TEST CODE 01239020

FORM TP 2011025 JANUARY 2011

CARIBBEAN E XAM I NAT I O N S COUNCIL

SECONDARY EDUCATION CERTIFICATE

EXAMINATION

PRINCIPLES OF ACCOUNTS

Paper 02 – General Proficiency

3 hours

06 JANUARY 2011 (a.m.)

1. Answer ALL the questions in Section I and TWO questions from Section II.

2. Begin EACH answer on a separate page.

3. Keep ALL parts of EACH answer together.

4. Silent electronic calculators may be used, but ALL necessary working should be clearly shown.

5. EACH question is worth 20 marks.

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

Copyright © 2009 Caribbean Examinations Council.

All rights reserved.
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SECTION I

Answer the THREE questions in this section.

1. The owner of JZ Variety Store begins his business on May 1, 2010. He recorded all transactions
in a General Journal. The following are the records for the first month of business:

JZ Variety Store
General Journal

Date Details Dr ($) Cr ($)

2010

May 1 Bank a/c 50 000

Premises 101 000
Motor vans a/c 24 000
Capital a/c 175 000

May 2 Equipment a/c 40 000
Equipco Ltd a/c 40 000

May 5 Electricity a/c 2 400
Bank a/c 2 400

May 8 Sam’s Used Cars a/c 12 000
Bank a/c 12 000
Motor van a/c 24 000

May 14 Motor van 30 000
Bank 30 000

May 15 Purchases a/c 20 000
Bevy Distributors a/c 20 000

May 20 Fixtures a/c 20 000
Wood Products Ltd a/c 20 000

May 25 Wages a/c 4 400
Bank a/c 4 400

May 26 Bevy’s Distributors a/c 1 200
Returns Outwards 1 200

May 30 Bank 25 000

Sales 25 000

At the end of the month, JZ records a closing stock of $5 000.

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(a) Write the narratives required to complete the entries on May 1, May 8 and May 25.
(3 marks)

(b) (i) Identify THREE journals (day books), other than the General Journal which JZ
Variety Store can use.

(ii) Explain the use of EACH journal (day book) identified in (b) (i) above.
(6 marks)

(c) From the information in the General Journal, draw up a Trading and Profit and Loss
Account for JZ Variety Store for the month of May 2010. (7 marks)

(d) List the creditors and debtors of JZ Variety Store as at May 31, 2010. (4 marks)

Total 20 marks

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2. C. Wynn and T. Bain’s partnership deed states the following:

Interest on capital – 10% per year on capital at start of the year

Interest on drawings – 10% per year on all partners’ drawings

Monthly salaries – C. Wynn $1 200; T. Bain $800

The partnership extracted the following trial balance for the year ended December 31, 2010 after
calculating net profit before interest on the Loan from T. Bain.
$ $

Profit before Interest 39 100

Stock December 31, 2010 4 200
Land and Buildings after depreciation 56 900
Prepaid Insurance 800
Motor vehicles after depreciation 28 680
Accounts Receivable 7 420
C. Wynn’s Capital Account 35 000
C. Wynn’s Current Account 750
C. Wynn’s drawings 12 700

Bank overdraft 8 300
Creditors 4 440
Rent owing 2 160
T. Bain’s Current Account 1 750
T. Bain’s Capital Account 25 000
T. Bain’s 2 year, 4% Loan 5 000
T. Bain’s drawings
9 300
120 750 120 750

(a) Prepare the Appropriation Account for C. Wynn and T. Bain for the year ended
December 31, 2010. (Show all working clearly) (11marks)

(b) Using columnar style, prepare the Current Accounts for C. Wynn and T. Bain.
(7 marks)

(c) Draw up a statement showing the net worth of EACH partner as at December 31, 2010.
(2 marks)

Total 20 marks

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3. (a) As at November 30, 2010 the following personal account balances existed in the Sales
and Purchases Ledgers of Smallmoon Enterprises.
Sales Ledger
Marshall $32 500

Purchases Ledger
Hamilton $19 290

The following information was extracted from the company’s day books for the month
of December 2010:

Sales Day Book

2010 $
Dec 4 Marshall 25 200
Dec 21 Marshall 8 002
Purchases Day Book
2010 $
Dec 6 Hamilton 3 150
Dec 29 Hamilton 2 250
Sales Returns Day Book
2010 $
Dec 6 Marshall 3 100
Purchases Returns Day Book
2010 $
Dec 11 Hamilton 415
CASH BOOK
Date Details Bank Date Details Bank
2010 $ 2010 Hamilton for Credit $
Dec 1 Bal b/d 5 200 Dec 28 Purchases 15 000

Dec 23 Marshall for Cash 400 Dec 28 Hamilton for Cash 500
Sales Purchases
Dec 23 Marshall for Credit 26 000 Dec 31 Bal c/d 16 100
Sales
31 600 31 600
2011
Jan1 Bal b/d 16 100


(i) Prepare and balance the personal accounts appearing in the ledgers of Smallmoon
Enterprises as at December 31, 2010. (9 marks)
(ii) Prepare and CLOSE the Sales and Purchases Accounts in the General Ledger of
Smallmoon Enterprises as at December 31, 2010. (4 marks)

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(b)
The following balances were taken from the books of Metal Works Enterprises
on April 30, 2010. An inexperienced bookkeeper placed some items in the wrong
column.


Dr ($) Cr ($)
Land and building 68 000
Bank overdraft 6 500
Cash on hand 3 200
Accounts receivable 49 000
Carriage inwards 1 500
Carriage outwards 2 700
Accounts payable 38 250
Rent received 10 200
Motor vehicles 36 000
Allowance for depreciation of motor vehicles 12 000
Purchases returns 600
Sales returns 1 100
Commission paid 1 600
Loans 25 000
Sales 105 400
Purchases 90 000
Drawings 6 200
Salaries 12 500

Rewrite the Trial Balance for Metal Works Enterprises in good style, including an amount
for capital. (7 marks)

Total 20 marks

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SECTION II

Answer any TWO questions in this section.

4. Mr Best prepared the following information in order to produce end-of-year figures for his final
accounts.
$
Sales Ledger balances, January 1, 2010 – Debit 25 260
– Credit 540
Purchases Ledger balances, January 1, 2010 – Debit 350
– Credit 32 130
Total receipts from customers 392 690
Total payments to suppliers 308 160
Purchases on credit 321 100
Sales on credit 412 500
Discount allowed 3 220
Discount received 4 660
Return Inwards 2 100
Return Outwards 1 500
Bad debts written off 2 800
Balance in the Sales Ledger set off against balances in the Purchases Ledger 500
Sales Ledger balance December 31, 2010 – Debit ?
– Credit 360
Purchases Ledger balance December 31, 2010 – Debit 230
– Credit ?

(a) Prepare the Sales Ledger Control Account and the Purchases Ledger Control Account
for Mr Best, for the year ended December 31, 2010. (15 marks)

(b) Mr Best extracted a Trial Balance on July 31, 2010 which failed to agree by $7 425; a
shortage on the debit side of the Trial Balance. A Suspense Account was opened for the
difference.

In August 2010 the following errors were discovered.

1. Sales Day Book had been undercast by $4 100.

2. A cheque paying $3 500 to B. Ashton was entered in the Cash Book but not in
the Personal Account.

3. Inventory at close was under-valued by $3 900.

4. Discount received of $4 125 from a supplier was not posted to the supplier’s
account.

Write up the Suspense Account showing the correction of the errors. (5 marks)

Total 20 marks

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5.
E. Sandiford is the owner and operator of Par Excellence Woodcraft Manufacturers, which
specializes in building wooden fixtures and furniture. At December 31, 2010, E. Sandiford
presented the following information:
$
Stock at January 1, 2010: Raw materials 8 000
Finished goods 29 110
Work-in-progress 10 500

Stock at December 31, 2010: Raw materials 6 000

Finished goods 35 000
Work-in-progress 22 700
Purchases of raw materials 135 000
Office supplies & stationery 2 800
Packing material 6 500
Factory supplies 1 640

Returns of raw materials 5 700

Office staff salaries 14 800

Wages of factory workers 62 900
Factory manager’s salary 28 000
Transportation Costs - Raw materials 1 300
- Finished products to customers 2 400
Telephone 3 600
Administrative 2 500
Advertising 600
Warehousing 7 000
Depreciation expense for the year - Lathe 1 900
- Office equipment 750
- Factory machinery & equipment 2 100
Rent 30 000
Electricity 7 200

Note: The electricity and rental costs are apportioned between the factory and the office as
follows: Factory - 3/5; Office - 2/5.

(a) Prepare the Manufacturing Account for E. Sandiford’s business for the year ended
December 31, 2010 clearly identifying totals for:

• Cost of raw materials consumed

• Prime cost
• Factory overheads
• Cost of goods produced (14 marks)

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(b) Prepare a list of costs incurred by E. Sandiford’s office to arrive at total office costs.
(3 marks)

(c)
E. Sandiford made 480 computer tables for the year ended December 31, 2010. Calculate
the unit cost of manufacturing one computer table. (Show all working clearly.)
(3 marks)
Total 20 marks

6. (a) J. Collins, owner and operator of Collins’ Smart Mart, lost all her stock in a fire on the
evening of March 31, 2010. She also lost most of her records in the fire, but was able to
piece together the following information:

$
• Amount owing to suppliers as at January 1, 2010 500
• Payments by cheque, made to suppliers 36 725
• Amount owing to suppliers as at March 31, 2010 1 420
• Cash purchases for February 2010 2 700
• Cash from sales deposited at bank between January 1 to March 31, 2010 82 000
• Closing inventory as at December 31, 2009 85 000



(i) Prepare the Creditors (Total) Account to calculate the amount of credit purchases
for the period. (5 marks)

(ii) Calculate the total purchases figure for Collins’ Smart Mart for the period January
1 to March 31, 2010. (Show all working clearly.) (2 marks)

(iii) Given that J. Collins normally operates at a gross profit margin of 20%, find the
cost of sales for the period January 1 to March 31, 2010. (Show working.)
(3 marks)

(iv) Prepare the Income Statement (Trading Account) for Collins’ Smart Mart for the
period ended March 31, 2010. Show clearly the value of the inventory (Closing
Stock) lost in the fire on March 31, 2010. (9 marks)

(b) State the name given to the relationship between gross profit and cost of sales.
( 1 mark )

Total 20 marks

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7. Mrs Chin Lee does her own accounts. At the end of the year, December 31, 2010, in preparing
her final accounts she makes the decisions stated in (a) (i) - (v) below.

(a) Using a phrase or sentence, state the accounting concept NOT being followed in each of
the situations below:

(i) At the end of the year, Mrs Chin Lee owes $2 000 in wages to an employee. She
made no entry for the amount owing.

(ii) Mr Harris, a long-standing customer, promised to make a purchase of $5 000 early

in the next year. This amount was included in sales.

(iii) Mrs Chin Lee uses the straight line method of depreciation on a yearly basis and
provides $4 000 per annum as depreciation on motor vehicles. This year, she
changed to the reducing balance method and charged $5 600 as depreciation on motor
vehicles.

(iv) Mrs Chin Lee paid insurance on her house amounting to $7 500 and recorded it
as a business expense.

(v) Mrs Chin Lee changes her stock valuation method every year. (5 marks)

(b) Mrs Chin Lee recorded net profit of $36 500 for the year ended December 31, 2010. With
reference to items (a) (i) to (iv) above, prepare a statement of corrected net profit.
(5 marks)

(c) List THREE external users and TWO internal users of accounting information and
state ONE need of EACH user. (10 marks)

Total 20 marks

END OF TEST

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