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3 MG has been in business for a number of years as a furniture manufacturer. On 31 August 2022
the bank column of his cash book showed the business had $25 600 in the bank account. The
bank statement on this date showed a credit balance of $24 815.

The following transactions were included only in the cash book.

$
Cheque paid to JW 680
Cheque received from TH 910

In addition, an error had been identified. A standing order for rates of $205 had incorrectly been
recorded in the cash book as $255.

The following transactions were included only on the bank statement.

$
Dishonoured cheque received from RJ 420
Insurance paid by direct debit 110
Bank charges 75

REQUIRED

(a) Update the cash book of MG. Bring down the updated balance on 1 September 2022.

MG
Cash book (bank columns only)

Date Details $ Date Details $

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[5]

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(b) Prepare a bank reconciliation statement at 31 August 2022.

MG
Bank reconciliation statement at 31 August 2022

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(c) State two reasons why a business would prepare a bank reconciliation statement.

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[2]

(d) State two possible reasons why the cheque from RJ was dishonoured.

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(e) Explain the differences between a direct debit and a standing order.

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© UCLES 2022 7707/22/O/N/22

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(f) A potential new customer has asked MG for a 5% discount on any orders placed. Advise MG
on whether to accept or decline these terms. Justify your answer.

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[Total: 20]

© UCLES 2022 7707/22/O/N/22 [Turn over

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2 Rasheed started a business on 1 October 2021. He maintains a petty cash book in the business.
A monthly imprest of $100 is restored on the first day of each month.

REQUIRED

(a) State two advantages of maintaining a petty cash book.

1 ................................................................................................................................................

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2 ................................................................................................................................................

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Rasheed’s transactions for the month of September 2022 were as follows.

$
September 2 Paid taxi fare 12
7 Paid purchases ledger account of Crystal 16
13 Bought postage stamps 10
18 Paid purchases ledger account of Kalpa 15
25 Paid bus fare 5
29 Paid cleaner 28

REQUIRED

(b) Complete Rasheed’s petty cash book for the month of September 2022 on the next page.

Balance the petty cash book and bring down the balance on 1 October 2022. Clearly show
the amount required to restore the imprest.
[8]

© UCLES 2022 7707/23/O/N/22

 Rasheed – Petty Cash Book

Total Date Details Total Travel Postage Cleaning Ledger

Received paid accounts

© UCLES 2022
$ 2022 $ $ $ $ $

100 September 1 Cash ........................ ........................ ........................ ........................ ........................

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7707/23/O/N/22
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(c) Record the entries which would be made in the following accounts in September 2022. It is
not necessary to total or balance the accounts.

Rasheed
Postage account

Date Details $ Date Details $

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Purchases ledger
Crystal account

Date Details $ Date Details $

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[2]

At the end of his first year in business Rasheed had a closing inventory of $8600.

REQUIRED

(d) Prepare the inventory account at 30 September 2022. Balance the account and bring down
the balance on 1 October 2022.

Rasheed
Inventory account

Date Details $ Date Details $

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[2]

© UCLES 2022 7707/23/O/N/22

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(e) At the end of his first year in business Rasheed would like to compare his financial performance
with other businesses. Explain to Rasheed three problems of inter-firm comparison.

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[6]

[Total: 20]

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1 Jenny runs a small trading business.

Jenny received her bank statement which showed a credit balance of $1367 on 29 February 2024.
On the same date her bank column in her cash book showed an overdrawn balance of $1933.

When comparing her bank statement and cash book she found that the following items appeared
on her bank statement and not in her cash book:

February $
26 M Stores, a credit customer, had paid by bank transfer 1 900
26 Interest received 358

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27 A cheque previously received from C Stores had been dishonoured 1 121
28 Bank charges 125
28 A direct debit for electricity had been taken 290

The following items appeared in her cash book but not on her bank statement

February $
23 A cheque paid to B Properties 1 025
27 A payment by credit transfer to pay for rent and insurance 2 300
28 A cheque received from a credit customer Y Traders was paid into the bank 792

Upon investigation, she discovered the following error:

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A cheque made payable to D Sports $45 had been recorded in the bank column of her cash
book. The cheque had been written from her personal account to pay for her gym membership.

REQUIRED:

(a) Update the bank column of Jenny’s cash book.

Balance the account and bring down the balance on 1 March 2024.

Jenny
Cash book – bank columns

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Date Details $ Date Details $

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[7]
ĬÍĊ¾Ġ´íÈõÏĪÅĊßû¸þ×
© UCLES 2024 ĬąÐñÍĞĉėÙĄĈ¹ĊÛ·ÔõĂ
ĥĥąÕõõąõÕÕõÅąĕåĕąÕ
7707/23/O/N/24
 * 0000800000003 *
DO NOT WRITE IN THIS MARGIN

3
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(b) Prepare a bank reconciliation statement at 29 February 2024.

Start with the balance from Jenny’s bank statement.

Jenny
Bank reconciliation at 29 February 2024

$ $
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[5]

(c) Suggest two advantages of preparing a bank reconciliation statement.

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1 ................................................................................................................................................

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2 ................................................................................................................................................

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(d) Explain why a bank overdraft is shown as a debit balance on a bank statement.

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ĬÏĊ¾Ġ´íÈõÏĪÅĊßù¸þ×
© UCLES 2024 ĬąÏòÕĬąħàöùðÎãģÔąĂ
ĥĥõĕµĕĥĕÅååÅąõÅÕĕÕ
7707/23/O/N/24 [Turn over
 * 0000800000004 *

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4
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Jenny is concerned about her bank overdraft and is considering adding additional capital into
the business from her personal funds.

REQUIRED:

(e) Advise Jenny whether she should contribute additional capital to pay off her bank overdraft.
Justify your answer.

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[Total: 20]
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ĬÍĊ¾Ġ´íÈõÏĪÅĊÝû¸Ā×
© UCLES 2024 ĬąÏóÕĢ÷ĢÛüò÷ðÿÁÄíĂ
ĥÕåĕõĕĥµåąÕÅÅõĥÕąÕ
7707/23/O/N/24