TEST CODE 01239032

FORM TP 2014026 JANUARY 2014

CAR I B B EAN E XAM I NAT I O N S C O U N C I L

CARIBBEAN SECONDARY EDUCATION CERTIFICATE®

EXAMINATION

PRINCIPLES OF ACCOUNTS

Paper 032 – General Proficiency

1 hour 30 minutes

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

1. Answer ALL questions.

2. All answers MUST be writen in this booklet.

3. Show ALL working clearly.

4. You may use a silent, non-programmable calculator to answer questions.

5. You are advised to take some time to read through the paper and plan your answers.

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

Copyright © 2013 Caribbean Examinations Council

All rights reserved.

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INSTRUCTIONS: This paper consists of a case study and ELEVEN questions. Read the case study and
answer ALL the questions that follow in the spaces provided in the booklet.

CASE STUDY

Lita Ward owns a firm, Lita Ward Services, which offers business services. Lita spent the month of October
2013 in another country. She finds that her sister Sita has not made the required entries in any of the accounting
books. Lita decides to teach Sita some accounting principles.

1. List TWO examples of source documents.

_________________________________________________________________________________

_________________________________________________________________________________
(2 marks)

2. Identify ONE journal and ONE ledger which Lita Ward would use to record non-cash, (credit)
transactions.

Journal __________________________________________________________________________

Ledger __________________________________________________________________________
(2 marks)

3. State the TWO rules of entry which would be used by Lita Ward to record her receipts and payments.

_________________________________________________________________________________

_________________________________________________________________________________
(2 marks)

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Lita teaches Sita about assets, capital, liabilities, expenses and revenues and the accounting (balance sheet)
equation.

4. Write out the accounting (balance sheet) equation.

_________________________________________________________________________________

_________________________________________________________________________________
(2 marks)

5. Explain the balance sheet equation.

_________________________________________________________________________________

_________________________________________________________________________________
(2 marks)

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6. Lita shows Sita the following list of assets, liabilities, expenses and revenues she had recorded at the
end of the month of September 2013.

$
Computers and printers 20 800
Bank balance 20 300
3-year bank loan 25 000
Petty cash 240
Stock of printing paper 360
Amount owed to customers for jobs 600
Supplier: Devin Technologies 1 180
Rent and utilities owing 480
Purchases 39 510
Sales 49 500
Amount owed by customers for jobs 2 670
Stock of CDs 1 400
Prepaid insurance costs 1 350
Stock of printing ink 1 730

Lita explains to Sita how to prepare a Trial Balance.

On page 5, draw up the Trial Balance for Lita Ward Services as at 30 September 2013 showing CLEARLY
Lita’s capital. (9 marks)

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Write your answer to Question 6 here.

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7. Sita brings Lita information about Devin’s Technologies, a supplier whose balance brought forward
at the beginning of the month of October was $1 180. The information in the table below shows the
company’s transactions with Devin’s Technologies during the month of October.

Date Details Amount ($)

October 4 Paid by cheque 1 180
October 4 Purchases 5 500
October 22 Purchases 2 500

Draw up the T-account of Devin’s Technologies in the books of Lita Ward Services.

(3 marks)

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8. Lita Ward’s agreement with Devin’s Technologies states:

— Payment made within two weeks of the date of purchase earns a discount of 5% of the value of
purchases.

— Payment made after two weeks of the date of purchase is subject to a late payment charge of 3%.

Sita had made no payment to Devin’s Technologies except for the one on 4 October.

Using the information provided for Question 7 on page 6, complete the table below, then answer the
questions that follow.

Calculation of Amounts Owed to Supplier

Purchases earning late payment charge $

Late payment charge rate %
Late payment charge amount $
Purchases earning discount from supplier $
Discount rate %
Discount received amount $
Total amount to be paid on 1 November 2013

(i) State the amount of late payment charge owed to Devin’s Technologies at the end of October
2013.

__________________________________________________________________________

__________________________________________________________________________

(ii) State the amount of discount to be received if payment is made on 1 November 2013.

__________________________________________________________________________

__________________________________________________________________________

(iii) State the amount to be paid to Devin’s Technologies if Lita pays the full amount on
1 November 2013.

__________________________________________________________________________

__________________________________________________________________________
(7 marks)

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9. Lita tells Sita that she had bought the computers and printers on 1 November 2011 for $20 800 and
that she must calculate an expense called depreciation on these assets for every year or part year of
ownership.

Explain why depreciation is calculated on fixed assets.

_________________________________________________________________________________

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(1 mark)

10. Lita decides to use a method of depreciation that uses the same rate of 12% every year on the cost of
the computers and printers.

Using the table provided below, insert the correct information to arrive at the current Net Book Value
of the computers and printers bought on 1 November 2011.

Calculation of Net Book Value of Computers and Printers

Details (Insert responses here)

Rate of depreciation
Name of method of depreciation
Cost of computers and printers
Depreciation expense per year
Age of computers as at 31 October 2013
Accumulated depreciation expense as at 31 October 2013
Net book value as at 31 October 2013

(7 marks)

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11. Lita wants to find out whether the performance of the business has remained the same given that she
was absent during the month of October 2013. The following information is available.

September 2013 October 2013

Sales 48 500 49 900
Net Profit 18 430 18 463

(i) Calculate the net profit percentage for Lita Ward Services for EACH month shown above.

_______________________________________________________________________

_______________________________________________________________________
(2 marks)

(ii) Write, in a sentence, a report to Lita Ward on whether the business did better or worse in the
month of October.

_______________________________________________________________________

_______________________________________________________________________
(1 mark)

Total 40 marks

END OF TEST

IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.

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