AS Accounting

1. AS Accounting Unit 1 Past Examination Paper June 2009

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

3. (a) Explain three reasons for keeping accounting records. • 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) 6 marks

4. (b) Explain the following terms 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. 6 marks

5. (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 May Dis rec 200 31 May Rent received 700 900 31 May Bal b/d 399 31 May General exps 36 31 May Dis all 65 31 May Wages 200 31 May Drawings 200 900 (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 (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 Calculate balance b/d – difference between debit and credit balances (2) Expense account undercast by 36 – Dr general expenses Cr Suspense 10 marks

6. (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 4 200 36 65 No effect 750 200 7 marks (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 (3) Discount allowed is an expense, this correction will therefore increase total expenses (6) Cr Wages account, thus increasing total wages amount and total expenses, and reducing NP (4) No amounts need to be changed, just correction to the t-accounts (2) The amount of total expenses is to be increased, therefore reducing NP (1) Discount rec is income, there has been more income therefore NP will increase

7. (a) Prepare a profit and loss account for Abdul Miraz for the year ended 31 April 2009. • 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 13 marks

8. (b) Prepare a balance sheet for A Miraz at 30 April 2009 Balance sheet of A Miraz at 30 April 2009 ASSETS Fixed assets Premises 95000 Motor vehicles 16400 Provision for depreciation (3280+3280) 65609840 104840 Current assets Prepayments 1340 Debtors 8790 Stock 24850 34980 139820 • Key points: • Current assets need to be in order of inverse liquidity (least liquid first)

9. (b) Prepare a balance sheet for A Miraz at 30 April 2009 Balance sheet of A Miraz at 30 April 2009 LIABILITIES Ownership Capital 71500 Net profit 18010 Less drawings 18180 71670 Long-term liabilities Mortgage on premises 37500 Current liabilities Accruals 400 Bank loan 4100 Bank 14630 Creditors 11860 30990 139820 • 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 21 marks

10. (a) Prepare a sales ledger control account for May 2009 Sales Ledger Control a/c Balance b/d 33459 Sales 48144 Discount received 1136 82739 Returns Inward 1635 Bank 42912 Discount allowed 992 Bank (DC) 169 Contra 214 Balance c/d 36817 82739 9 marks

11. (b) Explain how the balance on James Shea’s sales ledger control account verifies the accuracy of his sales ledger. The total of the individual debtors balances should match with the balance brought down of £36 817 on the sales ledger control account. 2 marks

12. (c) Explain two types of error that would not be identified by preparing a sales ledger control account. 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 • 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 6 marks