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ZIMSEC O Level · 7112/1 · N2014

Principles of Accounting Paper 1 November 2014

Questions
40
Syllabus code
7112/1

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Questions
40
Pass mark
24
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Answer every question in the printed order, get marked at the end, then see the answers.

The questions

Question 1

Forms of business organisation
Sole proprietorships are
  1. Amanufacturing businesses.
  2. Bnot for profit organisations.
  3. Cowner-managed businesses.
  4. Dretail businesses.

Question 2

Books of original entry

G. Moyo received an invoice of $1 600 from City Builders for repairs to the workshop.

This transaction was first entered in the

  1. ACash Book.
  2. BGeneral Journal.
  3. CPurchases Journal.
  4. DSales Journal.

Question 3

Division of the ledger
Which set of items contains nominal accounts?
  1. Acapital, creditors, debtors
  2. Bcash, drawings, wages
  3. Cdiscount received, motor expenses, stationery
  4. Dfurniture, motor vehicles, stock

Question 4

Bank reconciliation
What is the source of information for the entries in an updated cash book?
  1. Abank statement
  2. Bcheck stub
  3. Creconciliation statement
  4. Dstatement of account

Question 5

Computers in accounting
Which of the following is a disadvantage of using computers for processing data?
  1. AAccurate and up-to-date information is provided.
  2. BArithmetical errors are minimised.
  3. CEfficiency of the accounts office improves.
  4. DFraud is more difficult to discover.

Question 6

Control accounts
One of the advantages of preparing control accounts is to
  1. Acalculate purchases.
  2. Bcorrect errors.
  3. Cdeter fraud.
  4. Dprevent cheating.

Question 7

Computers in accounting
Which of the following is a computer hardware device?
  1. Aexcel
  2. Bmicrosoft word
  3. Cmouse
  4. Dpastel

Question 8

The accounting equation

An entrepreneur brought her private motor vehicle valued at $10 000 into her business.

The effect of this transaction is to

  1. Aincrease capital by $10 000.
  2. Bincrease working capital by $10 000.
  3. Creduce capital by $10 000.
  4. Dreduce working capital by $10 000.

Question 9

Capital and revenue expenditure
Which transaction is classified as revenue expenditure?
  1. Acredit purchase of a computer for $1 200 from S. Nyamande
  2. Bpayment of $5 000 by cheque for an extension to the accounts office
  3. Cpurchase of a second hand motor vehicle for $4 000 cash
  4. Dpayment of $800 cash for replacement of tyres for a second hand vehicle

Question 10

Ledger accounts

B. Muronda owed J. Brown $800 on 1 May 2011. On 5 May 2011, Muronda bought goods on credit from Brown for $2 400. On 8 May 2011, Muronda paid $780 cash in full settlement of the debt owed on 1 May 2011.

How much does Muronda owe Brown on 9 May 2011?

  1. A$780
  2. B$800
  3. C$2 400
  4. D$2 420

Question 11

Errors and the suspense account
A correct amount is entered in the wrong person's account. This is an error of
  1. Acommission.
  2. Boriginal entry.
  3. Cprinciple.
  4. Dtransposition.

Question 12

Errors and the suspense account
Which error is revealed by a trial balance?
  1. Aa cash sale of goods for $269 entered in the books, both debit and credit, as $296
  2. Ba cheque of $450 received from a debtor debited to the debtor's account and credited to the bank account
  3. Ca cheque payment of $1 500 for fixtures entered in the cash book but not in the fixtures account
  4. Dcash drawings of $500 debited to drawings account and credited to bank account

Question 13

Bank reconciliation
Which item appears in the bank reconciliation statement?
  1. Abank charges shown on the bank statement
  2. Bdishonoured cheques on the bank statement
  3. Ccredit transfers on the bank statement
  4. Derrors made on the bank statement

Question 14

Bank reconciliation

The following information relates to a business.

$
Overdraft as per cash book2 890
Bank charges not yet entered190
Unpresented cheques3 200
Deposits not yet credited4 900

The balance as per bank statement is

  1. A$3 080 credit.
  2. B$3 080 debit.
  3. C$4 780 credit.
  4. D$4 780 debit.

Question 15

Final accounts
The drawings account is closed by transferring its balance to the
  1. Acredit side of the capital account.
  2. Bcredit side of the profit and loss account.
  3. Cdebit side of the capital account.
  4. Ddebit side of the profit and loss account.

Question 16

Disposal of fixed assets
The double entry for a loss on the disposal of a fixed asset is
  1. Adebit fixed asset disposal account, credit profit and loss account.
  2. Bdebit profit and loss account, credit fixed asset disposal account.
  3. Cdebit profit and loss account, credit provision for depreciation account.
  4. Ddebit provision for depreciation account, credit fixed asset disposal account.

Question 17

Stock valuation
The double entry for closing stock(inventory) is
  1. Adebit purchases account, credit stock (inventory) account.
  2. Bdebit stock (inventory) account, credit purchases account.
  3. Cdebit stock (inventory) account, credit trading account.
  4. Ddebit trading account, credit stock (inventory) account.

Question 18

Depreciation

A Trial Balance extract as at 31 December 2011 is as follows:

$$
Machinery at cost40 000
Provision for depreciation, 1 January 201114 400

Machinery is depreciated at 20% per annum on a reducing balance basis.

What is the depreciation charge on 31 December 2011?

  1. A$2 880
  2. B$5 120
  3. C$8 000
  4. D$10 880

Question 19

Non-profit making organisations
A debit balance in the subscriptions received account represents subscriptions
  1. Aowed by members.
  2. Bpaid by the club.
  3. Creceived in advance.
  4. Dreceived for the year.

Question 20

Capital and revenue expenditure
If revenue expenditure is classified as capital expenditure,
  1. Athe net loss increases.
  2. Bthe net profit decreases.
  3. Cthe net profit increases.
  4. Dthere is no effect on the net profit.

Question 21

Non-profit making organisations

The following information relates to Batanai Club on 1 January 2011.

$
Cash in hand500
Equipment8 200
Bar stock1 700
Subscription in arrears450
Subscriptions in advance690
Creditors for bar stock1 100

What is the cumulated fund?

  1. A$7 860
  2. B$9 060
  3. C$9 540
  4. D$10 440

Question 22

Partnerships
Which of the following is a disadvantage of partnerships?
  1. ALosses are shared by all partners.
  2. BMore capital is raised.
  3. CMore chances of better decisions are made.
  4. DProfits are shared by all partners.

Question 23

Non-profit making organisations
A surplus in the income and expenditure account is
  1. Aadded to the accumulated fund in the balance sheet.
  2. Bdeducted from the accumulated fund in the balance sheet.
  3. Centered as a current asset in the balance sheet.
  4. Dentered as a current liability in the balance sheet.

Question 24

Bad debts and provisions

The following is a Trial Balance extract as at 31 December 2011:

$$
Debtors (trade receivables)25 000
Provision for bad debts, 1 January 20111 100

The provision for bad debts is to be adjusted to 4% of debtors.

The provision for bad debts entry in the profit and loss account on 31 December 2011 is

  1. A$100 credit.
  2. B$100 debit.
  3. C$1 000 credit.
  4. D$1 000 debit.

Question 25

Partnerships
In partnership, profits on revaluation of assets are
  1. Acredited to old partners' capital accounts at new ratios.
  2. Bcredited to old partners' capital accounts at old ratios.
  3. Cdebited to old partners' capital accounts at new ratios
  4. Ddebited to old partners' capital accounts at old ratios.

Question 26

Goodwill

The following relates to the business of W. Washaya on 1 January 2011.

$
Buildings75 000
Fixtures12 000
Stock (inventory)18 000
Debtors (Trade receivables)15 000
Creditors (Trade payables)14 000
Expenses due1 500

A purchaser is willing to pay a goodwill of $29 500 for the business.

What is the agreed purchase price?

  1. A$104 500
  2. B$120 000
  3. C$134 000
  4. D$149 500

Question 27

Partnerships
The profit or loss-sharing ratio of a partnership changes when
  1. Aa new partner is admitted into the partnership.
  2. Bthe drawings of the partners exceed their share of profit.
  3. Cthe profit for the year is high.
  4. Dthere is a net loss for the year.

Question 28

Ratios and interpretation

Use the following information to answer this question.

$
Stock(Inventory) 1 January 201160 000
Stock(inventory) 31 December 201184 000
Turnover480 000
Cost of goods sold360 000

What is the gross profit margin?

  1. A25 %
  2. B33⅓ %
  3. C66⅔ %
  4. D75 %

Question 29

Ratios and interpretation

Use the following information to answer this question.

$
Stock(Inventory) 1 January 201160 000
Stock(inventory) 31 December 201184 000
Turnover480 000
Cost of goods sold360 000

The rate of stockturn is

  1. A4 times.
  2. B5 times.
  3. C6 times.
  4. D10 times.

Question 30

Goodwill
When a business is purchased as a going concern, the value of assets taken over is
  1. Acredited to business purchases account.
  2. Bcredited to goodwill account.
  3. Cdebited to business purchase account.
  4. Ddebited to goodwill account.

Question 31

Manufacturing accounts
In the accounts of a manufacturer, the double entry for cost of production is
  1. Adebit manufacturing account, credit profit and loss account.
  2. Bdebit manufacturing account, credit trading account.
  3. Cdebit profit and loss account, credit manufacturing account.
  4. Ddebit trading account, credit manufacturing account.

Question 32

Manufacturing accounts
Prime cost is direct materials plus
  1. Adirect costs less direct labour.
  2. Bdirect expenses plus direct labour.
  3. Cdirect labour less indirect costs.
  4. Ddirect labour plus indirect costs.

Question 33

Manufacturing accounts

The following relates to a manufacturing company.

$
Cost of raw materials consumed240 000
Manufacturing wages350 000
Selling and distribution expenses175 000
Factory overheads198 000

The cost of production is

  1. A$392 000.
  2. B$590 000.
  3. C$788 000.
  4. D$963 000.

Question 34

Limited companies
In joint stock companies, debenture interest is charged to the
  1. Aappropriation account.
  2. Bcapital account.
  3. Cprofit and loss account.
  4. Dtrading account.

Question 35

Ratios and interpretation

The following information was extracted from the books of Geko Limited.

$
Fixed (Non-current) assets500 000
Current assets150 000
Current liabilities100 000
Long term (Non-current) liabilities50 000

The working capital ratio is

  1. A1:1.
  2. B1,5:1.
  3. C3:1.
  4. D4,3:1.

Question 36

Incomplete records

J. Maradze did not keep her records on the double entry system.

She provided the following information on 31 December 2011.

$
Capital 1 January 201153 000
Capital 31 December 201169 000
Drawings17 000

The net profit or loss for the year was

  1. A$1 000 loss.
  2. B$1 000 profit.
  3. C$33 000 loss.
  4. D$33 000 profit.

Question 37

Ledger accounts

The following account appeared in the ledger of D. Ndlovu.

A. MOYO ACCOUNT

DATEDETAILSDEBIT $CREDIT $BALANCE $
2011 April 1Balance b/f5 200
3Bank3 5001 700
8Sales2 3004 000
10Bank3 5007 500
16Cash4 5003 000

The entry on 10 April 2011 means

  1. AMoyo paid by cheque.
  2. BMoyo received a cheque from Ndlovu.
  3. CMoyo's cheque was dishonoured.
  4. DMoyo deposited $3 500 into the bank.

Question 38

Stock valuation
If closing stock (inventory) is overstated, then
  1. Agross profit and net profit would be overstated.
  2. Bgross profit and net profit would be understated.
  3. Cgross profit only would be overstated.
  4. Dgross profit only would be understated.

Question 39

Limited companies
Which set of items makes up the shareholders' funds?
  1. Aauthorised share capital plus issued share capital
  2. Bauthorised share capital plus debentures
  3. Cissued share capital plus debentures
  4. Dissued share capital plus reserves

Question 40

Limited companies

The capital structure of Tashinga Limited is as follows:

Authorised share capital$
250 000 ordinary shares of $2 each500 000
200 000 8 % preference shares of $1 each200 000
Issued share capital$
200 000 ordinary shares of $2 each400 000
200 000 8 % preference shares of $1 each200 000

On 31 December 2011, the directors recommended a final dividend of 12 % on ordinary shares.

What was the final ordinary share dividend?

  1. A$24 000
  2. B$48 000
  3. C$60 000
  4. D$72 000

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