AS Accounting Unit 1 Past Examination Paper June 2009

By the end of this lesson Have marked your answers to all questions Write notes on areas to improve Decide on three improvement targets

(a) Explain three reasons for keeping accounting records. 6 marks Possible reasons include: Legal requirement – business records are required to be kept for up to 5 years Helps preparation – e.g. Double entry entered automatically by one entry To determine how profitable a business is To help determine a valuation for the business To provide record of a transaction that in the future may need clarification To keep track of where money is going (to check its not being stolen)

(b) Explain the following terms 6 marks Accrued expenses: An expense that should have been paid in the current accounting period but has not been paid in that accounting period and therefore is still owing. Treated as a current liability and added onto the expense paid in the Income Statement. Prepaid expenses: An expense that relates to a future accounting period and that has been paid in the current accounting period. Treated as a current asset and deducted from the expense paid in the Income Statement. Depreciation: The reduction in the economic value of an asset over time caused by wear and tear or obsolescence. Treated as an expense in the Income Statement and deducted from the asset in the Balance Sheet.

(a) Enter the difference in the trial balance totals in the suspense account below. Make any necessary entries in the suspense account to correct the errors Suspense account 31 MayDis rec MayRent received Calculate balance b/d – difference between debit and credit balances 31 MayBal b/d MayGeneral exps MayDis all MayWages MayDrawings (1) Need to increase the amount of discount received – Dr Suspense Cr Discount (as dis received is income therefore increase it is achieved by crediting the account) (3) Discount allowed is an expense account, therefore to increase it we need to Dr dis all Cr Suspense (4) This error does not affect the suspense account as the correct amounts have been entered, just to the wrong account. The correction will be Dr motor repairs Cr P&M (5) Rent received is an income account and therefore the entry should have been to credit the account. Thus Dr Suspense 700 Cr rent received 700 (6) Need to remove the entry from the wages account so Dr wages Cr Suspense. Then need to make actual entry Dr drawings (expense a/c) Cr suspense (2) Expense account undercast by 36 – Dr general expenses Cr Suspense 10 marks

(b) Complete the following table to identify the amount, if any, by which the net profit of Joshua Rose would be affected by the correction of the errors of page 4 7 marks ErrorIncrease NPReduce NPNo effect on NP (1) (2) (3) (4) (5) (6) (1) Discount rec is income, there has been more income therefore NP will increase (2) The amount of total expenses is to be increased, therefore reducing NP (3) Discount allowed is an expense, this correction will therefore increase total expenses (4) No amounts need to be changed, just correction to the t-accounts (5) Rent received account should have been credited, but it has been debited so we need to credit it by 700 which increase NP as this is income (6) Cr Wages account, thus increasing total wages amount and total expenses, and reducing NP No effect

(a) Prepare a profit and loss account for Abdul Miraz for the year ended 31 April Key points: REMEMBER to give final accounts their title...EASY marks!! Label TB in qu...Dr column = asset or expense Cr column = liability or income Profit and Loss account of A Mira for the year ended 30/04/09 Gross profit Discount allowed 310 General expenses12420 Add accrued Motor expenses MV depreciation 3280 Rent and rates24700 Less prepayment Total expenses New profit marks

(b) Prepare a balance sheet for A Miraz at 30 April 2009 Key points: Current assets need to be in order of inverse liquidity (least liquid first) Balance sheet of A Miraz at 30 April 2009 ASSETS Fixed assets Premises95000 Motor vehicles16400 Provision for depreciation ( ) Current assets Prepayments 1340 Debtors 8790 Stock

(b) Prepare a balance sheet for A Miraz at 30 April marks Balance sheet of A Miraz at 30 April 2009 LIABILITIES Ownership Capital71500 Net profit18010 Less drawings Long-term liabilities Mortgage on premises37500 Current liabilities Accruals 400 Bank loan 4100 Bank14630 Creditors Key points: Drawings need to be increased by £2000, bank needs to be reduced by £2000 Bank loan is repayable in the next accounting period and therefore is a current liability

(a) Prepare a sales ledger control account for May marks Sales Ledger Control a/c Balance b/d33459 Sales48144 Discount received Returns Inward 1635 Bank Discount allowed 992 Bank (DC) 169 Contra 214 Balance c/d

(b) Explain how the balance on James Shea’s sales ledger control account verifies the accuracy of his sales ledger. 2 marks The total of the individual debtors balances should match with the balance brought down of £ on the sales ledger control account.

(c) Explain two types of error that would not be identified by preparing a sales ledger control account. 6 marks Possible errors: Error of commission – failure to make the correct entries. Due to (for example) mixing up debtors names..Harish is mistaken for Harris Original error – £200 has been entered in the Sales Day Book (instead of £2000) and the incorrect £200 is also entered in the debtors account Error of omission – transaction completely omitted, this would not cause disagreement as no double entry has been made Compensating error– by chance two separate mistakes cancel each other out because they happen to be the same number Remember there are 4 types of error that may not be detected when comparing the sales ledger control account closing balance with the closing total on the debtors schedule