Paper T3 (INT)

Certified Accounting Technician Examination

Intermediate Level

Maintaining
Financial Records
(International Stream)
Wednesday 9 December 2009

Time allowed: 2 hours

This paper is divided into two sections:

Section A – ALL 20 questions are compulsory and MUST
be attempted
Section B – ALL FOUR questions are compulsory and MUST
be attempted

Do NOT open this paper until instructed by the supervisor.

This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

Section A – ALL 20 questions are compulsory and MUST be attempted

Please use the Candidate Registration Sheet provided to indicate your chosen answer to each multiple choice question.
Each question is this section is worth 2 marks.

1 Estelle has prepared the following journal entry:

Debit Cash $500
Credit T Simpkins $500

What is the correct narrative for the journal entry?

A Cash sale to T Simpkins
B Cash purchase from T Simpkins
C Cash paid to T Simpkins
D Cash received from T Simpkins

2 On checking his ledger entries, Ade found the following errors:

(i) an invoice from a supplier has not been recorded; and
(ii) the debit entry of $500 for repairs has been correctly recorded, but the credit entry was recorded as $50.

Which of the above errors would cause a difference between the total of the debit balances and the total of the
credit balances when the trial balance is extracted?
A (i) only
B (ii) only
C both (i) and (ii)
D neither (i) nor (ii)

3 Which of the following statements describes the qualitative characteristic ‘relevance’?

A information which is free from material error
B information which is unbiased
C information which influences the decisions of a user
D information which can easily be understood

4 In the year to 30 November 2009, Lui accounted for $7,000 of expenditure on machinery repairs as the cost of a new
machine. Lui depreciates machinery on a straight-line basis over 10 years and charges depreciation for a full year in
the year an asset is acquired.

What is the effect of the error on Lui’s profit for the year to 30 November 2009?
A understated by $6,300
B understated by $7,700
C overstated by $6,300
D overstated by $7,700

2
5 In the financial year ended 31 October 2009, Edita sold a car for $5,600. The car had been bought in January 2006
for $14,000. Edita depreciates motor vehicles on the reducing balance basis at a rate of 25% per annum. She charges
a full year’s depreciation in the year an asset is bought, and no depreciation in the year it is sold.

What is the profit or loss on disposal of the car (to the nearest $1)?
A $306 loss
B $306 profit
C $2,100 loss
D $2,100 profit

6 When completing the extended trial balance, in which column should the balance for receivables allowance be
included?
A income statement debit
B income statement credit
C statement of financial position debit
D statement of financial position credit

7 Eva opened a suspense account with a debit balance of $99. She then discovered that:
– when recording a cash sale for $9 only the credit entry was made; and
– the balance on the sales account was under-cast by $90.

When these errors are corrected, what is the debit balance on the suspense account?
A nil
B $18
C $180
D $198

8 When completing the reconciliation between the balance on the receivables control account in the general ledger and
the total of the list of balances from the personal ledger, Emir discovered that a credit note for $47 issued to a customer
had been entered in the customer’s personal account as an invoice.

How will the total value of the list of balances change when the error is corrected?
A increase by $47
B increase by $94
C reduce by $47
D reduce by $94

9 Gilda is preparing her bank reconciliation statement. Following the necessary correcting entries, the balance on the
bank account in her general ledger is $4,782 credit. She still has to deal with the following:
(i) her bank charged fees of $365 to her account in error;
(ii) she has outstanding cheques totalling $1,745; and
(iii) she has an outstanding lodgement of $1,519.

What is the overdraft balance on her bank statement?

A $4,191
B $4,556
C $4,643
D $4,921

3 [P.T.O.
10 On checking his draft financial statements, Ricardo noted that he had omitted an accrual for $754 and a prepayment
for $388.

By how much is the value of his current assets understated?

A $388
B $366
C $754
D $1,142

11 Jerome’s receivables ledger has balances totalling $57,840. He has decided to write off an irrecoverable debt of $320.
His receivables allowance at the last year end was $1,368. He has calculated that this should be revised to $1,247.

What is the resulting charge to Jerome’s income statement?

A $199
B $441
C $1,567
D $1,688

12 At 31 October 2009, Lalia had a bank overdraft of $3,681 and a bank loan of $16,800. The bank loan is due to be
repaid by three payments of $5,600 on 1 April 2010, 1 April 2011 and 1 April 2012.

How should these amounts be reported in Lalia’s statement of financial position at 31 October 2009?
Current liabilities Non-current liabilities
A $3,681 $16,800
B $3,681 $11,200
C $9,281 $11,200
D $20,481 nil

13 At 1 November 2008 Borim had an accrual of $855 for fuel. During the year to 31 October 2009 he paid invoices
with a total value of $11,874. His closing accrual at 31 October 2009 was $962.

What is the charge for fuel in his income statement for the year to 31 October 2009?
A $10,057
B $11,767
C $11,981
D $13,691

14 Agnes sold some items of inventory which she had bought for $2,622, for $1,950 in cash.

How are her assets and capital affected by the sale?

Assets Capital
A reduced by $672 reduced by $672
B reduced by $2,622 reduced by $672
C increased by $672 increased by $2,622
D increased by $1,950 reduced by $672

4
15 Consider the following statements about going concern:
(i) financial statements must always be prepared on the going concern basis
(ii) if a business is not considered to be a going concern, financial statements should not be prepared

Which of the statements is/are correct?

A (i) only
B (ii) only
C both (i) and (ii)
D neither (i) nor (ii)

16 Val has extended and totalled her extended trial balance, but has not entered the profit or loss for the period. The total
of the statement of financial position debit column is less than the total of the statement of financial position credit
column.

Which of the following is correct?

A Val has made a profit, and the total of the income statement debit column will be less than the total of the income
statement credit column.
B Val has made a loss, and the total of the income statement debit column will be less than the total of the income
statement credit column.
C Val has made a profit, and the total of the income statement debit column will be greater than the total of the
income statement credit column.
D Val has made a loss, and the total of the income statement debit column will be greater than the total of the income
statement credit column.

17 At 30 November 2009, Marek’s trial balance includes the following balances:

$ $
Inventory at 1 December 2008 17,558
Trade receivables 31,749
Prepayments 3,629
Trade payables 24,928
Accruals 5,291
Bank account 1,827
Receivables allowance at 1 December 2008 683
Inventory at 30 November 2009 is valued at $18,736, and the receivables allowance is to be adjusted to $744.

What value should be reported on Marek’s statement of financial position at 30 November 2009 for current
assets?
A $51,543
B $52,192
C $52,253
D $53,370

18 Which of the following correctly calculates closing capital?

A Capital introduced + drawings – profit + opening capital
B Capital introduced – drawings + profit + opening capital
C Capital introduced + drawings + profit + opening capital
D Capital introduced – drawings – profit – opening capital

5 [P.T.O.
19 When carrying out a reconciliation between the non-current assets in her asset register and the assets which she can
physically identify, Wilma could not find one of the assets which is recorded in her asset register.
She thinks this could be because:
(i) no record was made when the asset was sold
(ii) the supplier’s invoice has not yet been received

Which of the reasons may explain the discrepancy?

A (i) only
B (ii) only
C both (i) and (ii)
D neither (i) nor (ii)

20 Wasim has prepared the following receivables reconciliation:

$
Total of list of balances 19,738
Discount not recorded in personal account (29)
–––––––
Balance on receivables control account 19,709
Invoice not recorded in day book 1,627
–––––––
21,336
Contra with payables ledger not recorded (2,628)
–––––––
18,708
–––––––
–––––––

What value should be reported in Wasim’s statement of financial position for receivables?
A $18,708
B $19,709
C $19,738
D $21,336

(40 marks)

6
Section B – ALL FOUR questions are compulsory and MUST be attempted

1 (a) Explain:
(i) the difference between assets and expenses; and (2 marks)
(ii) how each of these elements is treated in the financial statements. (2 marks)

(b) State TWO reasons for maintaining a non-current asset register, and indicate THREE items of information
which are normally recorded about each non-current asset. (5 marks)

(c) At 30 September 2008, closing inventory was incorrectly valued using the periodic weighted average method
instead of the first-in, first-out (FIFO) method.
During the year to 30 September 2008 prices have risen.
The error was not corrected until 30 September 2009, when the correct method (FIFO) was used.

Required:
Identify the effect on profit and net assets in the financial statements for:
(i) 2008; and (2 marks)
(ii) 2009. (2 marks)

(d) Explain two reasons for extracting a trial balance. (2 marks)

(15 marks)

7 [P.T.O.
2 At 30 November 2009, the balance on the payables control account in Ariadna’s general ledger was $80,130 and
the total of the list of balances on the suppliers’ personal accounts was $80,441. Investigation of the reasons for the
difference indicated the following:
(i) a credit note received from a supplier for $438 was omitted from the accounting records;
(ii) an invoice for $385 was correctly recorded in the purchase day book, but when posting to the supplier’s personal
account the value was entered as $358;
(iii) a payment of $1,000 was made to settle a balance of $1,012, but the discount was not recorded on the supplier’s
personal account;
(iv) a contra with the receivables ledger of $700 had been recorded in the supplier’s personal account, but no entry
was made in the control account;
(v) a debit balance of $63 on a supplier’s personal account was treated as a credit balance;
(vi) the purchase day book was under-cast by $900; and
(vii) a payment to a supplier for $320 was incorrectly recorded as drawings.

Required:

(a) Prepare the payables control account in the general ledger, including the necessary adjusting entries and the
corrected balance.
NOTE: Your answer MUST be presented in an acceptable format, which clearly indicates whether each entry is
a debit entry or a credit entry. Annotating an entry as ‘+’ or ‘–’ will NOT obtain marks. (5 marks)

(b) Prepare the reconciliation of the list of balances to the corrected balance on the payables control account in
the general ledger. (6 marks)

(c) For each of the adjusting entries in the payables control account in the general ledger, indicate which general
ledger account will be used to complete the double entry. (4 marks)

(15 marks)

8
3 Adnan and Boris are in partnership, sharing profits and losses in the ratio 2:3. The partnership maintains separate
capital and current accounts. The partners have prepared draft accounts for the year to 31 October 2009, which report
a profit of $27,850. This has been divided between the partners in the profit and loss sharing ratio, although the
partnership agreement states that interest is to be paid on the partners’ opening capital balances at a rate of 9% per
annum.
You have the following additional information:
(i) the following items have been included as part of the partnership’s business expenses for the year to 31 October
2009:
– the salary of $13,000 which Adnan is entitled to under the terms of the partnership agreement; and
– the partners’ drawings of $22,000 each.
(ii) the opening balances on the partners’ capital and current accounts were:
Capital Current
Adnan $20,900 credit $5,359 debit
Boris $23,100 credit $7,956 debit

Required:
Calculate:
(a) the correct net profit for the year to 31 October 2009; (2 marks)

(b) the correct amount of profit to be divided in the profit and loss sharing ratio; (4 marks)

(c) each partner’s total share of the corrected net profit; (4 marks)

(d) the closing balance on each partner’s current account at 31 October 2009; and (3 marks)

(e) the total assets less total liabilities of the partnership at 31 October 2009. (2 marks)

(15 marks)

9 [P.T.O.
4 During a burglary at his business premises, some of Deng’s accounting records were destroyed. All of the cash which
was on the premises was also stolen. Deng has asked you to calculate how much cash was stolen, and his net profit
up to the date of the burglary. You have agreed that the amount of cash stolen will be treated as a business expense
when calculating his net profit.
You have the following information:
(i) all of Deng’s sales are cash sales, at a mark up of 30%;
(ii) at the date of the burglary, the total amount due to suppliers was $17,855, and he had lodged $255,850 to his
bank account. $40,000 of this was a loan from a relative, and the rest was receipts from sales;
(iii) none of his inventory, which was valued at $7,246, was stolen;
(iv) cheques with a total value of $223,600 had been debited in his bank statement up to the date of the burglary.
This has been analysed as follows:
$
Payments to suppliers 165,570
Business expenses 34,815
Drawings 23,215;
(v) accrued expenses at the date of the burglary are estimated to be $1,044, and prepaid expenses at the same date
are estimated to be $373;
(vi) depreciation on non-current assets has been calculated as $11,800;
(vii) balances at the start of the period included:
$
due to suppliers 15,847
inventory 6,958
accrued expenses 752
prepaid expenses 519;
(viii) there were no outstanding cheques or lodgements when the last financial statements were prepared, or at the
date of the burglary; and
(ix) there was no cash on the premises at the start of the current accounting period.

Required:
Calculate:
(a) the value of purchases up to the date of the burglary; (2 marks)

(b) the gross profit up to the date of the burglary; (3 marks)

(c) the value of the cash which was stolen; and (3 marks)

(d) net profit up to the date of the burglary. (7 marks)

(15 marks)

End of Question Paper

10