EXAMTIME S 2013 P1 9 ❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙❙ In asso cia tion wit h THE INSTITUTE OF EDUC ATI ON Business EXAM STRUCTURE BusinessStudi es (Honours) has2 pap ers Totalmarks:400 Paper1 -2½ hours(240marks) Sect ionA: 80Marks - Answer20 shortquestions (nochoice) Sect ionB: 160Mark s -Answer4 que sti onsoutof(Allquestionscarry 40 mar ksin Sec tionB) Paper2 -2hours(160marks) Answer 4 questions out of 6. ( A ll questions carry equal marks, of 40 marks per ques- tion.) TIMING Paper1 -2½hours ■ 5 minutesreadingtime ■ SectionA-45minutes ■ Section B - 25 minutes for eachquestion Paper2 -2hours ■ 4 minutesreadingtime ■ 29 minutes for each ques- tion Every year there has been a question on Budgeting, Trial Balance, Final Accounts, Eco- nomics, Banking and Finance, Business Documents, and Club Accounts. Other very important areas include Insurance, At Work andThe Consumer. GENERALADVICE 1. Answeryour favouri te topic firs t of all . Thiswillgiveyou the feel good factor and make you more relaxed when answering therestofthepaper. 2. Stick as close as possible to thetimelimitslistedabove.Stu- den tsoftenrunout oftimeand may have only ten minutes left whenansweringtheir lastques- tion. 3. Make sure you have a good workingcalculat or. 4. Purcha sepreviousexamina- tion papers and practise as many ques tions as possibl e fromthese papers. 5. The bookkeeping section can be predicted quite easily. This section cannot be learnt and must bepractised cont inu- ously. Areas like Final Ac- counts, the Trial Balance and Club Accounts are examined everyyear. Inpreviousyearsthese thr ee topics have accounted for over 30 per cent of the total marks fromPaper1 andPape r2. 6. Ifyou hav e thetime,answer more than the four questions onPaper1(SectionB)andonPa- per2. You will be marke d out ofyourfour bestquestions. 7. Have plenty of rough work pagesfor calc ula tion s andkeep thes e closeto therelev antques - tions. 8. Whenansweringany theoryquestion make sure to state yourpoint,givea bri efexplana- tion of your poi nt and capit offwithan exampl e. 9. Do not leave the examina- tionhall early. W HERE STR A TEG Y COUNTS FRE QUE NC Y OF EXA M TOP ICS (Excluding Section A of Paper 1) Students should make sure they understand exactly how much time they should spend on each question, advises Arthur Russell
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Answer 4 questions out of 6.(All questions carry equalmarks, of 40 marks per ques-tion.)
TIMING
Paper1 -2½hours
■ 5 minutesreadingtime
■ SectionA-45minutes
■ Section B - 25 minutes foreachquestion
Paper2 -2hours
■ 4 minutesreadingtime■ 29 minutes for each ques-tion
Every year there has been aquestion on Budgeting, Trial
Balance, Final Accounts, Eco-nomics, Banking and Finance,Business Documents, and ClubAccounts.
Other very important areasinclude Insurance, At WorkandThe Consumer.
GENERALADVICE
1. Answeryour favourite topicfirst of all. Thiswillgiveyou thefeel good factor and make youmore relaxed when answeringtherestofthepaper.
2.Stick as close as possible tothetimelimitslistedabove.Stu-dentsoftenrunout oftimeandmay have only ten minutes leftwhenansweringtheir lastques-tion.
3.Make sure you have a good
workingcalculator.
4.Purchasepreviousexamina-tion papers and practise asmany questions as possiblefromthese papers.
5.The bookkeeping sectioncan be predicted quite easily.This section cannot be learntand must bepractised continu-ously. Areas like Final Ac-counts, the Trial Balance andClub Accounts are examinedeveryyear.
Inpreviousyearsthese threetopics have accounted for over30 per cent of the total marksfromPaper1 andPaper2.
6. Ifyou have thetime,answermore than the four questionsonPaper1(SectionB)andonPa-per2.
You will be marke d out of yourfour bestquestions.
7.Have plenty of rough workpagesfor calculations andkeepthese closeto therelevantques-tions.
8.Whenansweringany theoryquestion make sure to stateyourpoint,givea briefexplana-tion of your point and capit off withan example.
9. Do not leave the examina-tionhall early.
WHERE STRATEGY COUNTS
FREQUENCY OFEXAM TOPICS(ExcludingSection A ofPaper 1)
Students shouldmake sure theyunderstandexactly how muchtime they shouldspend on eachquestion, advisesArthur Russell
Thefollowing areas must beincludedin yourstudy plans.It isim-portant to remember that this is not an exhaustive list of topicsnorisitmeanttobealistofquestionsthatwillappearintheJuniorCert2013.
Allfiguresbelowarein¤
FINALACCOUNTSOF LIMITEDCOMPANIES
Thisis a questionwhichisexaminedeveryyearin Paper2.
The following Trial Balance was extracted from the books of N.Halloran and N. Lawlor Ltd. on 31 Dec. 2012. The AuthorisedShareCapitalis 500,000¤1 Ordinary shares.
TrialBalance
You are given the following additional information on December31st,2012.
You are required to prepare the company’s trading, profit and lossand appropriation accounts for the year ending December 31st,2012and a balancesheet ason that date.
Beforewe begin anumberof pointsmustbe considered:
a)On thedebitsideof thetrialbalanceappearsallof theexpensesand assets. On the credit side appears all of the gains andliabilities.
3. Rent receivable prepaid is recorded in the profit and lossaccount as a minus from the rent receivable figure and in thebalancesheetas a currentliability.
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c) Record the following bank transactions for the month of May.Post the relevant figures to the ledger. Note: analyse the banktransactionsusing thefollowing moneycolumn headings:
Debitside: bank,sales,VAT, capital.Creditside: bank,purchases, VAT,creditors,rent.3/5/2012 purchases for resale (cheque no.1) 40,000 plus VAT at23percent.5/5/2012cash saleslodged 98,400 (80,000 plusVAT of 18,400).13/5/2012paid A. Enright(chequeno.2) 45,000.19/5/2012paid rent(cheque no.3)14,000.
29/5/2012capitalinvested in thebusinesslodged to bank50,000.
1. TheGeneral JournalOneof themostimportant uses ofthe generaljournalisfor there-cording of the assets and liabilities at the start of the month. Al-waysenterassetson thedebitside of thejournaland liabilitiesonthe creditside.
The rule for posting to the ledger is as follows – keep the samesides in the ledger as in the general journal. in this question thegeneraljournalis given.
5. The Sales Returns BookThisis used forrecordingreturnsby debtorstothe business.Thereare nosalesreturnsinthisquestion.
Postingtotheledger–enterontheoppositesidestothesalesbookinpointfourabove.■ Debit thesalesreturnsaccountwiththenet figure.■ Debit theVATaccount with thevatfigure.■ Creditthe debtorsaccountwiththetotalfigure.
6. The CashBookThis is used for recording the receipts and payments of cash/cheques.In this question you are asked to present a cash book, which youcomplete asshown below.
Therulefor postingto theledgerfromthe cash bookisswitchthesides.itemsin theanalysiscolumns onthe debit side of cash bookare entered on the credit side of the ledger and vice versa. Don'forget to enter the end of month cash book balance of 60,200 inthe trialbalance.
Thefollowing isa typicalratio analysisquestion.F MaguireandLMorgan Ltd is a squash ball manufacturing company. Examinethefollowingfinalaccountsand balancesheetsfor 2011 and2012and compare and comment on the performance and state of affairs of the company for the two years. Include as part of youranswerthe following:
In2012the companyis sellingoffits average stocknearly17timeswhich is a big improvement on 2011. The high stock turnovermight indicate that thisbusinessis involvedinthe grocerytrade.
6.The Mark-Up –This isanother measure of profitability.
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BANKRECONCILIATIONSTATEMENTSRoryMurphyLtd.hasa currentaccountin theKatieMullinBank.Thecompany receivedthe following BankStatement on Decem-ber31st, 2012:
The company compared the above bank statement with its owncash bookrecordsbelow:
CashBook
You are required to:a)Correct thecashbook.b) Prepare a bankreconciliation statement.
From the above you can see that the balance in the cash book of
¤1,145 is different from the balance on the bank statement of ¤275.
PROCEDURE1.Tickofftheitemsthatappearinboththecashbookandthebankstatement andyouwillfinda numberof itemsnot inboth.a) In the cash book and not in the bank statement there are twoitems:
TheT Hennessy Tennis Club hadthe following assetsand liabili-tiesat 1/1/2012:premises620,000;bar stock3,000;cash 50,000;accumulated fund 673,000. The Clubtreasurer I Byrne has pro-
vided the following account of the clubs activities during the yearfortheChairperson DEppelandfor theSecretary J Fehily.
Receiptsand PaymentsAccount
The following information should also be considered at31/12/2012:1) BarStock ¤14,000.2) Subscriptionsdue ¤8,000.3)Subscriptions prepaid¤3,000.4)DepreciationEquipmentby 20percent.5) Insurancedue 2,000.
Prepare:a)A bartradingaccountforyearending31/12/2012.b) An income and expenditure account for year ending31/12/2012.c)A balancesheetasat 31/12/2012.
1. CONTROL ACCOUNTSA popular SectionA questionon Paper 1 isone ona Debtors oraCreditors Control Account, e.g. from the following informationprepare theCreditorsControlAccount of Yogi Bear Ltd.
¤T ot al C re di t Pur ch as es 8 5, 00 0TotalPurchasesReturns 9,000TotalCashpaidto Creditors 24,000
CreditorsControl Account
Ifasked tocomplete a Debtors ControlAccount the entriesareontheoppositesidestotheabove:
DebtorsControl Account
2. INSURANCE PREPAIDOn 1 July 2012, N. Garveyand C. GreenblattLtd paid itsinsur-ancepremiumof ¤8,000for12 monthsfromthat date.The insur-ance account had an opening debit balance of ¤3,000 on 1 Jan2012.Showthe Insurance Accountfor the yearended 31/12/2012.
InsuranceAccount
The ¤4,000 balance at 31 December 2012 is the insurance pre-paid for6 monthsof theyear2013.
The¤8,000paidisfor theperiod from1 July 2012 until30 June2013,therefore sixtwelfths of ¤8,000 equalsthe ¤4,000 prepaidgoinginto theyear2013.
Theamountprepaidis subtractedfrom theamountpaidto re-duce the amount sent to the Profit and Loss Account. Also the
¤4,000 prepaid is recorded as a Current Asset in the BalanceSheetat the31/12/2012.
3. LIGHT &HEATDUEM.HarnettLtd. owed¤1,300forlightandheatonthe31/12/2012.Light andHeat paid on the30/9/2012 is ¤4,000. Showthe LightandHeat Accountfor the yearending 31/12/2012.
LightandHeat
The ¤1,300due(notyetpaid) attheend oftheyearis addedtotheamountpaidof¤4,000toincreasetheamountsenttotheProf-itand LossAccount to¤5,300.
Also the¤1,300 dueis recordedas a CurrentLiabilityin theBalanceSheet at the31/12/2012.
4. THE PURCHASEOFFIXEDASSETSE.MatthewsLtd.,agrocer,purchasedacomputeroncreditfromM.McCreaLtd for¤3,000on the30/9/2012.Recordthe aboveinthegeneraljournaland theledger of E.MatthewsLtd.
Because this is the purchase of a non-trading good on credit itshould be enteredin theGeneralJournal of E. Matthews Ltd. asfollows:
GeneralJournal
This transactionis enteredin thebooksby usingthe rule Debitthe Receiving Account (Computer) and Credit the Giving Ac-count,which is(M. McCreaLtd.)
When postingto theledger puttheentrieson thesamesidesasthe GeneralJournalas shownbelow:
On 5th of April 2012 O. McHale, 62 South Street, NewRoss, Co Wexford bought a new 60-inch colour Smarttelevision for ¤900 from T. Eccles Limited, Rathgar,Dublin6. Itwasdeliveredon 9th AprilandwhenOscarturned it on, all he received was a black and white pic-ture.
On10thofApril2012,Oscarwrotetothe salesmanag-er of Eccles Ltd.describingthe problem. Oscar also in-cluded proof of purchase and sought an immediate re-dress.
Thetelevisionhas notworkedforme, asit onlyshows a blackand white picture. I now want you to replace it with one thatworksproperly.
Please find an enclosed copy of the receipt as proof of pur-chase and I would like to hear from you as soon as possible. If thismatteris notdealtwithin anexpeditious mannerI will takeittotheSmallClaimsCourt,
Yours faithfully,OscarMcHale.
b)(i) One formof redress isa cashrefund,Oscaris entitledto acashrefund.Anotherformofredressis thatOscarcanchoosetohavethe colourtelevisionreplaced.
(ii)TheSaleof Goodsand Supplyof ServicesAct 1980.
(iii) Goods must be of merchantable quality and must be fitforthe purpose intended.
c) (i) Impulse buying is purchasing an item that you hadn'tplannedto buy,e.g.walkingintoastoretobuymilkandthensub-sequently buyingan unplanned itemsuch as chocolate aswell.
(ii) A good consumer is one who budgets and sticks to thebudget. He is also one that shops around to get the best value.Heknowshisconsumerrightsand doesn'tbuyon impulse.
When M. Stein checked her analysed cash book at the end of December 2012, she discovered that her actual income andexpenditure forthe 12 monthsdifferedfromher budgetedfig-uresdueto thefollowing:
1. The salaries of the Stein household increased by five percent.
a) Usingthe budget comparison sheetbelow enter the appropri-ate figures into the “Actual” column. Show the differences be-tween the “Actual” and “Budget” figures by completing the col-umnmarked “Difference”.
JoyMalone, Barrett’sPark,New Ross,Co.Wexford,has a currentaccount in the Bank of Ireland, The Park, New Ross. Thebranchsortingcode number is 93-16-27and hercurrentaccount numberis 51526351.a)In the past Joyhaspaidherelectricitybills bychequeand now,forconvenience, shehas decided topay herfuture bills byDirectDebit. Her electricity account number is 645-778-512. Her con-tacttelephonenumber is051-443567.
OnJuly 12th, 2012shecompleted a direct debit instructionfor theelectricityutility company.
(i) Complete the direct debit instruction using the blank docu-mentbelow.(ii)Explaintwodifferencesbetweenadirectdebitandastandingorder.(iii)Explain howa Lasercardoperates.
(i)Givethreeexamplesof relevantquestionsthat a bankmanagerwouldaskJoy beforegrantingtheloan.(ii)Apart fromcommercialbanks,name twoother types of finan-cialinstitutions thatofferloansto customers.
c) Joy is going on holidays to New York. She goes to her bank tochange¤1,000intoAmerican Dollarsand seesthefollowingratesquoted:
Currency Bank Sells Bank BuysAmerican Dollars 1.30 1.40
(i) Calculate the total amount in American dollars that Joy willreceive.(ii) Explain two suitable methods of payment, other than cash,thatJoycoulduse whileshoppingin NewYork.
(ii)1.Creditcard:thisiswherethebuyerbuysgoodsbutpayslater.Thecreditcardcompanypaysthe sellerandthensends a monthly statement tothe buyer. If thebuyerpays within a weekto tendaystherewillbenointerestcharged.Iftheaccountisnotclearedwith-inthat timea highrateof interestwill bechargedonthe outstand-ingbalance.
2Travellerscheques:thisiswherechequesarepre-printedinvari-ous amounts of the currency required. They are paid for andsigned in the presence of a bank official when bought. They aresigned again when being cashed and a passport is used to checkthe signatures.
(ii)NiallGarveyappliedforthe positionandforwarded hisCurric-ulum Vitae. List three pieces of information, which Niall wouldgive on his CV other than his name, address and telephonenumber.
b)Niall’s applicationfor a jobin MatthewsLtd wassuccessful. Asan employee in the salesdepartment, he may be entitled to com-mission. Also experienced staff often receives benefit-in-kindfromthe company.
(i) Explain, with an example in each case, the terms “benefit-in-kind”and “commission”.
(ii) Explain, with an example, how “work” differs from “employ-ment”.
SOLUTIONa)(i)Basicpay: thisis paymentfor thenormalworkingweekof 40hours before overtime is added and before deductions are takenaway.Overtime:thisis additional payat a higherrate perhour forwork-ingin excessof thenormal40 hourweek.Flexitime: this iswhereyouremployer allowsyou toworkthe re-quired40 hoursat anytime,withinlimits,duringtheweek.Spreadsheet:thisis acomputerprogrammethat allowsthe opera-tor todo accountsandbudgetson a computer.Anychangeto onefigurewill havea knock-oneffecton allthe other figures.Email: thisis thesendingor receivingof documents, messagesorpictureselectronically by computer.Equal opportunities employer: when employing workers an em-ployer cannot discriminate on thebasis of race,gender,religion,colouror age.
(ii) Information on a CV should contain: (1) educational achieve-ments;(2) workexperience;(3)namesof referees.
b)(i)Benefit-in-kind:this is a non-financialrewardwhichworkersmay receive,eg a companycar, subsidisedmeals.
Commission:a source ofincomefor salespeoplebasedon theval-ue of their sales earned, eg 10per cent of the sales revenue iscommission.
(ii) Employment is work with payment whereas workcan be hu-man effort without any payment received. A homeowner whopaintshisownhouseis not goingto getpaidsothatis anexampleof work. Employment on the other hand is a painting contractorwhoispaidtopaintyourhouse.
b)(i)Whatwasthebudgetedclosingcashattheendof2012?(ii) How much had the Stein household budgeted to save during2012?(iii) Whatwas theactual closingcashat theendof 2012?(iv)Stateby howmuch theSteinhouseholdexceededtheirbudget-edtotalexpenditure.(v) Explain one possible reason why the “Actual” interest wasmorethan the“Budget” interest.
The net cash, line six, is found by subtracting line five from lineone.
b)(i)¤1,485(ii)¤85(iii)¤2,494(iv)¤1,231(v) Deposit interest rates may have risen during the year or theStein householdmay have investedmoremoney intheir bankac-
count
BUSINESSDOCUMENTSQUESTION
Thisquestionnormallyappearsin Paper2.
On May 28th, 2012 Jorden Bukspan Ltd Ferry Bridge, New Ross, received Order No.4 fromEthan Brady Arnold Ltd., 121 John Street, NewRoss,Co. Wexfordforthefollowinggoods:
50 LeatherFootballs@ ¤60per Football.
50Boxesof SquashBalls@¤80per Box.
20Basketballs@¤30perBall.
Allof thegoodsordered were instockexceptforthe footballs.
Jorden Bukspan Ltd. issued Invoice No. 69 forthegoods instock on June 1st,2012. Theinvoiceincludedthe following terms: trade discount 30percentandVAT23percent.
On receiving the goods and the invoice on June4th, 2012, Ethan Brady Arnold Ltd paid theamountdue infull.