ZIMSEC O LEVEL ACCOUNTS

JUNE 1999

PAPER 1
 Section A

Answer all questions in this section.

1. B. Mushonga Pharmacy has two departments – Cosmetics and

Medicines. The following trail balance was extracted from the
business books on 31 December 1998.

$ $
Capital 90 000
Drawings 18 000
Furniture and fittings at cost 9 000
Provision for Depreciation:
Furniture (1 January 1998) 1 800
Creditors 8 500
Purchases: Cosmetics 70 100
Medicines 95 700
Debtors 12 200
Stocks (1 January 1998)
Cosmetics 10 500
Medicines 30 000
Commission on Sales 4 000
Advertising 4 500
Salaries and Wages 30 900
Insurance 1 500
Rent 2 400
General expenses 6 300
Land and Buildings 55 000
Sales: Cosmetics 100 000
Medicines 150 000
Cash at bank 5 000
352 700 352 700

Additional information:
 1. Stocks at 31 December 1998
- Cosmetics $10 150
- Medicines $16 350
2. Depreciation is provided on furniture and fittings at 20% per
annum using the diminishing (reducing) balance method.
3. Mushonga took medicines worth $500 for personal use. No
entry was made in the books.
4. Salaries and wages outstanding on 31 December 1998 amount
to $1 100.
5. Insurance paid covers the periods from 1 January 1998 to 31
March 1999.
6. A provision for doubtful debts of 5% of debtors is to be created.
(a) Prepare the Departmental Trading Account, in columnar
form, showing clearly the gross profit for each
department for the year ended 31 December 1998. [6]
(b) Prepare the combined Profit and Loss Account for the
year ended 31 December 1998. [7]
(c) Prepare the Balance Sheet as at 31 December 1998. [1

2. Write down only the word or words required to complete the

following sentences.

(a) That part of the cost of a fixed asset consumed during its period
of use is known as ……………………………..
(b) Goods which are partly finished in the manufacturing process
are referred to as ………………………………
(c) A loan which the business repays in full within one financial
year is classified as ………………………… liability.
(d) The double entry for commission received by cheque is debit
the ……… (i) ……….. Account and credit the ……….. (ii)
…………. Account.
(e) Carriage paid for school stationery is classified as ………… (i)
……….. expenditure and carriage paid for new school desks as
……….. (ii) ……….. expenditure.
(f) Rent paid in advance is shown an current ……………… in the
balance sheet.
(g) If an entry is made in the wrong of account, this is an error
of ……………………..
(h) Credit sales are entered on the ………………… side of the
Sales Ledger Control Account.
 (i) If closing stock is undervalued, gross profit will be …………..
(j) Goodwill is the excess of ……… (i) ………. Over …….. (ii)
……… taken over.
(k) If a customer is underchanged, he may be sent a ……… (i)
…….. note for the additional amount instead of an amended
………. (ii) ………..
(l) At the end of the financial year, salaries for employees are
transferred to the ……… (i) ……… Account while partners’
salaries are transferred to the ………. (ii) ……….. Account.
(m) The following information relating to a non-profit making
organization is available.

$
Subscriptions owing on 1 January 1998 140
Subscriptions received during 1998
Including $70 for 1999 1 200
Subscriptions owing on 31 December 1998 80

The amount transferred to the Income and Expenditure Account for

the year ended 31 December 1998 is ……… (i) ……… and
subscriptions paid in advance on the same date will be shown as a
……… (ii) ………… in the Balance Sheet. [9]

3. (a) The balances given below appeared in the ledger of G. Moyo on

1 July 1998.

$
Land and Buildings 50 000
Rent receivable owing 120
Rates prepaid 70

During the six months ended 31 December 1998, the following

transactions took place:

$
Rent received from tenants 1 080
Payments for rates by cheque 430
Payments for extensions to buildings 10 000
 At 31 December 1998, $100 was owing for rates and a tenant
had paid $160 in advance.

G. Moyo prepares her final accounts on 31 December.

Prepare the following accounts:

(i) Land and Buildings;

(ii) Rent receivable;
(iii) Rates.

Pay special attention to dates and details. [12]

(b) The following account appeared in the ledger of R. Patel.

Packing Materials
1998 1998
Jan.1 Balance b/d 180 Dec. 31 Trading Account 2020
March 13 Bank 750
Oct. 20 City Packaging 1 200 Dec. 31 Balance c/d 110
2 130 2 130

1999
Jan. 1 Balance b/d 110

(i) What does the balance of $180 represent?

(ii) Give the transaction relating to the entry on 20 October.
(iii) What is the value of the packing materials used during the year?
(iv) Where exactly in the balance sheet does the balance of $110
appear? [4]

4. T. Revayi received a bank statement for the month of May which

showed an overdraft of $400. His Cash Book for the same period
showed an overdraft of $69.

On comparing the bank statement and the cash book, he finds that:

1. Cheques drawn amounting to $300 had not been presented to

the bank for payment.

2. Deposits totaling $390 had not been credited by the bank.

3. A cheque for $89 to a creditor had been entered as $98 in the
cash book.

4. The following items appeared on the bank statement but not in

the cash book:
- Stop order for trade subscriptios $205
- Bank charges $25
- Dividends received $100
- Dishonoured cheque (from P. Pinto) $120

Prepare on 31 May1999:

(a) an amended Cash Book; [7]

(b) a Bank Reconciliation Statement [7]
 Section B

Answer two questions in this section.

5. On 31 March 1999 the share capital in Induna Limited was as follows:

$
Authorised Capital
800 000 $1 Ordinary Shares 800 000
500 000 10% $1 Preference shares 500 000
Issued Capital
600 000 $1 Ordinary shares, fully paid 600 000
600 000 $10% $1 Prefence shares, fully paid 300 000

The following information is available for the year ended 31 March

1999:

$
Profit and Loss Account credit balance (1 April 1998) 60 000
Net Tradition Profit for the year ended 31 March 1999 240 000
General Reserve 250 000
8% Debentures 400 000
Interim Ordinary dividend paid 30 000
Interim Preference Dividend paid 15 000
Final Preference Dividend paid 15 000

The directors recommended that:

1. $50 000 should be transferred to General Reserve;

2. a final dividend of 10% should be paid to ordinary
shareholders.
(a) Prepare the Profit and Loss Appropriation Account for the year
ended 31 March 1999. [8]
(b) Prepare a Balance Sheet extract at 31 March 1999, showing the
capital structure. [5]
6. M. Phiri extracted a trial balance on 28 February 1999. Credits
exceeded debits by $250 and this amount was placed in a Suspense
Account.

Subsequently, the following errors were discovered:

1. The cost of repainting buildings, $850, had been debited to

Premises Account instead of Maintenance Account.
2. The Sales Journal had been overcast by $300.
3. The interest earned amounting to $75 had been debited to the
Interest Paid Account.
4. The Petty Cash balance of $100 had been omitted from the
Trial Balance.
5. A sale of goods on credit to A. Adams for $450 had nto been
recorded in the books.

(a) Prepare Journal entries to correct the errors (narrations not

required). 10]
(b) Prepare the Suspense Account. [3]

7. The following information relates to the business of D.Munya, a

retailer:

$
Stock (1 January 1998) 20 000
Purchases 160 000
Gross Profit 50 000
Net Profit 10 000
Fixed Assets 75 000
Current Assets 39 000
Current liabilities 19 500

Gross Profit Percentage on turnover (margin) is 25%

Calculate the following, showing all your workings:

(a) Sales for the year;
(b) Cost of Sales;
(c) Stock on 31 December 1998;
(d) Rate of Stockturn (Stock Turnover Ratio);
(e) Total Expenses for the year;
(f) Net Profit percentage;
(g) Working capital ratio. [13]