UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education ACCOUNTING

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1 UNIVERSITY OF MRIGE INTERNTIONL EXMINTIONS International General ertificate of Secondary Education OUNTING 0452/01 Paper 1 Multiple hoice May/June 2006 dditional Materials: Multiple hoice nswer Sheet Soft clean eraser Soft pencil (type or H is recommended) 1 hour RE THESE INSTRUTIONS FIRST Write in soft pencil. o not use staples, paper clips, highlighters, glue or correction fluid. Write your name, entre number and candidate number on the nswer Sheet in the spaces provided unless this has been done for you. There are forty questions on this paper. nswer all questions. For each question there are four possible answers,, and. hoose the one you consider correct and record your choice in soft pencil on the separate nswer Sheet. Read the instructions on the nswer Sheet very carefully. Each correct answer will score one mark. mark will not be deducted for a wrong answer. ny rough working should be done in this booklet. alculators may be used. I06 06_0452_01/3RP ULES 2006 This document consists of 11 printed pages and 1 blank page. [Turn over

2 1 Why should a sole trader record all the financial information about her business? 2 because she is required to do so by law because she needs to pay her creditors on time so that she can prepare final accounts so that she knows how much her debtors owe her 2 What is net profit? the amount of money taken out of the business by the owner during the year the cash in the business bank account the difference between sales and cost of sales the sales revenue less cost of sales and expenses 3 What is shown as a liability in a alance Sheet? accrued wages fixtures and fittings prepaid rent stock of goods 4 What information is shown by a business s Trading ccount? if the business assets equal the liabilities if the business has made a gross profit if the business has made a net profit if the business income exceeds expenditure 5 The credit side of a business s cash book includes the following payments. $ cash taken by proprietor for personal use 5000 cash paid for fuel for proprietor s private motor car 200 cash taken by proprietor to purchase business stationery 20 How much will be recorded as proprietor s drawings? $5000 $5020 $5200 $5220 ULES /01/M/J/06

3 3 6 business sends a cheque to a supplier. The transaction is recorded in the cash book and supplier s account. Which accounting principle is being applied? consistency duality money measurement prudence 7 When does a business recognise the income from a sale of goods on credit? when it sends a statement to the customer when the customer pays for the goods when the goods are delivered to the customer when the goods are ordered by the customer 8 Which describes the going concern principle? ccountants apply the same treatment to similar transactions. ccountants assume that the business will continue to exist indefinitely. ccountants keep the transactions of the proprietor and the business separate. ccountants record the two-fold aspect of every transaction. 9 In which order are documents used when goods are purchased on credit? cheque, invoice, order cheque, order, invoice order, invoice, cheque invoice, order, cheque 10 When will a business issue a debit note? when goods are received from a supplier when goods are returned by a customer when goods are returned to a supplier when goods are sent to a customer ULES /01/M/J/06 [Turn over

4 4 11 bdul sells goods with a list price of $4000 on credit to Omar. bdul offers the following discounts. ash discount 10 % Trade discount 20 % What amount will be entered in the sales journal of bdul? $2880 $3200 $3600 $ business keeps a three column cash book. Where is the total of the discount column on the debit side posted? to the credit side of discounts allowed account to the credit side of discounts received account to the debit side of discounts allowed account to the debit side of discounts received account 13 trader purchases a motor vehicle to deliver goods to his customers. How will he record this? account to be debited account to be credited bank motor vehicles motor vehicles bank bank purchases purchases bank 14 Sarah sublets part of her premises to Ruth. cheque for rent has been received from Ruth. How will Sarah record this in her ledger? account to be debited account to be credited bank rent receivable rent receivable bank rent receivable Ruth Ruth bank ULES /01/M/J/06

5 15 Where are the personal accounts of trade customers found? 5 purchases journal purchases (creditors) ledger sales journal sales (debtors) ledger 16 What is the main purpose of a trial balance? to check the arithmetical accuracy of the double entry to check the bank balance agrees with the bank statement balance to check that all invoices have been sent to check that all journal entries have been posted 17 Which is an error of principle? cheque for $85 from W entered in W s account as $58 purchase of machinery entered in purchases account sales of goods, $300, to X completely omitted from books sale to Y entered in the account of Z 18 The total of the discounts received account, $400, is entered on the wrong side of a trial balance. Which suspense account entry will balance the trial balance? $400 credit $800 credit $400 debit $800 debit 19 The purchase of a motor vehicle on credit was debited to the motor expenses account. How is this error corrected? account to be debited account to be credited creditors motor expenses motor expenses creditors motor expenses motor vehicles motor vehicles motor expenses ULES /01/M/J/06 [Turn over

6 20 What is the purpose of preparing a bank reconciliation statement? 6 to check that all expenses have been paid to check on the amount owed by debtors to explain the difference between the bank statement balance and cash book balance to see by how much the bank balance has increased during the accounting period 21 business paid $1800 for insurance in prepayment of $150 had been brought forward from How much is charged to the Profit and Loss ccount in 2005? $1650 $1800 $1950 $ When preparing his final accounts, a trader forgot to include an unpaid invoice for repairs to his motor vehicle. What is the effect of this? fixed assets are overstated fixed assets are understated net profit is overstated net profit is understated 23 Which is revenue expenditure? building an extension to factory premises legal costs of buying factory premises purchase of factory premises redecorating factory premises 24 What is the effect if capital expenditure is treated as revenue expenditure? gross profit is understated net profit is understated total assets are overstated working capital is understated ULES /01/M/J/06

7 25 trader recognises that his motor vehicles depreciate in value each year. How does he record this in his final accounts? 7 Profit and Loss ccount alance Sheet increase expense decrease expense increase fixed assets decrease fixed assets 26 business buys a machine for $ It will be used for 5 years and the estimated residual value is $5000. What is the annual depreciation charge using the straight line method? $1000 $3000 $4000 $ Zafar owed li $500. Zafar was only able to pay li $200. li wrote the balance off as a bad debt. Which entries record this in li's ledger? account to be debited $ account to be credited $ bad debts 500 bank Zafar bank Zafar bad debts bank Zafar 500 bad debts bank bad debts 500 Zafar trader made a net profit of $ Sales were $ and overhead expenses were $ What was the cost of sales? $ $ $ $ ULES /01/M/J/06 [Turn over

8 29 How is carriage inwards recorded in final accounts? 8 credit Profit and Loss ccount debit Profit and Loss ccount credit Trading ccount debit Trading ccount 30 fter preparing her final accounts, a trader finds that she has not included accrued electricity charges. How will the correction of this error affect her final accounts? Profit and Loss ccount alance Sheet increase expenses decrease expenses increase capital decrease capital 31 Mark and Sally are in partnership sharing profits and losses in the ratio of 2 : 1. The following is extracted from their final accounts for the year ended 30 pril $ $ Net profit Partners salaries - Mark Sally Profit available for distribution How much in total will be recorded in Sally s current account on 30 pril 2006? $ $ $ $ ULES /01/M/J/06

9 32 partnership makes a loss during the financial year. How is this shown in the accounts? 9 account to be debited account to be credited ppropriation ccount partners capital accounts ppropriation ccount partners current accounts partners capital accounts ppropriation ccount partners current accounts ppropriation ccount 33 The following information is available in respect of a sole trader. $ net profit for year drawings capital at end of year There were no additions to capital during the year. What was the trader s opening capital? $ $ $ $ What is an intangible asset? debtors goodwill prepayment stock ULES /01/M/J/06 [Turn over

10 10 35 The following is extracted from a trader s alance Sheet. $ fixed assets 3500 current assets 4750 creditors 1300 accruals 85 long term loan 3270 What is the working capital? $3365 $3450 $3535 $ Jones starts a business with capital of $ In addition to this he obtains a five year loan of $ to purchase fixed assets. What is the capital employed? $8000 $ $ $ Which is a current asset? accrued expense bank overdraft creditors prepaid expense 38 business has the following assets and liabilities. $ fixed assets current assets current liabilities long term loan What is the current ratio? 2.0 : : : : 1 ULES /01/M/J/06

11 11 39 business provided the following information for the year ended 31 ecember $ $ Sales ost of sales Opening stock Purchases Less closing stock What is the rate of stock turnover? 4.2 times 8.0 times 8.4 times 12.0 times 40 business has calculated the following ratios. percentage of gross profit to sales percentage of net profit to sales Year 1 40 % 19 % Year 2 40 % 25 % Why did the net profit percentage increase in Year 2? cost of sales decreased cost of sales increased expenses decreased expenses increased ULES /01/M/J/06

12 12 LNK PGE Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (ULES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. University of ambridge International Examinations is part of the University of ambridge Local Examinations Syndicate (ULES), which is itself a department of the University of ambridge. 0452/01/M/J/06