UNIVERSITY OF CAMBRIDGE LOCAL
EXAMINATIONS SYNDICATE
General Certificate of Education Ordinary Level
PRINCIPLES OF ACCOUNTS 7112/1
NOVEMBER 1996 SESSION 3 hour
Section A
Answer all questions in this section.
1. Bush and Patel are in partnership sharing profits and losses equally. Interest is
allowed on capital at 10% per annum and charged on drawings at 5%. Patel is
entitled to an annual salary of $10000 for managing the business.
The following balances were extracted from the books of the partnership on 31
December 1995 after the preparation of the Trading Account.
$
Capital, 1 January 1995 Bush 45 000
Patel 30 000
Current accounts, 1 January 1995 Bush 1 800 Cr
Patel 4 300 Dr
Drawings Bush 9 000
Patel 7 500
Gross profit for the year 119 305
Stock, 31 December 1995 26 400
Administration and selling expenses 68 030
Equipment 60 000
Trade debtors 32 195
Trade creditors 21 500
Cash at bank 2 180
Salary paid to Patel 8 000
Additional information
(i) Selling expenses amounting to $510 were outstanding at 31 December 1995.
(ii) Patel introduced his private motor van into the business at an agreed value of $15
000 on 1 July 1995. No entry had been made in the books in respect of this
transaction.
(iii) Equipment is to be depreciated by 15% of the year-end value and the motor van
by $1500.
(a) Prepare the partnership Profit and Loss and Appropriation Accounts for the year
ended 31 December 1995. [10]
(b) Prepare the Balance Sheet as at 31 December 1995.
Details of the Current Accounts must be shown either within the Balance Sheet or
in separate ledger accounts with final balances given in the Balance Sheet. [16]
2. N. J. Kapisa, a manufacturer of nuts and bolts, provides you with the following
information for the year ended 31 October 1996.
$
Stocks, 1 November 1995 - Raw materials 7 500
Work-in-progress 9 250
Finished goods 13 850
Stocks, 31 October 1996 - Raw materials 14 100
Work-in-progress 11 500
Finished goods 15 000
Raw material purchases 43 700
Manufacturing wages 32 000
Patent fees 15 440
Factory maintenance 3 410
Repairs to plant and machinery 4 800
Sales of finished goods 196 850
Administration expenses 22 000
Factory rent and rates 10 200
Selling expenses 36 800
Factory power 8 150
Carriage on purchases 2 480
Depreciation on plant and machinery 3 220
Select relevant balances and prepare for the year ended 31 October 1996:
(a) the Manufacturing Account, showing within the account Cost of Raw Materials
consumed, Prime Cost and Cost of Production; [12]
(b) the Trading Account. [3]
3. Write down the word or words required to complete the following sentences. [Do
not write out the whole sentence.]
(a) Goodwill occurs when the ____(i)____ of a business exceeds the value of
net ___(ii)___ taken over.
(b) ________ is obtained by dividing the cost of goods sold by average stock.
(c) Stock is valued at ___(i)___ or ___(ii)___ whichever is lower.
(d) Issued capital of a company cannot exceed __________ capital.
(e) Traders offer ________ to customers to encourage them to pay promptly.
(f) In the books of a non-profit making organization, the capital account is
replaced by the _________ account.
(g) That part of the cost of a fixed asset consumed during its period of use is
called ________.
(h) If sales to E. Sibanda are debited to B. Sibanda’s account, this is an error
of ________.
(i) The excess of current assets over current liabilities is ________
(j) In a manufacturing account, prime cost consists of ___(i)___ and
___(ii)___
(k) If a customer has been undercharged, he may be sent a ________ for the
additional amount instead of an amended invoice.
(l) Debenture holders receive a fixed rate of ___(i)____ while preference
shareholders receive a fixed rate of ___(ii)___. [16]
4. On 1 January 1996, L. Dambaza’s account in the ledger of T. Ndhlovu showed a
credit balance of %160.
During the month, the following transactions relating to this account took place:
January 9 Bought goods on credit from L. Dambaza $600 list price less 20%
trade discount.
11 Paid L. Dambaza by cheque the amount due to him on 1 January
1996 less 2 1/2 % cash discount.
18 Returned damaged goods bought from L. Dambaza on 9 January
1996 list price $100.
20 Purchased more goods from L. Dambaza $240 net.
26 Brought stationery $30 on credit for office use from L. Dambaza.
28 L. Dambaza accepted a business chair valued at $120 in part
settlement of his account.
(a) Make the necessary entries in the account of L. Dambaza. Balance the
account on 31 January 1996. [11]
(b) Name the book of original entry in which each of the above transactions
would be recorded. [6]
Section B
Answer two questions from this section.
5. P. Mutandwa prepared a trial balance for his business on 30 June 1996 and it
failed to agree. He opened a suspense account to enable him to proceed with the
preparation of draft final accounts.
Further investigations revealed the following errors:
(i) A cheque received from C. Jongwe, a debtor, had been correctly entered in
the cash book as $205 but had been credited to C. Jongwe’s account as
$250.
(ii) Major repair work to a damaged machine amounting to $1800 had been
debited to the Machinery Account.
(iii) Commission paid $150, had been credited to the Commission Received
Account.
(iv) The Sales Day book had been under cast by $100.
(a) Prepare journal entries to correct the above errors (i)-(iv).
[Narrations are not requested.] [10]
(b) Prepare the Suspense Account showing the original trial balance
difference. [3]
6. On 1 July 1995, P. Dell took over from C. Jackson assets and liabilities at the
following agreed values”
Fixed assets 23 700
Current assets 18 500
Current liabilities 5 500
During the year, he purchased additional fixed assets for $12 900 and received
from his father an interest-free loan of $15 000. The loan is repayable after three
years.
At the end of the year, his current assets were $28 950 and current liabilities
$9650. He had withdrawn $5000 for private use and his fixed assets had
depreciated by $1800.
(a) Draw up a statement to show his net profit or loss for the year ended 30
June 1996. [11]
(b) Calculate as at 30 June 1996 for P. Dell:
(i) working capital ratio;
(ii) capital employed (long term funds). [2]
7. The Receipts and Payments Account of the Emakhandeni Tennis Club for the
year end 31 March 1996 was as follows:
Receipts payments
$ $
Balance, 1 April 1995 168 Ground rent 180
Games receipts 91 Traveling expenses
209
Subscriptions 605 Purchases of equipment 210
Games expenses 70
Balance, 31 March 1996 195
864 864
The following additional information is available:
1 April 1995 31 March 1996
$ $
Subscriptions due 40 38
Subscription in advance 90 20
Equipment at valuation 520 657
Rent owing 30 45
(a) Calculate the Accumulated Fund at 1 April 1995. [3]
(b) Prepare the Income and Expenditure Account for the year ended 31 March
1996. [6]
(c) Prepare a Balance Sheet as at that date. [4]
