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Name

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Candidate Number

Centre Number

7110/02

Paper 2
October/November 2003
1 hour 45 minutes
Candidates answer on the Question Paper.
Additional Materials: Multi-column Accounting Paper

READ THESE INSTRUCTIONS FIRST

Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen in the spaces provided on the Question Paper.
You may use a soft pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Answer all questions.
Question 6 may be answered either in this booklet or on multi-column accounting paper.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
You may use a calculator.
Where layouts are to be completed, you may not need all the lines for your answer.
The businesses mentioned in this Question Paper are fictitious.

For Examiners Use

1
2
If you have been given a label, look at the
details. If any details are incorrect or
missing, please fill in your correct details
in the space given at the top of this page.
Stick your personal label here, if
provided.

3
4
5
6
TOTAL

This document consists of 10 printed pages and 2 lined pages.

SJF2870 S43609/2
CIE 2003

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PRINCIPLES OF ACCOUNTS

s
er

CAMBRIDGE INTERNATIONAL EXAMINATIONS

General Certificate of Education Ordinary Level

2
1

The balances given below were taken from the books of K. Lyon on 1 July 2003.
$
480 Dr.
1 000 Cr.
640 Dr.

Stationery
Rent received
M. Millan
The following transactions took place during July 2003.
July 3
4
8
11
12
23
25

Bought stationery $160 on credit from Boss Supplies.

Received a cheque from M. Millan for the amount due less 5% cash discount.
Received $100 rent in cash.
Bought stationery $220 by cheque.
Sold goods to M. Millan on credit for $360.
Sent a credit note to M. Millan for $30 for wrong goods supplied.
Lyon was told that Millan was insolvent. He decided to write off her account as bad
immediately.
30 Received a cash refund of $40 for unsatisfactory stationery returned.

Additional information:
1.

The tenant of Lyons premises had agreed to pay a monthly rental of $100 from
1 August 2002.

2.

The stock of stationery at 31 July 2003 was valued at $210.

3.

Lyon prepares his final accounts on 31 July 2003.

REQUIRED:
Prepare the following ledger accounts, balanced at 31 July 2003. Pay attention to dates and
details. Include, where appropriate, the transfers to the Profit and Loss Account.
(a) Stationery account
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(b) Rent received account
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(c) M.Millan
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2

A Trial Balance was taken out for A. Suma on 31 August 2003. Unfortunately, the Trial
Balance failed to agree and a suspense account was opened for the difference.
Investigations revealed the following errors:
1.

A sale of goods worth $910 to J. Lee had been correctly entered in the Sales
Journal but had not been posted to Lees account.

2.

A credit note for $140 received from F. Kerry had been correctly entered in the
appropriate journal but had been posted to Kerrys account as $410.

3.

Discounts allowed $190 had been wrongly credited to the Discounts Received
account. No entry had been made in the Discounts Allowed account.

REQUIRED:
(a) Prepare Journal entries, with narratives, to correct the above errors:
Details

Dr.
$

Cr.
$

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(b) Draw up the Suspense account showing all the necessary corrections from (a) and the
opening Trial Balance difference.

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What conclusions do you draw from the following information relating to the accounts of
P. Moyo? Assume that the ledger accounts have been balanced and the final accounts
prepared.

(a) Dariens account in the Purchases Ledger has a credit balance.

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(b) P. Gees account in the Sales Ledger has a credit balance.
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(c) There is a debit balance on the Insurance account.
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4

The following information for the year ended 30 September 2003 was extracted from the
books of Preserves Ltd, manufacturers of jam and fruit juices.

Stocks:

raw materials
jars, lids and labels
finished goods

Purchases:

raw materials
jars, lids and labels

1 October 2002

30 September 2003

$
6 800
10 400
21 000

$
6 400
10 000
21 600
70 600
17 000

Sales
Factory wages
Factory light and power
Factory machines repairs
Carriage on raw materials
Depreciation of plant and machinery

365 000
36 800
29 200
11 400
11 000
12 600

REQUIRED:
(a) Prepare, in good style, the Manufacturing Account for the year ended
30 September 2003.
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(b) Prepare the Trading Account for the year ended 30 September 2003.
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5

Karls final accounts for the year ended 31 December 2002 contain the following information.
$
116 000
72 000
23 000

Sales
Cost of sales
Expenses

Karls assets and liabilities at the same date of 31 December 2002 were
$
Fixed assets
224 000
Stock
16 000
Debtors
14 000
Creditors
13 000
Bank overdraft
9 000
Karls brother, Matt, runs a similar business and the two brothers decided to compare
results. Matt supplied the following ratios.
Ratio

Matt

Gross profit as a percentage of sales

34.1%

Net profit as a percentage of sales

16.81%

Net profit as a percentage of capital

10.33%

Current ratio

Column (a)

2.15:1

REQUIRED:
(a) Calculate
(i)

Karls gross profit

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(ii)

Karls net profit

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(b) Complete column (a) in the table above to show the ratios for Karls business.
Calculation should be to two decimal places.
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(c) For each ratio suggest one possible reason for the difference between Karls ratio and
Matts ratio.
Gross profit as a percentage of sales
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Net profit as a percentage of sales
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Net profit as a percentage of capital
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Current ratio
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6

Jenny Lee is a trader and the following Trial Balance was extracted from her books on 31
December 2002.

Purchases and Sales

Stock, 1 January 2002
Debtors and Creditors
Sundry expenses
Carriage on purchases
Equipment
Delivery vehicle
Rent and insurance
Provision for doubtful debts, 1 January 2002
Bad debts
Discounts received
Wages and salaries
Lighting and heating
Bank
Drawings
Capital

Dr.
$
474 000
46 000
53 000
16 600
2 400
9 000
33 000
18 000

Cr.
$
648 000
39 000

1 200
900
5 500
76 400
8 000
9 500
55 000
108 100
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801 800
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801 800
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Additional information:
1.

Stock at 31 December 2002 was valued at $64 400.

2.

$700 was owing for sundry expenses at 31 December 2002.

3.

The provision for doubtful debts is to be reduced to $800.

4.

Jenny Lees imperfect attempt at the Delivery Vehicle account was entered in the
ledger as follows:

2002
Jan 1

2003
Jan 1

Delivery Vehicle
$
2002
Balance (old vehicle) b/d 12 000
Jan 1 Cash (sale of old vehicle)
Cash (cost of new
Dec 31 Balance c/d
vehicle)
36 000
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48 000
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Balance b/d

$
15 000
33 000
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48 000
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33 000

Jenny Lee wishes to charge depreciation on the new vehicle at 20% on cost.
5.

During 2002, Lee took goods at cost, $3000, from the business for her private use.
No entries were made in the books.

REQUIRED:
(a) Prepare the Trading
31 December 2002.

and

Profit

and

Loss

Accounts

(b) Draw up the Balance Sheet as at 31 December 2002.

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[15]

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