Association of Accounting Technicians



Exam

|NVQ/SVQ in Accounting |Diploma pathway |

|Level 3 |Advanced certificate |

|Maintaining Financial Records |Financial Accounting (FRA) |

|and Preparing Accounts (FRA) |2003 Standards |

|2003 Standards | |

Wednesday 18 June 2008 (afternoon)

Time allowed - 3 hours plus 15 minutes’ reading time

Please complete the following information in BLOCK CAPITALS:

|Student member number | | | |

|Venue code | |Date | |

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|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.

FRA

|Note: |

|You may use this page for your workings. |

|Note: |

|This page is perforated. You may remove it for easy reference. |

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 7 tasks and Section 2 contains 5 tasks.

You should spend about 100 minutes on Section 1 and about 80 minutes on Section 2.

There is blank space for your workings in the spaces provided, and on pages 2, 5, 10, 16, 18, 20 and 23, but you should include all essential calculations in your answers.

|Note: |

|This page is perforated. You may remove it for easy reference. |

Section 1

You should spend about 100 minutes on this section.

Write your answers in the blank spaces provided. Please use the blank space on pages 2, 5 and 10 to show your workings.

Data

Adil and Jan are the owners of Bookends, a partnership business that sells books to colleges. They do not keep a double entry bookkeeping system. The business is not registered for VAT.

You are an accounting technician at Harper and Co., the accounting firm that prepares the final accounts for Bookends. You are working on the accounts for Bookends for the year ended 31 March 2008 and you have the following information.

|Balances as at |31 March 2007 |31 March 2008 |

| |£ |£ |

|Bank account - overdrawn |5,140 |560 |

|Capital account - Adil |6,000 |6,000 |

|Capital account - Jan |6,000 |6,000 |

|Current account Adil - credit balance |4,200 |To be calculated |

|Current account Jan - credit balance |2,600 |To be calculated |

|Loan account |6,350 |3,240 |

|Trade creditors |5,100 |6,800 |

|Trade debtors |18,690 |24,400 |

|Stock |3,900 |1,800 |

|Furniture and equipment - cost |20,000 |20,000 |

|Furniture and equipment - accumulated depreciation |7,200 |To be calculated |

at

For the year ended 31 March 2008:

• Purchases amounted to £35,600

• Sales amounted to £141,000

Payments from the bank included:

• Wages £42,500

• Administration expenses £5,200

• Rent £8,000

• Drawings - Adil £18,000

• Drawings - Jan £20,000

|Note: |

|You may use this page for your workings. |

Task 1.1

(a) Prepare the purchases ledger control account for the year ended 31 March 2008, showing clearly the payments from the bank as the balancing figure.

Purchases ledger control account

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(b) Prepare the sales ledger control account for the year ended 31 March 2008, showing clearly the receipts banked as the balancing figure.

Sales ledger control account

| |£ | |£ |

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Task 1.2

(a) Calculate the payments to the loan account that have passed through the bank account for the year ended 31 March 2008. There were no additional loans received during the year.

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(b) Prepare a summarised bank account for the year ended 31 March 2008. Use the data on

page 4 and your answers to tasks 1.1 and 1.2 (a).

Bank account

| |£ | |£ |

| | |Balance b/f |5,140 |

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|Balance c/f |560 | | |

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Task 1.3

You need to provide for depreciation on the furniture and equipment at 20% using the reducing balance method. There were no fixed asset additions or disposals during the year.

(a) Calculate the depreciation charge for the year ended 31 March 2008.

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(b) Calculate the updated accumulated depreciation as at 31 March 2008.

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Task 1.4

Recalculate the administration expenses to include accruals for:

• Bank and loan interest of £1,200

• Accountancy fees of £580

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Task 1.5

Wages of £2,000 have been treated as Jan’s drawings in error.

(a) Prepare the wages account, showing clearly the wages for the year ended 31 March 2008.

Note:

You will also need to use the information shown on page 4.

Wages

| |£ | |£ |

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(b) Update the partners’ current accounts, showing clearly the balance carried forward as at

31 March 2008.

Notes:

You will also need to use the information shown on page 4.

You do not need to make any appropriation account adjustments.

Current accounts

| |Adil £ |Jan £ | |Adil £ |Jan £ |

| | | |Balance b/f |4,200 |2,600 |

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|Note: |

|You may use this page for your workings. |

Task 1.6

Complete the proforma trial balance as at 31 March 2008, taking into account your answers to the above tasks, and all the other information that you have been given.

Bookends

Trial balance as at 31 March 2008

| |Dr £ |Cr £ |

|Accrual - accountancy fee | | |

|Accrual - interest | | |

|Administration expenses | | |

|Bank | | |

|Capital account - Adil | | |

|Capital account - Jan | | |

|Current account - Adil | | |

|Current account - Jan | | |

|Furniture and equipment - cost | | |

|Furniture and equipment - accumulated depreciation | | |

|Depreciation expense | | |

|Loan | | |

|Purchases | | |

|Purchases ledger control account | | |

|Rent | | |

|Sales | | |

|Sales ledger control account | | |

|Stock - closing - balance sheet | | |

|Stock - closing - profit and loss account | | |

|Stock - opening | | |

|Wages | | |

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|Total | | |

Task 1.7

Adil and Jan are considering introducing a new partner into the business. You need to explain why they should account for goodwill if they decide to introduce a new partner.

a) Briefly explain what is meant by goodwill.

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b) Briefly explain why it is necessary to account for goodwill when there is a change in a partnership.

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c) What will be the entries for the introduction of goodwill into their accounts before the admission of a new partner? Fill in the account names and tick the boxes as appropriate.

|Account name |Dr |Cr |

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Section 2

You should spend about 80 minutes on this section.

Write your answers in the blank spaces provided. Please use the blank space on page 16, 18, 20 and 23 to show your workings.

Data

Nell Tan is the owner of a business that makes and sells jam to the general public and local businesses.

You are an accounting technician at Harper and Co., the accounting firm that prepares the final accounts for Nell Tan.

• The financial year end is 31 March.

• Nell Tan’s double entry accounting system consists of a main ledger, a purchases ledger and a sales ledger.

• The business is not registered for VAT.

• An extract from the extended trial balance as at 31 March 2008 is shown on page 17.

Task 2.1

Most of the year-end adjustments have been made in the accounts, but there are some further adjustments you now need to make:

• The trial balance includes an amount of £500 paid for rent for the period 1 April 2008 to

30 June 2008.

• Closing stock has been valued at £750 but no entries have been made.

• Interest received of £115 has been credited to general expenses.

Make entries to account for the above in the adjustments columns of the extract from the extended trial balance on page 17.

Note:

Do not total the adjustment columns yet.

Task 2.2

Nell part-exchanged a piece of equipment during the year but no entries have been made in the ledger for this transaction.

• The original cost of the equipment which was part-exchanged was £1,700.

• The net book value of the equipment which was part-exchanged was £425.

• A part-exchange allowance of £300 was given against the new equipment.

• The balance of the amount owing for the new equipment of £1,000 was paid from the bank.

• A full year’s depreciation needs to be provided on the new equipment on a 25% straight line basis. No other depreciation needs to be provided.

(a) Calculate the accumulated depreciation on the equipment that was part-exchanged.

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(b) Calculate the profit or loss on disposal of the equipment that was part-exchanged.

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Task 2.2, continued

(c) Calculate the total cost of the new equipment.

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(d) Calculate the depreciation charge on the new equipment for the year ended 31 March 2008.

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(e) Make entries in the adjustments columns of the extended trial balance on page 17 to account for:

• the disposal of the part-exchanged equipment and the acquisition of the new equipment

• the depreciation charge on the new equipment

|Note: |

|You may use this page for your workings. |

Tasks 2.1 and 2.2 (e)

Nell Tan

Extract from extended trial balance as at 31 March 2008

| |Ledger balances |Adjustments |

| |Dr £ |Cr £ |Dr £ |Cr £ |

|Bank |6,555 | | | |

|Capital | |4,050 | | |

|Cash |75 | | | |

|Consumables |1,200 | | | |

|Delivery expenses to customers |2,000 | | | |

|Depreciation expense |200 | | | |

|Drawings |13,200 | | | |

|Equipment at cost |2,700 | | | |

|Equipment accumulated depreciation | |1,875 | | |

|General expenses |950 | | | |

|Opening stock |900 | | | |

|Purchases |9,800 | | | |

|Purchases ledger control account | |405 | | |

|Rent |2,500 | | | |

|Sales | |35,000 | | |

|Sales ledger control account |1,250 | | | |

|Prepayments | | | | |

|Closing stock - balance sheet | | | | |

|Closing stock - profit and loss account | | | | |

|Interest received | | | | |

|Disposals | | | | |

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|Total |41,330 |41,330 | | |

|Note: |

|You may use this page for your workings. |

Task 2.3

Prepare a profit and loss account for Nell Tan for the year ended 31 March 2008, taking into account the adjustments you have made on the extended trial balance. Show clearly the gross profit and the net profit.

Nell Tan - Profit and loss account for the year ended 31 March 2008

|Workings | |£ |£ |

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|Note: |

|You may use this page for your workings. |

Task 2.4

Prepare a balance sheet for Nell Tan as at 31 March 2008, taking into account the adjustments you have made on the extended trial balance.

Nell Tan - Balance sheet as at 31 March 2008

|Workings | |£ |£ |£ |

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|Note: |

|Please turn over for task 2.5 |

Task 2.5

(a) Briefly explain what is meant by capital expenditure.

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(b) Briefly explain what is meant by revenue expenditure.

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(c) Nell is going to buy a computer costing £800 for use in the business.

Would you recommend she treats it as capital or revenue expenditure? Give a reason for your answer.

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|Note: |

|You may use this page for your workings. |

NVQ/SVQ qualification codes

Intermediate (2003 standards) - 100/2941/2 / G793 23

Unit number (FRA) – T/101/8103

Diploma pathway qualification codes

Advanced certificate (2003 standards) – 100/5924/6

Unit number (FRA) – R/103/6446

© Association of Accounting Technicians (AAT) 06.08

140 Aldersgate Street, London EC1A 4HY, UK

t: 0845 863 0800 (UK) +44 (0)20 7397 3000 (non-UK)

e: aat@.uk w: .uk

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