LCCI International Qualifications

Book-keeping
Level 1

Model Answers
Series 4 2008 (1017)

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Book- Keeping Level 1
Series 4 2008

How to use this booklet

Model Answers have been developed by EDI to offer additional information and guidance to Centres,
teachers and candidates as they prepare for LCCI International Qualifications. The contents of this
booklet are divided into 3 elements:

(1) Questions – reproduced from the printed examination paper

(2) Model Answers – summary of the main points that the Chief Examiner expected to
see in the answers to each question in the examination paper,
plus a fully worked example or sample answer (where applicable)

(3) Helpful Hints – where appropriate, additional guidance relating to individual

questions or to examination technique

Teachers and candidates should find this booklet an invaluable teaching tool and an aid to success.

EDI provides Model Answers to help candidates gain a general understanding of the standard
required. The general standard of model answers is one that would achieve a Distinction grade. EDI
accepts that candidates may offer other answers that could be equally valid.

© EDI 2009

All rights reserved; no part of this publication may be reproduced, stored in a retrieval system or
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Page 1 of 9
QUESTION 1

On 1 July 2008 Dilip Patel had the following Purchases Ledger Account balances:

£
6,000 B Lotte (Cr)
1,440 R Savva (Cr)
3,480 N Kotecha (Cr)

Credit purchases during July 2008:

Date Supplier List Price Trade Discount

£
3 July L Zandie 2,040 10%
7 July R Savva 1,440 15%
10 July B Lotte 3,930 20%
16 July N Kotecha 6,720 25%

Returns outwards during July 2008:

Date Supplier List Price

£
15 July R Savva 300
23 July N Kotecha 600

REQUIRED

Prepare for July 2008:

(a) (i) The Purchases Day Book

(ii) The Returns Outwards Day Book.

(8 marks)

On 31 July 2008 Dilip Patel paid cheques to his creditors in full settlement of the amount owing on
1 July 2008. B Lotte allowed a cash discount of 3% and N Kotecha allowed a cash discount of 2½%.

REQUIRED

Prepare for July 2008:

(b) The accounts of B Lotte, R Savva and N Kotecha balanced at 31 July 2008.
(17 marks)

(Total 25 marks)

1017/4/08/MA Page 2 of 9
MODEL ANSWER TO QUESTION 1

(a)

(i) Purchases Day Book

Date Supplier £
2008
3 July L Zandie 1,836
7 July R Savva 1,224
10 July B Lotte 3,144
16 July N Kotecha 5,040
11,244

(ii) Returns Outwards Day Book

Date Supplier £
2008
15 July R Savva 255
23 July N Kotecha 450
705

(b)

B Lotte
2008 £ 2008 £
31 July Bank 5,820 1 July Balance b/d 6,000
31 July Discount 180 10 July Purchases 3,144
31 July Balance c/d 3,144
9,144 9,144
1 Aug Balance b/d 3,144

R Savva
2008 £ 2008 £
15 July Returns 255 1 July Balance b/d 1,440
31 July Bank 1,440 7 July Purchases 1,224
31 July Balance c/d 969
2,664 2,664
1 Aug Balance b/d 969

N Kotecha
2008 £ 2008 £
23 July Returns 450 1 July Balance b/d 3,480
31 July Bank 3,393 16 July Purchases 5,040
31 July Discount 87
31 July Balance c/d 4,590
8,520 8,520
1 Aug Balance b/d 4,590

1017/4/08/MA Page 3 of 9
QUESTION 2

On 31 October 2008 the Cash Book of Antonio Vong showed a balance at bank of £5,130 (Dr). An
examination of the bank statement, received on that date, revealed the following:

(i) On 16 October a cheque paid to R Wong, a creditor, for £1,725 had been posted to the cash
book as £1,275.

(ii) The following cheques had not been presented to the bank for payment:

Cheque Number Payee £

3012 J Lou 1,350
3016 S Mak 540
3017 E Chan 2,125
3020 Y Kou 630

(iii) A standing order payment for insurance of £350, made on 20 October, had not been entered
in the cash book.

(iv) On 25 October a cheque for £1,800 received from G Lumas, a debtor, was banked on that
date. This was not credited on the bank statement.

(v) Bank charges not recorded in the cash book amounted to £225.

(vi) On 26 October a cheque had been received from L Holt for £1,125 and had been correctly
entered in the cash book. The cheque was dishonoured on 30 October. No entry regarding
this had been made in the cash book.

REQUIRED

(a) Starting with the balance of £5,130 (Dr), bring the bank column of the Cash Book up to date at
31 October 2008.
(7 marks)

(b) Starting with your updated Cash Book balance, prepare a Bank Reconciliation Statement at
31 October 2008.
(14 marks)

(c) State the meanings of standing order and direct debit.

(4 marks)

(Total 25 marks)

1017/4/08/MA Page 4 of 9
 MODEL ANSWER TO QUESTION 2

(a)
Cash Book (Bank Column)

2008 £ 2008 £
31 Oct Balance b/d 5,130 31 Oct R Wong 450
31 Oct Insurance 350
31 Oct Bank charges 225
31 Oct L Holt 1,125
31 Oct Balance c/d 2,980
5,130 5,130
1 Nov Balance b/d 2,980

(b)
Antonio Vong
Bank Reconciliation Statement at 31 October 2008

£
Balance as per cash book 2,980
Add: Unpresented cheques
NUMBER PAYEE £
3012 J Lou 1,350
3016 S Mak 540
3017 E Chan 2,125
3020 Y Kou 630 4,645
7,625
Less: Lodgement not credited – G Lomas 1,800
Balance as per bank statement 5,825

(c)
Standing Order
A written instruction by the account holder to a bank to make payments of fixed amounts at stated
dates to specific persons or organisations.

Direct Debit
A written agreement obtained by the payee from the payer to charge amounts against the payer’s
bank account. The dates and the amounts, by agreement, may vary.

1017/4/08/MA Page 5 of 9
QUESTION 3

Sue Loar extracted the following Trial Balance from her books on 31 August 2008:

Dr Cr
£ £
Wages and salaries 59,568
Discounts 1,776 624
Rent payable 10,224
Light and heat 15,696
Bank 49,680
Drawings 37,536
Capital 161,520
Motor expenses 7,872
Debtors 105,600
Creditors 59,088
Purchases 143,952
Sales 335,712
Returns inwards 2,544
Returns outwards 3,744
Vehicles at cost 48,000
Fixtures and fittings at cost 28,800
Provision for depreciation:
Vehicles 19,200
Fixtures and fittings 5,760
Stock at 1 September 2007 74,400
585,648 585,648

Additional information at 31 August 2008:

(i) Stock at cost £68,160

(ii) Rent prepaid £864

(iii) Light and heat owing £1,920

(iv) Depreciation is provided as follows:

Vehicles at 25% using the reducing balance method

Fixtures and fittings at 20% on cost.

REQUIRED

Prepare:

(a) Trading and Profit & Loss Account for the year ended 31 August 2008
(15 marks)

(b) Balance Sheet at 31 August 2008.

(10 marks)

(Total 25 marks)

1017/4/08/MA Page 6 of 9
MODEL ANSWER TO QUESTION 3

(a)
Sue Loar
Trading and Profit & Loss Account for the year ended 31 August 2008

£ £ £
Sales 335,712
Less: Returns 2,544
333,168
Less: Cost of sales
Stock at 1 September 2007 74,400
Purchases 143,952
Less: Returns 3,744 140,208
214,608
Less: Stock at 31 August 2008 68,160 146,448
Gross Profit 186,720
Discounts received 624
187,344
Less: Expenses:
Wages and salaries 59,568
Discounts allowed 1,776
Rent (10,224 – 864) 9,360
Light and heat (15,696 + 1920) 17,616
Motor expenses 7,872
Depreciation -
Vehicles (48,000 –19,200 x 25%) 7,200
Fixtures and fittings (28,800 x 20%) 5,760 109,152
Net Profit 78,192

(b)
Balance Sheet at 31 August 2008

Aggregate Net Book

Fixed Assets Cost Depreciation Value
£ £ £
Vehicles 48,000 26,400 21,600
Fixtures and fittings 28,800 11,520 17,280
76,800 37,920 38,880
Current Assets
Stock 68,160
Debtors 105,600
Bank 49,680
Prepayment 864
224,304
Less: Current Liabilities
Creditors 59,088
Accrual 1,920 61,008
Net Current Assets 163,296
202,176
Financed By:
Capital 161,520
Add: Net Profit 78,192
239,712
Less: Drawings 37,536
202,176

1017/4/08/MA Page 7 of 9
QUESTION 4

Elena Solonos prepared a Trial Balance at 30 September 2008. The following errors were found:

(i) A delivery vehicle, bought on credit, from G Pananris for £7,250 had not been entered in the
books.

(ii) A payment of £600 by cheque to N Lardis, a creditor, had been debited to the account of
B Lassettas.

(iii) A payment of £950 for repairs to the premises had been credited correctly in the cash book
but had been debited to the land and buildings account.

(iv) An invoice for the purchase of stock for £1,060 on credit from G Heracli had not been
entered in the books.

(v) Elena had bought petrol for her own vehicle, £38. This had been entered in the motor
expenses account.

(vi) Commission receivable of £2,820 for September 2008 had been correctly entered in the
cashbook, but the credit entry had been posted to the commission payable account.

(vii) An invoice of £270 for stationery, dated 30 September, was paid by cheque on that date.
This had not been entered in the books.

REQUIRED

(a) Journal entries to correct the above errors. Narratives are not required.
(14 marks)

Net profit, calculated before the above errors were discovered, was £21,500.

(b) Calculate the revised net profit. Show how each of the above items will affect the net profit, if
there is no effect this must be stated. Ignore depreciation.

(11 marks)

(Total 25 marks)

1017/4/08/MA Page 8 of 9
MODEL ANSWER TO QUESTION 4

(a)

Dr Cr
£ £
(i) Delivery Vehicle 7,250
G Pananris 7,250
(ii) N Lardis 600
B Lassettas 600
(iii) Premises Repairs 950
Land and Buildings 950
(iv) Purchases 1,060
G Heracli 1,060
(v) Drawings 38
Motor Expenses 38
(vi) Commission Payable 2,820
Commission Receivable 2,820
(vii) Stationery 270
Bank 270

(b)

£
Net Profit 21,500
Add Subtract
£ £
(i) No Effect
(ii) No Effect
(iii) 950
(iv) 1,060
(v) 38
(vi) No Effect
(vii) 270 (2,242)
Revised Net Profit 19,258

1017/4/08/MA Page 9 of 9 © Education Development International plc 2009

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1017/4/08/MA Page 9 of 9 © Education Development International plc 2009