CARIBBEAN EXAMINATIONS COUNCIL

1978

PRINCIPLES OF ACCOUNTS PAPER II GNERAL PROFICIENCY

Answer ALL questions in Section I and TWO questions from Section II.
Begin EACH answer on a separate page
Keep ALL parts of EACH answer together
Silent electronic calculators may be used, but ALL necessary working should be clearly
shown.

SECTION I
Answer all THREE questions in this section.
1.

Robert Brown and James Henry are in partnership sharing profits and losses
equally. On may 31, 1978 their trial balance is:
DR
CR
$
$
Bank Current Account
143
Bank Deposit Account
1 600
Capital: Robert Brown
8 000
James Henry
6 000
Carriage Inwards
128
Carriage Outwards
322
Cash
28
Commission
136
Debtors and Creditors
1 478
1 865
Discounts
224
196
Drawings: Robert Brown
1 200
James Henry
1 960
Furniture and Fittings
1 260
General Expenses
987
Insurance
123
Premises (at cost)
8 000
Purchases and Sales
14 090
23 538
Returns
458
Stock 1 June 1978
3544
Wages and Salaries
4 710
40 112
40 112
Prepare Trading and Profit and Loss Account for year ended May 31, 1978, and a
Balance Sheet as at that date, taking into consideration the following:
(a)

(i)

For managing the business James Henry is to be credited with a

partnership salary of $2 000 a year

(ii)

Interest is to be allowed on the partners Capitals at the rate of 6

percent per annum, but no interest is to be charged on Drawings

(b)

Value of stock May 31 1978 $5 240

(c)

There are accrued (i) Carriage Inwards $12 (ii) Commission owing to
an agent by the firm $58 and of the Insurance ($123) $28 is a payment in
advance

(d)

Furniture and fittings are revalued at $1 134

(e)

Bad Debts $38 are to be written off

(f)

Two-thirds of the wages and salaries are to be charged to Trading Account,

one-third to Profit and Loss Account
( 20 marks)

2.

On January 1, 1977 the following opening balances appeared (among others) in

J Whites ledger:
DR
CR
$
$
Motor Vehicles
1 700
Rates
59
J B Williams
106
R Black and Co.
290
(a)
(b)

Enter the opening balances in the above accounts

Make the entries in the above accounts for the following:

( 4 marks)
( 10 marks)

1977
Jan

18

Paid cheque to R Black and Co. for balance of their account as at

December 31, 1976, less 5% cash discount

Feb

10

Paid by cheque; rates $118 for half year to March 31,1977

March 17

Purchased a motor vehicle value $750 and paid cheque $400, the
Balance of the purchase price being met by and old motor vehicle,
book value $300, taken in part exchange

April 24

Purchased goods from R Black and Co. at list price $400 less 20%
trade discount

May

Goods invoiced by R Black and Co. on April 24 were defective. R

Black and Co. agreed to allow $60 off list price

June

20

Paid by cheque; rates $124 for half year to September 30, 1977

30

Wrote $440 off motor vehicles as depreciation

Wrote off the balance of J B Williams account as a bad debt.

(c)

Balance the accounts for the half year ended June 30, 1977, make any
adjustment you think necessary, so as to show how they would appear
after preparation of the final account at June 30, 1977.
( 6 marks)
Note: You are required to show only the accounts named at the beginning
of the question.

SECTION II
Answer any TWO questions in this section.
3.

(a)

What do you understand by the term CAPITAL as used in business.

Indicate its relationship to stock-turnover;

(c)

From the following Balance Sheet calculate the answers to the questions
given:

BALANCE SHEET OF B SHARP

$
Creditors
1 800
Loan
1 000
Capital
4 500

$7 000

$
Cash
Bank
Debtors
Stock at close
Other Assets

50
650
1 100
3 000
2 500
$7 000

(a)
(b)
(c)

What is the total of Sharps current assets?

What is the amount of his working capital?
What would be the amount of his capital if:
(i)
(ii)
(iii)
(iv)

4.

The market value of his stock were $2 500?

A debt of $100 owing to Sharp cannot be recovered?
Sharps creditors do not include $50 owing for rates?
The value of other assets should have been $2 750?

On April 30, 1978, V R Careless extracted a Trial Balance from his ledger. The
Trial Balance did not agree and a Suspense Account was opened for the
difference. A further check revealed the following errors which accounted for the
difference:
(a)
(b)
(c)
(d)
(e)

Sales Book over-cast by $100;

Returns Outwards of $31.00 posted to the personal accounts only;
Cheque for $70.00 received from Barton Bros. Posted to Sales Ledger as
$76.00;
Dividend of $2.00 received; was written off as bad debts (H Wilkins);
Cheque for $12.00 paid to Smithson for goods supplied has been posted to
his credit in the Sales Ledger;

Show by means of Journal Entries how the above errors would be corrected and
show the suspense Account as it should appear after correction of errors.
5.

The treasurer of the Hercules Social Club summarised his Cash Book for the year
ended December 31, 1977 as follow:
RECEIPTS

PAYMENTS
$
24.40
168.00
5.00
60.80

Balance (1 Jan.)
Subscriptions for year
Entrance Fees
Refreshment Income

Refreshment Expenses
Lighting and Heating
Printing, Postage etc.
Cleaning
New Games Equipment
Sundry Expenses
Balance (31 December)

$258.20

$
46.30
35.60
42.70
52.00
10.00
24.10
47.50
$258.20

The club owned its own premises valued at $1 000 and Games Equipment valued
on January 1, 1977 at $100
On December 1977 it was decided to depreciate all the Games Equipment by
20%. On that date subscriptions were $10.00 in arrears and a sundry expense
amounting to $5.00 was still owing.
You are required to prepare:
(a)
(b)
6.

An Income and Expenditure Account for the year ended December 31,
1977;
A Balance Sheet as at that date.

Distinguish between the following pairs of account terms:

(a)
(b)
(c)
(d)

Capital Expenditure and Revenue Expenditure;

Real Accounts and Nominal Accounts;
Trade discount and Cash discount;
Cost of goods sold, and Sales