Centre Number

Candidate Number

Name

CAMBRIDGE INTERNATIONAL EXAMINATIONS

General Certificate of Education Ordinary Level
PRINCIPLES OF ACCOUNTS

7110/02

Paper 2
May/June 2003
1 hour 45 minutes
Candidates answer on the Question Paper.
Additional Materials:
Multi-column Accounting Paper

READ THESE INSTRUCTIONS FIRST

Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen in the spaces provided on the Question Paper.
You may use a soft pencil for rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Answer all questions.
Question 5 should be answered on pages 11 and 12 or multi-column accounting paper. If you use multicolumn accounting paper, attach your answer to Question 5 to this booklet.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
You may use a calculator.
Where layouts are to be completed, you may not need all the lines for your answer.
The businesses mentioned in this Question Paper are fictitious.

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1

If you have been given a label, look at the

details. If any details are incorrect or
missing, please fill in your correct details
in the space given at the top of this page.
Stick your personal label here, if
provided.

2
3
4
5
Total

This document consists of 10 printed pages and 2 lined pages.

SP (SJF2745) S39591/4
UCLES 2003

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Peter Dlaminis Cash Book (bank column) had a debit balance of $515 on 30 April 2003.
This did not agree with the bank statement of the same date, which showed a balance of
$290.
The Cash Book was checked against the bank statement and the following differences were
found:
1.

Cheques totalling $620 issued to creditors had not been presented to the bank for
payment.

2.

An amount of $950 paid into the bank did not appear on the bank statement.

3.

Cash sales deposited into the bank amounting to $390 had been omitted from the Cash
Book.

4.

The bank had received $150 by credit transfer (bank giro) from Klerk for Dlaminis
account. Dlamini had not been advised.

5.

A cheque for $315 received from Joseph had been paid into the bank but it had now
been returned unpaid. No action has been taken by Dlamini.

6.

The following transaction by the bank had not been recorded in the Cash Book:
Bank charges $120

REQUIRED:
(a) Prepare an up-dated and balanced Cash Book.
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(b) Prepare a correctly headed statement to reconcile the adjusted Cash Book balance with
the bank statement balance at 30 April 2003.

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N. Mann is a sole trader who does not keep the books of the business on the double entry
system. However, the following information is available from the records:

Debtors
Creditors
Stock

1 January 2002
$
8 480
7 560
4 360

31 December 2002
$
10 160
6 200
5 640

All sales and purchases are made on a credit basis.

Receipts from debtors during the year ended 31 December 2002 amounted to $54 800.
Payments to creditors during the year ended 31 December 2002 amounted to $32 640.
REQUIRED:
(a) Calculate the sales and purchases totals for the year ended 31 December 2002.
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(b) Give the basis for the valuation of stock. Suggest why businesses use this basis.
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(c) Calculate the rate of stock turnover.
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(d) Explain how Mann could use the information from (c).
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The details of the capital structure of Mahon Ltd are as follows:

Authorised Share Capital
3 000 000 ordinary shares of $1 each
300 000 12% preference shares of $1 each
300 000 10% preference shares of $1 each
Issued Share Capital
800 000 ordinary shares of $1 each, fully paid, issued on 15 May 1971
200 000 12% preference shares $1 each, fully paid, issued on 15 May 1995
150 000 10% preference shares $1 each, fully paid, issued on 30 June 2002
150 000 10% preference shares $1 each, fully paid, issued on 31 December 2002
Loan Capital
$400 000 10% debentures repayable 31 December 2009, issued on 1 January 1999
During the year ended 31 December 2002, the company made a trading profit of $284 000
before payment of interest.
No interim dividends were paid during the year. The directors decided to pay the dividends
due on the preference shares, to transfer $50 000 to General Reserve, and to recommend a
dividend of 15% on the ordinary shares.
The balance of profit brought forward from 2001 was $10 600.
REQUIRED:
(a) Prepare the Profit and Loss Appropriation Account for the year ended 31 December
2002.
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(b) Describe three features of each of the following different types of capital:
1.

Preference shares

2.

Debentures

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4
Summarised Balance Sheet of W. Chell at 31 December 2002

Fixed Assets
Current Assets
Stock
Debtors
Cash

$
37 400
29 000
12 200
1 800

$
60 000
18 800
78 800
30 000
48 800

Capital
Net Profit
Drawings

43 000
Long Term Loan
Current Liabilities
Trade Creditors
Accrued Expenses

5 000
25 000
1 600
26 600

80 400

80 400

REQUIRED
(a) Calculate as at 31 December 2002:
(i)

the Working Capital

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(ii)

the owners capital

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(iii)

the Capital Employed

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(b) Explain what the figures for current assets and current liabilities tell you about Chells
financial position at 31 December 2002.

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Information regarding the years 2000 and 2001:

31 December 2000
31 December 2001

Working Capital
$

Owners Capital
$

Net Profit
$

37 000
28 000

70 000
60 000

16 000
17 500

(c) Using the results of your calculations for (a)(i) and (ii) and the information above,
comment on the trends disclosed by the figures. Advise Chell on any course of action
he should follow.
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A. Tree was in business as an import merchant and the following balances were extracted
from his books on 31 December 2002:

Purchases
Sales
Wages
Motor Expenses
Sundry Expenses
Air Freight Charges on Purchases
Rent and Rates paid
Interest on loan from Sure
Loan from Sure at 1 January 2002
Creditors
Debtors
Stock at 1 January 2002
Fittings and Equipment
Motor Vehicles
Cash at Bank
Capital
Drawings

$
124 000
236 000
32 800
10 700
600
20 200
11 200
900
10 000
10 280
25 200
14 240
9 800
44 000
4 360
61 720
20 000

Additional information:
1.

Stock at 31 December 2002 was valued at $17 920.

2.

Motor vehicles are to be depreciated by 20%.

3.

Interest on the loan by Sure is at the rate of 12% per annum and has been paid to
30 September 2002.

4.

A provision for doubtful debts of 5% of debtors is to be made.

5.

One-quarter of the wages was for staff employed in re-packaging the goods for sale.

6.

Rates amounting to $800 had been paid in advance for the year 2003.

REQUIRED:
(a) Prepare the Trading Account and the Profit and Loss Account for the year ended
31 December 2002.
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(b) Prepare the Balance Sheet as at 31 December 2002.

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