London Examinations Igcse: Accounting

Surname Initial(s)
Centre
Paper Reference
No.
4 3 0 5 0 1
Candidate
Signature
No.
Paper Reference(s)
4305/01 Examiner’s use only
London Examinations Team Leader’s use only
IGCSE
Accounting Question Leave
Number Blank
Paper 1 1
Friday 3 November 2006 – Afternoon 2
Time: 2 hours 30 minutes 3

4
5
Materials required for examination Items included with question papers 6
Nil Nil
Instructions to Candidates
In the boxes above, write your centre number, candidate number, your surname, initials and signature.
Answer ALL the questions in Section A and Section B in the spaces provided in this question paper.
The paper reference is shown at the top of this page. Check that you have the correct question paper.
Final accounts and balance sheet may be set out in a range of acceptable forms. You may draw up
your own ruling for final accounts and balance sheet.
Ledger accounts and books of original entry should be completed (if required) in the format required
by the layout given.
Information for Candidates

The total mark for this paper is 100.
The marks for individual questions and the parts of questions are shown in round brackets: e.g. (2).
There are 6 questions in this question paper. Any blank pages are indicated.
There are 4 ruled pages at the end of this question paper which you may use if you cannot fit your
answer in the space provided.
Advice to Candidates
You are reminded of the importance of clear English and careful presentation in your answers.
Total
This publication may be reproduced only in accordance with
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©2006 Edexcel Limited.
Printer’s Log. No.
M24650A
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Acc151002_M24650A_IGCSE_Accounti1 1 21/09/2006 10:01:36

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Section A
Answer ALL questions
Question 1
For each question, choose the best answer A, B, C or D and write it in the box.
(a) In a trial balance, which one of the following accounts would be correctly shown as a
credit balance?
A Cash
B Capital
C Machinery
D Drawings
(1)
(b) Which one of the following transactions would be recorded in the journal?
A credit purchase of a fixed asset
B credit sale of goods to a customer
C cash purchase of raw materials
D return of faulty goods
(1)
(c) An opening credit balance of £550 in the bank account in a firm’s cash book means
A the account is overdrawn at the bank by £550
B the owner’s capital is £550
C the firm’s cash balance is £550
D the firm has £550 in the bank
(1)
(d) A cashier keeps the petty cash book using the imprest system. This means
A the chief cashier has to authorise each payment of petty cash
B the petty cashier requests money from the chief cashier as required
C the petty cashier starts each period with the same amount of money
D a copy has to be kept of each petty cash voucher
(1)
(e) Which one of the following items would appear in the appropriation account of a
partnership?
A partners’ drawings
B interest on partners’ capitals
C partners’ loans
D partners’ capitals
(1)

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(f) In a limited company, the reserves belong to which of the following?
A directors
B creditors
C debenture holders
D ordinary shareholders
(1)
(g) A provision for bad debts account would be created when

A bad debts are written off
B a debtor ceases trading
C a debtor becomes bankrupt
D risk of bad debts is assessed
(1)
(h) For a manufacturing business, direct material + direct labour + direct expenses equals
A prime cost
B administration costs
C factory overheads
D cost of raw materials consumed
(1)
(i) In company final accounts, debenture interest is

A debited in the appropriation account
B credited in the trading account
C shown as a long term liability in the balance sheet
D debited in the profit and loss account
(1)
(j) If a business has sales of £80 000, opening stock of £6 000, closing stock of £10 000 and
a profit margin of 20%, what is the rate of stock turnover?
A 8 times
B 7.5 times
C 6 times
D 5 times
(1) Q1
(Total 10 marks)

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Question 2
Throughout this question, assume that the rate of VAT is 10%.
D Davies’s business sells computer equipment. During August 2006, D Davies received the
following invoices from suppliers.
Aug 10 Cameron Ltd, goods at list price £700 less 20% trade discount plus VAT (no
cash discount was offered on this transaction).
Aug 24 Fox Ltd, goods value £1 500 plus VAT. The invoice offered a cash discount of
2.5% for payment within 10 days.
(a) Enter the above items into the purchases journal for August 2006. Total the purchases
journal at the end of the month.
Purchases Journal
Date Narration Goods VAT Total
(6)

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During August, D Davies returned some goods to his suppliers and the following credit notes
were received.
Aug 17 Cameron Ltd, goods at list price £60 (these were some of the goods supplied
on 10 August).
Aug 29 Howard Computing, goods at list price £650 less a trade discount of 25% plus
VAT (no cash discount had been offered on the invoice for these goods).
(b) Prepare the returns outwards journal and total it at the end of the month.
Returns Outwards Journal
Date Narration Goods VAT Total
(6)
Question 2 continues on next page


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As well as the information recorded in the purchases and returns outwards journals, the
following details are available regarding Cameron Ltd.
Aug 1 Balance of account: £5 000 credit.
Aug 4 Cheque sent in full settlement of the balance on 1 August less a cash discount
of 10%.
(c) Prepare the account of Cameron Ltd in D Davies’s purchases ledger. Balance the account
on 31 August and bring the balance down.
Cameron Ltd Account
Date Narration £ Date Narration £
(5)

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In addition to the VAT arising from credit purchases and returns outwards, the following
transactions included VAT.
Aug 8 Purchase of new cash register from Major Ltd, on credit £2 000 plus VAT.
Aug 13 Purchase of stationery by cheque £440 including VAT.
Aug 31 Cash sales for the month totalled £10 450 including VAT.
(d) Starting with the opening credit balance b/d of £1 650 at 1 August, prepare the VAT
account in D Davies’s nominal (general) ledger. Balance the account on 31 August and
bring down the balance.
VAT Account
(6)
(e) (i) State where the closing balance of the VAT account would be shown in the balance
sheet.
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(ii) State why it appears there.
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(2) Q2
(Total 25 marks)


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Question 3
Gobi D Ltd is a medium-sized business. At the end of the company’s financial year on
30 June 2006, the following balance sheet was drafted by a new trainee accountant. You have
established that the figures were obtained from a correct trial balance.
Gobi D Ltd
Balance Sheet
as at 30 June 2006
£000 £000
Plant and Machinery 300 Ordinary Share Capital (Issued) 5 000
Ordinary Share Capital 8 000 Freehold Premises 5 000
(Authorised)
Trade Creditors 10 Stock 30 June 2006 400
Profit and Loss Account Balance
960 Stock 1 July 2005 350
30 June 2006
Cash at Bank (Cr) 50 Motor Vehicles 350
Provision for Depreciation Provision for Depreciation
75 180
30 June 2006 30 June 2006
(Motor Vehicles) (Plant and Machinery)
Cash In Hand 50 Bank Loan (Repayment in 2010) 75
‘Balancing Figure’ 2 160 Debtors 250
11 605 11 605

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(a) Prepare a correct balance sheet for Gobi D Ltd as at 30 June 2006 showing clearly
fixed assets, current assets, current liabilities, long-term liabilities, working capital and
shareholders’ funds.
Gobi D Ltd
Balance Sheet
as at 30 June 2006
(11)


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(b) Distinguish between authorised share capital and issued share capital.
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(6)
(c) Using an example in each case, evaluate the importance of the consistency concept and
the accruals concept when preparing final accounts.
Consistency concept
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Accruals concept
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(8) Q3
(Total 25 marks)
TOTAL FOR SECTION A: 60 MARKS
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Section B
Answer all questions
Question 4
On 30 September 2006, the totals of the trial balance drawn up for Indira’s business did not
agree. The difference was entered in a suspense account. An investigation of the difference
revealed the following errors relating to the period for which the trial balance had been
prepared.
l The sales day book had been overcast by £240
l No entries had been made for stock £750 taken by Indira for her own use
l Goods purchased for £1 250 from the Pointer brothers had been posted to their
account as £1 520
l £85 discount allowed to Farmer & Co had been debited to their account
l A credit purchase from A Patel for £500 had been credited to the account of L Patel
(a) Set out the journal entries for the items that do not involve the suspense account. Narrations
are required and must state the type of error involved.
General Journal
Debit Credit
(3)
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(b) Write up the suspense account, including the opening balance. Assume that the trial
balance totals agree after the errors have been corrected.
Suspense Account
(4)
(c) Before discovery of the errors, which side of the trial balance was deficient (lighter) and
by how much?
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(2)
(d) State why a trial balance which agrees may not provide a true check of accuracy. Use an
example to support your answer.
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(3) Q4
(Total 12 marks)
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Question 5
On 1 April 2004, Charles Simpson purchased new vehicles for his business at a cost of
£35 000. He intends keeping the vehicles for 4 years and estimates that they will have a scrap
value of £11 000 at that time.
Charles is aware of the need to depreciate the new vehicles but is unsure whether to write off
the depreciation by the straight line or the diminishing (reducing) balance method.
(a) Calculate depreciation for the years ended 31 March 2005 and 31 March 2006, using the
straight line method.
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(2)
(b) Write up the provision for depreciation of vehicles account as it should appear for the
years ended 31 March 2005 and 31 March 2006 under the reducing balance method, using
a rate of 20% per annum.
Provision for Depreciation – Vehicles Account
(6)
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(c) State two reasons why vehicles depreciate.
Reason 1
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Reason 2
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(2)
(d) (i) Using an example in each case, explain the meaning of capital expenditure and
revenue expenditure.
Capital expenditure
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Revenue expenditure
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(4)
(ii) Why is it important to distinguish between capital expenditure and revenue

expenditure?
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(2) Q5
(Total 16 marks)
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Question 6
(a) Using an example in each case, explain the meaning of profitability and liquidity.
Profitability
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Liquidity
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(4)
One business use of computerised accounting software is in stock control.
(b) Explain one other business use of computerised accounting software.
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(2)
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(c) Explain how the use of a computerised accounting program can improve the speed and
accuracy of the accounting process.
Speed
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Accuracy
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(6) Q6
(Total 12 marks)
TOTAL FOR SECTION B: 40 MARKS

TOTAL FOR PAPER: 100 MARKS
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London Examinations Igcse: Accounting

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Surname Initial(s)

4305/01 Examiner’s use only

London Examinations Team Leader’s use only

Time: 2 hours 30 minutes 3

Information for Candidates

Acc151002_M24650A_IGCSE_Accounti1 1 21/09/2006 10:01:36

Answer ALL questions

(g) A provision for bad debts account would be created when

(i) In company final accounts, debenture interest is

Acc151002_M24650A_IGCSE_Accounti3 3 21/09/2006 10:01:36

Throughout this question, assume that the rate of VAT is 10%.

Date Narration Goods VAT Total

Returns Outwards Journal

Date Narration Goods VAT Total

Question 2 continues on next page

Acc151002_M24650A_IGCSE_Accounti5 5 21/09/2006 10:01:36

Aug 1 Balance of account: £5 000 credit.

Cameron Ltd Account

Date Narration £ Date Narration £

Aug 13 Purchase of stationery by cheque £440 including VAT.

Date Narration £ Date Narration £

(ii) State why it appears there.

Acc151002_M24650A_IGCSE_Accounti7 7 21/09/2006 10:01:36

Acc151002_M24650A_IGCSE_Accounti9 9 21/09/2006 10:01:36

TOTAL FOR SECTION A: 60 MARKS

Acc151002_M24650A_IGCSE_Accounti11 11 21/09/2006 10:01:36

Answer all questions

l The sales day book had been overcast by £240

Date Narration £ Date Narration £

Acc151002_M24650A_IGCSE_Accounti13 13 21/09/2006 10:01:37

Provision for Depreciation – Vehicles Account

Date Narration £ Date Narration £

(ii) Why is it important to distinguish between capital expenditure and revenue

Acc151002_M24650A_IGCSE_Accounti15 15 21/09/2006 10:01:37

One business use of computerised accounting software is in stock control.

(b) Explain one other business use of computerised accounting software.

TOTAL FOR SECTION B: 40 MARKS

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