Accounts U1 Spec2022

TEST CODE 02101010
SPECIMEN 2022
CARIBBEAN E XAM I NAT I O N S COUNCIL
CARIBBEAN ADVANCED PROFICIENCY EXAMINATION®
ACCOUNTING
UNIT 1 – Paper 01
1 hour 30 minutes
READ THE FOLLOWING INSTRUCTIONS CAREFULLY.
1. This test consists of 45 items. You will have 1 hour and 30 minutes to answer them.
2. In addition to this test booklet, you should have an answer sheet.
3. Do not be concerned that the answer sheet provides spaces for more answers than there are items
in this test.
4. Each item in this test has four suggested answers lettered (A), (B), (C), (D). Read each item
you are about to answer and decide which choice is best.
5. On your answer sheet, find the number which corresponds to your item and shade the space
having the same letter as the answer you have chosen. Look at the sample item below.
Sample Item
The cost of an asset consumed in the generation of

revenue is treated in the books as Sample Answer
(A) a gain A B C D
(B) a liability
(C) an expense
(D) an allowance
The best answer to this item is “an expense”, so answer space (C) has been shaded.
6. If you want to change your answer, erase it completely before you fill in your new choice.
7. When you are told to begin, turn the page and work as quickly and as carefully as you can. If
you cannot answer an item, go on to the next one. You may return to that item later.
8. You may do any rough work in this booklet.
9. Figures are not necessarily drawn to scale.
10. You may use a silent, non-programmable calculator to answer items.
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.
Copyright © 2021 Caribbean Examinations Council

All rights reserved.
02101010/CAPE/SPEC 2022
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1. What is the MOST important element of 4. Financial accounting focuses on the specific
an internal control system? needs of decision-makers external to the
organization. Which of the following is
(A) Publishing of the internal controls NOT an external user?
(B) Motivating staff to increase output
(C) Purchasing adequate insurance (A) Bank
coverage (B) Stockholder
(D) Performing a cost-benefit analysis (C) Internal Revenue Service
before each internal control is (D) Vice president of marketing
put in place
5. Which of the following statements does

2. Gablewoods Apartments Inc. received six NOT express a feature of a computerized
months’ rent in advance on 1 December 2022. accounting system?
Under the accrual basis of accounting, the
income should be recognized (A) Arithmetic calculations are more
accurate.
(A) on 31 December 2022 (B) Accounting information and reports
(B) on 1 December 2022 are accessed much faster.
(C) proportionately each month (C) The recording of business
(D) at the end of the six-month period transactions is more efficient.
(D) Principles different from those in
a manual accounting system are
3. Which of the following activities is NOT used.
an application of accrual accounting?
(A) Recording expenses when paid

(B) Recognizing revenues when earned
(C) Recognizing expenses when
incurred
(D) Adjusting the accounts at the end
of a period
GO ON TO THE NEXT PAGE

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6. The principle that underlies an accountant’s decision to make a provision for doubtful debts is
(A) double entry

(B) conservation
(C) revenue recognition
(D) money measurement
7. Richardson Inc. sold 2 000 ordinary shares which were held as a temporary investment. The shares
were acquired six months before at a cost of $45 per share. Richardson Inc. sold the shares at $40
per share. The entry to record the sale is
$ $
(A) Temporary stock investment 80 000
Loss on sale of temporary investment 10 000
Cash 90 000
(B) Cash 90 000

Gain on sale of temporary investment 10 000
Temporary stock investment 90 000
(C) Cash 80 000

(D) Cash 80 000

Loss on sale of temporary investment 10 000
8. Joylyn Inc. paid $9 000 for 1 500 common shares with a par value of $5.00 each from Jackie Ltd.
The journal entry to record this transaction in the books of Jackie Ltd is
$ $
(A) Investment in Jackie Ltd 9 000
Cash 9 000
(B) Cash 9 000

Share capital 7 500
Share premium 1 500
(C) Share capital 7 500

Share premium 1 500
Cash 9 000
(D) Share capital 9 000

Cash 9 000

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9. RXM Ltd invested $600 000 in marketable 12. Guyco issued 750 000 shares of $10 par
securities in 2021. During 2022, the market value common stock in exchange for a
value of these securities fluctuated between building valued at $800 000. The entry for
$300 000 and $600 000. The market value this transaction includes a
at the end of 2022 was $650 000. RXM Ltd
should record its marketable securities at 31 (A) debit to the building account for
December 2022 as $800 000
(B) debit to the building account for
(A) $ 50 000 $750 000
(B) $ 300 000 (C) credit to common stock for
(C) $ 600 000 $800 000
(D) $ 650 000 (D) credit to the building account for
$50 000
10. ABC Corporation issued 1 000 shares of
$10 par value at $12 per share. Which of 13. A company received a $300 dividend
the following credits were made in order payment on a short-term investment. Which
to record this transaction? of the following is true?
(A) Share capital $10 000 and share (A) Dividend revenue is credited for
premium $2 000 $300.
(B) Share capital $12 000 and cash (B) Dividend revenue is debited for
$2 000 $300.
(C) Share capital $10 000 and profit (C) Short-term investment is debited
and loss $2 000 for $300.
(D) Share capital $10 000 and retained (D) Short-term investment is credited
earnings $2 000 for $300.
11. Which of the following tasks is a function

14. On 1 January 2022, RosMarie Inc. has
of International Financial Reporting
machinery on the books that originally
Standards?
cost $100 000. During 2022, the following
expenditures were made:
(A) Providing rules for conducting
business activities
$
(B) Providing guidelines indicating how
Minor repairs 5 000
to report economic events
Improvements 20 000
(C) Regulating the payment of income
Additions 9 000
tax in Caribbean territories
(D) Devising principles for conducting
How much would be recorded in the
accounting research and practice
machinery account on 31 December 2022?
(A) $105 000

(B) $109 000
(C) $120 000
(D) $129 000

02101010/CAPE/SPEC 2022
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15. The declaration of a 10% stock dividend 19. The Lara Company issued 10 000 000
on 100 000 outstanding shares, with a no par shares at a stated value of $5 on
par value of $1 and a market value of $20 1 January 2022. On 31 December 2032,
would include a debit to retained earnings the company declared and distributed a 5%
of stock dividend. The shareholders’ equity on
the statement of financial position would
(A) $ 0 increase by
(B) $ 20 000
(C) $ 200 000 (A) $ 0
(D) $ 210 000 (B) $ 500 000
(C) $ 2 000 000
(D) $ 2 500 000
16. The Hodge Company estimated at
1 January 2022 that its income before
taxes for the year ended 31 December Items 20 and 21 refer to the following
2022 would be $5 500 000. The Hodge information.
Company’s tax rate for the year is
42%. The company made quarterly tax Able, Baker and Chapman partnership had
payments in April, June, September and assets with a book value of $240 000 and a
15 December. The actual income for market value of $195 000. It had liabilities of
the year ended 31 December 2022 was $90 000 and capital balances for partners
$5 700 000. The amount of income Able, Baker and Chapman of $70 000,
tax payable at 31 December 2022 is $30 000 and $50 000 respectively. The
partners decide to incorporate the partnership.
(A) $ 0
The new company, ABC Inc., will issue
(B) $ 84 000
30 000 shares with a par value of $2 each to
(C) $ 100 000
the partners.
(D) $ 144 000
20. How much will be Able’s share of the gain
17. Which of the following is an advantage of or loss on realization?
being a member of a cooperative?
(A) $ 15 000
I. Sharing profits (B) $ 21 000
II. Making quick decisions (C) $ 28 000
III. Sharing knowledge, skills and (D) $ 50 000
effort
(A) I and II only 21. Chapman will receive shares with a total
(B) I and III only value of
(C) II and III only
(D) I, II and III (A) $ 10 000
(B) $ 20 000
(C) $ 35 000
18. A statutory corporation is owned by (D) $ 50 000
(A) all nationals of that state

(B) individuals or small groups
(C) the government on behalf of all
nationals
(D) members of the public who purchase
shares

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Items 22 and 23 refer to the following 25. A factor that distinguishes a company from
information. a sole proprietorship or partnership is that
the company is
Lloyd Smith, a new partner, is admitted
to the Labell and Ross partnership under (A) an accounting entity
the bonus method. He contributes cash of (B) organized to make a profit
$20 000 and equipment with a market (C) subject to statute and government
value of $30 000 in exchange for a 20% regulations
ownership interest in the new partnership. (D) required to close its temporary
The capital of the existing partnership is accounts at the end of the fiscal
$130 000. Labell and Ross share profits period
and losses in the ratio 80:20 respectively.
22. Lloyd Smith’s capital balance is 26. Which of the following statements relating
to societies is FALSE?
(A) $ 30 000
(B) $ 35 000 (A) Members can transfer their shares
(C) $ 36 000 on the local securities exchange.
(D) $ 50 000 (B) They are controlled by members
who have equal voting rights.
(C) The surplus can be allocated in the
23. Which of the following bonus amounts form of patronage refund.
would be recorded? (D) They are based on values of self-
help, equality and equity.
(A) $ 14 000 to Lloyd Smith’s capital
(B) $ 2 800 increase to Ross’ capital
(C) $ 2 800 decrease to Ross’ capital 27. The Georgetown Cricket Club has
(D) $ 7 000 increase to Labell’s capital 75 members who pay an annual subscription
of $150 each. During the review of
the records on 1 April 2022, it was
24. On 1 January 2022, Haynes Company discovered that 70 members had paid
issued $75 000 of notes payable, of which their annual subscriptions during the year
$15 000 is due on 1 January for each of the and 15 members had prepaid their 2022
next five years. The company’s yearend is subscriptions in 2021. The club had a social
31 December. The statement of financial event in 2022 which realized a total profit
position presentation on 31 December 2022 of $12 500. The Georgetown Cricket Club
is should show income from subscriptions
and social events in the amount of
(A) Current Liabilities – $ 75 000
(A) $ 11 250
(B) Long-term Liabilities – $ 75 000 (B) $ 23 000
(C) $ 23 750
(C) Current Liabilities – $ 60 000 (D) $ 25 250
Long-term Liabilities – $ 15 000
(D) Current Liabilities – $ 15 000

Long-term Liabilities – $ 60 000

02101010/CAPE/SPEC 2022
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28. Alexander Inc. purchased a new truck in 31. Ashdon Inc.’s cost of goods sold for 2022
2018 for $27 000. On 1 January 2022, when was $65 000. They had beginning and
accumulated depreciation was $20 000, ending inventory of $12 000 and $14 000
the truck was sold for $7 000 cash. What respectively. What was Ashdon Inc.’s
amount of gain or loss should Alexander inventory turnover for 2022?
Inc. report for this sale?
(A) 4.6
(A) $ 0 (B) 5.0
(B) $ 7 000 (C) 5.4
(C) $ 10 000 (D) 5.6
(D) $ 14 000
32. A Caribbean company made credit sales last

29. Which of the following would NOT be year of $10 000 000. The company’s average
considered an intangible asset? annual accounts receivable was $1 000
000. Given 365 days in a year, what was
(A) Franchise the average collection period in days?
(B) Leasehold
(C) Trademark (A) 36.5 days
(D) Receivables (B) 66.5 days
(C) 300 days
(D) 360 days
30. Windies company issued $375 000
shares of $5 par value common stock in
exchange for land valued at $400 000.
What would the entry for this transaction
include?
(A) Debit to land account for $400, 000

(B) Debit to land account for $375, 000
(C) Credit to land account for $25, 000
(D) Credit to common stock for
$400, 000

02101010/CAPE/SPEC 2022
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33. Information relating to Black River Company’s shares is as follows:
Per share $
Book value at 31 December 2022 15.00
Market value on Caribbean Stock Exchange at 31 December 2022 10.00
Earnings for 2022 5.00
Par value 2.00
Dividend for 2022 1.00
What is the price-earnings ratio on common stock for 2022?
(A) 1.5
(B) 2.0
(C) 3.0
(D) 5.0
34. A common measure of long-term solvency 36. Justin Inc. had the following balances at
is 30 June 2022.
(A) asset turnover Total Liabilities $ 80 000

(B) the current ratio Total Shareholders’ Equity $ 20 000
(C) earnings per share Total Assets $100 000
(D) the debt-to-equity ratio Pre-tax Income $ 10 000
What is Justin Inc.’s debt-to-equity ratio?

35. Diamond Inc. reported net income of
$300 000 for 2022 and paid dividends (A) 3:1
to common and preferred stockholders (B) 4:1
of $50 000 and $80 000 respectively. (C) 5:1
Diamond Inc. had 100 000 shares of (D) 10:1
common and 50 000 shares of preferred
stock outstanding during the year. What
was Diamond Inc.’s EPS for 2022? 37. The financial statements of Pryce Inc.
showed a net loss of $10 000, depreciation
(A) $1.70 expense of $15 000, and an increase in
(B) $2.20 accounts receivable of $6 000. The amount
(C) $2.50 of cash provided by operating activities,
(D) $3.00 assuming no other charges in the account
is
(A) $ (1 000)
(B) $ (4 000)
(C) $ 5 000
(D) $ 11 000

02101010/CAPE/SPEC 2022
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38. For the year ended 31 December 2022, a 41. In the process of a liquidation, the receiver
company had cash payments for dividends must
on stock of $40 000, cash paid for interest
of $7 000, cash paid to suppliers of $8 000 (A) dispose of assets in a commercially
and cash payments for equipment of reasonable manner
$9 000. Cash used by investing activities for (B) dispose of the business assets as
2022 is soon as possible
(C) pay the creditors the full amount of
(A) $ 9 000 their claims
(B) $ 17 000 (D) pay liquidation expenses after all
(C) $ 24 000 other claims
(D) $ 49 000
42. Which of the following are limitations of

39. ACE Builders Inc. has three items in the statement of financial position?
inventory at 31 December. The cost and
net selling price of each are included in the I. Many items are omitted.
following table. II. Judgement may be used.
III. Current values are not reflected.
Item Cost Net Selling Price
(A) I and II only
A $10 $ 8
(B) I and III only
B $12 $14 (C) II and III only
C $15 $16 (D) I, II and III
Using the lower-of-cost-or-market method

on units basis of valuing inventory, what 43. In January 2021, a major customer of K &
is the value reported for inventory in the M Ltd unexpectedly declared bankruptcy.
statement of financial position? This customer accounted for 15% of
the company’s accounts receivables.
(A) $34 K & M Ltd was in the process of finalizing
(B) $35 its annual financial statements for the period
(C) $37 ended December 2020 which would be issued
(D) $38 in March 2021.
How should the customer’s account
receivables be treated in the 2020 financial
40. Which of the following events occuring statements?
after the reporting period would generally
require adjustment of the financial (A) Provide a disclosure note only in the
statements? 2021 financial statements.
(B) Provide a disclosure note only in the
(A) Retirement of the General Manager 2020 financial statements.
(B) Issue of a large amount of capital (C) Adjust the 2020 financial statements
stock and provide a disclosure note.
(C) Employee strikes that shut down (D) Adjust the 2021 financial statements
the company for one month and provide a disclosure note.
(D) Settlement of a lawsuit when the
event that gave rise to the matter
occurred prior to the balance
sheet date

02101010/CAPE/SPEC 2022
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44. During periods of inflation or deflation, the 45. Creditors with liens against assets whose
historical cost model for financial reporting realizable value is more than the amount
is deficient because of the claim are called
(A) comparative financial statements (A) priority creditors

are published only for the three (B) unsecured creditors
years prior (C) fully secured creditors
(B) the historical cost model uses (D) partially secured creditors
numerous estimates for revenue
and expense
(C) the historical cost model recognizes
revenues and expenses before
they are actually realized
(D) it adds and subtracts dollars with
different purchasing power
without adjusting for those
differences
END OF TEST
IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.
02101010/CAPE/SPEC 2022
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CANDIDATE’S RECEIPT
INSTRUCTIONS TO CANDIDATE
1. Fill in all the information requested clearly in capital letters.
TEST CODE 0 2 1 0 1 0 1 0
SUBJECT ACCOUNTING − UNIT 1 − Paper 01
PROFICIENCY ADVANCED
REGISTRATION NUMBER
FULL NAME ________________________________________________________________

(BLOCK LETTERS)
SIGNATURE _________________________________________________________________
DATE _______________________________________________________________________
2. Ensure that this slip is detached by the Supervisor or Invigilator and given to you when you
hand in this booklet.
3. Keep it in a safe place until you have received your results.
INSTRUCTION TO SUPERVISOR/INVIGILATOR
Sign the declaration below, detach this slip and hand it to the candidate as his/her receipt for this booklet
collected by you.
I hereby acknowledge receipt of the candidate’s booklet for the examination stated above.
Signature _____________________________
Supervisor/Invigilator
Date _________________________________
CARIBBEAN ADVANCED PROFICIENCY

EXAMINATION
ACCOUNTING - UNIT 1
SPECIMEN PAPER 2022
Question SO Key Question SO Key

1 1.2.2 D 24 2.6.6 D
2 1.6.6 C 25 2.1.1 C
3 1.2.2 D 26 2.1.1 A
4 1.1.1 C 27 2.8.8 C
5 1.7.7 D 28 2.4.4 A
6 1.5.5 C 29 2.6.6 D
7 1.4.4 D 30 2.6.6 A
8 1.5.5 B 31 3.6.6 B
9 1.5.5 D 32 3.6.6 A
10 1.5.5 A 33 3.6.6 B
11 1.3.3 B 34 3.8.8 C
12 1.5.5 A 35 3.6.6 B
13 1.5.5 A 36 3.6.6 B
14 1.5.5 D 37 3.5.5 A
15 1.5.5 C 38 3.5.5 A
16 2.12.12 B 39 3.4.4 B
17 2..1.1 C 40 3.3.3 B
18 2.1.1 C 41 3.9.9 A
19 2.11.11 D 42 3.7.7 C
20 2.10.10 B 43 3.4.4 C
21 2.10.10 C 44 3.2.2 D
22 2.9.9 C 45 3.9.9 C
23 2.9.9 B
02101010/CAPE/SPEC 2022
‘‘*’’Barcode Area”*”
Front Page Bar Code
SPECIMEN PAPER
FILL IN ALL THE INFORMATION REQUESTED CLEARLY IN CAPITAL LETTERS.
TEST CODE 0 2 1 0 1 0 2 0
SUBJECT ACCOUNTING – UNIT 1 – Paper 02
REGISTRATION NUMBER
SCHOOL/CENTRE NUMBER
NAME OF SCHOOL/CENTRE
CANDIDATE’S FULL NAME (FIRST, MIDDLE, LAST)

Current Bar Code
DATE OF BIRTH D D M M Y Y Y Y
SIGNATURE __________________________________________________
Sequential Bar Code
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TEST CODE 02101020
SPECIMEN 2022
ACCOUNTING
UNIT 1 – Paper 02
2 hours 45 minutes
INSTRUCTIONS TO CANDIDATES
1. This paper consists of THREE questions.
2. EACH question is worth 35 marks.
3. ALL questions are COMPULSORY.
4. Begin EACH answer on a new page.
5. Silent non-programmable calculators may be used, but ALL

necessary working should be clearly shown.
DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.
Copyright © 2022 Caribbean Examinations Council

All rights reserved.
02101020/CAPE/SPEC 2022
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DO NOT WRITE IN THIS AREA DO NOT WRITE IN THIS AREA DO NOT WRITE IN THIS AREA
MODULE 1
ACCOUNTING THEORY, RECORDING AND CONTROL SYSTEMS
1. (a) The Paradise Cove Inn has the following internal control procedures over cash receipts
and disbursements. Explain the internal control principle that is applicable to EACH
procedure.
(i) Company cheques are pre-numbered.
(ii) The bank statement is reconciled monthly by an internal auditor.
(iii) Cheques must be signed by the financial controller and an operations assistant.
(iv) Cash is secured in a locked vault with access restricted to the financial controller.
(v) The person who receives cash and cheques from customers must not be the same
person who updates customers’ records.
[10 marks]
(b) The table below presents a number of accounting procedures and practices in Golden Drop
Corporation. Each item listed violates an accounting assumption, principle, information
characteristic or modifying convention.
Item
Item Description
Number
1 An officer of Golden Drop Corporation charges the cost of his life insurance
premium as an administrative expense.
2 Equipment which cost $120 000 is reported at the current market value of
$150 000.
3 Golden Drop Corporation recognized all its sales revenue on a cash basis.
4 Golden Drop Corporation wishes to change from the straight-line method
of depreciation to the reducing balance method of depreciation in order to
reflect a higher net profit.
5 Golden Drop Corporation’s lawyers advised the company that it could
possibly be awarded $3 000 000 in damages and Golden Drop recorded the
amount as a receivable.
For EACH item, identify and state the purpose of the assumption, principle, information
characteristic or modifying convention that is being violated.
[15 marks]

02101020/CAPE/SPEC 2022
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(c) The Charter of Chestnut Corporation authorizes the issuance of 15 000 shares of Class A
preferred stock, 3 000 shares of Class B preferred stock par value $50 and 30 000 shares of
common stock at $1 par value. During the month of December, the following transactions
occurred.
Dec 1 Issued 4 000 shares of common stock at $12.50.
Dec 4 Sold 600 Class A preferred stock at $5.00, for $3 000 cash.
Dec 7 Purchased a 7-year, 10% $100 000, long-term bond at par.
Dec 15 Acquired equipment with market value of $25 000 in exchange for 12 500
shares of $1 par common stock.
Dec 27 Issued 2 000 of Class B preferred shares. The issue price was $60 per share.
Dec 28 From the profits, transferred $20 000 to a general reserve and $10 000 to a
foreign exchange fluctuation reserve.
Prepare the journal entries for the transactions above. [10 marks]
Total 35 marks

02106020/CAPE/SPEC 2022
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MODULE 2
PREPARATION OF FINANCIAL STATEMENTS
2. (a) (i) Chanika, Sabena and Jason are thinking of starting a business. Advise on whether
they should select a partnership or a company, stating THREE reasons to justify
your choice. [3 marks]
(ii) Distinguish between EACH of the following characteristics of a sole proprietorship

and a cooperative.
• Legal status
• Equity
[4 marks]

02101020/CAPE/SPEC 2022
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(b) Tar-sell Incorporated, specialising in the sale of kitchenware, had the following trial balance
extracted from the company’s books for the financial year ending 31 December 2022.
Debit ($) Credit ($)

Cash 25 050
Accounts receivable 64 050
Allowance for doubtful debts 13 500
Merchandise inventory 57 000
Store supplies 8 250
Investment 142 500
Store equipment 127 500
Accumulated depreciation – Store equipment 27 000
Delivery equipment 72 000
Accumulated depreciation – Delivery 13 500
equipment
Accounts payable 72 750
Utilities payable 4 200
Notes payable 90 000
Issued ordinary share captial 60 000
Share premium 105 000
Retained earnings 51 375
Sales 1 131 000
Sales returns and allowances 6 300
Purchases 692 400
Purchases returns, allowances and discounts 22 200
Rent and utilities expense 57 000
Freight-in 16 200
Salaries expense 210 000
Advertising expense 19 800
Delivery expense 36 000
General expense 32 175
Interest expense 24 300
Total 1 596 225 1 596 225

02101020/CAPE/SPEC 2022
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Additional Information
1. Store supplies used amounted to $4 250 at the end of the period.
2. Depreciation is charged on all fixed assets at the rate of 20 per cent per annum using the
straight-line basis.
3. Merchandise inventory on hand at 31 December 2022 is $60 000.
4. Bad debts expense is estimated at 2 per cent of net sales.
5. $50 000 of the notes payable is due for payment the following year.
6. The corporation tax rate is 30 per cent.
7. Accounts receivable includes $2 750 due from a customer who went into liquidation on
15 December 2022 and is irrecoverable.
8. Other expenses are distributed as shown in the following table.
SELLING % ADMINSITRATIVE %
Salaries expense 60 40
Rent and utilities expense 70 30
General expense 100 -
9. The investments are government bonds that will mature on 1 December 2033. The bonds
pay 8 per cent interest annually and were acquired in 2019.
Required:
Prepare EACH of the following financial statements for Tar-sell Incorporated at yearend in
accordance with the requirements of the International Financial Reporting Standards (IFRS) for
SMEs.
(i) Statement of Comprehensive Income [16 marks]
(ii) Statement of Changes in Equity [3 marks]
(iii) Statement of Financial Position [9 marks]
Total 35 marks

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MODULE 3
FINANCIAL REPORTING AND INTERPRETATION
3. (a) Explain how EACH of the following concepts applies to the established ethical behaviour
of accountants.
• Integrity
• Objectivity
• Confidentially
[9 marks]
(b) The following was extracted from the books of Glide Ltd.
Statement of Financial Position as at 31 December 2022
2021 2022
Non-Current Assets $ 000 $ 000 $ 000 $ 000
Property, plant and equipment at cost 940 920
Less accumulated depreciation (320) (326)

620 594
Investments 215 325
835 919
Current Assets
Inventory 136 170
Trade receivables 109 97
Investments 23 50
Bank 80 118
Cash 40 388 62 497
1 223 1 416
EQUITY & LIABILITIES
Capital & Reserves

Common shares 650 700
General reserves 40 55
Retained earnings 181 871 371 1126
Non-Current Liabilities
10% Debenture 170 170
Curent Liabilities
Trade payables 156 102
Tax 15 10
Interest 11 182 8 120
1 223 1 416

02101020/CAPE/SPEC 2022
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Additional Information
• Data from the Statement of Profit and Loss and the Statement of Changes in Equity for the
period ended 31 December 2022 revealed the following:
$ 000
Operating profit 325
Interest (17)
Profit before tax 308
Tax (77)
Net income 231
Dividends paid (26)
Transfer to reserves (15)
Profit for the year 190
Retained earnings b/d 181
Retained earnings c/d 371
• During the year ending 31 December 2022, the company sold equipment costing $60 000,
with an accumulated depreciation of $42 000 for $24 000.
Required:
Using the indirect method, prepare a statement of cash flows for the year ended 31 December
2022, in accordance with Section 7 IFRS for SMEs (IAS7).
[20 marks]

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(c) Calculate EACH of the following for Glide Ltd for 2022.
(i) Return on total assets [2 marks]
(ii) Debt to equity [2 marks]
(iii) Times interest earned [2 marks]
Total 35 marks
END OF TEST
IF YOU FINISH BEFORE TIME IS CALLED, CHECK YOUR WORK ON THIS TEST.
02101020/CAPE/SPEC 2022
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EXTRA SPACE
If you use this extra page, you MUST write the question number clearly in the box provided.
Question No.
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02101020/CAPE/SPEC 2022
- 13 -
EXTRA SPACE
If you use this extra page, you MUST write the question number clearly in the box provided.
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02101020/CAPE/SPEC 2022
DO
NO
W T
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TE
TH ON
IS
PA
GE
DO
NO
W T
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IS
PA
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CANDIDATE’S RECEIPT
INSTRUCTIONS TO CANDIDATE
1. Fill in all the information requested clearly in capital letters.
TEST CODE 0 2 1 0 1 0 2 0
SUBJECT ACCOUNTING − UNIT 1 − Paper 02
REGISTRATION NUMBER
FULL NAME ________________________________________________________________

(BLOCK LETTERS)
SIGNATURE _________________________________________________________________
DATE _______________________________________________________________________
2. Ensure that this slip is detached by the Supervisor or Invigilator and given to you when you
hand in this booklet.
3. Keep it in a safe place until you have received your results.
INSTRUCTION TO SUPERVISOR/INVIGILATOR
Sign the declaration below, detach this slip and hand it to the candidate as his/her receipt for this booklet
collected by you.
I hereby acknowledge receipt of the candidate’s booklet for the examination stated above.
Signature _____________________________
Supervisor/Invigilator
Date _________________________________
02101020/CAPE/K/MS/SPEC 2022
C A R I B B E A N E X A M I N A T I O N S C O U N C I L
ACCOUNTING
UNIT 1 — PAPER 02
KEYS AND MARK SCHEME
SPECIMEN 2022
-2-
02101020/CAPE/K/MS/SPEC 2022
ACCOUNTING
UNIT 1 — PAPER 02
MODULE 1
ACCOUNTING THEORY, RECORDING AND CONTROL SYSTEMS
Question 1.
Specific Objectives: 1.1
(a) (i) The company’s use of pre-numbered cheques ensures

documentation procedures, since all cheques are in a series
and therefore can be accounted for in the records.
[2 marks]
(ii) The monthly reconciliation of the bank statement by an

internal auditor allows for independent internal verification
since bank and cash book balances are compared.
[2 marks]
(iii) Cheques being signed by the financial controller and

operations assistant establishes responsibility, since only
two persons are authorized. Having two persons also ensures
that the information is valid and accurate.
[2 marks]
(iv) Cash secured in a locked vault with access restricted to the

financial controller represents physical control by
safeguarding the assets.
[2 marks]
(v) The person who receives cash and cheques from customers must
not be the same person who updates customers’ records; this
ensures that the recording of the transaction and custody of
the contents of the transaction are separate.
[2 marks]
1 mark for partial explanation and two marks for complete

explanation.
-3-
02101020/CAPE/K/MS/SPEC 2022
ACCOUNTING
UNIT 1 — PAPER 02
Question 1. (continued)
ITEM
(b) (i) Separate Legal Entity
The business is seen as separate and distinct from its owners,

so that finances of the firm should not be comingled with that
of the officer’s or owners of the company.
(ii) Historical Cost Concept
Assets should be reported and presented at their original cost

unless permitted by another principle or convention such as
the lower of cost or market.
(iii) Revenue Recognition
Revenue should be recognized and recorded in the period in

which it is earned rather than when it received, that is,
credit sales should be recognized as revenue.
(iv) Consistency Principle
In a business, similar items must be treated in a similar

manner in the accounting period and from one accounting period
to the next. However, should a change be made, it should be
disclosed in the notes to the financial statements.
(v) Prudence Concept
Expenses and liabilities should not be understated and

revenues and assets should not be overstated in the accounting
period. Revenues should be recognized when they are realized
or assured.
1 mark awarded for identification of the assumption,

principle, characteristic that is being violated.
1 mark for partial explanation of EACH assumption, principle,
characteristic and 2 marks for complete explanation
(3 marks) x5
[15 marks]
-4-
02101020/CAPE/K/MS/SPEC 2022
ACCOUNTING
UNIT 1 — PAPER 02
(c) Dec 1 Cash 50 000

Common Stock 4 000
Share Premium 46 000
[2 marks]
1 mark is awarded for partially correct journal entry.
Dec 4 Cash 3 000

Preference Stock - Class A 3 000
[1 mark]
Dec 7 Investment in Long Term 100 000

Security
Cash 100 000
[1 mark]
Dec 15 Equipment 25 000

Common Stock 12 500
[2 marks]
Dec 27 Cash 120 000

Preference Stock – Class B 100 000
[2 marks]
Dec 28 Retained earnings 30 000

General reserve 20 000
Foreign Exchange Fluctuation
Reserve 10 000

[2 marks]
Total 35 marks
-5-
02101020/CAPE/K/MS/SPEC 2022
ACCOUNTING
UNIT 1 — PAPER 02
MODULE 2
PREPARATION OF FINANCIAL STATEMENTS
Question 2.
Specific Objectives: 1.2.1, 1.2.3, 1.2.4, 1.2.11
(a) (i) Some reasons for forming a company:
• The business is a separate legal entity from the owners.

• Allows access to more funding and establishing business
credit.
• Business acquires more credibility.
• Adds a layer of privacy for owners.
• Greater possibility for continuity of the business.
• Prevents misunderstanding among those who formed the
business.
Some reasons for forming a partnership:
• Sharing of the work burden

• Greater access to knowledge, skills, experience and contacts
• Shared and better decision-making
• Fewer legal obligations and less formal business entity
• Very easy to get started
• Some partners may enjoy limited liability
Any three from either company or partnership – 1 mark each
(ii) Distinguish between EACH of the following characteristics of a

sole proprietorship and a cooperative:
Sole proprietorship Cooperative

Legal status Legally the owner is not Separate legal entity
separate from the business.
Equity Made up of capital + profit Made up of shares,
(-losses) reserves and any
undistributed surplus
1 mark for each statement 4 marks

-6-
02101020/CAPE/K/MS/SPEC 2022
ACCOUNTING
UNIT 1 — PAPER 02
(b) (i)
Tar-sell Incorporated
Statement of Comprehensive Income for the year ended 31 December, 2023
$ $ $
Sales 1 621 000
Sales Returns 6 300
Net Sales (1) 1 624 700
Cost of Goods Sold

Opening Inventory
Purchases
Add: Freight 57 000*
Less: Purchase Returns 892 400*
Net Purchases 16200*
22 200*
Closing Inventory 886 400*
Cost of Goods Sold 943 400 (1) OF 883 400
Gross Profit 60,000* (1) OF 741 300
Distribution and Selling

Delivery equipment depreciation
(wk 1)
Advertising 14 400*
Delivery expense
Rent and Utilities (wk 2) 19 800*
Bad debt 36 000*
Salaries (wk 3) 39 900*
General expenses (wk 4) 2 750*
126 000* (264 590)
25 740*
Administrative expenses
General expense (wk 5)
Salaries (wk 6)
Store supplies 6 435*
Rent and Utilities (wk 7) 84 000*
Depreciation- Store Equipment 4250*
(wk 8) 17 100* (167 285)
55 500*
Finance Cost
Interest on Loans (1) (24300)
Profit before Tax (1) OF 285 125
Corporation Tax (wk 9) (1) OF 85 238
Net Income (1) OF 199 587
-7-
02101020/CAPE/K/MS/SPEC 2022
ACCOUNTING
UNIT 1 — PAPER 02
OF – Own figure
1 mark for every 2 correct answers/figures denoted by the (*)
Total – 16 weeks
Workings:
1. (20% x 72 000)
2. (70% x 57 000)
3. (60% x 210 000)
4. (0.8 x 32175)
5. (0.2 x 32175)
6. (40% x 210 000)
7. (30% x 57 000)
8. (20% x 277 500)
9. (30% x 285 125)
(b) (ii) Tar-sell Incorporated
Statement of Changes in Equity for the year ended 31 December, 2023
$
Profit for the year (1) OF 199 587
Retained earnings b/f (1) 51 375
Dividend __ - _____
Retained earnings c/f (1) OF 250 963
[3 marks]
-8-
02101020/CAPE/K/MS/SPEC 2022
ACCOUNTING
UNIT 1 — PAPER 02
(b) (iii)
Tar-sell Incorporated
Statement of Financial Position as at 31 December, 2023
$ $ $
ASSETS
Non-Current Assets
Property, Plant and

Equipment
Store equipment: Cost 277 500

Accumulated depreciation 82 500
(1) 195 000
Delivery Equipment: Cost

Accumulated depreciation 72 000
27 900
Investment in Government (1) 44 100 239 100
Bonds
292 500*
Current Assets 531 600
Store Supplies (wk 1)
Merchandise Inventory
Accounts Receivable (wk 2) 4000*
Cash 60 000*
47 800*
Total Assets 25 050*
136 850
EQUITY AND LIABILITIES 668 450
Equity
Ordinary Share Capital 60 000*
Share Premium
Retained Earnings 105 000*
OF 250 962* 415 962
Non-Current Liabilities
Note Payable (wk 3)
(1) 40 000
Current Liabilities
Note Payable (wk 3)
Corporation Tax Payable
Utilities Payable 50 000*
Accounts Payable 85 538*
4 200*
Total Equity and Liabilities 72 750* 212 488
668 450
-9-
02101020/CAPE/K/MS/SPEC 2022
ACCOUNTING
UNIT 1 — PAPER 02
Total -9 marks
1 mark for every 2 correct answers/figures denoted by the (*)
Workings:
1 (8250-4250)
2 (64 050-2750-13 500)
3 (90 000-50 000)
Total 35 marks
-10-
02101020/CAPE/K/MS/SPEC 2022
ACCOUNTING
UNIT 1 — PAPER 02
MODULE 3
FINANCIAL REPORTING AND INTERPRETATION
Question 3.
Specific Objectives: 1.3.1, 1.3.5, 1.3.6
(a) Integrity requires that the accountant be straightforward and honest

in all professional and business relationships. It extends to fair
dealing in all business activities and truthfulness. Objectivity
requires acting without bias, refraining from conflict of interest in
all interactions and transactions and acting without undue influence
of others to override professional or business judgements.
Confidentiality means to act, in accordance with the law, respect the
confidentiality of information and not disclose any such information
to third parties without proper and specific authority. Confidential
information acquired as a result of professional and business
relationships shall not be used for the personal advantage of the
member or third parties.
1 mark is awarded for an explanation that includes or refers to the
underlined points, maximum 9 marks
(b)
Glide Ltd
Statement of Cash Flow for the year ended December 31 2022 Marks
Cashflow from Operating Activities $000 $000
Net profit before interest and tax 325 (1)
Adjustments for:
Profit on disposal of assets (6)1 (2)
Depreciation 482 (2)
Decrease in Trade receivables 12 (1)
Increase in Inventories (34) (1)
Decrease in Trade payables (54) (1)
Interest paid (20)3 (2)
Taxation paid (82)4 (2)
Net cashflow from operating activities: 189

-11-
02101020/CAPE/K/MS/SPEC 2022
ACCOUNTING
UNIT 1 — PAPER 02
Cashflow from Investing Activities
Purchase of PPE (40)5 (2)
Proceeds from the sale of PPE 24 (1)
Purchase of long-term investments (110) (1)
Net cashflow from investing activities (126)
Cashflow from financing activities
Proceeds issue of shares 50 (1)
Dividend paid (26) (1)
Net cashflow from financing activities 24
Net increase in cash and cash

equivalents during the year 87 (1)
Cash and Cash equivalents at the start

of period 143 (1)
Cash and Cash equivalents at the end of

period 230
20
Workings:
1 Profit on disposal of assets = 24 – (60 – 42)
= 24 – 18 [1 mark]
= 6 [1 mark OF]
2 Depreciation = 326 + 42 – 320 [1 mark]
= 48 [1 mark OF]
3 Interest paid = 17 + 11 - 8 [1 mark]

= 20 [1 mark OF]
4 Taxation paid = 77 + 15 – 10 [1 mark]

= 82 [1 mark OF]
5 Purchase of PPE = (920 + 60) - 920 [1 mark]

= 40 [1 mark OF]
-12-
02101020/CAPE/K/MS/SPEC 2022
ACCOUNTING
UNIT 1 — PAPER 02
(c) Glide Ltd Ratios
(i) Return on Assets = Net Income

Average Total Assets
Average Total Assets = (1 223 000 + 1 416 000)/ 2
= 1 319 500
Return on Total Assets = 231 000 x 100
1 319 500
= 17.51%
[2 marks]
(ii) Debt to Equity = Total Debt

Total Equity
= 170 000 + 120 000
1 126 000
= 25.75%
[2 marks]
(iii) Times Interest Earned = Income before Tax and Interest

Interest Expense
= 325 000
17 000
= 19.12 times
[2 marks]
Total 35 marks

Accounts U1 Spec2022

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Accounts U1 Spec2022

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TEST CODE 02101010

CARIBBEAN ADVANCED PROFICIENCY EXAMINATION®

READ THE FOLLOWING INSTRUCTIONS CAREFULLY.

2. In addition to this test booklet, you should have an answer sheet.

The cost of an asset consumed in the generation of

8. You may do any rough work in this booklet.

9. Figures are not necessarily drawn to scale.

10. You may use a silent, non-programmable calculator to answer items.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

Copyright © 2021 Caribbean Examinations Council

5. Which of the following statements does

(A) Recording expenses when paid

GO ON TO THE NEXT PAGE

(A) double entry

(B) Cash 90 000

(C) Cash 80 000

(D) Cash 80 000

(B) Cash 9 000

(C) Share capital 7 500

(D) Share capital 9 000

GO ON TO THE NEXT PAGE

11. Which of the following tasks is a function

(A) $105 000

GO ON TO THE NEXT PAGE

(A) all nationals of that state

GO ON TO THE NEXT PAGE

(D) Current Liabilities – $ 15 000

GO ON TO THE NEXT PAGE

32. A Caribbean company made credit sales last

(A) Debit to land account for $400, 000

GO ON TO THE NEXT PAGE

33. Information relating to Black River Company’s shares is as follows:

What is the price-earnings ratio on common stock for 2022?

(A) asset turnover Total Liabilities $ 80 000

What is Justin Inc.’s debt-to-equity ratio?

GO ON TO THE NEXT PAGE

42. Which of the following are limitations of

Using the lower-of-cost-or-market method

GO ON TO THE NEXT PAGE

(A) comparative financial statements (A) priority creditors

1. Fill in all the information requested clearly in capital letters.

SUBJECT ACCOUNTING − UNIT 1 − Paper 01

FULL NAME ________________________________________________________________

3. Keep it in a safe place until you have received your results.

CARIBBEAN ADVANCED PROFICIENCY

SPECIMEN PAPER 2022

Question SO Key Question SO Key

CARIBBEAN ADVANCED PROFICIENCY EXAMINATION®

FILL IN ALL THE INFORMATION REQUESTED CLEARLY IN CAPITAL LETTERS.

SUBJECT ACCOUNTING – UNIT 1 – Paper 02

CANDIDATE’S FULL NAME (FIRST, MIDDLE, LAST)

CARIBBEAN E XAM I NAT I O N S COUNCIL

CARIBBEAN ADVANCED PROFICIENCY EXAMINATION®

1. This paper consists of THREE questions.

2. EACH question is worth 35 marks.

3. ALL questions are COMPULSORY.

4. Begin EACH answer on a new page.

5. Silent non-programmable calculators may be used, but ALL

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO.

Copyright © 2022 Caribbean Examinations Council

ACCOUNTING THEORY, RECORDING AND CONTROL SYSTEMS

(i) Company cheques are pre-numbered.

(ii) The bank statement is reconciled monthly by an internal auditor.

GO ON TO THE NEXT PAGE