O-LevelAccountingThe fundamentals of accounting7707/22 · May/June 2012 · Q119 Marks

Giorgos commenced business on 1 May 2012 with the following assets and liabilities. Bank loan $6 000 Bank 1 000 Dr Cash 600 Premises 15 000 Inventory 1 800 Trade payable – Early Ltd 1 200

(a)Complete the opening trial balance showing clearly the value of the capital. Giorgos Trial Balance at 1 May 2012 Debit Credit $ $[2]
(b)Complete the following table for the above transactions. The first item has been completed as an example. State clearly if there is no effect on owner's capital. May 1 Paid Early Ltd $570, after deducting $30 cash discount May 2 Bought office furniture on credit for $3000 May 3 Paid wages in cash, $250 May 4 Customer returned goods selling price $745 (cost price $630) Source Book of Effect on document prime entry owner's capital May 1 Cheque Cash book +$30 counterfoil[9]
(c)Prepare the account of Early Ltd. Balance the account on 31 May 2012 and bring down the balance. Early Ltd account[3]
(d)On 31 May 2012 Giorgos prepared another trial balance. State one use of a trial balance.[2]
(e)Giorgos is considering the use of Information Communication Technology (ICT) to record his books of account. State three benefits to Giorgos of using Information Communication Technology (ICT).[3]

Mark scheme

Marking points from the official mark scheme (May/June 2012). The mark or mark type is shown in brackets.

[2] (a) Trial Balance at 1 May 2012: Debit side total $18400 (Bank $1000, Cash $600, Premises $15000, Inventory $1800). Credit side entries: Bank loan $6000, Trade payable – Early Ltd $1200. Capital $11200 (1cf). Debit and Credit totals $18400 (1cf both).
[9] (b) Table: 2. Bought office furniture on credit for $3000: Source document (Purchase) invoice (1), Book of prime entry (General) Journal (1), Effect on owner's capital No effect (1). 3. Paid wages in cash, $250: Source document Payslip or wages sheet (1), Book of prime entry Cash Book (1), Effect on owner's capital -$250 (1). 4. Customer returned goods selling price $745 (cost price 630): Source document Credit note (1), Book of prime entry Sales Returns/Returns Inwards Journal/Book(1), Effect on owner's capital -115 (1).
[3] (c) Early Ltd account: Credit side: 2012 May 1 Balance b/d $1200 (1). Debit side: 2012 May 1 Bank/Cash $570 (1), Discount received $30 (1), May 31 Balance c/d $600. Totals: $1200 on both sides. 2012 June 1 Balance b/d $600 (1of). Marks for correct date, narrative and amount.
[2] (d) To check the arithmetical accuracy of the double entry; To identify errors in the ledger; To check the debits equal credits; To provide a basis for the preparation of financial statements. (2 marks per point)
[3] (e) More accurate (1); Large amounts of information can be stored on disk (1); Speed of processing/Saves time (1); Information available at all times (1); Security of information/Use of passwords limits access (1); Automatic backup (1); Can produce financial statements/ reports automatically (1); Can process multiple transactions (1); Saves money as less staff are employed (1). (1) x 3 points