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Exam AAT Accounting Qualification Diploma pathway Certificate Level Introductory Accounting (IAC) 2003 Standards Tuesday 2 December 2008 (afternoon) Time allowed - 3 hours plus 15 minutes’ reading time Please complete the following information in BLOCK CAPITALS: Student member number Desk number Venue code Date Venue name Important: This exam paper is in two sections. You should try to complete every task in both sections. We recommend that you use the 15 minutes’ reading time to study the exam paper fully and carefully so that you understand what to do for each task. However, you may begin to write your answers within the reading time, if you wish. We strongly recommend that you use a pen rather than a pencil. You may not use programmable calculators or dictionaries in the exam. Do NOT open this paper until instructed to do so by the Supervisor.

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This exam paper is in TWO sections. You must show competence in BOTH sections. So, try to complete EVERY task in BOTH sections. Section 1 contains 10 tasks and Section 2 contains 20 tasks. You should spend about 75 minutes on Section 1 and 105 minutes on Section 2. There is blank space for your workings on pages 10 and 17, but you should include all essential workings and calculations in your answers. Both sections are based on the business described below.

Introduction • Suki Jones is the owner of The Flower Chain, a business that supplies fresh flowers. • You are employed by the business as a bookkeeper. • The business uses a manual accounting system. • The VAT rate is 17.5%. • Double entry takes place in the main (general) ledger. Individual accounts of debtors and creditors

are kept in subsidiary ledgers as memorandum accounts. • Bank payments and receipts are recorded in the cash book, which is part of the double entry system. • Assume today’s date is 30 November 2008 unless you are told otherwise.

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Section 1 – Double entry bookkeeping and trial balance You should spend about 75 minutes on this section. Note: Show your answer with a tick, words or figures, as appropriate. Task 1.1 The following transactions all took place on 30 November and have been entered into the purchases day-book as shown below. No entries have yet been made in the ledger. Purchases day-book Date 2008 Details Invoice number Total £ VAT £ Net £

30 November Fresh Fields 163 2,585 385 2,200

30 November Scented Garden 3982 1,410 210 1,200

30 November The Daisy Chain 2001 799 119 680

30 November Petal Place S320 376 56 320

Totals 5,170 770 4,400

(a) What will be the entries in the subsidiary (purchases) ledger? Subsidiary (purchases) ledger

Account name Amount £ Debit

a Credit

a

(b) What will be the entries in the main ledger? Main ledger


a Credit

a

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Task 1.2 Sales credit notes have been prepared and partially entered in the sales returns day-book as shown below. (a) Complete the entries in the sales returns day-book by inserting the VAT and total amounts for

each invoice. (b) Total the last three columns of the sales returns day-book. Sales returns day-book Date 2008 Details Invoice number Total £ VAT £ Net £

30 November PVB Ltd CR31 200

30 November Carlow & Company CR32 80

Totals

Task 1.3 Refer to the sales returns day book in Task 1.2. (a) What will be the entries in the subsidiary (sales) ledger?

Subsidiary (sales) ledger


a Credit

a



a Credit

a

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Task 1.4 An amount of £26 has been withdrawn from the bank and placed in the petty cash box. What will be the entries in the main ledger? Main ledger


a Credit

a

Task 1.5 A cheque has been received from a credit customer, B H Trading Ltd, for £1,175. What will be the entries in the main ledger? Main ledger


a Credit

a

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Task 1.6 The following transactions all took place on 30 November and have been entered in the cash-book as shown below. No entries have yet been made in the ledgers. Cash-book Date 2008 Details VAT £ Bank £ Date

2008 Details VAT £ Bank £

30 Nov 30 Nov

Balance b/f Cash sales

315

16,6742,115

30 Nov 30 Nov 30 Nov 30 Nov 30 Nov 30 Nov

Fixtures and fittings Motor expenses Loan repayment Fresh Fields (creditor) Petal Place (creditor) Balance c/d

525 3,525

245500

5,0004,3265,193

315 18,789 525 18,789 1 Dec Balance b/d 5,193 (a) What will be the entries in the subsidiary (purchases) ledger? Subsidiary (purchases) ledger


a Credit

a



a Credit

a

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Task 1.7 On 30 November the opening balance in the discount received account was £552. On the same day a further discount was received of £56. Make the necessary entries in the discount received account to: (a) record the opening balance (b) record the discount received (c) close the account, showing clearly the balance carried down at 30 November (closing) and

brought down at 1 December (opening). Discount received Date 2008 Details Amount £ Date 2008 Details Amount £

Task 1.8 Flowers have been purchased by cheque from a supplier who does not offer The Flower Chain a credit account. What will be the entries in the main ledger to record the purchase of flowers for £280 plus VAT?


a Credit

a

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Task 1.9 Record the journal entries needed in the main ledger to deal with the information below. You do not need to give dates and narratives. (a) Sales of £500 have been credited to the sales returns account


a Credit

a

(b) Entries to record a bank payment of £125 for office expenses have been reversed.


a Credit

a

(c) There is a debit balance of £118 in the suspense account. The following two errors have now been

discovered:

• A bank payment of £299 has been entered in the cash book as £29. • Discount allowed of £388 has been omitted from the discount allowed account.


a Credit

a

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Task 1.10 Below is a list of balances to be transferred to the trial balance as at 30 November 2008. Place the figures in the debit or credit column, as appropriate, and total each column.

Account name Amount £ Debit £ Credit £

Motor vehicles 20,000

Fixtures and fittings 18,315

Cash at bank 5,193

Petty cash 50

Sales ledger control 54,250

Purchases ledger control 32,753

VAT (credit balance) 7,779

Loan from bank 6,500

Capital 43,969

Sales 149,118

Purchases 100,520

Purchases returns 1,030

Discount received 608

Bank interest received 117

Bank interest paid 80

Wages 25,320

Motor expenses 1,458

Office expenses 2,759

Rent and rates 10,500

Heat and light 632

Insurance 1,240

Advertising 225

Legal fees 800

Miscellaneous expenses 532

Totals

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Note: You may use this page for your workings.

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Section 2 – Tasks and questions You should spend about 105 minutes on this section. Notes: • You do not need to adjust any accounts in Section 1 as part of any of the following tasks. • Show your answer with a tick, words or figures, as appropriate. Task 2.1 The following is an extract from the coding lists used at The Flower Chain.

Supplier name Account code

The Daisy Chain Fresh Fields Growers Corner LBC Ltd Petal Place Raven Gardens Renata Flowers D Saunders Ltd Scented Garden Shah Displays Shore Flowers Vale Blooms Young and Brown

DAI001 FRE001 GRO001 LBC001 PET001 RAV001 REN002 SAU001 SCE002 SHA003 SHO004 VAL001 YOU001

Flower description Product code

Red daisies in boxes of 10 White carnations in boxes of 15 Yellow roses in boxes of 20 Purple asters in boxes of 20

DAIR10 CARW15 ROSY20 ASTP20

(a) What will be the supplier account codes for the new suppliers shown below?

Supplier name Supplier account code

P Venables Ltd

RJH Ltd

(b) What will be the product codes for the new flowers shown below?

Flower description Product code

Orange lilies in boxes of 10

Blue lupins in boxes of 15

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Task 2.2 On the first day of every month cash is drawn from the bank to restore the petty cash imprest level to £75. A summary of petty cash transactions during November is shown below. Opening balance on 1 November £22 Cash from bank on 1 November £53 Expenditure during month £16 (a) What will be the amount required to restore the imprest level on 1 December? £

(b) Will the receipt from the bank on 1 December be a debit or credit entry in the petty cash

book?

a Debit

Credit

Task 2.3 An invoice from a supplier has been received at The Flower Chain. The invoice has been damaged in the post and the only amount that can be seen is the VAT amount of £63. No discount has been offered. (a) What is the VAT exclusive (net) amount of the invoice?

Net amount: £

Workings: (b) What is the VAT inclusive (gross) amount of the invoice? Gross amount: £

Workings:

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Task 2.4 The Flower Chain was quoted £80 plus VAT for a supply of goods, but has now been offered a 10% trade discount. What will be the VAT-exclusive amount of the goods, after the discount has been taken? £

Task 2.5 A credit customer, ABC Ltd, has ceased trading, owing The Flower Chain £240 plus VAT. What will be the accounting entries needed in the main ledger to write off the net amount and VAT?


a Credit

a

Task 2.6 All of the accounting records at The Flower Chain are kept on a bookshelf in the reception office. The reception office is often unstaffed and usually unlocked. Identify THREE risks to the accounting information.

1.

2.

3.

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Task 2.7 Show whether each of the following items are capital or revenue expenditure by placing a tick in one column for each item.

Capital expenditure a

Revenue expenditure

a

Purchase of a delivery van

Purchase of office stationery

Cost of redecorating the office

Repair to delivery van

Purchase of specialist refrigeration equipment for storing flowers

Task 2.8 The Flower Chain accepts a variety of methods of payment from customers. Name FOUR different methods of payment that customers could use.

1.

2.

3.

4.

Task 2.9 What document would The Flower Chain issue for EACH of the following activities?

Activity Document to be used

Placing an order with a supplier

Detailing what purchase invoice amounts are included in a payment

Returning damaged goods to a supplier

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Task 2.10 Suki Jones offered to supply flowers for a friend’s wedding, free of charge. (a) Has a contract been formed?

a Yes

No

(b) Briefly explain your answer to (a). Task 2.11 Listed below are some of the amounts relevant to the payroll calculations for the month of December. Show whether each amount would be a debit or credit entry in the wages and salaries control account.

Debit

a

Credit

a

Gross wages

Net wages

Income tax

Social club fees

Task 2.12 Goods were returned to a credit supplier and a credit note has now been received. In what book of prime entry would the credit note be entered?

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Task 2.13 A supplier statement of account has been received showing an amount outstanding of £768. The subsidiary (purchases) ledger at The Flower Chain shows an amount outstanding of £650. Give TWO possible reasons for the difference. If your reasons involve an error, you must explain the error.

1.

2.

Task 2.14 A customer has requested a credit note in respect of the return of faulty goods. Name THREE source documents that could be used to prepare the sales credit note.

1.

2.

3.

Task 2.15 Complete the following sentences. The Flower Chain sends a/an ………………………………………….………….…… with goods, which must be signed by the customer to provide proof of delivery. The Flower Chain issues a/an ……………………………………………………..…… when an order is received, and sends it to the customer before the goods are despatched. Task 2.16 Show whether the following statements are true or false.

True

a

False

a

The journal is a book of prime entry.

The sales day book is part of the double entry book-keeping system.

A balance carried down will always be on the same side of an account as the balance brought down.

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Note: You may use this page for your workings.

Note:Please turn over for task 2.17

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Task 2.17 A summary of transactions with credit customers during November 2008 is shown below. (a) Show whether each entry will be a debit or credit in the sales ledger control account in the

main ledger. Sales ledger control account

Details Amount £Debit

a Credit

a Balance of debtors at 1 November 2008 48,125

Goods sold on credit 37,008

Receipts from credit customers 28,327

Discount allowed 240

Contra entry (set-off against purchases ledger control account) 2,316

(b) What will be the balance of creditors on 1 July on the above account? £54,250 £58,882 £54,730 £42,000

a

The following balances were in the subsidiary (sales) ledger on 1 December: £ J Hicks Ltd 3,298 Parks and Gardens 4,109 Greener Grass 18,250 TTL Ltd 18,106 Reeves and Wright 10,400 (c) Reconcile the balances shown above with the sales ledger control account balance you have

calculated in part (a).

£

Sales ledger control account balance as at 1 December 2008

Total of subsidiary (sales) ledger accounts as at 1 December 2008

Difference

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Task 2.17, continued The sales ledger control account and subsidiary (sales) ledger do not agree. (d) Which TWO of the following errors might have caused the difference?

a VAT has been overstated on an invoice.

VAT has been understated on an invoice.

A sales invoice has been entered in the subsidiary ledger twice.

A sales credit note has been entered in the subsidiary ledger twice.

A receipt from a customer has been omitted from the subsidiary ledger.

A receipt from a customer has been entered in the subsidiary ledger twice.

Note:Please turn over for tasks 2.18 – 2.20

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Task 2.18 Data On 28 November, The Flower Chain received the following bank statement as at 25 November.

High Street Bank plc The Concourse, Badley, B72 5DG

To: The Flower Chain Account no: 28710191 Date: 25 November 2008

STATEMENT OF ACCOUNT Date 2008 Details Paid out £ Paid in £ Balance £ 03 Nov Balance b/f 9,136 C 07 Nov Cheque 110870 6,250 2,886 C 17 Nov Cheque 110872 2,250 636 C 21 Nov Cheque 110865 3,670 3,034 D Direct Debit – Insurance Ensured 500 3,534 D 21 Nov Bank Giro Credit – BBT Ltd 10,000 6,466 C 24 Nov Bank Giro Credit – Petals Ltd 2,555 9,021 C Direct Debit – Rainbow Ltd 88 8,933 C 25 Nov Cheque 110871 1,164 7,769 C

D = Debit C = Credit The cash-book as at 28 November is shown below. Cash-book

Date 2008 Details Bank £ Date 2008 Cheque no. Details Bank £

01 Nov Balance b/f 5,466 03 Nov 110870 Roberts & Co 6,250

24 Nov Bevan & Co 1,822 03 Nov 110871 J Jones 1,164

24 Nov Plant Pots Ltd 7,998 06 Nov 110872 Lake Walks Ltd 2,250

10 Nov 110873 PH Supplies 275

17 Nov 110874 Peters & Co 76

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Task 2.18, continued (a) Check the items on the bank statement against the items in the cash book. (b) Update the cash book as needed. (c) Total the cash book and clearly show the balance carried down at 28 November (closing

balance) AND brought down at 29 November (opening balance).

Note: You do not need to adjust the accounts in Section 1. (d) Using the information on page 20, prepare the bank reconciliation statement below as at

28 November. Note: Do not make any entries in the shaded boxes.

Bank reconciliation statement as at 28 November 2008

Balance per bank statement £

Add:

Name: £

Name: £

Total to add £

Less:

Name: £

Name: £

Total to subtract £

Balance as per cash book £

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Task 2.19 The following invoice has been received at The Flower Chain.

Office Express

The Trading Centre Badley

B75 2TG

Telephone: 013456 817100

The Flower Chain 1 December 2006 100 Silver Street, Badley, B72 5FH

Invoice No 1984 To supplying one box of printed stationery, as per your instructions List price Trade discount 10%

£600.00 £50.00

VAT at 17.5% £105.00

Gross amount £705.00

Check the invoice for accuracy and list any discrepancies below:

1.

2.

3.

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Task 2.20 A credit customer, Bassfold Ltd, has not settled an outstanding amount of £750. The debt is over three months old. Using the letterhead below, draft a courteous letter to Mr T Green, Accounts Manager at Bassfold Ltd, ready for Suki Jones to sign. • State the amount outstanding and the age of the debt. • Request a remittance by return. • State that failure to pay will result in legal action.

The Flower Chain 100 Silver Street,

Badley, B72 5FH

Mr T Green Accounts Manager Bassfold Ltd 24 Gold Street Badley B7 3KD

Qualification codes (Diploma pathway) Certificate – 100/5923/4 Unit number (IAC) – J/103/6444 © Association of Accounting Technicians (AAT) 12.08 140 Aldersgate Street, London EC1A 4HY, UK t: 0845 863 0800 (UK) +44 (0)20 7397 3000 (non-UK) e: [email protected] w: aat.org.uk

For Assessor’s use only Section 1 Section 2 Task 1.1 Task 2.1 Task 2.11

Task 1.2 Task 2.2 Task 2.12









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