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1 * * Cambridge International Examinations Cambridge Ordinary Level PRINCIPLES OF ACCOUNTS 7110/11 Paper 1 Multiple Choice May/June 2015 Additional Materials: Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended) 1 hour READ THESE INSTRUCTIONS FIRST Write in soft pencil. Do not use staples, paper clips, glue or correction fluid. Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you. DO NOT WRITE IN ANY BARCODES. There are thirty questions on this paper. Answer all questions. For each question there are four possible answers A, B, C and D. Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet. Read the instructions on the Answer Sheet very carefully. Each correct answer will score one mark. A mark will not be deducted for a wrong answer. Any rough working should be done in this booklet. Calculators may be used. This document consists of 10 printed pages and 2 blank pages. IB15 06_7110_11/3RP [Turn over

2 1 How should the owner of a business use his financial statements? 2 A B C D to calculate the cash drawings for the year to determine the amount due to trade payables to measure the change in the bank balance to monitor the progress of the business 2 A business had the following assets and liabilities. premises inventory trade receivables bank overdraft trade payables It took out a bank loan, 2000, to pay for a motor vehicle. What was the owner s capital after the transaction? A B C D Sarah sells goods on credit to Zafar. How is this recorded in Sarah s ledgers? general ledger sales ledger A credit sales account debit Zafar account B debit sales account credit Zafar account C credit Zafar account debit sales account D debit Zafar account credit sales account 4 Which statement about a debit note is correct? A B C D It is sent to a customer to request payment of an account. It is sent to a customer when his order cannot be supplied in full. It is sent to a supplier to order additional goods. It is sent to a supplier when damaged goods are received. 7110/11/M/J/15

3 3 5 Hassan maintains a sales journal, purchases journal, sales returns journal and a purchases returns journal. At the end of each month, Hassan transfers the totals of these journals to the ledger. Which entries will Hassan make in his ledger to record these totals? A B C D account to be debited purchases returns sales purchases returns sales returns purchases sales purchases sales returns account to be credited purchases sales returns purchases sales purchases returns sales returns purchases returns sales 6 At the end of April the discount column on the debit side of a three column cash book showed entries of 80 and 60. How is this recorded in the ledger? account(s) to be debited account(s) to be credited A discount allowed 140 individual debtor accounts 80 and 60 B discount received 140 individual creditor accounts 80 and 60 C D individual creditor accounts 80 and 60 individual debtor accounts 80 and 60 discount received 140 discount allowed /11/M/J/15 [Turn over

4 7 On 1 May a trader s bank statement showed an overdraft of 80. The following were recorded in the cash book but did not appear on the bank statement. 4 cheques not presented 194 amounts not credited 334 What was the balance in the cash book on 1 May? A B C D 60 debit 60 credit 220 debit 220 credit 8 The following account appeared in the books of Abdul Hanif account Debit Credit Balance March 1 Balance Cr 4 Purchases Cr 18 Returns Cr 31 Bank Cr Discount Cr Which statement is correct? A On 1 March Abdul owed Hanif 400. B C On 4 March Hanif purchased goods, 250, from Abdul. On 31 March Abdul allowed Hanif 8 trade discount. D On 31 March Hanif owed Abdul On 1 January 2014 a trader owed one month s rent. During the year rent was paid by a cheque. On 31 December 2014 two month s rent was prepaid. How did the trader calculate the rent for the year ended 31 December 2014? A B C D amount paid + opening accrual + closing prepayment amount paid + opening accrual closing prepayment amount paid opening accrual + closing prepayment amount paid opening accrual closing prepayment 7110/11/M/J/15

5 10 At the end of the financial year, Ryan had accrued motor expenses of 200. How will this appear in Ryan s ledger and statement of financial position? 5 motor expenses account in the ledger statement of financial position A credit balance brought down current asset B credit balance brought down current liability C debit balance brought down current asset D debit balance brought down current liability 11 A business maintains a provision for doubtful debts of 2% of trade receivables. On 1 January 2014 the provision was On 31 December 2014 the trade receivables amounted to Which entry should be made on 31 December 2014? debit credit A income statement 2000 provision for doubtful debts 2000 B provision for doubtful debts 2000 income statement 2000 C income statement 3000 provision for doubtful debts 3000 D provision for doubtful debts 3000 income statement Ezra received the following cheques. 210 from the sale of goods 1000 from the sale of old motor vehicle (at book value) 150 for rent of premises How did Ezra classify these receipts? sale of goods motor vehicle rent received A capital receipt capital receipt revenue receipt B capital receipt revenue receipt capital receipt C revenue receipt capital receipt revenue receipt D revenue receipt revenue receipt capital receipt 7110/11/M/J/15 [Turn over

6 13 Repairs to a motor vehicle were debited in error to the motor vehicles account. 6 How does this affect the profit for the year and the non-current assets in the statement of financial position? profit for the year non-current assets A overstated overstated B overstated understated C understated overstated D understated understated 14 What is the formula for calculating the depreciation for the year using the revaluation method? A B C D closing valuation + additions during the year opening valuation closing valuation additions during the year opening valuation opening valuation + additions during the year closing valuation opening valuation additions during the year closing valuation 15 A vehicle purchased for was sold four years later for The balance on the provision for depreciation account was at the date of sale. What was the profit or loss on the sale? A B C D 1000 loss 1000 profit 2000 profit 3000 loss 16 Carla is preparing her sales ledger control account. Where will she obtain information about contra entries? A B C D cash book general journal purchases ledger sales ledger 7110/11/M/J/15

7 7 17 On 1 January 2014 Kim s net assets totalled On 31 December 2014 they totalled During the year Kim withdrew 4000 for personal use. What was the profit or loss for the year? A B C D loss profit loss profit 18 How should inventory be valued? A B C D cost higher of cost and net realisable value lower of cost and net realisable value net realisable value 19 How is capital employed calculated? A B C D current assets current liabilities current assets (current liabilities + non-current liabilities) non-current assets + current assets current liabilities non-current assets + current assets (current liabilities + non-current liabilities) 20 Amelia is a photographer. She provided the following information. fees owing at the beginning of the year fees received during the year fees owing at the end of the year How much would be entered for fees in the income statement? A B C D In the accounts of a partnership, where would interest on drawings appear? A B C D capital accounts as a credit entry capital accounts as a debit entry current accounts as a credit entry current accounts as a debit entry 7110/11/M/J/15 [Turn over

8 8 22 Clear is a sole trader making annual profits of He decides to admit Deep as a partner. They agree that Clear would receive salary, and profits and losses would be shared equally. The forecast appropriation account for the partnership s first year of trading is: profit for the year salary Clear profit available for distribution By how much will Clear s total income increase? A 1000 B 6000 C D At the end of the financial year, some members of Allsports Club had not paid their subscription. How will these unpaid subscriptions be recorded by Allsports Club? receipts and payments account income and expenditure account statement of financial position asset liability A B C D 24 What is similar to a statement of affairs? A B C D bank reconciliation statement income statement statement of financial position trial balance 7110/11/M/J/15

9 25 Vivek provided the following information for the month of April. 9 increase in trade payables during the month 670 amounts paid to credit suppliers 5660 cash refunds from credit suppliers 250 discount received 310 What were purchases for April? A 4930 B 5050 C 6270 D A limited company provided the following information. January 1 ordinary shares of 1 each retained earnings December 31 profit for the year transfer to general reserve A dividend of 10 % on ordinary shares was paid during the year. What were the retained earnings on 31 December? A B C D Martha received gross pay of 1000 per month. Her employer provided the following information. percentage of gross pay employee s social security contribution 10 % employer s social security contribution 15 % income tax 20 % What was Martha s net pay for the month? A 550 B 650 C 700 D /11/M/J/15 [Turn over

10 10 28 A company provided the following information about its current ratio. Year : 1 Year : 1 Year : 1 What would explain the changes in the ratio? A B C D Inventory is decreasing. Other payables are increasing. Other receivables are increasing. Trade receivables are decreasing. 29 What is the going concern principle? A B C Accounting records are prepared assuming that the business will continue to operate in the foreseeable future. Income and expense should be accounted for in the same way they were accounted for in previous periods. Profit should not be anticipated and losses written off as soon as they are known. D Revenue and costs should be recognised as they are earned or incurred, not when the money is received or paid. 30 The payment of an insurance premium was entered in the cash book and in the insurance account. Which accounting principle was applied? A B C D accounting year dual aspect matching (accruals) materiality 7110/11/M/J/15

11 11 BLANK PAGE 7110/11/M/J/15

12 12 BLANK PAGE Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at after the live examination series. Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge. 7110/11/M/J/15

13 * * Cambridge International Examinations Cambridge Ordinary Level PRINCIPLES OF ACCOUNTS 7110/12 Paper 1 Multiple Choice May/June 2015 Additional Materials: Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended) 1 hour READ THESE INSTRUCTIONS FIRST Write in soft pencil. Do not use staples, paper clips, glue or correction fluid. Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided unless this has been done for you. DO NOT WRITE IN ANY BARCODES. There are thirty questions on this paper. Answer all questions. For each question there are four possible answers A, B, C and D. Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet. Read the instructions on the Answer Sheet very carefully. Each correct answer will score one mark. A mark will not be deducted for a wrong answer. Any rough working should be done in this booklet. Calculators may be used. This document consists of 10 printed pages and 2 blank pages. IB15 06_7110_12/2RP [Turn over

14 1 How should the owner of a business use his financial statements? 2 A B C D to calculate the cash drawings for the year to determine the amount due to trade payables to measure the change in the bank balance to monitor the progress of the business 2 Sarah sells goods on credit to Zafar. How is this recorded in Sarah s ledgers? general ledger sales ledger A credit sales account debit Zafar account B debit sales account credit Zafar account C credit Zafar account debit sales account D debit Zafar account credit sales account 3 Gail s statement of financial position included the following. non-current assets current assets current liabilities What was Gail s capital? A B C D /12/M/J/15

15 3 4 Hassan maintains a sales journal, purchases journal, sales returns journal and a purchases returns journal. At the end of each month, Hassan transfers the totals of these journals to the ledger. Which entries will Hassan make in his ledger to record these totals? A B C D account to be debited purchases returns sales purchases returns sales returns purchases sales purchases sales returns account to be credited purchases sales returns purchases sales purchases returns sales returns purchases returns sales 5 Which statement about a debit note is correct? A B C D It is sent to a customer to request payment of an account. It is sent to a customer when his order cannot be supplied in full. It is sent to a supplier to order additional goods. It is sent to a supplier when damaged goods are received. 6 A trader received his monthly bank statement. Which item(s) may have appeared on this statement? 1 bank charges 2 credit transfers 3 unpresented cheques A 1 and 2 B 1 only C 2 and 3 D 3 only 7110/12/M/J/15 [Turn over

16 7 The following account appeared in the books of Mary Which statement is correct? A On 1 April Paul owed Mary 90. Paul account Debit Credit Balance April 1 Balance Dr 14 Sales Dr 21 Returns Dr 30 Bank Dr Discount Dr B C On 14 April Paul sold goods, 150, to Mary. On 21 April Mary returned goods, 25, to Paul. D On 30 April Mary owed Paul Which error would be revealed by a trial balance? A a cheque for 78 entered on the correct sides in both W s account and the cash book as 87 B C D goods returned by a customer, 300, not entered in the books goods sold to Y for 650 correctly entered in the sales account and credited to Y s account the purchase of a machine, 3500, debited to the purchases account 9 Ali s financial year ends on 31 March. During the year ended 31 March 2015 Ali paid wages of On 31 March wages were accrued. Which journal entry records the transfer from the wages account to the income statement on 31 March 2015? debit credit A income statement wages B income statement wages C wages income statement D wages income statement /12/M/J/15

17 10 At the end of the financial year, Ryan had accrued motor expenses of 200. How will this appear in Ryan s ledger and statement of financial position? 5 motor expenses account in the ledger statement of financial position A credit balance brought down current asset B credit balance brought down current liability C debit balance brought down current asset D debit balance brought down current liability 11 At the end of her financial year Annie decided to reduce her provision for doubtful debts. Which entry recorded this? debit credit A bad debts provision for doubtful debts B income statement provision for doubtful debts C provision for doubtful debts bad debts D provision for doubtful debts income statement 12 Which transaction is a capital receipt? A B C D cash received from sale of goods interest received from bank proceeds of sale of equipment rent received from tenant 13 Repairs to a motor vehicle were debited in error to the motor vehicles account. How does this affect the profit for the year and the non-current assets in the statement of financial position? profit for the year non-current assets A overstated overstated B overstated understated C understated overstated D understated understated 7110/12/M/J/15 [Turn over

18 6 14 Sara started a business on 1 January 2013 and purchased equipment costing She depreciated the equipment by 20% per annum using the straight-line method. The equipment was sold for 5200 on 1 January What was the profit or loss on the sale of the equipment? A 800 loss B 800 profit C 1200 loss D 1200 profit 15 The totals of a trial balance failed to agree by 680 and the difference was entered in a suspense account. It was then found that rent received had been correctly entered in the cash book but treated as rent paid in the ledger. Which entry will correct this? account to be debited account to be credited A rent received 340 suspense 680 rent paid 340 B suspense 680 rent received 340 rent paid 340 C suspense 340 rent paid 680 rent received 340 D suspense 340 rent paid Why does a trader prepare a sales ledger control account? A B C D to determine when interest should be charged on overdue accounts to identify bad debts which should be written off to locate incorrect postings in the sales ledger to obtain totals to enter in the books of prime (original) entry 17 On 1 January 2014 Kim s net assets totalled On 31 December 2014 they totalled During the year Kim withdrew 4000 for personal use. What was the profit or loss for the year? A B C D loss profit loss profit 7110/12/M/J/15

19 7 18 How should inventory be valued? A B C D cost higher of cost and net realisable value lower of cost and net realisable value net realisable value 19 The owner of a business took goods for his own use but failed to make an entry in the accounts. What was the effect of this error? profit for the year capital employed A overstated no effect B overstated understated C understated no effect D understated overstated 20 The financial year of Tony and Paul ends on 30 April. On 1 May 2015 Tony had a debit balance of 5000 on his current account. What does this mean? A B C D He had invested 5000 in the business. He had withdrawn 5000 from the business. His drawings exceeded his total profit share. His total profit share exceeded his drawings. 21 What is similar to a statement of affairs? A B C D bank reconciliation statement income statement statement of financial position trial balance 7110/12/M/J/15 [Turn over

20 8 22 Omar started a business but did not maintain any accounting records. Which item(s) are included in a calculation to find credit purchases for his first year of trading? 1 amount owing to trade payables at year end 2 amount owing by trade receivables at year end 3 cash discount received A 1 and 3 B 1 only C 2 and 3 D 2 only 23 Which statement applies to preference shareholders? A B C D They are members of the company. They are usually entitled to vote. They get a fixed percentage of the profit each year. They get a fixed rate of interest each year. 24 A limited company provided the following information. January 1 ordinary shares of 1 each retained earnings December 31 profit for the year transfer to general reserve A dividend of 10 % on ordinary shares was paid during the year. What were the retained earnings on 31 December? A B C D /12/M/J/15

21 9 25 Raminder, a manufacturer, provided the following information for the year ended 30 April cost of materials used factory overheads wages machine operators work in progress 1 May work in progress 30 April What was the cost of production for the year ended 30 April 2015? A B C D Heng is paid a basic wage of 6 per hour for a 40 hour week. Any overtime is paid as follows: Monday to Saturday Sunday time and a quarter double time One week, Heng worked 45 hours. Of these, 3 hours were on Sunday. What was Heng s gross pay for the week? A 291 B C 351 D A business provided the following information. cost of sales gross profit expenses What was the profit for the year as a percentage of revenue? A 12 % B 15 % C 20 % D 25 % 28 A payment made from the business bank account for petrol for the owner s private car is not included in the income statement. Which accounting principle is being applied? A B C D accounting entity going concern historical cost money measurement 7110/12/M/J/15 [Turn over

22 10 29 A business's financial statements should include all the costs and income for the period to which they relate. Which accounting principle is referred to in this statement? A B C D accounting year consistency prudence matching (accruals) 30 What is the purpose of international accounting standards? A B C D to allow users to rely on the information in financial statements being error-free to enable accountants to get work easily anywhere in the world to enable non-accountants to understand all the information in financial statements to make it easier to compare financial statements prepared in different countries 7110/12/M/J/15

23 11 BLANK PAGE 7110/12/M/J/15

24 12 BLANK PAGE Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at after the live examination series. Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge. 7110/12/M/J/15

25 Cambridge International Examinations Cambridge Ordinary Level * * PRINCIPLES OF ACCOUNTS 7110/21 Paper 2 May/June hours Candidates answer on the Question Paper. No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Write your Centre number, candidate number and name on all the work you hand in. Write in dark blue or black pen. You may use an HB pencil for any diagrams or graphs. Do not use staples, paper clips, glue or correction fluid. DO NOT WRITE IN ANY BARCODES. Answer all questions. You may use a calculator. Where layouts are to be completed, you may not need all the lines for your answer. The businesses mentioned in this Question Paper are fictitious. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 19 printed pages and 1 blank page. DC (ST) /2 [Turn over

26 2 1 Mira prepared a trial balance using the following information on 31 March The trial balance failed to balance. REQUIRED Office fixtures (at cost) Office fixtures provision for depreciation 7200 Trade payables 5400 General expenses (prepaid) 1520 Trade receivables 3700 Inventory 7800 Bank overdraft 2600 Capital (a) Prepare the trial balance at 31 March 2015, including an appropriate balancing entry. Mira Trial Balance at 31 March 2015 Dr Cr Office fixtures (at cost) Office fixtures provision for depreciation Trade payables General expenses Trade receivables Inventory Bank overdraft Capital [4] 7110/21/M/J/15

27 On inspecting the books, Mira found the following errors: 3 1 A payment for general expenses, 750, had been correctly entered in the bank account, but had been recorded in the general expenses account as General expenses, 1000, had been recorded in the office fixtures account. REQUIRED (b) Prepare the entries in the general journal to correct items 1 and 2. Narratives are not required. General Journal Dr Cr [4] 7110/21/M/J/15 [Turn over

28 The following were some of the transactions completed in April April 9 April 11 April 14 April 19 Sold goods on credit to Yash. Yash returned goods sold on 9 April as they were damaged. Paid wages by cheque. Purchased office fixtures on credit from Equip Limited. REQUIRED (c) Complete the following table. The first item has been completed as an example. Date Transaction Source document Book of prime entry Account debited Account credited April 9 Sold goods on credit to Yash. Sales invoice Sales journal Yash Sales April 11 Yash returned goods sold on 9 April as damaged. April 14 Paid wages by cheque. April 19 Purchased office fixtures on credit from Equip Limited. [12] [Total: 20] 7110/21/M/J/15

29 2 The following information was obtained from the books of Arden. 5 1 February 2015 Trade receivables balance Dr Trade payables balance Cr 28 February 2015 Cheques received from trade receivables Cheque from trade receivable later dishonoured 200 Cheques paid to trade payables Discount allowed 2700 Discount received 910 Purchases returns Bad debts Cash sales March 2015 Trade receivables balance Dr Trade payables balance 8450 Cr REQUIRED (a) Prepare the purchases ledger control account showing the credit purchases made in the month of February Purchases ledger control account Date Details Date Details [6] 7110/21/M/J/15 [Turn over

30 6 (b) Prepare the sales ledger control account showing the credit sales made for the month of February Sales ledger control account Date Details Date Details Additional information 1 Payments for February Wages General expenses Balances at 1 February 28 February Inventory Non-current assets (at valuation) General expenses owing [7] 7110/21/M/J/15

31 7 REQUIRED (c) Prepare the income statement for the month ended 28 February Income Statement for the month ended 28 February 2015 (d) State two benefits to Arden of using Information Communication Technology (ICT) in his bookkeeping and accounting [2] [Total: 21] 7110/21/M/J/15 [6] [Turn over

32 8 3 Warle Limited provided the following information after the calculation of the profit for the year ended 30 April Additional information The directors have: Profit for the year ended 30 April Authorised share capital: 1 Ordinary shares Called up share capital: 1 Ordinary shares Interim dividend paid 3000 General reserve Retained profits 1 May transferred to the general reserve 2 paid a final ordinary shares dividend of 0.15 per share. REQUIRED (a) Prepare the statement of changes in equity for the year ended 30 April Warle Limited Statement of Changes in Equity for the year ended 30 April 2015 Share Capital General Reserve Retained Profits Total Balance at 1 May Profit for the year Transfer to general reserve Dividend paid (interim) Dividend paid (final) Balance at 30 April [6] 7110/21/M/J/15

33 9 (b) Prepare the statement of financial position extract for the equity and reserves of Warle Limited at 30 April Statement of Financial Position extract at 30 April [5] (c) State two differences between preference shares and debentures [4] (d) State two possible reasons why the directors of Warle Limited have transferred to the general reserve [2] 7110/21/M/J/15 [Turn over

34 10 (e) State two reasons why large companies prepare their published financial statements in accordance with International Accounting Standards (IAS) [2] [Total: 19] 7110/21/M/J/15

35 4 John provided the following information for the year ended 31 March REQUIRED 11 Revenue Inventory 1 April Inventory 31 March Expenses Owner s capital Long term loan Mark up 20% (a) Calculate for the year ended 31 March 2015: (i) Cost of goods sold...[2] (ii) Profit for the year...[2] 7110/21/M/J/15 [Turn over

36 12 (b) Calculate the following ratios. Workings 31 March March 2014 Profit margin (profit for the year to revenue) Rate of inventory turnover Return on capital employed (ROCE) 5% 7 times 4% [6] (c) Give two comments on the performance of John s business over the two years [6] 7110/21/M/J/15

37 John is considering the following proposals to improve his profit for the year Change the depreciation methods for non-current assets. 2 Remove the provision for doubtful debts from the financial statements. 3 Value the inventory at market price. 4 Place a value on the skill of the workforce in the financial statements. 5 Exclude expenses owing from the income statement. REQUIRED (d) Name the accounting principle/concept which would not be complied with if each proposal was implemented. The first one has been completed as an example. Proposal 1 Change the depreciation methods for non-current assets Accounting principle/ concept Consistency 2 Remove the provision for doubtful debts from the financial statements 3 Value the inventory at market price 4 Place a value on the skill of the workforce in the financial statements 5 Exclude expenses owing from the income statement [4] [Total: 20] 7110/21/M/J/15 [Turn over

38 14 5 The following balances were extracted from the books of Spiron Manufacturing on 30 April Factory machinery (cost) Office fixtures (cost) Provision for depreciation Factory machinery Office fixtures 8000 Purchases of raw materials Inventory at 1 May 2014 Raw materials Work in progress Finished goods Revenue Purchases of finished goods Factory managers salaries Office wages and salaries Direct factory expenses 5600 Indirect factory expenses 9800 Factory wages Rent Insurance 8000 Marketing expenses Distribution costs 9850 Financial expenses 7650 Provision for doubtful debts 400 Trade receivables Trade payables Bank 7700 Dr Capital Drawings /21/M/J/15

39 15 Additional information at 30 April Inventory was valued as follows: Raw materials Work in progress Finished goods Insurance and rent are to be apportioned 80% to the factory and 20% to the office. 3 Financial expenses owing were Marketing expenses of 600 were prepaid. 5 Depreciation is to be charged as follows: (i) (ii) Factory machinery at 25% per annum using the diminishing (reducing) balance method Office fixtures at 15% using the straight-line method. 6 A debt of 1900 was considered irrecoverable. A provision for doubtful debts is to be maintained at 5%. 7110/21/M/J/15 [Turn over

40 16 REQUIRED (a) Prepare the manufacturing account for the year ended 30 April Show clearly the prime cost and the cost of production. Spiron Manufacturing Manufacturing Account for the year ended 30 April /21/M/J/15 [13]

41 (b) Prepare the income statement for the year ended 30 April Income Statement for the year ended 30 April 2015 [15] 7110/21/M/J/15 [Turn over

42 18 (c) Prepare the statement of financial position at 30 April Statement of Financial Position at 30 April /21/M/J/15

43 [12] [Total: 40] 7110/21/M/J/15

44 20 BLANK PAGE Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at after the live examination series. Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge. 7110/21/M/J/15

45 Cambridge International Examinations Cambridge Ordinary Level * * PRINCIPLES OF ACCOUNTS 7110/22 Paper 2 May/June hours Candidates answer on the Question Paper. No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Write your Centre number, candidate number and name on all the work you hand in. Write in dark blue or black pen. You may use an HB pencil for any diagrams or graphs. Do not use staples, paper clips, glue or correction fluid. DO NOT WRITE IN ANY BARCODES. Answer all questions. You may use a calculator. Where layouts are to be completed, you may not need all the lines for your answer. The businesses mentioned in this Question Paper are fictitious. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 19 printed pages and 1 blank page. DC (ST) /3 [Turn over

46 1 The following balances were available from the books of Priya on 1 April Putil Wages 3000 credit 1750 debit The following transactions took place in April April 5 Paid Putil half of his outstanding balance on 1 April by cheque, less 2% cash discount April 8 Bought goods on credit from Putil, 800, less 20% trade discount April 19 Paid wages in cash 450 April 23 Returned goods, list price 200, purchased on 5 April April 26 Sold a non-current asset at book value, 2000, on credit REQUIRED (a) Complete the following table. The first item has been completed as an example. Where the owner s capital is not affected, write No effect. Date Transaction Source document Book of prime entry Effect on owner s capital April 5 Paid Putil half of his outstanding balance on 1 April by cheque, less 2% cash discount Cheque counterfoil Cash book +30 April 8 Bought goods on credit from Putil, 800, less 20% trade discount April 19 Paid wages in cash 450 April 23 Returned goods, list price 200, purchased on 8 April April 26 Sold a non-current asset at book value, 2000, on credit [12] 7110/22/M/J/15

47 3 (b) Prepare the account of Putil for the month of April Balance the account and bring down the balance on 1 May Putil account Date Details Date Details Priya prepared her income statement on 30 April She calculated that wages, 150, were prepaid at that date. REQUIRED (c) Prepare the wages account for the month of April 2015 including the transfer to the income statement. Balance the account and bring down the balance on 1 May Wages account [5] Date Details Date Details [3] [Total: 20] 7110/22/M/J/15 [Turn over

48 2 Atto Electrical had the following non-current assets on 31 March Net book value Premises (cost ) Motor vehicles (cost ) Computers Atto Electrical has the following depreciation policy. 4 Premises are depreciated at the rate of 2% per annum by straight-line method. Motor vehicles are depreciated at the rate of 25% per annum by diminishing (reducing) balance method. Computers are depreciated by revaluation method. A full year s depreciation is charged on all non-current assets owned at the end of the financial year. Additional information 1 There were no purchases or sales of non-current assets during the year ended 31 March The following purchases of non-current assets were made during the year ended 31 March Payments were made by cheque. Premises Motor vehicles 9000 Computers Computers were valued as follows: 31 March March REQUIRED (a) Explain the term depreciation....[2] (b) State one cause of depreciation of a computer....[1] 7110/22/M/J/15

49 5 (c) Complete the table to show the depreciation to be charged to the income statement for each of the years ended 31 March 2014 and 31 March Year ended 31 March 2014 Year ended 31 March 2015 Premises Motor vehicles Computers [6] Question 2(d) is on the next page. 7110/22/M/J/15 [Turn over

50 6 (d) Prepare the following ledger accounts for each of the years ended 31 March 2014 and 31 March Balance the accounts and bring down the balances on 1 April. Motor vehicles account Date Details Date Details Motor vehicles provision for depreciation account [4] Date Details Date Details [5] 7110/22/M/J/15

51 7 (e) Identify which two of the following accounting principles/concepts support the charging of depreciation in an accounting year. Accruals/Matching Dual aspect Going concern Materiality Money measurement [2] [Total: 20] 7110/22/M/J/15 [Turn over

52 3 The following information is available for the Axton Chess Club. 8 Receipts and Payments Account for the year ended 31 March 2015 Balance b/d 1 April Rent of clubroom 2000 Subscriptions 3260 Treasurer s salary 250 Competition entry Purchase of fixtures fees received 1580 and equipment 1100 Donations 350 Competition prizes 750 Balance c/d 31 March Travelling expenses Other operating expenses Balance b/d 1 April Additional information 1 Balances at: 1 April March 2015 Subscriptions in advance 450 Subscriptions in arrears Fixtures and equipment (valuation) Rent of clubroom prepaid 50 Rent of clubroom accrued 70 Other operating expenses accrued Accumulated fund 4500? of the subscriptions in arrears on 1 April 2014 were subsequently received. 3 Subscriptions not paid after 12 months were considered irrecoverable. REQUIRED (a) Prepare the subscriptions account for the year ended 31 March 2015, showing the transfer to the income and expenditure account. Balance the account and bring down the balances on 1 April Subscriptions account Date Details Date Details 7110/22/M/J/15 [5]

53 (b) Prepare the income and expenditure account for the year ended 31 March Axton Chess Club Income and Expenditure Account for the year ended 31 March 2015 [8] 7110/22/M/J/15 [Turn over

54 10 (c) Prepare the statement of financial position at 31 March Statement of Financial Position at 31 March [7] [Total: 20] 7110/22/M/J/15

55 4 Xever provided the following information for the year ended 31 March REQUIRED 11 Capital Bank loan (repayable 1 Jan 2020) Inventory 1 April Inventory 31 March Cost of sales Trade receivables Trade payables Bank overdraft Mark up 20% Profit margin (profit for the year to revenue) 5% (a) Calculate the following for the year ended 31 March (i) Revenue...[2] (ii) Purchases...[2] (iii) Expenses for the year...[2] 7110/22/M/J/15 [Turn over

56 12 (b) Calculate the following ratios, correct to two decimal places. The previous year s ratios are shown in the last column. Workings 31 March March 2014 Gross profit margin (gross profit to revenue) Return on capital employed (ROCE) Rate of turnover of inventory Quick ratio (acid test ratio) 25.61% 12.00% 2.82 times 0.91:1 [8] (c) Comment on the changes to Xever s business over the two years under the following headings. (i) Profitability...[3] (ii) Liquidity...[3] [Total: 20] 7110/22/M/J/15

57 13 Question 5 is on the next page. 7110/22/M/J/15 [Turn over

58 14 5 Farah and Hana are in partnership. The partnership agreement states that they share profits and losses equally. Interest on capital is allowed at the rate of 4% per annum. Interest is charged on drawings made during the year at the rate of 5% per annum. No salaries are paid to the partners. The following balances were extracted from the books on 30 April Premises (cost) Delivery vehicles (cost) Office fixtures (cost) Provisions for depreciation Premises 3600 Delivery vehicles Office fixtures Trade payables 7900 Trade receivables Provision for doubtful debts 500 Bank overdraft Capital accounts: Farah Hana Current accounts at 1 May 2014: Farah 3250 Cr Hana 1850 Cr Drawings: Farah 6000 Hana 6000 Purchases Revenue Returns inwards 8600 Inventory at 1 May Advertising expenses Wages and salaries Delivery vehicle expenses Heat and light 9750 Other operating expenses /22/M/J/15

59 15 Additional information The following information was available 30 April Inventory was valued at Advertising expenses prepaid were Heat and light 150 was outstanding. 4 Depreciation is to be charged on all non-current assets owned at the end of the year as follows: Premises at the rate of 2% on cost per annum Delivery vehicles at the rate of 20% per annum using the diminishing (reducing) balance method Office fixtures at the rate of 10% per annum using the straight-line method. 5 The provision for doubtful debts is to be maintained at 4%. 6 A cheque payment of 550, made to a credit supplier on 15 April, had not been recorded in the books. Question 5(a) is on the next page. 7110/22/M/J/15 [Turn over

60 16 REQUIRED (a) Prepare the income statement and appropriation account for the year ended 30 April Farah and Hana Income Statement and Appropriation Account for the year ended 30 April /22/M/J/15

61 17 [18] (b) Prepare the current accounts for the year ended 30 April Current accounts Details Farah Hana Details Farah Hana [7] 7110/22/M/J/15 [Turn over

62 18 (c) Prepare the statement of financial position at 30 April Statement of Financial Position at 30 April /22/M/J/15

63 19..[15] [Total: 40] 7110/22/M/J/15

64 20 BLANK PAGE Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at after the live examination series. Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge. 7110/22/M/J/15

65 Cambridge International Examinations Cambridge Ordinary Level * * PRINCIPLES OF ACCOUNTS 7110/22 Paper 2 May/June hours Candidates answer on the Question Paper. No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Write your Centre number, candidate number and name on all the work you hand in. Write in dark blue or black pen. You may use an HB pencil for any diagrams or graphs. Do not use staples, paper clips, glue or correction fluid. DO NOT WRITE IN ANY BARCODES. Answer all questions. You may use a calculator. Where layouts are to be completed, you may not need all the lines for your answer. The businesses mentioned in this Question Paper are fictitious. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 19 printed pages and 1 blank page. DC (ST) /4 R [Turn over

66 1 The following balances were available from the books of Priya on 1 April Putil Wages 3000 credit 1750 debit The following transactions took place in April April 5 Paid Putil half of his outstanding balance on 1 April by cheque, less 2% cash discount April 8 Bought goods on credit from Putil, 800, less 20% trade discount April 19 Paid wages in cash 450 April 23 Returned goods, list price 200, purchased on 8 April April 26 Sold a non-current asset at book value, 2000, on credit REQUIRED (a) Complete the following table. The first item has been completed as an example. Where the owner s capital is not affected, write No effect. Date Transaction Source document Book of prime entry Effect on owner s capital April 5 Paid Putil half of his outstanding balance on 1 April by cheque, less 2% cash discount Cheque counterfoil Cash book +30 April 8 Bought goods on credit from Putil, 800, less 20% trade discount April 19 Paid wages in cash 450 April 23 Returned goods, list price 200, purchased on 8 April April 26 Sold a non-current asset at book value, 2000, on credit [12] 7110/22/M/J/15

67 3 (b) Prepare the account of Putil for the month of April Balance the account and bring down the balance on 1 May Putil account Date Details Date Details Priya prepared her income statement on 30 April She calculated that wages, 150, were prepaid at that date. REQUIRED (c) Prepare the wages account for the month of April 2015 including the transfer to the income statement. Balance the account and bring down the balance on 1 May Wages account [5] Date Details Date Details [3] [Total: 20] 7110/22/M/J/15 [Turn over

68 2 Atto Electrical had the following non-current assets on 31 March Net book value Premises (cost ) Motor vehicles (cost ) Computers Atto Electrical has the following depreciation policy. 4 Premises are depreciated at the rate of 2% per annum by straight-line method. Motor vehicles are depreciated at the rate of 25% per annum by diminishing (reducing) balance method. Computers are depreciated by revaluation method. A full year s depreciation is charged on all non-current assets owned at the end of the financial year. Additional information 1 There were no purchases or sales of non-current assets during the year ended 31 March The following purchases of non-current assets were made during the year ended 31 March Payments were made by cheque. Premises Motor vehicles 9000 Computers Computers were valued as follows: 31 March March REQUIRED (a) Explain the term depreciation....[2] (b) State one cause of depreciation of a computer....[1] 7110/22/M/J/15

69 5 (c) Complete the table to show the depreciation to be charged to the income statement for each of the years ended 31 March 2014 and 31 March Year ended 31 March 2014 Year ended 31 March 2015 Premises Motor vehicles Computers [6] Question 2(d) is on the next page. 7110/22/M/J/15 [Turn over

70 6 (d) Prepare the following ledger accounts for each of the years ended 31 March 2014 and 31 March Balance the accounts and bring down the balances on 1 April. Motor vehicles account Date Details Date Details Motor vehicles provision for depreciation account [4] Date Details Date Details [5] 7110/22/M/J/15

71 7 (e) Identify which two of the following accounting principles/concepts support the charging of depreciation in an accounting year. Accruals/Matching Dual aspect Going concern Materiality Money measurement [2] [Total: 20] 7110/22/M/J/15 [Turn over

72 3 The following information is available for the Axton Chess Club. 8 Receipts and Payments Account for the year ended 31 March 2015 Balance b/d 1 April Rent of clubroom 2000 Subscriptions 3260 Treasurer s salary 250 Competition entry Purchase of fixtures fees received 1580 and equipment 1100 Donations 350 Competition prizes 750 Balance c/d 31 March Travelling expenses Other operating expenses Balance b/d 1 April Additional information 1 Balances at: 1 April March 2015 Subscriptions in advance 450 Subscriptions in arrears Fixtures and equipment (valuation) Rent of clubroom prepaid 50 Rent of clubroom accrued 70 Other operating expenses accrued Accumulated fund 4500? of the subscriptions in arrears on 1 April 2014 were subsequently received. 3 Subscriptions not paid after 12 months were considered irrecoverable. REQUIRED (a) Prepare the subscriptions account for the year ended 31 March 2015, showing the transfer to the income and expenditure account. Balance the account and bring down the balances on 1 April Subscriptions account Date Details Date Details 7110/22/M/J/15 [5]