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PRINCIPLES OF ACCOUNTS

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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

7110/22
May/June 2013
2 hours

Candidates answer on the Question Paper.

No Additional Materials are required.
READ THESE INSTRUCTIONS FIRST
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for any diagrams or graphs.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.
Answer all questions.
You may use a calculator.
Where layouts are to be completed, you may not need all the lines for your answer.
The businesses mentioned in this Question Paper are fictitious.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.

This document consists of 13 printed pages, 6 lined pages and 1 blank page.
DC (SJF) 63012/3
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1

Jamie provided the following information on 1 May 2012.

Non-current assets at net book value

Trade receivables
Trade payables
Prepayment of insurance
Accrual for rent
Bank overdraft
Capital

For
Examiners
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$
14 000
3 012
1 298
260
350
324
?

REQUIRED
(a) Prepare an opening journal entry at 1 May 2012 to show the capital at that date.
A narrative is required.
Journal
Debit
$

Credit
$

...

...

...

...

...

...

...

...

...

...

...

...

[4]

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The following payments were made during the year.
1

Insurance, $840, including $300 for the quarter ended 30 June 2013.

Rent, $11 350, not including $1000 for the month of April 2013.

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REQUIRED
(b) Prepare the insurance account for the year ended 30 April 2013. Balance the account
and bring down the balance at 1 May 2013.
Insurance account
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(c) Prepare the rent account for the year ended 30 April 2013. Balance the account and
bring down the balance on 1 May 2013.
Rent account
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(d) State the accounting principle applied in (b) and (c).
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(e) Explain the difference between capital receipts and revenue receipts.
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(f)

Indicate by placing a tick () which transactions are capital receipts and which are
revenue receipts.
Transaction

Capital receipt

Revenue receipt

Cash sales
Loan from a bank
Discount received
Commission received
Sale of a motor vehicle
[5]
[Total: 25]

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5
2

John Givens trial balance at 31 May 2013 failed to agree and a suspense account for the
difference, $926 debit, was opened.

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Examiners
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The following errors were discovered:

1

Commission received, $120, had been recorded in the account twice.

Total trade receivables were understated by $824.

A payment for insurance, $650, had been correctly entered in the cash book, but
recorded in the insurance account as $560.

The total of the sales returns journal had been overcast by $108.

REQUIRED
(a) Show the entries in the general journal to correct items 1 to 4 above. Narratives are not
required.
Journal
Debit
$

Credit
$

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...

...
[8]

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(b) Prepare the suspense account at 31 May 2013.
Suspense account
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(c) Explain three types of errors not shown by a trial balance.
1 .......................................................................................................................................

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3 .......................................................................................................................................
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[Total: 18]

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3

The following is an extract from Davids wages book for January 2013.

For
Examiners
Use

Wages book
Employee
Number

Gross
pay

Tax

$
001

Employers
Social
Security
Contributions
$

Charitable
Donations

Net
pay

Employees
Social
Security
Contributions
$

2200

440

132

198

002

2600

520

156

234

25

Total

4800

960

288

432

25

REQUIRED
(a) Calculate the net pay for:
Employee 001
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Employee 002
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(b) Calculate the total wages cost.
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(c) State two methods used for recording hours worked.
1 .......................................................................................................................................

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2 ...................................................................................................................................[2]
(d) Explain a non-statutory deduction.
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......................................................................................................................................[1]
[Total: 11]

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4

Baljit provided the following information for the year ended 30 April 2013.

Inventory 1 May 2012

Inventory 30 April 2013
Cost of goods sold
Administration expenses
Selling expenses
Capital employed 1 May 2012
Mark up

$
14 841
21 159
90 000
4 890
7 485
101 250
25%

REQUIRED
(a) Calculate for the year ended 30 April 2013:
(i)

Sales
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.............................................................................................................................. [2]

(ii)

Purchases
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.............................................................................................................................. [2]

(iii)

Profit for the year

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(b) Calculate the following ratios. Comparative figures for the previous year are shown in
the last column.

Workings
Gross profit
margin
(gross profit
to sales)

30 April
2013

For
Examiners
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30 April
2012

25%

Net profit
margin
(net profit
to sales)

11%

Rate of
inventory
turnover

8 times /
45.6 days

Return
on capital
employed
(ROCE)

12%

[8]
(c) Give two comments on the performance of Baljits business over the two years.
1 .......................................................................................................................................
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2 .......................................................................................................................................
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(d) Suggest three actions Baljit may take to improve her rate of inventory turnover.
1 .......................................................................................................................................
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2 .......................................................................................................................................
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3 .......................................................................................................................................
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[Total: 26]

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13
5

The following balances were extracted from the books of Patricia Chin on 31 March 2013.
$
67 000
20 000
18 000

Premises
Fixtures and fittings (cost)
Motor vehicle (cost)
Provisions for depreciation:
Premises
2 680
Fixtures and fittings
9 600
Motor vehicle
11 520
Revenue
119 140
Purchases
60 200
Purchases returns
2 900
Inventory at 1 April 2012
5 430
Wages
20 960
General expenses
9 100
Insurance
12 600
Motor vehicle expenses
5 670
Discount allowed
1 428
Discount received
884
Trade receivables
7 546
Trade payables
4 920
Provision for doubtful debts
800
Bank overdraft
2 330
7% Bank loan (repayable 30 June 2018) 30 000
Capital
56 000
Drawings
12 840
Additional information
1

Inventory at 31 March 2013 was valued at $4200.

Insurance relates to a period of fourteen months to 31 May 2013.

A motor vehicle repair bill $225 was owing at 31 March 2013.

Bad debts of $246 are to be written off.

During the year Patricia took $800 from the bank for personal use.
No record of this was made in the books.

A purchase of fixtures and fittings during the year, $2000, had been recorded in the general
expenses account.

Premises are depreciated at 2% per annum on cost.

Fixtures and fittings are depreciated at 8% per annum on cost.
Motor vehicles are depreciated at 20% per annum using the diminishing (reducing) balance
method.

The provision for doubtful debts is to be maintained at 6% of trade receivables.

REQUIRED
(a) Prepare the income statement for the year ended 31 March 2013.

[20]

(b) Prepare the balance sheet (statement of financial position) at 31 March 2013.

[20]
[Total: 40]

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Answer Question 5 on the following pages.
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BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

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