Accounting Qualification

Question paper

Intermediate level
Maintaining financial records
and preparing accounts (FRA) / Level 3 Diploma for Accounting Technicians (QCF)
Financial accounting (FRA)

Wednesday 1 December 2010 (afternoon)

Time allowed - 3 hours plus 15 minutes’ reading time

Please complete the following information in BLOCK CAPITALS:

Student member number / Desknumber
Venue code / Date
Venue name

Important:

This exam paper is in two sections. You should try to complete every task in both sections.

We recommend that you use the 15 minutes’ reading time to study the exam paper fully and carefully so that you understand what to do for each task. However, you may begin to write your answers within the reading time, if you wish. You must use permanent ink, preferably black, to write your answers. Correcting fluid may not be used.

You must not, during the exam, communicate with any other candidate or be in possession of unauthorised materials, such as pre-prepared notes, books, programmable calculators and dictionaries. Any of these actions will constitute malpractice and will result in disciplinary action. If you are in possession of unauthorised materials you must give them to the Supervisor before the start of the exam.

Do NOT open this paper until instructed to do so by the Supervisor.

Note:
You may use this page for your workings.
Note:
This page is perforated. You may remove it for easy reference.

This exam paper is in TWO sections.

You must show competence in BOTH sections. So, try to complete EVERY task in BOTH sections.

Section 1 contains 7 tasks and Section 2 contains 5 tasks.

You should spend about 80 minutes on Section 1 and 100 minutes on Section 2.

There is blank space for your workings on pages 2, 11, 15, 20 and 23 but you should include all essential workings and calculations in your answers.

Section 1

You should spend about 80 minutes on this section.

Against each task is a recommended time for that task, but please note that these times are guidelines only.

Data

Amy and Lin are the owners of Bake4u, a partnership business that provides catering services to businesses. They maintain a manual cash-book but they do not keep a double entry bookkeeping system. All sales and purchases are on credit terms. The business is not registered for VAT.

You are an accounting technician at Harper and Co., the accounting firm that prepares the final accounts for Bake4u. You are working on Bake4u’s accounts for the year ended 30 September 2010 and you have the following information (page 4).

Note:
This page is perforated. You may remove it for easy reference.
Balances as at: / 30 September 2009 / 30 September 2010
£ / £
Equipment at cost / 18,000 / 18,000
Equipment accumulated depreciation / 6,480 / To be calculated
Stock at cost / 1,900 / 2,500
Trade debtors / 5,130 / 4,820
Prepayments / 750 / To be calculated
Trade creditors / 2,675 / 2,610
Capital – Amy / 5,000 / 5,000
Capital – Lin / 5,000 / 5,000
Current – Amy (credit balance) / 800 / To be calculated
Current – Lin (credit balance) / 885 / To be calculated

Bank summary for the year ended 30 September 2010

£ / £

Receipts from trade debtors

/

56,700

/

Balance b/f

/

4,940

Loan

/

10,000

/

Rent

/

4,500

Payments to trade creditors

/

22,570

General expenses

/

6,400

Drawings - Amy

/

13,000

Drawings - Lin

/

11,000

Loan repayments

/

1,800

Balance c/f

/

2,490

66,700

/

66,700

Task 1.1 (25 minutes)

(a)Prepare the sales ledger control account for the year ended 30 September 2010, showing clearly the credit sales as the balancing figure.

Sales ledger control account

£ / £

(b)The sales margin is 60%. Using your sales figures from (a), calculate the cost of goods sold.

(c)Using your figure from (b) and the data on page 4, calculate the purchases figure to be included in the trial balance.

Note:
Task 1.1 continues on page 6.

Task 1.1, continued

(d)Prepare the purchases ledger control account for the year ended 30 September 2010, showing clearly the discounts received as the balancing figure.

Purchases ledger control account

£ / £

Task 1.2 (6 minutes)

The business took out a loan during the year. Loan interest of £465 needs to be added to the loan account.

Prepare the loan account, showing clearly all the relevant entries and the closing balance. You will need to refer to the information on page 4.

Loan account

£ / £

Task 1.3(8 minutes)

The equipment is to be depreciated at 20% on a reducing balance basis.

(a)Calculate the depreciation charge for the year ended 30 September 2010.

(b)Calculate the updated accumulated depreciation as at 30 September 2010.

Task 1.4(8 minutes)

The figure in the list of balances for prepayments is for rent. The figure for rent in the bank summary includes a payment of £1,125 for the period 1 August 2010 to 31 October 2010.

Prepare the rent account, showing clearly the rent for the year ended 30 September 2010.

Rent

£ / £
Workings:

Task 1.5 (8 minutes)

Update the partners’ current accounts:

  • Enter the balances from the information on page 4
  • Enter the drawings
  • Balance off the accounts ready for preparation of the trial balance.

Current accounts

Amy £

/ Lin £ / Amy £ / Lin £

Task 1.6 (20 minutes)

Complete the trial balance as at 30 September 2010, taking into account your answers to the above tasks, and all the other information you have been given.

Bake4u

Trial balance as at 30 September 2010

Dr £ / Cr £
Bank
Capital – Amy
Capital – Lin
Closing stock – balance sheet
Closing stock – profit and loss account
Current account – Amy
Current account – Lin
Depreciation charge for the year
Discounts received
Equipment at cost
Equipment accumulated depreciation
General expenses
Loan
Loan interest
Opening stock
Prepayments
Purchases
Purchases ledger control account
Rent
Sales
Sales ledger control account
Total

Task 1.7(5 minutes)

A junior member of staff at your firm asks you some questions about stock valuation.

(a)According to accounting standards, which ONE of the following should be used when valuing stock?

The lower of cost and selling price

The higher of cost and selling price

The lower of cost and net realisable value

The higher of cost and net realisable value

(b)Which TWO of the following should be included in the cost of stock?

Selling expenses

Purchase price of the goods

Administration expenses

Carriage outwards

Carriage inwards

Loan interest paid

Note:
You may use this page for your workings.
Note:
Please turn over for Section 2.

Section 2

You should spend about 100 minutes on this section.

Against each task is a recommended time for that task, but please note that these times are guidelines only.

Data

Jim Kemp is the owner of a business that installs and maintains intruder alarm systems in houses.

You are an accounting technician at Harper and Co., the accounting firm that prepares the final accounts for Jim Kemp.

  • The financial year end is 30 September.
  • Jim Kemp’s accounting system consists of a main ledger and a subsidiary purchases ledger.
  • Double entry takes place in the main ledger. Individual accounts of creditors are kept in memorandum accounts in the purchases ledger.
  • A purchases day-book is used. Totals from the day-book are transferred into the main ledger.
  • The business is registered for VAT.
  • The extended trial balance as at 30 September 2010 is on pages 18-19.

Task 2.1 (25 minutes)

Ali Sayed is a junior colleague at your firm. He needs to understand more about the purchases day-book, the purchases ledger and the purchases ledger control account.

(a)Write an email to Ali Sayed. Explain:

  • the purpose of the purchases day-book
  • the purpose of the purchases ledger
  • the purpose of the purchases ledger control account
  • which of these provides a figure for the trial balance

From:
To:
Sent: 1 December 2010
Subject:Purchases day-books, ledgers and control accounts

Task 2.1, continued

The individual balances of the accounts in the purchases ledger have been listed, totalled and compared with the £13,600 balance on the purchases ledger control account. The total is £13,835 but after investigation the following errors were found.

1.A bank payment of £890 had not been entered in the supplier account.

2.A credit note for £140 had been entered in a supplier account as an invoice.

3.A supplier account with a credit balance of £3,200 was listed as £2,300.

4.Interest received of £35 was incorrectly credited to the purchases ledger control account. The corresponding debit entry was correct. No entries were made to the purchases ledger.

(b)Reconcile the purchases ledger and the purchases ledger control account using the table below. For each adjustment show clearly the amount and whether it is to be added, subtracted or not changed.

£

Total from listing of purchases ledger balances

/ 13,835
Adjustment for 1. – add / subtract / no change
Adjustment for 2. – add / subtract / no change
Adjustment for 3. – add / subtract / no change
Adjustment for 4. – add / subtract / no change
Revised total of purchases ledger balances
Purchases ledger control account balance / 13,600
Adjustment for 4. – add / subtract / no change
Revised purchases ledger control account balance
Note:
You may use this page for your workings.
Note:
Please turn over for tasks 2.2 and 2.3.

Data

You need to make some adjustments to the trial balance. Ignore VAT.

(a)You need to make an adjustment following your reconciliation in Task 2.1. Interest received of £35 was incorrectly credited to the purchases ledger control account. The corresponding debit entry was correct.

(b)You need to make an accrual for accountancy fees of £3,500. Accountancy fees are posted to the general expenses account.

(c)During the year Jim withdrew £2,000 from the bank for personal use. £2,000 was credited to payroll expenses and debited to the bank account.

(d)Jim sold a vehicle during the year.

  • The original cost of the vehicle was £15,000.
  • The vehicle was purchased on 1 October 2007.
  • Depreciation has been applied at 25% per year on a straight line basis. A full year’s depreciation is applied in both the year of acquisition and the year of disposal. Depreciation for the year has already been correctly posted.
  • The proceeds have been correctly posted to the bank account and the disposals account.

Task 2.2 (20 minutes)

Prepare journal entries to account for the information given above. Use the blank journal on page 17. You do not need to give dates and narratives. Show your workings.

Task 2.3 (32 minutes)

(a)Enter your journal entries into the adjustment columns of the extended trial balance on pages 18-19.

(b)Complete the profit and loss and balance sheet columns of the extended trial balance on pages 18-19. Make entries to record the net profit or loss for the year ended
30 September 2010.

Workings:

Journal

Dr £ / Cr £
(a)
(b)
(c)
(d)
Jim Kemp– Extended trial balance
Ledger balances
Dr £ / Cr £
Advertising / 16,890
Bank / 12,335
Capital / 15,435
Cash / 250
Cost of goods sold / 152,050
Closing stock / 9,300
Depreciation charge for the year / 12,000
Disposals / 3,100
Drawings / 35,000
General expenses / 10,300
Interest received / 90
Payroll expenses / 28,000
Purchases ledger control account / 13,600
Rent / 11,420
Sales / 289,000
VAT / 5,820
Vehicles at cost / 48,000
Vehicles accumulated depreciation / 23,500
Vehicle running expenses / 15,000
Total / 350,545 / 350,545
as at 30 September 2010
Adjustments / Profit and loss account / Balance sheet
Dr £ / Cr £ / Dr £ / Cr £ / Dr £ / Cr £
Note:
You may use this page for your workings.

Task 2.4 (18 minutes)

Complete the proforma profit and loss account for Jim Kemp for the year ended 30 September 2010. Show clearly the gross profit and the net profit.

Jim Kemp

Profit and loss account for the year ended 30 September 2010

You may use this column for your workings if you need to. / £ / £
Note:
Please turn over for task 2.5.

Task 2.5 (5 minutes)

(a)Jim Kemp has recently appointed an accounts clerk. She contacts your firm for advice on buying a new computer and computerised accounts system. Your firmadvises that she needs a new system costing £3,200. What should the accounts clerk do next?

Choose ONE answer.

Follow the advice and order the new computer and software immediately

Ask your firm to order the new computer and software for her

Request authorisation from Jim Kemp before placing an order

Order the new computer and software and then advise Jim Kemp of her action

(b)You are preparing some year-end journal entries for another client. You are making an adjustment for annual depreciation on computers for the year ended 31 October 2010.

Choose the most appropriate narrative for this journal entry.

Debit depreciation expense, Credit accumulated depreciation - computers

Debit accumulated depreciation - computers, Credit depreciation expense

Annual depreciation on computers, year ended 31 October 2010

Year-end journal

Note:
You may use this page for your workings.

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NVQ/SVQ qualification codes

Intermediate level - 100/2941/2 / G793 23

Unit number (FRA) – T/101/8103

QCF qualification codes

Level 3 Diploma – 50041150

Unit number (FRA) – R/103/6446

© Association of Accounting Technicians (AAT) 12.10

140 Aldersgate Street, LondonEC1A 4HY, UK

t: 0845 863 0800 (UK)+44 (0)20 7397 3000 (non-UK)

e: : aat.org.uk

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