Certified Accounting Technician
Examination
Intermediate Level
Time allowed: 2 hours
This paper is divided into two sections:
Section A – ALL 20 questions are compulsory and MUST
be attempted
Section B – ALL FOUR questions are compulsory and MUST
be attempted
Do NOT open this paper until instructed by the supervisor.
This question paper must not be removed from the examination hall.
Paper T3 (UK)
Maintaining
Financial Records
(UK Stream)
Wednesday 5 December 2007
The Association of Chartered Certified Accountants
Section A – ALL 20 questions are compulsory and MUST be attempted
Please use the Candidate Registration Sheet provided to indicate your chosen
answer to each multiple choice question.
Each question in this section is worth 2 marks.
1 Which of the following is the correct formula to calculate cost of sales?
A Purchases – Opening stock – Closing stock
B Purchases + Opening stock + Closing stock
C Purchases – Opening stock + Closing stock
D Purchases + Opening stock – Closing stock
2 Andrew’s trial balance at 31 October 2007 includes the following balances:
£
Machinery at cost 85,800
Accumulated depreciation on machinery 21,750
Trade debtors 42,650
Debtors allowance 1,570
Bank overdraft 6,470
Stock at 1 November 2006 21,650
His stock at 31 October 2007 is valued at £22,300
What value should be reported for current assets in Andrew’s balance sheet at 31
October 2007?
A £62,730
B £63,380
C £64,950
D £69,850
3 Joe has prepared the following journal entry:
Debit Cash £850
Credit T Sugden £850
Which of the following is the correct narrative for the journal entry?
A Cash sale to T Sugden
B Cash purchase from T Sugden
C Cash payment to T Sugden
D Cash receipt from T Sugden
4 Jamie is preparing his trial balance at 31 October 2007. At 1 November 2006 he
had an accrual of £297 for
telephone expenses. During the year to 31 October 2007 he paid invoices for
telephone charges up to 31 October
2007 of £4,570.
What balance should Jamie include in his initial trial balance at 31 October
2007 for telephone expenses?
A £4,273 debit
B £4,273 credit
C £4,867 debit
D £4,867 credit
2
5 Patrick is preparing a reconciliation between the total of the list of
balances from his debtors ledger, which is £37,552,
and the balance on the debtors control account in his nominal ledger, which is
£38,842.
He has found that the following errors have been made:
a debit balance of £1,200 was omitted from the list of balances;
a credit note for £375 was recorded in the daybook as an invoice; and
the total of the sales invoices in the sales daybook was overstated by £90.
What value should be reported on Patrick’s balance sheet for debtors?
A £38,002
B £38,377
C £38,752
D £38,842
6 Louise is completing her extended trial balance. In the profit and loss
columns, the total of the debit column is greater
than the total of the credit column.
Which of the following could explain this?
A Louise has overstated the credit entry for closing stock
B Louise has not made any entries for the post trial balance adjustments
C Louise has made a profit
D Louise has made a loss
7 Elaine is preparing her bank reconciliation. She has noted the following:
(i) the bank has levied charges on her account
(ii) a cheque payable to S. Wright has not been presented at the bank
Which of the above errors require an entry in the bank account in her nominal
ledger?
A both (i) and (ii)
B (i) only
C neither (i) nor (ii)
D (ii) only
3 [P.T.O.
The following information relates to questions 8 and 9:
Vivienne and Robert are in partnership, sharing profits and losses in a ratio of
3:2. They maintain current accounts
and fixed capital accounts. In the last year, their profit before appropriations
was £27,800. Robert is entitled to an
annual salary of £3,800.
During the year Vivienne and Robert made cash drawings of £12,000 each.
8 What is Vivienne’s share of the profit?
A £2,280
B £9,600
C £14,400
D £16,680
9 The correct entry for the partners’ drawings has been made in the cash
account.
What entry is needed to complete the posting for the partners’ drawings?
A a debit entry in the partners’ capital accounts
B a credit entry in the partners’ capital accounts
C a debit entry in the partners’ current accounts
D a credit entry in the partners’ current accounts
10 Jean’s electricity expense account has a debit balance of £1,540. Jean had no
opening accrual or prepayment for
electricity. The last electricity invoice was for £462 for the three months to
30 September 2007.
What are the correct amounts to be charged to Jean’s profit and loss account for
the year to 30 November 2007
and reported as an accrual on her balance sheet at 30 November 2007 for
electricity?
Charge to profit and loss Accrual
A £1,694 £154
B £1,694 £308
C £1,848 £154
D £1,848 £308
The following information relates to questions 11 and 12:
The total amount owed to Robert by his customers at 30 November 2007 was
£78,600. Robert has decided that a
balance of £600 should be written off as it is irrecoverable, and that, based on
past experience, an allowance equal
to 11/2% of the remaining debtors balance should be made. His debtors allowance
at 1 December 2006 was £1,200.
11 Robert has made the entry in the debtors expense account to write off the
irrecoverable balance.
What other entry does he need to make?
A a debit entry in the sales account
B a credit entry in the sales account
C a debit entry in the debtors account
D a credit entry in the debtors account
12 How should the movement in the debtors allowance be reflected in the profit
and loss account?
A a credit of £21
B a charge of £21
C a credit of £30
D a charge of £30
4
13 Tim has recently commenced trading. The materials he uses in his business are
subject to regular price rises. He is
unsure how to value his stock and is trying to decide whether to use First In
First Out (FIFO), or continuous weighted
average.
Which of the following statements is correct?
A Tim’s profit will be unaffected by the method of stock valuation
B FIFO will lead to the higher reported profit
C Continuous weighted average will lead to the higher reported profit
D The profit will be more accurate if FIFO is used
14 You are preparing the final accounts for a business. The cost of the items in
closing stock is £41,875. This includes
some items which cost £1,960 and which were damaged in transit. You have
estimated that it will cost £360 to
repair the items, and they can then be sold for £1,200.
What is the correct stock valuation for inclusion in the final accounts?
A £39,915
B £40,755
C £41,515
D £42,995
15 On 1 December 2006 Pat borrowed £40,000 at a fixed rate of interest. A single
capital repayment is due on
1 December 2009. During the year to 30 November 2007 the interest of £300 per
month has been paid on the last
day of each month.
How should the loan be reported on Pat’s Balance Sheet at 30 November 2007?
Current liability Long term liability
A £3,600 £40,000
B £40,000 £3,600
C nil £40,000
D £40,000 nil
16 After completing his final accounts, Kevin found that he had understated a
prepayment.
How are Kevin’s net profit and capital affected by the correction of the error?
Net profit Capital
A increased increased
B increased decreased
C decreased increased
D decreased decreased
17 Changes may be made in:
(i) a measurement basis
(ii) an accounting estimate
Which of these is/are a change in accounting policy?
A (i) only
B (ii) only
C both (i) and (ii)
D neither (i) nor (ii)
5 [P.T.O.
18 Into which profit and loss account columns of the extended trial balance
should the balances for sales returns
and purchases returns be extended?
Sales returns Purchases returns
A debit debit
B debit credit
C credit debit
D credit credit
19 At 31 October 2006 Gina Dobbs owed her suppliers £13,856. During the year to
31 October 2007, her payments
to suppliers totalled £95,886, and at 31 October 2007 she owed £11,552.
What is the value of Gina’s credit purchases for the year to 31 October 2007?
A £70,478
B £93,582
C £98,190
D £121,294
20 In the year to 30 November 2007, Grace Smith obtained a 25% mark up on all
her sales.
Her sales for the year totalled £120,600. Her opening stock was valued at £9,340
and her closing stock was valued
at £11,855.
What was the value of Grace’s purchases for the year to 30 November 2007?
A £87,935
B £92,965
C £93,965
D £98,995
(40 marks)
6
Section B – ALL FOUR questions are compulsory and MUST be attempted
1 (a) Define the terms ‘asset’ and ‘liability’, and provide one example of each.
(4 marks)
(b) State TWO reasons why suspense accounts may be used. (2 marks)
(c) Describe THREE types of error which will NOT be revealed by extracting a
trial balance. (3 marks)
(d) Indicate how classifying capital expenditure as revenue expenditure will
affect the net profit for both the year
in which the error is made and the following year if the error is not corrected.
(2 marks)
(e) Explain how the principle of materiality affects the preparation of
financial statements. (4 marks)
(15 marks)
7 [P.T.O.
2 You are employed in the accounting department of a transport company. One of
your tasks is to maintain the
accounting records relating to fixed assets.
During the year to 30 November 2007, a new lorry was purchased. The invoice
includes the following information:
Date of invoice – 1 January 2007
£
Volvo model S557 24,000
Customisation with company logo 1,000
Insurance for year to 31 December 2007 5,000
Fuel supplied 400
–––––––
Total cost 30,400
–––––––
The information you are required to record in the fixed asset register includes:
(i) Internal reference number
(ii) Manufacturer’s serial number
(iii) Depreciation charge for year
(iv) Cost
(v) Supplier
(vi) Description
At 30 November 2006, the total cost of the company’s lorries was £242,000, and
the accumulated depreciation was
£166,736. During the year to 30 November 2007 a lorry which cost £22,000 and
which had a net book value of
£11,264 was sold.
Your company’s policy is to depreciate lorries on the reducing balance basis at
a rate of 20% per annum. It is
anticipated that lorries will be sold after three years of use. The expected
sale proceeds are 50% of the cost capitalised
on acquisition. A full year’s depreciation is charged in the year of
acquisition, and no depreciation is charged in the
year of disposal.
Required:
(a) Calculate the cost of the new lorry to be capitalised on acquisition as a
fixed asset. (2 marks)
(b) Assuming that the new lorry is sold on 31 December 2009, calculate the
anticipated profit or loss on
disposal. (3 marks)
(c) Prepare the following ledger accounts for the year to 30 November 2007:
Lorries at cost;
Accumulated depreciation on lorries.
Note: you must present your answer in a format which clearly indicates whether
each entry is a debit entry
or a credit entry. (7 marks)
(d) For any THREE of the items (i)–(vi), state one reason for recording each
item in the fixed asset register.
(3 marks)
(15 marks)
8
3 Toni Pedlow is carrying out a reconciliation between the balance on the trade
creditors control account in her nominal
ledger, which is £128,593 and the total of the list of balances on the
suppliers’ personal accounts, which is
£128,929.
She has discovered that:
(i) an invoice from a supplier for £263 has been entirely omitted from her
accounting records;
(ii) an invoice from a supplier for £67 was entered in her daybook as a credit
note;
(iii) a payment of £430 to a supplier has not been recorded in the supplier’s
personal account;
(iv) no entries have been made in respect of an agreement to offset a credit
balance of £570 in the creditors ledger
against a debit balance in the debtors ledger;
(v) a supplier’s account with a credit balance of £71 was omitted from the list
of balances;
(vi) a balance of £24,823 was settled by a payment of £24,800. The settlement of
the balance was correctly
recorded on the supplier’s personal account, but the discount was not entered in
the nominal ledger;
(vii) a cheque for £460 paid to a supplier was recorded in Toni’s cash book as
£640.
Required:
(a) Prepare the creditors control account in Toni’s nominal ledger, including
the necessary adjusting entries and
the corrected balance.
Note: you must present your answer in a format which clearly indicates whether
each entry is a debit entry
or a credit entry. (6 marks)
(b) Prepare the reconciliation of the list of balances to the corrected balance
on the creditors control account in
Toni’s nominal ledger. (7 marks)
(c) State how the creditors balance should be reported in Toni’s final accounts.
(2 marks)
(15 marks)
9 [P.T.O.
4 Tanya Joyce has extracted the following trial balance at 30 November 2007:
Debit Credit
£ £
Sales 205,117
Purchases 108,539
Wages 33,552
Electricity 9,526
Rent 7,200
General expenses 4,788
Fixed assets at cost 125,980
Accumulated depreciation at 1 December 2006 74,812
Stock at 1 December 2006 11,629
Trade debtors 19,885
Debtors allowance 1,442
Cash at bank 1,731
Trade creditors 11,954
Capital at 1 December 2006 34,305
Loan (due for repayment in 2012) 25,000
Drawings 29,800
–––––––– ––––––––
352,630 352,630
–––––––––––––––– ––––––––––––––––
Tanya also has the following additional information:
(i) Depreciation for the year has been calculated as £25,196
(ii) Electricity accrued at 30 November 2007 is £940
(iii) Rent was prepaid by £1,200 at 30 November 2007
(iv) Stock at 30 November 2007 was valued at £13,664
(v) The debtors allowance is to be revised to £1,620
Required:
(a) Prepare Tanya’s profit and loss account for the year to 30 November 2007. (8
marks)
(b) Calculate the following figures for inclusion in Tanya’s balance sheet at 30
November 2007:
(i) current assets; (4 marks)
(ii) capital balance. (3 marks)
(15 marks)
End of Question Paper
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