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EXAMTIMES2013P19

WHERE STRATEGY COUNTS

Students should make sure they understand exactly how much time they should spend on each question, advises Arthur Russell

Business

Balance, Final Accounts, Economics, Banking and Finance, Business Documents, and Club 4 minutes reading time Business Studies (Honours) 29 minutes for each ques- Accounts. has 2 papers Other very important areas tion include Insurance, At Work Total marks: 400 Every year there has been a and The Consumer. Paper 1 - 2 hours (240 marks) question on Budgeting, Trial Paper 2 - 2 hours Section A: 80 Marks - Answer 20 short questions (no choice) Section B: 160 Marks - Answer 4 questions out of (All questions carry 40 marks in Section B) Paper 2 - 2 hours (160 marks) Answer 4 questions out of 6. (All questions carry equal marks, of 40 marks per question.)

EXAM STRUCTURE

GENERAL ADVICE
1. Answer your favourite topic
first of all. This will give you the feel good factor and make you more relaxed when answering the rest of the paper.

working calculator. the time limits listed above. Students often run out of time and 4. Purchase previous examinamay have only ten minutes left tion papers and practise as when answering their last ques- many questions as possible from these papers. tion.

2. Stick as close as possible to

3. Make sure you have a good 5. The

FREQUENCY OF EXAM TOPICS (Excluding Section A of Paper 1)

bookkeeping section can be predicted quite easily. This section cannot be learnt and must be practised continuously. Areas like Final Accounts, the Trial Balance and Club Accounts are examined every year. In previous years these three topics have accounted for over 30 per cent of the total marks from Paper 1 and Paper 2. more than the four questions on Paper 1 (Section B) and on Paper 2. You will be marked out of your four best questions.

6. If you have the time, answer

TIMING
Paper 1 - 2 hours 5 minutes reading time Section A - 45 minutes Section B - 25 minutes for each question

7. Have plenty of rough work pages for calculations and keep these close to the relevant questions.
question make sure to state your point, give a brief explanation of your point and cap it off with an example.

8. When answering any theory

9. Do not leave the examination hall early.

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TYPICAL ACCOUNTING QUESTIONS

The following areas must be included in your study plans. It is important to remember that this is not an exhaustive list of topics nor is it meant to be a list of questions that will appear in the Junior Cert 2013. All figures below are in count and as a minus from fixed assets in balance sheet. The following is a suggested solution: Trading Account for year ending December 31st, 2012

FINAL ACCOUNTS OF LIMITED COMPANIES

This is a question which is examined every year in Paper 2. The following Trial Balance was extracted from the books of N. Halloran and N. Lawlor Ltd. on 31 Dec. 2012. The Authorised Share Capital is 500,000 1 Ordinary shares. Trial Balance Profit and Loss Account for year ending December 31st, 2012

This is a question which is examined every year in Paper 2. Kate Dempsey and Emer Downes Ltd had the following balances in the general journal on the May 1st, 2012. General Journal

BOOKS OF FIRST ENTRY & LEDGER

Balance Sheet as at December 31st, 2012

You are given the following additional information on December 31st, 2012. 1) Closing stock 22,000. 2) Insurance prepaid 500. 3) Rent receivable prepaid 2,000. 4) Depreciation: machinery 25 per cent of cost per annum. motor vehicles 20 per cent of cost per annum. You are required to prepare the companys trading, profit and loss and appropriation accounts for the year ending December 31st, 2012 and a balance sheet as on that date. Before we begin a number of points must be considered: a) On the debit side of the trial balance appears all of the expenses and assets. On the credit side appears all of the gains and liabilities. b) Every item in the trial balance appears once in the trading, profit and loss and balance sheet. c) All of the adjustments appear twice in the trading, profit and loss and balance sheet as follows: 1. Closing stock is recorded in the trading account and in the balance sheet as a current asset. 2. Insurance prepaid is recorded in the profit and loss account as a minus from the insurance paid figure and in the balance sheet as a current asset. 3. Rent receivable prepaid is recorded in the profit and loss account as a minus from the rent receivable figure and in the balance sheet as a current liability. 4. Depreciation is recorded as an expense in the profit and loss ac-

a) Post the balances in the general journal to the relevant ledger accounts. b) Post the relevant figures from the purchases and sales books to the ledgers. Purchases Day Book

Sales Day Book

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EXAMTIMES2013P21
The rule for posting to the ledger from the cash book is switch the sides. items in the analysis columns on the debit side of cash book are entered on the credit side of the ledger and vice versa. Don't forget to enter the end of month cash book balance of 60,200 in the trial balance. The Ledger Accounts of Dempsey and Downes Ltd.

c) Record the following bank transactions for the month of May. Post the relevant figures to the ledger. Note: analyse the bank transactions using the following money column headings: Debit side: bank, sales, VAT, capital. Credit side: bank, purchases, VAT, creditors, rent. 3/5/2012 purchases for resale (cheque no.1) 40,000 plus VAT at 23 per cent. 5/5/2012 cash sales lodged 98,400 (80,000 plus VAT of 18,400). 13/5/2012 paid A. Enright (cheque no.2) 45,000. 19/5/2012 paid rent (cheque no.3) 14,000. 29/5/2012 capital invested in the business lodged to bank 50,000. d) Balance the accounts on 31/5/12 and extract a trial balance. BEFORE WE BEGIN ANSWERING THIS QUESTION IT IS IMPORTANT TO KNOW THE FOLLOWING There are six main books of first entry:

This is used for recording returns by the business to creditors. There are no purchases returns in this question. Posting to the ledger enter on the opposite sides to purchases in point two (The Purchases Book) above. Credit the purchases returns account with the net figure. Credit the VAT account with the vat figure. Debit the creditors account with the total figure.

3. The Purchases Returns Book

4. The Sales Book

This is used for recording sales of trading goods on credit to debtors. In this question the sales book is already given. When posting to the ledger the following rules are used: Credit the Sales account with the net figure. Credit the Vat account with the vat figure. Debit the Debtors account with the total figure.

1. The General Journal

One of the most important uses of the general journal is for the recording of the assets and liabilities at the start of the month. Always enter assets on the debit side of the journal and liabilities on the credit side. The rule for posting to the ledger is as follows keep the same sides in the ledger as in the general journal. in this question the general journal is given.

5. The Sales Returns Book

This is used for recording returns by debtors to the business. There are no sales returns in this question.

This is used for recording the purchase of trading goods on credit from creditors. In this question the purchases book is given. When posting to the ledger the following rules are used: Debit the purchases account with the net figure. Debit the VAT account with the VAT figure. Credit the creditors account with the total figure.

2. The Purchases Book

Posting to the ledger enter on the opposite sides to the sales book in point four above. Debit the sales returns account with the net figure. Debit the VAT account with the vat figure. Credit the debtors account with the total figure.

This is used for recording the receipts and payments of cash/cheques. In this question you are asked to present a cash book, which you complete as shown below.
The cash book.

6. The Cash Book

Trial Balance as at 31/05/12

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THE ACID TEST

RATIO ANALYSIS
SOLUTION This Question may appear in Paper 1 or Paper 2. 1. Acid Test Ratio this is a liquidity measurement which shows whether or not the company is able to pay its current liabilities out of its liquid assets. Liquid assets are assets that can be easily conThe following is a typical ratio analysis question. F Maguire and L verted into cash. Morgan Ltd is a squash ball manufacturing company. Examine the following final accounts and balance sheets for 2011 and 2012 Formula: Current Assets Closing Stock and compare and comment on the performance and state of affairs of the company for the two years. Include as part of your Current Liabilities answer the following: 2011 30000 8,000 1. The acid test ratio. = 0.41: 1 2. The return on capital employed. 54,000 3. The gross Profit Margin . 4. The rate of dividend paid. 2012 74,000 10,000 5. The stock turnover ratio. = 2.1: 1 6. Mark-up. 30,000 2011 Income Statement 5. Stock Turnover measures the number of times the average stock is sold off each year. Formula: Cost of Sales Average Stock Average Stock = opening stock + closing stock 2 2011 134,000 13.4 ti 10,000 152,000 9,000 =13.4 times 2012 = 16.9 times The norm is 1:1. In the year 2012 the company is liquid, ie it can pay In 2012 the company is selling off its average stock nearly 17 times its current liabilities out of its liquid assets. For every 1 of current which is a big improvement on 2011. The high stock turnover liabilities there is 2.1 of liquid assets. might indicate that this business is involved in the grocery trade.

Balance Sheet

2012 Income Statement

2. Return on Capital Employed this is a measurement of profita- 6. The Mark-Up This is another measure of profitability. bility or how efficiently management is using the resources made available to it by its shareholders and by the banks. Formula: Gross Profit X 100 Formula: Net Profit Cost of Sales Capital Employed x 100 2011 466,000 = 347.8% 2011 366,000 134,000 X 100 = 54.14% 676,000 x 100 2012 208,000 = 136.84% 2012 58,000 152,000 X 100 = 9.01% 644,000 x 100 The mark-up has fallen substantially but is still extremely high in 2012. The firm is profitable earning a return well in excess of the return from risk free investments of three per cent. However profitability is declining so management would want to take steps to eliminate this decline such as cutting expenses and raising revenue. CONCLUSION The firm is liquid, highly profitable (even though profitability is disimproving rapidly) and is paying an excellent dividend to its shareholders. 3. Gross Profit Margin this is another measure of profitability. Other ratios and percentages that could be examined are: Formula: Gross Profit X 100 1. The Current Ratio: Current Assets Sales Current Liabilities 2011 466,000 X 100 = 77.67% 2. The Net Profit Percentage: Net Profit 600,000 X 100 Sales 2012 208,000 X 100 = 57.8% 360,000 The gross margin has fallen from 78 per cent in 2011 to 58per cent in 2012 but is still way above the average of 30 per cent.

4. Rate of Dividend Paid the dividend is the part of the profit paid to the shareholders. Balance Sheet Formula: Dividend Share Capital X 100 30,000 70,000 X 100 20,000 70,000 x 100 = 42.8%

2011

2012

= 28.57%

The dividend has worsened on the 2011 figure but is still way above the average of three per cent. Shareholders would be very happy with their return.

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EXAMTIMES2013P23

CORRECTIONS AND RECONCILIATIONS

BANK RECONCILIATION STATEMENTS
The following information should also be considered at 31/12/2012: 1) Bar Stock 14,000. Rory Murphy Ltd. has a current account in the Katie Mullin Bank. Note: remember to switch sides when completing task number 2) Subscriptions due 8,000. The company received the following Bank Statement on Decem- two and task number three. 3) Subscriptions prepaid 3,000. ber 31st, 2012: 4) Depreciation Equipment by 20per cent. 3. Correct the bank statement by entering the items in the cash 5) Insurance due 2,000. book not yet in the bank statement, into the bank statement as Prepare: shown below. a) A bar trading account for year ending 31/12/2012. b) An income and expenditure account for year ending SOLUTION 31/12/2012. c) A balance sheet as at 31/12/2012. Cash Book 2. Correct the cash book by entering the items on the bank statement not yet in the cash book into the cash book as shown below. SOLUTION a) Bar Trading Account for y/e 31/12/2012

The company compared the above bank statement with its own cash book records below : Cash Book

Bank Reconciliation Statement as at 31/12/2011

b) Income & Expenditure Account for y/e 31/12/2012 The closing balance in the cash book of 1,005 now equals the closing balance in the bank statement of 1,005.

CLUB ACCOUNTS
You are required to: a) Correct the cash book. b) Prepare a bank reconciliation statement. This question normally appears in Paper 1. The T Hennessy Tennis Club had the following assets and liabilities at 1/1/2012: premises 620,000; bar stock 3,000; cash 50,000; From the above you can see that the balance in the cash book of accumulated fund 673,000. The Club treasurer I Byrne has pro1,145 is different from the balance on the bank statement of vided the following account of the clubs activities during the year for the Chairperson D Eppel and for the Secretary J Fehily. 275. PROCEDURE 1. Tick off the items that appear in both the cash book and the bank statement and you will find a number of items not in both. a) In the cash book and not in the bank statement there are two items: Dec. 31 Lodgement of 800 Dec. 19 Cheque paid to C. White (no.133) for 70 b) In the bank statement not in the cash book there are four items: Dec. 15 Standing Order 130 Dec. 17 Direct Debit 90 Dec. 19 Credit Transfer 110 Dec. 29 Bank Charges 30 Receipts and Payments Account

c) Balance Sheet as at 31/12/2012

As can be seen from this question club accounts are very similar to final accounts except that the terminology is changed: The receipts and payments account is the same as a cash book. The income and expenditure account is the same as a profit and loss account. Excess of income is the same as net profit. Accumulated fund is the same as capital.

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THE IRISH TIMES

OTHER AREAS OF BOOKKEEPING

1. CONTROL ACCOUNTS
Total Credit Purchases Total Purchases Returns Total Cash paid to Creditors A popular Section A question on Paper 1 is one on a Debtors or a E. Matthews Ltd., a grocer, purchased a computer on credit from Creditors Control Account, e.g. from the following information M. McCrea Ltd for 3,000 on the 30/9/2012. Record the above in prepare the Creditors Control Account of Yogi Bear Ltd. the general journal and the ledger of E. Matthews Ltd. 85,000 9,000 24,000 Because this is the purchase of a non-trading good on credit it should be entered in the General Journal of E. Matthews Ltd. as follows: General Journal

TYPICAL
CONSUMER QUESTION
This question normally appears in Paper 1. On 5th of April 2012 O. McHale, 62 South Street, New Ross, Co Wexford bought a new 60-inch colour Smart television for 900 from T. Eccles Limited, Rathgar, Dublin 6. It was delivered on 9th April and when Oscar turned it on, all he received was a black and white picture. On 10th of April 2012, Oscar wrote to the sales manager of Eccles Ltd. describing the problem. Oscar also included proof of purchase and sought an immediate redress. a) Write the letter that Oscar sent to Eccles Ltd. on the 10th of April 2012. b) (i) Explain two forms of redress available to Oscar. (ii) Name the consumer law that applies in this case. (iii) State two relevant principles of consumer law that have been broken in this case. c) (i) Explain, with an example, the term impulse buying.

4. THE PURCHASE OF FIXED ASSETS

Creditors Control Account

If asked to complete a Debtors Control Account the entries are on the opposite sides to the above: Debtors Control Account

This transaction is entered in the books by using the rule Debit the Receiving Account (Computer) and Credit the Giving Account, which is (M. McCreaLtd.) When posting to the ledger put the entries on the same sides as the General Journal as shown below:

(ii) Identify 4 characteristics of a good consumer.

SOLUTION
a) 62 South Street, New Ross, Co. Wexford Sales Manager, T. Eccles Ltd., Rathgar, Dublin 6. 10 April 2012

2. INSURANCE PREPAID

On 1 July 2012, N. Garvey and C. Greenblatt Ltd paid its insurance premium of 8,000 for 12 months from that date. The insurance account had an opening debit balance of 3,000 on 1 Jan 2012. Show the Insurance Account for the year ended 31/12/2012. Insurance Account

Re: Colour Television

The 4,000 balance at 31 December 2012 is the insurance prepaid for 6 months of the year 2013. The 8,000 paid is for the period from 1 July 2012 until 30 June 2013, therefore six twelfths of 8,000 equals the 4,000 prepaid going into the year 2013. The amount prepaid is subtracted from the amount paid to reduce the amount sent to the Profit and Loss Account. Also the 4,000 prepaid is recorded as a Current Asset in the Balance Sheet at the 31/12/2012.

3. LIGHT & HEAT DUE

M. Harnett Ltd. owed 1,300 for light and heat on the 31/12/2012. Light and Heat paid on the 30/9/2012 is 4,000. Show the Light and Heat Account for the year ending 31/12/2012. Light and Heat

The 1,300 due (not yet paid) at the end of the year is added to the amount paid of 4,000 to increase the amount sent to the Profit and Loss Account to 5,300. Also the 1,300 due is recorded as a Current Liability in the Balance Sheet at the 31/12/2012.

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EXAMTIMES2013P25

NON-ACCOUNTING QUESTIONS
Privatisation of semi state bodies Dear Sir, Corporation Tax I wish to register a complaint in relation to a 60 inch colour Social Welfare Smart television which I bought from your shop on the 5th April Infrastructural Expenditure 2012 for 900. Education The television has not worked for me, as it only shows a black Servicing of the National Debt and white picture. I now want you to replace it with one that works properly. Please find an enclosed copy of the receipt as proof of purchase and I would like to hear from you as soon as possible. If this matter is not dealt with in an expeditious manner I will take SOLUTION it to the Small Claims Court, Yours faithfully, The National Budget for 2012 Oscar McHale. b) (i) One form of redress is a cash refund, Oscar is entitled to a cash refund. Another form of redress is that Oscar can choose to have the colour television replaced. (ii) The Sale of Goods and Supply of Services Act 1980. (iii) Goods must be of merchantable quality and must be fit for the purpose intended. c) (i) Impulse buying is purchasing an item that you hadn't planned to buy, e.g. walking into a store to buy milk and then subsequently buying an unplanned item such as chocolate as well. (ii) A good consumer is one who budgets and sticks to the budget. He is also one that shops around to get the best value. He knows his consumer rights and doesn't buy on impulse.
Minister

2,000 8,000 18,000 7,000 8,000 3,000

for Finance Michael Noonan delivering the 2013 Budget last December. PHOTOGRAPH: DARA MAC DNAILL

ECONOMICS QUESTION

b) In the above budget give one example of Capital Income and one example of Capital Expenditure. Capital Income is once-off, non-regular income of the state, e.g. privatisation of state assets. Privatisation is where the government sells off state assets, such as Eircom or Aer Lingus to the private sector. Capital Expenditure is once-off, non-regular expenditure of the state and an example of this type of expenditure is government spending on the infrastructure. c) State the effect on Irish government finances of the present slowdown in the level of economic activity. During a recession companies begin to lay off workers and unemployment rises. The level of income tax revenue received by the government falls and the level of government expenditure on social welfare rises. Consumer spending also falls and the government's tax take from VAT declines as well. All of this combines to worsen the state of government finances and its budget deficit increases. d) The Irish economy is regarded as a mixed economy, what does this mean? A mixed economy is one where the economy is organised in such a way that there is free enterprise and also government companies existing side by side. In Ireland we have private companies like Airtricity and government companies like the ESB operating in the same business environment. e) In recent times the has fallen in value against the Sterling. State one effect this might have on the Irish economy. The falling in value against the , makes imports from the UK into Ireland dearer and Irish exports going into the UK less expensive. This increases the level of economic activity in Ireland because more Irish goods will be sold in the UK. f) Tim Cullen plans to either buy a 20 year old Aston Martin or take an exotic holiday in Donegal. Explain the opportunity cost of deciding to buy the car. The opportunity cost is the cost of the alternative foregone. We all have limited income so we must make choices and in this case Mr. Cullen has decided to buy the car and therefore the opportunity cost is the exotic holiday.

This question normally appears in Paper 1. a) Show the National Budget for 2012 in the following circumstances : m PAYE 10,000 Health 11,000 VAT and Excise Duty 17,000

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P26EXAMTIMES2013

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MEN AT WORK
PEOPLE AT WORK QUESTION
This question can appear in Paper 1 or Paper 2. The following advertisement appeared in a newspaper:

BANKING QUESTION
This question can appear in Paper 1 or Paper 2. Joy Malone, Barretts Park, New Ross, Co. Wexford, has a current account in the Bank of Ireland, The Park, New Ross. The branch sorting code number is 93-16-27 and her current account number is 51526351. a) In the past Joy has paid her electricity bills by cheque and now, for convenience, she has decided to pay her future bills by Direct Debit. Her electricity account number is 645-778-512. Her contact telephone number is 051-443567.

SOLUTION a) (i)See completed direct debit below. (ii) 1. A standing order is an instruction given by you to the bank to take money from your account and transfer it into someone elses account, whereas a direct debit is where you give your creditor permission to withdraw money from your account. 2. A standing order is for fixed amounts of money only, whereas a direct debit is for variable and fixed amounts of money.

a) (i) Explain the six underlined terms in the advertisement above. (ii) Niall Garvey applied for the position and forwarded his Curriculum Vitae. List three pieces of information, which Niall would give on his CV other than his name, address and telephone number. b) Nialls application for a job in Matthews Ltd was successful. As an employee in the sales department, he may be entitled to commission. Also experienced staff often receives benefit-in-kind from the company. (i) Explain, with an example in each case, the terms benefit-inkind and commission. (ii) Explain, with an example, how work differs from employment. c) Matthews Ltd pays overtime on the basis that the first five hours are paid at time-and-a-half with double time thereafter. Calculate Nialls gross wage if he works 52 hours in a week. SOLUTION a)(i) Basic pay: this is payment for the normal working week of 40 hours before overtime is added and before deductions are taken away. Overtime: this is additional pay at a higher rate per hour for working in excess of the normal 40 hour week. Flexitime: this is where your employer allows you to work the required 40 hours at any time, within limits, during the week. Spreadsheet: this is a computer programme that allows the operator to do accounts and budgets on a computer. Any change to one figure will have a knock-on effect on all the other figures. Email: this is the sending or receiving of documents, messages or pictures electronically by computer. Equal opportunities employer: when employing workers an employer cannot discriminate on the basis of race, gender, religion, colour or age. (ii) Information on a CV should contain: (1) educational achievements; (2) work experience; (3) names of referees. b) (i) Benefit-in-kind: this is a non-financial reward which workers may receive, eg a company car, subsidised meals. Commission: a source of income for sales people based on the value of their sales earned, eg 10per cent of the sales revenue is commission. (ii) Employment is work with payment whereas work can be human effort without any payment received. A homeowner who paints his own house is not going to get paid so that is an example of work. Employment on the other hand is a painting contractor who is paid to paint your house. c) The answer here is 1,230, and the workings are as follows: Basic Pay: Overtime: (40 hours x 20) (5 hours @ 1.5 x 20) (7 hours @ 2 x 20) Total Pay: = 800 = 150 = 280 1,230

(iii) A Laser card is swiped in the retailers terminal or card reader. The amount is entered by the shopkeeper plus any cash back. On July 12th, 2012 she completed a direct debit instruction for the The buyer enters his PIN number. The amount of the purchases is electricity utility company. instantly transferred from the buyer's bank account into the seller's bank account by electronic means. Then a receipt is given to (i) Complete the direct debit instruction using the blank docu- the buyer. ment below. (ii)Explaintwodifferencesbetweenadirectdebitandastandingorder. b)(i)1. Has Joy a good consistent savings history? (iii) Explain how a Laser card operates. 2. Has she defaulted on any loans in the past? 3. What is her present income and is her job secure? b) Joy is applying for a loan of 2,000 to buy new furniture. (ii) Building societies, credit unions. (i) Give three examples of relevant questions that a bank manager would ask Joy before granting the loan. c) (i) $1,300 which is 1,000 multiplied by the sell rate of $1.30 (ii) Apart from commercial banks, name two other types of financial institutions that offer loans to customers. (ii) 1. Credit card: this is where the buyer buys goods but pays later. The credit card company pays the seller and then sends a monthly c) Joy is going on holidays to New York. She goes to her bank to statement to the buyer. If the buyer pays within a week to ten days change 1,000 into American Dollars and sees the following rates there will be no interest charged. If the account is not cleared withquoted: in that time a high rate of interest will be charged on the outstandCurrency Bank Sells Bank Buys ing balance. American Dollars 1.30 1.40 2 Travellers cheques: this is where cheques are pre-printed in vari(i) Calculate the total amount in American dollars that Joy will ous amounts of the currency required. They are paid for and receive. signed in the presence of a bank official when bought. They are (ii) Explain two suitable methods of payment, other than cash, signed again when being cashed and a passport is used to check that Joy could use while shopping in New York. the signatures.
Completed direct debit.

MICRO ECONOMIES
HOUSEHOLD BUDGET QUESTION
This question appears in Paper 1. When M. Stein checked her analysed cash book at the end of December 2012, she discovered that her actual income and expenditure for the 12 months differed from her budgeted figures due to the following: 1. The salaries of the Stein household increased by five per cent. 2. There are two children in the household and child benefit increased by 20 per child from September 1st, 2012. 3. The actual interest received for the year 2012 was 380. 4. The Stein household received 900 from the sale of an antique dressing table. 5. Mortgage payments increased by 15 per month from March 1st, 2012.

6. The Stein household enjoyed a no claims bonus, so their car insurance was 25 per cent less than budgeted. 7. The house insurance was 325 for the year. 8. Household costs were nine per cent greater than budgeted. 9. Car costs were 375 greater than budgeted. 10. Clothing and footwear costs were 300 less than budgeted. 11. Light and heat costs were six per cent less than budgeted. 12. Dental and medical costs were 2,500 in total for the year. 13. Entertainment costs averaged 100 per month except for the 3 months of June, July and December, which averaged 170. 14. Due to an engagement party, presents cost an additional 300. 15. Holidays were cancelled due to an illness in the family. a) Using the budget comparison sheet below enter the appropriate figures into the Actual column. Show the differences between the Actual and Budget figures by completing the column marked Difference. Note: use a plus sign if the Actual is greater than the Budget figure and use a minus sign if the Actual is less than the Budget figure.


BUSINESS DOCUMENTS QUESTION

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(i) What procedures would you recommend to Jorden Bukspan Ltd. when preparing and processing receipts? (ii) Complete Invoice No. 69 and Receipt No. 67 issued by Jorden BukspanLtd. (iii) Record the issue of the Invoice and the Receipt in the Sales Book and the Analysed Cash Book of Jorden BukspanLtd. SOLUTION (i) The procedures to be followed when preparing and processing receipts include: 1. Check the amount received against the invoice and credit note and statement. 2. Check the accuracy of the name and address of the debtor. 3. Insert the correct date. 4. Insert the amount of money received in figures and in words. 5. Sign the receipt. 6. File a copy of the receipt. 7. Record the amount received in the analysed cash book and in the debtors ledger.

EXAMTIMES2013P27

This question normally appears in Paper 2. On May 28th, 2012 Jorden Bukspan Ltd Ferry Bridge, New Ross, received Order No.4 from Ethan Brady Arnold Ltd., 121 John Street, New Ross, Co. Wexford for the following goods : 50 Leather Footballs @ 60 per Football. 50 Boxes of Squash Balls @ 80 per Box. 20 Basketballs @ 30 per Ball. All of the goods ordered were in stock except for the footballs. Jorden Bukspan Ltd. issued Invoice No. 69 for the goods in stock on June 1st, 2012. The invoice included the following terms: trade discount 30 per cent and VAT 23 per cent. On receiving the goods and the invoice on June 4th, 2012, Ethan Brady Arnold Ltd paid the amount due in full. Jorden Bukspan Ltd. issued Receipt No. 67 signed by Kara Stein on June 7th, 2012.

b) (i) What was the budgeted closing cash at the end of 2012? (ii) How much had the Stein household budgeted to save during 2012? (iii) What was the actual closing cash at the end of 2012? (iv) State by how much the Stein household exceeded their budgeted total expenditure. (v) Explain one possible reason why the Actual interest was more than the Budget interest. SOLUTION As you are answering the question cover the Actual column and see can you calculate the correct figures. a) Household budget of the Stein family see table at right. The total expenditure, line five, is found by adding lines two, three and four. The net cash, line six, is found by subtracting line five from line one. b) (i) 1,485 (ii) 85 (iii) 2,494 (iv) 1,231 (v) Deposit interest rates may have risen during the year or the Stein household may have invested more money in their bank account