Cambridge Assessment International Education uid §=— Cambridge Ordinary Level OLevel PRINCIPLES OF ACCOUNTS 7110/12 Paper 1 Multiple Choice May/June 2019 1 hour Additional Materials: Multiple Choice Answer Sheet Soft clean eraser Soft pencil (type B or HB is recommended) READ THESE INSTRUCTIONS FIRST ‘Write in soft pencil Do not use staples, paper clips, glue or correction fluid. Write your name, centre number and candidate number on the Answer Sheet in the spaces provided Unless this has been done for you. DO NOT WRITE IN ANY BARCODES. There are thirty questions on this paper. 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 in soft pencil on the separate Answer Sheet. Read the instructions on the Answer Sheet very carefully. 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. This document consists of 10 printed pages and 2 biank pages. 1819 06_7110_1270RP ‘Cambridge Assessment @UCLES 2015 International Education [Turn over Scanned with CamScanner11 What is the main function of book-keeping? A communicating information B interpreting information C recording information D__ summarising information 2 Which does not reduce the owner's capital? business expenses paid using a personal cheque cash withdrawn from the business bank account for personal use ° goods taken from inventory for personal use ° personal expenses paid using business cash 3. What would be recorded by a debit entry in a ledger account? A a decrease in an asset B anincrease in a liability € anincrease in an asset D__anincrease in capital employed 4 In April Meena sent Ralph invoices for $170, $240, $125 and a credit note for $63. In the same month Ralph sent Meena a debit note for $70 and a cheque for $107. What was the balance on Meena’s account in Ralph's books on 1 May? $295 credit $295 debit $365 credit $365 debit coo © UCLES 2018 Tronenis Scanned with CamScanner3 5 Tahir purchased goods on credit from Yasmin. How did Yasmin record this? book of prime (original) account account entry debited credited A purchases journal | _ purchases Yasmin B purchases journal =| Yasmin purchases c sales journal | sales Tahir D sales journal | Tahir sales 6 Jane invoiced John for goods, $5000. John took a cash discount of 5% and sent Jane a cheque for the amount due. Which entries will appear in Jane’s cash book? discount | discount Gllowed | Pankdebit | Tooevay | bank credit $ $ $ $ A 250 4750 B 250 4750 c 250 5000 D 250 5000 7 After receiving her bank statement Lyn updated her cash book. Which items would reduce the overdrawn balance in the cash book? 1 bank interest received 2 credit transfer received 3. direct debit payment A 1and2only B 1and3only C 1,2and3 D 2and3only © ucLEs 2019 Tivoranwt9 [Turn over Scanned with CamScanner4 8 The following account appeared in the ledger of Chan. Fu account 2019 $ | 2019 $ March 28 bank 100 |March ‘balance b/d 100 31 balancecid 250. 12 purchases 250 350 350 Which statement is correct? ‘On 1 March Chan was owed $100 by Fu. (On 12 March Fu purchased goods, $250, from Chan, ° ‘On 28 March Chan paid Fu $100 by cheque. ° On 31 March Fu owed Chan $250. 9 After preparing a trial balance it was found that a cheque, $300, received from Oliver, had been debited in Oliver's account and credited in the bank account. No other errors were found. Which statement about the trial balance before correcting the error is correct? A The credit column was equal to the debit column. B The credit column was $300 more than the debit column. The debit column was $300 more than the credit column. D__ The debit column was $600 more than the credit column. © UCLES 2018 Tronenis Scanned with CamScanner5 10 Ali financial year ends on 31 March. During the year ended 31 March 2019, Ali paid wages of $42500. On 31 March 2019, $1400 wages were accrued. Which journal entry records the transfer from the wages account to the income statement on 31 March 2019? debit credit $ $ A. | income statement 42500 wages 42500 B | income statement 43900 wages 43900 | wages 42500 income statement 42500 D | wages 43900 income statement 43900 11 A trader created a provision for doubtful debts. Why did he create this provision? 1 to ensure that money was available to cover bad debts 2 to ensure that the current assets were not overstated 3. to ensure that the matching accruals principle was followed 4 toensure that the profit for the year was not overstated A tand3 B tonly © 2and4only D 2,3and4 42. Which item is revenue expenditure for a manufacturer? A buying new office equipment B_ extending the factory purchasing motor vehicles D repairing machinery © ucLEs 2019 Tivoranwt9 [Turn over Scanned with CamScanner13 An item of revenue expenditure was treated as an item of capital expenditure. What was the effect of this error? profit for the year | non-current assets A overstated overstated B overstated understated Ci understated overstated D understated understated 14 What causes computer equipment to depreciate? A. depletion B economic reasons € passage of time D physical deterioration 15 On 1 January 2017 Wayne purchased a motor vehicle for $8000. He decided to depreciate it using the diminishing (reducing) balance method at 20% per annum Which journal entry did Wayne make on 31 December 2018? debit | credit $ $ A | income statement 1280 provision for depreciation 1280 B | income statement 1600 provision for depreciation 1600 € | provision for depreciation 1280 income statement 1280 D | provision for depreciation 1600 income statement 1600 @UCLES 2019 Titorr2nwrts Scanned with CamScanner7 16 Acheque received from D Pawson, a trade receivable, was correctly debited to the bank account but was credited to the account of P Dawson, a trade payable. What was the effect of correcting this error? trade receivables trade payables A decrease decrease B decrease increase c increase decrease D increase increase 17 Which items are used to calculate cost of goods sold? carriage on purchases, carriage on sales, net purchases, opening inventory carriage on purchases, closing inventory, net purchases, opening inventory ° carriage on sales, closing inventory, net purchases, opening inventory ° carriage on sales, closing inventory, net purchases, sales returns 18 Fatima opened a department store on 1 January 2018. She provided the following information on 31 December 2018. department X department Y $ $ | revenue 100000 60000 sales returns 14000 8000 purchases 80000 40000 carriage outwards - 1000 carriage inwards 5000 - At 31 December 2018 inventory was valued at $16 000 of which 75% related to department X. What was the gross profit of department Y? A $15000 B $16000 © $23000 D $24000 © ucLEs 2019 Tivoranwt9 [Turn over Scanned with CamScanner8 19 Muriel had a bank overdraft of $3820 and was owed $2100 by Ada. ‘Ada paid promptly by cheque and received a 5% cash discount What was the effect on Muriel’s statement of financial position when Ada paid her debt? current assets $ | curentiiabilities — $ capital $ A decrease 1995 decrease 2100 decrease 105 B decrease 1995 decrease 2100 increase 105 c decrease 2100 decrease 1995 decrease 105 D decrease 2100 decrease 1995 increase 105 20 On 1 January 2019 a commission receivable account had a credit balance. What does this balance represent? commission commission receivable receivable asset paid in advance | outstanding v v v v com> 24 What is an advantage of trading as a partnership? A. Apartnership is a separate legal entity. B Decision-making is easy and quick © Liability is unlimited. D__ Responsibilities are shared 22 A golf club sells refreshments to its members. Suppliers of refreshments were owed $250 on 1 January 2018 and $400 on 31 December 2018. Payments to suppliers during the year were $7200. The inventory at the end of the year was $100 less than the inventory at the start of the year. What was the cost of sales of refreshments for the year ended 31 December 2018? A $7050 B $7150 © $7300 D $7450 @UCLES 2019 Tronenis Scanned with CamScanner23 After the preparation of the financial statements of a sports club it was found that no adjustment had been made for subscriptions received for the following financial year. How will correcting this error affect the financial statements? income and statement of expenditure account financial position A decrease income increase current assets B decrease income increase current liabilities c increase income increase current assets D increase income increase current liabilities 24 Abusiness provided the following information. 100000 sales opening inventory | 40000 30000 5000 closing inventory gross profit What was the value of the purchases? A $85000 B $95000 © $105000 D $115000 25. Alimited company provided the following information. $ ‘January —_| ordinary shares of $1 each | 200000 retained earings 12000 31 December | profit for the year 43000 transfer to general reserve 10000 A dividend of 10% on ordinary shares was paid during the year. What were the retained earings on 31 December? A $13000 B $23000 © $25000 D $35000 @UCLES 2019 Titorr2nwrts [Turn over Scanned with CamScanner10 26 What is not included in a statement of changes in equity of a limited company for the year ended 31 March 2019? A anissue of additional ordinary shares that was made during the year an interim dividend paid to the ordinary shareholders on 1 November 2018 B a proposed final dividend which is to be paid to ordinary shareholders on 1 August 2019 D a transfer made to general reserve from retained earnings on 31 March 2019 27 Abusiness's sales are $100 000, the expenses are $3000 and the profit for the year is $2000. What is the gross profit/sales ratio? A 10% B 50% Cc 70% D 80% 28 A business prepares its accounts on the basis that it will continue to trade in the foreseeable future. Which accounting principle is being applied? A accounting entity B accounting year © going concern D_ matching/accruals 29 A cheque paid by a business for fuel for the delivery vehicle was recorded in the books of the business. A cheque paid by the business owner for fuel for his motorcycle was not recorded in the books of the business. Which accounting principle was applied? A accounting entity B going concern C materiality D money measurement 30 Which statement is not correct about reasons for using international accounting standards? A helps when making comparisons between companies B__ improves the reliability of accounting information C narrows the areas of difference between companies D__ makes the preparation of financial statements less time consuming © UCLES 2018 Tronenis Scanned with CamScanner