Answers

ACCA Certified Accounting Technician Examination – Paper T3 (INT) June 2008 Answers
Maintaining Financial Records (International Stream) and Marking Scheme

Question No Solution Question No Solution

1 A 11 D
2 C 12 C
3 D 13 D
4 A 14 C
5 D 15 B
6 D 16 A
7 A 17 B
8 C 18 D
9 D 19 D
10 B 20 B

1 Invoices $4,728 Dr
Opening accrual $353 Cr
Closing balance $4,375 Dr

2 Balance per ledger $31,554 Cr

Discount $53 Dr
Invoice $622 Cr
––––––––
Corrected balance $32,123
––––––––

6 Cost $80,000
Depreciation at 15% pa straight line is $12,000
A full year’s depreciation will be charged in the years to 30 September 2005, 2006 and 2007.
Thus the net book value is $44,000.
If proceeds are $39,000, there will be a loss of $5,000

7 Opening balance on account $420 debit

Cash sale omitted in sales account. A credit
entry is required in the sales account. Thus
the entry required in the suspense account is $80 debit
Error has increased the credit balance by $700
and omitted a debit balance of $100. Thus the
incorrect account requires a debit entry of $800,
leading to a credit entry in the suspense account. $800 credit
Thus closing balance $300 credit

8 Closing inventory is 160 units. Using FIFO, 150 of these are all deemed to be part of the final delivery, and therefore they are
valued at $22·30 per unit = $3,345. The remaining 10 units are deemed to be part of the previous delivery and are therefore
valued at $22·20 per unit = $222.
Thus total value is $3,567

14 The ledger balance of $422 credit should be adjusted by a debit entry of $153 for interest. Thus the corrected balance is $269
credit.
The statement balance will therefore be an overdraft of $269 after the cheque of $822 has been processed.
Therefore the statement balance must currently be $553 cash at bank.

15 For the income statement, the total of the credit column exceeds the total of the debit column by $22,689. This represents the
profit.

16 Allowance required $2,757

Existing allowance $2,492
Increase, therefore charge $265

17 Receivables balance ($137,850) less revised allowance ($2,757) = $135,093

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19 Purchases were payments made plus increase in suppliers’ balances
i.e. $127,569 + ($12,826 – $11,564) = $128,831
Thus cost of sales Opening inventory $5,288
Purchases $128,831
–––––––––
$134,119
– Closing inventory $4,184 = $129,935
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Section B Marks

1 (a) The following errors will not be detected by extracting a trial balance:
If an entry is omitted entirely from the accounting records, there will be no debit entry and no credit entry. This
is sometimes referred to as an error of complete omission.
If the correct amount is used to record a transaction, and either the debit or the credit entry is made on the
correct side but in the incorrect account. If the incorrect account in which the entry is made is from the same
category of account as the correct account, this is referred to as an error of commission. If the incorrect account
is from a different category of account, this is referred to as an error of principle.
If an error is made in recording the value of a transaction in the daybook, both the debit entry and the credit
entry will be incorrect. This is referred to as an error of original entry.
If two or more errors are made, and the overall effect is that one error is cancelled out by the other error(s).
This is referred to as compensating errors.
Mark allocation 1 mark for each error correctly described or identified
to a maximum of 3

(b) If capital expenditure (on depreciable assets) is incorrectly treated as revenue expenditure, the total expenses
in the year the error is made will be overstated. This will mean that profit will be understated by the difference
between the cost of the asset(s) purchased and the amount of depreciation which should have been charged.
This will lead to net assets being understated by the same amount as profit.
In the following year, profit will be overstated as the charge which should be made for depreciation will not be
made, leading to an understatement of expenses.
If the capital expenditure was in relation to assets which do not require to be depreciated (e.g. land), the profit
and net assets in the year the error is made will be understated by the cost of the asset(s). In the following
year, the profit is unaffected as there will be no depreciation charge.
Mark allocation: In year of error profit understated 1
net assets understated 1
In following year effect on profit 1 3
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(c) When goods are purchased on credit, both assets and liabilities will increase by the same amount, but capital
will be unaffected. This is because:
the cost of the items purchased will be included in the inventory of the business;
the liability to suppliers will rise by the same amount; and
as no profit has been earned, and no expense has been incurred, capital will remain unchanged.
Mark allocation: 1 mark per valid point, for example:
assets increase
liabilities increase
these amounts are equal
capital is unchanged
to a maximum of 3

(d) ‘Cost’ includes all costs incurred in the normal course of business to bring inventory to its present location
and condition. 2
‘Net realisable value’ is the expected selling price less any costs which will be incurred in order to complete
the sale. 2

(e) (i) The income statement shows the financial performance of a business for a period of time. It reports 1
the revenue earned and expenses incurred in the period.
(ii) The statement of financial position (balance sheet) reports the overall financial position of a business at 1
a particular date, by reporting the assets, liabilities and capital balances.
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2 (a) Item Ledger List

(i) yes yes
(ii) no yes
(iii) yes yes
(iv) no yes
(v) yes yes
(vi) no yes
Mark allocation:
1 mark for each error correctly treated 6

15
 Marks
(b) Receivables Ledger Control Account

$ $
Balance as given 28,024 Offset (iii) 450
Invoice (i) 1,750 Credit note (v) 422
Balance 28,902
––––––– –––––––
29,774 29,774
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––––––– –––––––
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1 mark for each correcting entry 3

(c) $
Total of list as given 28,245
Invoice (i) 1,750
Incorrect balance (ii) (270)
Offset (iii) (450)
Discount (iv) (7)
Credit note (v) (422)
Debit balance (vi) 56
–––––––
28,902
Mark allocation:
1 mark for each adjustment 6
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3 (a) Roy Greg

$ $ $
Profit per income statement 67,891
Salary 12,000 (12,000) 1
–––––––
55,891
Interest on capital
Roy $55,000 x 8% 4,400
Greg $51,000 x 8% 4,080 (8,480) 2
Interest on drawings
Roy (4,480)
Greg (2,744) 7,224 2
–––––––
54,635
–––––––
–––––––
Share of residual profit of $54,635
Roy (4/7) 31,220 1
Greg (3/7) 23,415 54,635 1
––––––– ––––––– –––––––
–––––––
Total for each partner 31,140 36,751 1
–––––––
––––––– –––––––
––––––– –––
8

(b) Partners’ Current Accounts

Roy Greg Roy Greg

$ $ $ $
Opening balance 17,506 Opening balance 28,563
Drawings 32,000 19,600 Total share 31,140 36,751
Closing balance 27,703 Closing balance 355
––––––– ––––––– ––––––– –––––––
59,703 37,106 59,703 37,106
–––––––
––––––– –––––––
––––––– –––––––
––––––– –––––––
–––––––
Mark allocation 1 mark each for Opening balances
Drawings
Total share
Closing balance 4

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 Marks
(c) Current Account Capital Account Total
$ $ $
Roy 55,000 credit 27,703 credit 82,703 credit 1
Greg 51,000 credit 355 debit 50,645 credit 1
Total 106,000 credit 27,348 credit 133,348 credit 1
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3

4 Prepayment
Debit Prepayment $1,850
Credit Rent $1,850
Accrual
Debit Electricity $2,380
Credit Accruals $2,380
Depreciation
Debit Depreciation expense $16,812
Credit Accumulated depreciation $16,812
Inventory
Debit Closing inventory (cost of sales) $1,540
Credit Closing inventory (current assets) $1,540
Irrecoverable debt and receivables allowance
Debit Receivables expense $1,956
Credit Trade receivables $1,288
Receivables allowance $668
Workings:
(i) Rent – Prepayment
6 months to 30 June $11,100
Thus $1,850 per month. One month paid in advance $1,850
(ii) Electricity – Accrual
3 months to 30 April $3,570
Thus $1,190 per month. Two months unpaid $2,380
(iii) Depreciation
Cost $138,900
Accumulated depreciation at 1 June 07 $45,500
––––––––
Net book value $93,400
––––––––
––––––––
x 18% = $16,812
(iv) Inventory
Cost of obsolete items $5,290
Net realisable value ($4,000 – $250) $3,750
–––––––
Write down required $1,540
(v) Bad debt write off $1,288
Allowance $668 $1,956
–––––––
Mark allocation:
For each entry, 3 marks
Debit account 1
Credit account(s) 1
Value of entry 1
––– –––
3 x5= 15
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