CORK INSTITUTE OF TECHNOLOGY INSTITIÚID TEICNEOLAÍOCHTA CHORCAÍ. Semester 2 Examinations 2009/10

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1 CORK INSTITUTE OF TECHNOLOGY INSTITIÚID TEICNEOLAÍOCHTA CHORCAÍ Semester 2 Examinations 2009/10 Module Title: Financial Accounting Module Code: TOUR 6009 School: Humanities Programme Title: Bachelor of Business in Hospitality Management Stage 2 Programme Code: OHCMA_7_Y2 External Examiner(s): Internal Examiner(s): Ms. Dympna Scanlon Mr. A. Murphy Instructions: Answer Question One and any Two Questions out of the other 3. Duration: 2 Hours Sitting: Summer 2010 Requirements for this examination: Note to Candidates: Please check the Programme Title and the Module Title to ensure that you have received the correct examination paper. If in doubt please contact an Invigilator.

2 Q1. The following multiple-choice question consists of TWENTY parts, each of which is followed by FOUR possible answers. There is only one right answer in each part. Requirement: Indicate the right answer to each of the following parts on your exam book. Each correct answer gets 2 marks. 1. Which of the following is an asset? (a) Machinery (b) Bank overdraft (c) Capital (d) Wages owing 2. Which of the following is incorrect? Assets Liabilities Capital (a) (b) (c) (d) Which of the following should not be called Sales? (a) Office fixtures sold (b) Goods sold on credit (c) Goods sold for cash (d) Sale of item previously included in Purchases. 4. Which of the following is correct? (a) To record an increase in any given asset account, that account must be debited. (b) To record a decrease in capital, the capital account must be credited. (c) To record an increase in any given liability account, that account must be debited (d) To record a decrease in any given liability account, that account must be credited. 5. The term purchases means (a) All items bought (b) Only goods bought on credit (c) Only goods bought for resale (d) Only goods bought and paid for

3 6. In the case of a sole trader, which of the following statements is correct (a) Profit has no effect on capital (b) Earning profit reduces capital (c) Capital can only arise by earning profit (d) Earning profit increases capital 7. A Trial Balance (a) shows the financial position of a firm. (b) proves whether the underlying accounting records are correct. (c) lists all of the entries in the double-entry accounting records (d) is a list of all of the balances brought down in the double-entry accounting records 8. A T account is : (a) The account of all debtors whose name begins with T. (b) The account that shows the cost of office refreshments. (c) The account of a golfer. (d) A simple presentation of the layout of an account 9. Which of the following is a Book of Original Entry? (a) The sales ledger. (b) The purchases daybook. (c) The general ledger. (d) The purchases ledger. 10. A 200 credit balance brought down on the cash column of a firm s cash book means that---- (a) the firm has spent 200 more cash than it has received (b) the firm has 200 cash in hand (c) a mistake has been made in the recording of cash (d) someone has stolen 200 cash 11. The total of the discount allowed column in the cash book should be posted to (a) the debit side of the discount allowed account. (b) the debit side of the discount received account. (c) the credit side of the discount allowed account. (d) the credit side of the discount received account.

4 12. If sales including VAT at the rate of 10%, are 1,800, sales excluding VAT are: (a) 1,620 (b) 1,636 (c) 1,720 (d) None of the above 13. A debit balance brought down on the VAT account in a firm s ledger represents.. (a) an expense. (b) VAT payable to the Collector General. (c) irrecoverable VAT. (d) VAT recoverable from the Collector- General. 14. Cash lodged in a bank account should be recorded in the Cash Book as: Column to Debit Column to Credit (a) Cash Bank (b) Bank Cash (c) Cash Cash (d) Bank Bank Background Information to parts 15 to 17 A firm has the following transactions for a VAT period: Sales (inclusive of 15% VAT) ,025,000 Purchases for resale (inclusive of 15% VAT) ,875,000 Purchases not for resale (inclusive of 21% VAT) , The VAT on sales for the VAT period amounts to: (a) 525,000 (b) 603,750 (c) 152,500 (d) 388, The total VAT on purchases for resale and not for resale for the VAT period amounts to: (a) 357,000 (b) 18,650 (c) 393,650 (d) 388,650

5 17. The VAT payable by the business for the VAT period amounts to: (a) 136,350 (b) 150,000 (c) 511,350 (d) 535, The sales day book is prepared from the (a) cash receipts analysis (b) trade receivables analysis (c) trade receivables control account (d) sales invoices 19. The double entry required to post a sale on credit to a customer is (a) Debit customer s account : Credit purchases account (b) Debit sales account : Credit customer s account (c) Debit purchases account : Credit sales account (d) None of the above 20. Goods purchased and paid for immediately by cash will result in : (a) an increase in current assets (b) an increase in current liabilities (c) a decrease in current assets (d) no affect on current assets (Total 40 Marks)

6 Q2. The following is the bank statement received by Bona Forde from their bank for the month of February Date Particulars Debit Credit Balance 1 Feb. Balance forward 6,801cr 2 Feb. Lodgement 818 7,619cr 2 Feb. Cheque ,525cr 3 Feb. Cheque ,183cr 4 Feb. Cheque 611 7,223 40dr 8 Feb. Standing Order---Pension dr 10 Feb. Direct Debit-Life Assurance dr 12 Feb. Credit Transfer cr 14 Feb. Cheque cr 15 Feb. Cheque dr 15 Feb. Lodgement cr 18 Feb. Cheque cr 20 Feb. Bank Charges cr 20 Feb. Bank Interest cr 21 Feb. Lodgement cr 28 Feb. Cheque 610 1, dr Note: You are advised that the entries on the bank statement are correct. The bank account according to the books of Lime Ltd for February is as follows: Cash Book Date Receipts Date Payments 1 Feb. Balance 5,383 2 Feb. Cheque 611 7,223 8 Feb. Cheque Feb. Cheque Feb. Lodgement Feb. Cheque Feb. Cheque Feb. Cheque Feb. Lodgement Feb. Cheque Feb. Cheque Feb. Cheque Feb. Cheque Feb. Lodgement Feb. Balance 620 8,023 8,023 Required: (a) Up-date the Cash Book of Bona Forde. as at 28 th February (b) Prepare the Bank Reconciliation Statement as at 28 th February (15 Marks) (15 Marks) (Total 30 Marks)

7 Q3. Greagan, Kelly & Forde wha are in partnership carry on a business making lunches at C.I.T.. On 1 st January 2010, the following information was extracted from the records of the partnership for the year ended 31 December Stock of food ingredients at 31 December Stock of finished meals at 31 December dozen Debtors at 31 December 2009 (re: November sales ) 750 Debtors at 31 December 2009 (re: December sales ) 800 Creditors at 31 December 2009 (re: Dec. purchases of Raw Mat) 200 Bank overdraft at 31 December The budgets for the three months to 31 March 2010, are as follows (1) Sales: Dozen Price per Dozen January February March (2) Production Dozen January 85 February 90 March 85 (3) Production Costs Direct Material 4 Direct Labour 2 Variable overheads 1 (4) Fixed production overheads are 80 per month payable in the month incurred. (5) Purchases of food ingredients January 220 February 240 March 250 These ingredients will be paid for in the month following purchase. (6) Debtors will pay two months after they have had their meals. (7) Direct labour and variable expenses will be paid in the same month as the expense is incurred. (8) Equipment for the kitchen costing 1,200, will be bought in January and paid for in March. No depreciation is to be provided for in respect of this equipment.

8 Requirement Prepare each of the following budgets, on a month by month basis, for the three months ended 31 March 2010: (a) Sales Budget (b) Production Budget (in dozens ) (c) Production Cost Budget (d) Materials Purchases Budget (e) Cash Budget (Total 30 Marks)

9 Q4. The following Trial Balance was extracted from the books of Alpine Classic Cars as at 31 st March Dr. Cr. Land and Buildings 100,000 Fixtures & Fittings 20,000 Inventory as at 1/4/ ,000 Revenues 150,000 Purchases 52,000 Wages 75,000 Rent & Rates 4,000 Trade Receivables 1,000 Trade Payables 1,500 Ìnsurances 3,000 Discounts allowed / received Returns inwards / outwards 1,000 2,500 Bank 5,500 Carriage inwards 1,500 Carriage outwards 2,500 Drawings 25,000 Light & Heat 4,200 Rent Received 4,000 Capital as at 1/4/ , , ,700 The following is additional information obtained after the Trial Balance had been prepared. 1. Closing Inventory at 31 st March Wages owing were Rent amounting to 500 was prepaid. 4. The rent received, was for the period 1/4/2007 to 30/11/2007. The annual rent receivable is 6,000. Prepare (a) Income Statement for the year ended 31 March (b) Balance Sheet as at 31 st March (Total 30 Marks)