ROYAL COLLEGE PORT LOUIS MOCK EXAMINATION 2022 Grade 11 ACCOUNTING Paper 2 JULY 2022 TIME: 1 Hour and 45 minutes Name:……………………………………………………………………………………. Class:………………………… INSTRUCTIONS TO CANDIDATES Write your name and class in the spaces provided. Write in dark blue or black pen only You may use a soft pencil for any rough working Do not use staples, paper clips, highlighters, and glue or correction fluid ANSWER ALL QUESTIONS ON THIS QUESTION PAPER ITSELF At the end of the examination, fasten all your work securely together The number of marks is given in brackets [ ] at the end of each question or part section. This paper is of a total of 100 marks. 1 Question 1 - Nick sells goods on credit and maintains a sales ledger control account. The following information is available for the month ended 31 May 2022. 2022 May Amount owing by credit customers 1 31 Cheques from credit customers Dishonoured cheque (included in cheques received) Cash sales Credit sales Credit notes issued to customers Discount allowed Irrecoverable debt $ 36 000 53 800 2 080 4 500 51 270 1 750 950 1 450 REQUIRED (a) State two reasons for a business to account for irrecoverable debts. 1.………………………………………………………………………………………………………………………… 2…………………………………………………………………………………………………………….…………[2] The accountant has calculated the sales ledger control account balance brought forward at 1 June 2022 for a total value of $31 400. Also on the same date the balance on the provision for doubtful debts account was $1 900. Nick maintains a provision for doubtful debts at 5%. REQUIRED (b) Explain how the accountant of Nick has determined the rate of 5% for provision for doubtful debts for the business. .……………….………………………………………………………………………………………………………… .…………………….…………………………………………………………………………………………………… .……………………….………………………………………………………………………………………………… .……………………….………………………………………………………………………………………………… .……………………….………………………………………………………………………………………………… .……………………….……………………………………………………………………………………………… [3] (c) Based on the information given above, prepare a provision for doubtful debts account for the year ended 31 May 2022. Balance the account and bring down the balance on 1 June 2022. Provision for doubtful debts account Date Details $ Date Details $ [3] 2 (d) Name the accounting concept or principle that supports the use of provision for doubtful debts. .……………………….……………………………………………………………………………………………… [1] On 15 June 2022, Nick was advised by his accountant that Jim, a credit customer who owed $1250, was bankrupt. Nick received a cheque for $500 in final settlement. The balance was written off as irrecoverable. REQUIRED (e) Prepare the journal entry made by Nick to record the bankruptcy of Jim. A narrative is required. General journal Dr Cr $ $ [4] The following information related to the electricity account for the month ended 31 May 2022. May 17 31 Paid for electricity by cheque $440. Prepared the income statement. It was estimated that $55 was owed for electricity at that date. REQUIRED (f) Prepare the electricity account for the month of May 2022. Balance the account and bring down the balance on 1 June 2022. Electricity account Date Details $ Date Details $ 2022 May 1 Balance b/d 200 [3] 3 (g) Complete the following table for the transactions shown. Name the source document prepared by the accountant of Nick and the book of prime entry used. The first item has been completed as an example. Transactions May 9 Sold goods on credit for $800, (cost $500) Source document Book of prime entry Sales invoice Sales journal Customer returned goods, bought by 15 him on 9 May for $300 22 Paid wages in cash $150. [4] [Total: 20] 4 Question 2 - The following balances were recorded in the books of Sameera on 1 March 2021. Motor vehicles account (at cost) Motor vehicles – provision for depreciation account $ 50 000 18 400 Additional information 1. On 31 May 2021 a motor vehicle costing $16 000 and with an accumulated depreciation of $7000 was sold for $8400. 2. On 10 June 2021 a motor vehicle costing $20 000 was purchased on credit. 3. The depreciation policy of Sameera is as follows: Motor vehicles are depreciated at the rate of 25% per annum using the diminishing (reducing) balance method. A full year’s depreciation is charged in the year of purchase. No depreciation is charged in the year of sale. REQUIRED (a) State the meaning of the accounting term depreciation. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. …………………………………………………………………………………………………………………………[2] (b) What are the 3 main causes of depreciation for non-current assets? 1………………………………………………………………………………………………………………………..… 2.…………………………………………………………………………………………………………………………. 3.………………………………………………………………………………………………………………………[3] (c) Suggest one reason why the reducing balance method might be the most appropriate method for Sameera to depreciate her motor vehicle. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. …………………………………………………………………………………………………………………………[2] 5 (d) Calculate the: (i) profit or loss on the sale of the motor vehicle on 31 May 2021. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. …………………………………………………………………………………………………………………………[2] (ii) Motor vehicles depreciation charge for the year ended 28 February 2022. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. …………………………………………………………………………………………………………………………[2] (e) Prepare the motor vehicles provision for depreciation account for the year ended 28 February 2022. Balance the account and bring down the balance on 1 March 2022. Motor vehicles provision for depreciation account Date Details $ Date Details $ [5] 6 (f) Identify by ticking the appropriate box, () whether each payment is capital expenditure or revenue expenditure. Capital Revenue expenditure Expenditure Purchase of spares for Motor vehicles Installation of new engine for Motor vehicle Repairs to office furniture Purchase of loose tools [4] [Total: 20] Question 3 – The financial year of PVL Sports Club ends on 31 December. The treasurer provided the following information about receipts and payments for the year ended 31 December 2021. Receipts Subscriptions $ Payments $ 19 200 Competition prizes 4 100 Competition receipts 7 300 Dinner dance costs 6 200 Dinner dance ticket sales 6 500 Equipment 12 000 General expenses 11 500 The treasurer also provided the following information. 1 January 2021 $ Equipment at net book value 31 December 2021 $ 23 000 30 000 General expenses owing 400 500 Subscriptions in arrears 700 300 1 100 900 Subscriptions in advance Of the subscriptions in arrears on 1 January 2021 an amount of $80 had not been paid by 31 December 2021 and is to be written off as irrecoverable. REQUIRED (a) Prepare the subscriptions account for the year ended 31 December 2021. Balance the account and bring down the balances on 1 January 2022. 7 PVL Sports Club Subscriptions Account Date Details $ Date Details $ [8] REQUIRED (b) Prepare the income and expenditure account for PVL Sports Club for the year ended 31 December 2021. PVL Sports Club Income and Expenditure Account for the year ended 31 December 2021 $ $ [9] 8 The treasurer of PVL Sports Club wants to encourage more members to pay their subscriptions in advance by offering a 10% reduction in annual subscription fees. (c) Advise the treasurer whether or not PVL Sports Club should offer this reduction in annual subscription fees to members who pay in advance. Justify your answer with one advantage and one disadvantage. ……………………………………………………………………………………………………………………………. ………………………………………………………………………………………………………………………….… ……………………………………………………………………………………………………………………….…… ……………………………………………………………………………………………………………………………. ………………………………………………………………………………………………………………………….… ……………………………………………………………………………………………………………………………. ………………………………………………………………………………………………………………………….… ……………………………………………………………………………………………………………………….…… …………………………………………………………………………………………………………………….……… ………………………………………………………………………………………………………………..……..…[3] [Total: 20] Question 4 – Khalid prepared her trial balance at 31 January. The total of the debit side was more than the total of the credit side. Khalid entered the difference in a suspense account. (a) Explain how the use of a suspense account allows a draft statement of financial position to be prepared. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. …………………………………………………………………………………………………………………………[2] Khalid later discovered the following errors. 1 A repair to the premises, $220, had been debited to the premises account. 2 The purchase of a motor vehicle, $3400, on credit from Neil’s Wheels, had not been recorded in the accounting records. 3 Both the sales journal and the purchases journal had been overcast by $100. 4 Returns inwards, $19, had not been recorded in the returns inwards account. 5 Bank interest received, $25, had been debited to the bank charges account. The entry in the bank account had been correctly made. REQUIRED (b) Prepare the journal entries to correct errors 1–5. Narratives are not required. 9 Error number Khalid Journal Details Debit $ Credit $ [11] (c) State the number of the error which is (i) a compensating error ................................................. [1] (ii) an error of omission ................................................. [1] 10 (d) Complete the table to indicate the effect of each error on gross profit and on profit for the year. The first one has been completed as an example. Error number 1 Gross Profit Profit for the year 220 2 3 4 5 [4] (e) State why a balance may remain on the suspense account after errors 1–5 have been corrected. ……………………………………………………………………………………………………………………………. ……………………………………………………………………………………………………………………………. …………………………………………………………………………………………………………………….……[1] [Total: 20] 11 Question 5 – Rajbir owns a groceries wholesale business. The following balances appeared in his books on 30 September 2021. $ Inventory Purchases Trade payables Revenue 8 000 109 000 11 600 160 000 Trade receivables 22 600 Operating expenses 35 200 The inventory on 1 October 2020 was $11 000. All sales and purchases were on a credit basis. REQUIRED (a) Calculate the gross profit and profit for the year. …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………….….. …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………[2] (b) (i) Calculate the gross margin. …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………[2] 12 (ii) Advise Rajbir on two actions he could take to improve his gross margin. 1. …………………………………………………………………………………………...…………………………… …………………………………………………………………………………………………………………………… 2. ……………………………………………………………………...………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………[2] (c) Calculate the trade receivables turnover. Round up your answer to the next whole day. ……………………………………………………………………...………………………………………….………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………[2] Rajbir allows his credit customers a cash discount of 5% for prompt payment. He is considering reducing this to 2%. REQUIRED (d) State one advantage and one disadvantage to Rajbir of this proposal. ……………………………………………………………………………………………………………………….….. …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………[2] (e) Calculate the trade payables turnover. Round up your answer to the next whole day. …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………… …………………………………………………………………………………………………………………………[2] 13 Rajbir is considering turning his business into a limited company. REQUIRED (f) Advise Rajbir whether or not he should form a limited company. Justify your answer with two advantages and two disadvantages of forming a limited company. …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… ………………………………………………………………………………………………………………….………[5] Rajbir is concerned that the business bank balance has shown a large decrease. This could be an issue to form a limited company. He is therefore considering either investing more cash from his private funds or obtaining a two-year bank loan. REQUIRED (g) Advise Rajbir which option he should select. Justify your answer by providing one advantage and one disadvantage of each option. …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… …………………………………………………………………………..…………………………………………...…… ………………………………………………………………………………………………………………….………[3] [Total: 20] 14
