1.

Answer all the questions.

2.

Calculator is allowed in this examination.

3.

Write your answers on the separate answer paper.

Do not write your answer on the question paper.

4.

Start each question on a separate page.

5.

All calculations must be shown adjacent to answer.

6.

If you use more than one sheet of paper, fasten the sheets together.

7.

If an answer extends beyond one sheet, all sheets for that question must be kept together.

1.

What is the formula for the accounting equation ?

A.

assets = owners’ equity minus liabilities

B.

assets = owners’ equity plus liabilities

C.

liabilities = assets plus owners’ equity

D.

owners’ equity = liabilities plus assets

2.

A trader discovered that a credit customer had been undercharged for his last purchase. Which document should the trader send to the customer ?

A.

Cheque

B.

credit note

C.

debit note

D.

Receipt

3.

Which should be recorded in the general journal before it is entered in the ledger ?

A.

bad debt written off

B.

cash sales

C.

equipment purchased by cheque

D.

purchases returns

4.

A business keeps a full set of books of prime entry.

Which book is written up from the copies of credit notes issued by the business ?

A.

Purchases Journal

B.

Purchases Returns Journal

C.

Sales Journal

D.

Sales Returns Journal

5.

Eddie Teo, a trader, withdrew $20 from the business bank account for office use.

How is this recorded in Eddie Teo’s books ?

account to be debited

account to be credited

A.

bank

cash

B.

cash

bank

C.

bank

drawings

D.

drawings

bank

6.

A business maintains a petty cash book using the imprest system. The amount of the imprest is $300. The petty cash is restored on the first day of each month.

Which statement is true ?

A.

The petty cashier ends each month with $300.

B.

The petty cashier is given $300 each month by the chief cashier.

C.

The petty cashier spends $300 each month.

D.

The petty cashier starts each month with $300.

7.

Wong returns goods to Tan.

How is this recorded in Wong’s books ?

book of prime entry

account to be debited

account to be credited

A.

Purchases Return Journal

purchases returns

Tan

B.

Purchases Return Journal

Tan

purchases returns

C.

Sales Return Journal

sales returns

Tan

D.

Sales Return Journal

Tan

sales returns

8.

The following account appears in the ledger of Andrew Chew.

Johnson Lee Account

2005

$

2005

$

Jan

28

Bank

100

Jan

1

Balance b/d

100

31

Balance c/d

250

12

Purchases

250

350

350

Which statement is true ?

A.

On 1 January Andrew Chew is owed $100 by Johnson Lee.

B.

On 12 January Johnson Lee purchased goods, $250, from Andrew Chew.

C.

On 28 January Andrew Chew paid Johnson Lee $100 by cheque.

D.

On 31 August Johnson Lee is a debtor of Andrew Chew for $250.

9.

Where does net profit appear in the final accounts of a business ?

Trading Account

Profit & Loss Account

Balance Sheet

A.

yes

no

yes

B.

yes

no

no

C.

no

yes

no

D.

no

yes

yes

10.

Which should be shown as a current asset in the Balance Sheet of a retailer ?

A.

amount owed by customers

B.

amount owed to suppliers

C.

general expenses due

D.

rent received in advance

$

Debtors

11,250

Creditors

6,060

Returns inwards

810

Returns outwards

570

Sales

41,970

Purchases

22,860

Stock, 1 June 2003

5,160

Stock, 31 May 2004

4,290

Discounts Allowed

1,440

Discounts Received

930

Capital

7,200

Bank overdraft

4,350

Cash

90

Carriage outwards

2,160

Rent and insurance

1,740

Fixtures and fittings

1,200

Delivery van

2,100

Drawings

2,880

Salaries and wages

8,940

General office expenses

450

(a)

Trading and Profit and Loss Accounts for the year ended 31 May 2004.         [20]

(b)

Balance Sheet as at 31 May 2004.                                                                     [15]

1 January 2004

31 December 2004

$

$

Debtors

4,580

5,100

Creditors

5,470

3,560

Stock

1,100

1,300

$

Cash Sales

7,500

Receipts from debtors

33,880

Payments to creditors

25,870

Discounts allowed

400

Discounts received

240

(a)

Calculate the sales and purchases totals for the year ended 31 December 2004.  [19]

(b)

Calculate the rate of stock turn (rapidity of stock turnover).                                 [11]

(c)

Explain how Anson Quek could use this information regarding his rate of

stock turn.                                                                                                                 [3]

(d)

State and explain the accounting principle on which stock is valued.                     [2]

$

Cash at bank

1,100

Equipment

6,450

Stock at cost

4,640

Debtors

3,200

Creditors

1,860

Bank loan

2,000

Draw up a Statement, which may be in Balance Sheet form, to show the net profit for 2004.

1.

What is the formula for the accounting equation ?

ANSWERS

The correct answer was [___] ________ = _______________ plus _____________.

Owners’ Equity is ________________.

In other word, the accounting equation is __________ = ________ + ___________.

                                                              or Assets – Capital = Liabilities

                                                              or Assets – Liabilities = Capital.

2.

A trader discovered that a credit customer had been undercharged for his last purchase. Which document should the trader send to the customer ?

ANSWERS

The correct answer was [___] _______________________.

_______________ is _____________, so when we ______ to the customers ______

______________, we open the debtor accounts and record the credit sales in the debtor accounts. We also send an ___________________ (a letter) to remind the customer to pay up for his credit sales.

What if we undercharge our customer ? Then we must debit the debtor accounts for the undercharged amount and send a __________________ to inform the customer the ____________________________ and the customer must pay up the amount undercharged.

What if we overcharge our customer ? Here we must credit the debtor accounts for the overcharged amount and send the ________________________ to inform our customer the __________________, and if the customer had already paid in full the invoiced amounts, then we must refund the overcharged amounts to our customer.

3.

Which should be recorded in the general journal before it is entered in the ledger ?

ANSWERS

The correct answer was [___] __________________________________.

_______________________ to be _________________ the __________________

_______________________________or General Journal before posted to ledger.

Books of Prime Entry (or Books of Original Entry) _________________________

________________________________, so cash sales and equipment purchased by cheque were first recorded in the Cash Book and purchases returns were first recorded in the Purchases Returns Journal.

________________, ______________________, ___________________________, _______________________ (or Returns Inwards) ______________________ and ________________________ (or Returns Outwards) _____________________ are examples of the Books of Prime Entry.

______________________ that were __________________________________

________________________then ________________________________________ this would include bad debt written off.

4.

A business keeps a full set of books of prime entry.

Which book is written up from the copies of credit notes issued by the business ?

ANSWERS

The correct answer was [___] _______________________________________.

When a business _______________________________________, it will send the sales invoices to the customers and ___________ the credit sales_______________

_______________________________.

What if the customer not happy with the item sold and return the item sold back to the business ? Here, the business must issue (or give) the customer a ____________ as evidence that goods previously sold had now been returned and record the ____

_______________________________________in the ______________________ (or Returns Inwards) _______________________.

Similarly when the business purchase its goods from its suppliers, it will receive the purchases invoices for the amounts of goods purchased. All _______________

_____________________________must be _____________________________ the _______________________________.

What if the business decide to return the goods purchased back to its suppliers ? Here, the business will be given a ________________________ from the suppliers as evidence that goods had already been returned. Amounts of _____________

_________________________________must be _________________________

_________________________________(or Returns Outwards) ________________.

5.

Eddie Teo, a trader, withdrew $20 from the business bank account for office use.

How is this recorded in Eddie Teo’s books ?

ANSWERS

The correct answer was [___] ______________________, ___________________.

_____________________________________________________, assets accounts increases on the debit side and decreases on the credit side.

Withdrew $20 from bank accounts, so bank accounts went down by $20, so credit bank accounts $20, the $20 cash was for office use, so Cash increases by $20 and debit Cash $20.

6.

A business maintains a petty cash book using the imprest system. The amount of the imprest is $300. The petty cash is restored on the first day of each month.

Which statement is true ?

ANSWERS

The correct answer was [___] ___________________________________________.

The amount of the imprest is $300 (or the imprest amounts is $300) mean that the petty cashier (which is the officer in charge of the petty cash) must make sure that he has $300 in hand on the first day of the month.

_______ the petty ________________________________ that was carried forward from last month, then _________________________________________________

_____________________________________ to make the imprest amount to $300.

_______, again, the petty __________________________________ that was carried forward from last month, then, ___________________________________________

___________________________________ to bring up the imprest amount to $300.

7.

Wong returns goods to Tan.

How is this recorded in Wong’s books ?

ANSWERS

The correct answer was [___].

book of prime entry

account to be debited

account to be credited

__.

____________________

_________________

__________________

___________________________________________________________________.

So _______________________________________________________ and must be recorded in the Purchases Returns (or Returns Outwards) Journal by debit Creditor – Tan Accounts (liabilities went down after goods was returned to supplier) and credit Purchases Returns Account (purchases return increases after goods were returned back to supplier).

8.

The following account appears in the ledger of Andrew Chew.

Johnson Lee Account

2005

$

2005

$

Jan

28

Bank

100

Jan

1

Balance b/d

100

31

Balance c/d

250

12

Purchases

250

350

350

Which statement is true ?

A.

On 1 January Andrew Chew is owed $100 by Johnson Lee.

B.

On 12 January Johnson Lee purchased goods, $250, from Andrew Chew.

C.

On 28 January Andrew Chew paid Johnson Lee $100 by cheque.

D.

On 31 August Johnson Lee is a debtor of Andrew Chew for $250.

ANSWERS

The correct answer was [___] ___________________________________________

_______________________________________________________.

First of all, _______________________________. How do you know ? ________

________________________________________at the start of the month, the balance b/d $100 _______________________________________, this mean that Andrew Chew (assuming you are Andrew Chew) owed its creditor – Johnson Lee $100 at the start of the month.

C was the correct answer because on 28 January 2005, Andrew Chew(i.e. you) had paid (your) supplier, Johnson Lee $100 in cheque.

9.

Where does net profit appear in the final accounts of a business ?

ANSWERS

The correct answer was [___].

Trading Account

Profit & Loss Account

Balance Sheet

__.

______________

__________________

____________

____________________ = ___________________ minus ____________________.

Net Profit is appeared (or recorded) in the Profit & Loss (P & L) Account. It is because the __________________________________________________________

_________________________________________________ for the year and if total income is more than total expenses, then the difference is called Net Profit and is recorded in the P & L Account.

The _____________________ for the year will be used to ___________________

________________________________________in the Balance Sheet. If the owner reports a net profit for the year, it will increases his capital, however, if he does reports a net loss for the year, the net loss will reduce his capital.

Balance Sheet is used to record all items of assets, liabilities and capital.

10.

Which should be shown as a current asset in the Balance Sheet of a retailer ?

ANSWERS

The correct answer was [___] ___________________________________________.

____________________________________________________________ (or trade debtors) in the Balance Sheet and classified as Current Assets.

___________________________________________________________________. Examples of liabilities will include amount owed to suppliers, general expenses due (but not yet paid, so still owing) and rent received in advance.

_____________________________________________________. _______ because it is ____________ item of __________________________. Should the business fail to keep up on its promise of making available the building for rental occupation, the business is liable to refund the rent (that it has) received in advance to the tenant.

QUESTIONS

ANSWERS

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

(a)

Trading and Profit and Loss Accounts for the year ended 31 May 2004.            [20]

(b)

Balance Sheet as at 31 May 2004.                                                                        [15]

(a)

Calculate the sales and purchases totals for the year ended 31 December 2004.  [19]

ã

ä

ä

ã

(b)

Calculate the rate of stock turn (rapidity of stock turnover).                                 [11]

(c)

Explain how Anson Quek could use this information regarding his rate of

stock turn.                                                                                                                 [3]

(d)

State and explain the accounting principle on which stock is valued.                     [2]

Draw up a Statement, which may be in Balance Sheet form, to show the net profit for 2003.

1.

What is the formula for the accounting equation ?

ANSWERS

The correct answer was [B] Assets = Owners’ Equity plus Liabilities.

Owners’ Equity is Capital.

In other word, the accounting equation is Assets = Capital + Liabilities.

                                                              or Assets – Capital = Liabilities

                                                              or Assets – Liabilities = Capital.

2.

A trader discovered that a credit customer had been undercharged for his last purchase. Which document should the trader send to the customer ?

ANSWERS

The correct answer was [C] Debit Note.

Customer is debtor, so when we sell to the customers on credit, we open the debtor accounts and record the credit sales in the debtor accounts. We also send an invoice (a letter) to remind the customer to pay up for his credit sales.

What if we undercharge our customer ? Then we must debit the debtor accounts for the undercharged amount and send a debit note to inform the customer the undercharge and the customer must pay up the amount undercharged.

What if we overcharge our customer ? Here we must credit the debtor accounts for the overcharged amount and send the credit note to inform our customer the overcharge, and if the customer had already paid in full the invoiced amounts, then we must refund the overcharged amounts to our customer.

3.

Which should be recorded in the general journal before it is entered in the ledger ?

ANSWERS

The correct answer was [A] Bad Debt written off.

Transactions are first to be recorded in the Books of Prime (or Original) Entry or General Journal before posted to ledger.

Books of Prime Entry (or Books of Original Entry) are where transactions first recorded, so cash sales and equipment purchased by cheque were first recorded in the Cash Book and purchases returns were first recorded in the Purchases Returns Journal.

Cash Book, Sales Journal, Purchases Journal, Sales Returns (or Returns Inwards) Journal and Purchases Returns (or Returns Outwards) Journal are examples of the Books of Prime Entry.

Transactions that were not recorded in the Books of Prime Entry are then recorded in the General Journal, this would include bad debt written off.

4.

A business keeps a full set of books of prime entry.

Which book is written up from the copies of credit notes issued by the business ?

ANSWERS

The correct answer was [D] Sales Returns Journal.

When a business sell to its customers on credit, it will send the sales invoices to the customers and record the credit sales in the Sales Journal.

What if the customer not happy with the item sold and return the item sold back to the business ? Here, the business must issue (or give) the customer a credit note as evidence that goods previously sold had now been returned and record the goods returned by the customers in the Sales Returns (or Returns Inwards) Journal.

Similarly when the business purchase its goods from its suppliers, it will receive the purchases invoices for the amounts of goods purchased. All purchases of goods from suppliers must be recorded in the Purchases Journal.

What if the business decide to return the goods purchased back to its suppliers ? Here, the business will be given a debit note from the suppliers as evidence that goods had already been returned. Amounts of goods returned to suppliers must be recorded in the Purchases Returns (or Returns Outwards) Journal.

5.

Eddie Teo, a trader, withdrew $20 from the business bank account for office use.

How is this recorded in Eddie Teo’s books ?

ANSWERS

The correct answer was [B] debit Cash, credit Bank.

Both Cash and Bank are assets accounts, assets accounts increases on the debit side and decreases on the credit side.

Withdrew $20 from bank accounts, so bank accounts went down by $20, so credit bank accounts $20, the $20 cash was for office use, so Cash increases by $20 and debit Cash $20.

6.

A business maintains a petty cash book using the imprest system. The amount of the imprest is $300. The petty cash is restored on the first day of each month.

Which statement is true ?

ANSWERS

The correct answer was [D] The petty cashier starts each month with $300.

The amount of the imprest is $300 (or the imprest amounts is $300) mean that the petty cashier (which is the officer in charge of the petty cash) must make sure that he has $300 in hand on the first day of the month.

If the petty cashier already has $120 that was carried forward from last month, then he will needs to ask $180 from the chief cashier to make the imprest amount to $300.

If, again, the petty cashier already has $70 that was carried forward from last month, then, he will needs $230 from the chief cashier to bring up the imprest amount to $300.

7.

Wong returns goods to Tan.

How is this recorded in Wong’s books ?

ANSWERS

The correct answer was [B].

book of prime entry

account to be debited

account to be credited

B.

Purchases Return Journal

Tan

purchases returns

Wong returned goods to its supplier, Tan.

So it was a purchases returns and must be recorded in the Purchases Returns (or Returns Outwards) Journal by debit Creditor – Tan Accounts (liabilities went down after goods was returned to supplier) and credit Purchases Returns Account (purchases return increases after goods were returned back to supplier).

8.

The following account appears in the ledger of Andrew Chew.

Johnson Lee Account

2005

$

2005

$

Jan

28

Bank

100

Jan

1

Balance b/d

100

31

Balance c/d

250

12

Purchases

250

350

350

Which statement is true ?

A.

On 1 January Andrew Chew is owed $100 by Johnson Lee.

B.

On 12 January Johnson Lee purchased goods, $250, from Andrew Chew.

C.

On 28 January Andrew Chew paid Johnson Lee $100 by cheque.

D.

On 31 August Johnson Lee is a debtor of Andrew Chew for $250.

ANSWERS

The correct answer was [C] On 28 January 2005, Andrew Chew paid Johnson Lee $100 by cheque.

First of all, this is a creditor account. How do you know ? Because the opening balance at the start of the month, the balance b/d $100 was on the credit side, this mean that Andrew Chew (assuming you are Andrew Chew) owed its creditor – Johnson Lee $100 at the start of the month.

C was the correct answer because on 28 January 2005, Andrew Chew(i.e. you) had paid (your) supplier, Johnson Lee $100 in cheque.

9.

Where does net profit appear in the final accounts of a business ?

ANSWERS

The correct answer was [D].

Trading Account

Profit & Loss Account

Balance Sheet

D.

no

yes

yes

Net Profit = Total Incomes minus Total Expenses.

Net Profit is appeared (or recorded) in the Profit & Loss (P & L) Account. It is because the P & L Accounts summarises all the incomes and all the expenses for the year and if total income is more than total expenses, then the difference is called Net Profit and is recorded in the P & L Account.

The Net Profit for the year will be used to add back to the owner’s capital account in the Balance Sheet. If the owner reports a net profit for the year, it will increases his capital, however, if he does reports a net loss for the year, the net loss will reduce his capital.

Balance Sheet is used to record all items of assets, liabilities and capital.

10.

Which should be shown as a current asset in the Balance Sheet of a retailer ?

ANSWERS

The correct answer was [A] amount owed by customers.

Amount owed by customers is termed debtors (or trade debtors) in the Balance Sheet and classified as Current Assets.

Balance Sheet summarises all assets, liabilities and capital. Examples of liabilities will include amount owed to suppliers, general expenses due (but not yet paid, so still owing) and rent received in advance.

Rent received in advance is a liability. It is because it is an item of unearned income. Should the business fail to keep up on its promise of making available the building for rental occupation, the business is liable to refund the rent (that it has) received in advance to the tenant.

QUESTIONS

ANSWERS

1.

B

2.

C

3.

A

4.

D

5.

B

6.

D

7.

B

8.

C

9.