INTRODUCTION TO ACCOUNTING

THE NATURE AND SCOPE OF ACCOUNTING

ASSIGNMENT 1
Question 1
(a) Identify four main ledgers used for bookkeeping in a business organisation. (4 marks)
(b) Identify three main purposes of accounting. (3 marks)
(c) All business organisations have different interested users (often referred to as internal
and external stakeholders).
(i) Identify six different stakeholders interested in the accounts of a large business.
(6 marks)
(ii) For each of the six stakeholders you have identified, comment on why each might
be interested in the financial information of the business. (12 marks)
(Total 25 marks)
Question2
(a) Explain the following four terms:
(i) Trade discounts
(ii) Cash discounts
(iii) Credit notes
(iv) Debit notes (8 marks)
(b) Complete the following table in your answer book:

Give your answer in P and t (thebe)

(Note ignore taxation) (10 marks)

(c) The following extracts are from your organisations cash book.

Required:
You are required to total and balance the cash book, clearly indicating the balances to be
carried down at the period end. (4 marks)
(d) Identify three reasons why an individual debtors balance might have to be written off
as a bad debt. (3 marks)
(Total 25 marks)
Question 3
Clearly outline the difference between management and financial accounting (Total 25 marks)
Question 4
Describe the essential differences between a sole trader and a partnership (15 Marks)
What are the advantages and disadvantages of running a business as a limited liability company.
(10 Marks)
(Total 25 Marks)

INTRODUCTION TO ACCOUNTING
BOOKS OF ORIGINAL ENTRY, THE LEDGER AND THE TRIAL BALANCE
ASSIGNMENT 2
Question 1
The following are the first 12 transactions of a new business:
Nov 01Put 40,000 into a business bank account.
Nov 01Paid rent 2,500 by cheque.
Nov 01Paid 18,000 for office equipment, paying by cheque.
Nov 02Bought goods for resale 4,500, paying by cheque.
Nov 04Bought stationery for 800 paying by cheque.
Nov 07Sold goods for 6,000, and immediately banked the cheque.
Nov 08Paid wages 1,200, paying by cheque.
Nov 12Bought goods for resale 5,500, paying by cheque.
Nov 12Paid insurance premium 1,800, paying by cheque.
Nov 13Sold goods for 7,000, and immediately banked the cheque.
Nov 16Paid wages 1,200, paying by cheque.
Nov 17Sold goods for 2,500 and immediately banked the cheque.
TASKS
a)
Record the above transactions in the cash book and relevant ledger accounts. (18 Marks)
b)
Prepare the trial balance as at the end of 17 November 2009.
(7 Marks)
(Total 25 Marks)
Question 2
The following credit sales took place during November 2009:
Nov 01 Invoice for goods 400 to Aron
Nov 03 Invoice for goods 500 to Calla
Nov 04 Invoice for goods 200 to Byran
Nov 06 Invoice for goods 300 to Byran
Nov 11 Invoice for goods 800 to Aron
Nov 13 Invoice for goods 600 to Calla
Nov 19 Invoice for goods 700 to Aron
Nov 21 Invoice for goods 1,200 to Byran
Nov 24 Invoice for goods 900 to Calla
Nov 29 Invoice for goods 1,000 to Aron
All the above purchase invoices need 15% VAT (sales tax) added to the goods values.
Byran is a new customer, and sent in a cheque for 345 on 30 November 2009.
TASKS
a)
Fully record the above transactions in the sales day book. (15 marks)
b)
State the amount to be posted to the sales account (state whether it should be debited or
credited).
(2 marks)
c)
Explain the purpose of day books. (4 marks)
d)
Write up the ledger account of Byran for the month of November 2009. (4 marks)
(Total 25 Marks)

Question 3
You have the following details in the sales and purchase ledgers of a business:
November 1 Total creditors
81,200
Total debtors
198,400
Transactions in November:
Cash sales
3,700
Cash purchases
4,800
Credit sales
203,500
Credit purchases
93,600
Returns to credit suppliers
1,600
Returns from credit customers
900
Discounts received
4,200
Discounts allowed
3,100
Bad debts written off in November 1,400
Contras (set offs)
2,700
Increase in provision for bad debts 400
Payments to creditors
85,200
Receipts from debtors
201,600
TASKS
a)
Prepare the sales ledger control account as at 30 November 2009. (8 marks)
b)
Prepare the purchase ledger control account as at 30 November 2009.
(7 marks)
c)
Explain the major reasons for maintaining control accounts. (5 Marks)
d)
Write brief notes on the consistency concept (5 Marks)
(Total 25 Marks)
Question 4
(a) (i) What are the advantages of operating a business as a sole trader (4 marks)
(ii) Your organisation, Blue Star Ltd, has the following information available about the
creditors control account for May 2008:
Balance at 1 May 2008
22,982
Balance at 31 May 2008
11,286
Cash payments to creditors 14,603
Calculate the purchases figure for the month to be included in the organisations trading
account. (3 marks)
(iii) Use the figures below and your calculated purchases figure in (ii) above to draw
up Blue Star Ltds trading account for May 2008.
Sales P26,002
Opening stock 1 May 2008 = P8,621
Closing stock 31 May 2008 = P10,044 (6 marks)
(b) (i) Explain the term trade discount. (3 marks)
(ii) How is a trade discount dealt with in the books of a company? (3 marks)
(iii) What is the difference between carriage inwards and carriage outwards? (3 marks)
(iv) What is a credit note? (3 marks)
(Total 25 marks)

INTRODUCTION TO ACCOUNTING
FINAL ACCOUNTS AND CASH FLOW STATEMENT
ASSIGNMENT 3
Question 1
You work as an accountant to Hartley and the following trial balance has been extracted on 28
February 2010:
dr
cr
Sales
517,000
Purchases
175,000
Rent, rates and insurances
48,000
Returns
2,000
1,000
Carriage inwards
3,000
Advertising costs
22,000
Energy costs
29,000
Stock (inventory) as at 01 03 09
22,000
Wages and salaries
145,000
Communication expenses
28,000
Discounts allowed
3,000
Discounts received
1,000
Interest paid
3,000
Owners drawings
25,000
Equipment at cost
80,000
Premises
200,000
Depreciation (equip at 01 03 09)
25,000
Capital (at 01 03 09)
180,000
Long-term loan
80,000
Debtors
46,000
Creditors
24,000
Bank overdraft
3,000
--------------------Totals
831,000
831,000
======
======
Notes at 28 February 2009:
Stock in hand (inventory) was valued at 23,000.
Wages owing amounted to 5,000.
Advertising costs prepaid amounted to 4,000.
Equipment is to be depreciated at 25% on cost.
TASKS
a)
Prepare the trading and profit and loss account (income statement) of Hartley for the year
ended 28 February 2010.
(16 Marks)
b)
Prepare the balance sheet (position statement) of Hartley as at 28 February 2010. (9
Marks)
(Total 25 marks)

Question 2
The following information relates to Bassenthwaite PLC for the year ended 31 December
2007.
Operating profit before tax
161
Dividends paid
64
Tax paid
50
Interest paid
38
Decrease in stock
16
Decrease in creditors
10
Increase in debtors
24
Depreciation charge for the year
26
Purchase of fixed assets
63
Sale proceeds from fixed assets
115
Issue of debentures
31
Issue of shares
50
Increase in cash
150
Required:
(a) Prepare a cash flow statement for the year ended 31 December 2007. (15 marks)
(b) For each of the following transactions, state whether it results in an increase or a
decrease in cash and the amount involved.
(i) Sale of fixed assets was 110m not 115m.
(ii) Decrease in stock was 12m not 16m.
(iii) Share issue was 60m not 50m.
(iv) Interest paid was 35m not 38m.
(v) Increase in debtors was 30m not 24m. (10 marks)
(Total 25 marks)
Question 3
At the end of March 2009, the bookkeeper of Kendal Ltd extracted a trial balance that
included a number of errors. The trial balance is shown below:

Required:
(a) Identify which of the above figures are on the wrong side of the trial balance. (5 marks)

(b) Further investigation has shown the following additional errors:

1. 160 for salaries had been incorrectly charged to the wages account.
2. Cash sales of 100 had been entered in the bank account instead of the cash account.
3. 40 had been entered in the general expenses account instead of the carriage out account.
4. No entry had been made to record a receipt of 60 from a debtor.
5. Fixtures costing 500 had been posted to the premises account rather than the fi xtures and
fi ttings account.
Required:
Prepare journal entries to record the correction of the above errors. (Narrations are NOT
required.) (10 marks)
(c) Prepare a revised trial balance that incorporates your adjustments from (a) and (b)
abo ve. (10 marks)
(Total 25 marks)
Question 4
Dixon and Phillips are in partnership sharing profi ts and losses in the ratio 2:1 respectively.
The following trial balance has been drawn up at 31 March 2009.

The following information is also available:

1. Closing stock at 31 March 2009 was 4,240.
2. Rent accrued at 31 March 2009 was 400.
3. Insurance prepaid at 31 March 2009 was 720.
4. Depreciation was to be provided as follows:
- buildings at 2.5% per year on a straight line basis assuming nil residual value.

- fi xtures at 20% per year on a reducing balance basis.

5. Partnership salaries are as follows:
- Dixon 2,000
- Phillips 500
6. Interest on capital is allowed at 5% per year.
Required:
(a) Prepare the trading, profi t and loss account and appropriation account for Dixon and
Phillips for the year ended 31 March 2009. (12 marks)
(b) Prepare a balance sheet for Dixon and Phillips at 31 March 2009. (13 marks)
(Total 25 marks)

INTRODUCTION TO ACCOUNTING
FINAL ACCOUNTS AND FINANCIAL RATIOS
ASSIGNMENT 4
Question 1
The following fixed asset transactions took place during the period 1 January 2006 to 31
December 2009:
1 January 2006 purchased vehicle A for 14,000.
1 January 2007 purchased vehicle B for 16,000.
3 February 2009 purchased vehicle C for 18,000.
3 February 2009 sold vehicle A for 7,800.
NOTES
Vehicles are depreciated at 20% per year using the straight line method.
In the year of purchase a full year of depreciation is to be provided.
In the year of disposal no depreciation is to be provided.
TASKS
a)
Write up the vehicles at cost account for the period ended 31 December 2009.
[9]
b)
Write up the provision for vehicle depreciation account for the period ended 31
December 2009.
[9]
c)
Write up the vehicle disposal account.
[4]
d)
Explain briefly the purpose of maintaining depreciation accounts. [3]
Question 2
A business started trading on 1 January 2008. During the period to 31 December 2008 it made
the following payments in respect of business rates and insurance:
Business rates:
14 January payment for the period 01 01 08 to 30 04 08
1,800
14 May payment for the period 01 05 08 to 31 08 081,800
15 September payment for the period 01 09 08 to 28 02 09 3,600
Insurance:
01 January payment for the period 01 01 08 to 31 03 08
06 April payment for the period 01 04 08 to 30 06 08
07 August payment for the period 01 07 08 to 31 09 08

800
800
800

TASKS
a)
Write up the business rates account for the period ending 31 December 2008.
b)
Write up the insurance account for the period ending 31 December 2008. [5]
c)
Explain the principles of VAT (sales tax).
[5]
d)
List FIVE users of accounting information, i.e. five interested parties. [5]
e)
Explain the use of a suspense account. [5]

[5]

Question 3
The following trial balance has been extracted from the books of Cosgrove and Phillips plc at
31 October 2009:

The following matters also need to be taken into account:

1. Outstanding wages and salaries at 31 October 2009 amount to 0.3m.
2. A rent prepayment at 31 October 2009 amounts to 0.7m.
3. Depreciation for the year ended 31 October 2009 needs to be provided for:
- Buildings on a straight line basis over 20 years (assuming no residual value).
- Plant and machinery on a reducing balance basis at 10% per year.
4. The following amounts need to be provided for from the net profit:
- A 1m transfer to general reserve.
- A 2m transfer to the international development reserve.
- A 5.24m proposed ordinary share dividend.
5. Closing stock (inventory) at 31 October 2009 is 36m.
Required:
(a) Prepare the trading, profit and loss, and appropriation account (income statement) for
Cosgrove and Phillips plc for the year ended 31 October 2009. (12 marks)
(b) Prepare the balance sheet for Cosgrove and Phillips plc as at 31 October 2009. (13 marks)
(Total 25 marks)

Question 4

Notes:
1. All purchases and sales are on credit.
2. Credit purchases for the year were 12,608,000.
Required:
(a) Calculate the following ratios for Gleaston plc:
(i) Gross profit ratio
(ii) Net profit ratio
(iii) Current ratio
(iv) Acid test (liquidity) ratio
(v) Debtors collection period (in days)
(vi) Creditor payment period (in days) (12 marks)
(b) Explain four limitations of using ratio analysis as a business indicator. (8 marks)
(c) Explain why profitability and liquidity are important to the survival of a business.
(5 marks)
(Total 25 marks)

INTRODUCTION TO ACCOUNTING
ELEMNTS OF COSTS & CALCULATION OF LABOUR AND MATERIAL COSTS
ASSIGNMENT 5
Question 1
(a) Although some errors cause a Trial Balance not to balance, not all of them do.
Required:
(i) Describe five types of error which would cause a Trial Balance not to balance.
(ii) Describe four types of error which would not affect the balancing of a Trial Balance.
(9 marks)
(b) When an error is discovered it must be corrected. Consider the following errors:
(i) A credit sale to A. Smith for 100 had been debited to A. Jones.
(ii) A credit of 50 in the Cash Account had been entered on the credit side of the Bank Account
instead.
(iii) A payment to A. Black of 250 had been debited to A. Brown.
(iv) A cash receipt of 80 from A. White (a debtor) had been completely omitted from the books.
(v) A charge of 30 for carriage in had been debited to carriage out.
Required:
Prepare journal entries (without narrative comments) to correct the five errors listed
above. (10 marks)
(c) Goods can be purchased for cash or on credit.
Required:
Identify the debit and credit entries required when goods are purchased:
(i) For cash;
(ii) On credit and the payment is made by cheque. (6 marks)
(Total 25 marks)
Question 2
Most fixed assets owned by a business are depreciated each year.
Required:
(i) List four causes of depreciation. (8 marks)
(ii) For each cause listed in (i) above, give an example of a fixed asset to which the
cause applies. (4 marks)
(b) A business has just purchased a new machine for 8,000. It will be kept for four years,
then it will be disposed of for an estimated 500. Output from this machine is estimated
to be as follows:
Year
Units
1
3,500
2
4,000
3
5,000
4
2,500

Required:
Calculate the depreciation charge on the new machine for each of the four years, using
each of the following alternative depreciation methods:
(i) Straight line (2 marks)
(ii) Reducing balance (50% rate) (4 marks)
(iii) Usage (7 marks)
(Total 25 marks)
Question 3
(a) Your organisation, Buttermere Ltd, has provided you with the following information
about units of Product X for the month ending 31 October 2009:
- 6 October - bought 10 units at 40 each
- 10 October - bought 10 units at 46 each
- 12 October - issued 6 units to production
- 17 October - bought 30 units at 48 each
- 24 October - issued 18 units to production
Required:
Calculate the value of the closing stock at 31 October 2009, using each of the following two
methods of stock valuation:
(i) FIFO (first in first out)
(ii) LIFO (last in first out) (15 marks)
(b) Write brief notes on any five sources of finance available to a business. (10 marks)
(Total 25 marks)
Question 4
Hawkshead Ltd manufactures one product that currently sells for 168 per unit.
This product has the following costs:
1. Variable costs per unit:
material costs - wood - 3 metres at 2.90 per metre
- cloth - 7 square metres at 6.40 per square metre
labour costs - grade A - 3 hours at 7.30 per hour
- grade B - 5 hours at 7.80 per hour
2. Fixed costs are 17,820 per year.
Required:
Calculate the following:
(a)
The contribution (per unit) towards the fi xed costs of Hawkshead Ltd. (6 marks)
(b)

The number of products that would have to be sold in order to break even. (5 marks)

(c) The profi t earned (or loss) if the total labour costs were increased by 0.20 per hour
and the number of units sold were 385 at 168 each. (7 marks)
(d) The directors of Hawkshead Ltd are considering the purchase of a new moulding
machine to help the manufacturing process.

The new machine, if purchased, would increase the fi xed costs by an additional
15,000 per year and reduce variable costs, per unit, as follows:
cost of wood - no change
cost of cloth - reduced by 25% of current cost
grade A labour - hours needed reduced to 1.2 hours per unit at 7.30 per hour
grade B labour - hours needed reduced to 2.9 hours per unit at 7.80 per hour
Calculate the profi t earned (or loss), after purchasing the new machine, if the number
of units sold were 400 at 168 each. (7 marks)
(Total 25 marks)

INTRODUCTION TO ACCOUNTING
ALL TOPICS
ASSIGNMENT 6
Question 1
The manager of the installation department in a telephone services business wishes to
develop a method of predicting the departments total costs in a period. The following costs
have been recorded:
Number of telephone
Total Cost
installations
Week 1
Week 2

17,800
19,140

1,072,380
1,132,680

Required:
(a) Calculate the variable cost per telephone installation. (5 marks)
(b) Calculate the fi xed costs, per week, of the installation department. (5 marks)
(c) The estimate for Week 3 is for 19,640 telephone installations to be achieved. If this
number of installations is achieved, what will the total cost be? (6 marks)
(d) Calculate the profi t (or loss) for the telephone installation department if, in Week 3, the
actual number of telephone installations was 18,940 and each customer was charged
55. (6 marks)
(e) Explain the term semi-variable (semi-fi xed) cost and give an example of one such cost.
(3 marks)
(Total 25 marks)
Question 2
The following information relates to some receipts and issues of machine fittings from a central
store in January 2006. Commodity No. 06713- Unit 1 box of 200 machine fittings
01 January 2006 Received 20 boxes valued at 4.00 each
04 January 2006 Received 20 boxes valued at 4.10 each
09 January 2006 Issued 15 boxes
13 January 2006 Received 20 boxes valued at 4.20 each
15 January 2006 Issued 25 boxes
21 January 2006 Received 20 boxes valued at 4.30 each
25 January 2006 Issued 10 boxes
28 January 2006 Received 20 boxes valued at 4.40 each
30 January 2006 Issued 25 boxes
Required:
(a) Calculate the value of closing stock using the following methods of stock valuation:
First in First out (FIFO)
Last in First out (LIFO)
Average Cost (AVCO) (18 marks)
(b) Explain the effect on gross profit of each of the different stock valuation methods. (7 marks)
(Total 25 marks)

Question 3
The following is a list of total costs for Paul Ltd at two different levels of activity.

Required:
(i) Classify each cost into either variable, semi-variable or fixed cost. (10 marks)
(ii) Analyse any cost which you have identified in (i) above as being semi-variable into
the fixed and variable elements. Explain your answer. (8 marks)
(b) Coniston Ltd has recorded the following information over the last five months.
Output (units)
Total cost
Jan
65,000
145,000
Feb
80,000
160,000
March
90,000
170,000
April
60,000
140,000
May
75,000
155,000
Required:
Calculate the total cost that should be expected in June if output is expected to be
85,000 units. (7 marks)
(Total 25 marks)
Question 4
Staveley PLC
(a) From the following information which relates to Staveley PLC you are required to:
Prepare a month by month cash budget for 1 July to 31 December 2007. (20 marks)
The companys only product, a leather vest, sells at 40 and has a variable cost
of 26 made up as follows:
Material 20; Labour 4; Overhead 2
Fixed costs of 6,000 per month are paid on the 28th of each month.
Quantities sold/to be sold on credit are:

 Cash sales at a discount of 5% are expected to average 100 units a month.

Customers are expected to settle their accounts by the end of the second month following the
month of sale.
Suppliers of material are paid two months after the material is used in production.
Wages are paid in the same month as they are incurred.
70% of the variable overhead is paid in the month of production, the remainder in the
following month.
Corporation tax of 18,000 is to be paid in October.
A new delivery vehicle was bought in June, the cost of which, 8,000, is to be paid in August.
The old vehicle was sold for 600, the buyer undertaking to pay in July.
The company is expected to be 3,000 overdrawn at the bank at 30 June 2007.
The opening and closing stocks of raw materials, work in progress and finished goods are
budgeted to be the same.
(b) Add brief comments that you consider might be helpful to Staveleys management.
(5 marks)
(Total 25 marks)