Paper T3 (INT)

Certified Accounting Technician Examination

Intermediate Level

Maintaining
Financial Records
(International Stream)
Wednesday 3 December 2008

Time allowed: 2 hours

This paper is divided into two sections:

Section A – ALL 20 questions are compulsory and MUST
be attempted
Section B – ALL FOUR questions are compulsory and MUST
be attempted

Do NOT open this paper until instructed by the supervisor.

This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

 Section A – ALL 20 questions are compulsory and MUST be attempted
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Please use the Candidate Registration Sheet provided to indicate your chosen answer to each multiple choice question.
Each question in this section is worth 2 marks.

1 Amir’s trial balance includes balances for:

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(i) Discounts allowed

(ii) Trade payables
(iii) Trade receivables

How should each of these balances be classified?

Asset Liability Expense
A (i) (ii) (iii)
B (ii) (iii) (i)
C (iii) (ii) (i)
D (ii) (i) (iii)

2 Kiera knows that her accounting records contain the following errors:
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(i) a cash sale for $430 was recorded correctly in the cash account but was entered on the correct side of the sales
account as $340
(ii) the entry for depreciation was made correctly in the accumulated depreciation account, and was entered on the
wrong side of the depreciation expense account

Which of the errors will lead to the total of the debit balances being greater than the total of the credit balances
in Kiera’s trial balance?
A (i) only
B (ii) only
C (i) and (ii)
D neither (i) nor (ii)
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3 In Benni’s records for the year to 31 October 2008, expenditure on a depreciable asset has been incorrectly classified
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as revenue expenditure.

If the error is not corrected, what is the effect on Benni’s profit for the years to 31 October 2008 and 2009?
year to 31 October 2008 year to 31 October 2009
A understated understated
B overstated overstated
C understated overstated
D overstated understated

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 4 Chimwe purchased a new non-current asset, and paid for this by cheque. At the same time a bank loan was raised
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to provide some of the funds needed for the purchase.

What entry correctly records the purchase of the non-current asset?

A Debit Non-current assets
Credit Bank
B Debit Non-current assets
Credit Bank loan
C Debit Bank
Credit Non-current assets
D Debit Bank loan
Credit Non-current assets

5 Cyrille has prepared the following reconciliation between the balance on the receivables ledger control account in his
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general ledger and the total of the list of balances from the personal ledger:
$
Total of list of balances from the personal ledger 56,844
Discount omitted from personal account (13)
–––––––
Balance on control account 56,831
Invoice omitted from sales day book 324
–––––––
57,155
Balance to be written off (750)
–––––––
56,405
–––––––
–––––––

What value should be reported on Cyrille’s statement of financial position (balance sheet) for trade receivables?
A $56,405
B $56,831
C $56,844
D $57,155
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6 When preparing the reconciliation between the balance on the receivables ledger control account in her general ledger
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and the total of the list of balances from the personal ledger, Avril discovered the following errors:
(i) an invoice for $375 was entered in the daybook as a credit note;
(ii) an addition error meant that a customer’s balance was understated in the personal ledger; and
(iii) Avril agreed to offset a balance in the receivables ledger against a balance in the payables ledger, but no entries
were made.

Which of the errors require an entry in the general ledger?

A (i), (ii) and (iii)
B (i) and (ii) only
C (ii) and (iii) only
D (i) and (iii) only

3 [P.T.O.
 7 Vikki is preparing her final accounts for the year to 31 October 2008. The most recent invoice in her records for
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electricity was a charge of $1,647 for the three months to 31 August 2008.

What post trial balance adjustment should Vikki make?

A $549 prepayment
B $549 accrual
C $1,098 prepayment
D $1,098 accrual

The following information relates to questions 8 and 9:

Ethel’s trial balance includes the following balances:
Trade receivables $136,853 debit
Receivables allowance $14,862 credit

8 If no further entries are needed, how should these balances be reported on Ethel’s statement of financial position
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(balance sheet)?
Current asset Current liability
A $136,853 $14,862
B $121,991 nil
C $14,862 $136,853
D nil $121,991

9 If Ethel calculates that her receivables allowance should be revised to $13,854, what should be reported for
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receivables expense in her income statement?

A a charge of $13,854
B a credit of $13,854
C a charge of $1,008
D a credit of $1,008

10 Shirley wishes to write off an irrecoverable receivables balance. She has made the correct entry in the receivables
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expense account.

What entry is needed to complete the double entry?

A Debit receivables
B Credit receivables
C Debit receivables allowance
D Credit receivables allowance

11 When the trial balance is being extended, where should the balances for accumulated depreciation be entered?
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A Statement of financial position (balance sheet) debit only

B Statement of financial position (balance sheet) credit only
C Statement of financial position (balance sheet) debit and income statement credit
D Statement of financial position (balance sheet) credit and income statement debit

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 12 Joyce’s trial balance has been completed and extended. The totals of the income statement columns and the
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statement of financial position (balance sheet) columns are:

Income statement Statement of financial position (balance sheet)
Debit Credit Debit Credit
$100,478 $110,536 $120,621 $110,563

What is Joyce’s profit or loss?

A a profit of $10,058
B a loss of $10,058
C a profit of $10,085
D a loss of $10,085
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13 Alec and Carl are in partnership, sharing profits and losses in the ratio 3:2. The income statement for the year to
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31 October 2008 reports a profit of $98,500.

Interest on capital has been calculated as:
Alec $7,900
Carl $5,100
Both capital and current accounts are maintained in the books of the partnership. Neither partner made any drawings
in the year to 31 October 2008.

What is the increase in the balance on Carl’s current account in the year to 31 October 2008?
A $34,200
B $39,300
C $39,400
D $49,700
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14 You are preparing the final accounts for a partnership, and have to include the following items:
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(i) partners’ salaries

(ii) staff salaries
(iii) interest on a loan from a partner

Which of the items should be included in the calculation of profit for the year in the income statement?
A (i) and (ii) only
B (i) and (iii) only
C (ii) and (iii) only
D (i), (ii) and (iii)

15 Joan has traded in a non-current asset. The entries in her journal include:
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Debit Non-current assets at cost

Credit Asset disposal

What aspect of the transaction is recorded by this entry?

A Cash proceeds from disposal of the old non-current asset
B Cash payment for purchase of the new non-current asset
C Trade-in value of the old non-current asset
D Transfer of the original cost of the old non-current asset on disposal

5 [P.T.O.
 16 Maureen had an opening accrual of $533 for telephone expenses. During the year she paid invoices with a total value
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of $2,974. Her closing accrual was $488.

What is the correct charge for telephone expenses in Maureen’s income statement?
A $1,953
B $2,929
C $3,019
D $3,995
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17 Jo sold a non-current asset which had originally cost $87,600 for $43,000. At the date of disposal, the accumulated
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depreciation on the asset was $45,800.

What was the profit or loss on disposal of the asset?

A $1,200 profit
B $1,200 loss
C $2,800 profit
D $2,800 loss
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18 Which of the following correctly calculates the difference between closing capital and opening capital?
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A Profit – Capital introduced – Drawings

B Profit + Capital introduced + Drawings
C Profit – Capital introduced + Drawings
D Profit + Capital introduced – Drawings

19 Which quality of financial information is described in the IASB’s ‘Framework for the Preparation and Presentation
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of Financial Statements’ as representing ‘faithfully that which it either purports to represent or could reasonably
be expected to represent’?
A relevance
B understandability
C reliability
D comparability

20 When Keith’s trial balance was extracted, a suspense account was opened as the total of the debit column was $400
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greater than the total of the credit column. Keith then found that a cash purchase of stationery for $200 was correctly
entered in the cash account, but was entered on the wrong side of the stationery account.

When the error is corrected, what is the balance on the suspense account?
A nil
B $200
C $600
D $800

(40 marks)

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Section B – ALL FOUR questions are compulsory and MUST be attempted

1 (a) Identify THREE errors which may be revealed by carrying out a reconciliation between a supplier’s statement
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and the supplier’s personal account. (3 marks)

(b) Explain why a suspense account should be cleared before final accounts are prepared. (3 marks)

(c) Explain why accrued expenses must be included in final accounts. (2 marks)

(d) Define depreciation and explain how the accounting entries for depreciation affect each element of the
accounting equation. (5 marks)

(e) State TWO roles of accounting standards. (2 marks)

(15 marks)

2 (a) You have been asked to complete the bank reconciliation at 30 November 2008 for Jeremy Stiles. The debit
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balance on the bank account in his general ledger is $2,717. The bank statement for his business bank account
shows that he has $44 at the bank.
You have noted the following:
(i) Due to an addition error, Jeremy overstated the total of cash banked by $900.
(ii) Jeremy recorded the value of a cheque paid to a supplier as $540. The cheque was debited on the bank
statement at the correct value of $450.
(iii) Jeremy did not record interest earned of $120, or bank charges of $265. Both of these items are shown on
the bank statement for November.
(iv) During November, a lodgement of $4,000 to Jeremy’s personal account was credited to his business
account by the bank.
(v) A customer’s cheque for $464 was returned as the customer did not have sufficient funds for payment.
Jeremy has not made any entries in his books for the return of the cheque.
(vi) A lodgement for $7,785 was not credited by the bank until 1 December. Jeremy recorded this lodgement
in November.
(vii) Cheques issued, with a total value of $2,531, have not been debited by the bank. This includes a cheque
for $427 which was cancelled. Jeremy has not made any entries in his books to record the cancellation of
the cheque.

Required:
(i) Show the bank account in Jeremy’s general ledger, including any adjusting entries which are required
by the information in (i) to (vii) above;
Note: you MUST present your answer in a format which clearly indicates whether each entry is a debit
entry or a credit entry. (7 marks)
(ii) Prepare a reconciliation of the balance on the bank statement to the corrected balance on the bank
account in Jeremy’s general ledger. (5 marks)

(b) Jeremy took out a bank loan on 31 October 2008 for $20,000. This is due for repayment in 16 equal
instalments at three-monthly intervals. The first repayment is due on 31 January 2009.

Required:
State how the balance on Jeremy’s bank account and the bank loan should be reported on his statement of
financial position (balance sheet) at 30 November 2008. (3 marks)

(15 marks)

7 [P.T.O.
 3 (a) Sandy Barr buys and modernises yachts prior to resale. At 30 November 2008 he had three yachts in inventory.
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Details of each of these are:

Yacht 1 2 3
$ $ $
Purchase price 8,700 7,800 6,740
Further expenditure on modernisation to 30 November 2008 1,200 1,700 1,850
Additional expenditure required before sale 400 600 900
Expected sale value 13,000 8,000 9,000

Required:
For each of the three yachts, calculate the following values at 30 November 2008:
(i) cost; (3 marks)
(ii) net realisable value; and (3 marks)
(iii) inventory value. (3 marks)

(b) A junior member of staff has prepared accounts for a client for the month of November 2008. The accounts report
a profit of $38,544 and closing capital of $117,529, based on a closing inventory valuation of $89,600. The
closing inventory valuation was calculated using the periodic weighted average method. However, the first in, first
out (FIFO) method should have been used.
Inventory movements were:
Date Purchases Sales
Units Cost per unit ($) Units
5 November 1,000 126·80
10 November 400
16 November 800 130·00
18 November 1,200
21 November 500 132·00
26 November 600
Opening inventory was 600 units, with a total value of $74,400.

Required:
Calculate the corrected value of:
(i) closing inventory; (4 marks)
(ii) profit for the month; and (1 mark)
(iii) closing capital. (1 mark)

(15 marks)

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 4 Cathy Quinn did not keep complete records for the year to 31 October 2008. From her bank statements, your previous
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year’s file and your discussion with Cathy you have obtained the following information:
(i) Between 1 November 2007 and 31 October 2008, $158,125 was lodged to her bank account, and cheques
totalling $135,186 were debited.
(ii) Her lodgements included $10,000 transferred from her personal bank account. All other lodgements were
payments received from customers.
(iii) The cheques debited in her bank statement included the following:
Paid to suppliers $101,028
Drawings $16,500
The remaining cheques were for business expenses.
(iv) At 31 October 2007, she had no outstanding cheques or outstanding lodgements.
(v) She had no outstanding lodgements at 31 October 2008.
(vi) In November 2008, cheques to suppliers with a total value of $3,897, which Cathy had written in October
2008, were debited in her bank statement.
(vii) At 31 October 2007, she owed $11,624 to her suppliers, and was owed $17,684 by her customers.
(viii) At 31 October 2008, she owed $10,789 to her suppliers. She does not know how much she was owed by her
customers, but she earned a 30% margin on all her sales.
(ix) Her accrued and prepaid business expenses were:
31 October 2007 31 October 2008
Accrued $2,204 $2,056
Prepaid $1,520 $1,470
(x) Cathy does not hold any inventory.

Required:
For the year to 31 October 2008, calculate Cathy’s:
(a) receipts from customers; (2 marks)

(b) business expenses; (4 marks)

(c) purchases; (3 marks)

(d) sales; (2 marks)

(e) net profit; and (2 marks)

(f) trade receivables balance at 31 October 2008. (2 marks)

(15 marks)

End of Question Paper