Financial Accounting
Sample Paper 2
Questions & Suggested Solutions
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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