Accounting Qualification Question paper Intermediate level Maintaining financial records and preparing accounts (FRA) Level 3 Diploma for Accounting Technicians (QCF) Financial accounting (FRA) Wednesday 1 December 2010 (afternoon) Time allowed - 3 hours plus 15 minutes’ reading time Please complete the following information in BLOCK CAPITALS: Student member number Desk number Venue code Date Venue name Important: This exam paper is in two sections. You should try to complete every task in both sections. We recommend that you use the 15 minutes’ reading time to study the exam paper fully and carefully so that you understand what to do for each task. However, you may begin to write your answers within the reading time, if you wish. You must use permanent ink, preferably black, to write your answers. Correcting fluid may not be used. You must not, during the exam, communicate with any other candidate or be in possession of unauthorised materials, such as pre-prepared notes, books, programmable calculators and dictionaries. Any of these actions will constitute malpractice and will result in disciplinary action. If you are in possession of unauthorised materials you must give them to the Supervisor before the start of the exam. Do NOT open this paper until instructed to do so by the Supervisor. Note: You may use this page for your workings. 2 Note: This page is perforated. You may remove it for easy reference. This exam paper is in TWO sections. You must show competence in BOTH sections. So, try to complete EVERY task in BOTH sections. Section 1 contains 7 tasks and Section 2 contains 5 tasks. You should spend about 80 minutes on Section 1 and 100 minutes on Section 2. There is blank space for your workings on pages 2, 11, 15, 20 and 23 but you should include all essential workings and calculations in your answers. Section 1 You should spend about 80 minutes on this section. Against each task is a recommended time for that task, but please note that these times are guidelines only. Data Amy and Lin are the owners of Bake4u, a partnership business that provides catering services to businesses. They maintain a manual cash-book but they do not keep a double entry bookkeeping system. All sales and purchases are on credit terms. The business is not registered for VAT. You are an accounting technician at Harper and Co., the accounting firm that prepares the final accounts for Bake4u. You are working on Bake4u’s accounts for the year ended 30 September 2010 and you have the following information (page 4). 3 Note: This page is perforated. You may remove it for easy reference. Balances as at: 30 September 2009 30 September 2010 £ £ 18,000 18,000 Equipment accumulated depreciation 6,480 To be calculated Stock at cost 1,900 2,500 Trade debtors 5,130 4,820 750 To be calculated Trade creditors 2,675 2,610 Capital – Amy 5,000 5,000 Capital – Lin 5,000 5,000 Current – Amy (credit balance) 800 To be calculated Current – Lin (credit balance) 885 To be calculated Equipment at cost Prepayments Bank summary for the year ended 30 September 2010 £ £ Receipts from trade debtors 56,700 Balance b/f 4,940 Loan 10,000 Rent 4,500 Payments to trade creditors General expenses 66,700 4 22,570 6,400 Drawings - Amy 13,000 Drawings - Lin 11,000 Loan repayments 1,800 Balance c/f 2,490 66,700 Task 1.1 (25 minutes) (a) Prepare the sales ledger control account for the year ended 30 September 2010, showing clearly the credit sales as the balancing figure. Sales ledger control account £ £ (b) The sales margin is 60%. Using your sales figures from (a), calculate the cost of goods sold. (c) Using your figure from (b) and the data on page 4, calculate the purchases figure to be included in the trial balance. Note: Task 1.1 continues on page 6. 5 Task 1.1, continued (d) Prepare the purchases ledger control account for the year ended 30 September 2010, showing clearly the discounts received as the balancing figure. Purchases ledger control account £ £ Task 1.2 (6 minutes) The business took out a loan during the year. Loan interest of £465 needs to be added to the loan account. Prepare the loan account, showing clearly all the relevant entries and the closing balance. You will need to refer to the information on page 4. Loan account £ 6 £ Task 1.3 (8 minutes) The equipment is to be depreciated at 20% on a reducing balance basis. (a) Calculate the depreciation charge for the year ended 30 September 2010. (b) Calculate the updated accumulated depreciation as at 30 September 2010. Task 1.4 (8 minutes) The figure in the list of balances for prepayments is for rent. The figure for rent in the bank summary includes a payment of £1,125 for the period 1 August 2010 to 31 October 2010. Prepare the rent account, showing clearly the rent for the year ended 30 September 2010. Rent £ £ Workings: 7 Task 1.5 (8 minutes) Update the partners’ current accounts: Enter the balances from the information on page 4 Enter the drawings Balance off the accounts ready for preparation of the trial balance. Current accounts Amy £ Lin £ 8 Amy £ Lin £ Task 1.6 (20 minutes) Complete the trial balance as at 30 September 2010, taking into account your answers to the above tasks, and all the other information you have been given. Bake4u Trial balance as at 30 September 2010 Dr £ Bank Capital – Amy Capital – Lin Closing stock – balance sheet Closing stock – profit and loss account Current account – Amy Current account – Lin Depreciation charge for the year Discounts received Equipment at cost Equipment accumulated depreciation General expenses Loan Loan interest Opening stock Prepayments Purchases Purchases ledger control account Rent Sales Sales ledger control account Total 9 Cr £ Task 1.7 (5 minutes) A junior member of staff at your firm asks you some questions about stock valuation. (a) According to accounting standards, which ONE of the following should be used when valuing stock? The lower of cost and selling price The higher of cost and selling price The lower of cost and net realisable value The higher of cost and net realisable value (b) Which TWO of the following should be included in the cost of stock? Selling expenses Purchase price of the goods Administration expenses Carriage outwards Carriage inwards Loan interest paid 10 Note: You may use this page for your workings. Note: Please turn over for Section 2. 11 Section 2 You should spend about 100 minutes on this section. Against each task is a recommended time for that task, but please note that these times are guidelines only. Data Jim Kemp is the owner of a business that installs and maintains intruder alarm systems in houses. You are an accounting technician at Harper and Co., the accounting firm that prepares the final accounts for Jim Kemp. The financial year end is 30 September. Jim Kemp’s accounting system consists of a main ledger and a subsidiary purchases ledger. Double entry takes place in the main ledger. Individual accounts of creditors are kept in memorandum accounts in the purchases ledger. A purchases day-book is used. Totals from the day-book are transferred into the main ledger. The business is registered for VAT. The extended trial balance as at 30 September 2010 is on pages 18-19. Task 2.1 (25 minutes) Ali Sayed is a junior colleague at your firm. He needs to understand more about the purchases day-book, the purchases ledger and the purchases ledger control account. (a) Write an email to Ali Sayed. Explain: From: To: Sent: Subject: the purpose of the purchases day-book the purpose of the purchases ledger the purpose of the purchases ledger control account which of these provides a figure for the trial balance AccountingTechnician@Harper.co.uk AliSayed@Harper.co.uk 1 December 2010 Purchases day-books, ledgers and control accounts 12 13 Task 2.1, continued The individual balances of the accounts in the purchases ledger have been listed, totalled and compared with the £13,600 balance on the purchases ledger control account. The total is £13,835 but after investigation the following errors were found. 1. 2. 3. 4. (b) A bank payment of £890 had not been entered in the supplier account. A credit note for £140 had been entered in a supplier account as an invoice. A supplier account with a credit balance of £3,200 was listed as £2,300. Interest received of £35 was incorrectly credited to the purchases ledger control account. The corresponding debit entry was correct. No entries were made to the purchases ledger. Reconcile the purchases ledger and the purchases ledger control account using the table below. For each adjustment show clearly the amount and whether it is to be added, subtracted or not changed. £ Total from listing of purchases ledger balances 13,835 Adjustment for 1. – add / subtract / no change Adjustment for 2. – add / subtract / no change Adjustment for 3. – add / subtract / no change Adjustment for 4. – add / subtract / no change Revised total of purchases ledger balances Purchases ledger control account balance Adjustment for 4. – add / subtract / no change Revised purchases ledger control account balance 14 13,600 Note: You may use this page for your workings. Note: Please turn over for tasks 2.2 and 2.3. 15 Data You need to make some adjustments to the trial balance. Ignore VAT. (a) You need to make an adjustment following your reconciliation in Task 2.1. Interest received of £35 was incorrectly credited to the purchases ledger control account. The corresponding debit entry was correct. (b) You need to make an accrual for accountancy fees of £3,500. Accountancy fees are posted to the general expenses account. (c) During the year Jim withdrew £2,000 from the bank for personal use. £2,000 was credited to payroll expenses and debited to the bank account. (d) Jim sold a vehicle during the year. The original cost of the vehicle was £15,000. The vehicle was purchased on 1 October 2007. Depreciation has been applied at 25% per year on a straight line basis. A full year’s depreciation is applied in both the year of acquisition and the year of disposal. Depreciation for the year has already been correctly posted. The proceeds have been correctly posted to the bank account and the disposals account. Task 2.2 (20 minutes) Prepare journal entries to account for the information given above. Use the blank journal on page 17. You do not need to give dates and narratives. Show your workings. Task 2.3 (32 minutes) (a) Enter your journal entries into the adjustment columns of the extended trial balance on pages 18-19. (b) Complete the profit and loss and balance sheet columns of the extended trial balance on pages 18-19. Make entries to record the net profit or loss for the year ended 30 September 2010. Workings: 16 Journal Dr £ (a) (b) (c) (d) 17 Cr £ Jim Kemp – Extended trial balance Ledger balances Dr £ Advertising 16,890 Bank 12,335 Capital Cr £ 15,435 Cash 250 Cost of goods sold 152,050 Closing stock 9,300 Depreciation charge for the year 12,000 Disposals 3,100 Drawings 35,000 General expenses 10,300 Interest received 90 Payroll expenses 28,000 Purchases ledger control account 13,600 Rent 11,420 Sales 289,000 VAT 5,820 Vehicles at cost 48,000 Vehicles accumulated depreciation 23,500 Vehicle running expenses 15,000 Total 350,545 18 350,545 as at 30 September 2010 Adjustments Dr £ Profit and loss account Cr £ Dr £ Balance sheet Cr £ 19 Dr £ Cr £ Note: You may use this page for your workings. 20 Task 2.4 (18 minutes) Complete the proforma profit and loss account for Jim Kemp for the year ended 30 September 2010. Show clearly the gross profit and the net profit. Jim Kemp Profit and loss account for the year ended 30 September 2010 You may use this column for your workings if you need to. £ £ Note: Please turn over for task 2.5. 21 Task 2.5 (5 minutes) (a) Jim Kemp has recently appointed an accounts clerk. She contacts your firm for advice on buying a new computer and computerised accounts system. Your firm advises that she needs a new system costing £3,200. What should the accounts clerk do next? Choose ONE answer. Follow the advice and order the new computer and software immediately Ask your firm to order the new computer and software for her Request authorisation from Jim Kemp before placing an order Order the new computer and software and then advise Jim Kemp of her action (b) You are preparing some year-end journal entries for another client. You are making an adjustment for annual depreciation on computers for the year ended 31 October 2010. Choose the most appropriate narrative for this journal entry. Debit depreciation expense, Credit accumulated depreciation - computers Debit accumulated depreciation - computers, Credit depreciation expense Annual depreciation on computers, year ended 31 October 2010 Year-end journal 22 Note: You may use this page for your workings. 23 NVQ/SVQ qualification codes Intermediate level - 100/2941/2 / G793 23 Unit number (FRA) – T/101/8103 QCF qualification codes Level 3 Diploma – 50041150 Unit number (FRA) – R/103/6446 © Association of Accounting Technicians (AAT) 12.10 140 Aldersgate Street, London EC1A 4HY, UK t: 0845 863 0800 (UK) +44 (0)20 7397 3000 (non-UK) e: aat@aat.org.uk w: aat.org.uk