Accounting Fundamentals

Transcription

1 Subject no. 50A Certificate in Offshore Finance and Administration Accounting Fundamentals February 2013 Tuesday morning 5 February 2013 Time allowed: 2 hours Do not open this examination paper until the presiding officer or an invigilator tells you to. You must not take this paper out of the examination room. This examination paper is divided into three sections. You must attempt all parts of Question 1 in Section A, all questions in Section B, and two questions only in Section C. Section A carries 20 marks (2 marks for each part of Question 1). Section B carries 30 marks (6 marks for each question). Questions in Section C each carry 25 marks. You should allow yourself approximately 20 minutes in total to answer the questions in Section A, 40 minutes in total to answer the questions in Section B and 30 minutes for each of the questions attempted in Section C. ICSA, 2013 Page 1 of 8

2 Section A Answer all parts of Question 1. Select only one of the options A, B, C or D for each part. 1. (i) The International Financial Reporting Standards (IFRS) identifies which one of the following concepts? A. Prudence B. Stable measuring unit C. Materiality D. Consistency (ii) The balance sheet reflects which one of the following equations? A. Total capital + Total liabilities = Total assets B. Total liabilities + Total assets = Total capital C. Total assets + Total capital = Total liabilities D. Total capital Total liabilities = Total assets (iii) Which one of the following is a source document? A. Sales daybook B. Cashbook C. Goods received note D. Journal (iv) Which one of the following statements correctly defines the term gearing ratio? A. The relationship between the gross profit and the sales. B. The relationship between internal and external finance in a company s capital structure. C. The total of the long term debt and shareholders funds employed in a company. D. The excess of current assets over current liabilities. ICSA, 2013 Page 2 of 8

3 (v) Which one of the following statements about not-for-profit organisations is correct? A. Not-for-profit organisations are not involved in trading activities. B. Not-for-profit organisations cannot make a profit. C. Not-for-profit organisations are not required to follow accounting procedures. D. Not-for-profit organisations accounting requirements are determined by their legal form. Parts (vi) to (x) below relate to the business of Harri Lane ( Harri ) for the accounting year 1 February 2012 to 31 January (vi) At the end of the financial year a rent invoice for 800 had not been dealt with in the accounts and remained unpaid. How should this be treated in Harri s financial statements? Profit and loss account Balance Sheet A. Increase rent expense by 800 Rent 800 shown as a current liability B. Increase rent expense by 800 Rent 800 shown as a current asset C. Decrease rent expense by 800 Rent 800 shown as a current liability D. Decrease rent expense by 800 Rent 800 shown as a current asset (vii) On 1 February 2012, Harri s capital account balance was 58,000. During the year ended 31 January 2013, Harri withdrew cash totalling 45,000 from the annual profit of 97,500 but introduced 13,500 additional capital on 25 June What was Harri s capital balance on 31 January 2013? A. 124,000 B. 110,500 C. 97,000 D. 19,000 ICSA, 2013 Page 3 of 8

4 (viii) On 1 February 2012, the provision for doubtful debt in Harri s financial statements was 1,200. At 31 January 2012, the debtors balance was 24,000 and Harri reviewed the debtors and decided that the provision for doubtful debt should be 2.5%. What should be the closing balance for the provision for doubtful debt on 31 January 2013? A. 1,800 B. 1,200 C. 600 D. 300 (ix) What is the correct double entry to account for Harri s provision for doubtful debt at 31 January 2013? Debit Credit A. Profit and loss account Provision for doubtful debt B. Debtors Provision for doubtful debt C. Provision for doubtful debt Debtors D. Provision for doubtful debt Profit and loss account (x) For the year ended 31 January 2013 the sales of Harri s business were 168,000 and his gross margin was 30%. What was Harri s cost of sales for the year? A. 117,600 B. 100,800 C. 67,200 D. 50,400 (Total: 20 marks) ICSA, 2013 Page 4 of 8

5 Section B Answer all five questions. 2. Outline three reasons why the receipts and payment account does not provide a club with a comprehensive picture of its financial position. (6 marks) 3. Explain, with examples, the difference between carriage inwards and carriage outwards. (6 marks) 4. Complete the missing entries in the following trading account: Year ended 31-Jan Turnover Opening stock Purchases Closing stock Cost of sales Gross profit ,200 A 59,665 37,850 42,480 B 2012 C 18,340 37,730 D 25,490 59, ,270 48,490 E 38,350 F 40,700 (6 marks) 5. Outline the differences between revenue expenditure and capital income. (6 marks) 6. List, with examples, the three classes of possible disagreement between a cash book and a bank statement of an organisation. (6 marks) (Total: 30 marks) ICSA, 2013 Page 5 of 8

6 Section C Answer two questions only. 7. Billy commenced his stationery business on 1 November 2012, paying 10,000 into a business bank account. His transactions during the first quarter ended 31 January 2013 were as follows: Date Transaction 3 Nov Paid first quarter s rent for his unit, 2,250; 7 Nov Paid public liability insurance for the year, 950; 8 Nov Obtained free sample of stationery from wholesalers; 11 Nov Paid the installation fee for the telephone system, 110; 28 Nov Received sales order from Alpha Academy for 700 and received cheque with the order; 1 Dec Purchased stock on credit from stationery wholesalers, 600; 3 Dec Supplied two quotes to new customers; 5 Dec Despatched stationery to Alpha academy. Stock at cost 250; 10 Dec Received 500 from sales of stock. Stock mark-up was 100%; 4 Jan Paid for advert at trade exhibition, 650; 19 Jan Paid stationery wholesalers, 600. (a) Open and prepare the ledger accounts to record the above business transactions. (16 marks) (b) Prepare a trial balance for the business as at 31 January (9 marks) (Total: 25 marks) 8. Apart from completeness, identify and explain six characteristics of accounting information. Support each of your explanations with an example of how the characteristic is applied in the production of accounting information. (25 marks) ICSA, 2013 Page 6 of 8

7 9. The book-keeper at Valley Golf Club ( Valley ) has produced the following summary of the club s financial position for the year ended 31 January 2013: Receipts Subscriptions 905,000 Tuition 68,955 Bar sales 101,510 1,075,465 Payments Bar stocks purchased 45,325 Overheads 35,120 Staff wages 98,665 Grounds maintenance 113, ,235 Annual Surplus 783,230 Notes: (i) Valley owns the freehold land and clubhouse and does not apply any depreciation charge to its clubhouse. The book value as at 31 January 2013 was 622,325. (ii) As at 31 January 2013 membership arrears was 26,875. (iii) As at 1 February 2012 the outstanding subscriptions were 19,660. (iv) (v) (vi) Subscriptions include 8 members who have each paid their fees of 3,750 in advance. The bar stock at 31 January 2013 was 8,150 and the balance at the start of the accounting period was 9,775. Valley has grounds equipment which cost 90,000 and had a net book value of 46,080 as at 1 February The club s depreciation policy is 20% per annum on a reducing balance basis. (vii) The bank balances were as follows: 1 February , January ,890 (viii) The water rates bill for the last quarter of the year for 1,250 was unpaid at 31 January (ix) Valley had accumulated funds of 10,500 as at 1 February (x) The receipts and payments only include transactions pertaining to the year ended 31 January (continued) ICSA, 2013 Page 7 of 8

8 Required (a) Prepare the income and expenditure account for Valley for the year ending 31 January (7 marks) (b) (c) Prepare a balance sheet for Valley for the year as at 31 January The balance sheet should clearly show the members fund balance as at 31 January (10 marks) Discuss the problems that arise from the club s depreciation policy outlined in Note (i), above. (8 marks) (Total: 25 marks) The scenarios included here, except where expressly identified, are entirely fictional. Any resemblance of the information in the scenarios to real persons or organisations, actual or perceived, is purely coincidental. ICSA, 2013 Page 8 of 8

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