accounting mid module assessment - animath · dec 4 sold goods, £240, the customer paid by cheque....
TRANSCRIPT
FOUNDATION EXAMINATION
Desk Number………………………………………
University Card Number…………………………
Group……….
November 2017
Accounting Mid Module Assessment
Duration: 90 minutes
Instructions
Answer ALL three questions in the answer booklet provided. Calculators are permitted. Write your
answers clearly in black or blue ink.
Candidates are reminded of the need for good English and orderly presentation of their answers.
The mid-module assessment has a total of 70 marks.
Question 1: 25 Marks
Question 2: 30 Marks
Question 3: 15 Marks
QQQQQQQQQQ Q\
Question 1
Record the following transactions for the month of December for H Stanton, balance off all
the accounts where necessary and then extract a Trial Balance as at 31 December 2017:
Dec 1 Started the business with £20,000 cash.
Dec 2 Bought goods on credit from A Clement - £540, N Kinski - £730.
Dec 3 Placed £15,000 cash into a business bank account.
Dec 4 Sold goods, £240, the customer paid by cheque.
Dec 6 Bought IT Equipment, £750, paying by cheque.
Dec 8 Returned unsuitable goods to A Clement, £120.
Dec 10 Sold goods on credit to: H Carson - £230, D Stockwell - £530.
Dec 11 H Stanton (owner) takes £75 from the business bank for personal use.
Dec 14 H Carson returns goods valued at £50.
Dec 15 Cash Sales, £60.
Dec 17 Received a £2,000 loan from Barclays paid into the business bank account.
Dec 18 Bought goods on credit from A Clement - £260.
Dec 19 Paid N Kinski the amount owing by cheque.
Dec 20 H Carson pays the amount owing by cheque and we allow a 5% discount.
Dec 24 The owner buys a delivery van for the business, £3,500, with his own money.
Dec 28 We pay A Clement the amount owing by cheque and receive a 5% discount.
Question 2
Dr Cr
£ £
Sales 234,000
Purchases 54,300
Returns (In/Out) 540 950
Rent 3,400
Opening Inventory 5,400
Buildings 680,000
Accumulated Depreciation: Buildings 122,400
Machinery 150,000
Accumulated Depreciation: Machinery 17,290
Accounts Receivable 23,500
Carriage Outwards 3,280
Carriage Inwards 2,190
Accounts Payable 7,300
Drawings 940
Salaries 45,000
Bad Debts 800
Loan (repay 2020) 15,000
Cash 1,800
Capital 571,990
Allowance for Doubtful Debts 1,200
Discounts (Allowed/Received) 780 1,800
971,930 971,930
End of Year Adjustments
Closing Inventory as on 31st December 2017 is £ 6100.
Allowance for Doubtful Debts to be calculated at 8% of debtors.
Depreciation on Buildings is calculated at 3% straight line method.
Depreciation on Machinery is calculated at 4% reducing balance method.
You are required to prepare the Income Statement and Balance
Sheet for M Ross from the information below:
M Ross: Trial Balance as at 31 December 2017
Question 3
a) What is the accounting equation and how does it relate to the Balance Sheet? 5 marks
b) Explain why Capital is a business liability with reference to the business entity concept. 5 marks
c) Define depreciation, give 3 causes of depreciation and describe how depreciation is accounted for in the Income Statement and Balance Sheet. 5 marks
1
Trial Balance Dr Cr£ £
Capital 23500 1
Bank 15210 1
Cash 5060 1
Discount Received 34 1
Discount Allowed 9 1
Drawings 75 1
Purchases 1530 1
Sales 1060 1
Returns In 50 1
Returns Out 120 1
H Carson 1
Customer 2 530 1
A Clement 1
N Kinski 1
IT Equip 750 1
Van 3500 1
Barclays 2000 1
26714 26714 2
20
Note: balanced off accounts may be omitted and gain marks.
5 Marks for T - accounts:
Evidence of Balance C/D 1
Evidence of Balance B/D 1
Evidence of dates and descriptions 1
Evidence of totals 1
Overal presentation. 1
Total marks for question 1 25
Trial Balance for H Stanton as at 31st Dec 2017
0 Capital 23500
Month £ Month £
1 cash 20000
24 Van 3500
bal c/d 23500
23500 23500
bal b/d 23500
17411 Bank 2201
Month £ Month £
3 Cash 15000 6 IT Equip 750
4 Sales 240 11 Drawings 75
17 Barclays 2000 19 N Kinski 730
20 H Carson 171 28 A Clement 646
bal c/d 15210
17411 17411
bal b/d 15210
20060 Cash 15000
Month £ Month £
1 capital 20000 3 bank 15000
15 Sales 60
bal c/d 5060
20060 20060
bal b/d 5060
0 Discount Received 34
Month £ Month £
28 A Clement 34
bal c/d 34
34 34
bal b/d 34
9 Discount Allowed 0
Month £ Month £
20 H Carson 9
bal c/d 9
9 9
bal b/d 9
75 Drawings 0
Month £ Month £
11 bank 75
bal c/d 75
75 75
bal b/d 75
1530 Purchases 0
Month £ Month £
2 A Clement 540
2 N Kinski 730
18 A Clement 260
bal c/d 1530
1530 1530
bal b/d 1530
0 Sales 1060
Month £ Month £
4 Bank 240
10 H Carson 230
10 D Stockwell 530
15 Cash 60
bal c/d 1060
1060 1060
bal b/d 1060
50 Returns In 0
Month £ Month £
14 H Carson 50
bal c/d 50
50 50
bal b/d 50
0 Returns Out 120
Month £ Month £
8 A Clement 120
bal c/d 120
120 120
bal b/d 120
230 H Carson 230
Month £ Month £
10 Sales 230 14 Ret In 50
20 Disc All'd 9
20 Bank 171
230 230
0 Customer 3 0
Month £ Month £
0 0
0 Customer 5 0
Month £ Month £
0 0
530 D Stockwell 0
Month £ Month £
10 Sales 530
bal c/d 530
530 530
bal b/d 530
0 Customer 4 0
Month £ Month £
0 0
0 Customer 6 0
Month £ Month £
0 0
800 A Clement 800
Month £ Month £
8 Ret Out 120 2 Purchases 540
28 Disc Rec 34 18 Purchases 260
28 Bank 646
800 800
0 Supplier 3 0
Month £ Month £
0 0
0 Supplier 5 0
Month £ Month £
0 0
730 N Kinski 730
Month £ Month £
19 bank 730 2 Purchases 730
730 730
0 Supplier 4 0
Month £ Month £
0 0
0 Supplier 6 0
Month £ Month £
0 0
0 Expense 1 0
Month £ Month £
0 0
0 Expense 2 0
Month £ Month £
0 0
0 Expense 3 0
Month £ Month £
0 0
750 IT Equip 0
Month £ Month £
6 Bank 750
bal c/d 750
750 750
bal b/d 750
3500 Van 0
Month £ Month £
24 Capital 3500
bal c/d 3500
3500 3500
bal b/d 3500
0 Asset 3 0
Month £ Month £
0 0
0 Revenue 1 0
Month £ Month £
0 0
0 Revenue2 0
Month £ Month £
0 0
0 Revenue 3 0
Month £ Month £
0 0
0 Barclays 2000
Month £ Month £
17 Bank 2000
bal c/d 2000
2000 2000
bal b/d 2000
0 Liability 2 0
Month £ Month £
0 0
0 Liability 3 0
Month £ Month £
0 0
Income Statement £ £
Sales 234000
less returns in 540
233460
Less Cost of Goods Sold
Opening Inventory 5400
Add Purchases 54300
Add Carriage In 2190
less returns out 950
less closing inventory 6100
54840
Gross Profit 178620
Add Revenues
Discounts Received 1800
1800
Less Expenses (use TB order)
Carriage Outwards 3280
Salaries 45000
Bad Debts 800
Discounts Allowed 780
Rent 3400
EOYA Expenses (use EOYA order)
Allowance for doubtful debts increase 680
Buildings depreciation 20400
Machinery depreciation 5308
79648
Net Profit 100772
10
Balance Sheet £ £
Fixed Assets (use TB order)
Buildings 680000
Less Accumulated Depreciation 142800 537200
Machinery 150000
Less Accumulated Depreciation 22598 127402
664602
Current Assets (use TB order)
Accounts Receivable 23500
less allowance for doubtful debts 1880
21620
Cash 1800
Closing Inventory 6100
29520
Current Liabilities (use TB order)
Accounts Payable 7300
7300
Fixed Liabilities
Loan 15000
Net Assets 671822
Capital 571990
Add Net Profit 100772
Less Drawings 940
671822
15
5 Marks for format and title
30
Question 3 Solution
a) The accounting equation is C = A - L or C + L = A or L = A - C. 2
The balance sheet lists the assets and liabilities of the business.
The net assets are then calculated as Total Assets - Total Liabilities.
This should, by the accounting equation,equal the updated Capital,
which is calculated as Capital (old) + Net Profit - Drawings.
The Balance Sheet is essentially an expression of the accounting
equation. 3
Marker to judge the quality of response and allocate marks accordingly.
b) The business entity concept states that the financial affairs of the owner 1
are separate from the financial affairs of the business.
The owner invests money/assets in the business. 1
When this happens, the assets belong to the business, not the owner. 1
However, this creates a liability in the business to (in theory) pay back the owner. 1
The owner is entitles to take drawings (in effect paying him/herself back). 1
c) Depreciation is the loss in value of a fixed asset over time. 1
causes: Wear and Tear 1
Obsolescence 1
No longer adequate 1
The current period's depreciation is an expense in the income statement.
The accumulated depreciation modifies the (estimated) value of the asset in
the balance sheet. 1
15 marks