Desk Number. University Card Number FOUNDATION Mid Term Assessment Group November 2016 Accounting 1.5 hours Instructions Please write all your answers in blue or black ink in the answer book provided. There are 3 questions to attempt. The answer booklet contains stationary for Q1) T-accounts, Trial Balance, Q2) Income Statement, Balance Sheet, Q3) Lined paper for written answers. Standard scientific calculators are permitted. Candidates are reminded of the need for good English and orderly presentation of their answers. Answer ALL questions. The mark allocation per question is as follows: Q1) 25 marks Q2) 35 marks Q3) 15 marks Total 75 marks
Question 1 (25 marks) Enter up the Ledger of Mr A. Ferguson from the following details for the month of June 2016. Then balance off the accounts where it is necessary and extract a Trial Balance as at 30 June 2016: June 1 Started business with 8,000 put in the bank June 2 Bought goods on credit from the following persons: D Chen 76; M Richard 27; B Braham 56 June 3 Cash sales 250 June 4 Paid wages in cash 14 June 6 Sold goods on credit to: H John 35; L Lane 42; J Carlton 72 June 8 Bought goods for cash 46 June 10 Bought goods on credit from: M Richard 57; T Barbara 98 June 11 Paid salaries in cash 50 June 12 Sold goods on credit to: L Lane 32; J Carlton 23. June 14 Bought shop fixtures on credit from Gamma Ltd for 50 June 15 Paid M Richard by cheque 84 June 17 We returned goods to T Barbara 20 June 18 Paid Gamma Ltd 50 by cheque June 19 We gave J Carlton a discount of 15 and he paid us a cheque for 80. June 25 We returned goods to D Chen 24 June 29 J King lent us 60 in cash June 30 Owner took 400 from business bank account for personal use. Ledger Trial Balance 5 marks 20 marks
Question 2 R Waters: Trial Balance as at 31 December 2016 Dr Cr Sales 125,000 Purchases 34,000 Returns 2,300 4,600 Rent 2,500 Inventory 12,500 Building 350,000 Accumulated Depreciation: Buildings 9,800 Machinery 55,000 Accumulated Depreciation: Machinery 1,700 Accounts Receivable 4,600 Carriage Outwards 4,500 Carriage Inwards 800 Accounts Payable 3,500 Drawings 900 Salaries 35,000 Bad Debts 1,250 Cash 5,600 Capital 365,150 Allowance for Doubtful Debts 1,500 Insurance 2,300 511,250 511,250 End of Year Adjustments Inventory as on 31st December 2007 9,600 Allowance ro Doubtful Debts to be calculated at 40% of debtors Depreciation on Buildings is calculated on 2% (straight line method) Depreciation on Machinery is calculated at 5% (reducing balance) Mark Scheme: Income Statement 15 marks Balance Sheet 15 marks Presentation 5 Marks TOTAL: 35 marks
Question 3 (15 Marks) a). Explain the accounting concept of Prudence and give an example of its use in financial statements. (3 marks) b). What is the Business Entity Concept? (3 marks) c). Why is Capital a liability? (4 marks) d). Define depreciation and give 3 causes of it. (5 marks) TOTAL 15 marks
0 Capital 8000 Ctrl z 8000 bal c/d 8000 8000 8000 bal b/d 8000 8080 Bank 534 8000 84 80 50 400 bal c/d 7546 8080 8080 bal b/d 7546 360 Purchases 0 76 27 56 46 57 98 bal c/d 360 360 360 bal b/d 360
24 Chen 76 24 76 bal c/d 52 76 76 bal b/d 52 84 Richard 84 84 27 57 84 84 0 Brabham 56 56 bal c/d 56 56 56 bal b/d 56
310 Cash 110 250 14 60 46 50 bal c/d 200 310 310 bal b/d 200 0 Sales 454 250 35 42 72 32 23 bal c/d 454 454 454 bal b/d 454 14 Wages 0 14 bal c/d 14 14 14 bal b/d 14
35 John 0 35 bal c/d 35 35 35 bal b/d 35 74 Lane 0 42 32 bal c/d 74 74 74 bal b/d 74 95 Carlton 95 72 80 23 15 95 95
20 Barbara 98 20 98 bal c/d 78 98 98 bal b/d 78 50 Salaries 0 50 bal c/d 50 50 50 bal b/d 50 50 Fixtures 0 50 bal c/d 50 50 50 bal b/d 50
50 Gamma 50 50 50 50 50 0 Returns Out 44 20 24 bal c/d 44 44 44 bal b/d 44 15 Discount Allowed 0 15 bal c/d 15 15 15 bal b/d 15
0 King 60 60 bal c/d 60 60 60 bal b/d 60 400 Drawings 0 400 bal c/d 400 400 400 bal b/d 400 0 0 0 0
Trial Balance Dr Cr 1 correct title for business. Capital 8000 1 Bank 7546 1 Purchases 360 1 Chen 52 1 Richard Brabham 56 1 Cash 200 1 Sales 454 1 Wages 14 1 John 35 1 Lane 74 1 Carlton Barbara 78 1 Salaries 50 1 Fixtures 50 1 Gamma Returns Out 44 1 Discount Allowed 15 1 King 60 1 Drawings 400 1 0 8744 8744 2 0 1 mark for each correct entry and 1 mark for each total 1 mark for correct title 20 5 marks for T accounts 1 for correct descriptions and dates 1 for balances correctly written 1 for totals in t accounts 2 for overall neatness and format Q1 Total 25 marks
1 INCOME STATEMENT Sales 125000 Less Returns In 2300 1 122700 Less cost of goods sold Opening Inventory 12500 Add Purchases 34000 Add Carriage In 800 Less Closing Inventory 9600 Less Returns Out 4600 1 33100 1 Gross Profit 89600 Add Revenues Allowance for D/Debts Decrease 0 Commissions 0 Rent Received 0 \ 0 \ 0 \ 0 0 Less Expenses Carriage Out 4500 1 Bad Debts 1250 1 Allowance for D/Debts Increase 340 1 Salaries 35000 1 Insurance 2300 Commission Payable 0 Water Rates 0 1 Rent 2500 Insurance 0 Motor Expenses 0 General 0 Sundry 0 45890 2 Depreciation Building 7000 2 Machinery 2665 Equipment 0 Vehicles 0 Computers 0 9665 55555 2 Net Profit 34045 15
1 BALANCE SHEET FIXED ASSETS Building 350000 2 Less Accumulated Depreciation 16800 333200 Machinery 55000 2 Less Accumulated Depreciation 4365 50635 CURRENT ASSETS Equipment 0 Less Accumulated Depreciation 0 0 Vehicles 0 Less Accumulated Depreciation 0 0 Computers 0 Less Accumulated Depreciation 0 0 1 Closing Inventory 9600 1 Accounts Receivable 4600 1 less doubtful debts provision 1840 2760 Bank (if debit balance) 0 1 Cash 5600 \ 0 383835 17,960 1 TOTAL ASSETS 401,795 CURRENT LIABILITIES 1 Accounts Payable 3500 FIXED LIABILITIES Bank (if credit balance) 0 \ 0 Loan 0 Mortgage 0 \ 0 \ 0 \ 0 3500 0 1 NET ASSETS 398,295 CAPITAL Capital 365150 1 Add net profit 34045 1 Less drawings 900 1 398295 15
Section C (15 Marks) a). Explain the accounting concept of Prudence and give an example of its use in financial statements. (3 marks) b). What is the Business Entity Concept? (3 marks) c). Why is Capital a liability? (4 marks)
d). Define depreciation and give 3 causes of it. (5 marks) TOTAL 15 marks