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University Foundation Programme

Accounting Paper 1
2014
Tuesday, 24th June 9 - 11am
Marking Scheme

General Coinments

Please remember that your marking standards should reflect the levels of performance of
international candidates, writing under examination conditions.

Positive Marking
You should be positive in your marking, giving credit for what is there rather than being too
conscious of what is not. Do not deduct marks for irrelevant or incorrect answers as
candidates penalise themselves in terms of the time they have spent.

Mark Range
You should use the whole mark range available in the mark scheme. Where the candidate's
response to a question is such that the mark scheme permits full marks to be awarded, full
marks must be given. A perfect answer is not required. Conversely, if the candidate's answer
does not deserve credit, then no marks should be given.

Alternative Answers / Layout

The answers given in the mark scheme are not exhaustive and other answers may be valid. If
this occurs, examiners should refer to the Subject Leader for guidance. Similarly, candidates may
set out their accounts in either a vertical or horizontal format. Both methods are acceptable.
Own Figure Rule
In cases where candidates are required to make calculations, arithmetic errors can be made so that the
final or intermediate stages are incorrect. To avoid a candidate being penalised repeatedly for an
initial error, candidates can be awarded marks where they have used the correct method with their own
(incorrect) figures. Examiners are asked to annotate a script with OF where marks have been allocated
on this basis. OF always makes the assumption that there are no extraneous items. Similarly, OF
marks can be awarded where candidates make correct conclusions or inferences from their incorrect
calculations

BRL/2013

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 Answer all questions in the spaces provided.

1 Total for this question: 22 marks

The following is a trial balance which has been incorrectly drawn up:

Trial Balance at 31 January 2014

£ £
Capital 1 February 2013 5,500
Drawings 2,800
Inventory 1 February 2013 2,597
Trade receivables 2,130
Furniture and fittings 1,750
Cash in hand 1,020
Trade payables 2,735
Sales 7,430
Returns inwards 85
Discount received 46
Business expenses 950
Purchases 4,380
16,446 14,977

In addition to the mistakes evident above, the following errors were also discovered:

I. A payment of £75 made to a creditor had not been posted from the cash
book into the purchases ledger.

II. A cheque for £56 received from a customer had been correctly entered in
the cash book but posted to the customer's account as £50.

III. A purchase of fittings £120 had been included in the purchases account.

IV. The total of the discounts allowed column in the cash book of £38 had
not been posted into the general ledger.

V. A page of the sales day book was correctly totaled as £564 but carried forward as
£456.

la) Show the trial balance as it would appear after all the errors had been corrected.
You are required to show all workings.

Workings
I. Trade payables 2735-75 =2660 (2)
a Trade receivables 2130 - 6 = 2124 (2)
m. Furniture and fittings 1750+120 =1870 (2)
Purchase 4380-120 =4260(2)
IV. Add discounts aUowed = 38 (2)
V. Sales 7430+(564-456) =7538 (2)
Working 12 marks
 Trial Balance as at 31 January 2014

Dr Cr
Drawings 2,800 (1)
Inventory 2,597(1)
Trade receivables 2,124(1)
Furniture 1,870
Cash 1,020 (1)
Returns inwards 85 (1)
Business expenses 950 (1)
Purchases 4,260
Discounts allowed 38
Capital 5,500 (1)
Trade payables 2,660
Sales 7,538
Discounts received 46 (1)
15.744 (2 OF)
10 marks

Question total = 22 Marks

2 Total for this question: 21 marks

The following trial balance has been extracted by the book-keeper of Don Smith, who runs a
wholesale stationery business, at 31 December, 2013:

Dr Cr
£ £
Trade receivables 24,325
Trade Payables 15,408
Capital 30,000
Bank 5,359
Rent and rates 10,862
Electricity 2,054
Telephone 1,695
Salaries 55,891
Vehicles 22,250
Office equipment 7,500
Vehicle expenses 10,855
Drawings 15,275
Discount allowed 478
Discount received 591
Purchases 138,960
Sales 257,258
Inventory at 1 January 2013 18.471 000000
308.616 308.616

Notes at 31 December 2013:

• inventory was valued at £14,075
• rates are prepaid £250.
• electricity owing £110
• salaries are owing £365

You are to prepare the income statement of Don Smith for the year ended 31 December 2013,
 together with his balance sheet at that date.

Workings

Rates 10862-150=10612 (2)

Electricity 2054 + 110 = 2164 (2)
Salaries 55891 + 365 = 56256 (2)
Don Smith
Income Statement for the year ending 31 December 2013 (1)
£ £
Sales 257,258 (1)
Opening Inventory (1 January 2013) 18,471 (1)
Purchases 138.960 (1)
157,431
Less Closing Inventory (31 December 2013) 14.075 (1)
Cost of Goods Sold 143,356 (1)
Gross profit 113,902 (1 OF)
Add Discount received 591 (1)
114,493 (1 OF)
Less expenses:
Rent and rates 10,612
Electricity 2,164
Telephone 1,695 (1)
Salaries 56,256
Vehicle expenses 10,855 (1)
Discount aUowed 478 (1)
82.060 (1 OF)
Profit for the year 32.433 (2 OF)

Question total =21 Marks

3 Total for this question: 18 marks

Lewis Ltd is a manufacturing company which is looking to expand by extending its premises.
Some of the expenditure incurred in the last financial year is listed below:

£52,000 paid to a construction company for the new extension;

£3,000 legal fees paid for the extension;
£3,200 interest paid on a loan to fund the extension;
£5,000 wages paid to Lewis's own staff to construct a new storage area, plus
a further £4,000 for materials:

£11,800 paid to the construction company for work on the existing factory (£2,900 for
repairing gutters, £4,200 new heating in the offices and £4,700 for installing a new
road).

3a) Explain whether the £5,000 wages should be treated as capital expenditure or as
revenue expenditure.

The £5,00 wages because they were used to pay for part of the extension could be
capitalised. 2 marks
 3b) Calculate the total amount of capital expenditure and revenue expenditure for
Lewis Ltd.

Capital total is 52,000 + 3,000 + 5,000 + 4,000 + 4,200 + 4,700 = £72,900 3 marks

Revenue expenses = 3,200 + 2,900 = £6,100 2 marks

Ms Lewis produces the accounts for Lewis Ltd before sending them off to the
accountant for auditing, however she is unsure how to deal with the following
transactions:-

I. Two months before the end of the financial year Ms Lewis wrote a cheque for
£5,000 for liability insurance for the year but does not record it as most of it is
for the following financial year. Is she correct in her thinking?

II. A machine costing £1000 was purchased but later Ms Lewis saw the same
machine advertised in a sale for £750, which value should she record?

III. A customer sent a cheque for £650 for goods but the amount due was only
£560. Which amount should be recorded?

3c) As the accountant explain how each transaction should be treated and why
I) £833.33 should be recorded in this year's accounts (5000 x 2/12) and the remaining
balance is prepayment (£4166.67) - Matching concept.
1 mark amount and 2 marks correct concept 3 marks
II) Machine value is £1,000 - Historic cost concept
1 mark amount and 2 marks correct concept 3 marks

Ill) £560 Revenue and £90 (650 - 560) overpayment - Accruals concept
1 mark amount and 2 marks correct concept 3 marks

3d) As the accountant explain to Ms Lewis why she should implement the accounting
concepts.

Accounting concepts allow accountants to work according to common guidelines (1), allowing
comparisons to be made (1) and reduce the chance for misleading information(1).
Any two points max 2 marks
4 Total for this question: 20 marks

Xiu Jin supplies the following information for October 2013

£
Credit balances in purchase ledger on 1 October 2013 3,551
Debit balances in purchase ledger on 1 October 2013 37
Credit purchases 15,338 I
Cash purchases 4,119
Cash paid to trade payables 12,440
Discounts received 1,084
Discounts allowed 936
Returns outwards 32
 Returns inwards 631
Debit balances in purchases ledger on 31 October 2013 154

4a) Prepare a purchases ledger control account for the month of October 2013.

Dr Purchase Ledger Control Account (1) Cr

Date I Detail £ | Date Detail £
1 Oct [ Balance b/d 37 (1) | I Oct | Balance b/d 3,551 (1)
31 Oct I Cash 12,440 (1) | 31 Oct | Purchases 15,338 (1)
31 Oct | Discounts received 1,084 (1)
31 Oct Returns Outward 32(1)
31 Oct | Balance c/d 5,450 | 31 Oct | Balance c/d 154 a)
19,043 19.043
1 Nov Balance b/d 154 I 1 Nov I Balance b/d 5,450 (2 OF)
10 Marks

4b) Name three errors that cannot be found though the preparation of a control account?
Errors of:-
Reversal errors
Original entry
Commission
Omission and
Compensating errors
Any 3 @ 2 marks each 6 marks
For Use of English over the whole paper Max 4 marks

5 Total for this question: 19 marks

The bank columns of Jane Jones's company cash book are shown.

Dr Cash book ^r
1 Oct Balance b/d 127.63 2 Oct MVaughan 673 272.61
7 Oct D Paster 367.42 4 Oct CChan 674 81.13
15 Oct T Henley 84.56 11 Oct VSVerc 675 364.42
15 Oct B Tain 97.42 27 Oct D Perth 676 182.09
31 Oct MSond 216.84 29 Oct N Lister 677 12.13
31 Oct Balance c/d 18.51
912.38 912.38
1 Nov Balance b/d 18.51

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Lewis Bank pic

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Current account statement

Account name Ms J. JONES

Sort Code: 20-17-44
Account number 007457892
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Branch Londffli

Transactions
Date DetaUs Ddbit Credit Balance
I October Balance 127.63
3 October F Smith 367.42 495.05
7 October 674 81.31 413.74
B Low 84.56 498.30
10 October T Field 97.42 595.72
15 October675
675 364.42 231.30
16 October673
673 272.61 41.310D
31 October Credit transfer G. Jackson 41.99 0.68
SO Loan repayment 150.00 149.32 OD
Dishonoured cheque 12.48 161.800D
Bank charges 27.56 189.36 OD

5a) Update Jane Jones's cash book

Dr Cash Book Cr
Date I Detail £ | Date Detail £
31 Oct | Credit transfer G. Jackson | 41.99(1) | 31 Oct | Balance b/d 18.51(1)
4 Oct | Correct error C Chan 0.18(1)
31 Oct | SO Loan repayment 150.00(1)
31 Oct | Dishonoured cheque 12.48(1)
31 Oct | Balance c/d 166.74 | 31 Oct | Bank charges 27.56(1)
208.73 208.73
Both Balances (1 OF) 31 Oct | Balance b/d 166.74
7 Marks
5b) Prepare a bank reconciliation statement for the 31 October

Jane Jones
Bank Reconciliation Statement at 31 October (1)
£ £
Balance as per cash book 166.74 OD (10F)
Add unpresented cheques
Perth 182.09 (1)
Lister 12.13 (1) 194.22
27.48
Less Lodgements
Sond 216.84 (1)

Balance as per bank statement 189.36 OD (10F) 6 Marks

5c) Explain three reasons why there may be a difference between Jane's cashbook and bank statement
• Timing differences
Oinissions from the cash book (SO, DO, Bank charges or Interest)
Errors
Dishonoured Cheques 3 Correct reasons @ 2 marks each 6 Marks
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UFP ACCOUNTS
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Centre: Canterbury
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Question 1

Advantages - one mark for any sensible point examples below;

Owner independence/ can run business as she like

No need to involve anyone else in decisions

Easy to establish legally MAX 3

Disadvantages - one mark for any sensible point examples below;

Unlimited liability
Expansion is limited

Owner will have to work long hours on her own without any help MAX 3
Stakeholders - Any of the following stated (1) + expansion (1)
Suppliers

Customers

Employees r

Owners

Bank

Government MAX 8

Question 2-1 mark for each

Item Source Document Account to be debited Account to be credited

1 Bank statement/ Cheque Stationary Bank

counterfoil

2 Credit note Fruits R Us Purchase returns

3 Invoice Rebecca restaurant Sales

4 Cash Receipt/ Wage Slip | Salaries/ Wages Cash

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Question 3-1 mark for each

Account Capital Fixed Current Current Revenue Expense

Asset Asset Liability or other
income
Capital x
Sales Returns x
Delivery vans x
Purchases x
Rent Payable x
Debtors/ Trade x
Receivables
Discounts x
allowed
Drawings x
Bank x
Rent Receivable x
Creditors/ Trade x
Payables
Computers x
Wages and x
salaries
Discounts x
received
Carriage x
/
inwards
Carriage x
outwards
Prepayments x
Accruals x
Goodwill x

2
s

Question 3

Alee

Trading Profit and Loss Account for the year ended 31 December 2012
£ £ Marks
Sales 300 000 1
1 Less cost of sales
Opening stock 30000 1
Purchases 186000 1
216000
Closing stock -42 000 174000 1
Gross Profit 126000 1
Less
Wages 56000 1
Heating and lighting 19400 1
Repairs to plant and 5100 1
machinery
Advertising 1 000 1
Depreciation freehold 3200 2
buildings
Plant and machinery 11 000 95700 2
Net Profit 30300

+ 2 marks for format and presentation (MAX !5 TVIARKS)

Balance Sheet at 31 December 2012

Cost Depreciation NBV Marks

£ £ £
Fixed Assets
Land and Buildings 100000 43200 56800 3
Plant and machinery 76000 43000 33000 3
176 000 86200 89800
Current Assets
Stock 42000 1
Trade Debtors 14000 1
Prepayments 6000 1
Bank 5500 1
67500
Current Liabilities
Trade Creditors 6300 1
Accruals 1 800 8100 59400 1
149200 1
Capital
1ST January 2012 150000 1
Profit 30300 1
Less: Drawings 27100 1
Less: good for own 4000 1
use
149 200 1

+ 2 marks for format and presentation

3
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