Principles of Accounts 3-2 2008.

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TESTCODE01239032
FORM TP 2008116 MAY/JUNE 2008

CARIBBEAN EXAMINATIONS COUNCIL

SECONDARY EDUCATION CERTIFICATE
EXAMINATION
PRINCIPLES OF ACCOUNTS

Paper 03/2 ~ General Proficiency

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( 19 MAY 2008 (p.m.) )

1. Answer ALL questions.

2. Answer the questions on the Answer Booklet provided and return it.

3. Silent electronk calculators may be used, but ALL necessary working should be clearly
shown.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

Copyright 0 2007 Caribbean Examinations Council ®.

All rights reserved.

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INSTRUCTIONS: This paper consists of a case study and FIFTEEN questions. Candidates must
answer all FIFTEEN questions.

CASE STUDY

PART A

The Fonn 3 students of the St. Paul's High School took over the operations of the school's cafeteria on
September I, 2006. They acquired the following assets and liabilities:

Items $
Equipment 12 000
Inventory (Stock) 2 800
Accounts payable 1 650
Fixtures & fittings 4 500
Petty cash 400
Bank overdraft 2 250

1. Calculate the openi~g capital. ( 1 mark}

2. Prepare a classified Balance Sheet for the St. Paul's High School Cafeteria, using the vertical
style. ( 6 marks)

PARTB

In order to increase the capital, each of the 25 students purchased one share in the business. Each share
had a value of$20.

3. Calculate the amount of additional capital invested. 1 mark)

4. Identify the type of business formed by the students. ( 1 mark)

PARTC

On August 31, 2007, various students collected information and presented their reports to the class.

PARTD

Student A reports:

The following are cash transactions for the year to August 31, 2007.

$2 500 was made in cash sales.

$1 200 was used to pay the wages of two full-time employees.
$700 was paid for carriage of the goods purchased.
$400 was paid to suppliers of raw materials.

5. Prepare the Cash Account for the year to August 31, 2007. ( 6 marks)

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PARTE

Student B reports:

Bank Account
For the year to August 31, 2007

$ s
Capital introduced 500 Balance b/d 2 250
Sales 91000 Purchases 70000
Electricity 12400
Creditors I 650
Sundry expenses 210
Refrigerator (Equipment) 3 600
Balance c/d __ll2Q_
91 500 91 500

PARTF

Student C reports:

Equipment and fixtures and fittings are to be depreciated at the rate of l 0% per annum using the
straight line method.
Inventory at the end of the period is $2 300.

6. Using the reports provided by students A, B and C, as well as the relevant information from the
opening balances, prepare the Income Statement (Trading and Profit and Loss Account) for
St. Paul's High School Cafeteria for the period ending August 3 I, 2007. ( 12 marks)

7. Calculate the following ratios, showing formulae used and workings:

(i) Gross profit margin

(ii) Stock turnover ratio ( 3 marks}

8. Identity ONE method of stock valuation that Student C can use to arrive at ending stock.
( 1 mark)

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PARTG

Student D rushes In late with the following information:

Current assets and liabilities are as follows:

$
Inventory (Stock) 2300
Bank I 390
Cash 600
Accruals 75
Prepayments 1 400
Creditors 1 650

9. Using the above report from Srudent D, calculate the working capital of the business. (Show
workings). ( 3 marks)

At a meeting of student-owners on September 1, 2007, srudents who are NOT in the Principles of
Accounts class asked certain questions. Provide suitable SHORT answers to the following questions.

10. How was the Net Profit calculated? ( 1 mark)

11. In which financial statement, other than the Trading Account, would ending stock appear?
( 1 mark)

12. Why is the electricity expense so much more than the other expenses? 1 mark)

13. What does the gross profit margin indicate about a business? 1 mark)

14. What does the stock rumover ratio indicate about a business? ( 1 muk)

15. What is meant by ' a good working capital ratio'? ( 1 mark)

Total 40 marks

END OF TEST

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