MAE’S SECONDARY SCHOOL

MOCK EXAMINATIONS
PRINCIPLES OF ACCOUNTS
PAPER 02 – GENERAL PROFICIENCY
2 HOURS

INSTRUCTIONS TO CANDIDATES
1. There are FIVE questions on this paper. Answer ALL questions.
2. Only answer questions in the spaces provided on the booklet.
3. Number each answer correctly when necessary.
4. Silent electronic calculators may be used but ALL necessary working should be
clearly shown.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

 QUESTION ONE

A) i) Define the term ‘depreciation’. (2 marks)

ii) Identify the double entry used to record depreciation. (2 marks)

iii) State THREE causes of depreciation. (3 marks)

B) Tamarind Company bought equipment costing $80,000 and charged depreciation at a rate of
10% per annum using the reducing balance method.
i) Using the information above, complete the table for the first THREE years of the
equipment’s life. (11 marks)

Year Cost or Net Book value Depreciation expense Accumulated Net Book Value After
Before Depreciation. for the Year. Depreciation. Depreciation.

ii) Draw up the balance sheet (extract) for the equipment at the END of the third
year of use. (2 marks)

Total 20 marks.
QUESTION TWO
Ava Telesford provided the following list of balances for her assets, liabilities, and capital on
30 April 2014.
$ $
Motor vehicles 80,000
Cash in hand 6,100
Accounts Receivable (debtors) 25,000
loans 68,000
Land and building 200,000
Provision for bad debts 2,500
Accumulated Depreciation:
Motor Vehicles 22,000
Land and Building 54,000
Inventory at Hand 42,000
Accounts Payable 30,500
Bank Overdraft 7,900
Fixtures and Fittings 24,200
Accrued expenses 2950
Prepaid rent 4000
Capital 156,800

Additional Information:
- Included in the loan of $68000 is an amount of is payable within the year.
- Depreciation on motor vehicle was omitted for the year. Motor vehicle is depreciated
at the rate of 20% per year using the straight-line method.
- Net income (profits) for the year up to 30 April 2014 was $49,450.
- Ava made drawings of $1,000 per month for the year and an additional $800 in
goods (inventory).
Prepare a classified statement of financial position (balance sheet) for Ava Telesford as at 30
April, 2014. (Use the order of permanence in classifying assets.)
Total 20 marks.
QUESTION THREE
The following trial balance was extracted at 30 June 2018 from the books of Zodiac Express
Inc.
Dr Cr
$ $
Capital 32,757
Drawings 23,050
Purchases and Sales 101,240 174,432

Inventory at 1 July 2017 9,927

Receivables and Payables 3,340 5094
Returns 1,975 1,437
Discounts 322 623
Wages and Salaries 31,851
Motor vehicle expenses 1,121
Rent and rates 8,526
Utilities expenses 2,107
Motor vehicle at cost 7,900
Provision for depreciation on motor vehicles 3,480
Shop fittings at cost 5,000
Provision for depreciation on shop fittings 1,100
Cash 645

Bank 21,919
_______
________
TOTAL 218,923 218,923
Additional information was provided at 30 June 2018 as follows:
1. Closing inventory was valued at $11,017.
2. Utilities expense outstanding, $225.
3. Rent was prepaid, $75.
4. Depreciation is to be accounted for as follows:
 Motor vehicle at 25% using the reducing balance method.
 Shop fittings at 10% using the straight-line method.
Required:
a) Prepare an income statement (Trading and profit and Loss account) for Zodiac
Express Inc. for the year ended 30 June 2018.
b) List the names of the FIVE current assets of Zodiac Express Inc.
c) Calculate the present capital of Zodiac Express Inc. At 30 June 2018. Show all
workings clearly.
Total 20 marks.
QUESTION FOUR
On 31 December 2017, Zidan extracted the following balances from his books of accounts.
Balances at 1 October 2017:
Sales ledger debit balances total $42,680
Sales ledger credit balances total $950
Purchases ledger debit balances total $620
Purchases ledger credit balances total $28,360

Sales day book total for October 2017 $102,900

Purchases day book total for October 2017 $65,950

Return inwards day book total for October 2017 $4,120

Return outwards day book total for October 2017 $5,390

Cash book totals for October 2017:

Receipts from credit customers $92,400
Payments to credit suppliers $75,000
Refunds to debtors who had overpaid their accounts $300
Dishonoured cheques received from debtors $1,200
Discounts allowed $2,800
Discounts received $4,200

General journal totals for October 2017:

Bad debts written off $860
Interest charged on customers’ overdue account $160
Interest charged by suppliers on overdue accounts $240
Balances at 31 October 2017:
Sales ledger debit balances total ?
Sales ledger credit balances total $590
Purchases ledger debit balances total $700
Purchases ledger credit balances total ?
Using the ledger control accounts provided, prepare the following accounts for Zidan for the
month of October 2017:
a) Sales leger control account
b) Purchases ledger control account
Balance the accounts as at 31 October 2017

SALES LEDGER CONTROLACCOUNT

DATE DETAILS/PARTICULARS $ DATE DETAILS/PARTICULARS $

PURCHASES LEDGER CONTROLACCOUNT

DATE DETAILS/PARTICULARS $ DATE DETAILS/PARTICULARS $
 Total 20 marks
QUESTION FIVE
Mhalal and Jack operate a business trading in bicycle tyres. They disagree on the inventory
valuation that should be used. Mhalal only knows the FIFO method and he insists that FIFO
should be used to determine the value of the ending inventory for the three months ended 31
March 2016.
a) Jack prefers the LIFO method of inventory valuation, explain to Mhalal, in ONE
sentence, how LIFO differs from the FIFO method.

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1 mark

The following information is presented to you by Mhalal and Jack.

2016 Units Cost per unit $
1 January Beginning 100 20
inventory
17 January Purchased 200 22
29 January sold 240 40
12 February Purchased 400 25
1 March Sold 260 42
10 March Purchased 130 26
31 March Sold 250 45

b) Complete the inventory form provided using the FIFO method, and in the space
below state the value of inventory as at 31 March 2016.
DATE RECEIPTS/PURCHASES ISSUES/SALES STIOCK AFTER
EVERY
TRANSACTION

Total 11 marks

c) Using the information from the inventory form, prepare the Trading Account for
Mhalal and Jack for the three months ended March 31 2016.
7 marks
d) Describe, in ONE sentence, the effect on cost of goods sold and gross profit if Mhalal
and Jack had used the LIFO method which gives a lower valuation for closing
inventory.

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1 mark.