Longman Mock (3, 2011)
(Basic Accounting)
Show how each of the following errors would affect the agreement of a trial balance:
(a)
Interest expense of $1,300 was credited to the interest revenue account.
(b)
Capital contribution of $20,000 was debited to the drawings account.
(c)
No entry was made for prepaid insurance of $3,860.
(d)
A cheque of $13,980 received from a trade debtor, D Chi, was entered in the cash book but not in the
personal account.
(e)
Inventory sheets were overcast by $8,765.
(f)
The returns inwards journal was undercast by $8,903.
(g)
A cash payment of $1,986 to a trade creditor was debited to the rates account.
(h)
Carriage outwards of $498 was credited to the returns outwards account.
(8 marks)
Suggested format:
Item
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
No effect
Debit total exceeds credit
total by the amount of
Credit total exceeds debit
total by the amount of
HKCEE
(2010, 1)
(Basic Accounting)
(B) For each of the following transactions, show the double entries required and the NET effects on the accounting
equation (Assets = Liabilities + Capital)
Example:
The owner took from the business $100,000 cash and
goods at a cost of $20,000
(a) Paid delivery expenses of $800 in cash on behalf of a
customer.
(b) Paid $500 for repairs and $1,500 for future
maintenance of a machine. The two amounts were
made by a cheque of $2,000.
(c) Borrowed a short-term loan of $100,000 from a bank
and repaid an overdue amount of $95,000 owed to a
supplier.
(d) The owner returned cash of $2,000 into the business
and paid $500 for accrued expenses which had been
recorded by the business one week ago. (The total
amount of $2,500 had previously been withdrawn by
the owner for private use.)
Entries required
Net effects on the
accounting equation
Debit: Drawings $120,000
Credit: Cash $100,000
Credit: Purchases $20,000
Decrease assets
Decrease capital
?
?
?
?
?
?
?
?
HKCEE
(2010, 2)
(Accrual and prepayment)
(B) Viola Company generates income by letting its office premises to tenants who are required to pay monthly rentals
in advance.
During 2008, the company had received in advance $28,000 in respect of rent for January 2009; and at 31
December 2008, an amount of $12,000 was owed by a tenant.
In 2009, the company received from the tenants cheques amounting to $730,000 which included a refundable
rental deposit of $100,000 and rent in advance for 2010 of $32,000. A rental deposit of $55,000 was refunded to a
tenant in November 2009. At 31 December 2009, rentals from a tenant of $10,000 per month, which were due on
16 November and 16 December 2009, remained unpaid.
During 2009, rates were paid by cheques quarterly on 1 January, 1 April, 1 July and 1 October. Details are as
follows:
3 months to 28 February 2009
3 months to 31 May 2009
3 months to 31 August 2009
3 months to 30 November 2009
$
1830
2160
2160
2160
8310
Rates amounting to $2,160 for the three months to 28 February 2010 has not yet been paid by the company as at
31 December 2009.
REQUIRED:
In the books of Viola Company, show the entries in the following accounts for the year ended 31 December 2009:
(a)
(b)
the rental income account; and
the rates account.
HKCEE
(2009, 3)
(Basic Accounting)
(B) Vera Company keeps its petty cash on the imprest system and maintains a petty cash float of $3,000 on the first
day of each month.
On 30 November 2008, the balance of petty cash was $1,037. The following transactions took place during the
month of December 2008:
December
1
2
3
8
11
15
16
19
22
27
29
Drew cash from the bank to restore to the imprest amount.
Paid newspaper subscriptions for December $135.
Bought postage stamps $400 and note pads $42.
Added $300 to messenger’s Octopus card for delivery of documents.
Reimbursed taxi fares $97.
Paid registered letter charges $122.
Refunded $294 to Carl Cheung, a customer, for an overpayment of his account in November
2008.
Bought ball pens and staplers $205.
Purchased paper cups and tissue rolls $76.
Bought magazines $163.
Paid speed post charges $210 and bus fare $8.
REQUIRED:
Draw up the petty cash book to record the above transactions for December 2008.
HKCEE
(2008, 1)
(Basic Accounting)
Amanda is the sole owner of a business engaged in the trading of telephone sets. With her limited knowledge of
accounting, she tries to do the accounting work herself. She remembers that all transactions should first be recorded in
the books of original entry before posting to ledger accounts, and that the trial balance will help to locate accounting
errors.
REQUIRED:
Advise Amanda on the following:
(a)
What is the book of original entry for the recording of each of the transactions below?
Book of Original Entry
(i)
Bought telephone sets for resale by cash
?
(ii)
Sold telephone sets to customers on credit
(iii)
Received a credit note from a supplier for telephone sets returned
?
?
(iv)
Gave full allowance to a customer for telephone sets returned
?
(v)
Acquired office premises by a mortgage loan
(vi)
Paid wages and salaries by autopay
?
?
(vii) Accrued for outstanding electricity charges as at year end
(b)
Form the transactions in (a) above, identify two examples for each of the following:
(i) Real accounts
(ii) Nominal accounts
(iii) Personal accounts
?
HKCEE (2007, 2)
(Basic Accounting)
(B) After preparing its final accounts for the year ended 31 March 2007, Babel Company found that the following
transactions had been omitted from the books. For each of the omissions, state the change (increase / decrease /
no change) in the net profit for the year and the working capital as at the year end after the omission has been
corrected.
Net profit for
the year ended
31 March 2007
Working capital
as at 31 March
2007
No change
Increase
Example:
After expenses at 31 March 2006 were paid by the proprietor from his own
bank account
(a)
A motor vehicle was sold on credit at a profit
?
?
(b)
A short-term bank loan, together with the accrued interest on
the loan, was repaid.
?
?
(c)
Goods were purchased by cash for resale. These goods were
sold on credit at a loss.
?
?
(d)
A customer settled his account. The amount received was used
to pay a creditor and the electricity expenses of the proprietor’s
residence.
?
?
HKCEE (2006, 3)
(A) Given below is a list of accounting terminology:
(1) Accounting equation
(2) Adjusting entries
(3) Closing entries
(4) Correct entries
(5) Discount received
(6) Double entry accounting
(7) Factory overheads
(8) General journal
(9) Liabilities
(10) Postings
(11) Raw materials
(12) Sales journal
(13) Trade discount
(14) Trade balance
(Basic Accounting)
Select from (1) to (14) above an appropriate accounting term that best fits each of the definitions/descriptions
below:
Accounting
Definitions/descriptions
terminology
Example:
Obligations of a firm to transfer assets to other firms as a result of past transactions.
9
A book of original entry in which credit sales of fixed assets are recorded.
(a)
?
A deduction from list price upon the purchase of goods
(b)
?
A major component of ‘prime cost’.
(c)
?
A list of all ledger balances as at a particular date for checking the arithmetic
(d)
?
accuracy of accounting entries.
Business transactions recorded with equal amount of debits and credits.
(e)
?
Entries made at the end of an accounting period to update expenses, revenue, assets
(f)
?
or liability accounts on an accrual accounting basis.
Entries made to transfer the balances of nominal accounts to the profit and loss
(g)
?
account.
The process of transferring accounting data from the books of original entry to
(h)
?
ledger accounts.
(B) On 1 January 2006, ABC Ltd found that its closing stock had been overstated by $80,000 at 31 December 2004 and
$70,000 at 31 December 2005.
You are required to:
Indicate how the above errors would have affected the following:
(a) the net profit for the year 2004,
(b) the net profit for the year 2005, and
(c) the retained profits as at 31 December 2005.
HKCEE (2005, 2)
(Basic Accounting)
(A) For each of the following transactions, show the effects on the accounting equation (Assets = Liabilities + Capital)
and the double entries required.
Effects on the
accounting equation
Entries required
Example:
The proprietor paid $6,000 to a creditor from his own bank
account.
The proprietor took from the business $50,000 cash
and a newly acquired motor van at its recorded cost
of $80,000.
(b) Paid $2,000 by cheque for repair and maintenance
charges. The expense had been recorded in the
company’s books two months ago.
(c) Sold goods for $6,400, of which $3,000 was received
in cash and the balance was due in the following
month.
(d) Issued 250,000 $1 ordinary shares at par. The
proceeds were partly used to repay a bank loan of
$200,000.
Increase capital
Decrease liabilities
Debit: Creditors $6,000
Credit: Capital $6,000
(a)
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?
?
?
?
?
?
?
(B) The steps in the accounting cycle are performed in sequence in each accounting period. Some of the steps of the
accounting cycle are shown below:
You are required to:
State the four missing steps in the above accounting cycle.
HKCEE
(2010, 2)
(Basic Accounting)
(B) Viola Company generates income by letting its office premises to tenants who are required to pay monthly rentals
in advance.
During 2008, the company had received in advance $28,000 in respect of rent for January 2009; and at 31
December 2008, an amount of $12,000 was owed by a tenant.
In 2009, the company received from the tenants cheques amounting to $730,000 which included a refundable
rental deposit of $100,000 and rent in advance for 2010 of $32,000. A rental deposit of $55,000 was refunded to a
tenant in November 2009. At 31 December 2009, rentals from a tenant of $10,000 per month, which were due on
16 November and 16 December 2009, remained unpaid.
During 2009, rates were paid by cheques quarterly on 1 January, 1 April, 1 July and 1 October. Details are as
follows:
3 months to 28 February 2009
3 months to 31 May 2009
3 months to 31 August 2009
3 months to 30 November 2009
$
1830
2160
2160
2160
8310
Rates amounting to $2,160 for the three months to 28 February 2010 has not yet been paid by the company as at
31 December 2009.
REQUIRED:
In the books of Viola Company, show the entries in the following accounts for the year ended 31 December 2009:
(a)
(b)
the rental income account; and
the rates account.
HKCEE (2005, 4)
(Financial Reporting)
Leo Lee is the sole proprietor of a real estate agency business. With limited knowledge in accounting, he prepared the
following trial balance as at 31 March 2005:
Agency commission revenue
Office equipment
Bank overdraft
Sales staff salaries
Sales staff bonus
Agency commission revenue in advance, 31 March 2005
Administrative expenses
Agency commission revenue in arrears, 31 March 2005
Printing of forms and leaflets
Capital, 1 April 2004
Drawings
Provision for depreciation – office equipment, 31 March 2005
Electricity deposit
Prepaid administrative expenses, 31 March 2005
$
206,040
79,790
13,450
24,890
$
101,230
11,180
46,830
29,080
4,600
25,000
5,000
49,850
8,500
379,500
You are required to:
Prepare for Leo Lee
(a) the correct trial balance as at 31 March 2005;
(b) the profit and loss account for the year ended 31 March 2005; and
(c) the balance sheet as at 31 March 2005.
5,600
231,540