SUBJECT: ACCOUNTING

Paper 1

Time allowed: 1hour 15minutes

Answer all questions (35 marks)

NAME:

SECOND TERM EXAMINATION

GRADE 8 DATE:

This assessment was led by the facilitator based on the presentation done throughout
the term.

The facilitator reads and observes the learner, follows and acts according to the
instructions.
1. A trader decides to write off the balance owed by a credit customer as an irrecoverable
debt. A credit entry is made in the account of the credit customer and a debit entry in
the irrecoverable debts account. Which accounting principles are being applied?
A. business entity and realization
B. consistency and materiality
C. duality and prudence
D. materiality and prudence

2. Why would a bakery business not include a value for inventory of stationery in the
statement of financial position?
A. It was of very low value.
B. It was purchased regularly and paid for in cash.
C. It was new and unused.
D. It was to be used in the next few months.

3. A limited company has invited potential investors to purchase shares in the business.
What information would be of interest to a potential investor?
1 the amount that they would pay for the shares
2 the expected future profits of the business
3 the expected rate of dividend that the business might pay
4 when the limited company will pay back the money invested

A. 1, 2 and 3
B. 1, 3 and 4
C. 1 and 2 only
D. 2 and 3 only

4. What are advantages to a sole trader of forming a partnership?

1 All partners would be entitled to drawings and dividends.
2 Profits would be shared with the partners.
3 The partners may bring additional skills and experience.
4 The partners would share responsibility for running the business.

A. 1, 2 and 3
B. 1 and 2 only
C. 3 only
D. 3 and 4
5. The owner of a business took goods for his own use but forgot to make an entry in the
accounts. What was the effect of this error?

profit for the year capital

A Overstated no effect

B overstated understated

C understated no effect

D understated overstated

6. Which statement about a statement of financial position is correct?

A. It is part of the double entry system.
B. It proves the arithmetical accuracy of the accounts.
C. It shows income and expenses for a certain period of time.
D. It shows the assets and liabilities on a certain date.

7. What is not a service business?

A. a computer repair shop
B. a furniture factory
C. a hairdressing salon
D. a travel agent

8. Which asset is valued at the lower of cost and net realisable value?
A. Goodwill
B. Inventory
C. loose tools
D. machinery

9. What is not a reason for preparing a monthly sales ledger control account?
A. to carry out a check of each entry recorded in the trade receivables’ accounts in the
sales ledger
B. to reduce fraud as the control account is completed by someone who has not been
involved in writing up the sales ledger
C. to prove that the entries made in the sales ledger are arithmetically correct
D. to provide a summary of the trade receivables’ transactions during the month
10. A trader has received her bank statement. What does she need to record when she is
updating her cash book?
A. a bank error
B. a credit transfer
C. an uncredited deposit
D. the bank statement balance

11. What is the name given to a list of ledger balances on a particular date?
A. control account
B. income statement
C. statement of account
D. trial balance

12. A business sold goods with a list price of $50 each. The terms of trade were as follows:
trade discount when more than 20 items are purchased: 10%
cash discount if customer pays within 30 days: 4%

How much was received in full settlement from a customer who bought 25 items and
paid after 35 days?
A. $900
B. $1075
C. $1125
D. $1200

13. Paul rents premises from John and pays the rent by credit transfer.
How would John record this?

account debited account debited

A bank rental income

B cash rental income

C rental income bank

D rental income cash

14. Sami maintains a full set of accounting records.
Why does Sami find it useful to complete the cheque counterfoil when he pays a credit
supplier by cheque?
A. It enables him to keep the purchases account up to date.
B. It helps in preparing the bank reconciliation statement.
C. It is a source of information for maintaining the cash book.
D. It is proof that he has paid the correct amount.

15. Amarjit had the following closing balances in his books at the end of the year.

$
non–current assets 25 000

trade receivables 11 000

bank overdraft 3 000

other payables 600

What was Amarjit’s capital at the end of the year?

A. $7 400
B. $10 400
C. $32 400
D. $38 400

16. Which statements about book-keeping and accounting are correct?

1 Accounting is performed periodically rather than daily.

2 Accounting uses information kept in the book-keeping records.
3 Book-keeping includes the preparation of financial statements.
4 Book-keeping involves the recording of financial transactions.

A. 1, 2 and 4
B. 1 and 3
C. 2, 3 and 4
D. 2 and 4 only
17. Which task is performed by a book-keeper?
A. analysing accounting ratios
B. interpreting the income statement
C. posting entries from the journals to the ledgers
D. preparing a statement of financial position

18. Which statement is correct?

A. Accounting involves measuring profits and losses.
B. Accounting is the recording of financial transactions.
C. Book-keeping involves communicating financial data.
D. Book-keeping requires the use of ratio analysis.

19. In which book of prime entry does a trader record cash discount received?
A. cash book
B. general journal
C. purchases journal
D. sales journal

20. The analysis columns of a petty cash book show the following totals.

$
Postage 20

stationery 31

How should these totals be posted to the ledger?

A. credit bank account with $51

B. credit postage account with $20 and stationery account with $31
C. debit cash account with $51
D. debit postage account with $20 and stationery account with $31

21. How does a trader use the information provided by financial statements?
A. to calculate the amount of cash drawings taken
B. to calculate the amount that is owed by trade receivables
C. to check the balance shown on a bank statement
D. to compare the business performance over a number of years
22. A book-keeper made two errors which cancelled each other out.
Which type of error did he make?
A. Compensating
B. complete reversal
C. original entry
D. principle

23. On 4 February Ann purchased goods, list price $5 200, on credit from Maria. The terms
of trade were:

20% trade discount on orders over $5 000.

1
2 2% cash discount if account paid by the end of the month.

Which amount did Ann enter in her accounts on 4 February?

A. $4 056
B. $4 160
C. $5 070
D. $5 200

24. Kate sells goods on credit to Kylie. Kate does not allow cash discount. On 1 May Kylie
owed Kate $350.
The following documents were exchanged in May:

$
May 4 invoice 420
8 debit note 112
10 credit note 92
19 cheque 350
26 invoice 170

How much did Kylie pay on 31 May to settle her account?

A. $148
B. $386
C. $498
D. $610
25. Zodwa sold goods on credit to Elspeth.
A. Credit note
B. Debit note
C. Invoice
D. Statement

26. In which book of prime entry will Lee record credit notes he has issued?
A. Purchases journal
B. Purchased returns journal
C. Sales journal
D. Sales returns journal

27. Which entries are posted from the purchases returns journal?

Account(s) to be debited Account(s) to be credited

A Individual credit suppliers Purchases
B Individual credit suppliers Purchases returns
C Purchases Individual credit suppliers
D Purchases returns Individual credit suppliers

28. Which book of prime entry is part of the double entry system?
1 cash book 3 petty cash book
3 purchases journal 4 sales journal

A. 1 only
B. 1 and 2
C. 3 and 4
D. 1, 2, 3 and 4

29. The cost of ensuring the owner’s personal motor vehicle was not included in the income
statement of the business. Which accounting principle was applied?
A. Business entity
B. Going concern
C. Money measurement
D. Prudence
30. A trader repaid a long-term loan of $10 000. She used all the money in the business
bank account, $7 000, and paid the balance from her personal bank account.
How did this affect the statement of financial position?

Assets Liabilities Capital

A no effect decrease $3 000 increase $3 000
B decrease $7 000 decrease $10 000 increase $3 000
C decrease $10 000 decrease $7 000 decrease $3 000
D decrease $10 000 decrease $10 000 no effect

31. How is the cost of sales calculated?

A. Opening inventory + purchases – carriage inwards – purchases returns – closing
inventory
B. Opening inventory + purchases – carriage inwards + purchases returns – closing
inventory
C. Opening inventory + purchases + carriage inwards – purchases returns – closing
inventory
D. Opening inventory + purchases + carriage inwards + purchases returns + closing
inventory

32. At the end of his first year of trading, Rashid provided the following information.

$
Revenue 72 500
Purchases 49 700
Closing inventory 4 800
Carriage inwards 1 150
Carriage outwards 2 950

What was Rashid’s gross profit?

A. $22 800
B. $24 650
C. $26 450
D. $27 600
33. Mai, a fashion retailer, did not record goods costing $500 taken for personal use.
What was the effect of this error?

Gross profit Profit for the year

Overstated Understated Overstated Understated
A ✓ ✓
B ✓ ✓
C ✓ ✓
D ✓ ✓

34. What is the purpose of a trial balance?

A. To calculate the capital of the business
B. To prove the arithmetical accuracy of the double entry
C. To summarise the assets and liabilities
D. To locate and correct errors in the ledger accounts

35. Which transaction will be entered in both the purchases ledger and the
nominal(general) ledger?
A. Cash paid for goods for resale
B. Purchase of office furniture by cheque
C. Returns of goods by a credit customer
D. Returns of goods to a credit supplier