CARIBBEAN EXAMINATIONS COUNCIL

1983

PRINCIPLES OF ACCOUNTS PAPER II GNERAL PROFICIENCY

Answer ALL questions in Section I and TWO questions from Section II.
Begin EACH answer on a separate page
Keep ALL parts of EACH answer together
Silent electronic calculators may be used, but ALL necessary working should be clearly
shown.

SECTION I
Answer all THREE questions in this section.
1.

On January 1, 1982 Mr. T. Smarts financial position was as follows:

$
875
450
870
680

Cash
Debtor G. Harry
Stock of goods
Creditor A. Friend
Mr. Smarts transactions for January were as follows:
(i)
(ii)
(iii)
(iv)
(v)

Jan

7
11
19
20
29

Paid A. Friend $350 on account.

Sold $620 worth of goods to M. Cupid on credit.
G. Harry paid off his account.
Sent Credit note to M. Cupid valued at $50 for goods which
were damaged and returned as a result of poor packaging.
Purchased on credit additional stocks valued at $300 from
A. Friend. He was allowed a 10% Trade Discount as per
Invoice No. 125.

You are required to:

2.

(a)

Show the opening journal entry to record the assets and liabilities of
T Smart as at January 1, 1982 and post to the appropriate Ledger
Accounts.

(b)

Journalize either transactions (iv) or transaction (v) above.

(c)

Post all the above transactions for January to their respective accounts,
balance and close off the accounts as at January 31, 1982.

(d)

Explain the significance of the balance on the Real Account and the
balance on A Friends Account.
( 24 marks)

(a)

Miss A Malcolm operates a small shop in Belize. She did not keep a
complete set of accounting records but provided you with the following
information for the year ending December 31, 1982.

Trade Debtors
Rates paid in advance
Trade creditors
Stocks
Equipment

Jan 1, 1982
$
400
750
1 200
2 500

Dec 31, 1982

$
600
100
960
1 550
3 200

Miss Malcolm paid all cash received from Sales into the bank except an
average of $10 per week for her sons lunch money. She also took $350
worth of goods (at cost price) for which she paid nothing.
All payments were made by cheque.
The following information was received from her bank statement:
1982

1982

Balance Jan 1
Lodgements:
Cash Sales
Cash from Debtors

$
260

$
Payments
Creditors
Wages
Rates
New Scale
Personal Drawing
General Expenses
Balance at Dec 31

10 250
2 090

8 540
940
250
850
550
480
990

12 600

12 600

From further examination it was determined that debtors owing $75.00

would not be able to pay anything on their account and were written off.
Miss Malcolm had also allowed $50.00 as discount on the receipts from
Sundry debtors.
You are required:

2.

iii

(b)

(i)

Calculate the opening capital.

(ii)

Calculate the total credit sales for the year.

(iii)

Calculate total sales for the year.

(iv)

Calculate total sales for the year.

( 20 marks)

Using the symbols given below show how each of the following
UNCORRECTED errors would affect the net profit of a business as
Ascertained in the firms Profit & Loss account for one year of operations.
(i)

No adjustment had been made to the expense account for expenses

prepaid.

(ii)

The sale of an old desk at book value had been included in the sales
account.

(iii)

The purchases account had been overstated by the purchases day

book total.

(iv)

Cash was withdrawn from the business for personal use.

(v)

Cash received from debtors was credited to the sales account.

Present your answer in a table using the format and symbols below.
No. (i) has been done as an example.
Symbols
+ to indicate increase
0 to indicate no effect
- to indicate a decrease

Transaction
(i)

Effect on Net Profit

No adjustment had been

made to the expense
account for expense
prepaid.

(ii)
(iii)
(iv)
(v)

SECTION II
Answer any TWO (2) questions in this section
3.

Morbey presents the following Trial Balance of the books of his business at
December 31, 1982.
$
$
Capital
52 549
Purchases
55 306
Bank
10 818
Premises
30 900
Sales
74 454
Mortgage
10 000
Transportation on Purchases (Carriage In.)
300
Drawings
2 549
Discount Received
1 200
Provision for Bad Debts at beginning of year
1 456
Cash
36
Office Expenses (Stationery, etc.)
2 845
Bad Debts
453
Travelling and Accommodation
5 781
Trade Debtors
18 050
Trade Creditors
9 700
Stock
2 501
Salaries and wages
6 480
Advertising
490
Mortgage interest
600
Motor Vehicles
12 250
149 359

149 359

You are required to prepared the trading Account (showing Cost of Goods Sold)
and Profit and Loss Account for the year ended December 31, 1982 and the
Balance Sheet as at that date, taking into consideration the information given
below:
(i)

An additional Motor Vehicle costing $3 750 had been included in

Travelling and Accommodation expenses.

(ii)

(v)

Depreciation of Motor Vehicles (including the addition) should be allowed

at 30 per cent per annum.
The Provision for Bad Debts is to be 10 per cent of the total debtors.
An invoice for Advertising for $250 was due for payment but had not been
included in the accounts.
Closing Stock December 31, 1982 was $2 603.
(24 marks)

(a)

Explain the purpose of a bank reconciliation statement.

(iii)
(iv)

4.

Miss S Salmon received a statement of account from her bank showing a debit
balance of $165.00 as at February 28. However, her Cash Book has a debit
balance of $128.00. She has requested you to examine her cash book and bank
statement. From the examination the following differences were discovered.
(i)
(ii)
(iii)
(iv)
(v)

A standing order for $350 payable to Young Building Society was

omitted from the Cash Book.
Two cheques from Mr Lee and Miss Green for $85 and $115 respectively
were paid directly to Miss Salmons bank account on February 25. She
has not received the bank notification as yet.
A cheque received for $456 which was entered in the Cash book on
Friday, February 26 was not ledged to the bank until Monday, March 1.
Bank charges shown in the bank statement for $55 had not been entered in
the Cash Book.
Three employees who were paid on February 26, did not present their
cheques of $135.00, $165.00 and $68.00 respectively for payment until
March 3.

You are required to prepare:

(b)
(c)
5.

iv

an adjusted Cash Book showing the closing balance on 28 February.

(9 marks)
A Bank Reconciliation Statement as at February 28 (starting with the
balance as per Bank Statement)
(11 marks)

On July 1, 1982 Mr J Irons, a sole trader, has cash in hand amounting to $17.50
and an overdraft at his bank of $635.25.
(i)
(ii)

July 2
7

(iii)

(iv)

12

(v)

13

(vi)
(vii)

15
16

Received cash from L Richards amounting to $57.50

Paid Appliance Co. $350.00 by cheque after deducting 5%
discount.
Sold goods valued at $162.50, Cash Discount deducted
$12.50.
Cashed a cheque for $100.00 and paid to the petty cashier for
imprest.
Received a cheque from S Smith for $275.00. A cash
discount of $13.73 was allowed.
Paid this cheque intothe bank together with $210.00 of the
cash on hand.
Paid R Phillips by cheque $125.00 less 5% Cash Discount.
Chashed cheque for $125.00 and paid wages $85 and his
personal business expenses of $35.00.

(b)
(c)
(d)

Post the discount allowed to its respective ledger account.

Explain the effect of the discount allowed on Mr Irons final accounts.
Using the format on the sheet provided, enter the transactions listed below
in the Petty Cash Book; balance the book and show reimbursement to
petty cashier.

(i)

Jan 1

(ii)
(iii)

2
3

Petty Cash fund established with $100.

Voucher No. 1 paid EMS Parkways $25 for travelling.
Voucher No. 2 paid office cleaner $10 for office cleaning.
Voucher No. 3 paid W Brown $15 on account.

(iv)
(v)

6.

Voucher No. 4 paid Post Office $5 for postage stamps.

Voucher No. 5 paid Voice Publishers $20 for stationery.
(24 marks)

Reevers, Sea and Lake are in partnership and their Capital Accounts stand at
$5 000 and $6 000 and $8 000 respectively. Lake has advanced $4 000 to the firm
as a loan.
The Partnership Agreement contains the following:
(i)

5% per annum interest is to be allowed on fixed capital.

(ii)

10% per annum interest is to be allowed on loans advanced by partner(s).

(iii)

Reevers and Sea are both to receive salaries of $500 per annum each.

(iv)

Interest at 10% per annum is to be charged on Drawings.

In 1982 the Net Profit before any partnership adjustments was $5 499, and
Drawings by partners were:
Reevers
Sea
Lake

$300
$400
$600

At the start of the trading period their current accounts revealed that:
The Partnership owed Reevers
Sea Owed the Partnership
The Partnership owed Lake

$1 000
500
400

You are required to:

(a)

Prepare

(i)
(ii)

The Appropriation Account

Columnar Current Accounts

(b)

Explain the significance of the credit balances on the current accounts.