This paper concentrates on the primary theme of ACCOUNTING, PURCHASING & COST CONTROL in which you have to explain and evaluate its intricate aspects in detail. In addition to this, this paper has been reviewed and purchased by most of the students hence; it has been rated 4.8 points on the scale of 5 points. Besides, the price of this paper starts from £ 40. For more details and full access to the paper, please refer to the site.


Instructions to candidates:

a) Time allowed: Three hours (plus an extra ten minutes’ reading time at the start – do not write anything during   time)

b) Answer Question 1 and any other THREE questions

c) Question 1 carries 40% of the marks, all other questions carry 20% of the marks. Marks for each question are shown in [ ]

d) Non-programmable calculators are permitted in this examination

1. You work as the accountant of a company called PMQ Ltd, and have just taken out the trial balance as at

29 February 2016:

£dr £cr

Bank 2,000

Cash 1,000

£1 Ordinary share capital 100,000

5% Debentures 100,000

Profit and loss account (01 03 15) 158,000

Long-term bank loan 150,000

Sales 1,570,000

Purchases 995,000

Inventory 62,000

Accounts receivable 95,000

Accounts payable 43,000

Business rates 51,000

Insurance expenses 29,000

Energy costs 47,000

Marketing 55,000

Loan interest paid 6,000

Payroll costs 236,000

Communication expenses 22,000

Buildings at cost 460,000

Equipment at cost 100,000

Equip. depreciation (01 03 15) 40,000

------------ ------------

2,161,000 2,161,000

======= =======

Notes at 29 February 2016:

• Inventory was valued at £60,000

• Insurance expenses prepaid amounted to £3,000

• Payroll costs owing amounted to £7,000

• The debenture interest is due for payment on 1 March 2016

• The equipment is to be depreciated by 25% on cost

• The directors wish to provide £34,000 for taxation

• The directors have declared a dividend of 18p per share

Question 1 continues overleaf


a) Prepare the income statement for the year ended 29 February 2016. [12]

b) Prepare the position statement as at 29 February 2016. [12]

c) Calculate the following:

i Gross profit as a percentage of sales

ii Net profit after tax as a percentage of sales

iii The current ratio

iv The acid test ratio [2 each]

d) Comment on the financial performance of PMQ Ltd over the financial year. [8]

Note: the equivalent ratios for the previous financial year were as follows:

Gross profit percentage 34%, Net profit before tax percentage 7.4%, Current ratio 1.9:1,

Acid test ratio 1.1:1

2. A restaurant compiled the following simplified profit and loss account for the year ended 29 February 2016:


Sales (63,000 covers) 1,764,000

Cost of food and beverage (V) (819,000)

Employee costs (V) (252,000)

Advertising and marketing costs (F) (160,000)

Other expenses (inc. depreciation) (F) (210,000)


Profit before tax 323,000

Note: (V) = variable costs, and (F) = fixed costs.


a) Calculate the following:

i The average receipt per cover (customer) [1]

ii The average employee cost per cover (customer) [1]

iii The average contribution per cover (customer) [2]

b) It is possible to enlarge the restaurant area. This would increase the other expenses (F) by 20%, however, they would not spend more on advertising. It is thought that such a move would increase the number of covers to 75,000. Prepare a revised simplified profit and loss account based on this scenario. [8]

c) Explain the term fixed costs, giving appropriate examples. [4]

d) Explain the term variable costs, giving appropriate examples. [4]

3. The Music Museum is a tourist attraction. The Music Museum includes a café and a shop. The following are the receipts and payments for the year ended 29 February 2016:

 £ (payments) £ (receipts)

Entrance fees 465,000

Café sales 390,000

Shop sales 180,000

Café cost of sales 108,000

Shop cost of sales 52,000

Advertising 100,000

Business rates and insurance 60,000

General wages 250,000

Communication expenses 40,000

Other expenses 20,000

Depreciation 60,000

The business is divided into three profit centres: M – the museum section, C – the café, and S – the shop.

The cost of advertising is wholly allocated to M whilst all other overheads are to be apportioned 70% to M, 20% to C and 10% to S.


a) Prepare an analysed profit statement. The profit statement must show the gross profits of C (the café) and S (the shop), and also the net profits of M (the museum section) and C and S. [12]

b) Explain the relevance of budgetary control. [8]

ontinued overleaf

4. You are thinking of buying a hotel. You have carried out a great deal of research and have two possible

choices. C (The Chococo) and J (The Jelico). You have established the following future cash flows:


£ £

Initial cost 3,500,000 3,500,000

Net surplus returns:

Year 1 730,000 820,000

Year 2 760,000 850,000

Year 3 790,000 860,000

Year 4 970,000 900,000

Year 5 1,000,000 930,000

The average cost of borrowing is 8%.

NPV (DCF) factors at 8%:

Year 0 1.000

Year 1 .926

Year 2 .857

Year 3 .794

Year 4 .735

Year 5 .681


a) Calculate the payback period for both C and J. [3]

b) Calculate the accounting rate of return for C and J. [3]

c) Calculate the NPV for C and J. [8]

d) Explain, with reasons, which of the hotels you would invest in. [6]

5. Write notes on FOUR of the following:

a) Stock control systems

b) A payroll system

c) Standard costing

d) The reasons for recording all financial transactions

e) VAT

f) A limited company

g) Sources of business finance

h) Accounting concepts [5 each]

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