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Accounting
Paper 1

Wednesday 9 January 2013 – Morning Paper Reference

Time: 2 hours 30 minutes 4AC0/01

You do not need any other materials. Total Marks

Instructions
t Use black ink or ball-point pen.
t Fill in the boxes at the top of this page with your name,
centre number and candidate number.
t Answer all questions.
t Answer the questions in the spaces provided
– there may be more space than you need.

Information
t The total mark for this paper is 100.
t The marks for each question are shown in brackets
– use this as a guide as to how much time to spend on each question.
t Calculators may be used.
Advice
t Write
Read each question carefully before you start to answer it.
t Try toyour answers neatly and in good English.
t Checkanswer every question.
t your answers if you have time at the end.

Turn over

P42217A
©2013 Pearson Education Ltd.
*P42217A0120*
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Section A
Answer ALL questions
Choose an answer A, B, C or D, and put a cross in the box .
If you change your mind about an answer, put a line through the box
and then mark your new answer with a cross .
1 Which transaction would be recorded in the purchases ledger?

A a payment by cheque to a credit supplier

B payment received from a debtor
C purchase of goods for cash
D purchase of machinery on credit

(Total for Question 1 = 1 mark)

2 The purpose of a credit note is to

A allow for cash discount
B ask for payment in advance
C increase the amount due on an invoice
D reduce the amount payable on an invoice

(Total for Question 2 = 1 mark)

3 In which book of original entry will credit notes received be recorded?

A purchases journal
B purchases returns journal
C sales journal
D sales returns journal

(Total for Question 3 = 1 mark)

4 Which transaction would be recorded in the business’s journal?

A cash withdrawn by the owner for his personal use
B payment of rent by direct debit
C purchase of a new motor vehicle on credit
D return of goods to a credit supplier

(Total for Question 4 = 1 mark)

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5 Which is a fixed asset?

A computer discs
B motor vehicle
C motor vehicle repairs
D rent

(Total for Question 5 = 1 mark)

6 What is the effect of treating capital expenditure as revenue expenditure?

A gross profit overstated
B net profit overstated
C fixed assets understated
D fixed assets overstated

(Total for Question 6 = 1 mark)

7 Which of the following errors would affect the balancing of the trial balance?
A addition
B commission
C omission
D principle

(Total for Question 7 = 1 mark)

8 The owner of a business takes goods valued at £25 for their own use. This was not
recorded in the accounts. What is the effect of this error on net profit?
A overstated £25

B understated £25

C overstated £50

D understated £50

(Total for Question 8 = 1 mark)

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9 What is the term used by a club or society to represent capital?

A accumulated fund
B bank balance
C subscriptions
D surplus

(Total for Question 9 = 1 mark)

10 At the start of 2012 a club had outstanding subscriptions of £850. During 2012 they
received subscriptions totalling £5 000, with a further £500 outstanding at the end
of the year. What amount should appear in the income and expenditure account for
2012?

A £3 650
B £4 150
C £4 650
D £5 500

(Total for Question 10 = 1 mark)

TOTAL FOR SECTION A = 10 MARKS

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SECTION B
Answer ALL questions.
11 The following transactions took place in November 2012 between Gregory and his
credit customer Roberto.

Nov Transaction
1 Roberto owed Gregory £500.
Roberto purchased goods, list price, £600, less 25%
4
trade discount.
12 Roberto returned goods with a list price of £80.
Roberto paid the balance due on November 1 by
24
cheque, after deducting a cash discount of 5%.

(a) Prepare Roberto’s account in Gregory's ledger for the month of November 2012.
Balance the account on 30 November 2012 and bring the balance down on
1 December 2012.
(8)
Roberto Account

Date Narration £ Date Narration £

(b) In what section of Gregory's balance sheet will the balance on November 30 be
shown?
(1)

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(c) Explain the meaning of the following terms.

(4)
Trade discount

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Cash discount

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(d) Show how the cash discount given to Roberto would be recorded in Gregory’s
books of account.
(2)

Debit

Credit

(Total for Question 11 = 15 marks)

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12 The following balances remained in the books of Ganchi Limited after the preparation
of the trading and profit and loss account for the year ended 31 October 2012.

£000
Land and buildings 650
Motor vehicles (Cost) 65
Provision for depreciation – motor vehicles 25
Debtors 40
Creditors 30
Cash in hand 4
Bank overdraft 10
Provision for doubtful debts 2
Stock – 31 October 2012 128
Ordinary share capital – 500 000 shares @ £1 each 500
6% Debentures 50
General reserve – 1 November 2011 20
Profit and loss account – 1 November 2011 175

Additional information

t
5IF
OFU
QSPGJU
GPS
UIF
ZFBS
FOEFE

0DUPCFS

CFGPSF
BQQSPQSJBUJPOT
XBT

£125 000.

t
%VSJOH
UIF
ZFBS
FOEFE

0DUPCFS

UIF
DPNQBOZ
QBJE
BO
JOUFSJN
PSEJOBSZ

share dividend of £0.10 per share.

t
0O

0DUPCFS

UIF
EJSFDUPST
QSPQPTFE
UP
QBZ
B
GJOBM
PSEJOBSZ
TIBSF
EJWJEFOE

of £0.05 per share, and to transfer £10 000 to the general reserve.

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(a) Prepare the appropriation account of Ganchi Limited for the year ended
31 October 2012.
(4)
Ganchi Limited Appropriation Account
Year ended 31 October 2012

(b) Prepare the balance sheet of Ganchi Limited at 31 October 2012.

(12)
Ganchi Limited
Balance Sheet at 31 October 2012

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(c) Using the figures calculated in (b), and stating the formula used, calculate each of
the following ratios to two decimal places.
Current ratio
(2)

Formula Calculation

Quick ratio (acid test)

(2)

Formula Calculation

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(d) Evaluate the importance of these two ratios to Ganchi Limited and suggest one
way in which the quick ratio (acid test) could be improved.
(5)

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(Total for Question 12 = 25 marks)

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13 Barack, a sole trader, had the following balances remaining in his books after the
preparation of his trading account for the year ended 30 November 2012.
Trial Balance
At 30 November 2012

Account £ £
Capital – 1 December 2011 60 000
Creditors 6 000
Drawings 14 350
Fixtures and fittings 14 000
Gross profit 22 907
Heat and light 1 325
Motor vehicles 25 000
Motor vehicles repairs 4 322
Rent and rates 7 860
Stock 30 November 2012 2 400
Wages and salaries 19 650
88907 88907

After the preparation of the trial balance, Barack discovered the following errors and
omissions:
1. Drawings, £650, had been posted to the wages and salaries account.
2. An electric bill for £175 was outstanding on 30 November 2012. No adjustment
had been made for this in the accounts.
3. A payment to a creditor, £360, had been incorrectly credited to the creditor and
debited to the bank.

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(a) Prepare the journal entries to correct the above three errors and omissions.
Narratives are not required.
(6)
The Journal

Account Debit Credit

(b) Prepare the profit and loss account for the year ended 30 November 2012 after
taking into account the above errors and omissions.
(4)
Barack
Profit and Loss Account
For year ended 30 November 2012

£ £

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Barack is concerned that his capital has been decreasing over the years.
(c) Evaluate the likely causes of this decrease and suggest steps that could be taken
to improve the current situation in the short-term and the long-term.
(5)

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. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

(Total for Question 13 = 15 marks)

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14 Precious and Little are in partnership sharing profits and losses equally after paying
the partners' interest on capital at 5% per annum and paying Little an annual salary
of £10 000.
On 1 October 2011 the balances on the partners’ capital accounts and current
accounts were as follows:

Capital account Current account

Precious £50 000 £13 200
Little £35 000 £8 700 (Dr)

The profit for the year ended 30 September 2012 was £57 250.
(a) Prepare the appropriation account of the partnership for the year ended
30 September 2012.
(6)
Precious and Little
Appropriation Account
Year ended 30 September 2012

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During the year ended 30 September 2012 the partners withdrew the following
monies:

£
Precious 16 200
Little 21 000

(b) Prepare Little's current account for the year ended 30 September 2012. Balance
the account and bring the balance down to 1 October 2012.
(5)
Current Account – Little

Date Narration £ Date Narration £

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(c) Explain the meaning of each of the following accounting concepts, using an
example to illustrate its application.
Accruals/Matching
(3)

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

Business entity
(3)

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

Going concern
(3)

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

(Total for Question 14 = 20 marks)

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15 During the year ended 31 December 2012, Streep, a trader, wrote off the sum of £650
in bad debts. At this date she was also advised that a debtor, Thatcher, who owed
£800 on 1 January 2012 had been declared bankrupt. Streep received £350 in full
settlement of this debt and the remainder was to be written off.
(a) Prepare the bad debts account in the books of Streep for the year ended
31 December 2012.
(4)
Bad Debts Account

Date Narration £ Date Narration £

(b) Prepare the account of Thatcher for the year ended 31 December 2012.
(3)
Thatcher Account

Date Narration £ Date Narration £

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Streep has recently purchased a new motor vehicle for use in the business.
(c) Explain the difference between capital and revenue expenditure and state how
each is treated in the end-of-year accounts.
(4)

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . .................................... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............................................................................................................................................ . . . . . . . . . . . . . . . . . . . .

(d) Indicate by placing a tick (√) which transactions are capital expenditure and which
are revenue expenditure.
(4)

Capital Revenue
Transaction
expenditure expenditure

Purchase of new premises

Insurance of premises

Installing and testing an air conditioning system

Repairs to premises roof

(Total for Question 15 = 15 marks)

TOTAL FOR SECTION B = 90 MARKS

TOTAL FOR PAPER = 100 MARKS

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