¥OSLigleseoe Cambridge International Examinations Mies §— Cambridge Ordinary Level OLevel PRINCIPLES OF ACCOUNTS 7110/12 Paper 1 Multiple Choice May/June 2017 1 hour Additional Materials: Multiple Choice Answer Sheet Soft clean eraser Soft pencil (ype B or HB is recommended) READ THESE INSTRUCTIONS FIRST Write in soft pencil Do not use staples, paper clips, glue or correction fluid Write your name, Centre number and candidate number on the Answer Sheet in the spaces provided Unless this has been done for you. DO NOT WRITE IN ANY BARCODES. ‘There are thirty questions on this paper. Answer all questions. For each question there are four possible answers A. B, C and D. Choose the one you consider correct and record your choice in soft pencil on the separate Answer Sheet. Read the instructions on the Answer Sheet very carefully. Each correct answer will score one mark. A mark will not be deducted for a wrong answer. ‘Any rough working should be done in this booklet Calculators may be used. This document consists of 10 printed pages and 2 blank pages, 1817 06_7110_12/RP CAMBRIDGE @UCLES 2017 Intemational Examinations [Turn over Scanned with CamScanner2 11 What is a disadvantage of Information and Communications Technology in book-keeping? A. accuracy of calculations B capacity of information storage © cost of training staff D speed of processing information 2 Atrader made the following entries in his accounting records. { debit credit [income statement | capital account What did he record? A. capital introduced B capital withdrawn C loss for the year D profit for the year 3 Acustomer received a credit note. In which book of prime (original) entry would the customer record this document? A purchases journal B__ purchases returns journal sales journal D sales returns journal 4 Total goods returned to Wayne by credit customers in March 2017 had a list price of $440. He allows a trade discount of 25% on all credit sales. He posts the total of his sales returns journal to the ledger at the end of each month. How much should be debited to Wayne's sales returns account on 31 March 2017? A $110 B $330 c $440 a) @uctes 2017 Tionanwt7 Scanned with CamScanner3 5 Melissa transferred $5000 from the bank deposit account to the bank current account on 1 May. On the same day she received a bank loan, $10000, which she paid into the bank current account. How will Melissa record these transactions? bank loan account bank deposit account bank current account debit credit debit credit debit credit A v v v B v v v c v v v D v v v 6 On 31 July the bank column in Jay's cash book showed he had $312 in the bank. On the same date his bank statement showed a debit balance of $53. It was found that bank charges, $47, had not been recorded in the cash book and a cheque, $318, from a customer had not been credited by the bank. What is the bank balance that should be shown in Jay’s statement of financial position on 31 July? $265 asset $324 liability ° $359 asset ° $371 liability 7 Which accounts alll have debit balances? A. capital, insurance, purchases B drawings, sales, purchases returns C inventory, motor vehicles, cash D rent received, drawings, wages @UCLES 2017 Tron? [Turn over Scanned with CamScanner4 8 —Sukesh’s account in the books of Jack showed the following, Sukesh account date oe a May 1 | balance 450 dr 4) sales 200 650 dr 8 | bank 432 | 218dr 8 | discount 18 | 200dr Which statements about the transactions on 8 May are correct? 1 Jack made a payment to Sukesh. 2 Jack received a payment from Sukesh. 3 Sukesh allowed a discount to Jack. 4 ‘Sukesh received a discount from Jack. A tand3 B tand4 © 2and3 D 2and4 9 Which is an error of omission? ‘A No entries have been made for the purchase of stationery by cheque. Purchase of stationery has been entered only in the cash book Purchase of stationery has been entered only in the stationery account. coo The stationery account has been omitted from the trial balance. 10. Maria started a business on 1 May 2016. The monthly rates on her business premises are $100. During the year ended 30 April 2017 she paid rates of $1300. Which journal entry will Maria make on 30 April 2017 to transfer the rates to the income statement? debit credit $ $ A | income statement 1200 rates 1200 B | income statement 1300 rates 1300 C | rates 1200 income statement 1200 D | rates 1300 income statement 1300 @uctes 2017 Tionanwt7 Scanned with CamScanner5 11 Liam rents premises from Gavin. In March Liam paid the rent in advance for April and May. How would the balance on 1 April appear in their ledgers? Liam's ledger rent payable account Gavin's ledger rent receivable account as a credit balance as a credit balance as a debit balance com> as a debit balance as a credit balance as a debit balance as a credit balance as a debit balance 12. An item of capital expenditure has been incorrectly treated as revenue expenditure. What is the effect of this error? assets profit for the year A overstated overstated B overstated understated c understated overstated D understated understated 13 Which cost would not be depreciated? A improvement of non-current assets installation of non-current B C purchase of non-current assets D assets repair of non-current assets @UCLES 2017 THON ZMN7 [Turn over Scanned with CamScanner14. The following account appeared in a trader's ledger. Provision for depreciation of machinery account 31 Dec 2015 balance c/d 31 Dec 2016 balance /d $ 3000 | 31 Dec 2015 income statement 3000 5100 | 1Jan 2016 balance b/d 5100 31 Dec 2016 income statement 1 Jan 2017 _ balance b/d 3000 3000 2100 5100 5100 There were no sales or purchases of machinery during the two year period. What does the $5100 on 1 January 2017 represent? A accumulated depreciation of machinery using the diminishing (reducing) balance method accumulated depreciation of machinery using the straight-line method B Cnet book value of machinery using the diminishing (reducing) balance method D net book value of machinery using the straight-line method 15. The totals of a trial balance did not agree and a suspense account was opened. It was later found that the total of the discount allowed column in the cash book, $100, had been credited to the discount allowed account. Which journal entry corrects this error? A | discount allowed suspense B | discount allowed suspense © | suspense discount allowed D | suspense discount allowed debit $ 100 200 100 200 credit 100 200 100 200 @uctes 2017 Tionanwt7 Scanned with CamScanner7 16 A trader calculated her draft profit for the year at $28.400. She later discovered the following errors. ‘A prepayment of rent payable was understated by $1000. Closing inventory was understated by $1500. What was the correct profit for the year? A $25900 B $27900 ¢ $28900 D $30900 17 Abusiness has two departments, X and Y. The total revenue was $120000 of which 60% related to department X. The total cost of sales was $90.000 of which 50% related to department X. What was the gross profit of department Y? A $3000 B $15000 ¢ $18000 D $2700 18 Alex purchased goods for resale costing $1000 to which she would normally apply a 25% mark-up. These goods remained unsold at the financial year end as they were found to be damaged. Alex estimated that they could be sold for $600. ‘At which value should these goods be recorded in the year end financial statements? A $400 B $600 c $750 D $1250 19 On 1 April a business had a working capital of $6000. On 2 April $1150 was received from credit customers in settlement of debts of $1200. On the same day damaged inventory costing $200 was written off. What was the working capital at close of business on 2 April? A $4600 B $5750 c $6950 D $7150 20 Pooja owns a hair salon. She lives in a flat above the salon. The business pays rent for the whole building. No adjustment has been made in the financial statements for the rent for the flat. What is the effect of omitting this adjustment? profit forthe year | capital employed A overstated no effect B overstated understated c understated no effect D understated overstated ouctEs 2017 Tiiovrenauit7 [Turn over Scanned with CamScanner2 22 23 24 8 Ben and Joe decide to form a partnership. Ben is to invest $50000 in the business and Joe $10000. Ben wants the partnership agreement to reflect the differences in the amounts invested by the partners. What should Ben insist is included in the partnership agreement? A. interest on capital B interest on drawings interest on partner's loan D salary for extra responsibilities A sports club was formed on 1 January 2016. Which amount will appear for subscriptions in the income and expenditure account for the year ended 31 December 2016? total subscriptions received during the year total subscriptions received less amounts owing plus amounts paid in advance ° total subscriptions received plus amounts owing less amounts paid in advance ° total subscriptions received plus amounts owing The financial year of a club ends on 30 April. During the year ended 30 April 2017, the club received an interest-free loan from a member. In which of the club's financial statements will this appear? A income and expenditure account and statement of financial position B receipts and payments account and income and expenditure account € receipts and payments account and statement of financial position D statement of financial position only How can profit for the year be calculated? A closing capital + opening capital + drawings B closing capital + opening capital — drawings closing capital — opening capital + drawings D closing capital — opening capital — drawings @uctes 2017 Tionanwt7 Scanned with CamScanner9 25 Abdul does not keep a full set of books but was able to provide the following information. $ opening inventory closing inventory purchases 5000 7000 58000 Abdul applies a mark-up of 20% to obtain the selling price of goods. What were Abdul's sales for the year? A $67200 B $70000 © $72000 D $75000 26 What are the main features of debentures? return received | _rate of return voting rights A dividend fixed rate no B dividend varies with profit yes G interest fixed rate no D interest varies with profit yes 27 Which items are shown in a statement of changes in equity? changes in changes | changes in long term share capital | inreserves | loans and debentures A v v v B v v x c v x x D x x v 28 Which document is used in the calculation of gross pay? A payroll register B_ payslip C time sheet D wages sheet @UCLES 2017 Tron? [Turn over Scanned with CamScanner10 29 Abusiness provided the following information tangible non-current assets 15000 intangible non-current assets | 25000 current assets 35000 current liabilities 10000 What was the working capital ratio (current ratio)? A 15:1 B 25:1 © 35:1 D 75:1 30 Mario has decided that all items purchased by his business should be recorded at the amount he actually paid for them. Which accounting principle is Mario applying? A accounting entity B consistency © going concen D historical cost @uctes 2017 Tionanwt7 Scanned with CamScanner