded in the Bank Account but
had been recorded in the Telephone Expenses Account as £570
(7) The purchase of a new computer, £5 000, had been recorded in the Computer
Expenses Account. Depreciation was charged on computers at the rate of 25% per
annum using the straight line method.
Required
(a) Identify which of the above errors could be corrected by using the Suspense
Account.
(3)
(b) Prepare the journal entries to record the correction of all errors.
Narratives are not required.
(16)
(c) Prepare the Suspense Account after the correction of all errors, showing the
opening balance.
(5)

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 On the 31 August 2017, the following balances were recorded in the ledger before
the correction of errors.
Inventory Account £41 600
Discount Allowed Account £1 320
Computer Expenses Account £12 300
Required
(d) Prepare the following corrected ledger accounts:
(i) Inventory Account
(3)
(ii) Discount Allowed Account
(3)
(iii) Computer Expenses Account.
(3)
Although the trial balance had failed to balance, Marvan prepared draft financial
statements that showed a draft profit for the year of £23 350
(e) Calculate the revised profit or loss for the year after the correction of all errors by
completing the table in your Question Paper.
(10)
(f ) Evaluate the usefulness of preparing draft financial statements when it is known
that there are errors in the books.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

7
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 SECTION B
Answer THREE questions from this section.
3 Bebi is a sole trader buying and selling goods for cash and on credit. When she
commenced business she decided not to keep a formal set of books.
Bebi is now required to calculate her profit or loss for the year and seeks your help.
In discussion with Bebi the following information is available:
(1) At the start of the year, on 1 October 2016, her assets and liabilities were:
• inventory £13 600
• motor van for business use £11 400 (at valuation)
• trade receivables £10 400
• trade payables £8 000
• bank overdraft £1 700
(2) Cheque receipts during the year from trade receivables were £106 000 for credit
sales and a further £9 200 was owed by trade receivables at 30 September 2017.
(3) Bebi banked £3 000 from cash sales after she had paid for the following in cash:
• motor van expenses £7 800
• wages £14 000
• personal drawings £9 200
(4) Credit purchases of £95 000 were paid by cheque during the year and £15 000
was owed to trade payables at 30 September 2017.
(5) Bebi marked up all goods by 331/3%
(6) The motor van was valued at £8 300 at 30 September 2017.
(7) Bebi paid £6 500 by cheque for general expenses during the year.
(8) At 30 September 2017, wages of £900 were accrued and general expenses of
£400 were prepaid.

8
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Required
(a) Calculate, for the year ended 30 September 2017, the:
(i) total revenue
(4)
(ii) total purchases.
(3)
(b) Calculate, at 30 September 2017, the:
(i) closing inventory
(3)
(ii) bank balance.
(3)
(c) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the
year ended 30 September 2017.
(7)
Bebi is considering merging her business and personal bank account.
(d) Explain the accounting concept that would be broken if Bebi records all business
and personal transactions in a single bank account.
(2)
(e) Explain the method of depreciation used for the motor van.
(2)
(f ) Evaluate Bebi’s decision not to maintain a formal set of books.
(6)

(Total for Question 3 = 30 marks)

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4 The Statement of Financial Position of Hoppe Electricals at 30 June 2016, showed the
following:

Accumulated
Non-current Asset Cost Carrying Value
Depreciation

£ £ £

Land and buildings 250 000 80 000 170 000

Motor vehicles 72 000 30 000 42 000

Loose tools 15 000 5 000 10 000

Total 337 000 115 000 222 000

(1) During the year ended 30 June 2017, the following non-current asset transactions
took place:
• An extension to the building costing £60 000 was completed and occupied.
• New motor vehicles were purchased at a cost of £23 000
• Existing motor vehicles with a cost of £25 000, were sold for their carrying
value of £5 000
• Additional loose tools were purchased for £6 000. Loose tools were valued on
30 June 2017 at £14 000
(2) Hoppe Electricals has the following depreciation policy:

• Land and buildings are depreciated at the rate of 10% per annum using the
straight line method.
• Motor vehicles are depreciated at the rate of 25% per annum using the
reducing balance method.
• Loose tools are depreciated using the revaluation method.
• A full year’s depreciation is charged on all non-current assets owned at the
end of the year.
Required
(a) State how the following accounting concepts apply to depreciation:
(i) going concern
(2)
(ii) consistency.
(2)

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P50730A
 (b) Calculate the depreciation to be charged for each type of non-current asset for
the year ended 30 June 2017:
(i) land and buildings
(2)
(ii) motor vehicles
(3)
(iii) loose tools.
(3)
(c) Complete the schedule of non-current assets in your Question Paper.
(12)
(d) Evaluate the depreciation policy of Hoppe Electricals for land and buildings.
(6)

(Total for Question 4 = 30 marks)

11
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5 Ding Repairs is in business as a car body repair workshop. The business has three
departments: Metal shop, Paint shop and Administration. The following information is
available:
(1) Raw materials – car parts and paint.
All car parts and paint to repair cars are purchased to order and will be charged to
the customer at cost plus 20%
(2) Labour
Metal shop employees are paid £7.50 per hour.
Paint shop employees are paid £10.00 per hour.
Metal shop employees work 45 hours per week for 50 weeks per year.
80% of all employee working hours are charged directly to customer repair jobs.
Paint shop employees work 48 hours per week for 50 weeks per year.
75% of all employee working hours are charged directly to customer repair jobs.
(3) Overheads
Allocated overheads:
£
• Metal shop 39 000
• Paint shop 53 000
• Administration 24 000
Other overheads:
£
Rent and rates 20 000
Depreciation of equipment 28 000
Insurance 7 000
Management salaries 45 000

Additional information

Metal shop Paint shop Administration

Floor area (sq m) 600 300 100
Employees (number) 5 3 1
Equipment value (£) 20 000 100 000 20 000
The total overhead for Administration is reallocated: 75% Metal Shop, 25% Paint
Shop.

12
P50730A
 Required
(a) Explain the accounting terms:
(i) semi-variable cost
(2)
(ii) overhead allocation
(2)
(iii) absorption of overheads.
(2)
(b) Calculate the total overhead cost (including the reallocation of Administration),
of the:
• Metal shop
• Paint shop.
(7)
(c) Calculate the overhead recovery rates per labour hour for the:
(i) Metal shop
(2)
(ii) Paint shop.
(2)
A customer has requested a quotation for the repair of his car. Ding Repairs will
purchase the car parts and paint for £250. The repair will take 16 hours in the Metal
shop and 20 hours in the Paint shop. Ding Repairs will include an additional charge of
£150 on the total cost for profit.
Required
(d) Prepare the quotation for the customer.
(7)
(e) Evaluate the usefulness of apportioning overheads to departments.
(6)

(Total for Question 5 = 30 marks)

13
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6 Yaso is in business buying and selling goods on credit. He is concerned that although
his business is making a good profit, his balance at the bank is not increasing. The
following information is available:
(1) At 1 September 2016, the bank balance was £40 000, and the inventory was
£35 000
(2) Summarised bank transactions for the year ended 31 August 2017.
£
Receipts from trade receivables 625 000
Payments to trade payables 580 000
Non-current assets purchased 250 000
6% loan taken out by Yaso 300 000
Expenses paid 125 000
Drawings 40 000
(3) Asset and liabilities at 31 August 2017.
£
Trade receivables 160 000
Trade payables 60 000
Inventory 45 000
Expenses prepaid 20 000
Non-current assets 320 000
6% bank loan 300 000
(repayable December 2022)
Bank To be calculated
(4) Credit transactions in the year ended 31 August 2017.
£
Purchases 570 000
Revenue 800 000
Required
(a) Explain the accounting terms:
(i) profitability
(2)
(ii) liquidity.
(2)
(b) Calculate the bank balance at 31 August 2017.
(4)

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P50730A
 (c) Calculate, for the year ended 31 August 2017, the:
(i) inventory turnover (times)
(2)
(ii) current ratio
(2)
(iii) liquid (acid test) ratio
(2)
(iv) trade payables payment period (in days)
(2)
(v) trade receivables collection period (in days)
(2)
(vi) revenue to non-current assets.
(2)
The following information is available for Yaso’s business for the previous year, ended
31 August 2016, and for the sector average for that year.

Yaso Sector average

For the year ended For the year ended
31 August 2016 31 August 2016

Inventory turnover 11 times 12 times

Current ratio 1.9:1 2:1

Liquid (acid test) ratio 1.1:1 1:1

Trade payables payment period

40 days 45 days
(in days)
Trade receivables collection
50 days 35 days
period (in days)

Revenue to non-current assets 2:1 2.5:1

(d) Evaluate the liquidity of Yaso’s business at 31 August 2017.

(6)
A friend of Yaso’s stated that you cannot judge the success of a business by the
financial factors alone. You must also consider non-financial factors.
(e) Identify four non-financial factors that could be important when judging the
success of Yaso’s business.
(4)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

15
P50730A
 Pearson Edexcel
International Advanced Level

Accounting
International Advanced Subsidiary
Paper 1: The Accounting System and Costing

Monday 8 January 2018 – Morning Paper Reference

Source Booklet WAC11/01

Do not return this Source Booklet with the question paper.

Turn over

P54343A
©2018 Pearson Education Ltd.

1/1/1/1/1/1
*P54343A*
 SECTION A
Answer BOTH questions in this section.
1 Wooden Gifts is a manufacturer and online retailer of wooden products.
The following balances were available at 31 December 2017.

£
Non-current assets (at cost):
Leasehold on building – 10 years 60 000
Manufacturing equipment 90 000
Computing equipment 75 000
Fixtures and fittings 15 000
Provisions for depreciation:
Leasehold on building – 10 years 48 000
Manufacturing equipment 45 000
Computing equipment 35 000
Fixtures and fittings 6 000
Provision for unrealised profit 8 000
Inventory – 1 January 2017
Raw materials 20 000
Work in progress 32 300
Finished goods 88 000
Purchases – Raw materials 85 000
Direct packaging costs 23 300
Trade payables 41 100
Trade receivables 8 600
Factory wages 72 000
Distribution wages 59 000
Management salaries 68 000
Power and heating 14 000
Capital 200 000
Drawings 30 000
Cash and bank 37 900
Website consultancy expenses 16 200
Advertising expenses 43 000
Postage on sales 37 000
Revenue 510 000
General expenses 18 800
Additional information at 31 December 2017
(1) Inventory – Raw materials £21 500
Work in progress £26 000
Finished goods £110 000
(2) Factory wages accrued were £4 000
75% of factory wages are direct and 25% are indirect.
(3) Advertising expenses of £5 500 were prepaid.

2
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 (4) Depreciation is charged as follows:
• leasehold on building at an appropriate rate
• manufacturing equipment at the rate of 20% per annum using the reducing
balance method
• computing equipment at the rate of 25% per annum using the reducing
balance method
• fixtures and fittings at the rate of 10% on cost.
(5) The following costs and expenses are to be apportioned to manufacturing.

Cost Manufacturing

Leasehold on building – depreciation 60%

Manufacturing equipment – depreciation 100%

Management salaries 35%

Power and heating 70%

General expenses 25%

(6) Manufactured goods are transferred to the warehouse at cost plus 10% profit.
Required
(a) Prepare, for the year ended 31 December 2017, the:
(i) Manufacturing Account
(13)
(ii) Provision for Unrealised Profit Account
(4)
(iii) Statement of Profit or Loss and Other Comprehensive Income.
(14)
(b) Prepare the Statement of Financial Position at 31 December 2017.
(12)
The owner of Wooden Gifts is planning his business strategy for the next year. He is
considering closing the manufacturing plant and purchasing all finished goods from
an outside supplier.
(c) Evaluate the effects of a possible closure of the manufacturing plant.
(12)

(Total for Question 1 = 55 marks)

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2 Alung is in business buying and selling goods on credit. The following were recorded
in the books for October 2017.
Trade Receivables Ledger Control Account £
Balances 1 October 2017: Debit 40 500
Credit 1 500
Totals for October 2017:
£
Credit sales 56 000
Receipts from credit customers 50 220
Interest charged on overdue account 320
Refund to credit customer 900
Bad debts 1 650
Discount allowed 2 050
Returns inwards 4 300
Trade Receivables Ledger Control Account £
Balances 31 October 2017: Debit To be calculated
Credit Nil
Required
(a) Prepare the Trade Receivables Ledger Control Account for October 2017.
(10)
(b) State two possible reasons why Alung had a credit balance on his Trade
Receivables Ledger Control Account on 1 October 2017.
(2)
On 31 October 2017 Alung compared his Trade Receivables Ledger Control Account
balance with the total balances in his Trade Receivables Ledger and found the
following errors:
(1) a sale of goods to Raj, £1 530, had been recorded in the books as £1 350
(2) discount allowed, £23, was entered in the discount column on the credit side of
the Cash Book and debited to the account of Copra
(3) a sale to Ng, £850, had been debited in the account of Nah
(4) an invoice recording the sale of goods to Shen, £650, had not been recorded in
the books
(5) a sale of office fixtures, £2 400, had been recorded in the Sales Account.
Required
(c) (i) Identify each type of error in (1) to (5).
(5)
(ii) Prepare the Journal entries to correct all the errors. Narratives are not
required.
(10)

4
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 (d) Explain why a compensating error would not be revealed by the trial balance.
(2)
On 1 November 2016 the balance of the Allowance for Doubtful Debts Account was
£2 300
At 31 October 2017, Alung had the following schedule of trade receivables.

Trade Percentage
Age of debt
receivables irrecoverable

0 – 1 month £20 000 2%

1 – 3 months £12 000 5%

3 months plus £6 000 10%

Required
(e) (i) Calculate the allowance for doubtful debts at 31 October 2017.
(3)
(ii) Prepare the Allowance for Doubtful Debts Account for the year ended
31 October 2017.
(3)
(iii) Prepare the Statement of Financial Position (Extract) showing the trade
receivables at 31 October 2017.
(3)
The following information relates to a customer, Weston Supplies, in November 2017.
November 1 Weston Supplies owed Alung £800
5 Alung sold goods, list price £400, to Weston Supplies less 25% trade
discount.
6 Weston Supplies returned goods purchased on 5 November with
a list price of £80
20 Weston Supplies informed Alung that it had ceased trading.
Weston Supplies paid £0.50 in the £1 on all outstanding debts.
Alung considers the remainder of the balance as irrecoverable.
Required
(f ) Prepare the ledger account of Weston Supplies for November 2017 in the books
of Alung.
(5)
(g) Evaluate the use of accounting concepts and conventions in the preparation of
financial statements.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

5
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 SECTION B
Answer THREE questions in this section.
3 Mathy prepared the following summarised financial statements for the three months
ended 31 December 2017.
Statement of Profit or Loss and Other Comprehensive Income for the three
months ended 31 December 2017
£
Revenue 66 000
Cost of sales (28 000)
Expenses (16 500)
Profit for the three months 21 500
Statement of Financial Position at 31 December 2017
£
Non-current assets (at carrying value) 2 500
Inventory 6 000
Trade receivables 12 000
Bank -
Total assets 20 500
Capital 6 000
Plus profit 21 500
27 500
Less drawings (15 000)
12 500
Trade payables 2 400
Bank overdraft 5 600
Total capital and liabilities 20 500
Additional information for the three months ended 31 December 2017
(1) All sales and purchases were on credit.
(2) Purchases were £30 000
(3) All expenses and drawings were paid by cheque.
Required
(a) Calculate the:
(i) trade payables payment period (in days)
(2)
(ii) trade receivables collection period (in days)
(2)
(iii) current ratio
(2)
(iv) liquid ratio (acid test).
(2)

6
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 (b) State four possible reasons why Mathy has an overdraft.
(4)
The following forecasts have been made for the next three months ended
31 March 2018.
(1) Sales revenue on credit will be £7 000 higher.
(2) Purchases on credit will be 5% higher.
(3) Inventory at 31 March 2018 will be £4 400
(4) Expenses will be reduced by 20%
(5) Drawings will be halved.
(6) Non-current assets will not be depreciated.
(7) Trade payables of £27 600 will be paid by cheque.
(8) Trade receivables collection period will be 60 days.

Required
(c) Complete, in your Question Paper, the Forecast Statement of Profit or Loss and
Other Comprehensive Income for the three months ended 31 March 2018.
(5)
(d) Calculate, at 31 March 2018, the forecast:
(i) trade payables
(2)
(ii) trade receivables
(2)
(iii) bank.
(3)
(e) Evaluate the liquidity of Mathy’s business at 31 March 2018.
Calculations of the current ratio and liquid ratio (acid test) are not required.
(6)

(Total for Question 3 = 30 marks)

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4 Highclass Garages repairs accident damaged cars. It has two production departments:
body repair shop and paint shop, and two service departments: stores and
administration.
The following information is available for the year ended 31 December 2018.
(1) Total overheads for each department will be:
£
Body repair shop 62 000
Paint shop 43 000
Stores 16 000
Administration 12 000
(2) The use of the two service departments has been estimated to be:

Body repair
Paint shop Stores Administration
shop

Stores 50% 25% - 25%

Administration 60% 30% 10% -

(3) Annual hours for each department that can be charged to customers’ jobs will be:
Body repair shop 6 400 labour hours per year
Paint shop 3 400 labour hours per year.
Required
(a) (i) Define the term allocation of overheads.
(2)
(ii) Explain why some overheads cannot be allocated.
(2)
(b) Reapportion the total overheads of the service departments to the production
departments using the continuous allotment method.
(12)
(c) Calculate the hourly overhead recovery rate, to the nearest pence, for the:
(i) body repair shop
(2)
(ii) paint shop.
(2)

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 In the previous year, ended 31 December 2017, the overhead recovery for the
paint shop was under absorbed by £3 800
(d) (i) Explain the meaning of the term under absorbed
(2)
(ii) Identify two possible reasons for the paint shop’s overhead recovery being
under absorbed.
(2)
(e) Evaluate the use of apportionment in determining the cost of operating
a department.
(6)

(Total for Question 4 = 30 marks)

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5 Fast Response is a business delivering goods to customers. The following information
is available:
(1) Extract from the Statement of Financial Position at 31 December 2016.
Non-current assets
Cost Accumulated Carrying
depreciation value
£ £ £
Delivery vehicles 31 000 4 600 26 400
(2) History of delivery vehicle purchases and sales.
1 January 2016 Purchased vehicle A £15 000
1 July 2016 Purchased vehicle B £16 000
1 April 2017 Purchased vehicle C £18 000
1 July 2017 Purchased vehicle D £20 000
1 July 2017 Sold vehicle A £11 000
(3) Fast Response has the following depreciation policy:
• delivery vehicles are depreciated at the rate of 20% per annum using the
straight line method
• depreciation is charged on delivery vehicle purchases and sales on a pro rata
basis to the months of ownership
• all sales of delivery vehicles are recorded through a disposal account.
(4) All purchases and sales of delivery vehicles were by cheque.
Required
(a) Complete the table in your Question Paper showing the depreciation charged on
each delivery vehicle for the year ended 31 December 2017.
(4)
(b) Prepare the Journal entries to record the sale of delivery vehicle A on 1 July 2017.
(4)
(c) Prepare, for the year ending 31 December 2017, the:
(i) Delivery Vehicles Account
(4)
(ii) Delivery Vehicles Disposal Account.
(4)
(d) Explain the difference between the accounting concepts of going concern and
consistency when applied to the depreciation of non-current assets.
(4)

10
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 (e) Identify whether each of the following costs is a capital expenditure or a
revenue expenditure for a new delivery vehicle purchased.
(1) Delivery cost of vehicle
(2) Road licence
(3) Insurance
(4) Sign writing of business name on delivery vehicle
(4)
(f ) Evaluate the suitability of the straight line method for depreciating delivery
vehicles.
(6)

(Total for Question 5 = 30 marks)

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6 PC Support has two departments, a shop selling computer accessories and
a workshop used for repairing computers.
The following information relates to the year ended 31 December 2017:
£
Revenue:
Shop accessories sales 75 000
Workshop repairs 45 000
Purchases:
Shop accessories 28 000
Parts for workshop repairs 6 400
Inventory at 1 January 2017:
Shop accessories 25 500
Parts for workshop repairs 1 800
Wages 65 000
Rent and rates 12 000
General expenses 5 100
Marketing expenses 600
Bad debts to be written off – workshop repairs 500
Allowance for doubtful debts at 1 January 2017:
Shop accessories sales 50
Workshop repairs 90
Fixtures and equipment (cost) 7 000
Trade receivables:
Shop accessories sales 6 000
Workshop repairs 4 000
Additional information at 31 December 2017
(1) Inventory – shop accessories £29 000. Parts for workshop repairs £2 000
(2) During the year computer accessories valued at £3 400 were taken from the shop
and used in workshop repairs.
(3) Wages of £2 500 were accrued.
(4) Five staff were employed, three in the shop and two in the workshop.
(5) The floor area occupied is: shop 150 sqm: workshop 90 sqm.
(6) General expenses are allocated, £3 150 shop: £1 950 workshop.
(7) The allowance for doubtful debts is to be maintained at: 2% shop and
4% workshop.
(8) Depreciation on fixtures and equipment is to be charged at 10% per annum on
cost and apportioned to the shop and workshop in the ratio 4:3

12
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 Required
(a) Recommend, giving a reason, the basis on which the following expenses should
be apportioned between the shop and the workshop.
• Rent and rates
• Marketing expenses
(4)
(b) Prepare the Departmental Statement of Profit or Loss and Other Comprehensive
Income for the year ended 31 December 2017, showing the profit (loss) for each
department. A totals column is not required.
(20)
The owner of PC Support has been advised by his accountant that he should
specialise by expanding one of the two departments.
(c) Evaluate whether the owner should expand one of the departments.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

13
P54343A
 Pearson Edexcel
International Advanced Level

Accounting
International Advanced Subsidiary
Paper 1: The Accounting System and Costing

Tuesday 15 May 2018 – Morning Paper Reference

Source Booklet WAC11/01

Do not return this Source Booklet with the question paper.

Turn over

*P51624A*
P51624A
©2018 Pearson Education Ltd.

1/1/1/1/1/1/1/1/1
 SECTION A
Answer BOTH questions in this section.
1 Future Solar generates electricity from solar panels placed on its land. The electricity
generated is then sold to a single customer, National Distribution, for £150 per
megawatt hour.
The following balances were available at 30 April 2018.
£
Non-current assets (at cost):
Land and buildings 800 000
Solar panels and equipment 600 000
Computers and fixtures 72 000
Provisions for depreciation:
Land and buildings 85 000
Solar panels and equipment 120 000
Computers and fixtures 16 000
Inventory – maintenance spares 1 May 2017 23 400
Purchases of maintenance spares 152 500
Trade payables 32 150
Trade receivables 69 000
Wages of maintenance staff 110 000
Management salaries 280 000
Capital 1 250 000
Drawings 25 000
Cash and bank 19 100
Selling expenses 9 500
Computer expenses 16 750
Revenue 750 000
Administration expenses 34 900
General expenses 41 000

2
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 Additional information at 30 April 2018
(1) Inventory of maintenance spares was counted and valued at £27 300
(2) A cash purchase of maintenance spares in March 2018, £1 750, had not been
recorded in the books.
(3) Amounts owing: maintenance staff wages £5 700, management salaries £11 200
(4) General expenses prepaid £1 400
(5) On 20 April 2018 computers costing £12 000 were sold for £1 500 cash.
On 1 May 2017 the computers had a carrying value of £6 000. No entries
recording the sale had been made in the books.
(6) Depreciation is charged on all non-current assets owned at the end of the year as
follows:
• No depreciation is charged on land, cost £250 000. Buildings are depreciated
at the rate of 2% per annum on cost.
• Solar panels and equipment have an economic life of 25 years with no
residual value. Depreciation is to be charged using the straight line method.
• Computers and fixtures at the rate of 25% per annum using the reducing
balance method.
(7) Cash drawings of £3 000 made by the owner had not been recorded in the books.
Required
(a) Calculate the value of the maintenance spares used for the year ended
30 April 2018.
(3)
(b) Prepare the:
(i) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 30 April 2018
(12)
(ii) Statement of Financial Position at 30 April 2018.
(16)

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 Future Solar is considering expanding its operation by purchasing more land
and installing more solar panels and equipment. The owner has forecast that the
additional cost would be, £800 000. To finance the expansion a 20-year 6% bank loan
would be needed for £750 000
When the expanded facilities are operational the following forecasts are made for a
full year.
(1) A total of 8 000 megawatt hours of electricity will be generated and sold to
National Distribution.
(2) National Distribution will pay a price per megawatt hour that will be 10% lower
than in the year ended 30 April 2018.
(3) The total costs for the year (before bank loan interest) will be:
Fixed – £880 000
Variable £12 per megawatt hour.
Required
(c) Calculate the forecast:
(i) profit or loss for the year
(5)
(ii) total cost of generating one megawatt hour.
(3)
(d) Explain:
(i) the term fixed cost
(2)
(ii) why the majority of Future Solar’s costs are fixed costs.
(2)
(e) Evaluate the expansion proposal of Future Solar.
(12)

(Total for Question 1 = 55 marks)

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2 Roshan’s bookkeeper extracted the following trial balance on 30 April 2018.
Dr Cr
£ £
Capital 60 000
Drawings 11 900
Revenue 205 000
Purchases 125 000
Returns inwards 800
Inventory – 1 May 2017 31 000
Non-current assets (cost) 64 000
Provision for depreciation
– non-current assets 36 000
Discount allowed 1 680
Discount received 3 100
Trade receivables 19 000
Trade payables 15 650
Allowance for doubtful debts 400
Wages 27 000
Rent and rates 8 500
Electricity and gas 4 600
General expenses 23 500
Cash in hand 3 170
Suspense 42 300

341 300 341 300

Roshan was aware that the bookkeeper had made some errors in drafting the trial
balance.
Required
(a) Complete the trial balance in your question paper, correcting all errors.
(8)

5
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 After the correction of the trial balance, the bookkeeper completed the financial
statements, which showed a profit for the year of £30 700. Roshan then identified
that there had been some errors in the year-end adjustments.
(1) The inventory at 30 April 2018 was recorded in the financial statements as
£35 500. There was an error in the inventory count, which should have shown the
total as £32 700
(2) No adjustment had been made for discount receivable owing.
£3 100 had been recorded in the financial statements when this should
have been £3 450
(3) No adjustments had been made for general expenses prepaid £1 200 and owing
£550
(4) Annual depreciation on non-current assets had been charged at the rate of 25%
on cost, when this should have been 15% on cost.
(5) No adjustment had been made to the allowance for doubtful debts, which should
have been maintained at 4%.
(6) A provision should have been made for an injury claim from one of Roshan’s
employees. The injury claim would be for 7 weeks’ loss of earnings at £180 per
week plus a total loss of bonus of £120. No entry had been made in the financial
statements.
Required
(b) Complete the table in the question paper, to calculate the revised profit/loss after
the corrections of (1) to (6).
(14)

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 The following information related to three of Roshan’s ledger accounts.

Balance Payments by Balance Transfer to statement of

1 May 2017 cheque 1 May 2018 profit or loss and other
comprehensive income

£ £ £ £

Allowance for To be
400 Nil To be calculated
doubtful debts calculated

Wages 650 Cr 27 650 175 Cr To be calculated

Electricity and
250 Dr 4 350 360 Cr To be calculated
gas

Required
(c) Prepare the following ledger accounts for the year ended 30 April 2018, showing
the balance brought down at 1 May 2018:
• Allowance for Doubtful Debts Account
• Wages Account
• Electricity and Gas Account.
(9)
(d) Explain the difference between:
(i) the accounting concepts of accruals and money measurement
(4)
(ii) bad debts and allowance for doubtful debts
(4)
(iii) social accounting and ethical accounting.
(4)
Roshan is considering computerising his accounts using information and
communication technology (ICT). He believes that this will eliminate the errors in his
financial statements.
(e) Evaluate the proposal that information and communication technology (ICT)
will eliminate the errors made by his bookkeeper in recording transactions and
preparing the trial balance and the financial statements.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

7
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 SECTION B
Answer THREE questions from this section.
3 Gadhar is in business as a sole trader. He decided to expand his business by investing
in the replacement of his outdated non-current assets. The replacement took place in
June 2017.
The following are the summarised Statements of Financial Position on 30 April 2017
(before the replacement of the non-current assets) and on 30 April 2018 (after the
replacement of the non-current assets).
Summarised Statements of Financial Position at:

30 April 2017 30 April 2018

£ £

10 000 85 000
Non-current assets
(carrying value)

Inventory 25 000 31 000

Trade receivables 12 000 26 000

Bank 10 000 –

57 000 142 000

Capital 35 000 50 000

10-year bank loan – 40 000

Trade payables 22 000 36 000

Bank overdraft – 16 000

57 000 142 000

Additional information
(1) Sales:
• year ended 30 April 2017 – £175 200 on credit
• year ended 30 April 2018 – total sales £300 000 of which £60 000 were for cash.
(2) Profit:
• year ended 30 April 2017 – £17 500
• year ended 30 April 2018 – £17 700
(3) Drawings for the year ended 30 April 2018 – £15 500
(4) Bank interest for the year ended 30 April 2018 – £3 900

8
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 Required
(a) Explain why a fall in the rate of inventory turnover may lead to a fall in liquidity.
(4)
(b) Calculate for both the year ended the 30 April 2017 and the year ended
30 April 2018 the:
• liquid (acid test) ratio
• trade receivables collection period (in days)
• percentage return on capital employed.
(12)
(c) Comment on the liquidity of Gadhar’s business at 30 April 2018.
(3)
(d) Calculate the capital introduced by Gadhar during the year ended 30 April 2018.
(2)
(e) State three alternative sources of funding, other than the bank loan, that Gadhar
could have used to fund the purchase of the non-current assets.
(3)
(f ) Evaluate the usefulness of ratios in determining the performance of a business.
(6)

(Total for Question 3 = 30 marks)

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4 There was a ‘break-in’ and theft at the Kewstoke Sports Club on 27 April 2018, when
cash from the manager’s office and sports equipment from the shop were stolen.
The following information is available.
(1) Balances 1 April 2018
Cash £250
Inventory of sports equipment in the shop £3 500
(2) Cash receipts and payments – 1 April to 27 April 2018
£
Receipts from hire charges 525
Wages 400
Cleaning 190
Cash refund made to customer 25
Subscriptions paid by members 310
Sundry payments 120
(3) All the cash was stolen from the manager’s office in the theft.
(4) Sports equipment sales and purchases – for 1 April to 27 April 2018
Revenue (Sales) £4 200
Purchases £3 200
(5) The inventory of sports equipment remaining after the theft was valued at
£2 300
(6) All sports equipment is sold with a 25% gross profit as a percentage of revenue
(profit margin).
(7) The Kewstoke Sports Club is insured with the Sports Insurance Company for the
theft of all sums, excluding the first £200 of any claim for stolen cash.

10
P51624A
 Required
(a) State two differences between a club and a sole trader business.
(4)
(b) Calculate the value of the cash stolen from the manager’s office on 27 April 2018.
(3)
(c) Calculate the value of the sports equipment stolen from the shop on
27 April 2018.
(4)
(d) Calculate the total value of the insurance claim to be made to the Sports
Insurance Company.
(2)
(e) Prepare the Journal entry, including narrative, recording the insurance claim
made to the Sports Insurance Company.
(5)
The Kewstoke Sports Club has a function room that it hires to the public for a daily
hire rate of £250 per day. The following information is available for the three months
ended 31 March 2018.
(1) The Kewstoke Sports Club hired the function room to the public for five days in
January, four days in February and six days in March.
(2) The following expenses were incurred in the three months ended 31 March 2018:
Rates £2 340
Wages £5 600
Advertising £2 200
Heating £40 per day when the function room is hired to the public.
The total floor area of the Kewstoke Sports Club is 900 sqm. The function room
area is 150 sqm.
It is estimated that 20% of the wages and 75% of the advertising are related to
the function room.
(3) Depreciation on the function room fixtures is charged on the revaluation method.
The valuations, purchases and sales of function room fixtures for the three
months ended 31 March 2018, were:
£
Valuation 1 January 2018 4 300
Additions 1 200
Disposals 600
Valuation 31 March 2018 4 700

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 Required
(f ) Prepare a statement showing the profit or loss on the hire of the function room
for the three months ended 31 March 2018.
(6)
The Kewstoke Sports Club has received a member’s proposal to discontinue the hire
of the function room.
(g) Evaluate the member’s proposal to discontinue the hire of the function room.
(6)

(Total for Question 4 = 30 marks)

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5 Brit Gold buys gold coins from the National Mint and sells them to customers.
The price of gold in the three months January to March 2018 fluctuated owing to
economic conditions.
The following information is available for Brit Gold for the three months January to
March 2018.
(1) Inventory of gold coins 1 January 2018, 200 coins with a total value of £180 000
(2) Purchases of coins from the National Mint and sales to customers.

Purchases from Sales

National Mint (coins)
(coins)

January 200 @ £950 110

February 250 @ £980 220

March 150 @ £1050 200

(3) Brit Gold uses the First In First Out (FIFO) perpetual inventory method of
valuation.
(4) Revenue for the three months ended 31 March 2018 totalled £550 000
(5) Total expenses, including depreciation, were £12 200 per month.
Required
(a) Explain the following accounting concepts as they relate to the valuation of
inventory:
(i) historic cost
(2)
(ii) consistency.
(2)
(b) Calculate the inventory value at the 31 March 2018 using the First In First Out
(FIFO) perpetual inventory method.
(8)
(c) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the
three months ended 31 March 2018.
(6)
(d) Calculate:
(i) the value of the inventory at 31 March 2018 using the Last In First Out (LIFO)
perpetual inventory method
(4)
(ii) the difference in the profit for the three months ended 31 March 2018 if Brit
Gold had used the Last In First Out (LIFO) perpetual inventory method.
(2)

13
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 The Sales Manager of Brit Gold stated: ‘We use the First In First Out (FIFO) inventory
valuation because our profit is always greater.’
(e) Evaluate the Sales Manager’s statement.
(6)

(Total for Question 5 = 30 marks)

14
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6 Asanka and Bhulo are in partnership sharing profits and losses equally. The following
balances were in the books on 30 April 2017.
Capital accounts: £
Asanka 30 000
Bhulo 25 000
Current accounts:
Asanka 600 Cr
Bhulo 1 500 Dr
Additional information
(1) On 1 May 2017 Asanka and Bhulo agreed to admit Padman as a partner.
An agreement was prepared for the new partnership as follows:
• Padman would introduce capital of £20 000 by cheque.
• Goodwill was valued at £18 000. This would not be retained in the books of
the new partnership.
• Asanka would withdraw £10 000 of his capital. This would be paid by cheque
on 1 May 2017.
• Interest will be charged on drawings taken at 5% per annum.
• Asanka would be paid interest on his remaining capital at 8% per annum.
• No interest on capital would be paid to Bhulo or Padman.
• Salaries for the year would be paid to Bhulo £8 000 and Padman £10 000
• The profit (loss) sharing ratio of Asanka, Bhulo and Padman would be 2:4:3
(2) Balances in the books at 30 April 2018:
• Profit for the year £45 585
• Salaries and drawings:

Partners’ Drawings
salaries accrued taken

£ £

Asanka – 5 800

Bhulo 500 6 500

Padman 1 000 8 000

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 Required
(a) State the rules that would apply to the following where there is no partnership
agreement:
• interest on partners’ loans
• partners’ salaries
• share of profit or loss.
(3)
(b) Prepare, for the year ended 30 April 2018, the:
(i) appropriation section of the Statement of Profit or Loss and Other
Comprehensive Income
(7)
(ii) capital accounts of Asanka, Bhulo and Padman
(7)
(iii) current accounts of Asanka, Bhulo and Padman.
(7)
(c) Evaluate the use of a formal partnership agreement.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

16
P51624A
 Pearson Edexcel International Advanced Level

Friday 2 November 2018

Morning Paper Reference WAC11/01

Accounting
International Advanced Subsidiary
Paper 1: The Accounting System and Costing

Source Booklet
Do not return this Source Booklet with the question paper.

Turn over

P54955A
©2018 Pearson Education Ltd.

1/1/1/1/1/1/1/1/1
*P54955A*
 SECTION A
Answer BOTH questions in this section.
1 Pence Stores is a grocery retailer. The following balances were extracted from the
books on 30 September 2018.
£
Non-current assets (cost)
Premises 150 000
Equipment 24 000
Fixtures and fittings 20 000
Provisions for depreciation
Premises 47 000
Equipment 8 000
Fixtures and fittings 12 000
Trade payables 36 800
Revenue 430 000
Purchases 285 000
Trade receivables 6 150
Wages 82 000
Rates 12 000
Carriage inwards 1 500
Carriage outwards 9 650
Inventory – 1 October 2017 22 000
Insurance 7 200
Equipment repairs 2 450
Capital 120 000
Drawings 16 350
Bank 5 900 Dr
General expenses 14 300
Commission receivable 4 700

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 Additional information at 30 September 2018:
(1) Inventory £17 100
(2) The owner had taken £400 of goods for his own use. This had not been recorded
in the books.
(3) Rates of £900 were prepaid.
(4) Commission receivable of £1 300 was outstanding.
(5) Depreciation is charged on all non-current assets owned at the end of the year,
as follows:
• premises at the rate of 2% per annum on cost
• equipment at the rate of 25% per annum using the reducing balance method
• fixtures and fittings at the rate of 10% using the straight line method.
Required
(a) Prepare the:
(i) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 30 September 2018
(13)
(ii) Statement of Financial Position at 30 September 2018.
(12)

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 The annual profit made by Pence Stores has been declining over recent years as
competition increases from larger retailers. As a result, the owner of Pence Stores has
decided to convert his store into a coffee shop, the details are as follows:
• The grocery store will close on 30 September 2018. The new coffee shop will
open, after the premises have been altered, on 1 November 2018
• The premises alterations will cost £20 000. Half will be paid by cheque in October
and half in November
• All equipment will be sold for £7 800, and a cheque will be received in October
• Half of the fixtures and fittings will be sold for £800, payment will be received by
cheque in October. The remaining half will be used in the new coffee shop
• New fixtures and fittings, costing £8 500, will be purchased and paid for by
cheque in October
• The grocery inventory will be sold at cost, payment will be received by cheque in
October
• Half of the trade payables on 30 September 2018 will be paid by cheque in
October and half in November
• All the money owing to the business for trade receivables on 30 September 2018
will be received by cheque during October
• Four staff members will be made redundant at a total cost of £9 000. Payment will
be made by cheque in October
• Running costs of £8 000 for October (wages, rates, etc.) will be paid by cheque in
October
• The owner of Pence Stores has agreed an overdraft with the bank of £20 000

4
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 Required
(b) Prepare the Bank Account of Pence Stores for the month of October 2018.
(9)
The new coffee shop will open on 1 November 2018. The owner has made the
following estimates for the year ended 30 September 2019.
• Revenue – 1 500 customers per week will use the coffee shop for the remaining
47 weeks of the year. Each customer will spend £5 per week.
• The gross profit margin will be 80%.
• Total running costs for the year (excluding depreciation/loss on sale of
non-current assets and redundancy costs) will be £90 000
• The premises alterations for the coffee shop will be treated as capital expenditure.
Required
(c) Prepare the Forecast Statement of Profit or Loss and Other Comprehensive
Income for the year ended 30 September 2019.
(9)
(d) Evaluate the decision of the owner to change the nature of the business from a
grocery retailer to a coffee shop.
(12)

(Total for Question 1 = 55 marks)

5
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2 Padma buys and sells leather bags. She does not maintain a set of double
entry books. The following information was available for the year ended
30 September 2018.
(1) Balances at
1 October 2017 30 September 2018
£ £
Inventory 3 600 4 400
Non-current assets 7 000 14 500
Trade payables 3 900 6 100
5% bank loan (repayable 2020) - 10 000
Bank 7 045 Dr 1 500 Cr
Trade receivables 5 250 8 700
Wages accrued 570 -
Insurance prepaid 600 200
Rent receivable prepaid 75 -
(2) Bank summary
£
Receipts from trade receivables 48 750
Payments to trade payables 15 300
Wages paid 19 420
Cash purchases 3 200
Rent, rates and insurance paid 9 900
Rent received 900
Commission received 2 450
General expenses paid 1 900
Non-current asset purchase 11 000
(3) The 5% bank loan (repayable 2020) was taken out on 1 January 2018. No interest
had been paid on the bank loan at 30 September 2018.
(4) Wages included £6 000 paid to Padma.

6
P54955A
 Required
(a) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the
year ended 30 September 2018.
(15)
(b) Calculate the following ratios at 30 September 2018:
• current ratio
• liquid ratio (acid test)
• trade receivables collection period (in days)
• trade payables payment period (in days).
(8)
(c) Comment briefly on each of the ratios calculated in question 2 (b).
(4)
Padma is worried that her bank balance has fallen from £7 045 to an overdraft of
£1 500 during the year.
(d) State three possible reasons why Padma’s bank balance has fallen during the year.
(3)
Padma is considering manufacturing bags instead of buying them. She has found
suitable premises for manufacturing and is considering two options.
Option 1 Manufacture 1 000 bags per year selling them to her customers.
Option 2 Manufacture 3 000 bags per year selling 1 000 to her customers and
selling the remainder to other retailers.
Forecast costs of manufacture:
(1) Raw material will be £4 per bag.
(2) Labour will be £5 000 per annum plus £5 per bag.
(3) Supervision and quality control will be £9 000 up to production of 2 000 bags at
which point a second supervisor will be required costing a further £9 000
(4) Production overheads will be £8 000 per annum at a production of 1 500 bags
and £10 000 at 2 500 bags.
Required
(e) Complete the table showing the total production cost and the production cost
per bag at the two production levels.
(10)

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 (f ) Identify whether the following costs incurred by Padma are variable,
semi-variable, semi-fixed or fixed costs.
• Raw material
• Labour
• Supervision and quality control
(3)
Padma currently purchases bags for £35 each.
(g) Evaluate whether Padma should continue purchasing bags or start manufacturing
bags.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

8
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 SECTION B
Answer three questions from this section.
3 Argit extracted a trial balance on 31 August 2018 and prepared a draft Statement of
Profit or Loss and Other Comprehensive Income that showed a profit for the year of
£7 100
On the 31 August 2018 after completion of the draft Statement of Profit or Loss and
Other Comprehensive Income, the following balances remained in the ledger.
£
Inventory 3 800
Wages and salaries 1 900 Dr
Rent and rates 1 100 Dr
Bank interest and charges 500 Cr
Non-current assets (cost) 30 000
Provision for depreciation
Non-current assets 8 000
General expenses 200 Cr
Trade receivables 9 800
Allowance for doubtful debts 400
Argit was aware that the trial balance contained several errors and the draft
Statement of Profit or Loss and Other Comprehensive Income required adjustments.
The following errors were found:
(1) Cash sales of £3 600 had not been recorded in the books.
(2) Cash sales of £4 500 had been posted to the ledger as £5 400
(3) Inventory at 31 August was valued incorrectly. The value should have been £4 350
(4) Wages at 31 August 2018 of £1 900 were recorded incorrectly as they were
accrued not prepaid.
(5) A salary bonus payment of £250 had not been recorded in the books.
(6) Rent and rates had been calculated incorrectly. The rent was prepaid £800 and the
rates were accrued £300 at the 31 August 2018.
(7) A provision of £3 000 for bank interest and charges had been made in the
financial statements. The actual sums were bank charges £1 750 and bank
charges £90
(8) Depreciation on non-current assets had been calculated at the rate of 25% using
the straight line method instead of 25% using the reducing balance method.
(9) General expenses included a payment of £600 interest on a loan for Argit’s
personal use. Business expenses of £75 paid by Argit, had not been recorded in
the books.
(10) The allowance for doubtful debts was to be maintained at 5% of trade receivables.

10
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 Required
(a) Complete the table showing adjustments and the corrected Statement of Profit or
Loss and Other Comprehensive Income.
(20)
(b) Explain the use of the following in correcting errors in the ledger:
• Suspense Account
• the Journal.
(4)
(c) Evaluate the preparation of a draft Statement of Profit or Loss and Other
Comprehensive Income when it is known that there are errors in the ledger.
(6)

(Total for Question 3 = 30 marks)

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4 Lohit is in business buying and selling goods on credit. The following information
relates to his bad and doubtful debts for the year ended 31 August 2018.
(1) Balance of Allowance for Doubtful Debts Account on 1 September 2017 was
£1 100
(2) Bad debts
Customer Balance owed Payment received
4 January 2018 Jegan £800 £300
30 March 2018 Smith and Sons £3 000 £0.60 in the £
19 May 2018 Nuri £500 £0.30 in the £
3 June 2018 Ng £250 Nil
(3) Bad debts recovered
The balance of £400 owed by Arca had been written off on 20 July 2016. A cheque
for part payment of the debt was received for £250 on 15 June 2018.
(4) Schedule of trade receivables 31 August 2018
Age of debt Amount Allowance for
doubtful debts
Up to 30 days £12 500 2%
31 – 60 days £6 000 5%
Over 60 days £1 500 20%

12
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 Required
(a) Prepare the following at 31 August 2018, including year-end transfers where
appropriate.
(i) Journal entries, including narratives and bank entries:
• bad debt of Smith and Sons
• recovery of part of the debt written off from Arca.
(8)
(ii) Bad Debts Account
(5)
(iii) Bad Debts Recovered Account
(3)
(iv) Allowance for Doubtful Debts Account.
(4)
(b) Explain four elements of good credit control.
(4)
A friend of Lohit stated, ‘I do not know why you use an allowance for doubtful debts
account. It is better to write off the bad debts when they actually occur.’
(c) Evaluate the friend’s statement.
(6)

(Total for Question 4 = 30 marks)

13
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5 Lee Manufacturing makes two products, chairs and tables. Each product is made on a
separate production line. The following information is available for the month of
July 2018.
(1) Raw materials
The tables and chairs are made using the same type of wood raw material.
Different sets of fittings are added to the tables and chairs to make the finished
product.

Wood for table

Table fittings Chair fittings
and chairs
Inventory 200 metres @ £100
90 sets @ £25 each 400 sets @ £10 each
1 July 2018 per metre
200 metres @ £120
Receipts 150 sets @ £30 each 200 sets @ £12 each
per metre

Issues 250 metres 200 sets 300 sets

• Lee Manufacturing uses the First In First Out (FIFO) method of periodic
inventory valuation.
• In July, 150 metres of wood were used in the manufacture of tables and the
remainder was used in the manufacture of chairs.
(2) Labour
• Five workers on the table production line worked 160 hours each in the
month. Workers were each paid £6 per hour of which 90% was recorded as
direct and 10% was recorded as indirect.
• Eight workers on the chair production line worked 175 hours each in the
month. Workers were each paid £6 per hour for 160 hours and time and a
third for 15 hours. 75% was recorded as direct and 25% recorded as indirect.
(3) Overheads
• Production supervisors salary was £3 900 and is to be apportioned on the
numbers of workers supervised.
• Depreciation for the month was £6 600 of which £2 400 was apportioned to
the production of tables.
• Other overheads totalled £7 500 and were apportioned 40% tables,
60% chairs.
(4) Work in progress
Tables Chairs
1 July 2018 £4 000 £5 200
31 July 2018 £3 850 £6 160

14
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 Required
(a) Prepare the Manufacturing Account, in columnar format, for the month of July
2018, showing the cost of production of tables and the cost of production
of chairs. (A total column is not required).
(20)
(b) Explain the difference between inventory valuation and inventory rotation.
(4)
The accountant has advised Lee Manufacturing to use perpetual inventory valuation
instead of periodic inventory valuation for its raw materials.
(c) Evaluate the accountant’s advice.
(6)

(Total for Question 5 = 30 marks)

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6 Ameer purchased a business that buys and sells electrical household goods. When
taking over the business, Ameer realised that the existing inventory was obsolete.
He therefore decided to have a clearance sale of the existing inventory and replace it
with a new, up-to-date inventory.
The following information is available for July 2018.
(1) Inventory on 1 July 2018
Cost Clearance sale price
£ £
5 Cookers 180 each 190 each
8 Fridges 90 each 60 each
10 Washing machines 160 each 170 each
(2) Purchases of new inventory during July
Cost
£
12 Cookers 200 each
10 Fridges 100 each
15 Washing machines 200 each
Ameer will ‘mark-up’ all new inventory for resale by 20%.
(3) Sales for July 2018
Clearance inventory New inventory
Number sold Number sold
Cookers 3 8
Fridges 5 6
Washing machines 4 12
Required
(a) Explain the following as they relate to inventory:
• net realisable value
• the accounting concept of historic cost
• the accounting concept of realisation.
(6)
(b) Calculate the total value of the inventory on 1 July 2018.
(3)
(c) Complete the table showing the calculation of the total value of the inventory
on 31 July 2018.
(7)
(d) Prepare the trading section of the Statement of Profit or Loss and Other
Comprehensive Income for the month ended 31 July 2018.
(8)

16
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 (e) Evaluate the use of accounting concepts and conventions in the preparation of
financial statements.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

17
P54955A
 Pearson Edexcel International Advanced Level

Monday 7 January 2019

Morning Paper Reference WAC11/01

Accounting
International Advanced Subsidiary
Paper 1: The Accounting System and Costing

Source Booklet
Do not return this Source Booklet with the question paper.

Turn over

*P54957A*
P54957A
©2019 Pearson Education Ltd.

1/1/1/1/1/1/1/1/1
 SECTION A
Answer BOTH questions in this section.
1 Rach and Saada are in partnership as accountants sharing profits and losses equally.
On 1 January 2018 the following were the partners’ balances:
£
Capital accounts Rach 25 000
Saada 30 000
Current accounts Rach 2 600 Cr
Saada 4 100 Cr
On 1 January 2018 Rach and Saada admitted Galenia as a partner. Galenia introduced
capital of £15 000 by cheque into the partnership.
The new partnership agreement stated:
• goodwill was valued on 1 January 2018 at £50 000. This would not be retained in
the books
• interest would be paid on the capital balances at the end of each year at the rate
of 10%
• interest would be charged on the total drawings made during the year at the rate
of 4%
• no salaries would be paid to the partners
• profits and losses would be shared by Rach, Saada and Galenia in the ratio 2:2:1
On 31 December 2018, after the first year of trading of the new partnership, the
following balances, excluding capital and current accounts, were in the books.
£
Accountancy fees received 246 400
Non-current assets (at cost)
Leasehold premises 160 000
Motor vehicles 62 000
Fixtures and computers 48 000
Provisions for depreciation
Leasehold premises 86 900
Motor vehicles 32 000
Fixtures and computers 14 000
Motor vehicles running expenses 24 350
Telephone and broadband expenses 6 200
Trade receivables 38 000
Trade payables 17 000
Computer maintenance 17 950
Insurance 30 000
Electricity and water 8 550
Marketing 15 000
Wages and salaries 75 500
6% bank loan (repayable 2022) 40 000
Drawings – Rach 10 000
Saada 7 500
Galenia 7 500
Cash and bank 2 450 Dr

2
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 Additional information at 31 December 2018
(1) Accountancy fee income of £7 000 in November 2018 had not been invoiced,
and no entries had been recorded in the books.
(2) Prepaid marketing £2 100
(3) Accrued expenses: telephone and broadband expenses £300, wages and salaries
£4 600
(4) The 6% bank loan was taken out on 1 April 2018. No interest had been paid on
the loan.
(5) A computer costing £4 000, and with a carrying value of £1 400, was sold for £250
cash on 15 December 2018. No record of the transaction had been recorded in
the books.
(6) Depreciation is charged on all non-current assets owned at the end of the year as
follows:
• the leasehold on the premises is for 20 years. The appropriate amount is to be
written off the leasehold
• motor vehicles at the rate of 20% per annum using the reducing balance
method
• fixtures and computers at the rate of 25% per annum using the straight line
method.
(7) Trade receivables of £3 000 are considered irrecoverable.
(8) An allowance for doubtful debts of 5% is to be created.
Required
(a) Prepare, for the year ended 31 December 2018, the:
(i) capital accounts of the partners
(4)
(ii) Statement of Profit or Loss and Other Comprehensive Income (including the
appropriation section)
(19)
(iii) current accounts of the partners.
(4)
(b) Prepare the Statement of Financial Position at 31 December 2018.
(16)
(c) Evaluate the use of accounting concepts and conventions in the preparation
of the financial statements of a business.
(12)

(Total for Question 1 = 55 marks)

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2 Abhra sells sandwiches to local businesses, which he purchases ready-made from
Quality Catering.
Abhra does not maintain full accounting records but the following information is
available for the year ended 31 December 2018.
(1) Bank Summary
£ £
Balance b/d 18 000 Paid to Quality Catering 115 000
Cash sales banked 180 000 Wages 23 450
Sale of fixtures 2 400 Motor vehicle expenses 14 100
Commission received 9 100 Purchase of motor vehicle 11 500
Rent received 5 900 Premises rent 10 000
Bank loan repaid and interest 7 300
General expenses 15 800
Balance c/d 18 250
215 400 215 400
Balance b/d 18 250
(2) Abhra banked all cash from sales after paying the following:
£
Wages 3 250 per month
Drawings 1 500 per month
Motor vehicle expenses 1 700
(3) Balances at:
1 January 2018 31 December 2018
£ £
Motor vehicles (carrying value) 30 000 35 000
Fixtures and fittings (carrying value) 12 000 8 800
Trade receivables 4 900 5 700
Trade payable (Quality Catering) 12 350 17 800
5% bank loan 30 000 24 000
Motor vehicle expenses 600 Cr 350 Dr
General expenses 750 Cr 1 300 Cr
(4) There was no inventory of sandwiches at the beginning or end of the year.
(5) There was no interest outstanding on the bank loan.

4
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 Required
(a) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the
year ended 31 December 2018. Show all workings.
(16)
Abhra does not maintain full accounting records, but is considering preparing full
accounting records in the future. To assist Abhra to make a decision he wishes to see
an example of double entry accounting.
(b) Prepare the Quality Catering Account for the year ended 31 December 2018 as it
would have appeared if Abhra had maintained full accounting records.
(5)
(c) State four advantages for Abhra of preparing full accounting records.
(4)

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 Abhra sells two types of sandwich, the basic and the superior, which he purchases
from Quality Catering. The following information is available.

Basic Superior

Purchase price from Quality Catering £2.50 per sandwich £3.25 per sandwich

Abhra selling price £3.50 per sandwich £5.00 per sandwich

Abhra is considering setting up his own sandwich production facility rather than
purchasing sandwiches from Quality Catering. He has prepared the following annual
cost estimates of producing his own sandwiches.

Sandwich type Basic Superior

Production required per week 800 300

Raw materials

Bread – two slices per sandwich £1.50 for 24 slice loaf £2.40 for 24 slice loaf

Fillings £5.00 for 10 sandwiches £4.00 for 5 sandwiches

Labour

Production time @ £7.20 per hour 10 sandwiches per hour 6 sandwiches per hour

Direct expenses

Packaging £15.50 for 100 boxes £30 for 100 boxes

Overheads

Total additional production overheads £27 500 per annum

6
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 Additional information
• Each sandwich is packaged in one box for sale.
• Abhra would absorb the total additional production overheads on the basis of the
number of sandwiches produced.
• Production will be for 50 weeks of the year.
Required
(d) Complete the table in your Question Paper to show the total weekly cost of
producing each type of sandwich.
(12)
(e) Calculate the production cost of:
• one basic sandwich
• one superior sandwich.
(2)
Abhra intends to sell the sandwiches at a profit margin of 40%.
(f ) Calculate the price that Abhra would need to charge for:
• one basic sandwich
• one superior sandwich.
(4)
(g) Evaluate whether Abhra should continue to purchase the sandwiches from
Quality Catering or set up his own sandwich production facility.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

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 SECTION B
Answer THREE questions from this section.
3 The following draft Statement of Profit or Loss and Other Comprehensive Income was
prepared from the books of Cassia for the year ended 31 December 2018.
£
Revenue 84 000
Cost of sales (47 000)
Gross profit 37 000
General expenses (8 000)
Motor vehicle expenses (including depreciation) (18 000)
Advertising (12 000)
Loss for the year (1 000)
After completion of the statement above, Cassia found that the following errors had
been made.
(1) A sale of goods had been made to Johns for £2 800. Johns had returned £600 of
the goods as defective. No entries have been recorded in the books for the sale or
the return.
(2) The closing inventory had been overvalued by £1 300
(3) General expenses included £800 for insurance on the motor vehicles.
(4) A full year’s depreciation, £3 000, had been charged on a new motor vehicle
purchased on 1 August 2018. Cassia has the policy that depreciation is charged
on non-current assets in proportion to the months of ownership in a year.
(5) The advertising figure of £12 000 in the Statement of Profit or Loss and Other
Comprehensive Income included £4 500 for a campaign from 1 September 2018
to 31 May 2019.
Required
(a) Explain the difference between an error of compensation and an error of reversal.
(4)
(b) Prepare the journal entries to record the correction of errors (1) to (5) in the
books. Narratives are not required.
(12)
(c) Complete the table in the question paper showing the revised profit for the year
ended 31 December 2018 after the correction of all errors. You should show all
workings.
(8)
Cassia has been advised that the use of information communication technology (ICT)
would remove all chance of errors occurring in her books.
(d) Evaluate this advice.
(6)

(Total for Question 3 = 30 marks)

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4 The following information was available for the Winston Tennis Club for the year
ended 31 December 2018.
(1) Summary of receipts and payments
Receipts £ Payments £
Annual subscriptions 18 900 General expenses 9 000
Life subscriptions 6 000 Payment to refreshments supplier 1 875
Competition fees 1 475 Competition expenses 430
Sale of fixtures 450 Purchase of equipment 3 850
Donations 700 Competition prizes 910
Sales of refreshments 2 050 Ground staff wages 10 930
(2) Balances 1 January 2018 31 December 2018
£ £
Receipts and payments account 800 Dr 3 380 Dr
Equipment and fixtures (carrying value) 12 400 13 300
Trade payables (refreshment supplier) 110 125
Annual subscriptions in-
advance 1 250 250
arrears 500 To be calculated
Life subscriptions account 11 500 To be calculated
Competition expenses accrued - 75
Inventory of refreshments 85 160
(3) Competition fees of £30 had not been recorded in the books.
(4) There were 80 annual subscription members in 2018 each paying £250 per
annum. There were no bad debts in the year.
(5) There were an additional four life subscription members in the year, each having
paid £1 500
(6) 10% of the Life Subscriptions Account balance at the end of the year is recorded
as income for the year.

10
P54957A
 Required
(a) State two differences between a receipts and payments account and an income
and expenditure account.
(4)
(b) Calculate the:
(i) accumulated fund at 1 January 2018
(2)
(ii) annual subscriptions in arrears at 31 December 2018
(3)
(iii) profit or loss on competitions for the year ended 31 December 2018
(3)
(iv) profit or loss on the sale of refreshments for the year ended
31 December 2018.
(3)
(c) Prepare, for the year ended 31 December 2018, the:
(i) Life Subscriptions Account
(4)
(ii) Income and Expenditure Account.
(5)
(d) Evaluate the use of life membership subscriptions by clubs.
(6)

(Total for Question 4 = 30 marks)

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5 Fix-it is a business that repairs double glazing in customers’ homes.
The business employs five technicians who carry out the repairs in customers’ homes.
Fix-it is preparing estimates for the next financial year ended 31 December 2019. The
following information is available.
(1) Materials and parts
All materials and parts used will be charged to customer jobs at cost plus £15 per
job.
(2) Labour
• Each technician works 50 hours per week for 48 weeks per year.
• Each technician spends 75% of their time on jobs chargeable to the customer,
the remainder of their time is travelling and administration.
• Technicians are paid £7 per hour for the first 40 hours per week and time and
a half for the remaining hours.
• A bonus of £32 per working week is also paid to each technician.
(3) Overheads
• Total budgeted overhead cost £135 000
• Overheads are recovered on the basis of total direct labour hours for all
technicians hours chargeable to customers.
(4) The mark-up on all jobs will be 25%.
Required
(a) Explain the accounting term job costing.
(2)
(b) Calculate the:
(i) number of labour hours for each technician chargeable to the customer
per year
(2)
(ii) labour rate per hour that customers must be charged to recover the total
labour cost
(3)
(iii) overhead recovery rate to be charged per direct labour hour.
(2)
(c) Prepare a quotation for a customer where it is estimated that the materials and
parts will cost £103 and the job will take 7 direct labour hours to complete.
(5)
(d) State two reasons why overheads might be over-absorbed in a year.
(2)

12
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 Fix-it has a total budgeted overhead cost of £135 000 for the year ended
31 December 2019.
Fix-it has three departments: administration, stores and repairs.
The owner has provided the following information.
(1) Budgeted overheads
£
Allocated-
administration 9 800
stores 2 700
repairs 4 500
Motor vehicle expenses 35 000
Rent and rates 25 000
Management salaries 48 000
Premises insurance 10 000
(2) Other information

Administration Stores Repairs

Motor vehicle (number) 1 1 5

Floor area (Sq m) 4 000 1 000 -

Employees (number) 4 1 5

Required
(e) (i) Explain the difference between allocation of overheads and apportionment
of overheads
(2)
(ii) Calculate, by completing the table in the Question Paper, the total budgeted
overheads for each department for the year ended 31 December 2019.
(6)
(f ) Evaluate the use of overhead apportionment.
(6)

(Total for Question 5 = 30 marks)

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6 Maban started business on 1 November 2018 buying and selling goods on credit.
The following balances were available after the first month of trading on
30 November 2018.
£
Trade receivables 9 000
Trade payables 4 000
Inventory 15 000
Bank overdraft 12 000
Accrued expenses 2 000
Required
(a) Calculate the liquid (acid test) ratio for Maban at 30 November 2018.
(2)
Maban started his business with £5 000 in the bank and is concerned that after only
one month’s trading he has a £12 000 bank overdraft.
(b) State four possible reasons why Maban’s bank balance has fallen from £5 000 to
a £12 000 overdraft.
(4)

14
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 During December 2018 the following was a summary of transactions.
(1) On 5 December, Fowler, a trade receivable was declared bankrupt paying £500 of
his debt of £2 000. The balance was irrecoverable.
(2) The remaining trade receivables paid £7 000 by cheque.
(3) Trade payables were paid £3 500 by cheque.
(4) Sales were £15 000 and purchases £6 000. All sales and purchases were on credit.
(5) Maban marks up purchases by 50%.
(6) Expenses were £2 500 on credit of which £2 000 was paid by cheque.
(7) Maban introduced additional capital of £3 000 into the bank.
Required
(c) Calculate, at 31 December 2018, by completing the table, the value of the:
• trade receivables
• trade payables
• inventory
• bank (overdraft)
• accrued expenses.
(14)
(d) (i) Calculate the liquid (acid test) ratio for Maban at 31 December 2018
(2)
(ii) Comment on the movement in liquidity during December 2018.
(2)
(e) Evaluate the use of credit control in reducing irrecoverable debts.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

15
P54957A
 Pearson Edexcel International Advanced Level

Tuesday 14 May 2019

Morning (Time: 3 hours) Paper Reference WAC11/01

Accounting
International Advanced Subsidiary
Paper 1: The Accounting System and Costing

Source Booklet
Do not return this Source Booklet with the question paper.

Turn over

*P56556A*
P56556A
©2019 Pearson Education Ltd.

1/1/1/1/1/1/1/1/1/1/1/1/1
 SECTION A
Answer BOTH questions in this section.
1 Bob’s Material is a retailer of building materials.
Bob’s Material has two departments, a shop and a timber yard.
The following balances were available for the year ended 30 April 2019.
£
Revenue
Shop 231 000
Timber yard 149 000
Purchases
Shop 156 000
Timber yard 124 000
Inventory 1 May 2018
Shop 16 300
Timber yard 9 200
Non-current assets (at cost)
Fixtures and fittings- Shop 17 000
Equipment- Timber yard 36 000
Delivery lorry 24 000
Provisions for depreciation
Fixtures and fittings- Shop 8 500
Equipment – Timber yard 21 000
Delivery lorry 14 000
Wages
Shop 16 700
Timber yard 11 600
Shop repainting 800
Management salary 22 000
Rent, rates and insurance 17 000
Delivery lorry running expenses 8 000
Trade receivables 27 500
Commission receivable- Shop 9 500
Trade payables 41 000
General expenses 11 400
Bank overdraft 24 800
Capital 20 000
Drawings 19 100
Bad debts 2 200

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 The following information was available at 30 April 2019.
(1) A sale of goods from the shop, with a list price of £5 000, had been recorded as
a sale of goods from the timber yard. The customer had been given a 20% trade
discount.
(2) During the year the shop was repainted. Paint, costing £700 was taken from the
shop inventory to carry out the repainting.
(3) Inventory:
Shop £14 600
Timber yard £25 200
(4) Rent of £2 000 is accrued and insurance of £1 000 is prepaid.
(5) Commission receivable for the shop of £3 000 is outstanding.
(6) On 20 April 2019 equipment in the timber yard costing £12 000, and with an
accumulated depreciation of £9 000 was sold for £3 000, the payment being
received by cheque.
Replacement equipment for the timber yard costing £16 000 was purchased on
the 20 April 2019 and was paid for by cheque.
No record of either transaction had been recorded in the books.
(7) Depreciation is charged on all non-current assets owned at the end of the year as
follows:
• shop fixtures and fittings at the rate of 10% using the straight line method
• timber yard equipment at the rate of 20% using the reducing balance method
• delivery lorry at the rate of 25% using the straight line method.
(8) Expenses are apportioned between the shop and the timber yard as follows:

Expense Basis Shop Timber yard

Management salary Employees 3 2

Rent, rates and insurance Floor area 2 500sqm 7 500sqm

Delivery lorry running expenses Percentage usage 15% 85%

General expenses Revenue To be calculated To be calculated

Bad debts Bad debts incurred £1 950 £250

3
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 Required
(a) Prepare the Departmental Statement of Profit or Loss and Other Comprehensive
Income showing the profit or loss for the shop and the timber yard for the year
ended 30 April 2019. Your answer should be in columnar format; a total column
is not required.
(22)
(b) Prepare the Statement of Financial Position at 30 April 2019.
(13)
The owner of Bob’s Material is concerned that the timber yard sales have fallen by
20% in the year and is considering closing the timber yard and expanding the shop.
(c) Evaluate whether Bob’s Material should close the timber yard.
(12)
The owner of Bob’s Material is considering including £50 000 of goodwill in his
financial statements. The owner believes that this will increase his profits and remove
his bank overdraft.
(d) (i) Define the term goodwill.
(2)
(ii) State two examples of goodwill.
(2)
(iii) State two reasons why goodwill is not normally recorded in the books.
(2)
(iv) State the effect on each of the following if goodwill is retained in the books:
(2)
• profit/loss for the year
• bank overdraft.

(Total for Question 1 = 55 marks)

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2 Samantha is in business buying and selling goods on credit. The following balances
were available for the month ended 30 April 2019.
£
Revenue 5 000
Purchases 2 700
Returns inwards 450
Returns outwards 210
Discount allowed 120
Bad debts 50
Bad debts recovered 200
General expenses 1 250
Inventory 600
Trade receivables 2 990
Allowance for doubtful debts 300
Trade payables 1 900
Bank overdraft 730
Non-current assets (at cost) 4 100
Provision for depreciation
–non-current assets 3 000
Drawings 550
Capital To be calculated

6
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 Required
(a) Prepare the trial balance at 30 April 2019, including the calculation of the capital.
(10)
Samantha prepares a trade receivables control account each month.
The following additional information is available for April 2019:
(1) Trade receivable account balances
1 April 2019 30 April 2019
£ £
Binham 1 600 Dr 2 300 Dr
John 970 Dr 750 Dr
Mel 90 Cr 60 Cr
Sanjay 80 Dr -
(2) Other information
£
Cheques received from customers 4 170
(including bad debt recovered)
Interest charged to Binham for an overdue account 20
Required
(b) State two possible reasons why Mel has a credit balance on her account.
(2)
(c) Prepare the Trade Receivables Control Account for the month of April 2019.
(12)
During April 2019 there was a bad debt and a bad debt recovered. The details were as
follows:
3 April 2019 Sanjay was declared bankrupt and Samantha received a cheque for
£30. The balance of the debt was irrecoverable.
15 April 2019 Received a cheque for £200 from Westley for a bad debt that
Samantha had written off as irrecoverable in a previous financial year.
Required
(d) Prepare the journal to include bank entries for the:
(i) bad debt of Sanjay on 3 April 2019
Narratives are not required.
(3)
(ii) bad debt recovered from Westley on 15 April 2019.
Narratives are not required.
(4)
(e) Evaluate the use of control accounts.
(12)

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 SECTION B
Answer THREE questions from this section.
3 Raza is in business buying and selling goods on credit.
The following balances were provided on 31 March 2019
£
Revenue 80 000
Purchases 60 000
Inventory 1 April 2018 18 000
Expenses 7 000
Trade payables 27 000
Trade receivables 38 000
Capital 120 000
Bank 4 000
5 year 8% bank loan 20 000
Additional information at 31 March 2019
Expenses of £3 000 are to be accrued
Inventory £12 000
Required
(a) State the meaning of the following terms:
• liquidity
• profitability.
(4)
(b) Calculate, using the information at 31 March 2019, the:
(i) current ratio
(2)
(ii) liquid (acid test) ratio
(2)
(iii) gross profit as a percentage of revenue
(2)
(iv) profit for the year as a percentage of revenue
(2)
(v) percentage return on capital employed.
(2)
(c) Comment on the sufficiency of the:
• liquidity
• profitability.
(2)

10
P56556A
 On 1 April 2019 Raza increased his mark-up to 40%. The following is a summary of the
transactions for April 2019:
• purchases were £10 000
• goods costing £15 000 were sold
• expenses of £11 000 were paid.
Additional information at 30 April 2019
Expenses of £4 000 are prepaid
Required
(d) Calculate the:
• revenue for April 2019
• inventory at 30 April 2019
• expenses for April 2019
• profit for the month of April 2019.
(8)
(e) Evaluate the use of ratios in determining the success of a business.
(6)

(Total for Question 3 = 30 marks)

11
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4 Willow Timber manufactures wooden products for the garden.
The following information was available for March 2019.
(1) Raw material inventory on 1 March 2019 was 400 metres of wood at a cost of
£50 per metre.
Purchases for the month were 300 metres at £55 per metre delivered on
1 March 2019.
30 metres of the delivery on 1 March 2019 were considered defective and were
returned to the supplier.
250 metres were used in production in the month.
Willow Timber values inventory on the Last In First Out (LIFO) basis.
(2) There were a total of six manufacturing employees in March 2019 each working
180 hours in the month.
All employees were paid at the rate of £7 per hour.
Three of the manufacturing employees worked 14 hours each in the month
undertaking stores duties.
Two of the manufacturing employees worked 9 hours each in the month
maintaining production equipment.
(3) Willow Timber’s overheads for the month of March 2019 were:

Total cost (£) Manufacturing Administration

Management salary 17 500 6 employees 4 employees

Rent, rates and insurance 15 000 1600 sq mtrs 2400 sq mtrs

cost of cost of
Depreciation 9 000 equipment equipment
£45 000 £15 000

(4) Work in progress was valued by an estimate of raw materials and direct labour
used in uncompleted products at the beginning and end of the month. These
were:
1 March 2019 31 March 2019
Raw materials 10 metres 8 metres
Direct labour 30 hours 25 hours
(5) The production for March was transferred to finished goods at an agreed value of
£48 000

12
P56556A
 Required
(a) Explain the difference between inventory valuation and inventory rotation.
(4)
(b) Prepare the Manufacturing Account for the month of March 2019.
(16)
(c) Explain how an adjustment to the provision for unrealised profit would be treated
in the:
• statement of profit or loss and other comprehensive income
• statement of financial position.
(4)
(d) Evaluate the use of Last In First Out (LIFO) when prices of raw materials are rising.
(6)

(Total for Question 4 = 30 marks)

13
P56556A
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5 Expand-it is a retailer. In the year ended 30 April 2019 Expand-it had two stores in
Eastville and Northern.
The following information was available for the year ended 30 April 2019.
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 April 2019

Eastville Store Northern Store Total

£ £ £

Revenue 365 000 300 000 665 000

Cost of sales (305 000) (250 000) (555 000)

Gross profit 60 000 50 000 110 000

Wages 10 000 16 000 26 000

Advertising 11 000 9 800 20 800

Rent payable 12 000 15 000 27 000

Overheads 14 000 14 000 28 000

(47 000) (54 800) (101 800)

Profit for the year 13 000 (4 800) 8 200

For the following year, ended 30 April 2020, Expand-it will open a third store, Weston.
Expand-it prepared the following projections for the year ended 30 April 2020.
(1) The additional store to be opened in Weston is estimated to have a revenue of
£400 000
(2) Revenue of the Eastville Store will remain unchanged but revenue of the Northern
Store will increase by 15%.
(3) The cost of sales for ALL stores will reduce due to increased purchase volumes.
The mark-up in the Northern Store will be 25%. The percentage gross profit to
revenue in the Eastville Store will be 20% and in the Weston Store will be 26%.
(4) Wages in the Eastville Store will be 6% of revenue and in the Northern Store will
increase by £1 000 for the year. Wages in the Weston Store will be 7% of revenue.
(5) Advertising will be £5 000 per store plus 2% of the revenue of that store.
(6) Rent payable will increase by 5% for the Eastville Store and 8% for the Northern
Store. The rent payable for the Weston Store will be £18 000 for the year.
(7) Total overheads will cost £30 000 plus £10 000 for each additional £200 000 of
total revenue above £400 000, up to total revenue of £1 000 000. The overheads
will be divided equally between the three stores.

14
P56556A
 Required
(a) Explain the difference between a semi-fixed overhead and a semi-variable
overhead.
(4)
(b) Prepare the Projected Statement of Profit or Loss and Other Comprehensive
Income for the year ended 30 April 2020. Complete the table in your question
paper.
(16)
(c) State for Expand-it one cost that is an example of a:
• variable cost
• semi-variable cost
• semi-fixed cost
• fixed cost.
(4)
(d) Evaluate the usefulness to Expand-it of preparing projections for the following
year.
(6)

(Total for Question 5 = 30 marks)

15
P56556A
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6 Able and Baker had each traded as sole traders for many years.
On 1 May 2018 the sole traders had the following assets and liabilities in their books:
Able Baker
£ £
Goodwill 12 000 -
Non-current assets (at carrying value) 14 000 18 000
Inventory 9 500 15 500
Trade payables 7 000 10 500
Trade receivables 6 500 11 500
Bank 8 000 Cr 3 000 Dr
On 1 May 2018 Able and Baker formed a partnership. Before opening the books of
the new partnership the following assets were revalued:
• £2 000 of the trade receivables of Able were considered irrecoverable
• The inventory of Baker was reduced in value by £2 500
The partnership agreement stated that:
• goodwill would not be retained in the books of the partnership
• the capital of Able would be reduced by £5 000 which would be retained in the
partnership as a 10% loan, repayable in April 2024
• Baker would take £4 000 of his capital out of the new partnership by cheque
• there would be no interest on capital
• a salary would be paid to Baker of £9 000 per annum
• interest on drawings, excluding salary payments, would be charged at 8% per
annum
• profits and losses would be shared Able 1/3, Baker 2/3.
Required
(a) Prepare the capital accounts of the partners after all adjustments at 1 May 2018.
(7)
(b) Prepare the Statement of Financial Position of the partnership at 1 May 2018.
(8)
(c) State how each of the following would be treated if there had been no
partnership agreement between the partners.
• Loan from Able
• Salary
• Interest on drawings
• Share of profit or loss
(4)

16
P56556A
 At the end of the first year of trading ended 30 April 2019, the following information
was available:
• profit for the year £20 800
• drawings
Able £7 500
Baker £19 000 including salary paid.
(d) Prepare the appropriation section of the Statement of Profit or Loss and Other
Comprehensive Income for the year ended 30 April 2019.
(5)
One of the partners stated that “There are many advantages of forming a partnership
and no disadvantages”.
(e) Evaluate the partner’s statement.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

17
P56556A
 Pearson Edexcel International Advanced Level

Wednesday 30 October 2019

Morning (Time: 3 hours) Paper Reference WAC11/01

Accounting
International Advanced Subsidiary
Paper 1: The Accounting System and Costing

Source Booklet
Do not return this Source Booklet with the question paper.

Turn over

P58473A
©2019 Pearson Education Ltd.
1/1/1/1/1/1/1/1/1
*P58473A*
 SECTION A
Answer BOTH questions in this section.
1 Alvor and Bernie had traded as sole traders for many years. On 1 October 2018 they
formed a partnership sharing profits and losses in the ratio of 2:1. The partners
agreed that Alvor would be paid a salary of £10 000 per annum and Bernie £6 000
per annum. There would be no interest paid on capital but interest would be charged
on the closing balance of drawings (excluding salary) at the rate of 10% per annum.
The sole trader businesses of both Alvor and Bernie had the following assets and
liabilities on 1 October 2018.
Alvor Bernie
£ £
Non-current assets (carrying value) 14 000 21 000
Trade payables 3 800 5 400
Trade receivables 6 000 11 600
5% bank loan (repayable 2022) – 12 000
Goodwill 18 000 –
Other receivables 300 900
Other payables 1 200 500
Inventory 7 000 8 600
Bank 4 500 Dr 6 100 Cr
All assets and liabilities would be brought into the partnership after the following
adjustments:
(1) Alvor would keep a motor vehicle with a carrying value of £5 000 for his own use.
(2) Bernie’s trade receivables included £1 600, which were considered irrecoverable.
An allowance for irrecoverable debts of 5% was to be created on all the remaining
trade receivables of Alvor and Bernie.
(3) Alvor’s inventory included outdated items that cost £4 000 and had a net
realisable value of £2 500
Required
(a) Calculate the capital introduced into the new partnership on 1 October 2018 by:
• Alvor
• Bernie.
(6)
After calculating the partners’ initial capital it was agreed that goodwill would not
remain in the books of the partnership.
(b) Prepare the Statement of Financial Position at the start of business on
1 October 2018.
(6)

2
P58473A
 After the first year of trading as a partnership, the following balances, with the
exception of the capital accounts, were extracted from the books of Alvor and Bernie
on 30 September 2019.
£
Revenue 300 000
Non-current assets (at carrying value)
Motor vehicles 16 000
Computers 9 000
Fixtures and fittings 5 000
Electricity and water 5 650
Telephone and communications 6 150
Supervision salaries 24 000
Rent 16 700
Purchases 148 000
Wages 38 300
Inventory 1 October 2018 Calculated in part (a)
Trade payables 7 800
Trade receivables 41 000
5% bank loan (repayable 2022) 12 000
Allowance for irrecoverable debts Calculated in part (a)
Carriage inwards 7 900
Bank 3 450 Dr
General expenses 7 400
Commission receivable 11 750
Insurance 1 800
Computer repairs 2 900
Drawings (including salaries paid):
Alvor 12 000
Bernie 14 000
Additional information at 30 September 2019
(1) Inventory £17 600
(2) Commission receivable, £900, owing.
(3) Electricity and water prepaid, £800
(4) Rent prepaid, £6 700
(5) Wages, £2 300, owing.
(6) No interest had been paid on the bank loan in the year and is owing.
(7) Depreciation is to be charged on all non-current assets owned at the end of the
year as follows:
• motor vehicles at the rate of 20% per annum using the reducing balance
method
• computers by revaluation. The computers have a current market value of
£7 500
• fixtures and fittings, which had cost £8 000, at the rate of 10% per annum
using the straight line method.
(8) The allowance for irrecoverable debts is to be maintained at 5% of trade
receivables.

3
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 Required
(c) Prepare the Statement of Profit or Loss and Other Comprehensive Income,
including an appropriation section, for the year ended 30 September 2019.
(19)
(d) Explain whether each of the following costs are variable, fixed, semi-fixed or
semi-variable:
• supervision salaries
• rent
• telephone and communications.
(6)
Alvor and Bernie are preparing some projections of income and costs for the
following year ending 30 September 2020.
(1) Revenue will increase by 50%.
(2) Variable cost will be 40 pence (£0.40) for every £1 of projected revenue.
(3) Fixed costs of £40 000 will increase by 15%.
(4) Semi-fixed costs. A fixed element of £60 000 will increase by £16 000 when
revenue reaches £200 000 and by a further £16 000 when revenue reaches
£400 000
(5) Semi-variable costs. A fixed element of £30 000 will increase by 10 pence (£0.10)
for every £1 of projected revenue.
Required
(e) Calculate the projected profit or loss for the year ending 30 September 2020.
(6)
Alvor believes that there are many benefits to preparing projections of future income
and costs. Bernie does not believe that the process provides any benefits.
(f ) Evaluate whether it is useful to prepare projections of income and costs for future
years.
(12)

(Total for Question 1 = 55 marks)

4
P58473A
2 The following information is available for the Kenton Lawn Tennis Club.
(1) Summarised bank transactions for the year ended 31 August 2019
£
Subscriptions received 15 970
Wages 7 550
Purchase of equipment 2 750
Donations received from members 500
Sale of equipment 900
Rent and insurance 2 390
Sale of tickets for the annual dance 3 200
Expenses for the annual dance 950
Catering expenses for the annual dance 250
General expenses 4 830
(2) Balances at:
1 September 31 August
2018 2019
£ £
Non-current assets (carrying value)
Property 15 800 15 400
Equipment 8 150 9 400
Bank 75 Dr To be calculated
Subscriptions – in arrears 810 720
– in advance 900 940
Amounts owing to the club
Rent prepaid 400 310
By members for annual dance tickets – 430
Refund for annual dance expenses – 125
Amounts accrued by the club
Wages 850 600
Insurance 180 –
Catering for the annual dance – 2 100
(3) The subscriptions in arrears on 1 September 2018 related to nine members of
the club. Five of those members paid the annual subscription of £90 in full, in
October 2018. The remaining debts were to be written off.
(4) An allowance for irrecoverable debts is to be created. The club has 180 members
each paying £90 per annum subscription. It is projected that six members will not
pay their subscriptions next year.

6
P58473A
 Required
(a) Prepare, for the year ended 31 August 2019, the:
(i) Receipts and Payments Account
(10)
(ii) Subscriptions Account
(5)
(iii) Rent and Insurance Account
(5)
(iv) Trading Account showing the profit or loss on the annual dance
(4)
(v) Income and Expenditure Account.
(11)
(b) Explain, using one example from the Income and Expenditure Account prepared
in (a)(v), the:
(i) accruals concept
(2)
(ii) prudence concept.
(2)
The Annual General Meeting of the club was called to present the financial
statements. Two members asked questions.
George asked whether the club had been ethical in preparing its financial statements.
(c) Explain the meaning of the term ethics in accounting.
(4)
A second member, Atqiya, recommended that the club should evaluate the purchase
of a computer and a computer software package to maintain the accounting records
and prepare the financial statements.
(d) Evaluate the use of information communication technology (ICT) in maintaining
Kenton Lawn Tennis Club’s accounting records and preparing the financial
statements.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

7
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Turn over
 SECTION B
Answer THREE questions from this section.
3 The following is an extract from the Statement of Financial Position of Elmo
Construction at 30 September 2018.

Accumulated
Non-current asset Cost Carrying value
depreciation

£ £ £

Motor vehicles 200 000 60 000 140 000

Plant and equipment 500 000 160 000 340 000

Loose tools 25 000 10 000 15 000

Total 725 000 230 000 495 000

• During the year ended 30 September 2019, the following non-current asset
transactions took place.
• New motor vehicles were purchased at a cost of £35 000
• Used motor vehicles, with a cost of £25 000, were sold for their book value of
£8 000
• New plant and equipment was purchased at a cost of £120 000
• Used plant and equipment with a cost of £40 000, which had been fully
depreciated, was scrapped. The plant and equipment had no scrap value.
• New loose tools were purchased at a cost of £9 000. All loose tools were
valued on 30 September 2019 at £16 000
• Elmo Construction has the following depreciation policy for non-current assets
owned at the end of the year.
• Motor vehicles – 20% per annum using the straight line method.
• Plant and equipment – 25% per annum using the reducing balance method.
• Loose tools – using the revaluation method.
Required
(a) Calculate the depreciation charge for the year ended 30 September 2019 for each
type of non-current asset.
(i) Motor vehicles
(3)
(ii) Plant and equipment
(3)
(iii) Loose tools.
(3)

8
P58473A
 (b) Complete the schedule of non-current assets in your question paper.
(13)
(c) State two reasons why the revaluation method may be the most appropriate
method of depreciation for a non-current asset.
(2)
The Sales Manager of Elmo Construction stated, “I believe that we should calculate
annual depreciation on all non-current assets using the straight line method.”
(d) Evaluate whether the straight line method is suitable for all non-current assets.
(6)

(Total for Question 3 = 30 marks)

9
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Turn over
4 Rahman buys and sells goods on credit. His summarised Statement of Profit or Loss
and Other Comprehensive Income for the year ended 30 September 2019 is shown
below:
Rahman
Statement of Profit or Loss and Other Comprehensive Income for the year ended
30 September 2019
£ £
Revenue 240 000
Inventory 1 October 2018 15 000
Purchases 160 000
175 000
Inventory 30 September 2019 (35 000)
Cost of sales (140 000)
Gross profit 100 000
Wages 70 000
Depreciation 10 000
Bank loan interest 1 000
General expenses 17 000
(98 000)
Profit for the year 2 000
Additional information
(1) Purchases are all on credit.
(2) The owner has a fixed capital of £40 000
(3) Rahman has a five year bank loan of £10 000, taken out on 1 October 2018. The
bank loan is repayable in five annual instalments paid on 30 September.
(4) Trade payables were £15 000 on 30 September 2019.
(5) Assume 365 days in the year.
Required
(a) Explain the difference between profit and profitability.
(4)
(b) Calculate, for the year ended 30 September 2019, the:
• gross profit as a percentage of revenue
• net profit for the year as a percentage of revenue
• return on capital employed
• trade payables payment period.
(8)

10
P58473A
 Rahman is considering changing his business strategy and selling more expensive
goods in the following year ending 30 September 2020. He has prepared the
following projections.
(1) The mark-up will be 50%.
(2) Revenue will be £360 000
(3) Purchases are all on credit.
(4) Inventory at 30 September 2020 will be £50 000
(5) Wage costs will rise by 10%.
(6) Depreciation and general expenses will remain unchanged.
(7) An additional five year bank loan of £10 000 will be required. This will be taken
out on 1 October 2019 and will be repayable in five equal instalments on
30 September each year.
(8) The total bank loan interest for the year will be £2 000
Required
(c) Prepare the Projected Statement of Profit or Loss and Other Comprehensive
Income for the year ending 30 September 2020.
(6)
(d) Calculate, for the year ending 30 September 2020, the projected:
• net profit for the year as a percentage of revenue
• return on capital employed.
(4)
(e) Calculate the value of the trade payables at 30 September 2020 if Rahman is to
achieve a trade payables payment period of 30 days.
(2)
(f ) Evaluate the use of considering only financial factors when judging the success
of a business.
(6)

(Total for Question 4 = 30 marks)

11
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5 Frost Bakeries requires a new delivery van on 1 January 2020. It is considering two
options:
Option 1 Purchase the new delivery van
Option 2 Hire the new delivery van
The delivery van will travel 20 000 kilometres per annum making deliveries.
Option 1
The following cost information is available for the delivery van if purchased on
1 January 2020.
(1) The delivery van will cost £14 000 and have an economic life of three years at the
end of which it will be sold for its residual value of £5 600
The depreciation policy is to use the straight line method.
(2) A maintenance service will be required every 10 000 kilometres, this will cost £150
except at the first 10 000 kilometres and 50 000 kilometres where the cost will be:
First 10 000 kilometres service Free
At 50 000 kilometres service £400
(3) General repairs
Tyres will need replacing every 25 000 kilometres and will cost £300 for
a set of tyres.
Other repair costs will be £100 in Year 1, £500 in Year 2 and £1 200 in Year 3.
(4) Insurance
There will be a fixed cost of £500 per annum plus £10 per 1 000 kilometres
travelled above 10 000 kilometres per annum.
The cost of insurance will rise by 5% in Year 3.
(5) Fuel
The delivery van will travel 10 kilometres per 1 litre of fuel in Year 1. As the
delivery van becomes older this will reduce to 8 kilometres per 1 litre of fuel in
Year 2 and Year 3. Fuel will cost 60 pence (£0.60) per litre.
Required
(a) Complete the Option 1 table in the question paper showing the total cost of the
delivery van in each of Year 1, Year 2 and Year 3, if the delivery van is purchased.
(14)

12
P58473A
 Option 2
The following cost information is available for the delivery van if hired on
1 January 2020.
(1) Frost Bakeries will agree to make a payment of £350 per month for three years.
The monthly payment will cover depreciation, servicing and repair costs.
(2) The only additional costs that Frost Bakeries will pay will be the cost of insurance
and fuel. These will be at the same rate as in Option 1.
Required
(b) Complete the Option 2 table in the question paper showing the total cost of the
delivery van in each of Year 1, Year 2 and Year 3, if the delivery van is hired.
(4)
(c) State the effect that both Option 1 and Option 2 would have upon the:
• cash payments made by Frost Bakeries in Year 1
• profit for the year in Year 3
• total cost of running the delivery van over the three years.
(6)
(d) Evaluate whether Frost Bakeries should choose Option 1 or Option 2.
(6)

(Total for Question 5 = 30 marks)

13
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6 Kobi prepared the draft financial statements of his business on 30 September 2019.
The following information is available.
Draft Statement of Financial Position at 30 September 2019

ASSETS

Non-current assets (carrying value) 30 000

Current assets

Inventory 17 000

Trade receivables 14 000

Other receivables 1 500

32 500

Total assets 62 500

CAPITAL AND LIABILITIES

Capital 32 500

Profit for the year 25 000

57 500

Drawings (15 000)

42 500

Current liabilities

Trade payables 9 000

Other payables 1 000

Bank overdraft 10 000

20 000

Total capital and liabilities 62 500

14
P58473A
 After the preparation of the financial statements, Kobi found that the following errors
remained in his books:
(1) The closing inventory had been undervalued by £3 500
(2) Kobi had taken additional drawings of £400 from the bank. No entries had been
made in the books.
(3) Rent owing at the end of the year of £700 had not been taken into account in
calculating the profit.
(4) A payment received by cheque from a credit customer, Basher, of £7 200 had not
been recorded in the books.
Required
(a) Explain the meaning of the terms:
(i) an error of commission
(2)
(ii) an error of principle.
(2)
(b) Prepare the Journal entries, including bank entries, to record the correction of
errors (1) to (4) in the books. Narratives are not required.
(8)
(c) Calculate the revised profit for the year ended 30 September 2019, after the
correction of all errors. Complete the table in your question paper.
(6)
(d) Prepare the revised Statement of Financial Position at 30 September 2019 after
the correction of all errors. Complete the table in your question paper.
(6)
Kobi is considering recording the goodwill of his business in the Statement of
Financial Position.
(e) Evaluate Kobi recording goodwill in his Statement of Financial Position.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

15
P58473A
 Pearson Edexcel International Advanced Level

Tuesday 7 January 2020

Morning (Time: 3 hours) Paper Reference WAC11/01

Accounting
International Advanced Subsidiary
Paper 1: The Accounting System and Costing

Source Booklet
Do not return this Source Booklet with the question paper.

Turn over

*P61109A*
P61109A
©2020 Pearson Education Ltd.

1/1/1/1/1/1/1
 SECTION A
Answer BOTH questions in this section.
1 Raj is a retailer of computer software. The following balances were in his books on
31 December 2019.
£
Non-current assets (cost):
Premises 80 000
Computers and equipment 30 000
Fixtures and fittings 16 000
Provisions for depreciation:
Premises 22 000
Computers and equipment 14 000
Fixtures and fittings 9 600
Purchases 216 000
Purchase returns 20 300
Wages 40 800
Management salaries 25 000
Bank and cash 10 350 Dr
Inventory 1 January 2019 37 600
Trade payables 28 350
Trade receivables 37 500
Capital 80 000
Raj – Current account 6 700 Cr
Drawings 22 000
Electricity and water 9 700
Premises running expenses 6 900
Advertising expenses 17 000
Revenue 309 000
5% bank loan 60 000
Bank loan interest paid 1 700
Allowance for irrecoverable debts 600

2
P61109A
 On the 31 December 2019 Raj inspected his books and found the following errors.
(1) Purchases, £1 800, had been returned to the supplier, Global ICT. No entries for
the returns had been made in the books.
(2) Drawings made by Raj, £900, had been posted to the Wages Account.
(3) The entries for the payment made by cheque for electricity, £1 150, were reversed
in the books.
Required
(a) Prepare the journal entries to correct the errors found on 31 December 2019.
Narratives are not required.
(6)
Additional information at 31 December 2019
(1) Inventory £51 100
(2) Wages £3 700 were accrued.
(3) Advertising expenses included a £4 000 payment for a campaign running from
1 November 2019 to 31 March 2020.
(4) The 5% bank loan was taken out on 1 January 2019. Half of the loan is repayable
on 1 January 2020 and half on 1 January 2021.
(5) Depreciation is charged on all non-current assets owned at the end of the year as
follows.
• Premises at the rate of 2% per annum on cost.
• Computers and equipment at the rate of 25% per annum using the reducing
balance method.
• Fixtures and fittings at the rate of 15% per annum using the straight line
method.
(6) A debt for £2 500 is considered irrecoverable. An allowance is to be maintained
on all remaining debts at 4% of trade receivables.
(7) Raj maintains a fixed capital account. All drawings and profit appropriations are
made through his current account.
Required
(b) Prepare the:
(i) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 31 December 2019.
(15)
(ii) Statement of Financial Position at 31 December 2019.
(18)

3
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 Raj is considering entering into a partnership with Paul from 1 January 2020.
Paul runs a computer hardware business.
Paul’s books show a capital of £80 000, but this does not include goodwill worth
£60 000
There is no goodwill in the business of Raj and it is agreed that goodwill would not
be maintained in the books of the proposed partnership.
Profits and losses in the proposed partnership would be shared, Raj 2/5 and Paul 3/5.
Required
(c) Calculate the amount of Raj’s initial capital and Paul’s initial capital if they decide
to form the partnership.
(4)
(d) Evaluate, from the point of view of Raj, his proposed partnership with Paul.
(12)

(Total for Question 1 = 55 marks)

4
P61109A
2 Tam is preparing his Statement of Financial Position at 31 December 2019.
The following information relates to his calculation of the current assets.
(1) Inventory
Tam calculates his inventory valuation using the First In First Out (FIFO) method.
The opening balance and inventory movements for December 2019 were:
1 December Balance 650 items at £13 per item
3 December Receipt 800 items at £12 per item
4–14 December Sales 600 items
15 December Receipt 400 items at £11 per item
16–23 December Sales 500 items
24 December Receipt 300 items at £10 per item
25–31 December Sales 200 items
Required
(a) Calculate the value of the inventory at 31 December 2019.
(8)
(b) State, giving one reason, whether the inventory value would be higher, or lower,
if Tam had used Last In First Out (LIFO) as his method of valuation.
(2)
(c) Explain the difference between inventory rotation and inventory valuation.
(4)
(2) Trade receivables
Tam calculates his trade receivables by preparing a Trade Receivable (Sales)
Ledger Control Account. The following information is available.
On 1 December 2019 the balances on the Trade Receivable (Sales) Ledger Control
Account were:
£5 100 Dr
£ 240 Cr
For the month of December 2019 the summarised transactions were as follows.
1. Sales were made, £3 850 on credit and £780 for cash.
2. Sales returns totalling £420 were received including £70 from cash customers.
3. Cheques were received from credit customers totalling £4 050
4. There was an irrecoverable debt of £230
5. Discount allowed was £170
6. Interest of £60 was charged on an overdue trade receivable account.
Additional information at 31 December 2019
• There was a credit balance on a trade receivable account of £350
• The allowance for irrecoverable debts was £400

6
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 Required
(d) Prepare the Trade Receivables (Sales) Ledger Control Account for December 2019
showing the balances at the end of the month.
(8)
(3) Other receivables
Consisted of one month’s prepaid rent on the premises charged at the rate of
£7 200 per annum, plus prepaid expenses of £95
(4) Cash and bank
The summarised cash and bank transactions for December 2019 were as follows.
£
Opening cash and bank balances 750
Receipts from trade receivables 4 050
Payment to trade payables 1 850
Sale of non-current assets 600
Wages 1 500
Expenses 1 350
Cash sales 780
Cash refund paid for sales returns 70
Additional information on 31 December 2019
The cash balance was £50
Required
(e) Calculate the bank balance at 31 December 2019.
(6)
(f ) Prepare the extract from Tam’s Statement of Financial Position listing all of the
current assets at 31 December 2019.
(7)
(g) Explain the following accounting concepts, giving one application of their use in
the preparation of the current assets in a Statement of Financial Position.
(i) Consistency
(4)
(ii) Prudence
(4)
(h) Evaluate the use of accounting concepts and conventions in the preparation of
financial statements.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

7
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 SECTION B
Answer THREE questions from this section.
3 Natalie started a business on 1 January 2019 as a retailer of hats. She rents premises
for an office and sells the hats on the internet.
Natalie does not maintain double entry books, but the following information is
available for the year ended 31 December 2019.
(1) On 1 January 2019 Natalie started the business with £2 000 in the bank and
fixtures valued at £2 500
(2) All purchases were on credit. All sales are paid for at the time of order.
(3) Purchases and sales for the year were:
Purchases 7 500 hats at £7 per hat
Purchase returns 200 hats which were defective
Sales 6 600 hats at £12 per hat
Sales returns 300 hats, full refund given to customer
(4) Expenses were all paid by cheque:
Rent £500 per month paid one month in advance
Postage on sales £1.25 per hat paid at time of postage
Office expenses £3 450
Internet costs £5 050
(5) Additional fixtures were bought in March costing £1 300
(6) Natalie took £500 per month as drawings.
(7) On the 31 December 2019:
Natalie owed trade payables £10 350
The fixtures were valued at £2 700
Required
(a) State two disadvantages of not maintaining double entry books.
(2)
(b) Prepare the:
(i) summarised bank account for the year showing the balance at
31 December 2019
(8)
(ii) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 31 December 2019
(8)
(iii) Statement of Financial Position at 31 December 2019.
(6)

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 Natalie is considering using information communication technology (ICT) to maintain
her accounts and records.
(c) Evaluate whether Natalie should use information communication technology
(ICT) to maintain her accounts and records.
(6)

(Total for Question 3 = 30 marks)

9
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4 Alex is in business selling electrical equipment. The following balances were recorded
in the books at 31 December 2018 and 31 December 2019.
31 December 31 December
2018 2019
£’000 £’000
Revenue 200 250
Purchases 120 140
Inventory 22 24
Trade payables 15 10
Trade receivables 12 30
Bank 6 Dr 28 Cr
Other payables 3 4
Other receivables 5 2
Additional information
(1) In the year ended 31 December 2018, 60% of revenue (sales) income and 75% of
purchases were on credit.
(2) In the year ended 31 December 2019, 80% of revenue (sales) income and 100% of
purchases were on credit.
Required
(a) Explain four features of a good credit control policy that Alex should use.
(8)
(b) Calculate the following ratios for both the years ended 31 December 2018 and
31 December 2019:
• current ratio
• liquid (acid test) ratio
• trade payables payment period (in days)
• trade receivables collection period (in days).
(16)
(c) Evaluate Alex’s liquidity position at 31 December 2019.
(6)

(Total for Question 4 = 30 marks)

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5 Keegan Manufacturing produces two products, desks and tables. Each product is
made on a separate production line. Both products are manufactured from the same
raw materials.
The following information was available for the year ended 31 December 2019.
Balances 1 January 2019:
£
Inventory
Raw material 54 000
Work in progress – desks 37 000
– tables 24 000
Provision for unrealised profit 70 000 Cr
Balances in ledger at 31 December 2019:
Purchases of raw materials 193 000
Production wages 208 000
Rent and rates 40 000
Management salaries 65 000
Sundry materials 30 000
Insurance of machinery 15 000
Electricity 16 800
Royalties – desks 20 000
Depreciation charge on machinery 30 000
Additional information available at 31 December 2019
(1) Inventory £
Raw material 61 000
Work in progress – desks 38 600
– tables 23 200
(2) £112 000 of raw materials was used to make desks, the balance of raw materials
was used to make tables.
(3) Sundry materials were considered 60% direct and 40% indirect. Two-thirds of
sundry materials were used in the production of desks and one-third in the
production of tables.
(4) Other information.

Desk Table

Production line workers 8 5

Floor area occupied (sq m) 6 000 4 000

Machinery value (£’000) 60 90

Machinery capacity (kilowatt hour) 16 12

(5) Finished goods were transferred to the warehouse at cost of production plus 10%.

12
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 Required
(a) Prepare the Manufacturing Account, in columnar format, for the year ended
31 December 2019, showing the cost of producing desks, tables and a total cost.
(20)
(b) Explain the entries to be made in the Provision for Unrealised Profit Account if the
inventory of finished goods at 31 December 2019 was valued at £660 000
(4)
The Production Manager has decided to remunerate each production line using
a group bonus scheme.
(c) Evaluate the Production Manager’s decision.
(6)

(Total for Question 5 = 30 marks)

13
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6 Maria is in business buying and selling printers and ink cartridges.
The following information is a summary of her inventory movements for the three
months ended 31 December 2019.

Printers Ink cartridges

Number Number

Inventory – 1 October 2019 16 120

Purchases 48 290

Purchase returns – 16

Sales 50 300

Sales returns 1 –

Required
(a) Explain the meaning of the following terms as they relate to inventory:
• historic cost concept
• net realisable value.
(4)
(b) Calculate the number of items in the inventory for each of the two products at
31 December 2019.
(6)
For the three months ended 31 December 2019 the purchase costs and selling prices
of the two products were as follows.

Printers Ink cartridges

£ £

Purchase cost 75 10

Selling price 80 25

Required
(c) Calculate Maria’s gross profit as a percentage of revenue on each:
• printer
• ink cartridge.
(4)

14
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 Additional information
(1) On 1 October 2019 expenses were accrued of £245
(2) Total expenses of £3 100 were paid during the three months ended
31 December 2019.
(3) On 31 December 2019 expenses of £720 were prepaid.
(4) Depreciation for the year ended 31 December 2019 was calculated to be £2 400
Required
(d) Complete the Statement of Profit or Loss and Other Comprehensive Income for
the three months ended 31 December 2019.
(10)
(e) Evaluate Maria’s pricing strategy for the sale of printers and ink cartridges.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

15
P61109A
 Pearson Edexcel International Advanced Level

Tuesday 12 May 2020

Morning (Time: 3 hours) Paper Reference WAC11/01

Accounting
International Advanced Subsidiary
Paper 1: The Accounting System and Costing

Source Booklet
Do not return this Source Booklet with the question paper.

Turn over

*P62450A*
P62450A
©2020 Pearson Education Ltd.

1/1/1/1/1
 SECTION A
Answer BOTH questions in this section.
1 All Fruit is a manufacturer and retailer of high quality jam. The following information
is available for the year ended 30 April 2020.
£  
Inventory at 1 May 2019
  Raw materials 41 500
  Finished goods 60 000
Revenue 720 000
Wages
  Production 93 000
  Administrative 37 650
Management salaries 210 000
Purchases of raw materials 160 000
Production expenses
  Direct 26 500
  Indirect 11 900
Marketing expenses 52 000
Rent and rates 25 000
Insurance 6 000
Commission received 5 600
Electricity and water 8 000
Non-current assets (cost)
  Production equipment 130 000
  Office computers 70 000
  Office fixtures 14 000
Provisions for depreciation
  Production equipment 78 000
  Office computers 18 000
  Office fixtures 2 800
Trade receivables 55 000
Irrecoverable debts 6 150
Trade payables 68 400
Cash and bank 7 250 Dr
Provisions for
  Unrealised profit 10 000
  Irrecoverable debts 1 500
Capital 125 000
Drawings 15 350

2
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 Additional information at 30 April 2020
(1) Inventory
Raw materials £33 000
Finished goods £54 000
(2) There was no inventory of work in progress.
(3) Marketing expenses, £4 800, were prepaid.
(4) Electricity, £2 000, was accrued.
(5) Depreciation is charged on all non-current assets owned at the end of the year
as follows.
– Production equipment at the rate of 20% per annum on cost.
– Computer equipment at the rate of 25% per annum using the reducing
balance method.
– Office fixtures at the rate of 10% per annum using the straight line method.
(6) Expenses are to be apportioned between production and administration
as follows.

Basis of
Expense Production Administration
apportionment
Management salaries Number of managers 2 5
Rent and rates Floor area (sq m) 9 000 1 000
Insurance Estimate 60% 40%
Electricity and water Estimate 80% 20%

(7) The provision for irrecoverable debts is to be maintained at 4% of

trade receivables.
(8) Finished goods are transferred from production to the warehouse at production
cost plus 20%.

Required
(a) Prepare the Manufacturing Account for the year ended 30 April 2020.
(13)

3
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 In the year ended 30 April 2020 All Fruit produced 20 000 cases of jam. Each case
contains 12 jars.
(b) Calculate the:
(i) cost of producing one jar of jam for the year ended 30 April 2020
(2)
(ii) closing balance of the provision for unrealised profit at 30 April 2020.
(2)
(c) Prepare the:
(i) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 30 April 2020
(15)
(ii) Statement of Financial Position at 30 April 2020.
(11)
A major supermarket chain would like All Fruit to supply an additional 15 000 cases
(180 000 jars) per year at a price of £1.80 per jar.
(d) Evaluate whether All Fruit should produce and supply the additional 15 000 cases
to the supermarket.
(12)

(Total for Question 1 = 55 marks)

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2 The following were the summarised financial statements of Conco for the year ended
31 December 2019.

Statement of Profit or Loss and Other Comprehensive Income

     £
Revenue 150 000
Cost of sales (100 000)
Expenses and depreciation (52 000)
Loss for the year (2 000)

Statement of Financial Position at 31 December 2019

Assets      £
Non-current (cost £70 000) 67 000
Inventory 11 600
Trade receivables 6 400
85 000
Capital and liabilities
Capital 10 000
Five-year 8% bank loan 50 000
Trade payables 16 000
Bank overdraft 9 000
85 000

Additional information
(1) 80% of sales were made on credit.
(2) Purchases of £104 000 were on credit.
(3) The five-year 8% bank loan was taken out on 1 January 2018.

Required
(a) Calculate the:
(i) percentage return on capital employed
(2)
(ii) liquid (acid test) ratio
(2)
(iii) trade receivables collection period (in days)
(2)
(iv) trade payables payment period (in days).
(2)

6
P62450A
 (b) Explain the term liquidity.
(2)
(c) Comment on the liquidity of Conco at 31 December 2019 using your calculations
in (a).
(4)
On 1 January 2020 Jafna purchased Conco for a purchase price of £80 000. The
purchase included all the assets and liabilities of Conco excluding the bank overdraft
and the five-year 8% bank loan.

Required
(d) Calculate the value of the goodwill paid by Jafna when purchasing Conco.
(2)
Jafna purchased Conco with the objectives of:
• improving liquidity
• improving profitability.
During the three-month period ended 31 March 2020
(1) Jafna opened a business bank account with £10 000 additional capital.
(2) Half of the inventory on 1 January 2020 was outdated and this was sold for
£3 000. Payment was received by cheque.
(3) Purchases of £35 000 were made on credit.
(4) All goods for sale were marked-up by 50%.
(5) Excluding the outdated inventory, sales of £48 000 were made. £6 000 was paid
by cheque and the remainder was sold to credit customers.
(6) A debt of £800 became irrecoverable.
(7) Expenses of £7 000 were paid by cheque.
(8) Jafna withdrew £500 per month from the bank account as drawings.
(9) Cheques received from trade receivables totalled £31 000
(10) Cheques paid to trade payables totalled £40 000

At 31 March 2020
• Jafna calculated his depreciation on non-current assets for the three-month
period to be £1 700
• Expenses of £750 were accrued and £325 were prepaid.

7
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 Required
(e) Calculate, by completing the table on page 14 in your question paper, the value
at 31 March 2020 of the:
(i) inventory
(4)
(ii) trade payables
(3)
(iii) trade receivables
(4)
(iv) bank.
(7)
(f ) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the
three months ended 31 March 2020.
(5)
(g) Calculate, at 31 March 2020, the:
(i) current ratio
(2)
(ii) percentage return on capital employed.
(2)
(h) Evaluate whether Jafna achieved his objectives to improve liquidity and
improve profitability.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

8
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 SECTION B
Answer THREE questions from this section.
3 The following balances were recorded in the books of Speedy Deliveries on
1 May 2019.

£
Non-current assets (cost)
  Motor vehicle 16 000
  Computer equipment 20 000
Provisions for depreciation
  Motor vehicles To be calculated
  Computer equipment 5 000

The motor vehicle had been purchased on 1 May 2017.

Depreciation policy
(1) The depreciation policy of Speedy Deliveries had been to charge depreciation on
all non-current assets owned at the end of each year at the rate of:
• motor vehicles 15% using the straight line method
• computer equipment 25% using the reducing balance method.
(2) On 30 April 2020 Speedy Deliveries reviewed its depreciation policy and decided
to charge depreciation on the motor vehicle at the rate of 25% using the reducing
balance method.
This would be backdated to the date of purchase of the motor vehicle with an
adjustment to be made in the Motor Vehicle Provision for Depreciation Account.

Required
(a) Calculate the adjustment to be made for each of the years ended 30 April 2018
and 30 April 2019 to introduce the new depreciation policy.
(3)

10
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 Purchase and sales of computer equipment for the year ended 30 April 2020
1 September 2019 Sold computer equipment, costing £3 600 and with a £1 000
carrying value, for a payment by cheque of £850
10 September 2019 Purchased computer equipment, £6 000, on credit from
Bell Computers.

Required
(b) State two causes of depreciation for computer equipment.
(2)
(c) Explain the following accounting concepts as they relate to the depreciation of
non-current assets:
• going concern
• consistency.
(4)
(d) Calculate the depreciation to be charged for the year ended 30 April 2020 for the:
(i) motor vehicle
(2)
(ii) computer equipment.
(3)
(e) Prepare for the year ending 30 April 2020 the following ledger accounts:
(i) Computer Equipment Account
(5)
(ii) Disposal Account.
(5)
Speedy Deliveries decided to depreciate its non-current assets using the reducing
balance method.
(f ) Evaluate Speedy Deliveries using the reducing balance method for its
non-current assets.
(6)

(Total for Question 3 = 30 marks)

11
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4 Sanjay and Tara are in partnership. The partnership agreement allows for interest
on capital, interest on drawings and partners’ salaries of £7 500 for each partner.
The remaining profits or losses are shared in the ratio
Sanjay two thirds: Tara one third.

The following information is available for the year ended 30 April 2020
(1) Balances 1 May 2019.

Sanjay Tara
£ £
Capital accounts 80 000 30 000
Current accounts 400 Dr 750 Cr

(2) Capital account changes during the year.

1 November 2019 Sanjay converted £20 000 of his capital into a 10-year
6% loan to the partnership.
He also withdrew £10 000 of his capital from the partnership
by cheque.
1 December 2019 The partners decided that the goodwill balance of
£18 000 should not remain in the books and this was
written off.
1 January 2020 Tara introduced additional capital consisting of computer
equipment valued at £4 000 and a cheque for £8 000
(3) Profit for the year was £23 660
(4) Other balances at 30 April 2020.

Sanjay Tara
£ £
Interest on capital 225 170
Drawings (excluding salaries) 4 500 7 000
Interest on drawings 405 630
Partnership salaries – paid 7 500 7 500

12
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Required
(a) Explain how the 10-year 6% loan of £20 000 from Sanjay and the interest on the
loan would be recorded in the:
• Statement of Profit or Loss and Other Comprehensive Income
• Appropriation Account
• Statement of Financial Position.
(6)
(b) Calculate, for the year ended 30 April 2020, the:
(i) percentage interest charged on the drawings of the partners
(2)
(ii) amount of share of profit (£) paid to Sanjay and to Tara.
(5)
(c) Prepare, for the year ended 30 April 2020, the:
(i) Capital Accounts of Sanjay and Tara
(6)
(ii) Current Account of Sanjay.
(5)
(d) Evaluate trading as a partnership rather than as a sole trader.
(6)

(Total for Question 4 = 30 marks)

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5 Alvo Products assembles a range of products in its factory. The products are
assembled by operators on production lines.
The management of Alvo Products has been varying the number of operators on the
Standard model production line in April. Three options for production line operator
numbers were as follows:

Option 1 Option 2 Option 3

Number of operators 8 10 12
Hours worked (per operator) 50 45 45
Total output (units) 5 600 7 200 8 100

Required
(a) Explain the term labour productivity.
(2)
(b) Advise management which of the three options gives the best output per hour,
showing all calculations.
(7)
On another production line, which makes the Super model, all operators are paid on
a day work basis. For Week 1 the following information is available:

Skilled Unskilled
Number of operators 8 4
Hours worked (per operator) 49 49
Basic rate per hour (£) 6 4

Additional information
(1) All operators work a standard 40-hour week before overtime is paid.
(2) Overtime is paid at time plus one third.
(3) During Week 1 the production output of Super models was a total of 2 400

Required
(c) Calculate the total labour cost of operating the Super model production line for
Week 1.
(7)

14
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 The management of Alvo Products is considering introducing a group bonus scheme
on the Super model production line. Operators would receive the same basic rate
and overtime rate for hours worked. A bonus of 20 pence (£0.20) per Super model
produced would be paid and divided equally amongst all operators on the Super
model production line.
It is estimated that if a group bonus scheme was introduced the hours worked by
skilled and unskilled workers would have been 43 hours in Week 1. The Week 1
output of Super models would have been the same at 2 400 units.

Required
(d) Calculate the forecast:
(i) total labour cost of operating the Super model production line in Week 1 if
a group bonus scheme was implemented.
(5)
(ii) gross pay of one unskilled operator in Week 1 if a group bonus scheme
was implemented.
(3)
(e) Evaluate the use of a group bonus scheme by the management of Alvo Products.
(6)

(Total for Question 5 = 30 marks)

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6 Akma prepared a trial balance on 30 April 2020. Although the trial balance agreed,
Akma found that there were errors in the books. These were as follows.
(1) A computer repair, £645, had been posted to the Computers Account.
(2) A sales return from Shelley had been recorded correctly, in the Sales Returns
Day Book as £47 but had been posted to the ledgers as £74
(3) A sale of goods on credit, £130, to Javid had not been recorded in the books.
(4) A receipt of £2 100 paid by a customer, Michael, had been posted to the account
of Maria.
(5) Discount received from Christina, £25, had been credited to her account and
posted as discount allowed in the books.
(6) There were two errors in the expense accounts.
The payment of an electricity bill, £90, had been recorded correctly in the Bank
Account but was recorded as £80 in the Electricity Account.
A payment for motor expenses, £130, had been recorded correctly in the Bank
Account but had been recorded as £140 in the Motor Expenses Account.

Required
(a) Explain the term suspense account.
(2)
(b) Identify the type of error in each of (1) to (6).
(6)
(c) Prepare the journal entries to correct the errors in (1) to (6). Narratives are
not required.
(16)
(d) Evaluate whether the use of information and communication technology (ICT)
would eliminate all errors in the books of Akma.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

16
P62450A
 Pearson Edexcel International Advanced Level

Thursday 7 January 2021

Afternoon (Time: 3 hours) Paper Reference WAC11/01

Accounting
International Advanced Level
Paper 1: The Accounting System and Costing

Source Booklet
Do not return this Booklet with the question paper.

Turn over

*P66151A*
P66151A
©2021 Pearson Education Ltd.

1/1/1/1/1/1
 SECTION A
Answer BOTH questions in this section.
1 Borin and Priti are in partnership. The partnership agreement states that:
• interest is paid on capital at the rate of 5% per annum
• interest is charged on drawings at the rate of 10% per annum on balances
at 31 December 2020
• partnership salaries are paid per year: Borin £9 000, Priti £6 000
• the profit sharing ratio: Borin three fifths, Priti two fifths.
Balances in the books at 31 December 2020 were
£
Capital accounts:
Borin 40 000
Priti 50 000
Current accounts – 1 January 2020
Borin 200 Dr
Priti 2 500 Cr
Drawings: Borin 4 000
Priti 5 000
Revenue 370 000
Purchases 180 000
Non-current assets:
Motor vehicles (Cost) 55 000
Office fixtures (Cost) 20 000
Provisions for depreciation:
Motor vehicles 30 000
Office fixtures 8 000
Wages and salaries 97 000
General expenses 27 100
Allowance for irrecoverable debts 2 700
Inventory at 1 January 2020 38 000
Carriage inwards 4 200
Carriage outwards 19 000
Bank 17 500 Dr
8% bank loan 30 000
Bank loan interest paid 1 200
Insurance 6 000
Rent payable 21 000
Rent receivable 4 000
Motor vehicles running expenses 11 000
Trade receivables 50 000
Trade payables 19 000

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 Additional information at 31 December 2020.
(1) Inventory £41 000
(2) Insurance includes the annual insurance renewal of £2 000 paid on 1 April 2020.
(3) Rent payable of £3 000 was prepaid.
(4) Rent receivable of £2 000 was owed.
(5) The 8% bank loan was taken out on 1 January 2020 and the capital is repayable
by five equal instalments on 1 January each year, starting in 2021.
(6) Wages and salaries included partnership salaries paid during the year to Borin
£9 000 and to Priti £6 000
(7) No entries had been made in the books for a cheque, £3 800 paid to Moween, for
goods purchased on credit.
(8) Depreciation is charged at the rate of:
– 20% on motor vehicles using the reducing balance method
– 15% on office fixtures using the straight line method.
(9) The allowance for irrecoverable debts is to be maintained at 4%.
Required
(a) Prepare the Statement of Profit or Loss and Other Comprehensive
Income (including the appropriation of profit or loss) for the year ended
31 December 2020.
(19)
(b) Calculate the current account balances of Borin and Priti at 31 December 2020.
(5)
(c) Prepare the Statement of Financial Position at 31 December 2020.
(14)
During the year ended 31 December 2020 the partners had agreed the following
changes to their capital accounts.
On 1 March 2020 Priti had introduced new capital of £20 000 in cash.
On 1 April 2020 Borin had withdrawn £25 000 of his capital by cheque.
(d) Prepare the Capital Accounts of Borin and Priti as they would appear in the books
for the year ended 31 December 2020.
(5)
Javid is a manager in the partnership. He now wishes to join the partnership as a
partner of Borin and Priti. He can introduce £5 000 cash as capital.
(e) Evaluate whether Borin and Priti should admit Javid to the partnership.
(12)

(Total for Question 1 = 55 marks)

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2 Teemu extracted the following balances from his books of account on
31 December 2020. He was aware that there were errors in the books of account,
some of which would affect the balancing of the trial balance.
£
Equipment (cost) 4 000
Equipment – provision for depreciation 1 600
Sundry expenses 1 900
Wages 26 330
Inventory 6 750
Purchases 52 000
Revenue 89 000
Equipment repairs 1 120
Discount allowed 300
Discount received 730
Bank (overdraft) 700
Electricity and water 2 800
Trade receivables 7 800
Trade payables 4 700
Capital 8 000
Drawings 900
Required
(a) Prepare Teemu’s Trial Balance at 31 December 2020 including the balancing figure
required in the Suspense Account.
(10)
On inspection of the books of account Teemu discovered the following errors.
(1) Equipment repairs, £470, had been posted to the Equipment Account.
(2) Discount of £60 given to Dominic, a credit customer, had been debited in
Dominic’s account and credited to the Discount Allowed Account.
(3) A cheque received from Robin, £290, had been recorded in the account of Riaz.
(4) No entry had been made in the books of account for a £800 sale of goods on
credit to Tower Industries.
(5) A purchase of goods on credit from Collinge was correctly recorded in the
Purchases Day Book as £580. This had been posted to the accounts in the ledger
as £850.
(6) The Sundry Expenses Account had been debited with the correct figure of £600
and the Bank Account credited with £650.
In another transaction the Wages Account had been debited with £900 and the
Bank Account credited with the correct figure of £850.
(7) A cheque received from Richard, £950, had been correctly recorded in the Richard
Account, but no entry had been made in the Bank Account.
(8) Drawings by cheque of £120 had been recorded in the Drawings Account but no
entry had been made in the Bank Account.

4
P66151A
 Required
(b) Identify the type of error in each of (1) to (5).
(5)
(c) Prepare the journal entries to correct the errors in (1) to (8). Narratives are not
required.
(18)
(d) Prepare the Suspense Account after the correction of all errors.
(5)
(e) Calculate the balance of the Bank Account after the correction of all errors.
(5)
A friend of Teemu has advised him that if he completes his books of account using
Information Communication Technology (ICT) this will ensure that there are no errors
in the books of account.
(f ) Evaluate the friend’s advice that the use of Information Communication
Technology (ICT) will ensure that there are no errors in the books of account.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

5
P66151A
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 SECTION B
Answer THREE questions from this section.
3 (a) Explain the accounting concepts.
(i) Going concern
(2)
(ii) Business entity
(2)
Eva is in business selling food and magazines from her shop. The following
information is available for the year ended 31 December 2020.

Food Magazines

£ £

Purchases 46 500 44 000

Revenue 65 000 50 000

Inventory 1 January 2020 3 500 5 000

Inventory 31 December 2020 3 000 5 500

Purchase returns – 1 000

Required
(b) Prepare the Departmental Trading Account, in columnar format, showing the
gross profit or loss made on food and on magazines. A total column is not
required.
(6)
During the year ended 31 December 2020, there has been a rise in theft from the
shop by customers who leave without paying for the food or magazines.
Eva operates on the following terms:
• a 30% gross profit margin on food
• a 20% gross profit margin on magazines.
Required
(c) Calculate the value of goods stolen from the shop in the year ended
31 December 2020.
• Food
• Magazines
• In total
(10)

6
P66151A
 Eva is considering the installation of a security system. The details are:
Purchase price £9 000. Estimated life of 5 years. No residual value.
Installation £2 000
Annual maintenance £1 500
Required
(d) Calculate the total annual cost of the security system.
(4)
(e) Evaluate whether Eva should purchase the security system.
(6)

(Total for Question 3 = 30 marks)

7
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4 (a) Explain the term capital expenditure.
(2)
(b) Indicate whether each of the following are examples of capital expenditure or
revenue expenditure for a motor vehicle.
• Delivery cost of a new motor vehicle.
• 10 000 kilometre service.
• New tyres.
• Signwriting the business name on the motor vehicle.
(4)
Lanzo Services is in business delivering goods to customers. On 1 January 2020 the
following balances were in their books of account.
Motor vehicles (at cost) £80 000
Motor vehicles provision for depreciation £18 000
Motor vehicles maintenance £2 400 accrued
During the year ended 31 December 2020 the following transactions occurred.
1 April A motor vehicle which had cost £10 000 and with accumulated
depreciation of £2 000 was sold for £4 500. Payment was received
by cheque.
1 May Motor vehicles costing £52 000 were purchased. Payment was
made by cheque.
Motor vehicles which had cost £30 000 and with a carrying value
of £21 000 were given in part exchange for an agreed value of
£12 500. The balance was paid by cheque.
1 January – Motor vehicle maintenance payments totalling £16 300 had been
31 December paid to suppliers during the year.
• Lanzo Services depreciates all motor vehicles held at the end of the year at the
rate of 10% using the straight line method.
• Motor vehicle maintenance of £1 500 was prepaid.

8
P66151A
 Required
(c) Prepare the following accounts for the year ending 31 December 2020, including
appropriate year end transfers to the financial statements.
(i) Motor Vehicle Account
(4)
(ii) Motor Vehicle – Provision for Depreciation Account
(4)
(iii) Motor Vehicles Disposal Account
(6)
(iv) Motor Vehicles Maintenance Account
(4)
(d) Evaluate the policy of depreciating motor vehicles at the rate of 10% using the
straight line method.
(6)

(Total for Question 4 = 30 marks)

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5 (a) Explain two reasons why a business would use apportionment for some of its
overheads.
(4)
Deli is the owner of an electrical installation business. He employs five electricians
who complete jobs for customers. Each electrician works 40 hours per week for 50
weeks of the year. Deli estimates that 65% of each electrician’s working hours is
directly chargeable to customer’s jobs.
Required
(b) Calculate the total hours that Deli can directly charge to customer’s jobs in 2020.
(3)
(c) Identify two activities undertaken by the electricians that would not be directly
chargeable to customer’s jobs.
(2)
Deli costs jobs on the following basis.
• Materials are charged at cost plus a mark-up of 15%.
• Labour at £10 per hour
• Overheads at £15 per labour hour worked.
Required
(d) Calculate the total cost for Job 73, which requires materials costing £80 and
12 hours of labour to complete.
(4)
For the year ended 31 December 2020 the following information is available.
• Total materials charged to customers’ jobs £9 200
• Total labour hours charged to customers’ jobs 6 700
• Total actual wages paid to the five electricians £58 000
• Actual overheads paid £104 000
Required
(e) Calculate for the year ended 31 December 2020 the:
(i) profit made on materials
(2)
(ii) profit or loss made on labour
(4)
(iii) over absorption or under absorption of overheads
(3)
(iv) total profit made by Deli’s business.
(2)

10
P66151A
 Deli remunerates (pays) his electricians on a day work basis for hours worked. He is
considering changing his remuneration to a piecework basis.
(f ) Evaluate whether Deli should change his method of remuneration for electricians
to a piecework basis.
(6)

(Total for Question 5 = 30 marks)

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6 (a) Explain the following accounting terms:
(i) liquidity
(2)
(ii) capital employed.
(2)
Mila wishes to purchase a retail business. She is considering two businesses with
potential for the future. These businesses are Alfah Retail and Zulu Shopping. The
following information is available for the year ended 31 December 2020.
Alfah Retail Zulu Shopping
£000 £000
Revenue 500 500
Cost of sales 300 300
Rent – 50
Other running expenses 140 140
Bank loan interest 5 –
Balances at 31 December 2020
Non-current assets 120 30
Inventory 40 35
Trade receivables 30 35
Bank 10 Cr 5 Dr
Trade payables 30 25
Capital 50 80
5% Bank loan (repayable 2023) 100 –
Note
Alfah Retail owns the premises from which it trades.
Zulu Shopping rents the premises from which it trades.

12
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 Required
(b) Calculate for each business the:
(i) net profit for the year as a percentage of revenue
(4)
(ii) revenue to non-current assets
(4)
(iii) percentage return on capital employed
(4)
(iv) current ratio
(4)
(v) liquid (acid test) ratio.
(4)
(c) Evaluate which business, if either of them, Mila should purchase.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

13
P66151A
 Pearson Edexcel International Advanced Level

Time 3 hours
Paper
reference WAC11/01
Accounting
International Advanced Subsidiary
PAPER 1: The Accounting System and Costing

Source Booklet
Do not return this Booklet with the question paper.

Turn over

*P65840A*
P65840A
©2021 Pearson Education Ltd.

1/1/1/1/1/1/1
 SECTION A
Answer BOTH Questions
1 George is in business as a retailer of jewellery. The following information was
available from his books on 30 April 2021.
£
Capital 100 000
Drawings 15 000
Non-current assets (cost):
Leasehold premises 60 000
Security equipment 29 000
Fixtures and fittings 45 000
Provisions for depreciation:
Leasehold premises 42 000
Security equipment 6 000
Fixtures and fittings 39 000
Revenue 250 000
Purchases 120 000
Purchase returns 8 500
Inventory – 1 May 2020 97 000
Wages 51 400
Trade receivables 10 700
Trade payables 34 600
Cleaning expenses 7 100
Rates 15 800
Electricity and water charges 11 750
Cash and bank 9 100 Dr
Credit card commission paid 3 500
Security equipment maintenance 4 750
Additional information at 30 April 2021
(1) Inventory £87 500
(2) Wages owing £600, electricity owing £550
(3) Rates paid in advance £2 100, water charges paid in advance £900
(4) A full year’s depreciation is charged on all non-current assets owned at the end of
the year as follows.
• The lease on the premises is for 15 years. An appropriate amount is written off
the lease each year.
• Security equipment at the rate of 20% reducing balance.
• Fixtures and fittings at the rate of 10% per annum straight line.
(5) On inspecting his books George found that the following errors had been made
and these required correction.
26 January 2021 A payment by cheque, £3 500, to a trade payable, Robin
Gems, had been recorded in the books as £350.
6 March 2021 Purchases of security equipment, £6 000, on credit from Hove
Security had not been recorded in the books.

2
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 Required
(a) Prepare the:
(i) Journal entries, including bank entries, correcting the errors of 26 January 2021
and 6 March 2021. Narratives are not required
(5)
(ii) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 30 April 2021
(12)
(iii) Statement of Financial Position at 30 April 2021.
(15)
George has been making projections for the next financial year ended
30 April 2022. He has projected the following for the year.
• Revenue will increase by 20% and gross profit as a percentage of revenue will be
40%.
• Premises costs will be £50 000
• All other costs will be £15 000 plus 10 pence (£0.10) for every £1 of revenue.
Required
(b) State whether the following costs are fixed, semi-fixed, semi-variable or variable.
• Premises costs
• All other costs
(2)
(c) Prepare the Forecast Statement of Profit or Loss and Other Comprehensive
Income for the year ended 30 April 2022.
(5)
(d) State two differences between ethics in accounting and social accounting.
(4)
(e) Evaluate whether a business should make decisions solely on the basis of the
profit made or whether it should also consider other factors.
(12)

(Total for Question 1 = 55 marks)

3
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2 Worlebury Stores is a retailer which has two productive departments, Food and
Clothing and one service department, Administration.
The following balances were in the books on 30 April 2021.
£
Wages:
Food 91 650
Clothing 33 550
Administration 47 800
Advertising 25 000
Management and supervision 70 000
Rent of premises 40 000
Electricity 12 000
Staff canteen costs 7 000
Non-current assets (carrying value):
Food freezers 60 000
Computers 80 000
Fixtures and fittings 30 000
Additional information.
(1) Advertising – 75% is related to the Food Department and the remainder to the
Clothing Department.
(2) Other information

Department Food Clothing Administration

Employees (number) 8 3 3

Floor area (sq m) 1 500 700 300

Equipment electrical capacity (kwh) 14 2 8

(3) Depreciation is charged on all non-current assets using the reducing balance
method based on the following rates per annum:
Food freezers 20%
Computers 25%
Fixtures and fittings 10%
(4) Computers are used 80% by Administration, 10% by Food and 10% by Clothing.
(5) Fixtures and fittings are used 20% in Food, 50% in Clothing and 30% in
Administration.

4
P65840A
 Required
(a) Calculate the cost of operating each of the three departments: Food, Clothing
and Administration, using the most appropriate basis to apportion costs. Prepare
your answer in a columnar format. A total column is not required.
(23)
The following revenue and cost of sales balances were available for the year
ended 30 April 2021.
£
Revenue:
Food 900 000
Clothing 300 000
Cost of sales:
Food 600 000
Clothing 150 000
After allocation and apportionment of costs, Worlebury Stores re-apportions the cost
of Administration to the two productive departments in proportion to revenue.
Required
(b) Calculate the cost of operating the Food and Clothing Departments after
re-apportionment of the Administration cost.
(2)
(c) Calculate for Food and for Clothing the:
• profit for the year ended 30 April 2021
• profit for the year as a percentage of revenue.
(8)
(d) State, two possible reasons why the profit for the year as a percentage of revenue
is different for Food and for Clothing.
(2)
Worlebury Stores is planning major alterations. The following works will be
undertaken.
(1) Building extension for the Administration Department.
(2) The Clothing Department will be redecorated.
(3) New advertising signage will be installed at the entrance to the store.
(4) The Food Department will be fitted with new freezers.

5
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 Required
(e) State giving one reason for each answer, whether (1) to (4) is capital
expenditure or revenue expenditure.
(8)
(f ) Evaluate if there is a benefit in preparing departmental accounts when many of
the costs will be apportioned.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

6
P65840A
 SECTION B
Answer THREE questions from this section.
3 Haman maintains full accounting records.
Bodger and Co, a customer of Haman, has asked for the outstanding balance of
their account on 15 March 2021. The following information had been posted to the
account of Bodger and Co by Haman.
2021
March
1 Bodger and Co owed Haman £500
5 Sales to Bodger and Co of goods with a list price £400
Haman allowed Bodger and Co 10% trade discount.
11 Bodger and Co returned goods sold on 5 March with a list price £50
14 Bodger and Co paid the balance outstanding on 1 March by cheque and
was allowed 3% cash discount.
Required
(a) Prepare the account of Bodger and Co in the books of Haman showing the
balance of the account on the 15 March 2021.
(5)
On receiving the balance of their account, Bodger and Co informed Haman that the
closing balance was incorrect because it had been agreed that the following terms
would apply to all transactions in 2021:
• 20% trade discount would be allowed on purchases
• 5% cash discount would be allowed on payments.
Required
(b) Calculate the revised balance owed by Bodger and Co on the 15 March 2021 after
the adjustments for trade discount and cash discount.
(4)
(c) Explain the difference between the trade receivables ledger and the trade
receivables ledger control account.
(2)

8
P65840A
 Haman prepares a trade receivables control account at the end of each month.
The following information was available from the books for April 2021.
• Balances 1 April 2021 £2 000 Dr
£45 Cr
• Totals for April 2021
£
Credit sales 3 950
Receipts from customers 2 700
Goods returned by customers 220
Discount allowed 90
Irrecoverable debt 320
Interest charged on
overdue account 30
• On 1 May 2021 there was no credit balance brought down.
Additional information
(1) A batch of invoices for credit sales totalling £500 had not been recorded in the
books.
(2) Receipts from customers included cash sales of £300
(3) £50 of the goods returned by customers was for cash sales.
(4) Credit balances in the trade receivables ledger control account of £45 had been
transferred during April into the trade payables ledger control account.
(5) The balance of the Allowance for Irrecoverable Debts Account on 1 April was
£110. The allowance at 30 April had been calculated at £140.
Required
(d) Prepare for April 2021 the:
(i) Trade Receivables Ledger Control Account
(9)
(ii) Allowance for Irrecoverable Debts Account.
(4)
(e) Evaluate whether preparing a trade receivables ledger control account ensures
that the books are correct.
(6)

(Total for Question 3 = 30 marks)

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4 Alesha is in business buying and selling goods on credit. She prepared her draft
financial statements on 30 April 2021 which contained the following balances.
£
Revenue – (all on credit) 150 000
Capital 70 000
Inventory 65 000
Trade payables 35 000
Trade receivables 30 000
6% bank loan (repayable 2023) 25 000
Bank 4 000 Dr
Profit for the year 16 500
Required
(a) Calculate the:
(i) current ratio
(2)
(ii) liquid (acid test) ratio
(2)
(iii) trade receivables collection period (in days)
(2)
(iv) percentage return on capital employed.
(2)
(b) Comment on the liquidity of Alesha’s business.
(3)
Alesha presented the financial statements to her accountant who required the
following changes.
Change 1
A sale or return of goods, £4 500 (cost £2 500), had been recorded in the accounts as
revenue. The customer had not informed Alesha of their intention to buy or return
the goods.
Change 2
A customer, Bangla and Co, which had owed a debt of £11 000 for 150 days is now
believed to have ceased trading. The debt is believed to now be irrecoverable.

10
P65840A
 Required
(c) State whether each of change 1 and change 2 would increase, decrease or have
no effect on the:
• profit for the year
• liquidity at 30 April 2021.
(4)
(d) Calculate, after making both changes 1 and 2, the:
(i) revised profit for the year
(3)
(ii) total value of the current assets.
(4)
(e) State the accounting concept which must be applied when:
(i) goods are supplied on a sale or return basis
(1)
(ii) a debt is believed to be irrecoverable.
(1)
(f ) Evaluate the use of accounting principles and concepts in calculating the profit of
a business.
(6)

(Total for Question 4 = 30 marks)

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5 John is a sole trader who works as a builder.
All work is priced by John using job costing.
(a) Explain the following costing terms.
• Job costing
• Under absorption of overheads
(4)
John prices work as follows.
• Materials – cost price plus a £20 administration fee.
• Labour – £25 per direct labour hour.
• Overheads – recovered at the rate of £15 per direct labour hour.
• Mark-up – 15% is added to the total cost.
A quotation has been requested from a customer for a job which will use materials
with a cost price of £380 and take 15 hours of direct labour to complete.
Required
(b) Calculate the price to be quoted to the customer for the job.
(5)
The following information is available for the trading year ended 30 April 2021.
(1) Revenue receipts from customers were £94 000. Trade receivables outstanding
on 30 April 2021 were £12 500, on 1 May 2020 trade receivables outstanding had
been £9 800.
(2) Materials with a list price of £22 000 were purchased by John who received a
trade discount of 15%.
(3) John worked 1800 hours of direct labour hours that were directly chargeable to
the customer in the year.
(4) Actual overheads (excluding depreciation) were £30 000
(5) Non-current assets:
Carrying value Purchases Sales
1 May 2020 during year during year
£ £ £
Motor vehicles 14 000 – –
Loose tools 9 800 1 100 250
Depreciation is charged on the following basis.
• Motor vehicles at the rate of 20% using the reducing balance method.
• Loose tools on the revaluation method. On 30 April 2021 the loose tools were
valued at £9 500.

12
P65840A
 Required
(c) Calculate the profit for the year ended 30 April 2021.
(7)
(d) State four activities that John might undertake which would not be directly
chargeable to the customer.
(4)
(e) Calculate the amount by which John over absorbed or under absorbed his
overheads in the year ended 30 April 2021.
(4)
(f ) Evaluate working in business as a sole trader compared to working in a
partnership.
(6)

(Total for Question 5 = 30 marks)

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6 Yusuf started business on 1 April 2020 buying and selling mobile phone accessories.
He started the business with a deposit in the bank from his own money and a 8%
bank loan repayable in full at the end of 5 years.
Yusuf did not keep full books of account, but does have a bank account and a
number of other documents.
He has asked you to assist him to prepare a set of financial statements for the
government. The following information is available.
(1) Bank Account summary
Receipts £ Payments £
Capital 5 000 Rent 7 500
Bank loan 5 000 Wages 10 000
Cheques from Motor vehicle 5 800
trade receivables 45 000 Fixtures and fittings 2 000
Cash sales banked 7 000 Cheques to trade payables 29 000
Motor vehicle expenses 1 900
General expenses 4 200
Bank loan interest 200
Total receipts 62 000 Total payments 60 600
(2) Expenditure paid from cash sales before banking.
£
Purchases 3 200
Drawings 8 750
General expenses 1 300
Additional information at 31 March 2021.
(1) Inventory £4 750
(2) Wages £900 were owing.
(3) Rent for the year was at the rate of £500 per month.
(4) Estimated values of the motor vehicle was £4 700 and the fixtures and fittings
were £1 500
(5) Trade receivables £5 100
(6) Trade payables £2 800

14
P65840A
 Required
(a) State three advantages of keeping a full set of books of account.
(3)
(b) Prepare the:
(i) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 31 March 2021
(11)
(ii) Statement of Financial Position at 31 March 2021.
(10)
(c) Evaluate the possible use by Yusuf of information and communication technology
(ICT) in maintaining his accounting records.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

15
P65840A
 Pearson Edexcel International Advanced Level
Time 3 hours
Paper
reference WAC11/01
 

Accounting
International Advanced Subsidiary
PAPER 1: The Accounting System and Costing

Source Booklet
Do not return this Booklet with the question paper.

Turn over

*P67921A*
P67921A
©2021 Pearson Education Ltd.

E:1/1/1/1/1/1
 SECTION A
Answer BOTH questions in this section.
1 Ajaz is in business as a retailer of furniture. The following balances were in his books
of account at 30 April 2021.
£
Revenue 860 000
Purchases 710 000
Commission receivable 8 500
Capital 50 000
Drawings 5 800
Inventory 1 May 2020 65 000
Disposal of non-current assets 5 700 Cr
Allowance for irrecoverable debts 2 000
7% bank loan 50 000
Bank loan interest paid 2 000
Bank overdraft 19 000
Rent payable 20 000
Wages and salaries 53 500
Trade receivables 38 000
Trade payables 74 000
Advertising expenses 11 900
Electricity and water 7 650
General expenses 34 350
Shop redecoration costs 8 000
Non-current assets
Delivery vehicles 72 000
Computer equipment 42 000
Fixtures and fittings 18 000
Provisions for depreciation
Delivery vehicles 7 000
Computer equipment 8 000
Fixtures and fittings 4 000
Additional information at 30 April 2021
(1) Inventory £95 000
(2) Commission receivable of £3 000 was owing to Ajaz.
(3) Electricity was £600 prepaid, and water was £250 accrued.
(4) Wages and salaries includes £6 000 paid to Ajaz.
(5) Advertising expenses includes £3 600 for an advertising campaign from 1 January
to 30 June 2021.
(6) Depreciation is charged on all non-current assets owned at the end of the year as
follows.
(i) Delivery vehicles at the rate of 20% per annum by the reducing balance
method.
(ii) Computer equipment by the revaluation method.

2 P67921A

 (iii) Fixtures and fittings at the rate of 15% per annum by the straight-line method.
(7) Computer equipment was valued at £30 000
(8) The 7% bank loan was taken out on 1 January 2020 and is repayable on
31 December 2024.
(9) The allowance for irrecoverable debts remained unchanged at £2 000
Required
(a) Prepare the:
(i) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 30 April 2021
(14)
(ii) Statement of Financial Position at 30 April 2021.
(17)
(b) Calculate the following ratios. Express your answers to two decimal places.
(i) Gross profit as a percentage of revenue.
(2)
(ii) Percentage return on capital employed.
(2)
(iii) Inventory turnover (times per year).
(2)
(iv) Current ratio.
(3)
(v) Liquid (acid test) ratio.
(3)
(c) Evaluate the financial position of the business from the financial statements
prepared and ratios calculated in parts (a) and (b).
Your answer should include consideration of the use of assets, profitability,
and liquidity.
(12)

(Total for Question 1 = 55 marks)

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 Turn over
2 Kristos Auto Services has two departments: auto repairs and tyre replacement.
The following were some of the balances in the books at 30 April 2021.
£
Revenue: Auto repairs 132 000
Tyre replacement 95 000
Purchases: Auto repair parts 19 300
Tyres 44 750
Purchase returns Auto repair parts 1 300
Inventory 1 May 2020: Auto repair parts 640
Tyres 2 000
Wages: Auto repairs 37 500
Tyre replacement 20 400
Premises rent 24 000
Light and heat 6 300
Cleaning of premises 2 700
Management salary 16 800
Insurance of premises 2 100
Insurance of equipment 1 600
General expenses 9 400
Advertising 4 100
Additional information at 30 April 2021
(1) Inventory:
Auto repair parts £730
Tyres £5 400
(2) Wages includes a short-term loan of £1 500 paid to a worker in the tyre
replacement department.
(3) Depreciation is charged on all non-current assets owned at the end of the year.
• Equipment at the rate of 20% per annum by the reducing balance method.
• Loose tools by the revaluation method. On 30 April 2021 loose tools were
valued at £5 000
(4) General expenses includes £700 prepaid and £300 accrued.
(5) Advertising of £3 000 related to the tyre replacement department.
(6) General information.

Auto repairs Tyre replacement

Floor area (sq m) 200 100

Number of workers 5 2

Equipment carrying value 1 May 2020 (£000) 60 20

Loose tools value 1 May 2020 (£000) 7 –

General expenses 60% 40%

4 P67921A

 Required
(a) Prepare the Departmental Statement of Profit or Loss and Other Comprehensive
Income for the year ended 30 April 2021 showing the departmental profit for
each of the auto repairs department and the tyre replacement department.
Your answer should be in columnar format. You are advised to prepare columns
for auto repairs and tyre replacement. A total column is not required.
(27)
Kristos Auto Services uses the First In First Out (FIFO) method on a perpetual basis to
value the inventory of tyres.
On 1 May 2020 the inventory of tyres was 50 tyres costing £40 each.
The receipts and issue (sales) of tyres for the year were:

Date Receipts Issues (sales)

May–July 2020 200 @ £45 each 180

August–October 2020 200 @ £50 each 240

November–January 2021 250 @ £55 each 210

February–April 2021 200 @ £60 each 180

It has been suggested that Kristos Auto Services should change the method of valuing
inventory to the Last In First Out (LIFO) method on a perpetual valuation basis.
Required
(b) Explain the difference between perpetual valuation and periodic valuation of
inventory.
(4)
(c) Calculate the value of the inventory of tyres at the 30 April 2021 using the Last In
First Out (LIFO) method on a perpetual basis of inventory valuation.
(8)
(d) State two disadvantages of using the Last In First Out (LIFO) method of
inventory valuation.
(2)
(e) Calculate the profit or loss of the tyre replacement department if Kristos Auto
Services had used the Last In First Out (LIFO) method of inventory valuation for
the year ended 30 April 2021.
(2)

P67921A 5
 Turn over
 The manager of Kristos Auto Services is considering the use of an individual bonus
scheme as part of the wage payment to workers.
(f ) Evaluate the use of an individual bonus scheme as part of the wage payment to
workers.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

6 P67921A

 SECTION B
Answer THREE questions from this section.
3 Hugsy started business on 1 May 2020 with £4 000 cash which she paid into a
Bank Account.
She did not maintain a set of formal books of account, but the following information
is available.
(1) All sales and purchases of goods were on credit.
(2) Purchases of goods totalled £78 350. Of this sum Hugsy owed £6 240 to trade
payables on 30 April 2021, the remainder had been paid by cheque.
(3) Sales of goods totalled £126 400. Of this sum Hugsy was owed £14 800 by trade
receivables on 30 April 2021, the remainder had been received by cheque.
(4) Inventory on 30 April 2021 was £7 900
(5) Non-current assets were purchased during the year for £27 000, payment was
made by cheque. Non-current assets were valued on 30 April 2021 at £20 500
(6) Rent of premises is £10 000 per annum. On 30 April 2021 Hugsy still owed the last
quarter’s (three months’) rent.
(7) Wages paid to staff were £1 100 per month. Payment for April 2021 is still owing.
(8) Hugsy withdrew drawings of £400 per month from the bank.
(9) General expenses incurred for the year were £15 500. On 30 April 2021, general
expenses of £720 were prepaid and £1 400 were accrued. General expenses were
paid by cheque.
(10) H
 ugsy took out a 6% bank loan on 1 August 2020 for £30 000. No interest had
been paid on the loan at 30 April 2021.
Required
(a) Prepare the summarised Bank Account for the year ended 30 April 2021.
(8)
(b) Prepare the:
(i) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 30 April 2021
(8)
(ii) Statement of Financial Position at 30 April 2021.
(8)
(c) Evaluate the decision of Hugsy not to maintain formal books of account.
(6)

(Total for Question 3 = 30 marks)

P67921A 7
 Turn over
4 The Greenfield Bowls Club maintains full accounting records.
The following information was available at 30 April 2021.
£
Subscriptions received 2 750
Equipment (carrying value) 1 May 2020 5 700
Inventory – club shop – 1 May 2020 800
Rent payable 500
Electricity 525
Cash 75
Bank overdraft 1 180
Bank charges 60
Competition entry fees received 720
Competition prizes paid 680
Club shop sales 4 350
Club shop purchases 3 600
Trade payables 1 500
General expenses 2 160
Accumulated fund To be calculated
Required
(a) State one difference between a Receipts and Payments Account and an Income
and Expenditure Account.
(2)
(b) Prepare the Trial Balance at 30 April 2021 including the calculation of the
accumulated fund.
(8)
After the preparation of the Trial Balance, the following additional information
was available at 30 April 2021
(1) Subscriptions in advance £150
(2) Subscriptions in arrears £350 of which £250 are to be written off as irrecoverable
debts.
(3) Equipment was valued at £4 900
(4) Inventory – club shop £930
(5) Club shop purchases of £200 had been returned. No entries had been made in
the books.

8 P67921A

 Required
(c) Prepare for the year ended 30 April 2021, the:
(i) Subscriptions Account
(4)
(ii) Club Shop Trading Account
(3)
(iii) Income and Expenditure Account.
(7)
The Greenfield Bowls Club is considering the introduction of a 10-year membership
subscription at a discounted rate.
(d) Evaluate the Greenfield Bowls Club offering a 10-year membership.
(6)

(Total for Question 4 = 30 marks)

P67921A 9
 Turn over
5 Bisdee Products manufactures parts for the motor industry.
The following information relates to manufacturing parts for April 2021.
(1) Raw materials
Bisdee Products uses the First In First Out (FIFO) periodic method of inventory
calculation.
Balance 1 April 250 units @ £10 per unit
Receipts 9 April 600 units @ £11 per unit
17 April 300 units @ £12 per unit
Balance 30 April 400 units
(2) Direct labour
Six workers are each paid at the rate of £5 per hour for 40 hours per week.
Overtime is paid at time and a half.
There were four weeks in April and each worker worked a total of 200 hours
in April.
(3) Other costs

£ Period

Sundry expenses 6 120 For month of April 2021

Supervision 2 500 For month of April 2021

Rent and rates 6 000 Per quarter

Equipment depreciation 15 000 Per annum

Note: 25% of sundry expenses are direct expenses.

(4) Work in progress
1 April £1 970
30 April £1 800
(5) Transfer value
Completed production is transferred to finished goods at cost plus 20%.
Required
(a) Prepare the Manufacturing Account for April 2021.
(16)
The value of finished goods for April 2021 was:
1 April £90 000
30 April £60 000

10 P67921A

 (b) Explain which entries are required for unrealised profit for April 2021 in the:
(i) Provision for Unrealised Profit Account
(4)
(ii) Statement of Profit or Loss and Other Comprehensive Income
(2)
(iii) Statement of Financial Position.
(2)
Bisdee Products is considering changing the basis of the transfer value of production
to finished goods from manufacturing cost plus 20% to one of a fixed price for
each unit produced.
(c) Evaluate the proposed change to a fixed price for each unit produced.
(6)

(Total for Question 5 = 30 marks)

P67921A 11
 Turn over
6 (a) Explain two reasons why a business would prepare control accounts.
(4)
Jenny maintains full accounting records. At the end of each month she prepares
control accounts for her trade receivables ledger and trade payables ledger.
The following information is available.

Trade receivables Trade payables

£ £

Debit Credit Debit Credit

Balances 1 April 2021 2750 175 265 1 900

Balances 1 May 2021 To be calculated 25 105 To be calculated

Transactions summary for April 2021

£
Total sales 4 250
Total purchases 2 500
Receipts from credit customers
(including dishonoured cheque) 3 050
Dishonoured cheque 180
Payments to credit suppliers 1 950
Discount allowed 150
Discount received 90
Interest charged by supplier 25
Purchase returns 450
Irrecoverable debts written off 650
Cash refund from supplier 410
Contra credit balance transferred to the
trade payables ledger 140
Additional information
(1) 80% of sales were on credit.
(2) 10% of purchases were for cash.
(3) There were no returns for cash sales or cash purchases.
Required
(b) Prepare the:
(i) Trade Receivables Ledger Control Account
(7)
(ii) Trade Payables Ledger Control Account.
(8)

12 P67921A

 (c) State two possible reasons for the credit balance on trade receivables on
1 April 2021.
(2)
(d) Explain why Jenny would transfer a balance from the trade receivables ledger to
the trade payables ledger.
(3)
Jenny stated that ‘You should only consider profit when making business decisions.’
(e) Evaluate the statement of Jenny.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

P67921A 13

 Pearson Edexcel International Advanced Level
Time 3 hours
Paper
reference WAC11/01
 

Accounting
International Advanced Subsidiary
PAPER 1: The Accounting System and Costing

Source Booklet
Do not return this Booklet with the question paper.

Turn over

*P70674A*
P70674A
©2022 Pearson Education Ltd.

L:1/1/1/
 SECTION A
Answer BOTH questions in this section.
1 Fred’s Bakery rents a shop in Extown from which it sells bakery products.
The following balances were in its books of account at 30 September 2021.

£
Revenue 150 000
Purchases 92 000
Purchase returns 1 500
Trade receivables 2 600
Allowance for irrecoverable debts 250
Wages 4 850
Rent and rates 14 500
Electricity and water 6 750
Advertising 3 800
Inventory – 1 October 2020 7 500
Insurance 4 100
Non-current assets (cost):
Equipment 70 000
Computers 8 000
Fixtures and fittings 3 000
Provisions for depreciation:
Equipment 17 500
Computers 4 000
Fixtures and fittings 1 400
Trade payables 11 100
General repairs 8 900
Capital 30 000
Drawings 7 500
Bank overdraft 3 650
5% bank loan 20 000
Bank charges and loan interest 1 100
Sundry expenses 5 600
Commission receivable 800

2 P70674A

 Additional information at 30 September 2021
(1) Inventory £8 000
(2) Wages £550 were owing.
(3) Rent £2 500 was prepaid and rates £500 were owing.
(4) General repairs included £6 000 for the purchase of a new computer.
(5) Depreciation is charged on all non-current assets owned at the end of each year
as follows.
• Equipment at the rate of 25% per annum using the reducing balance method.
• Computers by revaluation. Computers were valued at £7 500 on
30 September 2021.
• Fixtures and fittings at the rate of 15% using the straight-line method.
(6) The 5% bank loan commenced on 1 April 2021 and is considered long term.
(7) Bank charges and loan interest included £200 interest charged on the
5% bank loan.
(8) The allowance for irrecoverable debts is to be £150

P70674A 3
 Turn over
 Required
(a) Prepare the:
(i) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 30 September 2021
(15)
(ii) Statement of Financial Position at 30 September 2021.
(14)
For the following year, commencing 1 October 2021, Fred’s Bakery was considering
providing a home delivery service in addition to the shop sales.
Fred made the following projections.
(1) Home deliveries would provide a revenue of £5 000 per month. Shop revenue
would reduce by 10% because some customers would choose to have
home deliveries.
(2) The gross profit as a percentage of revenue on all sales would be 40%
(3) The costs of operating the shop would be:
• Fixed costs of £28 000
• Variable costs of 10 pence (£0.10) for every £1 of shop revenue.
(4) The costs of operating the home delivery service would be:
• One delivery vehicle at a purchase cost of £18 000. The delivery vehicle would
last for four years and have a residual value of £6 600
Equal depreciation would be charged each year.
• Delivery vehicle running costs of £600 per month.
• Wages for the delivery vehicle driver of £90 per week for 50 weeks of the year.
Required
(b) Prepare the Forecast Statement of Profit or Loss and Other Comprehensive
Income for the year ended 30 September 2022.
(10)
(c) (i) Explain the difference between fixed costs and variable costs.
(2)
(ii) State one example of a fixed cost and one example of a variable cost that
would be incurred by the shop at Fred’s Bakery.
(2)
(d) Evaluate whether Fred’s Bakery should offer a home delivery service.
Your evaluation should consider both financial and non-financial factors.
(12)

(Total for Question 1 = 55 marks)

4 P70674A

2 Fortnam Production is preparing the assets section of the Statement of Financial
Position at 30 September 2021. The following information is available.
(1) Non-current assets
Balances 1 October 2020

Accumulated
Cost
depreciation
£ £

Premises 100 000 26 000

Motor vehicles 50 000 30 000

Fixtures and fittings   9 000 2 000

Non-current asset movements in the year ending 30 September 2021

Premises
An extension to the premises costing £30 000 was completed and occupied on
1 July 2021.
Motor vehicles
A motor vehicle which had cost £10 000 with an accumulated depreciation of
£4 500 was sold on 1 October 2020 for £5 500. A new motor vehicle costing
£15 000 was purchased on 15 April 2021.
Fixtures and fittings
Fixtures costing £1 000 were sold for £500 on 1 June 2021 at their carrying value.
Depreciation policy
Fortnam Production has the following depreciation policy. All non-current
assets are:
• depreciated using the straight-line method at the rate of
Premises 2%
Motor vehicles 20%
Fixtures and fittings 10%
• charged depreciation on all non-current assets owned at the end of the year.
Required
(a) Calculate the depreciation of each category of non-current assets for the year
ended 30 September 2021.
(6)
(b) Prepare the extract of the Statement of Financial Position at 30 September 2021
showing the non-current assets section.
(9)

P70674A 5
 Turn over
 (2) Inventory
The business uses the First In First Out (FIFO) method for valuing inventory
on a periodic basis. The following information is available for the year ended
30 September 2021.

Inventory Issues Net realisable

Product Purchases during year
1 October 2020 during year value
700 @ £10 on 1 January
Standard 200 @ £10 950 £12 each
300 @ £11 on 1 May
400 @ £12 on 1 March
Deluxe 100 @ £12 400 £14 each
100 @ £13 on 1 June

Super 50 @ £20 200 @ £20 on 1 February 150 £15 each

Required
(c) Calculate the total inventory value at 30 September 2021.
(5)
(3) Trade receivables
The following balances and other information were available.
1 October 2020

Trade receivables £8 200

Allowance for irrecoverable debts £300

1 October 2020 – 30 September 2021

£
Sales revenue 40 000
Sales returns 750
Cheques from customers received and banked 28 600
Irrecoverable debts written off 450
Discount allowed 900
Interest charged on overdue accounts 150

Additional information at 30 September 2021

• 80% of sales and 80% of sales returns were credit transactions.
• A cheque for £300 received and banked was later dishonoured.
• Allowance for irrecoverable debts to be increased by £250
Required
(d) Prepare the Trade Receivables Ledger Control Account showing the value of the
trade receivables at 30 September 2021.
(9)

6 P70674A

 (4) Other receivables
There were two items of other receivables.
• The rates were £10 000 per annum. On 1 October 2020 there was a credit
balance of £2 500 on the account. Rates of £14 000 were paid in the year
ending 30 September 2021.
• Advertising of £4 800 was paid during the year. This included £2 200 for a
campaign to run from 1 July to 31 December 2021.
Required
(e) Calculate the total balance of other receivables at 30 September 2021.
(4)
(5) Cash and bank
Balances in the books 1 October 2020

Cash £230
Bank £960 Dr

Annual summary 1 October 2020 to 30 September 2021

Receipts Payments

£ £

Cash 4 200 2 530

Cheques 35 750 36 600

• In addition to cash receipts £1 750 in cash was banked during the year.
• A cheque for £300 received and banked was later dishonoured.
Required
(f ) Calculate at 30 September 2021 the:
• cash balance
• bank balance.
(4)
(g) Prepare the extract from the Statement of Financial Position at 30 September 2021
showing the current assets section.
(6)
(h) Evaluate whether Fortnam Production’s use of the straight-line method as the
single method of depreciation for all non-current assets is appropriate.
(12)

(Total for Question 2 = 55 marks)

P70674A 7
 Turn over
 SECTION B
Answer THREE questions from this section.
3 Moira recorded the following information in her books for the years ending
30 September 2020 and 30 September 2021.

For the year ended: 30 September 2020 30 September 2021

£ £

Revenue 250 000 150 000

Gross profit 150 000 80 000

Profit for the year 20 000   5 000

Balances at: 30 September 2020 30 September 2021

£ £

Capital 30 000 20 000

Inventory 15 000 13 000

Bank    5 000 Cr    11 000 Dr

5% bank loans
20 000 40 000
(repayable 2024)

Trade payables 18 000 25 000

Trade receivables 25 000 12 000

Additional information
(1) Inventory at 1 October 2019 was £10 000
(2) All purchases and sales were on credit.
(3) A full year’s interest is chargeable on the 5% bank loans.

8 P70674A

 Required
(a) Explain the importance of liquidity to a business.
(4)
(b) Calculate the following for each of the years ended 30 September 2020 and
30 September 2021.
(i) Inventory turnover
(4)
(ii) Percentage return on capital employed
(4)
(iii) Liquid (acid test) ratio
(4)
(iv) Trade receivables collection period (in days).
(4)
(c) Comment on the liquidity of the business at 30 September 2021.
(4)
The value of some inventory in the business has fallen during the year ended
30 September 2021 to a point where its value may be lower than the purchase price.
(d) Evaluate, using accounting concepts and conventions, whether Moira should
re-value her inventory.
(6)

(Total for Question 3 = 30 marks)

P70674A 9
 Turn over
4 (a) Explain two differences between maintaining fixed capital accounts and
maintaining floating capital accounts in a partnership.
(4)
Amman and Belinda are trading in partnership. They have worked for many years
sharing profits and losses equally.
The following balances were in the books at 30 September 2020.

£
Capital – Amman 50 000
        Belinda 40 000
Goodwill 25 000

Amman and Belinda agreed to admit Cara as a partner on 1 October 2020. The new
profit sharing ratio would be two-fifths Amman, two-fifths Belinda, one-fifth Cara.
To commence the new partnership on 1 October 2020, it was also agreed that:
(1) Cara would introduce capital of £25 000. This would be a motor vehicle £15 000
and £10 000 by cheque
(2) Goodwill would be removed from the books of the new partnership
(3) Belinda would reduce her capital by £20 000, but this would be retained in the
partnership as a 6% loan for a period of five years.
Required
(b) Prepare the journal entries, including bank entries, to record the changes for the
new partnership. Narratives are not required.
(9)
(c) Calculate the capital for each of Amman, Belinda and Cara after all the changes
were made at 1 October 2020.
(6)

10 P70674A

 The new partnership of Amman, Belinda and Cara prepared a written agreement to
be effective from 1 October 2020. The agreement stated that:
• interest is allowed on the capital balance at year end at the rate of 4% per annum
• interest is charged on drawings at year end at the rate of 5% per annum
• salaries are to be paid to Belinda £6 000 per annum and Cara £4 000 per annum
• the profit-sharing ratio is two-fifths Amman, two-fifths Belinda, one-fifth Cara.
For the year ended 30 September 2021 the following information is available.
Profit for the year before interest on loan was £30 700
Drawings:

Amman £8 000
Belinda £4 000 (excluding salary paid)
Cara £4 000 (excluding salary paid)

Required
(d) Prepare the appropriation section of the Statement of Profit or Loss and Other
Comprehensive Income for the year ended 30 September 2021.
(5)
(e) Evaluate the decision of Amman and Belinda to admit Cara as a partner.
(6)

(Total for Question 4 = 30 marks)

P70674A 11
 Turn over
5 Alpha manufactures two products in its factory. Each product is manufactured
in batches on separate production lines. The two products are the Small and
the Whoppa.
The following information is available.

Small Whoppa

Week 23 production 750 units 300 units

Raw material

Material in finished product 2 kg 5 kg

Cost per kg £3 £3

Material wastage in production 25% of total 20% of total

Direct labour

Labour in finished product 20 minutes 30 minutes

Cost per hour £9 £10

Required
(a) Calculate for Week 23 the:
(i) total raw material cost of production
(7)
(ii) raw material cost of producing
• one unit of Small
• one unit of Whoppa.
(2)
(b) Calculate for Week 23 the:
(i) total direct labour cost of production
(5)
(ii) direct labour cost of producing
• one unit of Small
• one unit of Whoppa.
(2)

12 P70674A

 The factory had the following production overhead costs for Week 23.

£
Rent 500
Management salaries 1 250
Equipment depreciation 400
Electricity 250

Additional information

Small production line Whoppa production line

Floor area occupied (sqm) 900 600

Cost of equipment (£000) 30 10

Machine power usage (kwh) 60 40

Staff (numbers)   6   4

Required
(c) Calculate the total overhead cost of operating each of the Small and the Whoppa
production lines.
(5)
(d) Calculate for Week 23 the total production cost of manufacturing each of:
(i) one unit of Small
(1)
(ii) one unit of Whoppa.
(2)
(e) Evaluate Alpha’s use of apportioning overheads to departments.
(6)

(Total for Question 5 = 30 marks)

P70674A 13
 Turn over
6 Shakti started an online business on 1 October 2020 selling the Style hairdryer on
the internet.
She had capital of £2 000 in the bank.
All receipts and payments of cash go through the bank.
She did not maintain full accounting records but the following information
is available.
(1) Purchases of Style hairdryers cost £20 each and were made on credit.
(2) Sales of Style hairdryers were £35 each including delivery. Payment was received
by cheque with the customer’s order.
(3) Inventory movements of Style hairdryers 1 October 2020 to 30 September 2021
were:

Style hairdryer Number of hairdryers

Opening inventory Nil

Sales 2 700

Purchases 2 900

Returns from customers   30

Returns to suppliers   50

Closing inventory To be calculated

(4) All customers returning goods were given a full refund of the £35 by cheque.
(5) Delivery costs of £13 500 were paid and a sum of £150 was owing at the end of
the year.
(6) Premises were rented for £500 per month. On 30 September 2021 rent of £1 500
was prepaid.
(7) General expenses paid were £5 800. On 30 September 2021 £720 was still owing
for general expenses incurred.
(8) Bank interest of £105 was received and bank charges of £230 were paid in
the year.
(9) A computer was purchased for £1 200 and fixtures and fittings were purchased for
£1 700 on 1 October 2020. Payments were made by cheque.
(10) On 30 September 2021 £4 650 was owed to the supplier of the Style hairdryers.
(11) Shakti took £250 per month drawings to 31 December 2020. She increased this to
£400 per month from 1 January 2021. Drawings were taken by cheque.

14 P70674A

 Additional information at 30 September 2021
(1) The computer was valued at £800 and the fixtures and fittings were valued
at £1 500
Required
(a) Explain the following accounting terms.
(i) Business entity concept
(2)
(ii) Realisation concept.
(2)
(b) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the
year ended 30 September 2021.
(10)
(c) Prepare the summarised Bank Account for the year ended 30 September 2021.
(10)
(d) Evaluate the decision of Shakti not to maintain full accounting records.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

P70674A 15

 Pearson Edexcel International Advanced Level
Time 3 hours
Paper
reference WAC11/01
 
Accounting
International Advanced Subsidiary
PAPER 1: The Accounting System and Costing

Source Booklet
Do not return this Booklet with the question paper.

Turn over

*P66182A*
P66182A
©2022 Pearson Education Ltd.

Q:1/1/1/1/1/1/1/1/1/1
 SECTION A
Answer BOTH questions in this section.
1 Linda and Rishi are in partnership as retailers.
Their partnership agreement states that:
• profits and losses will be shared equally
• there will be no partnership salaries paid
• interest on capital is paid at 5% per annum
• interest on drawings is charged at 8% per annum.
The following balances were available on 30 April 2022.
£
Revenue 570 000
Inventory 1 May 2021 61 000
Purchases 390 000
Capital accounts:
Linda 40 000
Rishi 60 000
Current accounts:
Linda 2 000 Cr
Rishi 450 Cr
Drawings:
Linda 15 000
Rishi 20 000
Commission receivable 6 750
Trade receivables 8 000
Allowance for irrecoverable debts 1 000
Trade payables 11 150
Cash and bank 17 350 Dr
Carriage inwards 3 600
Carriage outwards 8 100
Staff wages 57 500
General expenses 9 200
Management salaries 38 000
Non-current assets (cost):
Computer equipment 50 000
Fixtures and fittings 28 000
Provisions for depreciation:
Computer equipment 21 000
Fixtures and fittings 9 000
Rent and insurance 4 800
Irrecoverable debts 2 850
Advertising 7 950

2 P66182A

Additional information at 30 April 2022
(1) Inventory £72 000
(2) Rent £450 is owing and insurance £800 was paid in advance.
(3) Depreciation is to be charged on all non-current assets owned at the end of the year.
• Computer equipment at the rate of 20% per annum reducing balance.
• Fixtures and fittings at the rate of 15% per annum straight line.
(4) The allowance for irrecoverable debts is to be maintained at 5% of trade receivables.
(5) A premises refurbishment had been completed on 20 April 2022 and no entries had
been recorded in the books of account at 30 April 2022. The premises refurbishment
consisted of the following.
• Redecoration at a cost of £12 600. This had been paid by cheque on 28 April 2022.
• Additional computer equipment was purchased on credit from JK Computers for
£6 000
• Advertising newly refurbished premises £2 400. A cheque for £1 800 was issued
on 28 April 2022. The balance is owing to Northtown Newspapers.
Required
(a) Explain two differences between revenue expenditure and capital expenditure.
(4)
(b) State whether each of the following costs is revenue expenditure or
capital expenditure.
• Redecoration.
• Additional computer equipment.
• Advertising newly refurbished premises.
(3)
(c) Prepare the journal entries, including bank entries, to record the premises
refurbishment costs in the books. Narratives are not required.
(4)
(d) Prepare for the year ended 30 April 2022 the:
(i) Statement of Profit or Loss and Other Comprehensive Income (including an
appropriation section)
(16)
(ii) current accounts of the partners.
(4)
(e) Prepare the Statement of Financial Position at 30 April 2022.
(12)

P66182A 3
 Turn over
 Linda and Rishi sell many of their goods on credit. They are considering changing the
method of sale to cash sales only.
(f ) Evaluate the possible change of the method of sale to cash sales only.
(12)

(Total for Question 1 = 55 marks)

4 P66182A

2 Syed is in business selling clothing.
The following were some of the balances available for the year ended 30 April 2022.
£
Revenue 240 000
Inventory 1 May 2021 12 000
Purchases 96 000
Rent 25 000
General expenses (including bank loan interest) 71 000
Capital 120 000
8% bank loan 50 000
Trade payables 15 000
Trade receivables 18 000
Additional information
(1) Inventory 30 April 2022 £18 000
(2) All purchases were on credit.
(3) 90% of revenue (sales) were on credit.
(4) The 8% bank loan was taken out on 1 May 2021.
(5) Depreciation for the year £14 000
Required
(a) Calculate the following ratios. Express your answers to two decimal places.
(i) Inventory turnover (in times per year).
(2)
(ii) Gross profit as a percentage of revenue.
(2)
(iii) Profit for the year as a percentage of revenue.
(2)
(iv) Percentage return on capital employed.
(2)
(v) Trade payables payment period (in days).
(2)
(vi) Trade receivables collection period (in days).
(2)

6 P66182A

 Syed compared his calculations with information available for the previous year
ended 30 April 2021. The comparison was as follows.

Year ended Year ended

30 April 2021 30 April 2022

Inventory turnover (in times per year) 7.20 times Calculated in (a)

Gross profit as a percentage of revenue 52% Calculated in (a)

Profit for the year as a percentage of revenue 13% Calculated in (a)

Percentage return on capital employed 35.20% Calculated in (a)

Trade payables payment period (in days) 39 days Calculated in (a)

Trade receivables collection period (in days) 31 days Calculated in (a)

Current ratio 1.80:1 2.40:1

Liquid (acid test) ratio 0.80:1 0.90:1

Required
(b) Explain a possible reason for the changes in any two ratios for each of the
following for the year ended 30 April 2022.
(i) Profitability of the business.
(4)
(ii) Liquidity of the business.
(4)
Syed is considering expanding his business and has made projections for the next
year ending 30 April 2023. The projections are as follows.
(1) Due to an increase in sales volume, revenue will increase by 25%.
(2) Due to bulk buying, the cost of all sales units will be 10% lower than last year.
(3) Annual depreciation will remain at £14 000 until revenue reaches £280 000 when
it will increase to £19 000
(4) Rent will remain at the current level.
(5) General expenses (including bank loan interest) will be £30 000 plus 15 pence
(£0.15) for every £1 of revenue.

P66182A 7
 Turn over
 Required
(c) Explain the difference between:
(i) fixed costs and variable costs
(4)
(ii) semi-fixed costs and semi-variable costs.
(4)
(d) State one example from Syed’s costs of the following.
• Fixed cost
• Variable cost
• Semi-fixed cost
• Semi-variable cost.
(4)
(e) Prepare the Forecast Statement of Profit or Loss and Other Comprehensive
Income for the year ended 30 April 2023.
(5)
A friend of Syed’s has suggested that when planning the expansion of his business he
should also consider social accounting aspects in addition to profit when operating
his business.
(f ) Explain three ways in which Syed could consider social accounting in operating
his business.
(6)
(g) Evaluate the use of profitability ratios as the only way of judging the success of a
business.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

8 P66182A

 SECTION B
Answer THREE questions from this section.
3 The following balances were extracted from the books of the Hillside Sports Club on
30 April 2022.
£
Subscriptions received 2 950
Trade payables 1 850
Rent payable 1 500
Telephone charges 320
Equipment (cost) 4 510
Equipment – provision for depreciation 1 100
Bank overdraft 70
Equipment repairs 600
Disposal account (profit on sale) 150
Sale of dance tickets 2 100
Catering cost for dance 390
Hire of band for dance 500
Donations received 300
Sundry expenses 1 450
Accumulated fund To be calculated
Required
(a) Prepare the trial balance for the Hillside Sports Club at 30 April 2022 including the
balance of the accumulated fund at that date.
(9)
Additional information at 30 April 2022
(1) Subscriptions paid in advance for year commencing 1 May 2022 £200
(2) Subscriptions still due for year ended 30 April 2022 £860
(3) The dance organised by the club had the following sums outstanding.
Sale of dance tickets to members £580 was still owed.
Catering cost – 70% of the total catering cost was still owed.
Hire of band – 60% of the total band cost was still owed.
(4) Equipment repairs included £250 for the purchase of new equipment.
(5) The equipment was revalued at £3 310
(6) Sundry expenses £420 is owing and £130 was paid in advance.

10 P66182A

Required
(b) Calculate the profit or loss of the dance.
(5)
(c) Prepare the Income and Expenditure Account for the year ended 30 April 2022.
(10)
(d) Evaluate the financial position of the Hillside Sports Club.
(6)

(Total for Question 3 = 30 marks)

P66182A 11
 Turn over
4 Marvin prepares control accounts at the end of each month. On 30 April 2022 the
following information was available.
Trade Receivables Ledger Control Account
Balances 1 April 2022 £8 700 Dr
£250 Cr
Summary of transactions for April 2022

Details £ Notes

Sales 11 500 £2 600 of sales were for cash, the balance was on
credit.
Cheques received from 8 350 Cheques included £420 from B Luck which was
trade receivables ‘dishonoured’ by the bank on 28 April 2022.
Sales returns 800 Included £250 of cash sales returns.

Discount allowed 350

Interest charged for 80

overdue accounts
Contra 50 Balance of £50 owing by G Weeks ‘set off’ against
Trade Payables Ledger Control balance.
Irrecoverable debts 730 Includes debt of B Luck

Balances 1 May 2022 Debit balance to be calculated

£400 Cr
Required
(a) State four reasons why Marvin might prepare control accounts.
(4)
(b) Prepare the Trade Receivables Ledger Control Account for the month of
April 2022.
(10)
(c) Prepare the extract from the Statement of Financial Position showing the trade
receivables balance at 30 April 2022.
(3)

12 P66182A

 The following transactions relate to the account of B Luck, one of Marvin’s customers.
1 April 2022 B Luck owed Marvin a balance of £420
18 April 2022 B Luck sent a cheque to Marvin for £420
20 April 2022 Sold goods to B Luck on credit £120
28 April 2022 Cheque sent on 18 April was ‘dishonoured’ by the bank.
30 April 2022 Debt of B Luck declared irrecoverable.
25 May 2022 B Luck offered 25 pence (£0.25) in the pound on his outstanding
debt in final settlement. This was accepted by Marvin.
Required
(d) Prepare the B Luck Account in the books of Marvin.
(7)
(e) Evaluate whether it is ever possible for Marvin to avoid all irrecoverable debts.
(6)

(Total for Question 4 = 30 marks)

P66182A 13
 Turn over
5 The following were some of the balances extracted from the books of
Harptree Manufacturing on 30 April 2022.
The business has manufacturing and administrative departments.
£
Purchases of raw materials 134 250
Opening inventory:
Raw materials 20 500
Work in progress 42 100
Production wages 165 750
Rent and rates 27 000
Electricity and power 7 200
Production expenses 9 000
Management salaries 75 000
Royalty payments 10 200
Canteen costs 18 000
Non-current asset depreciation 33 000
Provision for unrealised profit
– 1 May 2021 6 700
Additional information at 30 April 2022
(1) Inventory value:
Raw material £18 900
Work in progress £38 700
Finished goods £48 300
(2) 60% of production expenses are direct and 40% are indirect.
(3) Other information:

Manufacturing Administration

Floor area occupied (sq m) 1 400 400

Employees (number) 30 20

Non-current asset capacity (kw h) 600 300

Non-current asset book value (£000) 700 400

(4) A manufacturing profit of 15% is added to the cost before transfer to the
Statement of Profit or Loss and Other Comprehensive Income Account.
Required
(a) Explain the following terms:
• overhead allocation
• overhead apportionment.
(4)

14 P66182A

 (b) Prepare for the year ended 30 April 2022, the:
(i) Manufacturing Account
(16)
(ii) Provision for Unrealised Profit Account.
(4)
Harptree Manufacturing has a single production line for its products. Production
workers are remunerated on a day work basis.
The Management of Harptree Manufacturing is considering changing the method of
remuneration for production workers to a group bonus scheme basis.
(c) Evaluate the proposed change in the remuneration method.
(6)

(Total for Question 5 = 30 marks)

P66182A 15
 Turn over
6 The following information is available for the equipment of Highgate Construction.
1 May 2021 Balances brought down
Equipment £240 000
Equipment – provision for depreciation £45 000
Purchases and sales of equipment during year
1 August 2021 Sold equipment for £9 000 cash.
The equipment had cost £24 000 and had a £16 900 provision for
depreciation when sold.
1 November 2021 Purchased equipment at a cost of £32 000 on credit from
CT and Partners.
1 January 2022 Purchased equipment at a cost of £16 000 paying by cheque.
Additional information
• Depreciation on equipment is charged at the rate of 15% per annum straight line.
• Charged pro rata to the months of ownership for equipment bought or sold.
Required
(a) Explain how the following accounting concepts and conventions would be
applied in the recording of non-current assets and charging depreciation.
(i) Historic cost
(2)
(ii) Consistency
(2)
(iii) Going concern
(2)
(b) Calculate the total depreciation charge on equipment for the year ended
30 April 2022.
(4)
(c) Prepare, for the year ended 30 April 2022, the:
(i) Equipment Account
(4)
(ii) Equipment – Provision for Depreciation Account
(3)
(iii) Disposal Account.
(4)

16 P66182A

 At a monthly Management Meeting the Sales Manager made the following
statement.
‘I do not think that we are using the right method of depreciation for our equipment.
If we look at one piece of equipment, the digging machine that cost £30 000, the
carrying value and the market value for the last three years do seem to be quite
different. Is it better for us to use a revaluation method for the depreciation of all
equipment?’

Year ended Carrying value Market value

30 April £ £
2019 25 500 20 000

2020 21 000 12 000

2021 16 500 10 000

(d) State three disadvantages of using the revaluation method for charging
depreciation.
(3)
(e) Evaluate whether Highgate Construction should continue to use the straight-line
method for depreciating the equipment.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

P66182A 17

 Pearson Edexcel International Advanced Level
Time 3 hours
Paper
reference WAC11/01
 
Accounting
International Advanced Subsidiary
PAPER 1: The Accounting System and Costing

Source Booklet
Do not return this Booklet with the question paper.

Turn over

*P72139A*
P72139A
©2022 Pearson Education Ltd.

B:1/1/1/1/1/1/1/1/1/
 SECTION A
Answer BOTH questions in this section.
1 Bejam is in business selling shoes and trainers. He does not maintain a full set of
double entry accounts but does maintain a bank account together with some
additional records.
The following information is available for the year ended 30 September 2022.
(1) Summarised Bank Account
£ £
Cash sales banked 19 600 Balance b/d 8 900
Receipts from credit customers 71 400 Payments to suppliers 58 000
Sale of equipment 1 500 Bank loan and interest 900
Refund from supplier 3 100 Motor vehicle purchase 9 000
Sale of motor vehicle 4 200 Wages 7 100
Balance c/d 1 800 Rent and rates 6 500
General expenses 11 200
101 600 101 600
Balance b/d 1 800

(2) Bejam paid the following from cash sales before banking.
£
Wages 4 750
General expenses 3 250
Drawings 5 200
(3) Included in the wages recorded in the bank account were withdrawals of
£2 500 for Bejam’s drawings.
(4) During the year Bejam took goods to the value of £250 for his own use.

2 P72139A

 (5) Other balances.
1 October 30 September
2021 2022
£ £
Computers (at valuation) 8 000 5 700
Equipment (at valuation) 11 000 7 000
Motor vehicle (at valuation) 3 000 6 300
5% bank loan (repayable over 5 years) 4 000 3 200
Inventory 10 900 8 100
Trade receivables 5 600 7 800
Trade payables 6 100 9 700
Wages 400 accrued 300 prepaid
Rent and rates – 500 prepaid
Bank loan interest – 90 accrued
(6) Bank loan and interest payments included the first of five annual repayments plus
interest charges.
(7) A 5% allowance for irrecoverable debts is to be created.
Required
(a) Calculate the:
(i) capital at 1 October 2021
(4)
(ii) revenue (sales) for the year ended 30 September 2022
(5)
(iii) purchases for the year ended 30 September 2022.
(4)
(b) Prepare the:
(i) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 30 September 2022
(15)
(ii) Statement of Financial Position at 30 September 2022.
(15)
Bejam is considering expanding his business. To do so would require £30 000 of
additional funds to purchase extra non-current assets and inventory.
Bejam is considering whether to fund the expansion by offering an equal partnership
to Kalib, or to obtain an 8% bank loan repayable over five years.
Required
(c) Evaluate whether Bejam should offer Kalib a partnership or obtain an
8% bank loan repayable over five years.
(12)
(Total for Question 1 = 55 marks)

P72139A 3
 Turn over
2 Alexandra’s bookkeeper extracted the following trial balance on 30 September 2022.
Alexandra is aware that the bookkeeper had made some errors in drafting.
Trial Balance at 30 September 2022

Dr Cr

£ £

Capital 70 000

Drawings 11 400

Revenue 205 000

Purchases 117 000

Returns outwards 1 900

Inventory – 1 October 2021 27 500

Bank overdraft 7 950

Wages 31 500

Rent payable 9 000

Rent receivable 4 750

Electricity and water 5 700

Sundry expenses 18 750

Non-current assets (cost) 88 000

Provision for depreciation
22 000
– non-current assets
Discount allowed 1 920

Discount received 4 100

Trade receivables 13 000

Trade payables 7 270

Allowance for irrecoverable debts 800

Suspense 49 700

               

348 620 348 620

4 P72139A

 Required
(a) Complete the corrected trial balance at 30 September 2022.
(10)
After the correction of the trial balance, the bookkeeper completed the financial
statements, which showed a profit for the year of £5 980. Alexandra then found
that there had been some errors in the year-end adjustments when preparing the
financial statements.
(1) The inventory at 30 September 2022 was recorded in the financial statements
as £23 600. The inventory count had been understated and should have
been £26 100
(2) No adjustment had been made for £2 000 rent receivable which was owing.
(3) No adjustments had been made for sundry expenses accrued £700
and for £240 prepaid.
(4) Annual depreciation on non-current assets owned at the end of the year
had been charged at the rate of 20% on cost, when this should have
been 25% on cost.
(5) No adjustment had been made to the allowance for irrecoverable debts that
should have been maintained at 4% of trade receivables.
(6) No provision had been made for an injury claim from one of Alexandra’s
employees. The injury claim would be for 10 weeks’ loss of earnings at
£190 per week plus a total loss of bonus £140
Required
(b) Calculate the revised profit for the year ended 30 September 2022.
(13)

P72139A 5
 Turn over
 The following information related to two of Alexandra’s ledger accounts.

Balance Payments/ Balance Transfer

1 October receipts by 30 September to income
2021 cheque 2022 statement

£ £ £ £

To be
Rent payable 650 Cr 9 650 600 Cr
calculated
To be
Rent receivable 250 Dr 5 000 6 750
calculated

Required
(c) Prepare the following ledger accounts for the year ended 30 September 2022.
(i) Rent Payable Account
(4)
(ii) Rent Receivable Account.
(4)
(d) Explain the following terms, giving one example of how each term would be
applied when preparing the financial statements of Alexandra’s business.
• Materiality concept
• Business entity concept
• Money measurement concept
• Annual depreciation charge
• Allowance for irrecoverable debts
• Accounting ethics.
(12)
A friend of Alexandra stated that
‘A balanced trial balance must ensure that the business transactions in the
books of account have been recorded correctly.’
(e) Evaluate this statement.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

6 P72139A

 SECTION B
Answer THREE questions from this section.
3 Job Lott manufactures metal components.
It has two production departments: machining and finishing.
It also has two service departments: stores and administration.
The following information is available for the year ended 30 September 2022.
(1) Allocated overheads for each department will be:
£
Machining 50 000
Finishing 30 000
Stores 25 000
Administration 27 500

(2) The use of the two service departments has been estimated to be as follows:

Machining Finishing Stores Administration

Stores 60% 30% – 10%

Administration 50% 30% 20% –

(3) Annual hours for each department are estimated to be:

Proportion chargeable
Total hours worked
to customers’ jobs

Machining 5 600 75%

Finishing 2 425 80%

Required
(a) (i) Explain the term job costing.
(2)
(ii) Identify two types of industry that might use job costing.
(2)
(b) Calculate the total overheads using the continuous allotment method,
after the reapportionment of the service department overheads to the
production departments.
(12)

8 P72139A

 (c) Calculate the hourly overhead recovery rate, to the nearest pence, for the:
(i) Machining department
(2)
(ii) Finishing department.
(2)
In the previous year, ended 30 September 2021, the overhead for the Finishing
Department was under-absorbed by £3 800
(d) (i) Explain the meaning of the term under-absorbed.
(2)
(ii) Identify two possible reasons for the Finishing Department overheads being
under-absorbed.
(2)
The raw materials used to make metal components are issued to production using
the last in first out (LIFO) method.
(e) Evaluate the use of the last in first out (LIFO) method when issuing raw materials
to production.
(6)

(Total for Question 3 = 30 marks)

P72139A 9
 Turn over
4 Venture Capital is considering the purchase of a mining business, Primary Metals.
The following information is available at 30 September 2022.
Primary Metals
Summary Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 September 2022
£ £
Revenue 820 000
Cost of sales 400 000
Wages and salaries 250 000
Loan interest 25 000
Depreciation 40 000
Rent 18 000
General expenses 75 000

(808 000)
Profit for the year 12 000

Additional information at 30 September 2022

(1) Capital £300 000
(2) 5% five-year bank loan £500 000
Required
(a) Calculate the following for Primary Metals. Give your answers to the nearest two
decimal places.
(i) Gross profit as a percentage of revenue.
(2)
(ii) Profit for the year as a percentage of revenue.
(2)
(iii) Percentage return on capital employed.
(2)

10 P72139A

 If Venture Capital purchases Primary Metals, it has the following proposals.
• Purchase volumes of materials will increase by 50%. These will all be purchased
at a 25% price reduction for materials from mines that are not controlled by any
government legislation.
• The gross profit as a percentage of revenue will be 40%.
• 50 staff will be made redundant saving £100 000 per year. The remaining staff will
be awarded a 4% increase in wages and salaries.
• Borrowing will increase by £200 000 with a 6% five-year bank loan to purchase
new non-current assets.
• Depreciation will increase to £65 000 per annum. Rent will remain unchanged.
• General expenses will be reduced by £15 000 per annum by buying from the
cheapest supplier rather than buying locally.
Required
(b) Prepare the Forecast Statement of Profit or Loss and Other Comprehensive
Income for Primary Metals, for the year ended 30 September 2023, if the purchase
goes ahead.
(10)
(c) Calculate the following forecasts for the year ending 30 September 2023, to the
nearest two decimal places.
(i) Profit for the year as a percentage of revenue.
(2)
(ii) Percentage return on capital employed.
(2)
(d) Explain four ways in which the principles of social accounting might not be
applied if the Venture Capital proposals are implemented.
(4)
(e) Evaluate the proposed purchase from the viewpoint of Primary Metals.
(6)

(Total for Question 4 = 30 marks)

P72139A 11
 Turn over
5 Ciara had traded as a sole trader for many years. On 30 September 2021 her assets
and liabilities were as follows.

Trade receivables 11 500

Trade payables 16 300

Goodwill 15 000

Inventory 13 000

Bank overdraft 6 500

Non-current assets 17 500

Provision for depreciation – non-current assets 14 000

Ciara’s current account 200 Cr

Required
(a) Calculate the capital of Ciara on 30 September 2021.
(2)
On 1 October 2021 Ciara converted her business into a partnership with Dennis.
The partnership agreement stated that:
• Dennis would bring capital of £20 000 into the business. This would consist of a
motor vehicle £5 000, inventory £3 000 and the balance by cheque.
• Goodwill would be removed from the books of the partnership.
• Profits and losses would be shared three-fifths Ciara: two-fifths Dennis.
• Dennis would be paid a salary of £7 500 per annum.
• There would be no interest charged on drawings or paid on capital.
Required
(b) Prepare the capital accounts for each of Ciara and Dennis on 1 October 2021.
(4)

12 P72139A

 On 1 October 2021 the partners also completed the following business actions.
• A 5% bank loan for £16 000 was taken out. This is repayable in ten years.
• Non-current assets that had cost £8 000 were sold for their carrying value
of £1 500 and were replaced by new non-current assets at a cost of £13 000.
Payment was received and paid by cheque.
• Trade payables of £4 500 were paid by cheque.
• Outdated inventory of £4 800 was sold at cost. Payment was received by cheque.
Required
(c) Prepare the summarised Bank Account at 1 October 2021.
(7)
(d) Prepare the Statement of Financial Position of the new partnership at
1 October 2021.
(8)
In the year ended 30 September 2022 Dennis was appropriated £4 400 as his share of
the profit.
(e) Calculate the partnership profit for the year ended 30 September 2022.
(3)
Ciara and Dennis are considering having floating capital accounts.
(f ) Evaluate the use of floating capital accounts for partners.
(6)

(Total for Question 5 = 30 marks)

P72139A 13
 Turn over
6 Farca is in business trading in goods on credit. The following was the ledger account
of one of his customers, Coldstore Traders, for July. Farca is aware that there are a
number of errors in the account.
Coldstore Traders Account

Date Details £ Date Details £

2022 2022

1 July Balance b/d 4 300 4 July Bank 1 170

Fixtures and
4 July Discount allowed 30 25 July 900
fittings

8 July Sales 420 31 July Balance c/d 7 980

17 July Sales 5 300

10 050 10 050

1 August Balance b/d 7 980

The following errors were discovered.

(1) 4 July The discount allowed on the payment by Coldstore Traders had been
credited in the cash book of Farca.
(2) 8 July A credit sale of goods to Collinge, £420, had been entered into the
account of Coldstore Traders.
(3) 17 July Sales of £6 500 to Coldstore Traders had been correctly entered in the
books of prime entry of Farca. The transaction had been posted to the
ledgers as £5 300
(4) 21 July Returns of £530 made by Coldstore Traders were not recorded.
(5) 25 July New fixtures and fittings on credit from Scudamore, £900, had been
posted to the account of Coldstore Traders.

14 P72139A

 Required
(a) Prepare the journal entries correcting the errors. Narratives are not required.
(10)
(b) Identify the types of error in each of (1) to (5).
(5)
(c) Calculate the corrected closing balance of Coldstore Traders on 31 July 2022.
(5)
(d) Explain two differences between an error of reversal and an
error of compensation.
(4)
The sales manager made the following statement.
‘If we bought and sold all goods for cash, there would be no errors in
the books.’
(e) Evaluate the sales manager’s statement.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

P72139A 15

 Pearson Edexcel International Advanced Level
Time 3 hours
Paper
reference WAC11/01
Accounting
International Advanced Subsidiary
UNIT 1: The Accounting System and Costing

Source Booklet
Do not return this Source Booklet with the question paper.

Turn over

*P72449A*
P72449A
©2023 Pearson Education Ltd.

1/1/1/1/1/
 SECTION A
Answer BOTH questions in this section.
1 Wincombe Manufacturing produces a single product. The following were some of the
balances in the books of account on 31 December 2022.

£
Revenue 811 000
Wages
  Manufacturing 197 000
  Administrative 78 000
Non-current assets (cost)
  Manufacturing machinery 120 000
  Computer equipment 60 000
  Office fixtures 45 000
Provisions for depreciation
  Manufacturing machinery 40 000
  Computer equipment 12 000
  Office fixtures 25 000
Management salaries 125 000
Purchases of raw materials 204 000
Purchase returns of raw materials 6 800
Advertising expenses 20 850
Rent and rates payable 18 000
Rent receivable 7 500
Manufacturing expenses
  Direct 11 800
  Indirect 29 200
Insurance 10 000
Royalties paid 12 500
Power and water 29 300
Trade receivables 96 000
Irrecoverable debts 3 650
Trade payables 71 400
Bank 25 600 Cr
Provision for unrealised profit 2 000
Allowance for irrecoverable debts 2 900
Inventory at 1 January 2022
  Raw materials 36 900
   Work in progress 46 700
  Finished goods 64 000

Additional information at 31 December 2022

(1) Inventory
Raw materials   £27 900
Work in progress     £45 600
Finished goods       £58 500

2 P72449A
 (2) Royalties had been paid on 25 000 units. They were outstanding on a further
5 000 units.
(3) Power was £1 100 accrued and water was £400 prepaid.
(4) Depreciation is charged on all non-current assets owned at the end of the year
as follows.
– Manufacturing machinery at the rate of 15% per annum using the
straight‑line method.
– Computer equipment at the rate of 25% per annum using the reducing
balance method.
– Office fixtures at the rate of 10% per annum using the straight-line method.
(5) Expenses are to be apportioned between manufacturing and administration
as follows.

Expense Basis of apportionment Manufacturing Administration

Management salaries Number of staff 21 4

Rent and rates payable Floor area (sq m) 11 000 4 000

Insurance Agreed estimate 60% 40%

Power and water Usage 70% 30%

Computer equipment
Hours usage per annum 4 000 8 000
depreciation

(6) The provisions are to be adjusted as follows.

– Unrealised profit is to be reduced by £500
– Irrecoverable debts are to be maintained at 5% of trade receivables.
– A new provision is to be created equal to 10% of administrative wages to
provide for a legal claim currently going through the law courts.
(7) Finished goods are transferred from manufacturing to the warehouse at a transfer
price of £21.50 per unit. During the year 30 000 units were transferred.
Required
(a) Prepare for the year ended 31 December 2022, the:
(i) Manufacturing Account
(17)
(ii) Statement of Profit or Loss and Other Comprehensive Income
(18)
(iii) Provision for Unrealised Profit Account.
(4)

P72449A 3

Turn over
 (b) Explain why Wincombe Manufacturing needs to maintain a provision for
unrealised profit.
(4)
Another manufacturer has approached Wincombe Manufacturing and offered to
supply 30 000 units per year for a price of £21.50 per unit.
(c) Evaluate whether Wincombe Manufacturing should continue with its own
production or purchase the manufactured product from the other manufacturer.
(12)

(Total for Question 1 = 55 marks)

4 P72449A
2 Javid and Kirstie are in partnership buying and selling goods.
They are preparing their financial statements at 31 December 2022. The following
information relates to the capital and liabilities section of the statement of
financial position.
(1) Capital Accounts

£
Balances 1 January 2022 Javid 50 000
Kirstie 50 000

Changes during the year

1 July      Javid introduced new capital of £30 000 by cheque.
Kirstie converted £20 000 of her capital into a 5% five-year loan
to the partnership.
(2) Current Accounts

£
Balances 1 January 2022 Javid 800 Cr
Kirstie 250 Dr

For the year ended 31 December 2022

Javid Kirstie

£ £

Interest paid on capital 2 600 1 600

Interest paid on loan – 1 250

Interest charged on drawings 420 280

Drawings 6 000 4 000

Salary appropriated 8 500 6 800

Salary paid to date 7 800 5 900

Share of profit 4 500 3 000

Additional information
• Interest is paid on the average capital account balance for each partner for
the year.
• Interest is charged on the balance of drawings at the end of the year.

6 P72449A
 Required
(a) Prepare for the year ended 31 December 2022, the:
(i) Capital Account for each partner
(4)
(ii) Current Account for each partner.
(9)
(b) Calculate, for the year ended 31 December 2022, the:
(i) percentage interest paid on a partner’s capital
(2)
(ii) percentage interest charged on a partner’s drawings
(2)
(iii) profit sharing ratio of the partners.
(1)
(3) Non-current liabilities
• The 5% five-year loan from Kirstie on 1 July 2022.
• 6% 10-year bank loan.
On 1 January 2021 the partnership had taken out a £40 000 6% 10-year bank
loan with the capital repayable by equal instalments in each year on 1 March and
1 September.
On 1 October 2022 the 6% 10-year bank loan was extended by borrowing a
further £20 000 with the capital repayable by equal instalments in each year on
1 March and 1 September.
Note: All bank loan interest is charged to a separate bank loan interest account.
Required
(c) Prepare the 6% 10-year Bank Loan Account for the year ended
31 December 2022.
(5)

P72449A 7

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 (4) Current liabilities
The partnership buys most of its goods for resale on credit. The following
information was available.
1 January 2022 – Trade Payables Ledger Control Account balance £8 540

Totals at 31 December 2022 £

Purchases on credit 64 800
Purchases for cash 6 350
Purchase returns 4 400
Cheques paid to trade payables 59 750
Discount received 1 650
Cheque refunds from trade payables 800
Interest charged on overdue account 170
Contra entry 160
Required
(d) Prepare the Trade Payables Ledger Control Account for the year ended
31 December 2022.
(9)
There were some other payable balances remaining in the books.

Rent payable £150

Wages payable £650
Bank Current Account £750
Required
(e) Prepare the extract of the Statement of Financial Position at
31 December 2022 showing the capital and liabilities section only.
(7)
(f ) Explain how the following concepts and conventions would be applied when
preparing the Statement of Financial Position of Javid and Kirstie.
• Business entity
• Money measurement.
(4)
Javid and Kirstie have prepared their financial statements complying with
International Accounting Standards (IAS).
Required
(g) Evaluate whether the partners were correct in applying International
Accounting Standards (IAS) in their financial statements.
(12)

(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

8 P72449A
 SECTION B
Answer THREE questions from this section.
3 Star Stores is a food retailer. The business is considering offering a new service of
delivering customers’ shopping orders to their homes.
Customers will place their orders by using the internet. Customer orders will then be
prepared by Star Stores’ staff and delivered to customers’ homes at an agreed time.
The following information is available.
(1) Star Stores will purchase delivery vehicles. Each delivery vehicle will cost £30 000
and will require some conversion and sign writing which will cost an additional
£6 000 per delivery vehicle.
(2) Delivery vehicles will be depreciated using the straight-line method and sold after
four years for £7 600 each.
(3) Road tax will be £600 per year for each delivery vehicle.
(4) Annual insurance will be £1 200 per delivery vehicle plus a further £200 for each
delivery vehicle travelling over 15 000 kilometres per year.
(5) Maintenance will cost an average of £3 860 per year for each delivery vehicle.
(6) Each delivery vehicle will average 20 000 km per year. Fuel will cost £1.30 per litre
and the delivery vehicle will travel 25 km per litre of fuel.
(7) Drivers will be paid £5 per hour.
(8) Each delivery vehicle will operate for 80 hours per week for 50 weeks of the year.
(9) Each delivery vehicle will deliver to 200 customers per week.
Required
(a) Explain, giving your reason, whether the following costs for the delivery vehicles
are revenue expenditure or capital expenditure.
• Conversion and sign writing
• Maintenance.
(4)
(b) Identify whether the following costs for each delivery vehicle are fixed, semi-fixed,
variable or semi‑variable.
• Road tax
• Insurance.
(2)
(c) Calculate the total cost of operating one delivery vehicle for one year.
(9)
(d) Calculate the cost of making one delivery to a customer.
(2)

10 P72449A
 Star Stores’ research has shown that more customers are demanding a home delivery
service. Star Stores proposes to operate five delivery vehicles in total.
Additional information
(1) Each of the five delivery vehicles will deliver to 200 customers per week.
(2) Each customer using the home deliveries service will spend an average of
£5 200 per year.
(3) Star Stores’ gross profit as a percentage of revenue is 40%.
(4) An additional management cost of £25 000 per annum will be incurred to operate
home deliveries.
Required
(e) Calculate the profit or loss per year of Star Stores offering the home delivery
service using five delivery vehicles.
(7)
(f ) Evaluate whether Star Stores should offer the home delivery service.
(6)

(Total for Question 3 = 30 marks)

P72449A 11

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4 The Quarry Art Club provided the following information at 31 December 2021.

Quarry Art Club

Statement of Financial Position at 31 December 2021

£ £

Non-current assets at valuation 20 000

Current assets

Inventory of art materials 6 450

Subscriptions in arrears 2 600

29 050

Accumulated fund

Opening balance 26 500

Deficit for the year (2 100)

24 400

Current liabilities

Trade payables 3 750

Bank overdraft   900

4 650

29 050

The Quarry Art Club has experienced difficulty in paying its expenses and trade
payables in 2021.
The Treasurer of the Quarry Art Club prepared a plan to improve the bank balance
and restore the club to a surplus for the year ended 31 December 2022. The plan
was to:
• Increase the subscription from the £200 per annum paid by each member
in the year ended 31 December 2021 to £250 per annum in the year ended
31 December 2022 and future years.
• Rent out part of the premises at a rent of £500 per month.
• The club will continue to purchase and sell art materials to members at a mark‑up.

12 P72449A
 Information for the year ended 31 December 2022.
(1) Four members with subscriptions that were in arrears on 31 December 2021
paid their subscriptions for 2021 in full. The remainder was written off as an
irrecoverable debt.
(2) There were 68 members for the year ended 31 December 2022. At the end of
the year, three members were in arrears for 2022 and five members had paid in
advance for 2023.
(3) 13 monthly payments were received for rent in the year.
(4) Operating expenses of £18 000 were paid by cheque. This did not include £900
operating expenses accrued.
(5) The credit purchases were £13 500 and trade payables of £15 000 were paid by
cheque during the year.
(6) Sales receipts were £16 000 all paid by cheque.
(7) There was a gross profit as a percentage of revenue of 10% on the sale of
art material.
(8) Non-current assets were valued at £15 900
Required
(a) Prepare the Subscriptions Account for the year ended 31 December 2022.
(6)
(b) Calculate at 31 December 2022 the:
(i) bank balance
(5)
(ii) trade payables.
(4)
(c) Prepare the art materials Trading Account for the year ended 31 December 2022.
(4)
(d) Prepare the Income and Expenditure Account for the year ended
31 December 2022.
(5)
(e) Evaluate the financial position of the Quarry Art Club at 31 December 2022.
(6)

(Total for Question 4 = 30 marks)

P72449A 13

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5 Cutprice Drinks are in business buying and selling canned drinks.
Cutprice Drinks use the first in first out (FIFO) method of inventory rotation and
perpetual inventory valuation.
The following information is available for the year ended 31 December 2022.
(1) On 1 January 2022 there were 500 cases of canned drinks costing £10 per case.
(2) The purchases and sales of canned drinks for the year ended
31 December 2022 were.

Dates Purchases Sales

2022

January – March 1 000 @ £11 per case 1 200 @ £15 per case

April – June 1 500 @ £12 per case 1 200 @ £16 per case

July – September 2 000 @ £13 per case 1 500 @ £18 per case

October – December 1 000 @ £12 per case   900 @ £20 per case

(3) All purchases and sales are on credit.

Required
(a) Explain the terms:
(i) inventory rotation
(2)
(ii) perpetual inventory valuation.
(2)
(b) Calculate the value of the closing inventory at 31 December 2022.
(6)
(c) Prepare the Trading Account for the year ended 31 December 2022.
(6)
Additional information at 31 December 2022

Trade receivables £9 000

Trade payables £11 500
Bank overdraft £3 500

14 P72449A
 Required
(d) Calculate to two decimal places, the:
(i) gross profit as a percentage of turnover
(2)
(ii) rate of inventory turnover
(2)
(iii) trade payables payment period (in days)
(2)
(iv) liquid ratio (acid test).
(2)
In the previous year ended 31 December 2021, the following ratios had been
calculated for Cutprice Drinks.

Gross profit as a percentage of turnover 19.58%

Rate of inventory turnover 9.21 times

Trade payables payment period (in days) 29 days

Liquid ratio (acid test) 0.80 : 1

Required
(e) Evaluate the business performance and liquidity of Cutprice Drinks using the
ratios calculated in (d) and other information provided.
(6)

(Total for Question 5 = 30 marks)

P72449A 15

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6 Amin prepared the following draft Statement of Profit or Loss and Other
Comprehensive Income which contains some errors.
The entries were made from his bank receipts, bank payments and the
inventory counts.

Draft Statement of Profit or Loss and Other Comprehensive Income

for the year ended 31 December 2022

£ £

Revenue receipts 124 000

Less purchases payments (60 630)

63 370

Inventory at 31 December 2022   7 900

Inventory at 1 January 2022   (6 720)

Trading profit 64 550

Add

Commission receivable receipts   3 700

68 250

Less expenses

Wages paid to staff 20 500

Rent paid for business premises 9 000

Rent paid for Amin’s home 6 100

General expenses paid 11 000

New non-current assets paid at cost 30 000

(76 600)

Total loss   (8 350)

16 P72449A
 Additional information
(1) All sales were either on credit or sale or return basis and all purchases of goods
were made by cash.
(2) Trade receivables on 1 January 2022 were £9 200 and on 31 December 2022
were £8 250. No adjustments to revenue receipts had been made in the
draft statement.
(3) Goods £4 200 (cost £2 600) had also been supplied on a sale or return basis in
November 2022 to a trade receivable customer. The customer had not stated her
intention to purchase the goods.
The sale or return goods had not been included in the inventory count.
(4) Goods with a value of £1 400 had been returned by Amin but no refund had
been received.
(5) Commission receivable of £230 has still to be received.
(6) Wages were prepaid by £285 at the end of the year.
(7) General expenses included some small office equipment purchases, the largest
of which was a £10 purchase of a new office calculator. It was decided not to
depreciate these items.
(8) Non-current assets on 1 January 2022 had a cost of £85 000 which had been
depreciated by £45 000 in previous years. It was estimated that the carrying value
of all non-current assets owned at the end of the year would have depreciated in
value by 15%.
Required
(a) Explain why the following concepts are applied in the preparation of the
statement of profit or loss and other comprehensive income.
• Prudence
• Consistency.
(4)
(b) State the accounting concept or convention that should be applied in
the following.
• Recording the goods supplied on a sale or return basis in November.
• Wages owed to staff.
• Rent paid on Amin’s home.
• Charging small office equipment purchases to the general expenses.
• Depreciating the total cost of a new non-current asset in its first year.
(5)
(c) Prepare the corrected Statement of Profit or Loss and Other Comprehensive
Income in the correct format for the year ended 31 December 2022.
(15)

P72449A 17

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 Amin makes all of his purchases of goods in cash.
(d) Evaluate this approach of paying cash for all purchases.
(6)

(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

18 P72449A
 Pearson Edexcel International Advanced Level
Friday 19 May 2023
Afternoon (Time: 3 hours)
Paper
reference WAC11/01
Accounting
 

International Advanced Subsidiary

UNIT 1: The Accounting System and Costing

Source Booklet
Do not return this Booklet with the question paper.

Turn over

P72041A
©2023 Pearson Education Ltd.
N:1/1/1/1/1/1
*P72041A*
 SECTION A
Answer BOTH questions in this section.
1 Bernie’s Food Store retails a range of foods.
It has two departments:
– Fresh foods – selling fruit and vegetables
– Packaged foods – selling tins and packets.
The following information is available for the year ended 30 April 2023.
£
Revenue – Fresh foods 160 000
Packaged foods 640 000
Wages – Fresh foods 21 000
Packaged foods 32 000
Management salaries 42 000
Purchases – Fresh foods 97 500
Packaged foods 549 700
Purchase returns –
Packaged foods 4 200
Premises running costs 9 600
Advertising 10 900
Cash and bank 19 400 Dr
Non-current assets (cost)
Leasehold premises 60 000
Fridges and equipment 28 000
Fixtures and fittings 22 500
Non-current assets (provisions for depreciation)
Leasehold premises 12 000
Fridges and equipment 26 200
Fixtures and fittings 7 500
Allowance for irrecoverable debts 5 000
Electricity and water 8 400
Insurance 1 800
Inventory 1 May 2022 –
Fresh foods 2 000
Packaged foods 28 000
Credit card expenses paid 5 500
Capital 70 000
10% bank loan 40 000
Bank loan interest paid 2 200
Drawings 10 500
Trade payables 41 700
Trade receivables 55 600

2 P72041A

 Additional information at 30 April 2023
• Inventory – Fresh foods £1 500
Packaged foods £29 500
• Electricity was £130 prepaid and water, £280, was owing.
• The 10% bank loan was taken out on 1 August 2022 and is repayable in full on
30 June 2025.
• Advertising of £2 100 was owing.
• Fridges and equipment with a cost of £6 500 and accumulated depreciation of
£5 200 were sold on 26 April 2023 for their carrying value. They were replaced on
that date by fridges and equipment costing £12 000. All receipts and payments
were made by cheque. No entries for the sale or purchase had been recorded in
the books of account.
• Depreciation is charged on all non-current assets owned at the end of the year.
– Leasehold premises have a lease for 20 years.
– Fridges and equipment at the rate of 20% per year using the reducing balance
method.
– Fixtures and fittings at the rate of 10% per year using the straight line method.
• Expenses are to be apportioned to departments as follows.

Expense Basis Fresh foods Packaged foods

Management salaries Employee numbers 7 13

Premises running costs Floor area 90 sq m 270 sq m

Insurance

Depreciation on non-current assets Estimated usage 40% 60%

Electricity and water Estimated usage 40% 60%

Advertising Revenue £160 000 £640 000

Credit card expenses
Bank loan interest

P72041A 3
 Turn over
 Required
(a) Prepare the Departmental Statement of Profit or Loss and Other Comprehensive
Income for the year ended 30 April 2023 showing the profit or loss made by each
department.
A total column is not required.
(26)
(b) Prepare the Statement of Financial Position at 30 April 2023.
(17)
Bernie has been advised that he could improve his business by using information and
communication technology (ICT) to prepare his accounts, control his inventory and
plan for future years.
(c) Evaluate whether Bernie should expand the use of information and
communication technology (ICT) in his business.
(12)
(Total for Question 1 = 55 marks)

4 P72041A

2 Barsha is the new bookkeeper for a business called Simple Really. On starting her new
job she finds that the books of account are incomplete and contain errors.
She needs to complete the books of account and correct the errors to prepare the
financial statements for the year ended 30 April 2023.
Barsha finds that two accounts have not been completed, the Rent and Rates Account
and the Commission Receivable Account.
The following information is available.
Balances 1 May 2022
Rent payable owing £400
Rates payable prepaid £150
Commission receivable owing £75
Payments and receipts
1 August 2022 Six months’ rent paid by cheque £1 200
1 June 2022 One year’s rates paid by cheque £900
1 February 2023 Six months’ rent paid by cheque £1 200
16 January 2023 Commission received by cheque £850
On 30 April 2023
Two months’ rent was outstanding
Three months’ rates had been paid in advance.
Commission receivable of £50 was owed to Simple Really
Required
(a) State two roles of accounting in a business.
(2)
(b) Prepare for the year ended 30 April 2023, including the year end transfers, the:
(i) Rent and Rates Account
(6)
(ii) Commission Receivable Account.
(4)
Barsha then prepared a trial balance which failed to balance. On inspection of the
books of account it was found that a number of errors had been made.
1 Payments of £900 made to the owner of the business had been recorded in the
Wages Account.
2 Notification had been received that a trade receivable, P Grimes, was bankrupt
owing Simple Really £3 150. No entries had been made in the books.
3 Small office equipment items costing less than £10 each are to be recorded as
sundry expenses. Items over £10 each are recorded in the Office Equipment
Account. Two items, one costing £6 and the other costing £8 were recorded in the
Office Equipment Account.
4 Discount allowed had been correctly recorded in the personal accounts but the
total of £120 had been credited to the Discount Allowed Account.

6 P72041A

 5 Sales on credit to Jerin, £230, had been correctly recorded in the Sales Account
but had been recorded as £320 in the account of Jerin.
6 Office expenses, £45, had been recorded correctly in the Cash Book but no other
entry had been made in the books.
Required
(c) Prepare the Journal entries correcting the errors 1 to 6. Narratives are not
required.
(12)
(d) Explain in each of the errors 1 to 3 the accounting concept or convention that
had been broken.
(6)
(e) Prepare the Suspense Account showing the original difference in the trial balance
totals.
(4)
On inspecting the inventory records Barsha finds that the inventory has not been
valued at 30 April 2023.
The following information is available.
The business has two products that it sells, the Standard and the Extra.
• Inventory at 1 May 2022
Standard 200 units at £10 each
Extra 100 units at £15 each
• Movements of inventory during the year were:

Year ended Standard Extra

30 April
2023 Receipts Sales Receipts Sales

Quarter 1 200 @ £10 190 @ £20 50 @ £15 80 @ £25

Quarter 2 200 @ £10 260 @ £20 150 @ £15 120 @ £25

Quarter 3 200 @ £10 150 @ £20 150 @ £15 90 @ £25

Quarter 4 150 @ £10 100 @ £20 100 @ £18 110 @ £28

• When carrying out the inventory count it was discovered that 50 Standard units
which were purchased in Quarter 4 were damaged and would each require £2
material and £3 in labour to repair them. Those 50 Standard units could then be
sold for £12 each.

P72041A 7
 Turn over
 Required
(f ) Explain the term net realisable value.
(2)
(g) Calculate the value of the inventory at 30 April 2023 using the First In First Out
(FIFO) periodic valuation method.
(7)
The owner of Simple Really has stated that the business should value its inventory on
a Last In First Out (LIFO) basis.
(h) Evaluate the statement that Simple Really should value its inventory on a Last In
First Out (LIFO) basis.
(12)
(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

8 P72041A

 SECTION B
Answer THREE questions from this section.
3 Vulture Capital is considering the purchase of Magna Bold.
The following balances were available from the financial statements of Magna Bold
on 30 April 2023.
£’000
Sales (80% on credit) 500
Purchases (90% on credit) 300
Cost of sales 350
Expenses (including bank loan interest) 115
Capital 250
Trade receivables 80
Trade payables 20
Five-year bank loan 200
Bank overdraft 50
Inventory 30 April 2023 40
Bank loan interest 10
Required
(a) Calculate the:
(i) gross profit as a percentage of revenue
(2)
(ii) inventory turnover
(2)
(iii) percentage return on capital employed
(2)
(iv) liquid (acid test) ratio
(2)
(v) trade receivables collection period (days)
(2)
(vi) trade payables payment period (days).
(2)
Additional information

Sector average

Inventory turnover 7 times

Liquid (acid test) ratio 0.9 : 1

Trade receivables collection period (days) 30 days

10 P72041A

 (b) Comment on Magna Bold’s:
(i) inventory turnover
(2)
(ii) liquidity
(2)
(iii) credit control.
(2)
(c) Explain three non-financial factors that Vulture Capital should consider before
making the purchase of Magna Bold.
(6)
The owner of Vulture Capital stated that ‘The decision whether to purchase the
business should solely be made upon the ratios of profitability and liquidity’.
(d) Evaluate this statement.
(6)
(Total for Question 3 = 30 marks)

P72041A 11
 Turn over
4 Anaya started her business on 1 May 2022 selling water coolers. She opened a
business bank account with £2 000 capital and commenced trading.
She did not keep a set of books of account but the following summary of information
is available for the year ended 30 April 2023.
• All sales and purchases of water coolers were on credit.
• 450 water coolers were sold in the year. Of these, 300 were sold at the full retail
price of £300 each. 100 were sold with a trade discount of 15% and 50 were sold
with a trade discount of 25%.
• Cheques for £105 000 had been received from customers after they had taken
£4 000 in cash discount.
• 500 water coolers were purchased in the year for £150 each. Of these, 10 were
returned to the manufacturer as faulty.
• Cheques for £60 000 had been paid to the supplier and after the deduction of
cash discount the balance of £12 800 was owing at the end of the year.
• On 1 May 2022 Anaya purchased fixtures and fittings at a cost of £6 300 and a
delivery vehicle at a cost of £7 500. Payment was by cheque.
• Premises were rented at a cost of £3 000 per quarter (3 months). £11 000 had
been paid by cheque for rent during the year.
• General expenses of £18 000 were paid by cheque during the year. On 30 April
2023 £900 was prepaid and £630 was still owing.
• Wages paid to staff by bank transfer were £16 500
• Anaya took drawings of £400 per month until December 2022 and then increased
the drawings to £500 per month for the remainder of the financial year. Payment
was by bank transfer.
Additional information at 30 April 2023
Fixtures and fittings were revalued at £5 000 and the delivery vehicle was revalued at
£5 800

12 P72041A

 Required
(a) Explain the difference between trade discount and cash discount.
(4)
(b) Calculate Anaya’s bank balance at 30 April 2023.
(3)
(c) Prepare the:
(i) Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 April 2023
(9)
(ii) Statement of Financial Position at 30 April 2023.
(8)
(d) Evaluate Anaya’s decision not to maintain a full set of books of account.
(6)
(Total for Question 4 = 30 marks)

P72041A 13
 Turn over
5 Three employees work in the warehouse of a business called Thames selecting and
packing customer orders ready for delivery.
The following information is available for Week 23.

Basic Overtime Orders selected

Name
hours hours and packed

Aadya 40 16 840

Brandon 24 0 480

Chanaka 40 5 540

Remuneration for the three employees is calculated on the following basis.

• All basic hours are paid at the rate of £6 per hour.
• Overtime is paid at time and one third per hour.
• An individual bonus of £0.50 per order is paid when an employee exceeds 500
orders selected and packed per week.
Required
(a) Calculate the total wage to be paid to each of the employees for Week 23.
(9)
(b) Calculate the output per hour of each employee in Week 23.
(3)
(c) State which employee was the most productive in Week 23.
(1)
Thames is considering replacing the existing remuneration system with a group
bonus scheme in Week 24. The terms of the group bonus scheme are.
• The group will have three employees: Aadva, Brandon and Chanaka.
• Each member of the group will work 50 hours per week. 40 hours will be paid at
£7 per hour and 10 hours will be paid at time and a half.
• The group will be required to select and pack a total of 2 000 orders per week.
• If the group selects and packs above a total of 2 000 orders per week, they will be
paid a bonus of £35 for each employee for the week.

14 P72041A

 Required
(d) Calculate the forecast for Week 24 of the:
(i) total labour cost of the group of Aadva, Brandon and Chanaka if the group
selected and packed a total of 2 100 orders.
(4)
(ii) cost of selecting and packing one order.
(3)
(e) Explain two disadvantages of a group bonus scheme.
(4)
(f ) Evaluate from Aadva’s perspective the proposed introduction of the group bonus
scheme.
(6)
(Total for Question 5 = 30 marks)

P72041A 15
 Turn over
6 Timmis Enterprises requires completion of the following schedule to prepare its
financial statement.

Schedule of Non-current Assets at 30 April 2023

Motor vehicles Equipment Fixtures and

fittings

£ £ £

To be
Cost at 1 May 2022 185 000 90 000
calculated
To be
Additions for year 15 000 5 000
calculated
To be
Disposals for year (25 000)    –  
calculated
To be
Non-current assets (at cost) 100 000 20 000
calculated

Less depreciation

To be
Provision at 1 May 2022 (50 000) (35 000)
calculated
Accumulated depreciation on To be
10 000 –
disposals calculated
Depreciation for the year ended To be
(10 000) (3 000)
30 April 2023 calculated

Accumulated depreciation (80 000) (41 000) (12 000)

To be
Carrying value at 30 April 2023 120 000 59 000
calculated

Additional information
• A full year’s depreciation is charged on all non-current assets owned on
30 April 2023.
• Motor vehicles are depreciated using the reducing balance method.
• Equipment and fixtures and fittings are depreciated using the straight line
method.

16 P72041A

 Required
(a) Complete the schedule of non-current assets in your question paper. Insert your
answers in each of the shaded boxes.
(8)
(b) Calculate the annual percentage depreciation being charged on:
(i) motor vehicles
(3)
(ii) fixtures and fittings.
(3)
(c) Explain two reasons for charging depreciation on non-current assets.
(4)
During the year ended 30 April 2023 Timmis Enterprises received payment by cheque
for disposals of motor vehicles for £14 000 and equipment for £2 500
(d) Prepare the Non-current Asset Disposal Account for the year ended 30 April 2023.
(6)
The Sales Manager said that
‘We depreciate some non-current assets using the straight-line method and some
using the reducing balance method. Why do we not just use the same method for all
non-current assets?’
(e) Evaluate the Sales Manager’s statement.
(6)
(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

P72041A 17

 Pearson Edexcel International Advanced Level
Thursday 12 October 2023
Morning (Time: 3 hours)
Paper
reference WAC11/01
Accounting
 

International Advanced Subsidiary

UNIT 1: The Accounting System and Costing

Source Booklet
Do not return this Booklet with the question paper.

Turn over

P75608A
©2023 Pearson Education Ltd.
Z:1/1/1/1/1/1/
*P75608A*
 SECTION A
Answer BOTH questions in this section.
1 Artem and Bipul are in partnership sharing profits and losses in the ratio 3 : 2. Artem is
paid a salary of £6 000 per annum but Bipul receives no salary. Interest will be paid on
capital and charged on drawings.
The following balances remained in the books of account on 30 September 2023 after
preparing the trading account.

£
   Cash and bank 14 000
   5 % bank loan 50 000
   Bank loan interest paid 1 400
  Capital accounts:
    Artem 35 000
    Bipul 20 000
  Current accounts:
    Artem 600 Dr
    Bipul 250 Cr
  Commission allowed 4 000
  Commission received 8 100
  Drawings:
    Artem (excluding salary) 12 000
    Bipul 9 000
  General expenses 9 700
  Gross profit 101 040
  Inventory 30 September 2023 38 200
  Irrecoverable debts 900
   Motor vehicle running expenses 7 100
   Non-current assets (at cost):
    Equipment 25 000
    Motor vehicles 40 000
    Fixtures and fittings 9 000
   Non-current assets – (provision for deprecation):
    Equipment 10 000
    Motor vehicles 14 000
    Fixtures and fittings 6 100
   Allowance for irrecoverable debts 3 100
  Rent paid 16 500
   Salary paid – Artem 6 000
  Selling expenses 6 800
   Trade payables 22 410
   Trade receivables 46 500
  Wages 23 300

2 P75608A

Additional information at 30 September 2023
(1) Selling expenses of £1 700 were prepaid.
(2) One month’s rent of £1 500 was owing.
(3) Commission allowed of £500 had been posted in error to the debit of the
commission received account.
(4) The 5 % bank loan had been increased on 1 April 2023 by £20 000
(5) Equipment costing £6 000 was traded in part exchange at its carrying value
of £2 500 on 20 December 2022 for replacement equipment costing £7 500.
The balance was settled by cheque. No entries had been made in the books.
(6) Depreciation will be charged on all non‑current assets owned on
30 September 2023 at the rate of:
– Equipment 15 % per annum using the reducing balance method.
– Motor vehicles 20 % per annum using the straight line method.
– Fixtures and fittings 10 % per annum using the straight line method.
(7) A further £1 500 is to be written off as irrecoverable debts.
(8) The allowance for irrecoverable debts was to be maintained at 4 % of
trade receivables.
(9) On 1 April 2023 Artem had increased her capital by £5 000 by cheque and Bipul
had increased his capital by £2 000 in cash.
(10) Interest on drawings and interest on capital for the year was calculated as follows.

Interest on capital paid Interest on drawings charged

Artem £1 400 £720

Bipul   £800 £540

P75608A 3
 Turn over
 Required
(a) Prepare the Statement of Profit Loss and Other Comprehensive Income (including
an appropriation account) for the year ended 30 September 2023.
(17)
(b) Prepare the ledger accounts for the year ended 30 September 2023.
(i) Capital account of Bipul
(3)
(ii) Current account of Artem.
(4)
(c) Prepare the Statement of Financial Position at 30 September 2023.
(19)
(d) Evaluate the decision of Artem and Bipul to bring additional capitals into the
business rather than increasing the bank loan further.
(12)
(Total for Question 1 = 55 marks)

4 P75608A

2 Costas is in business making and selling pre‑packed sandwiches. He sells his
sandwiches to local businesses that have a credit account and direct to other
customers who pay in cash.
Costas does not keep full accounting records but has the following
information available.
(1) Summarised cash book for the year ended 30 September 2023

£ £
Balance b/d 2 700 Cash purchases
Cash sales 48 400 of raw materials 9 800
Receipts from Payments to trade
trade receivables 36 200 payables for raw materials 34 900
8 % bank loan 15 000 General expenses 8 900
Delivery vehicle sale 2 700 Rent 19 500
Commission received 850 Wages 17 000
Bank loan interest paid 250
Delivery vehicle purchased 9 000
Balance c/d 6 500
105 850 105 850

Other balances

1 October 30 September
2022 2023
£ £
Trade receivables 4 650 3 850
Trade payables 7 300 3 500
Inventory of raw materials 1 100 1 450
Wages owing 350 800
General expenses prepaid 950 –
General expenses owing – 2 400
8 % bank loan – 15 000
Equipment (at valuation) 11 650 10 100
Delivery vehicle (at valuation) 4 000 8 300
Rent – to be calculated

6 P75608A

 (2) Costas took £200 per week cash drawings before paying cash sales receipts into
the bank.
(3) Irrecoverable debts of £2 100 are to be written off.
(4) One month’s rent had been paid in advance.
(5) The 8 % bank loan was taken out on 1 January 2023 and is for a period of
five years.
(6) Costas always has only one delivery vehicle at a time.
Required
(a) Calculate for the year ended 30 September 2023 the:
(i) total sales
(6)
(ii) purchases of raw materials.
(4)
(b) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the
year ended 30 September 2023.
(11)
Costas is reviewing the cost of making each sandwich. The current costs are:

Sandwich
Raw materials
Bread £1.50 for 20 slices (Two slices per sandwich)
Fillings £6.00 for 1 500 grams (100 grams of filling per sandwich)
Packaging £5.00 for 100 boxes (One box per sandwich)

Labour
Make the sandwich 3 minutes per sandwich
Pack the sandwich 2 minutes per sandwich
Wages are at the rate of £9 per hour

Overheads
£1.20 per sandwich

Required
(c) Calculate the total cost of making one sandwich ready for sale.
(7)
Costas currently remunerates on a day work basis his workers who make
the sandwiches.
He is considering changing the workers’ remuneration from day work to piecework.

P75608A 7
 Turn over
 Required
(d) Explain the terms:
(i) day work
(2)
(ii) piecework.
(2)
If Costas changes his remuneration method from day work to piecework he has
estimated that:
• the raw material purchase prices would remain the same but there would be a
10 % wastage of all raw materials.
• Labour
– workers who make sandwiches would make 30 per hour and would be paid
£0.30 per sandwich
– workers who pack sandwiches would pack 40 per hour and would be paid
£0.15 per sandwich.
• Overheads would reduce by 20 %.
Required
(e) Calculate the total cost of making one sandwich ready for sale using piecework
as the method of remuneration.
(5)
Brett is a worker who packs sandwiches. It is projected that for period three Brett will
work 45 hours including five hours overtime at time and one third.
During period three he will pack 2 700 sandwiches.
Required
(f ) Calculate the total wage that would be earned by Brett for period three using:
(i) day work
(3)
(ii) piecework.
(3)
(g) Evaluate the possible change of remuneration from day work to piecework from
the viewpoint of Costas.
(12)
(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

8 P75608A

 SECTION B
Answer THREE questions from this section.
3 Andreas is in business buying and selling goods on credit. The following balances
were available for August 2023.

£
Trade receivables 1 August 2023 4 500
Sales revenue 14 730
Sales returns 1 500
Discount allowed 230
Irrecoverable debt 1 050
Allowance for irrecoverable debts 600

Additional information for August 2023

(1) Sales revenue for the month of August included cash receipts totalling £2 600
(2) Bank receipts from trade receivables totalled £10 900
(3) A cheque for £130 banked on 3 August was dishonoured on 26 August.
(4) A refund of £60 was paid to a trade receivable for an overcharge.
(5) Interest of £25 had been charged to a trade receivable for late payment.
(6) The contra sum of £620 had been set‑off with the Trade Payables Ledger
Control Account.
(7) Trade receivables on 31 August 2023 included a credit balance of £360
Required
(a) State three ways in which the preparation of control accounts could be useful to
Andreas in running his business.
(3)
(b) Prepare the Trade Receivables Ledger Control Account for the month ended
31 August 2023.
(11)

10 P75608A

 In July 2023 Andreas had recorded a debt owed by Polis as an irrecoverable debt
when Polis was declared bankrupt.
On 15 September 2023 a cheque was received for £90 as final settlement of
Polis’s debt.
Required
(c) Prepare the Journal entries in the books of account to record the £90 receipt on
15 September 2023. Narratives are not required.
(6)
(d) State four ways in which Andreas might use credit control to reduce the
possibility of incurring irrecoverable debts in the future.
(4)
A friend has advised that Andreas should sell all goods for cash only.
(e) Evaluate Andreas selling goods only for cash.
(6)
(Total for Question 3 = 30 marks)

P75608A 11
 Turn over
4 Sunshine Partners has provided the following information from its financial
statements for the year ended 30 September 2023.

£000’s
Revenue 600
Cost of sales 360
Expenses 220

Non‑current assets 660

Inventory – 30 September 2023 85
Trade receivables 120

Capital 720
5 % bank loan (10 year) 80
Trade payables 50
Bank overdraft 15

Additional information
Inventory – 1 October 2022 £75 000
All revenue sales / purchases are on credit.

Required
(a) State one reason for calculating each of the following:
(i) use of assets ratios
(2)
(ii) profitability ratios.
(2)
(b) Calculate for Sunshine Partners the:
(i) gross profit as a percentage of revenue
(2)
(ii) percentage return on capital employed
(2)
(iii) non‑current assets to revenue ratio
(2)
(iv) inventory turnover (times per year)
(2)
(v) trade receivables collection period (days)
(2)
(vi) trade payables payment period (days).
(2)

12 P75608A

 Sunshine Partners also provided additional information for the previous two years.

Year ended Year ended

30 September 2021 30 September 2022
Gross profit as a
30 % 32 %
percentage of revenue
Percentage return on
10 % 6%
capital employed
Non‑current assets
£0.75 for every £1 £0.83 for every £1
to revenue

Inventory turnover 4.0 times 4.2 times

Trade receivables
40 days 60 days
collection period
Trade payables
60 days 55 days
payment period

Required
(c) Comment upon the ratios calculated in part (b) and for the previous two years
under the following headings. Select two ratios for each of the following:
(i) control of cash movements
(4)
(ii) profitability.
(4)
(d) Evaluate the use of social accounting in the decision-making of a business.
(6)
(Total for Question 4 = 30 marks)

P75608A 13
 Turn over
5 Banuja started a business making wooden garden furniture on 1 October 2022.
He decided that to start with he would concentrate on making and selling a single
product, the garden seat.
Banuja started the business with manufacturing equipment of £2 000 and a bank
balance of £4 000
Banuja has no training in accounting, but at the end of the first year of trading on
30 September 2023 he prepared the following profit statement.

£ £
Sales receipts 16 800
Raw materials purchased and paid 5 000
Wages paid 9 000
Production expenses paid 3 800
Selling expenses paid 2 300
(20 100)
Loss (3 300)
Additional information at 30 September 2023
(1) During the year 100 garden seats were manufactured of which 90 had been sold
to retailers at a price of £200 each.
(2) The inventory of unused raw materials was valued at a cost of £500
(3) Wages included £5 000 drawings by Banuja.
(4) Production expenses of £700 were prepaid.
(5) Selling expenses of £450 were owing.
(6) Manufacturing equipment was valued at £1 600
(7) There was no production work in progress.
(8) Trade receivables were £1 200

14 P75608A

 Required
(a) Explain the following accounting concepts and conventions:
(i) business entity
(2)
(ii) realisation
(2)
(iii) accruals.
(2)
(b) Calculate the:
(i) total production cost for the year ended 30 September 2023
(6)
(ii) profit for the year ended 30 September 2023
(5)
(iii) bank balance at 30 September 2023.
(7)
Banuja is considering employing a part‑time bookkeeper to manage his accounts.
(c) Evaluate Banuja employing a part‑time bookkeeper.
(6)
(Total for Question 5 = 30 marks)

P75608A 15
 Turn over
6 Casey prepared a trial balance on 30 September 2023. Although the totals of the trial
balance failed to agree he did proceed to calculate a draft profit for the year of £7 900
On further inspection of his books of account he found the following errors had
been made.
(1) Elena, a credit customer of Casey, had returned goods costing £520 as damaged.
No entries had been made in the books of account.
(2) Drawings of £450 had been posted to the Wages Account.
(3) Commission receivable, £250, had been correctly entered in the Cash Book and
had been debited to the Commission Receivable Account.
(4) An insurance premium of £105 had been correctly entered in the account of
Pearson Insurance but had been recorded as £150 in the Insurance Account.
(5) An irrecoverable debt of £720 had been correctly recorded in the account of
Chalini but no other entry had been made.
Required
(a) Explain how the following errors occur:
(i) an error of original entry
(2)
(ii) an error of principle.
(2)
(b) Prepare the journal entries to correct the errors (1) to (5). Narratives are
not required.
(10)
(c) Prepare the Suspense Account showing the original difference in the
trial balance.
(4)
(d) Calculate the revised profit for the year ended 30 September 2023 after the
correction of all errors.
(6)
(e) Evaluate whether Casey should calculate a draft profit when it is known that there
are errors in the books of account.
(6)
(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

16 P75608A

 Pearson Edexcel International Advanced Level
Thursday 11 January 2024
Morning (Time: 3 hours)
Paper
reference WAC11/01
Accounting
 

International Advanced Subsidiary

UNIT 1: The Accounting System and Costing

Source Booklet
Do not return this Source Booklet with the question paper.

Turn over

P73475A
©2024 Pearson Education Ltd.
S:1/1/1/1/1/1/1/1/1/1/
*P73475A*
 SECTION A

Answer BOTH questions in this section.

1 Cachi is in business recycling plastic waste.
Plastic waste is sorted and recycled into finished goods using specialist machinery.
The following balances were in the books of account at 31 December 2023.
£
Non‑current assets (cost)
Office premises 125 000
Machinery 85 000
Fixtures and fittings 36 000
Provisions for depreciation
Office premises 66 500
Machinery 34 000
Fixtures and fittings 25 200
Production wages 75 000
Production salaries 40 000
Office salaries 31 000
Drawings 20 000
Inventory 1 January 2023 – plastic waste 2 500
finished goods 9 500
Purchases of plastic waste 25 000
Trade receivables 33 850
Trade payables 21 800
Cash and bank 6 150
Indirect production expenses 9 500
Electricity and water 19 500
Marketing costs 12 300
Allowance for irrecoverable debts 1 500
Administration expenses 18 700
Capital 100 000
Revenue 300 000
Additional information at 31 December 2023.
(1) Inventory – plastic waste £5 000
finished goods £7 500
(2) There was no work in progress at the beginning or the end of the year.
(3) Finished goods are transferred from manufacturing at cost of production.
(4) £16 000 of the electricity and water cost related to the production process.
(5) Marketing costs, £1 300, were prepaid.
(6) Administration expenses, £4 100, were accrued.
(7) Depreciation is to be charged on all non‑current assets owned at the end of the
year using the straight‑line method at the rates of
office premises 2% per annum
machinery 20% per annum
fixtures and fittings 10% per annum.

2 P73475A

 Required
(a) Prepare the:
(i) Manufacturing Account for the year ended 31 December 2023
(10)
(ii) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 31 December 2023
(10)
(iii) Statement of Financial Position at 31 December 2023.
(10)
(b) Explain the terms:
(i) capital expenditure
(2)
(ii) revenue expenditure.
(2)
(c) State whether the following are capital expenditure or revenue expenditure:
• purchase of new machinery
• installation of new machinery.
(2)
Cachi is considering the purchase of new machinery which will increase the quantity
of plastic waste that he can process. The information relating to the existing
machinery and the new machinery is as follows.
Existing machinery New machinery
Cost of machinery £85 000 £125 000
Residual value Nil   £5 000
Useful economic life 5 years 8 years
Output per year 500 tons 800 tons
Production wages £75 000 per year See note 2 below
Other costs (excluding depreciation) £65 500 per year See note 3 below
Notes
(1) Cost of purchasing plastic waste will remain at £45 per ton.
(2) Production wages: the existing machinery requires a team of six workers. The new
machinery would require a team of eight workers each paid at the same rate.
(3) Other costs (excluding depreciation) contain a fixed cost of £50 000, remaining
costs are variable.
(4) All finished goods can be sold as there is a market shortage of recycled plastic.
Required
(d) Calculate the production cost of recycling one ton of plastic waste using the
existing machinery and one ton of plastic waste using the new machinery.
(7)
(e) Evaluate whether Cachi should invest in the new machinery.
(12)
(Total for Question 1 = 55 marks)

P73475A 3
 Turn over
2 The bookkeeper of Naag provided the following list of balances at 31 December 2023.
Naag is aware that there are errors in the books of account that could affect the
balancing of the trial balance.
£
Revenue 156 720
Purchases 110 000
Inventory – 1 January 2023 9 600
Discount allowed 750
Discount received 420
General expenses 32 450
Rent payable 18 500
Rent receivable 3 900
Non‑current assets – cost 40 000
Non‑current assets – provision for depreciation 10 000
Capital 40 000
Drawings 17 000
5% bank loan (repayable 2026) 20 000
Bank overdraft 4 080
Trade payables 7 850
Trade receivables 14 600
Irrecoverable debts 955
Allowance for irrecoverable debts 800
Required
(a) Prepare the trial balance of Naag from the list of balances at 31 December 2023.
(11)
On inspecting the books of account, the following errors were found.
(1) Naag had taken goods valued at £120 for his own use. No entries had been made
in the books.
(2) A credit sale to Jones was correctly recorded in the Book of Prime Entry as £560
but had been posted to the Ledger as £650
(3) The receipt of an £820 payment from a credit customer, Maxey, had been posted
to the account of Milner.
(4) Discount received, £70, had been correctly entered in the Cash Book but had
been posted to the debit side of the Discount Received Account.
(5) A credit customer, J Baahir, had become bankrupt owing a debt of £1 100 to Naag.
A cheque for £630 had been received in final settlement. No entries had been
recorded in the books.
(6) A payment of general expenses, £55, had been correctly posted to the bank
account but no other entry had been made.

4 P73475A

 Required
(b) Name the type of error in (1) to (3).
(3)
(c) Explain the terms:
(i) an error of reversal
(2)
(ii) a compensating error.
(2)
(d) Prepare the journal entries to correct errors (1) to (6).
Narratives are not required.
(13)
After the correction of the errors the bookkeeper of Naag then prepared draft
financial statements showing a profit for the year of £4 320
In preparing the draft financial statements the following items were
incorrectly recorded.
(1) The inventory count at 31 December 2023 included £5 600 of goods recorded at
selling price instead of cost price. Naag uses a mark‑up on cost of 40%.
(2) No adjustment had been made for general expenses. General expenses of £480
had been paid in advance and £640 was still owing.
(3) A full year’s interest on the 5% bank loan (repayable in 2026) had been incorrectly
calculated at £1 200
(4) Rent payable had been recorded as income of £550
(5) The depreciation on non‑current assets had been calculated at the rate of
20% per annum using the straight‑line method. This should have been calculated
at 20% per annum using the reducing balance method.
(6) The allowance of irrecoverable debts had not been adjusted to 5% of
trade receivables.
Required
(e) Complete the table in the Question Paper showing the effect on the draft profit of
each of the items incorrectly recorded.
(12)
A work colleague has said that if Naag uses information communication technology
(ICT) to prepare the books of account there will be no errors in the books.
(f ) Evaluate the use of information communication technology (ICT) in removing
all errors.
(12)
(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

P73475A 5
 Turn over
 SECTION B

Answer THREE questions from this section.

3 Aaheli is in business buying and selling goods on credit. In the year ended
31 December 2023 she increased her sales but is now having difficulty paying her
trade payables. The bank refuses to extend her overdraft or provide a further loan.
The following information relates to the last two trading years ended
31 December 2022 and 31 December 2023.
2022 2023
£  £
Revenue 500 000 900 000
Cost of sales 300 000 675 000
Expenses 180 000 190 000
Profit for the year 20 000 35 000

Non‑current assets 75 000 100 000

Inventory 55 000 70 000
Trade payables 25 000 85 000
Trade receivables 60 000 120 000
Non‑current liabilities 50 000 40 000
Closing capital 125 000 135 000
Bank 10 000 30 000 Cr
Additional information
(1) Inventory at 1 January 2022 was £50 000
(2) All sales and purchases of goods are on credit.

6 P73475A

 Required
(a) State two reasons why a business needs to manage the value of its
trade receivables.
(2)
(b) Explain how a business should manage the value of its trade receivables.
(2)
(c) Calculate for each of the years 2022 and 2023, correct to two decimal places, the:
(i) gross profit as a percentage of revenue
(4)
(ii) rate of inventory turnover
(4)
(iii) trade receivables collection period (in days)
(4)
(iv) liquid (acid test) ratio.
(4)
(d) State four possible reasons why Aaheli’s bank balance has decreased in 2023 and
she is having difficulty paying her trade payables.
(4)
(e) Evaluate the performance of Aaheli’s business in 2023.
(6)
(Total for Question 3 = 30 marks)

P73475A 7
 Turn over
4 Alex is in business manufacturing shirts for customers. He uses job costing when
preparing quotations.
A customer has requested a quotation on the 20 December 2023 for the manufacture
of 300 shirts that have been given the job number 652.
The following information is available for Job 652:
(1) Raw material for one shirt will be 1.5 metres of cloth material. The following were
the inventory movements for the cloth material.
1 August Opening balance 400 metres at £5 per metre
23 August Issued 150 metres
26 September Receipts 350 metres at £6 per metre
17 October Issued 300 metres
27 November Receipts 400 metres at £6.50 per metre
15 December Issued 150 metres
Alex uses the perpetual inventory, First In First Out (FIFO) method when
valuing inventory.
Alex will also purchase buttons, thread and packaging at a cost of £30.00
per 100 shirts.
(2) Direct labour costs will be:
Department Production Time Wage Rate
for Job 652 £ per hour
Cutting and machining 10 minutes per shirt 9
Finishing and packaging 6 minutes per shirt 7
(3) Overheads are charged to jobs on an hour rate basis.

Annual
Annual Annual
Department overhead cost Recovery basis
machine hours labour hours
£

Cutting and machining 80 000 10 000 – Machine hours

Finishing and packaging 36 000 – 6 000 Labour hours

(4) A mark‑up of 20% on cost is added to the manufacturing cost of all jobs
undertaken.

8 P73475A

 Required
(a) Explain the terms:
(i) perpetual inventory
(2)
(ii) periodic inventory
(2)
(iii) allocation of overheads
(2)
(iv) apportionment of overheads.
(2)
(b) Prepare a quotation for Job 652 showing the price to be charged to the customer
for 300 shirts. The quotation should clearly show the totals for the:
• raw material cost
• labour cost
• overhead cost
• quotation price.
(16)
Alex is considering changing the remuneration method for workers in the cutting and
machining department from day work rate to piecework.
(c) Evaluate the use of piecework as a method of remuneration for the cutting and
machining department.
(6)
(Total for Question 4 = 30 marks)

P73475A 9
 Turn over
5 The following information is available from the books of account of Jacinda at
31 December 2023.
(1) On 1 January 2023 the following account balances were in the books of account.
£
Electricity Account     400 Owed by Jacinda
Advertising Account    1 200 Owed by Jacinda
Rent Receivable Account     250 Owed to Jacinda for three months’ rent
Motor Vehicles Account 220 000
Provision for Depreciation Account
Motor Vehicles   50 000
(2) Electricity Account
Cheque payments
30 March Paid balance of 1 January 2023 by cheque and was allowed a cash
discount of 3%
4 October Paid electricity, £900, by cheque

Refund
13 November £15 by cheque
On 31 December 2023 it was estimated that £350 was owed by Jacinda
for electricity.
(3) Advertising Account
Cheque payments
3 January Paid £1 200 general advertising expenses
3 March Paid £1 600 for advertising brochures
1 October Paid £3 500 for an advertising campaign to run from
1 October 2023 to 31 March 2024
(4) Rent Receivable Account
Cheques received for Jacinda renting her property
9 January £500 for six months’ rent
26 June £500 for six months’ rent
4 December £500 for six months’ rent to 31 March 2024
(5) During the year ended 31 December 2023 the disposals and purchases of motor
vehicles were:
Disposals Motor vehicles costing £70 000 and with a carrying value of £42 000 were sold
Purchases New motor vehicles were purchased at a cost of £80 000
Jacinda depreciates motor vehicles owned on the last day of the financial year at the
rate of 20% using the straight‑line method.

10 P73475A

 Required
(a) Explain how the following accounting concepts would be used when preparing
financial statements:
(i) prudence
(2)
(ii) consistency.
(2)
(b) Prepare the following ledger accounts for the year ended 31 December 2023.
Each account should include the transfer to the Statement of Profit or Loss and
Other Comprehensive Income for the year ended 31 December 2023.
(i) Electricity Account
(5)
(ii) Advertising Account
(5)
(iii) Rent Receivable Account
(5)
(iv) Provision for depreciation – Motor Vehicles Account
(5)
(c) Evaluate the usefulness of using the accruals concept when preparing the
financial statements of a business.
(6)
(Total for Question 5 = 30 marks)

P73475A 11
 Turn over
6 Cabe is in business retailing clothing from a shop at a sports club. On
3 December 2023 the shop was broken into and there was a theft of all of the cash
and some of the inventory.
Cabe provided the following information about the cash.
Cash balance was £825 at 1 November 2023.
Cash sales were £9 130 between 1 November and 3 December 2023.
Cash banked £8 500 between 1 November and 3 December 2023.
Expenses paid in cash £735 between 1 November and 3 December 2023.
Cash remaining £ Nil at 3 December 2023.
Required
(a) Calculate the value of the cash stolen in the theft of 3 December 2023.
(4)
Cabe provided the following information about the inventory.
Sales from 1 November to 3 December 2023
Credit £5 870
Cash £9 130
Opening inventory 1 November 2023 £12 400
Inventory remaining after the theft on 3 December 2023 £1 730
Credit purchases from 1 November to 3 December 2023 £8 700
Cabe uses a ‘mark‑up’ of 50%
Required
(b) Calculate the value of the inventory stolen in the theft of 3 December 2023.
(7)
Cabe must now replace the stolen inventory to enable him to continue in business.
He must purchase the replacement inventory on credit and to enable him to do this
his suppliers have extended his total credit to a maximum of £15 000
To establish the current amount owing on credit he compiled a Trade Payables
Ledger Control Account from the following information.

Trade payables balance 1 November 2023 £5 100

Balances at 3 December 2023

Bank payments £7 850
Credit purchases £8 700
Interest charged by supplier £60
Discount received £150
Contra – trade receivables £230

12 P73475A

 Required
(c) (i) Prepare the Trade Payables Ledger Control Account to establish the amount
owed by Cabe to his trade payables on 3 December 2023.
(6)
(ii) Calculate whether Cabe will be able to replace his inventory within the credit
limit provided by his suppliers of a maximum of £15 000
(3)
(d) Explain the role of accounting information in supporting a business.
(4)
Cabe is considering using only credit sales and no cash sales for goods sold in
the future.
(e) Evaluate using only credit sales for goods sold in the future.
(6)
(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

P73475A 13

 Pearson Edexcel International Advanced Level
Friday 10 May 2024
Afternoon (Time: 3 hours)
Paper
reference WAC11/01
Accounting
 

International Advanced Subsidiary

PAPER 1: The Accounting System and Costing

Source Booklet
Do not return this Booklet with the question paper.

Turn over

P75882A
©2024 Pearson Education Ltd.
F:1/1/1/1/1/1/1/1/
*P75882A*
 SECTION A
Answer BOTH questions in this section.
1 Rapid Supplies buys and sells goods on credit to local businesses.
The following balances were recorded in the books of account on 30 April 2024.

£
Allowance for irrecoverable debts 300
5% bank loan (repayable 2026) 20 000
Bank loan interest paid 500
Capital 100 000
Cash and bank 10 120 Dr
Commission received 8 000
Delivery vehicle expenses 6 250
Discount allowed 1 350
Discount received 950
Drawings 28 000
General expenses 7 450
Insurance 2 100
Inventory – 1 May 2023 9 800
Irrecoverable debts 850
Marketing costs 11 250
Non‑current assets (at cost)
Premises 90 000
Delivery vehicles 54 000
Office equipment 30 000
Non‑current assets
(provision for depreciation)
Premises 9 000
Delivery vehicles 31 500
Office equipment 13 400
Power and water 13 500
Purchases 187 900
Rates 11 900
Returns inwards 11 180
Returns outwards 5 700
Revenue 345 000
Trade payables 15 500
Trade receivables 12 800
Wages and salaries 60 400

2 P75882A

 Additional information at 30 April 2024
(1) Inventory £12 000
(2) The 5% bank loan was taken out on 1 August 2023.
(3) Marketing costs included £4 500 paid for a promotion running from
1 January to 30 June 2024.
(4) Power owing was £1 100 and water prepaid was £400
(5) A delivery vehicle costing £14 000 and with an accumulated depreciation of
£11 500 was sold for £3 750 cash on 20 April 2024. No entries had been made in
the books of account to record the sale or receipt of cash.
(6) A full year’s depreciation is charged on all non‑current assets owned at the end of
the year. Depreciation is charged at the rates of:
Premises – 2% using the straight‑line method
Delivery vehicles – 20% using the reducing balance method
Office equipment – 25% using the straight‑line method.
(7) Trade receivables of £400 are now irrecoverable and are to be written off.
(8) The allowance for irrecoverable debts is to be maintained at 5% of
trade receivables.
Required
(a) Prepare the Statement of Profit or Loss and Other Comprehensive Income for the
year ended 30 April 2024.
(21)
(b) Prepare the Statement of Financial Position at 30 April 2024.
(18)
(c) Explain the terms:
(i) day work
(2)
(ii) piecework.
(2)
Rapid Supplies employs delivery drivers. At present, delivery drivers are paid a fixed
rate per week. It is proposed to change their method of remuneration to a payment
based on the deliveries made by the drivers.
(d) Evaluate the proposal to change the delivery drivers’ remuneration to a system
based on the deliveries made by the drivers.
(12)
(Total for Question 1 = 55 marks)

P75882A 3
 Turn over
2 Asheni is considering purchasing an electrical retail business.
She has identified two businesses that could be purchased, Alpha Stores and
Beta Bargains.
The following summary financial information is available for both businesses.

Alpha Beta
Stores Bargains
Total for the year ended
30 April 2024

£ 000s £ 000s

Revenue 800 800

Cost of sales 480 420

Expenses 300 260

Balances at
30 April 2024

£ 000s £ 000s

Trade receivables 40 50

Trade payables 35 55

Non‑current assets 60 80

Cash and bank 10 Dr 24 Cr

Inventory 32 36

Bank loan repayable 2024 – 10

4 P75882A

 Additional information
(1) The inventory on 1 May 2023
Alpha Stores £28 000
Beta Bargains £48 000
(2) Alpha Stores had the following profit for the year as a percentage of revenue in
the previous two years ended 30 April
2022 10%

2023 8%
(3) The bank loan of Beta Bargains is repayable on 30 September 2024.
(4) Revenue (sales) is made for cash and on credit.

Alpha Beta
Stores Bargains

Cash 20% 50%

Credit 80% 50%

(5) All purchases for Alpha Stores and Beta Bargains are made on credit.

P75882A 5
 Turn over
 Required
(a) Calculate for each of Alpha Stores and Beta Bargains the:
(i) gross profit as a percentage of revenue
(4)
(ii) profit for the year as a percentage of revenue
(4)
(iii) inventory turnover (times)
(4)
(iv) current ratio
(4)
(v) liquid (acid test) ratio
(4)
(vi) trade payables payment period (days)
(4)
(vii) trade receivables collection period (days).
(4)
(b) Comment upon the following:
(i) Profitability of Alpha Stores
(3)
(ii) Liquidity of Beta Bargains.
(3)
(c) Explain the term ‘goodwill’.
(2)
(d) State three reasons why Asheni may be willing to pay for the goodwill of
a business.
(3)
The owner of Beta Bargains has stated that he would be prepared to sell his business
for £100 000
(e) Calculate the value of the goodwill that Asheni would have to pay if she were to
purchase Beta Bargains for £100 000
(4)
Alpha Stores and Beta Bargains do not use information communication technology
(ICT) in the operation of their businesses or the preparation of their books of account.
(f ) Evaluate the use of information communication technology (ICT) in a business.
(12)
(Total for Question 2 = 55 marks)

TOTAL FOR SECTION A = 110 MARKS

6 P75882A

 SECTION B
Answer THREE questions from this section.
3 The following information is available for the Oldmixon Tennis Club for the year
ended 30 April 2024.
(1) Subscriptions were £60 per annum for each of the 90 members for the year
ended 30 April 2024.
On 1 May 2023 seven members had paid their subscriptions in advance and five
members were in arrears.
Two of the members in arrears on 1 May 2023 paid in full and the remainder were
considered irrecoverable debts.
On 30 April 2024 four members had paid in advance for the year commencing
1 May 2024 and six members’ subscriptions were in arrears.
All receipts for subscriptions were paid by cheque.
(2) Refreshments were sold to members. Sales of refreshments during the year
were £11 900
On 1 May 2023 the inventory was valued at a cost of £950. Purchases of
£4 500 had been paid during the year and invoices for £1 200 had payment
still outstanding.
A member had carried out an inventory count on 30 April 2024 and had valued
the inventory at the selling price of £1 400. The club marks up refreshment costs
by 25%.
(3) A grant was received from the Tennis Association of £5 000
(4) Depreciation is charged on equipment owned at the end of the year at the rate of
20% per annum using the straight‑line method.
On 1 May 2023 the club owned equipment with a cost of £30 000 and a carrying
value of £19 200
During the year equipment costing £4 000 which had been owned by the club
for three years was sold for £2 300. Replacement equipment costing £6 000
was purchased.

8 P75882A

 (5) Other expenses

Receipts and Payment Account entries

Other information
for year ended 30 April 2024

Expense £

One quarter’s (three months’) rent is still

Rent 1 500
outstanding at the end of the year.
Electricity of £190 was outstanding and water of
Electricity and water   890
£135 was prepaid at the end of the year.
A short‑term loan of £400 made to an employee
Wages 4 655
was included in the balance.

Equipment repairs 1 500 All equipment repairs were paid in the year.

A refund to the club of £100 on sundry expenses

Sundry expenses 1 200
was outstanding.

Required
(a) State two differences when preparing accounts for:
• a club, such as the Oldmixon Tennis Club, and
• a sole trader.
(4)
(b) Prepare for the year ended 30 April 2024 the:
(i) Subscriptions Account
(5)
(ii) Refreshments Trading Account
(4)
(iii) Income and Expenditure Account.
(11)
The Oldmixon Tennis Club is considering improvement works to the clubhouse.
Two options have been put forward by members to pay for the refurbishment:
(1) The club takes out a £20 000 bank loan at 8% per annum for ten years
(2) The subscription fee should be raised in one year to fund the refurbishment.
(c) Evaluate whether the Oldmixon Tennis Club should fund the refurbishment by
taking out a £20 000 bank loan at 8% per annum or fund the refurbishment from
raised subscription fees in one year.
(6)
(Total for Question 3 = 30 marks)

P75882A 9
 Turn over
4 Pire Solutions prepared a draft income statement for the year ended 30 April 2024
which showed a profit for the year of £19 000. The business was aware that there
were some errors in the books of account.
On further inspection the following errors were discovered in the books of account.
(1) Credit purchases costing £7 100 had been correctly posted in the Suppliers
Account but had been recorded in the Purchases Account as £1 700
(2) The owner of Pire Solutions had been paid £30 per week which had been paid
and posted to the General Expenses Account for the 52 weeks of the year.
(3) Commission receivable at the rate of 2.5% of £30 000 sales had been recorded in
the Cash Book but no other entry had been made in the books.
(4) Depreciation on office equipment had been charged for the year using the
reducing balance method which had been calculated at £350. This should have
been charged at 20% using the straight‑line method on the office equipment cost
of £3 000
(5) The allowance for irrecoverable debts on 1 May 2023 of £3 450 was not adjusted
at the year end. The balance of trade receivable at 30 April 2024 was £80 000 and
Pire Solutions estimated that 3.5% of debts would become irrecoverable.
Required
(a) Explain the terms:
(i) error of principle
(2)
(ii) suspense account.
(2)
(b) Prepare the journal entries to correct the errors.
(10)
(c) Complete the table in the question paper showing the corrected profit after the
correction of all errors.
(10)
(d) Evaluate the use of International Accounting Standards (IAS) when preparing
financial statements.
(6)
(Total for Question 4 = 30 marks)

10 P75882A

5 Astil is in business as a sole trader. He is considering the purchase of a new car to use
in his business.
He is considering two options manufactured by Molvo Cars, the Classic petrol version
and the Super electric.
The following information is available for both cars.

Classic petrol Super electric

Cost £35 000 £52 500

Resale value after 5 years £15 000 £20 000

20 000 kilometres (km) 20 000 kilometres (km)

Annual usage
per annum per annum
One electrical charge per
Fuel usage 8 km per litre of fuel
200 km
One electric charge costs £2
Fuel cost £1.50 per litre
per hour for three hours

Service maintenance £150 every 3 months £175 every 10 000 km

Repairs £200 per year £150 per year

Road tax £150 per year £0 per year

£200 plus £50 per year

Insurance for each 5 000 km over £100 per 3 months
10 000 km

12 P75882A

Required
(a) Explain two causes of depreciation.
(4)
(b) Explain why some non‑current assets are depreciated using the
reducing balance method and other non‑current assets are depreciated using the
straight‑line method.
(4)
(c) Calculate the total cost per year, by completing the table in the question paper,
of operating the:
(i) Classic petrol car
(6)
(ii) Super electric car.
(6)
(d) Calculate the total cost per kilometre of operating the:
(i) Classic petrol car
(2)
(ii) Super electric car.
(2)
(e) Evaluate whether Astil should purchase the Classic petrol car or the Super electric
car. Your answer may consider financial and non‑financial factors.
(6)
(Total for Question 5 = 30 marks)

P75882A 13
 Turn over
6 Abeer owns a business with two productive departments: machining and assembly,
and two service departments: design and administration.
The projections of overhead costs for the next period were as follows.

Machining Assembly Design Administration

Overhead cost (£) 100 000 70 000 30 000 30 000

Expected labour
  1 500 5 900 – –
hours worked
Expected machine
  4 250    900 – –
hours worked

The usages of the service departments were as follows.

Machining Assembly Design Administration

Design 40% 40% – 20%

Administration 50% 40% 10% –

Required
(a) Explain the terms:
(i) Allocation of overheads
(2)
(ii) Apportionment of overheads.
(2)
(b) Calculate the total overhead cost of operating the productive departments by
apportioning the service departments’ overheads using continuous allotment.
(9)
(c) Calculate the overhead recovery rate per hour to be charged by Abeer for each
of the machining department and the assembly department, rounding to the
nearest penny.
(6)

14 P75882A

 During the year ended 30 April 2024 the actual expenditure on overheads was
£184 000 and the actual hours worked were:

Machining Assembly

Actual hours worked

Labour 1 550 5 500

Machine 4 400   650

(d) Calculate the total under absorption or over absorption of overheads for the
business of Abeer for the year ended 30 April 2024.
(5)
(e) Evaluate the use of overhead recovery rates by Abeer.
(6)
(Total for Question 6 = 30 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 200 MARKS

P75882A 15
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