exam question paper - aat | the professional … in accounting (diploma pathway) introductory...

Certificate in Accounting (Diploma pathway) Introductory Accounting (IAC) (2003 standards)

Tuesday 5 December 2006 (afternoon)

EXAM QUESTION PAPER

Time allowed — 3 hours plus 15 minutes’ reading time

Please complete the following information in BLOCK CAPITALS. You must give your student membership number below. If you do not, your paper may not be marked.

Student Member Number Desk number......................... Approved Assessment Centre Code Date....................……........... Approved Assessment Centre Name........................................…............................................... Important: This exam paper is in two sections. You should complete all tasks 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

2

This exam paper is in TWO sections. You must show competence in BOTH sections. You should therefore attempt, and aim to complete, EVERY task in EACH section. Section 1 Double entry bookkeeping and trial balance Complete all 10 tasks Section 2 Accounting processes Complete all 20 tasks and questions You should spend about 75 minutes on Section 1 and about 105 minutes on Section 2. You may use the blank space on pages 9, 19, 25, 26 and 27 for your workings, but you should include all essential calculations within your answer, where appropriate. Both sections are based on the business described below. Introduction • Donald Grady is the owner of Fine Furnishings, a business that supplies furniture. • 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 memoranda 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 November 2006 unless you are told otherwise.

3

SECTION 1 – DOUBLE ENTRY BOOKKEEPING AND TRIAL BALANCE You should spend about 75 minutes on this section. Note: You should show your answer by inserting a tick, words or figures, as appropriate. Task 1.1 The following purchase invoices dated 30 November are ready for entry in the purchases day-book. The VAT rate is 17 ½%. Invoice 1984 from Kershaw Ltd for £3,200 plus VAT Invoice 2094 from Beardsworth & Co for £400 plus VAT Invoice P105 from J & J Ltd for £15,400 plus VAT Invoice 398/F from McFarlane Ltd for £2,000 plus VAT Enter these invoices into the purchases day-book below, and total each column.

Date 2006 Supplier Invoice

number Total

£ VAT

£ Net £

Total

Task 1.2 Would the purchases invoices in Task 1.1 above be debit or credit entries in the subsidiary (purchases) ledger? TTTT Debit

Credit

4

Task 1.3 The following sales invoices, dated 30 November, are ready for entry into the sales day-book. The VAT rate is 17 ½%. Invoice 198 to Rendell Furniture for £600 plus VAT Invoice 199 to Benson Beading for £3,000 plus VAT Invoice 200 to Hagley Furnishings for £1,800 plus VAT Invoice 201 to Cathcart Ltd for £10,000 plus VAT with 2% settlement discount for payment within 7 days Enter these invoices into the sales day-book below, and total each column.

Date 2006

Customer Invoice number

Total £

VAT £

Net £

Total

Task 1.4 The day-book totals in Task 1.3 are now ready to be posted to the main ledger. What entries are needed to record the transactions in the main ledger?

Account name Amount £

Debit TTTT

Credit TTTT

Task 1.5 Would the sales invoices in Task 1.3 be debit or credit entries in the subsidiary (sales) ledger? TTTT Debit

Credit

5

Task 1.6 The following transactions all took place on 30 November 2006 and have been entered into the cash-book as shown below. No entries have yet been made into the ledger system.

Cash-book Date 2006

Details

Bank £

Date 2006

Details Discount received

Bank £

30 Nov 1 Dec

Balance b/f Balance b/d

19,460

______ 19,460

1,060

30 Nov 30 Nov 30 Nov 30 Nov 30 Nov

Travel expenses Loan repayment Motor vehicle Kershaw Ltd (creditor) Balance c/d

50

__ 50

2001,000

15,2501,950

1,060_____ 19,460

(a) What will be the entries to record these transactions in the subsidiary

(purchases) ledger?

Subsidiary (purchases) ledger


Debit TTTT

Credit TTTT

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

Main ledger


Debit TTTT

Credit TTTT

6

Task 1.7 A sales credit note issued by Fine Furnishings for £1,200 plus VAT has not yet been entered in the ledger system. (a) Will the sales credit note be a debit or credit entry in the subsidiary (sales)

ledger? TTTT Debit

Credit

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

Main ledger


Debit TTTT

Credit TTTT

Task 1.8 A credit customer, B B Keen Ltd, has ceased trading. It owes Fine Furnishings £4,000 plus VAT. (a) What entries are needed in the main ledger to write off the net amount and

VAT?


Debit TTTT

Credit TTTT

(b) What entry is needed in the subsidiary (sales) ledger to record this transaction?


Debit TTTT

Credit TTTT

7

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) £2,000 has been debited to the office equipment account instead of the motor vehicles

account.


Debit TTTT

Credit TTTT

(b) An entry to record a payment of £350 for heat and light has been reversed, so it has

been debited to the bank account and credited to the heat and light account.


Debit TTTT

Credit TTTT

(c) £125 has been debited to the suspense account. The following two errors have now been discovered.

• A payment of £70 has been recorded as £170 in the miscellaneous expenses

account • A payment of £225 has been omitted from the office expenses account.


Debit TTTT

Credit TTTT

8

Task 1.10 Below is a list of balances to be transferred to the trial balance as at 30 November. Place the figures in the debit or credit column, as appropriate, and total each column.


Debit £

Credit £

Office equipment 14,325

Motor vehicles 22,600

Stock 40,000

Cash at bank 1,060

Petty cash control 100

Sales ledger control 126,430

Purchases ledger control 58,600

VAT owing to H M Revenue & Customs 22,765

Loan from bank 15,000

Capital 18,371

Sales 406,025

Sales returns 3,196

Discount received 984

Purchases 230,184

Purchases returns 3,100

Discount allowed 200

Wages 65,023

Motor expenses 3,850

Office expenses 1,950

Rent and rates 3,000

Heat and light 1,640

Bad debts written off 8,300

Travel expenses 1,325

Miscellaneous expenses 1,662

Totals

9

You may use this page for your workings.

10

SECTION 2 – TASKS AND QUESTIONS You should spend about 105 minutes on this section. Note 1: You do not need to adjust any accounts in Section 1 as part of any of the

following tasks. Note 2: You should show your answer by inserting a tick, words or figures, as appropriate. Task 2.1 The cheque shown below has been sent to Fine Furnishings by a credit customer.

WESTERN BANKWESTERN BANKWESTERN BANKWESTERN BANK PLC PLC PLC PLC 65656565----29292929---- 38383838 HULL BRANCHHULL BRANCHHULL BRANCHHULL BRANCH HIGH STREET, HULL, HF15 8ZX

Date 28 November 2006 Pay Fine Furnishings____________ __ Two Thousand Five Hundred Pounds Only __ ___ _ _ ______ _ ______ _____ _________________________________

"¦~000493"¦ 65"¦2938: 82157802"¦

Answer the following questions about the cheque by writing your answers in the table below.

(a) What is the name of the drawee?

(b) What is the name of the drawer?

(c) What is the sort code?

££££ 2,500.00

PRESTIGE DESIGNS LIMITED

_____P.Smith___DIRECTOR

11

Task 2.2 Fine Furnishings uses code numbers to trace transactions through the accounting system, for example, supplier account codes. Give THREE other examples of the use of code numbers in an accounting system. 1.

2.

3.

Task 2.3 The following accounts appear in the trial balance of Fine Furnishings. Show whether each account is an asset, expense, income or liability by ticking one correct answer for each. Account name Asset

TTTT Expense

TTTT Income

TTTT Liability

TTTT Rent received

Motor vehicles

Wages

Bank overdraft

Task 2.4 A customer of Fine Furnishings has been given a settlement discount for early payment of an invoice. What accounts in the main ledger would record this discount?

Account name Debit TTTT

Credit TTTT

12

Task 2.5 A customer of Fine Furnishings has asked to pay by debit card. Explain how payment by debit card differs from payment by cheque.

Task 2.6 Fine Furnishings keeps a petty cash float with an imprest amount of £100, and all claims need to be authorised by Donald Grady. An employee, Les Peters, has made the following petty cash claim.

Petty Cash Voucher PC Number: 306 Date: Postage stamps £30.00 Signed L Peters

List THREE things you would need to check before reimbursing the employee. 1. 2. 3. Task 2.7 What would the following balances in the main ledger of Fine Furnishings show? (a) The bank account has a credit balance

(b) The VAT account has a debit balance

13

Task 2.8

M Grimshaw is a credit customer of Fine Furnishings. The following information is available to you:

• payment terms are net monthly, no settlement discount is allowed • subsidiary (sales) ledger account (shown below) • cheque received in payment of September account (shown below)

M Grimshaw

Date 2006

Details Amount £

Date 2006

Details Amount £

01 October Balance b/f 10,417 31 October Balance c/d 12,45315 October Invoice 1881 1,691 17 October Invoice 1889 345 12,453 12,453 1 November Balance b/d 12,453

CENTRAL BANK PLC 30-20-40

Bennetts Lane Branch Bennetts Lane, Birmingham, B3 4DP

Date 31 October 2006 Pay Fine Furnishings_________________ Ten thousand pounds only____________ _________________________________ _________________________________

ʺ¦~0018761ʺ¦ 30ʺ¦2040: 291058474ʺ¦

(a) Compare the cheque received from M Grimshaw with the ledger account and

make a note of any discrepancy below.

(b) What will be the amount payable by M Grimshaw to clear the account at the end

of November?

£ 10,000.00

M GRIMSHAW

_______M.Grimshaw___ DIRECTOR

14

Task 2.9 Below is a summary of the payroll totals at 30 November 2006. £ Gross pay 7,000 Net pay 5,400 PAYE 1,100 Employees’ NIC 500 Employer’s NIC 580 Make the relevant entries in the wages control account below.

Wages control Date 2006

Details Amount £

Date 2006

Details Amount £

Task 2.10 A friend of Donald Grady offered to decorate the offices at Fine Furnishings, free of charge. However, the friend did not turn up on the agreed date and Donald has not heard from him. (a) Was there a valid contract? Circle your answer.

Yes / No

(b) Explain your answer.

15

Task 2.11

Every customer of Fine Furnishings is given a credit limit when they open an account. What is the purpose of a credit limit?

Task 2.12 Fine Furnishings’ sales invoices are currently filed in numerical order. Suggest DIFFERENT methods of filing EACH of the following documents. Document Method of filing Sales invoice Numerical

Purchase invoice

Bank statement

Insurance policies

Task 2.13 When a cheque is received from a customer, Donald Grady insists certain checks are made, for example that the cheque is dated correctly. Name TWO other checks you would make. 1. 2.

16

Task 2.14 A transaction with a credit customer involved Fine Furnishings issuing the following documents: Sales invoice Delivery note Statement of account Sales confirmation Quotation Place the documents in the order in which they would normally be sent out to the customer. Sequence Document

1

2

3

4

5

Task 2.15 The following are internal documents which are raised by Fine Furnishings as part of the purchasing process. Explain the purpose of each document. Document Purpose

Goods returned note

Goods received note

Cheque requisition

17

Task 2.16 One of the accounts in the subsidiary (sales) ledger at Fine Furnishings has a credit balance. No accounting errors have been made. Suggest ONE reason why this credit balance may have occurred.

Task 2.17

(a) The following is a summary of transactions with suppliers during the month of November.

Show whether each entry will be a debit or credit in the purchases ledger control account in the main ledger.

Details £ Debit TTTT

Credit TTTT

Balance of creditors at 1 November 172,548

Goods purchased on credit 89,946

Payments made to credit suppliers 64,320

Discount received 76

Goods returned to credit suppliers 152

(b) What will be the balance brought down on 1 December on the above account?

TTTT Dr £198,402

Cr £198,402

Dr £197,946

Cr £197,946

Dr £198,250

Cr £198,250

18

Task 2.17, continued The following credit balances were in the subsidiary (purchases) ledger on 1 December.

£ Sofa Stores 79,170 PJT Ltd 36,049 Bradley Furnishers 24,321 Tables & Chairs 41,220 Pagnall Ltd 17,034

(c) Reconcile the balances shown above with the purchases ledger control account

balance you have calculated in part (a). £

Purchases ledger control account balance as at 1 December

Total of subsidiary (purchases) ledger accounts as at 1 December

Difference

(d) What may have caused the difference you calculated in part (b)? TTTT Discounts received may have been entered in the subsidiary ledger twice

Discounts received may have been omitted from the subsidiary ledger

Goods returned may have been omitted from the subsidiary ledger

Goods returned may have been entered in the subsidiary ledger twice

19

TURN OVER FOR TASK 2.18


20

Task 2.18 On 28 November Fine Furnishings received the following bank statement as at 25 November:

High Street Bank plc 17 The Parade, Hull, HF15 6PR

To: Fine Furnishings Account No 38281903 25 November 2006

STATEMENT OF ACCOUNT Date Details Paid out Paid in Balance 2006 £ £ £ 01 Nov Balance b/f 5,281 C 07 Nov Cheque 008301 1,642 3,639 C 08 Nov Cheque 008302 1,391 2,248 C 11 Nov Bank Giro Credit Bright & Co 10,000 12,248 C 11 Nov Bank Giro Credit WWW Ltd 1,250 13,498 C 14 Nov Cheque 008304 6,340 7,158 C 15 Nov Direct Debit Hull CC 58 7,100 C 21 Nov Direct Debit Instone Insurance 110 6,990 C 22 Nov Overdraft facility fee 40 6,950 C 24 Nov Bank charges 12 6,938 C 24 Nov Bank interest 5 6,943 C

D = Debit C = Credit

21

The cash-book as at 25 November 2006 is shown below.

Cash-book Date

2006

Details Bank

£

Date

2006

Cheque

Number

Details Bank

£

01 Nov Balance b/f 5,281 01 Nov 08301 Wooden Wonders 1,642

15 Nov Bright & Co 10,000 01 Nov 08302 Davies Designs 1,391

22 Nov WWW Ltd 1,250 06 Nov 08303 PFT Ltd 6,065

22 Nov Leek & Lom 8,812 06 Nov 08304 Carver & Co 6,340

22 Nov C Smyth 175 25 Nov 08305 ELG Ltd 2,711

(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 25 November

(closing balance) and brought down at 26 November (opening balance). Note: you do not need to adjust the accounts in Section 1.

22

(d) Using the information on pages 20 and 21, prepare a bank reconciliation statement as at 25 November.

Note: do not make any entries in the shaded boxes.

Bank reconciliation statement as at 25 November 2006

Balance per bank statement £

Add:

Name: £

Name: £

Total to add £

Less:

Name: £

Name: £

Total to subtract £

Balance as per cash-book £ Task 2.19 The following is an extract from the company policy manual: Payments to suppliers will be made in the following way: Under £20.00 By cash on receipt £20.01 - £4,999.99 By cheque on the 10th of the month following invoice date £5,000 - £24,999.99 By BACS on the 15th of the month following invoice date £25,000 and over By CHAPS on the 30th of the month following invoice date Schedule the following payments according to company policy.

Supplier Invoice date Amount £ Type of payment Date of payment

ABC Ltd 23 November 15,600.25

B O’Connor 27 November 1,100.00

Phipps & Phipps 1 November 35.00

T Trench & Co 18 November 5,099.99

Lowes Furniture 1 December 25,000.00

23

Task 2.20 Fine Furnishings has received the following invoice, but there is no record of these goods ever having been received.

GPS Locksmiths 15 Gray Street, Ashley, PK2 8DP VAT Registration No 387 2983 00

INVOICE NO 387/B

29 November 2006

To: Fine Furnishings 27a High Street Hull HF21 3QX 100 sets … Brass furniture locks complete with keys £1,000.00 VAT at 17.5% £ 175.00 Total payable £1,175.00 Donald Grady has asked you to draft a letter ready for his signature. Using the letterhead on page 24, write to the supplier to explain the situation and request proof of delivery.

24

Fine Furnishings

27a High Street, Hull, HF21 3QX VAT Registration No 248 1246 00

GPS Locksmiths 15 Gray Street Ashley PK2 8DP

25


26


27


Qualification codes (Diploma pathway) Certificate – 100/5923/4 Unit number (IAC) – J/103/6444

© Association of Accounting Technicians (AAT) 12.06 154 Clerkenwell Road, London EC1R 5AD, UK Tel: +44 (0)20 7837 8600 Fax: +44 (0)20 7837 6970 E-mail: [email protected] Website: http:/www.aat.org.uk

exam question paper - aat | the professional … in accounting (diploma pathway) introductory...

Documents