Section A:

Answer all Questions.

Use the Multiple Choice Answer Sheet provided.

From the accounting equation, owners equity is :

A
B
C
D

Assets - Liabilities (Revenue Expenses)

Assets + Liabilities + (Revenue Expenses)
Revenue + Expenses - Drawings
Revenue + Expenses + Drawings

The balance date refers to the final date of :

A
B
C
D

lodging a tax return

payment to creditors
registration of the business
the accounting period

The entries to record Bought motor vehicle on credit are :

A
B
C
D

debit Purchases and credit Motor Vehicle

debit Motor Vehicle and credit Accounts Payable
debit Motor Vehicle and credit Cash at Bank
debit Purchases and credit Cash at Bank

A Sales Invoice does not contain the following information :

A
B
C
D

delivery instructions
customers order number
name of customer
reasons for goods returned

A telephone expense of $120 was wrongly debited to the Maintenance

Expense account. The correction entry for this error should be :

A
B
C
D

dr Telephone Expense and cr Cash at Bank

dr Telephone Expense and cr Maintenance Expense
dr Maintenance Expense and cr Cash at Bank
dr Maintenance Expense and cr Telephone Expense

Sample Final 1 Answers

Sold motor vehicle for cash. What is the effect of this transaction on the
accounting equation ?

A
B
C
D

no change in total assets

change in liabilities
increase in assets but decrease in liabilities
increase in liabilities but decrease in assets

The Profit and Loss Statement is a :

A
B
C
D

general ledger
general journal
voucher
report

Which of the following is not found in the balance sheet ?

A
B
C
D

drawings
overdrafts
bad debts
vehicle

P. Traders records show Opening inventory at $20,000, Purchases

$105,000, Purchases Returns $2,000, Freight Costs $3,000 and the Closing
inventory at $28,000. What is the Cost of Goods Sold ?

A
B
C
D

$98,000
$79,000
$56,000
$85,000

10

The Discount Allowed Account is debited because :

A
B
C
D

revenues decrease
liabilities increase
expenses increase
assets decrease

Sample Final 1 Answers

11

According to the double entry rule, the receipt of cash from a debtor will be
recorded as :

debit Cash at Bank as assets increase and credit Accounts Receivable

as assets decrease
debit Accounts Payable as liabilities increase and credit Cash at Bank as
assets increase
debit Accounts Payable as liabilities decrease and credit Cash at bank as
assets decrease
debit Cash at Bank as assets increase and credit Purchases as expenses
decrease

B
C
D

12

Purchased goods for cash is recorded in the :

A
B
C
D

cash receipts journal

cash payments journal
sales returns journal
purchases journal

13

Debts owing by P. Johnson are written off as bad debts and debited to :

A
B
C
D

Accounts receivable
Purchases account
Accounts payable
Bad debts account

14

Which of the following is not an equivalent of inventory ?

A
B
C
D

stock
goods
merchandise
drawings

15

Clinton, a debtor of Kozwinski Trading, has paid $109 for an outstanding

account of $100. The Statement of Account sent to Clinton at the end of the
month will show :

A
B
C
D

a credit balance of $9
a debit balance of $9
an opening balance of $109
a closing balance of $109

Sample Final 1 Answers

Use the information below to answer Questions 16 and 17.

Cheque Butt of Garden Supplies Pty Ltd.
Garden Supplies Pty. Ltd.

To: Mason Trading

For: Invoice 00116
(Discount $10)
Balance b/f
Deposits
Balance
This Cheque
Balance c/f

Cheque No. 216

Date: 7 April 20XX

$270

16

For Garden Supplies Pty. Ltd., the statement that best describes the
transaction which has taken place is :

sales of trading goods by cash of $270 allowing a discount of $10 in the

price for bulk buying
payment of $270 received from a debtor and allowed $10 discount for
prompt payment
payment of $270 for account outstanding and received $10 discount
for prompt payment
purchase of trading goods on credit of $270 receiving a discount of $10 in
the price for bulk buying

B
C
D

17

When Mason Trading receives cheque no. 216 from Garden Supplies Pty.
Ltd., which of the following entries must be made in the books of Mason
Trading ?

dr Cash at Bank $270, cr Accounts Receivable $270 and dr Discounts

Allowed $10, cr Accounts Receivable $10
dr Purchases $270, cr Cash at Bank $270 and dr Accounts Payable $10, cr
Discounts Received $10

B
C
D

dr Cash at Bank $280, cr Sales $280 and dr Discounts Allowed $10, cr

Accounts Receivable $10
dr Accounts Receivable $280, cr Cash at Bank $270 and dr Discounts
Allowed $10, cr Accounts Receivable $10

Sample Final 1 Answers

18

The accounting convention that ensures the equality of the accounting

equation is the :

A
B
C
D

continuity convention
historical cost convention
monetary convention
double entry convention

19

One of the guidelines for achieving strong internal control is to draw up an

organisation plan to establish :

A
B
C
D

responsibility for every function

an account for every purchase
a cash book to record bad debts
a bank reconciliation to record cash

20

From one accounting period to the next, the accounting cycle does not
involve which of the following functions ?

A
B

recording transactions on source documents

recording of transactions into journals and
ledgers
preparing a trial balance and financial reports
preparing a chart of accounts

C
D

20 marks

Sample Final 1 Answers

Question 21
5 marks

Section B:
Answer Questions 21 and 22 in the spaces provided in this examination booklet.
Question 21
Indicate whether each of the following statements is true or false by writing T or F in
the spaces provided:
T/F
a.

Handling of cash and the approval of cash payments should be done by the
same person as a good internal control practice.

b.

Increase in sales returns is debited because revenue is decreased.

c.

The rate of return on owners equity is sometimes called the debt to

equity ratio.

d.

The Profit and Loss Statement is presented as at a given date.

e.

Given total assets are $15,425 and total liabilities are $1,425. Owners
equity is $17,000 when the proprietor makes an additional contribution
of capital of $3,000 cash.

Sample Final 1 Answers

Question 22
15 marks
Question 22
a)

Discuss the accounting period convention and the significance of the

accounting convention in profit determination?

The accounting period convention states that the indefinite life of a

business should be split into regular and shorter time spans where
the profitability and financial position of the business are evaluated.
These time spans are referred to as accounting periods and usually
comprise a twelve months period. However, some businesses may
opt for shorter periods such as three or six months. Having
accounting periods of equal length means that business decisions
can be made more effectively by comparing accounting information
from one period to the next. We account for these time periods in
order to give profit figures to the interested parties. The accounting
period allows expenses for the period to be matched aginst the
revenue for the same period so that profit or the period could be
calculated.

5 marks

b)

Discuss at least five essential features of a good accounting report.

a.
b.
c.
d.
e.

timeliness - information must be current

clear headings - clear presentation / classifications / highlighted
items / present for users need / simplicity - easily understood
information
accuracy - precise information
compliance with law and standards
consistency- same format

5 marks

c) What is a trial balance? Discuss at least four limitations of the trial

balance.

The trial balance is done to check the accuracy of the ledger to

ensure that double entry rules have been followed. Although debit
and credit balances are equal, there may be errors not disclosed by
the trial balance such as incorrect amounts may have been posted
to both accounts affected, a transaction completely excluded from
the journal, a transaction may have been entered twice, two errors
made may have cancelled each other out in the same account or in
different accounts, ledger entries may have been reversed.
5 marks

Sample Final 1 Answers

Question 23
10 marks

Section C:
Question 23 Answer:
Analysis Chart of Kennedy Trading
Date

Accounts

A, L,
OE,
R, E

Increase/
Decrease

Increase

Dr

12,000

increase

Cr

12,000

increase

Dr

400

decrease

Cr

400

OE

decrease

Dr

150

Cash at Bank

decrease

Cr

150

17 Cash at Bank

increase

Dr

300

Accounts Receivable J. Mason

decrease

Cr

300

27 Accounts Payable Photographic

decrease

Dr

12,000

decrease

Cr

12,000

20XX Purchases

Debit/
Credit

Amount
$

June
3 Accounts Payable Photographic
Supplies
5 Wages
Cash at Bank

14 Drawings

Supplies
Cash at Bank

Sample Final 1 Answers

Question 24
20 marks

Question 24 (a) Answer:

Accounts Receivable Control Account
20XX
Oct. 1 Balance b/d
Sales

$
1400

$
Oct 31 Sales Returns

8640

320

Discount Allowed

360

Cash Receipts

5000

Bad debts written off

480

Contra

100

Balance c/d

3780

10040

Nov. 1 Balance b/d

10040

3780
13 marks

Question 24 (b) Answer:

For each of the items listed, write the appropriate source or journal from which the
figure would be obtained.

a.

Total debtors at 1
October 20XX

$1400

Balance from the same account

brought down from last month.

b.

Sales

$8640

Sales Journal total for the month

c.

Cash received from

debtors

$5000

Cash Receipts Journal

d.

Sales Returns

$320

Sales Returns or Returns Inwards

Journal for the month.

e.

Discount allowed to
debtors

$360

Cash Receipts Journal Discount

Allowed column (debit side) total for
the month.

f.

Bad debts written off

$480

General Journal. Total of debts written

off in the personal accounts in the
debtors ledger.

g.

Offset by contra from

accounts payable

$100

General Journal. Contra entry. Transfer

between accounts.
7 marks

Sample Final 1 Answers

Question 25
30 marks
Question 25 Answer:

General Journal of K. Moss

Date
20XX
1 Aug

Particulars
Bank
Stock
Motor vehicle
Accounts receivable
Accounts payable
Loan - C. Nash
Capital
Assets and liabilities at commencement of
business

Debit
$
25000
6000
5000
600

Office furniture
Sundry creditor or Acct. payable Funny Furniture Warehouse
Purchased furniture on credit
(inv. no. 206)

1200

Sundry debtor or Acct. receivable

- A. Jones
Motor vehicle
Sold used vehicle on credit to employee

5000

12

Bad debts
Accounts receivable - T. Tab
T. Tab declared bankrupt owing $300
- paid 50 in $1

Credit
$

1530
1500
33570

1200

5000
150
150

9 marks

10

Sample Final 1 Answers

Cash Receipts Journal of K. Moss

Date

Particulars

Receipt
no.

Dr
Bank

Sales

74

200

11

Commissions
received

75

50

12

T. Tab

76

150

16

Sales

77

80

80

27

Sales

78

1310

1310

31

Total:

20XX
Aug

Dr
Disc.
allowed

Cr
Accts.
receivable

Cr
Sales

Cr
Sundry

200
50
150

1790

150

1590

50

6 marks
Cash Payments Journal of K. Moss
Date

Particulars

Chq.
no.

69201

600

600

Office
equipment
Wages

69202

500

500

15

Purchases

69203

22

Drawings

69204

25

25

Advertising

69205

60

Stationery

69206

20

Rates

69207

90

170

1295

2265

20XX
Aug
4

31

Total:

Dr
Purchases

Dr
Sundry

970

970

Dr
Accts.
payable

Cr
Disc.
Received

Cr
Bank

970
25

8 marks

11

Sample Final 1 Answers

Date

Invoice no

20XX
10 Aug
20
21

265
266
267

Sales Journal of K. Moss

Particulars (Debtors)
S. Spencer
Sims Pty. Ltd.
P. Michael

Amount
$
200
2000
550
2750
3 marks

Date
20XX
3 Aug
24

Date
20XX
17 Aug

Date
20XX
19 Aug

Invoice no
693A
901

Credit
note no.
15

Purchases Journal of K. Moss

Particulars (Creditors)
Amount
$
ABC Retailers
J. Downey

900
655
1555
2 marks

Sales Returns Journal of K. Moss

Particulars
Amount
(debtors)
$
S. Spencer

25
25

1 mark

Purchases Returns Journal of K. Moss

Credit note
Particulars
Amount
no.
(creditors)
$
A12

ABC Retailers

100
100
1 mark

12

Sample Final 1 Answers