Certificate in Accounting (Diploma Pathway) Introductory ...

Exam Certificate in Accounting (Diploma Pathway) Introductory Accounting (IAC) 2003 Standards Tuesday 19 June 2007 (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. We strongly recommend that you use a pen rather than a pencil. You may not use programmable calculators or dictionaries in the exam. Do NOT open this paper until instructed to do so by the Supervisor.

IAC

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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 10 tasks and Section 2 contains 20 tasks. You should spend about 75 minutes on Section 1 and about 105 minutes on Section 2. There is blank space for your workings on pages 11, 12, 13 and 21, but you should include all essential calculations in your answers. Both sections are based on the business described below.

Introduction • Desmond Wood is the owner of The Studio, a business that supplies photographic equipment. • You are employed by the business as a bookkeeper. • The business uses a manual accounting system. • Double entry takes place in the main (general) ledger. Individual accounts of debtors and creditors

are kept in subsidiary ledgers as memorandum accounts. • Bank payments and receipts are recorded in the cash book, which is part of the double entry system. • Assume today’s date is 30 June 2007 unless you are told otherwise.

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Section 1 – Double entry bookkeeping and trial balance You should spend about 75 minutes on this section. Note: Show your answer with a tick, words or figures, as appropriate. Data The following sales invoices dated 30 June have been entered in the subsidiary (sales) ledger and are now ready for entry in the main ledger. The VAT rate is 17.5%. Invoice to Beale & Co for £3,800 plus VAT Invoice to CDR Ltd for £2,200 plus VAT Invoice to V Carter for £200 plus VAT Invoice to L Williams for £1,000 plus VAT Task 1.1 What will be the total amounts entered in the main ledger? Show whether each entry will be a debit or credit. Show your workings in the space below. Main ledger

Account name Amount £ Debit

a Credit

a Sales ledger control

Sales

VAT

Workings Sales ledger control

Sales

VAT

4

Task 1.2 Would the sales invoices in task 1.1 be debit or credit entries in the subsidiary (sales) ledger?

a Debit

Credit

Task 1.3 The following transactions all took place on 30 June and have been entered into the sales returns day book as shown below. No entries have yet been made in the ledgers. Sales returns day book Date 2007 Details Credit note number Total £ VAT £ Net £

30 June 30 June

Beale & Co CDR Ltd

25 26

94 1,880

14 280

801,600

What will be the entries in the subsidiary (sales) ledger? Subsidiary (sales) ledger


a Credit

a

5

Task 1.4 The following transactions all took place on 30 June and have been entered into the purchases day book as shown below. No entries have yet been made in the ledgers. Purchases day book Date 2007 Details Invoice number Total £ VAT £ Net £

30 June 30 June 30 June 30 June

Snap It DND Ltd Camco Ltd Field Films

184 4322 3619 L2 156

17,625 611

1,551 9,400

2,625 91

231 1,400

15,000520

1,3208,000

Totals 29,187 4,347 24,840 (a) What will be the entries in the subsidiary (purchases) ledger? Subsidiary (purchases) ledger


a Credit

a

(b) What will be the entries in the main ledger? Main ledger


a Credit

a

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Task 1.5 The following transactions all took place on 30 June and have been entered into the purchases returns day book as shown below. No entries have yet been made in the ledgers. Purchases returns day book Date 2007 Details Credit note number Total £ VAT £ Net £

30 June 30 June

Camco Ltd Field Films

391 109

1,363 987

203 147

1,160840

Totals 2,350 350 2,000 (a) What will be the entries in the subsidiary (purchases) ledger? Subsidiary (purchases) ledger


a Credit

a



a Credit

a

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Task 1.6 The following transactions all took place on 30 June and have been entered into the cash book as shown below. No entries have yet been made in the ledgers. Cash book

Date 2007 Details Bank £ Date 2007 Details Discount received Bank £

15,000 4,812

125

18711,000

2,7504,8751,000

19,812 125 19,812

30 June 30 June

Loan from bank Balance c/d

30 June 30 June 30 June 30 June 30 June 1 July

Balance b/f Fixtures and fittings Insurance DND Ltd (creditor) Motor expenses Balance b/d 4,812

(a) What will be the entries in the subsidiary (purchases) ledger? Subsidiary (purchases) ledger


a Credit

a



a Credit

a

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Task 1.7 (a) Record the following details in the miscellaneous expenses account below.

£ 01 June Balance b/f 930 03 June Bank payment 50 28 June Bank payment 78 29 June Journal credit 30

(b) Total the account, showing clearly the balance carried down at 30 June and the balance

brought down at 1 July. Miscellaneous expenses Date 2007 Details Amount £ Date 2007 Details Amount £

Task 1.8 There is a debit balance of £230 in the suspense account. You have discovered the following two errors: • A payment of £100 has been recorded as £10 in the travel expenses account. • A payment of £140 has been omitted from the heat and light account. What entries are needed to correct the errors and clear the suspense account?


a Credit

a

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Task 1.9 Record the journal entries needed in the main ledger to correct the following: Note: You do not need to give narratives. You may not need to use all the lines. (a) Entries to record a bank payment of £300 for motor expenses have been reversed.


a Credit

a

(b) A bank payment of £75 for electricity has been recorded as a petty cash payment.


a Credit

a

(c) A credit customer, Photo Gem, has ceased trading, owing The Studio £400 plus VAT. The net amount and VAT must be written off in the main ledger.


a Credit

a

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Task 1.10 Below is a list of balances to be transferred to the trial balance as at 30 June. Place the figures in the debit or credit column, as appropriate, and total each column. Account name Amount £ Debit £ Credit £

Motor vehicles 13,625

Fixtures and fittings 21,750

Stock 7,113

Bank overdraft 4,812

Bank savings account 1,000

Petty cash 100

Sales ledger control 86,421

Purchases ledger control 53,371

VAT owing to HM Revenue & Customs 13,242

Loan from bank 15,250

Capital 32,174

Sales 305,029

Sales returns 3,444

Purchases 249,590

Purchases returns 3,382

Discounts received 2,525

Wages 32,650

Heat and light 1,762

Motor expenses 1,985

Insurance 4,575

Repairs and renewals 328

Bad debts 2,614

Travel expenses 1,800

Miscellaneous expenses 1,028

Totals

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Note: You may use this page for your workings.

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13


Note:Please turn over for Section 2.

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Section 2 – Tasks and questions You should spend about 105 minutes on this section. Notes: • You do not need to adjust any accounts in Section 1 as part of any of the following tasks. • Show your answer with a tick, words or figures, as appropriate. Task 2.1 You have been asked to calculate the sales invoice amount for goods delivered to a credit customer. The price of the goods is £1,200.00 before discount allowed and VAT. The customer is entitled to the following discounts: • Trade discount of 10% • Settlement discount of 5% for payment within 7 days (a) Complete the following calculation. Invoice calculation £ p

Price of goods

Trade discount of 10%

Net invoice total

VAT

Invoice total

Workings:

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Task 2.2 The Studio paid several cheques into the bank today but the funds will not be available for several days. What is the reason for the delay?

Task 2.3 A cheque has been received for £60 plus VAT from DG Black, a customer without a credit account. What accounts will be used to record this cash sale? Tick a, b, c, or d.

Accounts a a Sales

VAT Debtors control

b D G Black Sales VAT

c Sales VAT Bank

d D G Black VAT Bank

Task 2.4 The following reports and documents are produced at The Studio. Show who the report or document would be sent to, by ticking one column for each. Report or document To a customer

a To a supplier

a To a manager

a Statement of account

Remittance advice

VAT report

Delivery note

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Task 2.5 The Studio keeps a small amount of petty cash in the office to purchase miscellaneous items. The imprest level is £100. The following payments were made during June.

£ 17 June Taxi fare 12 20 June Coffee and tea 17 29 June Postage stamps 30 (a) Enter each petty cash payment in the petty cash control account. (b) Total the account showing clearly the balance carried down at 30 June (closing balance) AND

brought down at 1 July (opening balance). (c) Record the amount received to restore the imprest level on 1 July.

Petty cash control

Date 2007 Details Amount £ Date 2007 Details Amount £

1 June Balance b/f 100

Task 2.6 The Studio has recently purchased a new delivery van (capital expenditure), and motor insurance for the delivery van (revenue expenditure). Briefly explain capital and revenue expenditure. Capital expenditure

Revenue expenditure

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Task 2.7 Desmond Wood has received a quotation for a supply of photographic equipment. The supplier is offering a 10% bulk discount. What is a bulk discount?

Task 2.8 Desmond Wood usually places purchase orders with his suppliers by telephone. Suggest THREE other ways in which Desmond could place an order with his suppliers.

1.

2.

3.

Task 2.9 Each supplier of goods to The Studio is identified by an alphanumeric supplier code. Suggest an appropriate FIVE character alphanumeric code for the following new suppliers:

Supplier Ledger page Supplier code

Janssen & Co 56

GLP Ltd 57

Pritchard Associates 58

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Task 2.10 There are two accounts assistants at The Studio, who each have different ways of working. Brenda enters each document (for example sales and purchases invoices) in the accounting system as soon as it is received. Karen waits until there is a number of the same type of document to process before entering them in the accounting system. Who is operating a batch control system?

a a Brenda Karen

Task 2.11 The Studio has accepted a credit card payment from a credit customer for £500. (a) What entries are needed in the main ledger to record this transaction?


a Credit

a

(b) Name THREE checks you should make before accepting payment by credit card.

1.

2.

3.

Task 2.12 A purchase invoice and a purchase credit note have been received today at The Studio. Name ONE document that should be referred to in EACH case before the purchase invoice and purchase credit note are authorised.

Purchase invoice

Purchase credit note

Task 2.13 When sales invoices are prepared at The Studio you can get invoice details from various sources. For example, prices can be taken from a price list. Name TWO other sources that may be used to produce the sales invoice.

1.

2.

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Task 2.14 A new employee has started work at The Studio and has asked what deductions he can expect to be taken from his gross wages. Name THREE deductions that could be made from gross pay.

1.

2.

3.

Task 2.15 The Studio has received a quotation (an offer) from a supplier for the supply of some equipment. Name TWO other elements of a contract that have to exist before the contract is formed.

1.

2.

Task 2.16 The Studio keeps an analysed petty cash book as a book of prime entry. Give ONE advantage of analysing a petty cash book.

20

Task 2.17 The following is a summary of transactions with customers during the month of June. (a) Show whether each entry will be a debit or credit in the sales ledger control account in the

main ledger. Sales ledger control account

Details Amount £Debit

a Credit

a Balance of debtors at 1 June 73,154

Goods sold on credit 21,726

Money received from credit customers 5,410

Discounts allowed 252

Goods returned by credit customers 2,797

(b) What will be the balance of debtors on 30 June on the above account?

£53,789 £86,421 £59,887 £97,241

a

The following balances were in the subsidiary (sales) ledger on 30 June: £ Beale & Co 24,325 CDR Ltd 10,943 V Carter 8,657 L Williams 32,641 Gray & Co 9,800 (c) Reconcile the balances shown above with the sales ledger control account balance you have

calculated in part (a).

£

Sales ledger control account balance as at 30 June

Total of subsidiary (sales) ledger accounts as at 30 June

Difference

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Task 2.17, continued The sales ledger control account and subsidiary (sales) ledger do not agree. (d) Name TWO actions you would take to trace the difference.

1.

2.

Note: You may use the rest of this page for your workings.

Note:Please turn over for tasks 2.18 – 2.20.

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Task 2.18 On 25 June The Studio received the following bank statement as at 22 June:

Baker Street Bank plc Hampton House, Hampton, H32 4LQ

To: The Studio Account no: 18472677 Date: 22 June 2007

STATEMENT OF ACCOUNT Date 2007 Details Paid out £ Paid in £ Balance £ 01 June Balance b/f 385 D

07 June Bank Giro Credit PKL Ltd

4,000

3,615

C

08 June Cheque 007313 250 3,365 C 08 June Cheque 007315 483 2,882 C 14 June Cheque 007316 2,165 717 C 15 June Cheque 007317 1,233 516 D

20 June Direct Debit Hampton CC

135

651 D

20 June Direct Debit Motor Mania

177

828 D

21 June Bank Giro Credit Bissell & Co.

2,500

1,672 C

22 June Bank charges 44 1,628 C 22 June Bank interest 3 1,631 C

D = Debit C = Credit The cash book as at 22 June is shown below:

Cash Book Date 2007 Details Bank £ Date 2007 Cheque no. Details Bank £

15 June PKL Ltd 4,000 01 June Balance b/f 635

20 June Beaker plc 3,245 01 June 07315 Abby Photos 483

21 June Bissell & Co 2,500 06 June 07316 LTL Ltd 2,165

22 June Gilchrist Ltd 2,416 06 June 07317 Retro Frames 1,233

22 June 07318 Tonks & Co 1,020

22 June 07319 Taylor Agencies 547

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Task 2.18, continued (a) Check the items on the bank statement against the items in the cash book. (b) Update the cash book as needed. (c) Total the cash book and clearly show the balance carried down at 22 June (closing balance)

AND brought down at 23 June (opening balance).

Note: You do not need to adjust the accounts in Section 1. (d) Using the information on page 22, prepare a bank reconciliation statement as at 22 June. Note: Do not make any entries in the shaded boxes.

Bank reconciliation statement as at 22 June 2007

Balance per bank statement £

Add:

Name: £

Name: £

Total to add £

Less:

Name: £

Name: £

Total to subtract £

Balance as per cash book £

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Task 2.19 Desmond Wood has asked you to make a payment to a supplier, B Green Ltd. You have the following information available: • Subsidiary (purchases) ledger account of B Green Ltd • Statement of account received from B Green Ltd Subsidiary (purchases) ledger B Green Ltd

Date 2007 Details Amount £ Date 2007 Details Amount £

30 April Balance c/d 8,300 01 April Invoice 308 6,000

15 April Invoice 317 2,300

8,300 8,300

08 May Bank 6,000 01 May Balance b/d 8,300

30 May Balance c/d 5,900 10 May Invoice 328 1,600

26 May Invoice 375 900

30 May Invoice 402 1,100

11,900 11,900

01 June Bank 1,500 01 June Balance b/d 5,900

01 June Discount received 100

30 June Balance c/d 4,300

5,900 5,900

01 July Balance b/d 4,300 Statement of account

B Green Ltd 12 High Street, Hampton, H32 4LF

To: The Studio Lower Croft, Hampton, H32 5BV STATEMENT OF ACCOUNT

Date 2007 Invoice number Details Invoice amount £ Cheque amount £ Balance £

01 April Inv 308 Goods 6,000 6,000

10 May Inv 328 Goods 1,600 7,600

26 May Inv 375 Goods 900 8,500

30 May Inv 402 Goods 1,100 9,600

01 June Cheque 1,500 8,100

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Task 2.19, continued The account of B Green Ltd in the subsidiary (purchases) ledger of The Studio, and the statement of account from B Green Ltd, do not reconcile. (a) What are the THREE reasons for the difference?

1.

2.

3.

(b) What may have caused EACH of the three differences identified above?

1.

2.

3.

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Task 2.20 The Studio has received the following invoice from Mr A Brown, of A B Stationers Ltd, for a supply of printed stationery.

A B Stationers Ltd

56 High Street Hampton, H32 4LZ

To: The Studio Lower Croft, Hampton, H32 5BV 25 June 2007 INVOICE NO 173/S

500 Letterheads at £10 per 100 £70.00

Terms: net monthly account

The order was for cream coloured stationery, but the supplier used white paper. There is also a calculation error on the invoice. Desmond Wood has asked you to draft a letter in reply, ready for his signature. Using the letterhead on page 27, write to Mr Brown • pointing out the incorrect goods • pointing out the calculation error • requesting a credit note by return

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Task 2.20, continued

The Studio

Lower Croft, Hampton, H32 5BV Telephone and fax: 01847 398209

Suppliers of photographic equipment Mr. A Brown A B Stationers Ltd 56 High Street Hampton H32 4LZ

Qualification codes (Diploma pathway) Certificate – 100/5923/4 Unit number (IAC) – J/103/6444 © Association of Accounting Technicians (AAT) 06.07 154 Clerkenwell Road, London EC1R 5AD, UK t: +44 (0)20 7837 8600 f: +44 (0)20 7837 6970 e: [email protected] w: www.aat.org.uk

For Assessor’s use only Section 1 Section 2 TASK 1.1 TASK 2.1 TASK 2.11

TASK 1.2 TASK 2.2 TASK 2.12









TOTAL TOTAL

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