Centre No. Candidate No. Paper Reference(s) 4305/01 London Examinations IGCSE Accounting Paper 1 Friday 3 November 2006 Afternoon Time: 2 hours 30 minutes Materials required for examination Nil Paper Reference 4 3 0 5 0 1 Surname Signature Items included with question papers Nil Initial(s) Examiner s use only Team Leader s use only Question Number Blank 1 2 3 4 5 6 Instructions to Candidates In the boxes above, write your centre number, candidate number, your surname, initials and signature. Answer ALL the questions in Section A and Section B in the spaces provided in this question paper. The paper reference is shown at the top of this page. Check that you have the correct question paper. Final accounts and balance sheet may be set out in a range of acceptable forms. You may draw up your own ruling for final accounts and balance sheet. Ledger accounts and books of original entry should be completed (if required) in the format required by the layout given. Information for Candidates The total mark for this paper is 100. The marks for individual questions and the parts of questions are shown in round brackets: e.g. (2). There are 6 questions in this question paper. Any pages are indicated. There are 4 ruled pages at the end of this question paper which you may use if you cannot fit your answer in the space provided. Advice to Candidates You are reminded of the importance of clear English and careful presentation in your answers. This publication may be reproduced only in accordance with Edexcel Limited copyright policy. 2006 Edexcel Limited. Printer s Log. No. M24650A W850/4305/57570 6/6/5/3/3/ *M24650A0124* Total Turn over Acc151002_M24650A_IGCSE_Accounti1 1 21/09/2006 10:01:36
Section A Answer ALL questions Question 1 For each question, choose the best answer A, B, C or D and write it in the box. (a) In a trial balance, which one of the following accounts would be correctly shown as a credit balance? A Cash B Capital C Machinery D Drawings (1) (b) Which one of the following transactions would be recorded in the journal? A credit purchase of a fixed asset B credit sale of goods to a customer C cash purchase of raw materials D return of faulty goods (c) An opening credit balance of 550 in the bank account in a firm s cash book means A the account is overdrawn at the bank by 550 B the owner s capital is 550 C the firm s cash balance is 550 D the firm has 550 in the bank (1) (1) (d) A cashier keeps the petty cash book using the imprest system. This means A the chief cashier has to authorise each payment of petty cash B the petty cashier requests money from the chief cashier as required C the petty cashier starts each period with the same amount of money D a copy has to be kept of each petty cash voucher (1) (e) Which one of the following items would appear in the appropriation account of a partnership? A partners drawings B interest on partners capitals C partners loans D partners capitals (1) 2 *M24650A0224* Acc151002_M24650A_IGCSE_Accounti2 2 21/09/2006 10:01:36
(f) In a limited company, the reserves belong to which of the following? A directors B creditors C debenture holders D ordinary shareholders (1) (g) A provision for bad debts account would be created when A bad debts are written off B a debtor ceases trading C a debtor becomes bankrupt D risk of bad debts is assessed (1) (h) For a manufacturing business, direct material + direct labour + direct expenses equals A prime cost B administration costs C factory overheads D cost of raw materials consumed (1) (i) In company final accounts, debenture interest is A debited in the appropriation account B credited in the trading account C shown as a long term liability in the balance sheet D debited in the profit and loss account (1) (j) If a business has sales of 80 000, opening stock of 6 000, closing stock of 10 000 and a profit margin of 20%, what is the rate of stock turnover? A 8 times B 7.5 times C 6 times D 5 times (Total 10 marks) (1) Q1 *M24650A024* 3 Turn over Acc151002_M24650A_IGCSE_Accounti3 3 21/09/2006 10:01:36
Question 2 Throughout this question, assume that the rate of VAT is 10%. D Davies s business sells computer equipment. During August 2006, D Davies received the following invoices from suppliers. Aug 10 Aug 24 Cameron Ltd, goods at list price 700 less 20% trade discount plus VAT (no cash discount was offered on this transaction). Fox Ltd, goods value 1 500 plus VAT. The invoice offered a cash discount of 2.5% for payment within 10 days. (a) Enter the above items into the purchases journal for August 2006. Total the purchases journal at the end of the month. Purchases Journal Date Narration Goods VAT Total (6) 4 *M24650A0424* Acc151002_M24650A_IGCSE_Accounti4 4 21/09/2006 10:01:36
During August, D Davies returned some goods to his suppliers and the following credit notes were received. Aug 17 Aug 29 Cameron Ltd, goods at list price 60 (these were some of the goods supplied on 10 August). Howard Computing, goods at list price 650 less a trade discount of 25% plus VAT (no cash discount had been offered on the invoice for these goods). (b) Prepare the returns outwards journal and total it at the end of the month. Returns Outwards Journal Date Narration Goods VAT Total (6) Question 2 continues on next page *M24650A0524* 5 Turn over Acc151002_M24650A_IGCSE_Accounti5 5 21/09/2006 10:01:36
As well as the information recorded in the purchases and returns outwards journals, the following details are available regarding Cameron Ltd. Aug 1 Aug 4 Balance of account: 5 000 credit. Cheque sent in full settlement of the balance on 1 August less a cash discount of 10%. (c) Prepare the account of Cameron Ltd in D Davies s purchases ledger. Balance the account on 31 August and bring the balance down. Cameron Ltd Account Date Narration Date Narration (5) 6 *M24650A0624* Acc151002_M24650A_IGCSE_Accounti6 6 21/09/2006 10:01:36
In addition to the VAT arising from credit purchases and returns outwards, the following transactions included VAT. Aug 8 Aug 13 Aug 31 Purchase of new cash register from Major Ltd, on credit 2 000 plus VAT. Purchase of stationery by cheque 440 including VAT. Cash sales for the month totalled 10 450 including VAT. (d) Starting with the opening credit balance b/d of 1 650 at 1 August, prepare the VAT account in D Davies s nominal (general) ledger. Balance the account on 31 August and bring down the balance. VAT Account Date Narration Date Narration (e) (i) State where the closing balance of the VAT account would be shown in the balance sheet. (ii) State why it appears there. (2) Q2 (6) (Total 25 marks) *M24650A024* 7 Turn over Acc151002_M24650A_IGCSE_Accounti7 7 21/09/2006 10:01:36
Question 3 Gobi D Ltd is a medium-sized business. At the end of the company s financial year on 30 June 2006, the following balance sheet was drafted by a new trainee accountant. You have established that the figures were obtained from a correct trial balance. Gobi D Ltd Balance Sheet as at 30 June 2006 000 000 Plant and Machinery 300 Ordinary Share Capital (Issued) 5 000 Ordinary Share Capital (Authorised) 8 000 Freehold Premises 5 000 Trade Creditors 10 Stock 30 June 2006 400 Profit and Loss Account Balance 30 June 2006 960 Stock 1 July 2005 350 Cash at Bank (Cr) 50 Motor Vehicles 350 Provision for Depreciation 30 June 2006 (Motor Vehicles) 75 Provision for Depreciation 30 June 2006 (Plant and Machinery) Cash In Hand 50 Bank Loan (Repayment in 2010) 75 Balancing Figure 2 160 Debtors 250 180 11 605 11 605 8 *M24650A024* Acc151002_M24650A_IGCSE_Accounti8 8 21/09/2006 10:01:36
(a) Prepare a correct balance sheet for Gobi D Ltd as at 30 June 2006 showing clearly fixed assets, current assets, current liabilities, long-term liabilities, working capital and shareholders funds. Gobi D Ltd Balance Sheet as at 30 June 2006 (11) *M24650A024* 9 Turn over Acc151002_M24650A_IGCSE_Accounti9 9 21/09/2006 10:01:36
(b) Distinguish between authorised share capital and issued share capital. (6) (c) Using an example in each case, evaluate the importance of the consistency concept and the accruals concept when preparing final accounts. Consistency concept Accruals concept (8) Q3 (Total 25 marks) TOTAL FOR SECTION A: 60 MARKS 10 *M24650A01024* Acc151002_M24650A_IGCSE_Accounti10 10 21/09/2006 10:01:36
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Section B Answer all questions Question 4 On 30 September 2006, the totals of the trial balance drawn up for Indira s business did not agree. The difference was entered in a suspense account. An investigation of the difference revealed the following errors relating to the period for which the trial balance had been prepared. The sales day book had been overcast by 240 No entries had been made for stock 750 taken by Indira for her own use Goods purchased for 1 250 from the Pointer brothers had been posted to their account as 1 520 85 discount allowed to Farmer & Co had been debited to their account A credit purchase from A Patel for 500 had been credited to the account of L Patel (a) Set out the journal entries for the items that do not involve the suspense account. Narrations are required and must state the type of error involved. General Journal Debit Credit (3) 12 *M24650A01224* Acc151002_M24650A_IGCSE_Accounti12 12 21/09/2006 10:01:36
(b) Write up the suspense account, including the opening balance. Assume that the trial balance totals agree after the errors have been corrected. Suspense Account Date Narration Date Narration (c) Before discovery of the errors, which side of the trial balance was deficient (lighter) and by how much? (2) (d) State why a trial balance which agrees may not provide a true check of accuracy. Use an example to support your answer. (3) Q4 (4) (Total 12 marks) *M24650A01324* 13 Turn over Acc151002_M24650A_IGCSE_Accounti13 13 21/09/2006 10:01:37
Question 5 On 1 April 2004, Charles Simpson purchased new vehicles for his business at a cost of 35 000. He intends keeping the vehicles for 4 years and estimates that they will have a scrap value of 11 000 at that time. Charles is aware of the need to depreciate the new vehicles but is unsure whether to write off the depreciation by the straight line or the diminishing (reducing) balance method. (a) Calculate depreciation for the years ended 31 March 2005 and 31 March 2006, using the straight line method. (2) (b) Write up the provision for depreciation of vehicles account as it should appear for the years ended 31 March 2005 and 31 March 2006 under the reducing balance method, using a rate of 20% per annum. Provision for Depreciation Vehicles Account Date Narration Date Narration (6) 14 *M24650A01424* Acc151002_M24650A_IGCSE_Accounti14 14 21/09/2006 10:01:37
(c) State two reasons why vehicles depreciate. Reason 1 Reason 2 (2) (d) (i) Using an example in each case, explain the meaning of capital expenditure and revenue expenditure. Capital expenditure Revenue expenditure (4) (ii) Why is it important to distinguish between capital expenditure and revenue expenditure? (2) Q5 (Total 16 marks) *M24650A01524* 15 Turn over Acc151002_M24650A_IGCSE_Accounti15 15 21/09/2006 10:01:37
Question 6 (a) Using an example in each case, explain the meaning of profitability and liquidity. Profitability Liquidity (4) One business use of computerised accounting software is in stock control. (b) Explain one other business use of computerised accounting software. (2) 16 *M24650A01624* Acc151002_M24650A_IGCSE_Accounti16 16 21/09/2006 10:01:37
(c) Explain how the use of a computerised accounting program can improve the speed and accuracy of the accounting process. Speed Accuracy (6) Q6 (Total 12 marks) TOTAL FOR SECTION B: 40 MARKS TOTAL FOR PAPER: 100 MARKS END *M24650A01724* 17 Acc151002_M24650A_IGCSE_Accounti17 17 21/09/2006 10:01:37
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