International Association of Book-keepers, Suite 5, 20 Churchill Square, Kings Hill, West Malling, Kent ME19 4YU Tel: 01732 897750, Fax: 01732 897751, email:education@iab.org.uk Website: www.iab.org.uk

June 2014 Examination Model Answers

322 Exam ID Model Answer Booklet for the following Qualifications: 300: Level 3 Certificate in Bookkeeping QCF: 50084793 320: Level 3 Certificate in Manual Bookkeeping QCF: 50092601 340: Level 3 Certificate in Applied Bookkeeping QCF: 50092765 3000: Level 3 Certificate in Bookkeeping QCF: 60107315 3030: Level 3 Diploma in Bookkeeping QCF: 60104843 Time Allowed 3 Hours Paper No: 0041

FOR USE BY ASSESSOR ONLY:

IAB ID Units covered Possible marks

310 Prepare financial statements for a partnership: Y6010742

60

311

Prepare financial statements for a sole trader: A6010734

40

SECTION A QUESTION ONE Alda and Bani Trading in Partnership Trading and Profit and Loss Account – Answer Task A

Alda and Bani

Trading and Profit and Loss Account for the Year Ended 31 May 2014

£ £ £

Sales 1/4 740,480

Less Cost of Goods Sold

Opening stock 1/4 45,560

Add Purchases 1/4 594,220

639,780

Less Closing stock 1/4 48,430

Cost of Sales 1/4 591,350

Gross profit 1 149,130

Less Expenses

Wages and salaries 1/4 64,340

Heat and light (£5,440 + £1,620) 1/2 7,060

Rates (£15,800 - £5,800) 1/2 10,000

Vehicle expenses 1/4 6,670

Advertising 1/4 2,400

Bank charges and interest 1/4 1,120

Other expenses 1/4 2,750

Depreciation 1/2 18,000

112,340

Net profit 1 36,790

6 Marks

IAB L3 Cert June 2014 Paper 2

Page

2

Alda and Bani Trading in Partnership Profit and Loss Appropriation Account – Answer Task B

Alda and Bani

Profit and Loss Appropriation Account for the Year Ended 31 May 2014

£ £

Net profit 1/2 36,790

Add Interest on drawings: Alda 1/2 600

Bani 1/2 400

1,000

37,790

Less Interest on capital: Alda 1/2 2,400

Bani 1/2 1,600

4,000

33,790

Less Share of profits: Alda 2 16,895

Bani 2 16,895

33,790

-

6½ Marks

IAB L3 Cert June 2014 Paper 2

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3

Alda and Bani Trading in Partnership Current Accounts – Answer Task C

DR Current Accounts CR

Date Details Alda

£

Bani

£

Date Details Alda

£

Bani

£

31/5/13 Balance b/f ¼ 1,220 31/5/13 Balance b/f ¼ 1,650

31/5/14 Interest on drawings

¼ 600 ¼ 400 31/5/14 Interest on capital

¼ 2,400 ¼ 1,600

31/5/14 Drawings ¼ 16,000 ¼ 14,000 31/5/14 Share of profit ¼ 16,895 ¼ 16,895

31/5/14 Balance c/d ½ 1,475 ½ 5,745

19,295 20,145 19,295 20,145

31/5/14 Balance b/d ¼ 1,475 ¼ 5,745

4 Marks

IAB L3 Cert June 2014 Paper 2

Page

4

Alda and Bani Trading in Partnership Balance Sheet - Answer Task D

Alda and Bani Balance Sheet as at 31 May 2014

£ £ £

Fixed Assets Cost Less Dep’n to

Date

NBV

Premises 125,000 - ¼ 125,000

Equipment 60,000 ½ 42,000

¼ 18,000

Vehicles 30,000 ½ 12,000

¼ 18,000

215,000 54,000 ½ 161,000

Current Assets

Stock ¼

48,430

Trade debtors ¼ 40,680

Prepaid expenses ¼

5,800

Cash ¼

200

95,110 Less Current Liabilities

Trade creditors ¼

44,820

Accrued expenses ¼

1,620

Bank ¼

2,450

48,890

Working capital ½ 46,220

1 207,220

Financed By:

Capital – Alda ¼

120,000

Add Current account ¼

1,475

121,475

Capital – Bani ¼ 80,000

Add Current account ¼

5,745

85,745

1 207,220

7½ Marks

Total This Question = 24 Marks

IAB L3 Cert June 2014 Paper 2

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5

QUESTION TWO Cara, Dee and Eve Trading in Partnership Capital Accounts – Answer Task A

DR Capital Accounts CR

Date Details Cara £

Dee £

Eve £

Date Details Cara £

Dee £

Eve £

1/6/13 Goodwill adjm’t - - 2 12,000 31/5/13 Balance b/f ½ 80,000 ½ 50,000 -

1/6/13 Balance c/d 1 88,000 1 54,000 1 48,000 1/6/13 Bank - - ½ 60,000

1/6/13 Goodwill adjm’t 2 8,000 2 4,000 -

88,000 54,000 60,000 88,000 54,000 60,000

1/6/13 Balance b/d ½ 88,000 ½54,000 ½ 48,000

12 Marks

Workings – Goodwill Adjustment

Partners Goodwill Creation

Goodwill Deletion

Net Adjustment

£ £ £

Cara 24,000 (CR) 16,000 (DR) 8,000 (CR)

Dee 16,000 (CR) 12,000 (DR) 4,000 (CR)

Eve - 12,000 (DR) 12,000 (DR)

40,000 (CR) 40,000 (DR) -

IAB L3 Cert June 2014 Paper 2

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6

Cara, Dee and Eve Trading in Partnership Profit and Loss Appropriation Account – Answer Task B

Cara, Dee and Eve

Profit and Loss Appropriation Account for the Year Ended 31 May 2014

£ £

Net profit ½

56,600

Less Interest on capital: Cara 2 2,640

Dee 2 1,620

Eve 2 1,440

5,700

50,900

Less Salaries: Cara ½ 6,000

Dee ½ 5,000

Eve ½ 4,000

15,000

35,900

Less Share of profit: Cara 2 14,360

Dee 2 10,770

Eve 2 10,770

35,900

-

14 Marks

IAB L3 Cert June 2014 Paper 2

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7

Cara, Dee and Eve Trading in Partnership Current Accounts - Answer Task C

DR Current Accounts CR

Date Details Cara £

Dee £

Eve £

Date Details Cara £

Dee £

Eve £

31/5/13 Balance b/f ½ 800 - - 31/5/13 Balance b/f - ½ 900 -

31/5/14 Drawings ½20,000 ½18,000 ½ 16,000 31/5/14 Interest on capital ½ 2,640 ½ 1,620 ½ 1,440

31/5/14 Balance c/d ½ 2,200 ½ 290 ½ 210 31/5/14 Salaries ½ 6,000 ½ 5,000 ½ 4,000

31/5/14 Share of profit ½ 14,360 ½ 10,770 ½10,770

23,000 18,290 16,210 23,000 18,290 16,210

31/5/14 Balance b/d ½ 2,200 ½ 290 ½ 210

10 Marks

Total This Question = 36 Marks

Total This Unit = 60 Marks

IAB L3 Cert June 2014 Paper 2

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8

SECTION B QUESTION ONE Comet Trading Trial Balance – Answer Task A

Comet Trading Trial Balance as at 31 May 2014

DR £

CR £

Bank 1/4 2,150

Cash 1/4 500

Sales 1/4 744,620

Telephone 1/4 1,020

Purchases 1/4 607,760

Sales returns 1/4 2,650

Purchases returns 1/4 1,920

Discounts allowed 1/4 2,870

Discounts received 1/4 3,650

Stock (31 May 2013) 1/4 64,550

Equipment (cost) 1/4 32,000

Equipment (provision for depreciation 31 May 2013) 1/4 6,400

Value Added Tax (VAT) 1/4 4,440

Drawings 1/4 36,140

Rent and rates 1/4 21,400

Capital 1/4 104,250

Wages 1/4 46,980

Vehicles (cost) 1/4 45,000

Vehicles (provision for depreciation 31 May 2013) 1/4 9,000

Vehicle expenses 1/4 4,980

Heat and light 1/4 2,960

Trade debtors 1/4 47,790

Trade creditors ¼ 45,550

Sundry expenses 1/4 350

Suspense 1/2 730

Totals 1/2 919,830 1/2 919,830

7½ Marks

IAB L3 Cert June 2014 Paper 2

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9

Comet trading Suspense Account – Answer Tasks B and D

DR Suspense Account CR

2014 Details £ 2014 Details £

31 May Difference in books 1/2

730 31 May

Purchases 1/2 1,000

31 May Sales 1/2

270

1,000

1,000

1½ Marks

Journal – Answer Task C Journal

2014 Details DR

£

CR

£

31 May Purchases 1/4 ½ 1,000

Suspense 1/4 ½ 1,000

Correction of error, purchases understated when transferred from Purchase Day Book 1/4

31 May Suspense 1/4 ½ 270

Sales 1/4 ½ 270

Correction of transposition error understating balance on Sales Account 1/4

3½ Marks

IAB L3 Cert June 2014 Paper 2

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10

Comet Trading Extended Trial Balance – Answers Tasks E, F and G

Comet Trading – EXTENDED TRIAL BALANCE AS AT 31 MAY 2014

Trial Balance Adjustments Profit & Loss Balance Sheet

Ledger Account DR £

CR £

DR £

CR £

DR £

CR £

DR £

CR £

Bank 2,150 ¼ 2,150

Cash 500 ¼ 500

Sales ½ 744,890 ¼ 744,890

Telephone 1,020 ¼ 1,020

Purchases ½ 608,760 ¼ 608,760

Sales returns 2,650 ¼ 2,650

Purchase returns 1,920 ¼ 1,920

Discounts allowed 2,870 ¼ 2,870

Discounts received 3,650 ¼ 3,650

Stock (31 May 2013) 64,550 ¼ 64,550

Equipment (cost) 32,000 ¼ 32,000

Equipment prov’n for dep’n 6,400 ¼ 6,400 ½ 12,800

Value Added Tax (VAT) 4,440 ¼ 4,440

Drawings 36,140 ¼ 36,140

Rent and rates 21,400 ¼ 7,200 ½ 14,200

Capital 104,250 ¼ 104,250

Wages 46,980 ¼ 46,980

Vehicles (cost) 45,000 ¼ 45,000

Vehicles prov’n for dep’n 9,000 ¼ 9,000 ½ 18,000

Vehicle expenses 4,980 ¼ 4,980

Heat and light 2,960 ¼ 1,320 ½ 4,280

Trade debtors 47,790 ¼ 47,790

Trade creditors 45,550 ¼ 45,550

Sundry expenses 350 ¼ 350

Totals ½ 920,100 ½ 920,100 - - - - - -

Closing stock – P & L ¼69,120 ¼ 69,120

Closing stock – Bal Sheet ¼69,120 ¼ 69,120

Prepayment adjustment ¼ 7,200 ¼ 7,200

Accruals adjustment ¼ 1,320 ¼ 1,320

Depreciation expense ¼15,400 ¼ 15,400

Net profit ½ 53,540 ½ 53,540

Totals ½93,040 ½93,040 ½ 819,580 ½ 819,580 ½ 239,900 ½ 239,900

16½ Marks

IAB L3 Cert June 2014 Paper 2

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11

Comet Trading

Trading and Profit and Loss Account – Answer Task H

Comet Trading

Trading and Profit and Loss Account for the Year Ended 31 May 2014

£ £ £

Sales ¼ 744,890

Less Sales returns ¼ 2,650

742,240

Less Cost of Goods Sold

Opening stock 1/4 64,550

Add Purchases 1/4 608,760

Less Purchase returns 1/4 1,920

671,390

Less Closing stock 1/4 69,120

Cost of Sales ½ 602,270

Gross Profit ½ 139,970

Add Other Income

Discounts received 1/4 3,650

143,620

Less Expenses

Telephone 1/4 1,020

Discounts allowed 1/4 2,870

Rent and rates 1/4 14,200

Wages 1/4 46,980

Vehicle expenses 1/4 4,980

Heat and light 1/4 4,280

Sundry expenses 1/4 350

Depreciation 1/4 15,400

90,080

Net profit 1 53,540

5¾ Marks

IAB L3 Cert June 2014 Paper 2

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12

Comet Trading Balance Sheet – Answer Task H

Comet Trading Balance Sheet as at 31 May 2014

£ £ £

Fixed Assets Cost Less Dep’n to Date

NBV

Equipment 32,000 1/4 12,800 1/4 19,200

Vehicles 45,000 1/4 18,000 1/4 27,000

77,000 30,800 1/4 46,200

Current Assets

Stock 1/4 69,120

Trade debtors 1/4 47,790

Prepayment 1/4 7,200

Bank 1/4 2,150

Cash 1/4 500

126,760

Less Current Liabilities

Trade creditors 1/4 45,550

Accrual 1/4 1,320

Value Added Tax (VAT) 1/4 4,440

51,310

Working capital 1/4 75,450

½ 121,650

Financed By:

Capital 1/4 104,250

Add Net Profit 1/4 53,540

157,790

Less Drawings 1/4 36,140

121,650

½ 121,650

5¼ Marks

Total This Question= 40 Marks Total This Unit = 40 Marks