ACCOUNTING ORDINARY LEVEL GRADE 12 1 1. Jane and Allen are in partnership. Their partnership agreement provides that 1. Interest on capital is allowed at 10% per annum. 2. Interest on drawings is charged at 5% per annum, calculated on the balances of the Drawings accounts at the end of the financial year. 3. Allen receives a salary of N$15 00 a year 4. Remaining profits are shared: Jane three quarters (¾) Allen one quarter (¼) The financial year end of the partnership is 30 September. On 30 September 2010 balances in the partnership books included: N$ Profit and Loss Account (net profit for year) 32 000 Capital account: Jane 50 000 Allen 30 000 Drawings account: Jane 20 000 Allen 10 000 Prepare the partnership s Profit and Loss Appropriation Account for the year ended 30 September 2010. Jane and Allen Profit and Loss Appropriation Account for the year ended 30 September 2010 Net Profit 32 000 Add: interest on drawings: Jane 20 000 x 5 1 000 Allen 10 000 x 5 500 1 500 33 500 Less: interest on capital: Jane 50 000 x 10 5 000 Allen 30 000 x 10 3 000 8 000 25 500 Less: salary: Allen 15 000 Profit share: Jane 10 500 x 3 1 4 7 875 10 500 Allen 10 500 x 1 1 4 2 625 10 000 0 [14]
2. On 31 October a Trial Balance showed a difference, which was posted to a Suspense account. The following errors were later discovered. 2 1. A payment of N$ 520 for electricity had been entered on the debit side of the electricity account as N$620. 2. Machinery repairs costing N$1 000 had been debited to the Machinery account. 3. Insurance premiums paid, N$1 200, had been posted to the credit side of the insurance account. (a) Give the journal entries, without narratives, to correct the above errors. JOURNAL 31 Suspense 100 Electricity 100 Machinery Repairs 1 000 Machinery 1 000 (b) Insurance 2 400 Suspense 2 400 [12] Write up the Suspense account below, including your figure for the opening balance. Show your calculation. Calculation of opening balance: Electricity 100 2 300 Difference as per Trial Balance SUSPENCE ACCOUNT Insurance 2 400 2 400 2 400 [4]
3 3. On 31 October the Cash Book (bank columns) and Bank Statement of Sara Perez were as follows. Cash Book (bank columns) Oct 24 Balance b/d 5 203 Oct 27 Paris Fashions 2 069 25 Fine Fabrics 242 28 Thai Exports 240 26 Super Satins 1 150 31 Balance c/d 5 264 30 Sales 1 078 7 573 7 573 Nov 1 Balance b/d 5 264 Bank Statement 31 October Debit Credit Balance N$ N$ N$ Oct 24 Balance 5 203Cr 26 Fine Fabrics 242 5 445 Super Satins 1 150 6 595 27 Cheque 185673 2 069 4 526 S.O. Motor Insurance 26 4 500 28 S.O. Rent 25 4 475 31 Bank Charges 88 4 387 Dishonoured Cheque (Fine Fabrics) 242 4 145 The following errors were discovered. A. The debit side of the bank column in the Cash Book had been undercast. B. The bank had debited a standing order for payment of rent for N$25 to Sara s business account instead of her personal account. (a) Make any additional entries that are required in the Cash Book of Sara Perez. Calculate a new bank balance at 31 October. Bring down the balance on 1 November. CASH BOOK Balance 5 264 Insurance 26 Undercast 100 Drawings 25 Bank charges 88 Fine Fabrics 242 Balance c/d 4 983 5 364 5 364 Nov 1 Balance b/d 4 983 [7]
4 b) Give two reasons for drawing up a bank reconciliation statement. To explain any difference between the bank balance appearing in the Cash Book and the balance of Bank Statement. Bank charges, debit orders, standing order, etc. [2] c) Prepare a bank reconciliation statement at 31 October. BANK RECONCILIATION STATEMENT AS AT 31 OCTOBER Balance as per Bank Statement 4 145 Add: Late deposits 1 078 5 223 Less: Outstanding cheques 240 Debit Balance as per Cash Book 4 983 [7]
5 4. Elmar is a self-employed builder whose financial year ends on 30 September. His trial balance drawn up on 30 September included the following balances. Dr Cr N$ N$ Sales 100 000 Purchases 66 000 Purchases returns 4 000 Stock 1 October 12 000 Insurance 4 250 Wages 6 000 General expenses 1 000 Motor expenses 2 600 Rent 5 000 Motor vehicle at cost 10 000 You are given the following additional information. 1. On 30 September insurance prepaid was N$250, motor expenses due but unpaid were N$400.. 2. Stock on 30 September was N$9 000. 3. Depreciation is to be charged on the motor vehicle at 20% on cost. Prepare Elmar s Trading and Profit and Loss account for the year ended 30 September. ELMAR Trading and Profit and Loss account for the year ended 30 September Sales 100 000 Less: Cost of Sales 65 000 Opening stock 12 000 Add: Purchases 62 000 74 000 Less: Closing stock 9 000 Gross profit 35 000 Less: Expenses 21 000 Insurance (4 250-250) 4 000 Wages 6 000 General expenses 1 000 Motor expenses (2 600 + 400) 3 000 Rent 5 000 Depreciation 10 000 x 20 2 000 Net Profit 14 000 [18]
6 5. Koba bought a printing press on 1 October 2007 for N$40 000. She is preparing her final accounts for the year ended 30 September 2008 and needs to decide which method of depreciation should be used. She expects the printing press to have a useful life of ten years, and to be able to sell it at the end of that time for N$4 000. Using this information she could use the straight line method, or the reducing (diminishing) balance method at 20% per annum. (a) Calculate how much depreciation will be charged in Koba s Profit and Loss account for the next three years under each of the two methods. Year ended 30 September Straight line Method N$ Reducing (diminishing) balance method N$ 2005 3 600 8 000 2006 3 600 6 400 2007 3 600 5 120 You may use space below for your workings. Straight line = 40 000 4 000 = 36 000 10 = N$3 600 Reducing balance = Y1 40 000 x 20 = 8 000 Y2 40 000 8 000 = 32 000 x 20 = 6 400 Y3 32 000 6 400 = 25 600 x 20 = 5 120 Koba decides to use the reducing balance method of depreciation. [5] (b) Show the entries in the provision for depreciation of machinery account below for each of the three years ending 30 September 2008, and 2010.
7 2008 2010 Provision for Depreciation of Machinery account Balance c/d 8 000 2008 Depreciation 8 000 Balance c/d 14 400 2008 Oct 1 Balance c/d 19 520 Balance b/d 8 000 Depreciation 6 400 14 400 14 400 Oct 1 2010 Balance b/d 14 400 Depreciation 5 120 19 520 19 520 [7]