Financial Accounting

Sample Paper 2 Questions & Suggested Solutions

 

    NOTES TO USERS ABOUT SAMPLE PAPERS

Sample papers are published by Accounting Technicians Ireland. They are intended to provide guidance to students and their teachers regarding the style and type of question, and their suggested solutions, in our examinations. They are not intended to provide an exhaustive list of all possible questions that may be asked and both students and teachers alike are reminded to consult our published syllabus (see www.AccountingTechniciansIreland.ie) for a comprehensive list of examinable topics.

There are often many possible approaches to the solution of questions in professional examinations. It should not be assumed that the approach adopted in these solutions is the only correct approach, particularly with discursive answers. Alternative answers will be marked on their own merits. This publication is copyright 2012 and may not be reproduced without permission of Accounting Technicians Ireland.

© Accounting Technicians Ireland, 2012.

Financial Accounting Sample Paper 2 

 

 

Page 2 of 31 

 

Accounting Technicians Ireland  

Year 1    

FINANCIAL ACCOUNTING     Sample Paper 2    EXAM DURATION THREE HOURS     

  INSTRUCTION TO CANDIDATES    PLEASE READ CAREFULLY 

  In this examination paper the £/€ symbol may be understood and used by candidates in Northern Ireland to indicate the UK pound sterling and by candidates in the Republic of Ireland to indicate the Euro. Answer ALL THREE questions from Section A.  Answer ANY TWO of the three questions from  Section  B.    If  more  than  TWO  questions  are  answered  in  section  B,  then  only  the  first  two  questions, in the order filed, will be corrected.    Candidates should allocate their time carefully.    All workings should be shown.    All figures should be labelled as appropriate e.g. €s, units etc.    Answers should be illustrated with examples, where appropriate.     

 

Financial Accounting Sample Paper 2 

 

 

Page 3 of 31 

 

SECTION A Answer ALL THREE QUESTIONS (Compulsory) in this Section QUESTION 1 (Compulsory) a) Provide a definition of depreciation and explain why non current assets are depreciated over their useful economic life. 5 Marks b) The following information relates to the non current assets of Past Editions Limited.

Cost at 1/1/2009 Accumulated depreciation as at 1/1/2009

Plant & Machinery € 180,000 74,656

Fixtures & Fittings € 290,000 70,000

Depreciation Policy Details are as follows: Past Editions Limited depreciates at the following rates: • Fixtures and fittings at 10% per annum straight line; • Plant and machinery at 20% per annum straight line. The depreciation policy of Past Editions Limited is to charge depreciation from the month of acquisition to the month of sale. During the year to 31 December 2009 the following transactions relating to non current assets occurred: Fixtures and Fittings An item of fixtures and fittings was purchased for €36,000 on 1 March 2009. Installation costs of €1,500 were incurred to bring the asset into working condition. The asset is to be depreciated in line with the company’s depreciation policy for fixtures and fittings. Plant & Machinery An item of machinery that originally cost €24,000 and with accumulated depreciation of €11,600 as at 1 January 2009 was traded in on 30 June 2009 against a new machine that cost €32,000. A trade in of €8,400 was achieved.

Financial Accounting Sample Paper 2 

 

 

Page 4 of 31 

 

QUESTION 1 (Cont’d) Buildings Past Editions Limited constructed a new building and the following costs were incurred: • Purchase of site €50,000; • Site preparation €10,500; • Raw material and labour costs €46,500; • Architect fees €15,000. The building was completed and Past Editions moved into the building on 1 September 2009. It is estimated that the building will have a useful economic life of 50 years and a residual value of €20,000.

You are required to prepare the following nominal ledger accounts of Past Editions for the year ended 31 December 2009: i.

Buildings: cost account;

ii.

Fixtures and fittings: cost account;

iii.

Plant and machinery : cost account;

iv.

Buildings: accumulated depreciation account;

v.

Fixtures and fittings: accumulated depreciation account;

vi.

Plant and machinery : accumulated depreciation account;

vii.

Disposal of plant and machinery account.

2 Marks 1 Mark 3 Marks

Financial Accounting Sample Paper 2 

 

2 Marks 2 Marks 3 Marks 2 marks Total 20 Marks

 

Page 5 of 31 

 

QUESTION 2 (Compulsory) The following information relates to the receivables and payables of John Forman, a sole trader, for the year ended 31 December 2009: Extract from the books as at 1 January 2009: € 200,000 Dr 20,000 Cr 180,000 Cr 80,000 Dr

Receivables’ ledger debit balances Receivables’ ledger credit balances Payables’ ledger credit balances Payables’ ledger debit balances

Transactions for the year ended 31 December 2009: € 1,400,000 80,000 900,000 40,000 1,200,000 20,000 30,000 60,000 6,000 3,000 750,000

Sales on credit Sales returns (all credit) Purchases on credit Purchases returns (all credit) Amounts received from receivables Discounts allowed to receivables Discounts allowed by payables Irrecoverable debts written off Interest charged by a payable for late payment of accounts Discount received subsequently disallowed Payments to payables Dishonoured cheque received from a receivable (included in the amounts received from receivables above) Cash sales Contra entry between receivable and payable balances Closing allowance for receivables

12,500 17,200 4,890 16,700

Additional Information • A receivable’s balance €3,495 was omitted from the list of debit balances as at 1 January 2009. • At 31 December 2009 the total of the credit balances in the Receivables’ ledger was €30,000 and the total of the debit balances in the Payables’ ledger was €12,000. You are required to: a) Prepare the receivables and payables control accounts for Mr. Forman for the year ended 31 December 2009. 16 Marks b) Explain why a company should prepare control accounts. 4 Marks Total 20 Marks

Financial Accounting Sample Paper 2 

 

 

Page 6 of 31 

 

QUESTION 3 (Compulsory) a) Write a note on your understanding of the terms financial accounting and management accounting. List four differences between financial accounting and management accounting. 8 Marks b) Outline three users of financial statements and briefly explain what information each of these three users requires. 6 Marks c) Over time several accounting concepts and conventions have developed. With the aid of examples, where appropriate, write a note on any three of the following concepts/conventions: i ii iii iv v

Going concern; Prudence; Consistency; Separate entities Materiality. 6 Marks Total 20 Marks

Financial Accounting Sample Paper 2 

 

 

Page 7 of 31 

 

SECTION B Answer any TWO of the three questions in this Section QUESTION 4 The following trial balance was extracted from the books of T Higgins on 31 December 2009: Buildings at cost Accumulated depreciation on buildings Delivery vans at cost Accumulated depreciation on delivery vans Inventories as at 1/1/2009 Receivables and payables Bank Purchases and sales General expenses Discounts received Carriage inwards Insurance VAT Interest Wages and salaries Allowance for receivables 1/1/09 Irrecoverable debts Drawings Capital

€ 132,000

€ 38,000

25,000

8,000

25,800 18,700

36,200 3,150 374,790

293,000 6,375

350

3,600 3,900

2,450

1,300 41,000 1,050

700 12,300 563,675

99,685 563,675

The following information, which has not been accounted for above, is also available: 1. Inventory at 31 December 2009 at cost was €32,950. This figure includes damaged inventory items that cost €7,800 and that is now worth only €3,000. 2. During the year T. Higgins took inventory items for his personal use valued at €5,400. This has not been accounted for. 3. The bank figure in the trial balance, when compared to the bank statement, revealed that the following adjustment is required: • A direct debit charge posted by the bank for €370 has not been entered in the books of T. Higgins. 4. An amount of €600 had been received in respect of a debt previously written off. This receipt has not been recorded in the books. 5. The allowance for receivables is to be adjusted to 4% of receivables

Financial Accounting Sample Paper 2 

 

 

Page 8 of 31 

 

QUESTION 4 (cont’d) 6. Depreciation is to be provided for as follows: i. ii.

Buildings Delivery Vans

-

2% straight line 15% reducing balance

7. T. Higgins informs you that €750 of insurance is prepaid for 2010 and that an accrual for carriage inwards of €450 should be provided for. You are required to prepare: i. ii.

The Statement of Profit & Loss for the year ended 31 December 2009; 13 Marks The statement of financial position as at that date. 7 Marks Total 20 Marks

Financial Accounting Sample Paper 2 

 

 

Page 9 of 31 

 

QUESTION 5 AA Rumble is an old fashioned business with a hand written set of books and records. A trial balance is extracted at the end of every month. This month (December 2009), however, the trial balance did not balance. The balance in the suspense account was €7,485 credit. The draft loss for the month of December 2009 was €12,540 before accounting for the transactions below. Upon inspection of the ledgers the following items were discovered: 1. An item of office machinery purchased during the month for €5,500 was credited to the machinery repairs account. The machinery was purchased on credit and the entry in the suppliers account was entered correctly. 2. The total of the receipts side of the cash book was overcast by €7,300. 3. A discount received from J Morgan for €175 had been treated as a discount allowed to J Moran in the personal accounts and in the nominal ledger. 4. An invoice for light and heat for the month for €1,420 was found in a filing tray. The invoice has not yet been accounted for, nor the supplier paid as at the month end. 5. A cheque received from Mr. Smith for €6,450 in payment for goods previously sold to him was treated correctly in the cash book. However in Mr. Smith’s personal account it was treated as the sale of additional goods and posted to the incorrect side of the account. The sales account was not affected. 6. Due to a totting error the balance in the allowance for receivables account is under cast by €985; 7. Due to cash flow problems, AA Rumble introduced €14,700 in cash into the business. The transaction was entered correctly in the cash book but was credited the capital account as €17,400. (Ignore the affects of VAT and depreciation) You are required to: a) Prepare the journal entries necessary to correct the above errors. 11 Marks

b) Prepare a Suspense Account to clear the difference

5 Marks c) State the effect on profits (if any) of correcting each of the above errors. 4 Marks Total 20 Marks

Financial Accounting Sample Paper 2 

 

 

Page 10 of 31 

 

QUESTION 6 The following information is available for All Lawns Tennis Club for the year to 31 December 2009. Receipts and Payments Account € Details

Details Balance c/d Subscriptions received: - Ordinary (annual) Bar takings

??? 79,200 198,750

Opening balance b/d

285,900 121,240

€

Light and heat Repairs of clubhouse Barperson salaries Insurance (30% relates to bar) Bar purchases Club secretary expenses Lawn maintenance Bar cleaning expenses Closing bank balance b/d

5,100 11,350 31,600 19,850 72,800 11,470 7,820 4,670 121,240 285,900

Other assets and liabilities of the club are as follows: 1/1/09 € 110,200 9,700 7,540 1,540 3,560 650

Clubhouse building at cost Bar inventories Bar purchases payables Subscriptions in advance Subscriptions in arrears Accruals light and heat Notes: 1.

31/12/09 € 110,200 10,200 6,310 2,300 5,560 540

No depreciation is charged on the clubhouse.

You are required to: a) Calculate the accumulated fund as at 1 January 2009.

6 Marks

b) Prepare a bar trading account for the year ended 31 December 2009. 5 Marks c) The clubs income and expenditure account for the year end 31 December 2009 and the statement of accumulated fund as at that date. 9 Marks Total 20 Marks

Financial Accounting Sample Paper 2 

 

 

Page 11 of 31 

 

Financial Accounting Sample Paper 2 – Suggested Solutions

Financial Accounting Sample Paper 2 

 

 

Page 12 of 31 

 

Solution One Part A Depreciation has been defined as a measure of the cost of the economic benefits of the non current asset that have been consumed during the period. When an item of non current asset is purchased it will last for longer than one year. It is not purchased to be resold but is purchased to be used within the business to help the business generate profits. As such the purchase of an item of non current asset is an example of a capital item of expenditure. Such expenditure is not written off to the Statement of Profit & Loss in the year of purchase but is capitalised and written off to the Statement of Profit & Loss via depreciation over the useful economic life of the asset. Therefore depreciation is a method that allocates the cost of the non current asset to the accounting period that benefited from the use of the non current asset. If the full cost of the purchase of a non current asset was written off to the Statement of Profit & Loss in the year of purchase then one year would bear the full cost of the asset. This is clearly not a true and fair view when the asset is used within the business for several years. As such, depreciation is an example of the accruals concept whereby the cost of using the non current asset is matched to the profits generated by that asset over its useful economic life.

Part B Date

Details

1/9/09

Addition

Buildings Cost Account € Date Details

€

122,000 31/12/09

Balance

122,000 122,000

122,000 1/1/2010

Balance

122,000

Note: all of the costs listed can be capitalised and included within the cost of the non current asset. € Purchase of site Site preparation Raw material and labour costs Architect fees

Financial Accounting Sample Paper 2 

50,000 10,500 46,500 15,000 122,000

 

 

Page 13 of 31 

 

Solution One (cont’d) Date

Details

31/12/09

Balance

Building Accumulated Depreciation Account Date Details € 680

31/12/09

Statement Profit & Loss

1/1/2010

Balance

€ of

680

680

Buildings depreciation calculation: € € 122,000 – 20,000 = 2,040 50

*

680 680

4/12

€ 680

=

Fixtures and Fittings Fixtures & Fittings Cost Account € Date Details

Date

Details

1/1/09 1/3/09

Balance b/d Additions

290,000 37,500 327,500

1/1/2010

Balance b/d

327,500

31/12/09

€

Balance c/d

327,500 327,500

Date

Fixtures and Fittings Accumulated Depreciation Account Date Details Details €

31/12/09

Balance

102,125 102,125

Depreciation on additions € 37,500 * 10% =

1/1/09 31/12/09

Balance b/d I/S charge

1/1/2010

Balance

€ 3,750

*

10/12

Deprecation on existing (continuing) non current assets € 290,000 * 10% =

Financial Accounting Sample Paper 2 

 

€ 70,000 32,125 102,125 102,125

=

€ 3,125

€ 29,000

 

Page 14 of 31 

 

Solution One (cont’d)

€

Total depreciation Additions Existing assets Total depreciation 2009

3,125 29,000 32,125

Plant and Machinery Plant and Machinery Cost Account € Date Details

Date

Details

1/1/09 30/6/09

Balance b/d Additions

180,000 32,000 212,000

1/1/2010

Balance b/d

188,000

30/6/09 31/12/09

€

Disposal Balance c/d

24,000 188,000 212,000

Date

Plant and Machinery Accumulated Depreciation Account Date Details Details €

30/6/09 31/12/09

Disposal Balance

14,000 97,456 111,456

1/1/09 31/12/09

Balance b/d I/S charge

1/1/2010

Balance

€ 74,656 36,800 111,456 97,456

Depreciation on additions € 32,000 * 20% =

€ 6,400

*

6/12

=

€ 3,200

Depreciation on disposals € 24,000 * 20% =

€ 4,800

*

6/12

=

€ 2,400

Deprecation on existing (continuing) non current assets € 180,000 – 24,000 * 20% =

Financial Accounting Sample Paper 2 

 

€ 31,200

 

Page 15 of 31 

 

Solution One (cont’d) € 3,200 2,400 31,200 36,800

Total depreciation Additions Disposals Existing assets Total depreciation 2009

Date

Details

30/6/09

Cost

Plant and Machinery Disposal Account € Date Details 24,000

30/6/09 30/6/09 30/6/09

€

Accumulated Depreciation Trade in I/S

14,000 8,400 1,600 24,000

24,000

Financial Accounting Sample Paper 2 

 

 

Page 16 of 31 

 

Solution Two Part A Date

Details

1/1/09

Balance b/d Sales Dishonoured cheques Balance omitted

31/12/09

Balance c/d

1/1/2010

Balance b/d

Receivables Control Account € Date Details 200,000 1,400,000 12,500

1/1/09

3,495

30,000 1,645,995 261,105

€

Balance b/d Sales returns Receipts from receivables Discounts allowed

31/12/09

Irrecoverable debts Contra Balance c/d

1/1/2010

Balance b/d

20,000 80,000 1,200,000 20,000 60,000 4,890 261,105 1,645,995 30,000

Note: both cash sales and the closing allowance for receivables do not appear in an individual receivables T account and therefore do not appear in the control account.

Date

Details

1/1/09

31/12/09

Balance b/d Purchases returns Discounts received Payments to payables Contra Balance c/d

1/1/2010

Balance b/d

Payables Control Account € Date Details 80,000 40,000

1/1/09

30,000 750,000 4,890 196,110 1,101,000 12,000

€

Balance b/d Purchases

180,000 900,000

Interest

6,000

Discounts disallowed

3,000

31/12/09

Balance c/d

1/1/2010

Balance b/d

12,000 1,101,000 196,110

Part B (Any two of the following points – other relevant points accepted) Control accounts are prepared by businesses for the following reasons: 1. The purpose of the control account is to keep the nominal ledger free of details, yet have the correct balance for receivables and payables for the trial balance which in turn forms part of the financial statements.

Financial Accounting Sample Paper 2 

 

 

Page 17 of 31 

 

Solution Two (cont’d) 2. Control accounts are a means of proving the accuracy of the ledger accounts of receivables and payables. As a result this is a control mechanism to ensure accuracy of the receivables and payables personal ledgers. This control assists in the location of errors. 3. Control accounts can also act as an internal check, i.e. the person posting entries to the control account acts as a check on a different person who posts amounts from the daybooks to the personal ledgers.

Financial Accounting Sample Paper 2 

 

 

Page 18 of 31 

 

Solution Three Part A (Other relevant points accepted) There are two broad types of accounting information: Financial accounting is based upon meeting the informational requirements of external users of accounting information for example payables, lenders and the government. Financial accounting is presented to external users in the form of financial statements. In order to facilitate comparison, financial accounts are prepared using accepted accounting conventions and standards. International Financial Reporting Standards (IFRSs) help to reduce the differences in the way companies prepare their financial statements. The financial statements are public documents. Management accounting is based upon meeting the informational needs of internal users of accounting information for example management and employees. Management needs much more detailed and up-to-date information in order to control the business and plan for the future. They need to be able to cost products and assess profitability. In order to facilitate this, management accounts present information in any way that may be useful to management and in most cases to the specifications of management. Such information is only available within the company and usually is strategic in nature. The differences between financial and management accounting are as follows: Financial accounting - Production of summary financial statements for external users; - Prepared annually; - Required by law; - Reflects past performance and current position; - Information is calculated and presented in accordance with strict legal and accounting requirements. Management accounting - Production of detailed accounts, used by management to control the business and plan for the future; - Normally prepared monthly; - Not mandatory; - Includes budgets and forecasts of future activities, as well as reflecting past performance; - Information is computed and presented in order to be relevant to managers. (Any four differences for full marks – other relevant points accepted)

Financial Accounting Sample Paper 2 

 

 

Page 19 of 31 

 

Solution Three (cont’d) Part B (Any three of the following for two marks each – other relevant users of financial information accepted) Lenders Banks who lend money to a business require information that helps them determine whether loans and interest will be paid when due. The key accounting information for lenders is therefore, cash flow and profitability of the business. Payables Suppliers and trade payables require information that helps them understand and assess the short-term liquidity of a business. Is the business able to pay shortterm debt when it falls due? The key accounting information for payables is therefore cash flow and profitability. Receivables Customers require information about the ability of the business to survive and prosper. As customers of the company’s products, they have a long-term interest in the company’s range of products and services. They may even be dependent on the business for certain products and services. The key accounting information for receivables is therefore sales growth, new product development and investment decision. Employees Employees require information about the stability and continuing profitability of the business. They are crucially interested in information about employment prospects and the maintenance of pension funding and retirement benefits. They are also likely to be interested in the pay and benefits obtained by senior management. The key accounting information for employees is therefore revenue and profit growth, levels of investment in the business and overall employment data (numbers employed, wages and salary costs). Government Many government agencies and departments are interested in accounting information. For many businesses the most significant one is the Revenue commissioners. Revenue needs information on business profitability in order to levy and collect corporation tax, accounting information on sales and purchases is needed to verify Value Added Tax (VAT) returns. Analysts Investment analysts require very detailed financial and other information in order to analyse the competitive performance of a business and its sector (only applicable for Plcs). Much of this is provided by the detailed accounting disclosures that are required by authorities such as the London Stock Exchange.

Financial Accounting Sample Paper 2 

 

 

Page 20 of 31 

 

Solution Three (cont’d) Public at large Interest groups formed by various groups of individuals who have a specific interest in the activities and performance of businesses, will also require accounting information for example the environmental policies of the business. Part C (Any three of the following) Going Concern Going concern states that when preparing a set of financial statements accountants assume, unless there is evidence to the contrary, that a company is not going out of business and that it will continue in operational existence for the foreseeable future (twelve months from the date the financial statements are signed) and there is no intention to put the company into liquidation. This has important implications for the valuation of assets and liabilities, for example assets can be valued at their value in use to the business as opposed to the net realisable value. Financial statements have to be prepared in accordance with the going concern concept. Prudence In conditions of uncertainty, a cautious approach should be taken, so that gains and assets are not overstated and losses and liabilities are not understated. This means that sales and profit should not be included in the Statement of Profit & Loss until the cash has been received or that there is reasonable certainty that the cash will be received. In contrast, losses should be recognised in the Statement of Profit & Loss as soon as they are foreseen and considered reasonably certain. Prudence is the exercise of sound judgement in practical affairs. For example: if post year end inventory items were sold for less than cost, prudence would dictate that year end value of the inventory was written down to the net realisable value of the inventory. Hence ensuring that the value of year end assets (inventory) was not overstated and that profits were not over stated (closing inventory forms part of the profit calculation in the cost of sales section). Consistency Consistency states that transactions and valuation methods are treated the same way year to year, or period to period. Users of accounts can, therefore, make more meaningful comparisons of financial performance from year to year. Where accounting policies are changed, companies are required to disclose the fact that they have been changed, explain the impact of the change and the reason for the change. Usually a change in accounting policy is allowable only on the grounds that it is required because of a new accounting standard coming into force or because the change in accounting policy would give a truer and fairer view of the financial performance and position of the entity.

Financial Accounting Sample Paper 2 

 

 

Page 21 of 31 

 

Solution Three (cont’d) Separate Entity The separate entities principle seeks to ensure that private transactions and matters relating to the owners of a business are segregated from transactions that relate to the business. In accounting, a business entity is treated as a separate entity from the owners. Therefore, any capital injections made by the owner are recorded as capital contribution from owners in the books of the business entity. The owner’s private expenditure/spending are therefore not recorded in the books of the business entity. Materiality Materiality is an important convention. The preparation of accounts involves a high level of judgement. Where decisions are required about the appropriateness of a particular accounting treatment, the materiality convention suggests that this should only be an issue if the judgement is significant or material to a user of the accounts. An item is material to a set of financial statements if its error/omission from the financial statements would influence the decisions of the users of financial statements.

Financial Accounting Sample Paper 2 

 

 

Page 22 of 31 

 

Solution Four T. Higgins Statement of Profit & Loss for the year ended 31 December 2009 €

€ 374,790

Sales Cost of sales Opening inventory Purchases Carriage inwards

25,800 287,600 4,050 317,450 (28,150)

Less closing inventory Cost of sales

(289,300) 85,490

Gross Profit

350

Discount received Less Expenses Debts previously written-off as recovered Bank charges Insurance Interest Wages and salaries General expenses Depreciation of buildings Depreciation of delivery vans Irrecoverable debts Decrease in allowance for receivables

irrecoverable,

(600) 370 3,150 1,300 41,000 6,375 2,640 2,550 700 (302)

Total expenses

(57,183) 28,657

Net Profit

Financial Accounting Sample Paper 2 

 

 

Page 23 of 31 

 

Solution Four (cont’d) T. Higgins Statement of Financial Position as at 31 December 2009 2009 € Non current assets Buildings Delivery vans

132,000 25,000

Current assets Closing inventory Receivables Prepayments

2009 €

2009 €

(40,640) (10,550)

91,360 14,450 105,810

28,150 17,952 750

46,852 152,662

Total Assets Equity and Liabilities Capital Capital Profit for 2009

99,685 28,657 128,342 (17,700)

Drawings

110,642 Current liabilities Payables Bank overdraft VAT Accruals

36,200 2,920 2,450 450 42,020 152,662

Total Equity and Liabilities

Workings 1 € 32,950 (4,800) 28,150

Closing inventory as per question: Less write down of inventory

Financial Accounting Sample Paper 2 

 

 

Page 24 of 31 

 

Solution Four (cont’d) Workings 2 € 293,000 (5,400) 287,600

Purchases as per TB Drawings Drawings Drawings as per TB Drawings as per W2 Total drawings

12,300 5,400 17,700

Working 3 and 4 New expense of €370 in the Statement of Profit & Loss: € 3,150 370 3,520 (600) 2,920

Bank as per TB O/D Bank charges not accounted for Irrecoverable debt recovered Restated bank balance (overdraft)

Workings 5 € 18,700 748 1,050 302

Receivables as per TB Allowance for receivables 4% Opening allowance for receivables Decrease in allowances for receivables Workings 6

€ 132,000 2,640

Cost of buildings Depreciation 2% SL

€ 25,000 (8,000) 17,000 2,550

Cost of delivery vans Accumulated depreciation NBV Depreciation 15% RBM

Financial Accounting Sample Paper 2 

 

 

Page 25 of 31 

 

Solution Four (cont’d) Workings 7 Insurance as per TB Insurance prepaid as per w7

€ 3,900 (750) 3,150

Carriage inwards as per TB Carriage inwards accrued as per w7

€ 3,600 450 4,050

Financial Accounting Sample Paper 2 

 

 

Page 26 of 31 

 

Solution Five Part A Debit € 1. Dr Dr Cr 2. Dr Cr 3. Dr Dr Cr Cr

4. Dr Cr 5. Dr Cr 6. Dr Cr 7. Dr Cr

Machinery repairs Machinery at cost Suspense Being an error of principle

5,500 5,500

Suspense Bank/cash book Being the a correction of error cash book overcast

7,300

Credit €

11,000

7,300

J Morgan 175 J Moran 175 Discount received Discount allowed Being the correction of error discount incorrectly treated in personal accounts and nominal Light and heat Other payables Being an error of omission

1,420

175 175

1,420

Suspense 12,900 Mr Smith Being cash receipts treated as additional sales in error

12,900

Suspense 985 Allowance for receivables Being correction of error, allowance for receivables under cast

985

Capital Suspense Being the correction of an error of transposition

Financial Accounting Sample Paper 2 

 

2,700 2,700

 

Page 27 of 31 

 

Solution Five (cont’d) Part B Details Journal 2 Journal 5 Journal 6

€

Suspense Account Details

7,300 12,900 985

Opening balance Journal 1 Journal 7

21,185

€ 7,485 11,000 2,700 21,185

Part C Draft loss for December 2009 Journal 1 Journal 2 Journal 3 Journal 4 Journal 5 Journal 6 Journal 7 Loss after adjustments

Financial Accounting Sample Paper 2 

€ (12,540) (5,500) 350 (1,420) (19,110)

 

 

Page 28 of 31 

 

Solution Six Part A Calculate the opening cash balance: Details

Receipts and Payments Account € Details

Balance c/d Subscriptions received: - Ordinary (annual) Bar takings

7,950 79,200 198,750

Opening balance b/d

285,900 121,240

€

Light and heat Repairs of clubhouse Barperson salaries Insurance (30% relates to bar) Bar purchases Club secretary expenses Lawn maintenance Bar cleaning expenses Closing bank balance b/d

5,100 11,350 31,600 19,850 72,800 11,470 7,820 4,670 121,240 285,900

Calculate opening accumulated funds: € Assets Clubhouse Bar inventory Subs in arrears Cash/bank Liabilities Bar purchases payable Subs in advance Light and heat accruals

110,200 9,700 3,560 7,950

€

131,410

7,540 1,540 650 (9,730)

Accumulated funds 1/1/09

Financial Accounting Sample Paper 2 

121,680

 

 

Page 29 of 31 

 

Solution Six (cont’d) Part B Details Cash paid for purchases Balance c/d

Bar Payables Control Account € Details 72,800 6,310 79,110

€

Balance b/d Purchases

7,540 71,570 79,110 6,310

Balance b/d All Lawns Tennis Club Bar trading account for the year ended 31 December 2009

€

€ 198,750

Bar sales Cost of sales Opening inventory Purchases

9,700 71,570 81,270 (10,200)

Less closing inventory Cost of sales

(71,070) 127,680

Gross Profit Less expenses Barpersons wages Insurance Bar cleaning

31,600 5,955 4,670 (42,225) 85,455

Bar profits Part C Details

Subscriptions Account € Details

€

Opening subs in arrears I/S value for subs Closing subs in advance

3,560 80,440 2,300

Opening subs in advance Cash received for subs Closing subs in arrears

1,540 79,200 5,560

Opening subs in arrears

86,300 5,560

Opening subs in advance

86,300 2,300

Financial Accounting Sample Paper 2 

 

 

Page 30 of 31 

 

Solution Six (cont’d) Income and expenditure account for the year to 31 December 2009 € € Income 80,440 Subscriptions 85,455 Bar profits 165,895 Expenditure Light and heat 4,990 Repairs 11,350 Insurance 13,895 Club secretary expenses 11,470 Lawn maintenance 7,820 (49,525) 116,370 Excess of income over expenses All Lawns Tennis Club Accumulated Fund Statement as at 31 December 2009 2009 € Non current assets Buildings 110,200 Current assets Bar closing inventory Subs in arrears Bank

2009 €

2009 € 110,200

10,200 5,560 121,240

Total Assets Equity and Liabilities Accumulated Fund/Capital Opening accumulated fund 1/1/09 Excess of income over expenditure 2009

121,680 116,370

Current liabilities Bar payables Subs in advance Accruals

6,310 2,300 540

238,050

9,150 247,200

Total Equity and Liabilities

Financial Accounting Sample Paper 2 

137,000 247,200

 

 

Page 31 of 31