MUSENDO HIGH SCHOOL

END OF YEAR EXAMINATIONS

ACCOUNTING PAPER 1
FORM 5 6001/1

PAPER 1 MULTIPLE CHOICE 1 HOUR 20 MINUTES

INSTRUCTION TO CANDIDATES
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 on the separate Answer Sheet.

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.

1. Which asset is not normally depreciated?

A Land
B Fixtures
C Buildings
D A revalued property
2. A business valued damaged stock at net realisable value. Which accounting
principle did it apply?
A Consistency
B Prudence
C Going concern
D Materiality
3. What is the equation for working capital
A Capital employed + current assets
B Capital employed + fixed assets
C Capital employed - liabilities
D Capital employed – fixed assets

4. The distinction between capital expenditure and revenue expenditure is

important when
A Calculating investment ratio
B Preparing bank accounts
C Preparing control accounts
D Preparing profit and loss accounts

5. A donation to a sports club to help it build a new pavilion will be shown as

A A special fund in the balance sheet
B An addition to accumulated fund
C An addition to surplus of income over expenditure
D An asset in the balance sheet

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 6. Musendo purchased a motor van for use in the business from Adbel for $10
million on credit. She debited the motor expenses and credited Adbel with
$10 million. What type of an error did she make?
A An error of principle
B An error of complete reversal
C An error of commission
D A compensating error

7. Which accounting convention is observed when capitalising a fixed asset

bought on hire purchase?
A Going concern
B Materiality
C Prudence
D Substance over form

8. A rent prepayment of $400 at the end of the year was treated as an accrual in
preparing a trader’s profit and loss account. What was the effect on profit?
A Overstated by $400
B Overstated by $800
C Understated by $400
D Understated by $800

9. Fixed assets are depreciated in order to

A Make a provision for repairs
B Make cash available to replace fixed assets when necessary
C Show the current market values of fixed assets.
D Charge the cost of fixed assets consumed against the revenue generated

10. Obsolete stock in a business is valued at the lower of cost and net realizable
value. The accounting principle applied is
A Consistency
B Going concern
C Materiality
D Prudence

11. The following information is for a business which lost all its stock in a fire on
10 June 2005.
$
Stock on 30 May 2005 1 300 000
Sales for the period 1-9 June 2005 192 000
Purchases for the period 1-9 June 2005 150 000
What was the value of stock on 9 June 2005, if the business makes a margin of
25%.
A $1 258 000
B $1 294 000
C $1 306 000
D $1 342 000

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 12. What appears as a credit in the appropriation account of a partnership?
A interest on capital
B interest on loans
C net profit
D partnership salaries

13. How would you treat non- purchased goodwill in the amounts of a company?
A do not recognise its existence
B include it in the balance sheet as an asset at valuation
C include it in the balance sheet as an asset to be amortised
D write it off against reserves

14. The purchases ledger control account for the year showed the following.
$
Opening balances 30 000 Cr
6 000Dr
Suppliers’ invoices 90 000
Credit notes received 3 000
Discount received 2 000
Sales ledger contra 8 000
Closing balances 35 000 Cr
2 000 Dr
How much cash was paid to creditors during the year?
A $60 000
B $65 000
C $67 000
D $68 000

15. A trial balance failed to agree sand the difference was placed in a suspense
account. This was due to discount received of $6 000 posted as discount
allowed, and a discount allowed of $2 500 posted as discount received.
What was the balance in the suspense account?
A $3 500 Cr
B $3 500 Dr
C $7 000 Cr
D $7 000 Dr

16. The following balances are in respect of subscriptions receivable for a sports
club1 January 2007 31 December 2007
$ $
Subscriptions owing 10 000 15 000
Subscriptions in advance 12 000 18 000

If $279 000 was income for the year, how much cash was received for the year
ended 31December year 2?
A $274 000
B $279 000
C $280 000
D $285 000

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 17. The business of a sole trader is acquired by a limited company. The net assets
of the business are valued at $334 000, but the purchase price of the business
is agreed at $274 000. The company will pay $100 000 in cash and will issue
120 000 shares of $1 each.
What is the premium per share?
A. $0,25
B. $0,45
C. $0,52
D. $0,95

18. Kwava and Musendo are partners sharing profits and losses in the ratio of
2:1 respectively. They admit Senzere as a partner and the new profit and loss
sharing ratio of Kwava, Musendo and Senzere is 2: 2: 1 respectively.
Goodwill is valued at $120 000 but is not to be rercoded in the accounts
Which entries will be made in the partner’s accounts?
Kwava Musendo Senzere
A Dr $32 00 Cr $8 000 Cr$24 000
B Dr $48 000 Dr $48 000 Cr $96 000
C Cr $32 000 Dr $8 000 Dr $24 000
D Cr $48 000 Cr $48 000 Dr $96 000

19. A building cost $400 000 some years ago. At 31 December 2005 its
accumulated depreciation was $50 000. On that date it was revalued to $600
000.
What will be the balance on the revaluation reserve?
A $150 000
B $200 000
C $250 000
D $550 000
/
20. Under which heading should negative goodwill be included in a company’s
statement of financial position?
A capital reserve
B long-term liabilities
C revenue reserve
D share capital

21. A building cost $340 000. The accumulated depreciation on the building was
$47600. It was decided to revalue the building to its market value of $560 000.

What is the balance on the revaluation reserve?

A $172 400 B $220 000 C $267 600 D $512 400
22. An item can be converted easily into cash.
In which section of the statement of financial position would this item appear?
A capital B current assets C current liabilities D non-current assets

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 23. A company’s financial year ends on 31 December.
At 31 December Year 1 the company carried forward a debit balance of $36 200
on the rent account.
During Year 2 payments made for 12 months’ rent, to 31 March Year 3, were
$157 200.
What is the amount of rent to be charged in the income statement in Year 2?
A $121 000 B $154 100 C $160 300 D $193 400
24. A trader buys inventory costing $6000.
He is entitled to trade discount at 10% and cash discount of 5%. On the same day
he discovers that he can only sell the inventory for $5000.

Which amount should he record as the purchase price of the inventory?

A $5000 B $5130 C $5400 D $6000

25. A business is preparing a bank reconciliation and finds the following.
$
Unpresented cheques 3 190
Bankings 1 949
The cash book has a debit balance of 5 000.
Which adjustments should be made to the cash book balance to reconcile it to the
bank statement?

A. minus $3190, minus $1949

B. minus $3190, plus $1949

C. plus $3190, minus $1949

D. plus $3190, plus $1949
26. During the month a company lost a quantity of inventory in a burglary. The
table shows the company’s results for the month.
$
Opening trading inventory, at cost 30 000
Purchases 210 000
Revenue 330 000
Closing trading inventory, at cost 4 000
A gross profit on all sales of 30% has been achieved.
What was the cost of the inventory lost in the burglary?
A $4000 B $5000 C $9000 D $13 000

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 27. During the financial year a business receives $620 000 from its trade
receivables after allowing cash discounts of $30 000.
At the start of the year trade receivables owed $47 000. At the end of the year
trade receivables owed $40 000.
What was the amount of credit sales made during the year?
A. $613 000 B. $627 000 C. $643 000 D. $657 000
28. A business had a profit for the year of $450 000 before correcting the
following errors.

1 Closing inventory was undervalued by $15 000.

2 Sales returns of $5000 had been recorded as purchases returns.
3 The charge for depreciation was overstated by $20 000.
What was the corrected profit?

A. $435 000 B $445 000 C $475 000 D $495 000

29. A company has the following expenses for the year.
$
directors’ salaries 140 000
depreciation of delivery vehicles 87 000
office salaries 90 000
loan interest 33 000
discounts allowed 12 000
What is the total of the administration overheads?
A $242 000 B $263 000 C $329 000 D $362 000
30. Which items appear in the manufacturing account of a business?
1. Closing inventory of finished goods
2. Closing inventory of work in progress
3. Carriage inwards
4. Carriage outwards
A 1 and 2 B 1 and 3 C 2 and 3 D 2 and 4
31. X becomes a partner in a business receiving a 25% share in the profits. He
pays in $60 000 as his capital. The goodwill of the business is valued at $40
000.
What is the balance on X’s capital account, if goodwill is not included in the
books?

A $20 000 B $50 000 C $60 000 D $70 000

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 32. The following financial information was provided at 31 December 2012.
$
Purchases 95 000
Returns inwards 3 300
Returns outwards 2 100
Inventory withdrawn for personal use 5 000
Inventory on 31 December 2012 was valued at $1000 more than on 1 January
2012.
What was the cost of sales?
A $85 700 B $86 900 C $89 000 D $97 100
33. A business is reviewing credit limits for its customers.
What would result in a customer’s credit limit being reduced?
A. Cash discounts are always taken by the customer.
B. Sales have increased to that customer.
C. The customer always pays their debt on time.
D. The customer has lost a major contract.
34. The trade receivables turnover for a company was 100 days in 2011. This
reduced to 90 days in 2012, with no change in the sales revenue.

Which statement explains this change?

A. Credit customers are paying earlier.

B. Credit customers are paying later.
C. Credit suppliers are being paid earlier.
D. Credit suppliers are being paid later.
35. A business has a good reputation. The owner wishes to include goodwill in
the financial statements. An accountant advises against it.
Which accounting principle is the accountant applying?
A business entity
B going concern
C matching
D prudence

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 36. A trader made four transactions.
1 paid for repairs to manufacturing equipment
2 purchased an item to be used by the business for more than 12 months
3 took goods for resale for his own use
4 transferred his own vehicle to the business
Which items are capital expenditure?
A 1 and 2 B 2 and 3 C 2 only D 3 and 4

37. A non-current asset costs $250 000 and has a useful economic life of 25 years.
The estimated residual value is $10 000.

Depreciation is provided on a straight line basis.

After 10 years the asset is sold for $120 000. Disposal costs of $20 000 are
incurred.

What is the loss on disposal?

A $30 000 B $34 000 C $50 000 D $54 000

38. A vehicle was part exchanged for a new vehicle.

Which entries record the part exchange?
account debited account credited
A cash motor vehicles
B disposal motor vehicles
C motor vehicles cash
D motor vehicles disposal

39. Senzere received his bank statement which showed a balance of $937
overdrawn. This did not agree with his cash book.
On investigation he noted the following.
Bank charges of $76 had not been entered in the cash book.
There was an unpresented cheque paid to suppliers of $214.
Alfredo had recorded $35 cash paid into his bank account, but this was
not showing on the statement.

At which value was the bank overdraft shown in the statement of financial position?
A $758 B $937 C $1116 D $1192

40. The purchases ledger control account has a closing balance of $15 300.
Discounts received of $600 have been entered on the wrong side of the control
account.
What is the corrected balance?

A $14 100 B $14 700 C $15 900 D $16 500

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