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JCE Commerce & Accounting

Commerce fundamentals, the full accounting cycle, and small business skills — one subject, covering trade, bookkeeping, and starting a business.

Topic 1

Introduction to Commerce

Nature and Scope of Commerce

Commerce is the branch of business activity concerned with the exchange of goods and services, including all the activities that help move goods from producers to consumers. Commerce is made up of two main parts: trade (the buying and selling of goods) and aids to trade (the services that support trade, such as banking, insurance, transport, warehousing, and advertising).

Trade itself is divided into home trade (buying and selling within a country, made up of wholesale trade and retail trade) and foreign trade (buying and selling between countries, made up of import trade, export trade, and entrepot trade, which is importing goods only to re-export them to another country).

Needs and Wants

A need is something essential for survival, such as food, water, shelter, and clothing. A want is something a person desires but is not essential to survive, such as a new phone or a holiday. Businesses exist to satisfy both needs and wants, though what counts as a "need" can change depending on the standard of living in a society.

Needs vs wants: the survival test

  • Need = you cannot survive without it (food, water, shelter, clothing)
  • Want = it improves quality of life, but survival doesn't depend on it
  • Quick test: "would a person die or suffer serious harm without this?" If yes, it's a need; if no, it's a want, however important it might feel

Nature of Production

Production is the process of creating goods and services to satisfy human needs and wants. Production happens in three sectors:

Primary Extracting raw materials e.g. farming, mining, fishing Secondary Manufacturing/ processing e.g. factories, construction Tertiary Providing services e.g. banking, retail, transport
Production happens in three sectors: primary (extracting raw materials), secondary (manufacturing them into goods), and tertiary (providing services to support the first two).

Commercial Activities and the Chain of Distribution

The chain of distribution describes the path goods take from the producer to the final consumer, and the path money takes back in the opposite direction.

Producer Makes the goods Wholesaler Buys in bulk, sells in smaller quantities Retailer Sells directly to the public Consumer Buys for personal use Goods flow → ← Money flows
The chain of distribution moves goods from producer to consumer, through wholesalers and retailers, while payment flows in the opposite direction back to the producer.

Not every product passes through every link in this chain — a farmer selling vegetables directly at a roadside stall skips both the wholesaler and retailer, selling straight to the consumer. The chain shown is the most common path, not the only one.

Trade vs aids to trade

  • Trade = the actual buying and selling of goods (wholesale, retail, import, export)
  • Aids to trade = services that SUPPORT trade but aren't trade itself (banking, insurance, transport, warehousing, advertising, communication)
  • Without aids to trade, trade would still be possible but far less efficient — e.g. without transport, a producer could only sell to people nearby

Specialisation

Specialisation is when an individual, business, region, or country concentrates on producing a limited range of goods or services, rather than trying to produce everything needed. Division of labour is a specific form of specialisation where a production process is split into separate tasks, with different workers each specialising in one task.

Specialisation increases efficiency and output, since workers become highly skilled at their specific task and less time is wasted switching between different jobs. However, it can also make workers dependent on others for goods they no longer produce themselves, and repetitive tasks can become monotonous.

Topic 2

Introduction to Accounting

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Topic 3

Recording in the Ledger

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Topic 4

Recording in the Cashbook

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Topic 5

Final Accounts of a Sole Proprietor

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Topic 6

Establishing a Small Business

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Topic 7

Operating the Business

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Topic 8

Non-Profit Organisations & Bank Reconciliation

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Topic 9

Computerised Accounting

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Topic 10

Money and Banking

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Flashcards

Key Terms

Flip through the key terms for each topic, in the same order they're introduced in the notes above.

TermCommerce
DefinitionThe branch of business activity concerned with the exchange of goods and services, made up of trade and aids to trade.
TermTrade
DefinitionThe buying and selling of goods.
TermAids to trade
DefinitionServices that support trade, such as banking, insurance, transport, warehousing, and advertising.
TermHome trade
DefinitionBuying and selling within a country, made up of wholesale trade and retail trade.
TermForeign trade
DefinitionBuying and selling between countries: import trade, export trade, and entrepot trade.
TermEntrepot trade
DefinitionImporting goods only to re-export them to another country.
TermNeed
DefinitionSomething essential for survival, such as food, water, shelter, and clothing.
TermWant
DefinitionSomething a person desires but is not essential to survive.
TermProduction
DefinitionThe process of creating goods and services to satisfy human needs and wants.
TermPrimary sector
DefinitionExtracting raw materials, e.g. farming, mining, fishing.
TermSecondary sector
DefinitionManufacturing or processing raw materials into goods, e.g. factories, construction.
TermTertiary sector
DefinitionProviding services, e.g. banking, retail, transport.
TermChain of distribution
DefinitionThe path goods take from producer to final consumer (and money flows back the other way).
TermSpecialisation
DefinitionConcentrating on producing a limited range of goods or services rather than everything needed.
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TermAccounting
DefinitionThe process of recording, classifying, summarising, and interpreting the financial transactions of a business.
TermAssets
DefinitionItems of value owned by the business (e.g. buildings, vehicles, stock, cash).
TermLiabilities
DefinitionAmounts owed by the business to others (e.g. loans, amounts owed to suppliers).
TermCapital
DefinitionThe amount the owner has invested in the business.
TermDrawings
DefinitionMoney or goods the owner takes out of the business for personal use.
TermRevenue (Income)
DefinitionMoney earned by the business, mainly from selling goods or services.
TermExpenses
DefinitionCosts incurred in running the business (e.g. rent, wages, electricity).
TermAccounting equation
DefinitionAssets = Liabilities + Capital. The two sides must always balance.
TermStatement of financial position
DefinitionA summary of a business's assets, liabilities, and capital at one point in time; also called the balance sheet.
TermNon-current assets
DefinitionItems kept for long-term use, such as buildings and equipment.
TermCurrent assets
DefinitionItems expected to be used or turned into cash within a year, such as stock, debtors, and cash.
TermCurrent liabilities
DefinitionAmounts owed that are due within a year, e.g. amounts owed to suppliers.
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TermDouble entry system
DefinitionEvery transaction affects at least two accounts — one debited, one credited, by the same amount.
TermDebit
DefinitionAn entry on the LEFT side of a T-account.
TermCredit
DefinitionAn entry on the RIGHT side of a T-account.
TermDEAD CLIC
DefinitionDebit increases Expenses, Assets, Drawings; Credit increases Liabilities, Income, Capital.
TermPurchases account
DefinitionRecords goods bought for resale; debited, since it behaves like an expense.
TermSales account
DefinitionRecords goods sold; credited, since it behaves like income.
TermBalancing off
DefinitionTotalling both sides of an account at the end of a period to find its closing balance.
TermBalance carried down (c/d)
DefinitionThe closing balance, inserted on the smaller side so both sides total the same.
TermBalance brought down (b/d)
DefinitionThe same closing figure brought down on the opposite side, as the opening balance for the next period.
TermLedger
DefinitionThe book (or set of accounts) where transactions are classified under separate account headings.
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TermCash book
DefinitionA book recording all cash and bank transactions; both a book of original entry and a ledger account.
TermTwo-column cash book
DefinitionA cash book with separate Cash and Bank columns on both the debit and credit sides.
TermContra entry
DefinitionA transaction between the business's own cash and its own bank account, recorded on both sides of the cash book.
TermPetty cash book
DefinitionRecords small, day-to-day cash expenses too minor for a full cheque.
TermImprest system
DefinitionA fixed float is given to the petty cashier, who is reimbursed at the end of each period to restore it.
TermFloat
DefinitionThe fixed amount given to the petty cashier at the start of a period.
TermAnalysis columns
DefinitionColumns in the petty cash book that break down each payment by expense type.
TermBook of original entry
DefinitionA book where a transaction is first recorded, before being posted elsewhere.
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TermTrial balance
DefinitionA list of all closing ledger balances in Debit and Credit columns, checking arithmetic accuracy.
TermError of omission
DefinitionA transaction left out completely; the trial balance still balances.
TermError of complete reversal
DefinitionDebit and credit sides swapped; the trial balance still balances.
TermCompensating errors
DefinitionTwo separate mistakes that happen to cancel each other out.
TermError of principle
DefinitionAn entry posted to the wrong TYPE of account, e.g. an asset purchase posted to an expense account.
TermIncome statement
DefinitionMade up of a Trading section and a Profit & Loss section; calculates profit or loss for a period.
TermGross profit
DefinitionSales minus Cost of Sales.
TermCost of sales
DefinitionOpening Stock + Purchases − Closing Stock.
TermNet profit
DefinitionGross profit minus all other business expenses.
TermClosing capital
DefinitionOpening Capital + Net Profit − Drawings.
TermTrading account
DefinitionThe part of the income statement that calculates gross profit.
TermProfit and loss account
DefinitionThe part of the income statement that deducts other expenses from gross profit to find net profit.
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TermEntrepreneur
DefinitionA person who identifies a business opportunity, organises resources, and takes on financial risk.
TermMarket research
DefinitionGathering information about customers and competitors to reduce the risk of business failure.
TermPrimary research
DefinitionGathering new, first-hand information directly, e.g. questionnaires, interviews, observation.
TermSecondary research
DefinitionUsing information that already exists, e.g. government statistics, industry reports.
TermAgenda
DefinitionA list of items to be discussed at a meeting.
TermMinutes
DefinitionA written record of what was discussed and decided at a meeting.
TermChairperson
DefinitionLeads the meeting and keeps discussion on track.
TermSecretary
DefinitionPrepares the agenda and records the minutes.
TermTreasurer
DefinitionReports on the organisation's finances.
TermBudget
DefinitionA financial plan estimating expected income and expenditure over a future period.
TermSurplus (budget)
DefinitionWhen estimated income exceeds estimated expenditure.
TermDeficit (budget)
DefinitionWhen estimated expenditure exceeds estimated income.
TermSole trader
DefinitionA business owned by one person, with unlimited liability.
TermUnlimited liability
DefinitionThe owner is personally responsible for business debts; personal assets can be used to pay them.
TermLimited liability
DefinitionThe owner can only lose what they invested in the business; personal assets are protected.
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TermBusiness plan
DefinitionA written document setting out a business's goals and how it intends to achieve them.
TermDirect selling
DefinitionA producer sells goods straight to the consumer, without going through wholesalers or retailers.
TermConsumer protection
DefinitionLaws and regulations designed to protect buyers from unfair business practices.
TermAdvertising
DefinitionPaid, non-personal promotion via media (TV, radio, print, online).
TermSales promotion
DefinitionShort-term incentives, such as discounts, competitions, or free samples.
TermCredit trading
DefinitionGoods are sold now, with payment made at a later, agreed date.
TermQuotation
DefinitionStates the price for goods/services before an order is placed; sent by the seller.
TermInvoice
DefinitionA bill requesting payment for goods supplied; sent by the seller.
TermCredit note
DefinitionReduces the amount owed, e.g. for returned or damaged goods.
TermDebit note
DefinitionCorrects an invoice where too little was charged, increasing what's owed.
TermStatement of account
DefinitionSummarises all transactions and the total amount still owed.
TermTrade discount
DefinitionA reduction off the list price for bulk/trade buyers, deducted BEFORE the invoice total is calculated.
TermCash discount
DefinitionA reduction for prompt payment, deducted only if the customer pays within an agreed time.
TermVAT
DefinitionA tax added to the price of most goods and services, collected on behalf of the government.
TermWage
DefinitionPay typically issued weekly, often based on hours worked.
TermSalary
DefinitionPay typically issued monthly, as a fixed annual amount divided into equal payments.
TermGross pay
DefinitionTotal earnings before any deductions.
TermNet pay
DefinitionTake-home pay, what remains after deductions such as tax and pension contributions.
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TermNon-profit organisation
DefinitionAn organisation (sports club, church, charity) that exists to serve members or a cause, not to make profit for owners.
TermAccumulated fund
DefinitionThe non-profit equivalent of capital.
TermSubscription
DefinitionA regular membership fee paid by members, forming the main source of income for a non-profit.
TermIncome and Expenditure Account
DefinitionThe non-profit equivalent of an Income Statement, resulting in a surplus or deficit.
TermReceipts and Payments Account
DefinitionThe non-profit equivalent of a Cash Book.
TermBank reconciliation statement
DefinitionA statement explaining differences between the cash book balance and the bank statement balance.
TermUnpresented cheques
DefinitionCheques written and recorded by the business, but not yet processed by the bank.
TermUncredited deposits
DefinitionMoney the business has recorded as received and banked, but the bank has not yet processed.
TermSurplus / Deficit
DefinitionThe non-profit equivalent of net profit/net loss.
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TermComputerised accounting
DefinitionUsing software to record, process, and report financial transactions, instead of handwritten books.
TermAdvantage of computerised accounting
DefinitionSpeed, automatic calculation, instant report generation, data can be backed up and shared.
TermDisadvantage of computerised accounting
DefinitionUpfront cost, staff training needed, risk of data loss, security risks, dependence on electricity/equipment.
TermWhat doesn't change
DefinitionThe underlying double-entry principles — only the method of recording changes.
TermBackup
DefinitionA copy of digital records kept safely in case the original data is lost or corrupted.
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TermMoney
DefinitionAnything generally accepted as payment for goods and services, or in settlement of debt.
TermBarter
DefinitionDirectly exchanging one good for another, without using money.
TermDouble coincidence of wants
DefinitionThe problem with barter: each party must want exactly what the other is offering.
TermMedium of exchange
DefinitionMoney's function of being used to buy and sell goods, without needing direct barter.
TermMeasure of value
DefinitionMoney's function of providing a common way to compare the value of different goods.
TermStore of value
DefinitionMoney's function of being saved and used later, since it keeps its value over time.
TermStandard for deferred payment
DefinitionMoney's function of allowing debts and future payments to be agreed in fixed amounts.
TermDurability
DefinitionA quality of good money: it doesn't wear out quickly.
TermDivisibility
DefinitionA quality of good money: it can be split into smaller units, e.g. cents.
TermAcceptability
DefinitionA quality of good money: people trust and accept it.
TermScarcity (of money)
DefinitionA quality of good money: limited supply, so it holds value.
TermUniformity
DefinitionA quality of good money: each unit is identical to another of the same value.
TermCurrent account
DefinitionA bank account for frequent transactions, usually with a chequebook/debit card, paying little or no interest.
TermSavings account
DefinitionA bank account designed for saving money over time, usually paying interest, with withdrawal limits.
TermCentral bank
DefinitionBotswana's Bank of Botswana; regulates the money supply, issues currency, oversees commercial banks.
TermCommercial bank
DefinitionAn ordinary bank (e.g. FNB, Stanbic) that serves individual customers directly.
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Introduction to Commerce

1
1 mark
Commerce is made up of trade and:
  • A.Production
  • B.Aids to trade
  • C.Specialisation
  • D.Division of labour
2
1 mark
Importing goods only to re-export them to another country is called:
  • A.Wholesale trade
  • B.Home trade
  • C.Entrepot trade
  • D.Retail trade
3
1 mark
Mining and fishing belong to which sector of production?
  • A.Primary
  • B.Secondary
  • C.Tertiary
  • D.Quaternary
4
4 marks
Distinguish between a "need" and a "want", giving one example of each.
Model answerA need is something essential for survival, e.g. food or water. A want is something desired but not essential for survival, e.g. a new phone or a holiday.
5
6 marks
Describe the chain of distribution from producer to consumer, and explain why not every product passes through every link.
Model answerThe chain of distribution moves goods from producer to wholesaler, to retailer, and finally to consumer, while money flows back in the opposite direction. Not every product passes through every link — for example, a farmer selling vegetables directly at a roadside stall skips the wholesaler and retailer, selling straight to the consumer via direct selling.
6
4 marks
Explain what is meant by "specialisation" and "division of labour", and give one advantage and one disadvantage of specialisation.
Model answerSpecialisation is concentrating on producing a limited range of goods or services. Division of labour is a specific form of specialisation where a production process is split into separate tasks. Advantage: increases efficiency and output, since workers become highly skilled. Disadvantage: workers become dependent on others, and repetitive tasks can become monotonous.

Topic 2

Introduction to AccountingIntroduction to Accounting

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Topic 3

Recording in the LedgerRecording in the Ledger

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Topic 4

Recording in the CashbookRecording in the Cashbook

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Topic 5

Final Accounts of a Sole ProprietorFinal Accounts of a Sole Proprietor

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Topic 6

Establishing a Small BusinessEstablishing a Small Business

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Topic 7

Operating the BusinessOperating the Business

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Topic 8

Non-Profit Organisations & Bank ReconciliationNon-Profit Organisations & Bank Reconciliation

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Topic 9

Computerised AccountingComputerised Accounting

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Topic 10

Money and BankingMoney and Banking

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Mock Exams & Past Papers

Full Papers

Two full-length mock papers in the JCE Commerce & Accounting exam style, drawing on every topic above. Work through them under timed conditions, then reveal each answer to mark yourself.

Paper 1 — Multiple Choice

Time allowed: 45 minutes  •  Total marks: 20

Instructions

  • Answer all 20 questions.
  • Each question carries 1 mark. Choose the single best answer.
1
1 mark
Buying and selling within a single country is called:
  • A.Home trade
  • B.Foreign trade
  • C.Entrepot trade
  • D.Export trade
2
1 mark
Banking, insurance, and transport are examples of:
  • A.Primary production
  • B.Aids to trade
  • C.Retail trade
  • D.Import trade
3
1 mark
The amount an owner has invested in a business is called:
  • A.Drawings
  • B.Liabilities
  • C.Capital
  • D.Revenue
4
1 mark
A business has assets of P70,000 and capital of P50,000. Its liabilities are:
  • A.P120,000
  • B.P20,000
  • C.P50,000
  • D.P70,000
5
1 mark
Under DEAD CLIC, a credit entry increases:
  • A.Expenses
  • B.Assets
  • C.Capital
  • D.Drawings
6
1 mark
The figure inserted on the smaller side of a T-account to make both sides total the same is called:
  • A.Balance b/d
  • B.Balance c/d
  • C.Contra entry
  • D.Trial balance
7
1 mark
The cash book acts as both a book of original entry and a:
  • A.Trial balance
  • B.Ledger account
  • C.Bank statement
  • D.Budget
8
1 mark
A fixed amount given to a petty cashier at the start of a period is called the:
  • A.Subscription
  • B.Budget
  • C.Float
  • D.Reserve
9
1 mark
Which of these errors would NOT be revealed by an unbalanced trial balance?
  • A.Posting a debit entry but forgetting the matching credit
  • B.Error of complete reversal
  • C.Adding up a column of figures incorrectly
  • D.Posting only one side of a transaction
10
1 mark
Gross Profit is calculated as:
  • A.Sales − Cost of Sales
  • B.Sales − Expenses
  • C.Sales + Purchases
  • D.Purchases − Closing Stock
11
1 mark
An entrepreneur is best described as someone who:
  • A.Only works for the government
  • B.Identifies a business opportunity and takes on financial risk to pursue it
  • C.Never takes any risks
  • D.Only invests in shares
12
1 mark
A business organisation where liability is limited to what shareholders invested is a:
  • A.Sole trader
  • B.Partnership
  • C.Private limited company
  • D.Government department
13
1 mark
A document sent by the buyer requesting to purchase specific goods is a(n):
  • A.Invoice
  • B.Quotation
  • C.Order
  • D.Receipt
14
1 mark
A reduction given to bulk/trade buyers, deducted before the invoice is written, is a:
  • A.Trade discount
  • B.Cash discount
  • C.VAT
  • D.Credit note
15
1 mark
Take-home pay, after all deductions, is called:
  • A.Gross pay
  • B.Net pay
  • C.Salary
  • D.Commission
16
1 mark
The non-profit equivalent of "net profit" is called:
  • A.Accumulated fund
  • B.Surplus
  • C.Subscription
  • D.Trading account
17
1 mark
Money the business has recorded as received and banked, but which the bank hasn't yet processed, is called:
  • A.Unpresented cheques
  • B.Uncredited deposits
  • C.Bank charges
  • D.Direct debits
18
1 mark
One disadvantage of computerised accounting is:
  • A.Reports take longer to produce
  • B.Calculations are less accurate
  • C.Risk of data loss or hacking if not properly protected
  • D.It cannot generate reports at all
19
1 mark
Money's function of being saved and used later, since it keeps its value over time, is called:
  • A.Medium of exchange
  • B.Measure of value
  • C.Store of value
  • D.Standard for deferred payment
20
1 mark
Botswana's central bank is called the:
  • A.First National Bank
  • B.Stanbic Bank
  • C.Bank of Botswana
  • D.Standard Chartered

Paper 2 — Structured Questions

Time allowed: 1 hour 15 minutes  •  Total marks: 60

Instructions

  • Answer all questions. Show all your working — marks are awarded for method as well as for the final answer.
1
6 marks
A business has non-current assets of P90,000, current assets of P12,000, and current liabilities of P17,000. Calculate (a) total assets, and (b) the owner's capital.
Model answer(a) Total assets = 90,000 + 12,000 = P102,000. (b) Capital = Net assets = 102,000 − 17,000 = P85,000.
2
8 marks
A trader's Bank column of the cash book showed a balance of P6,200 at the start of the month. During the month: it received a cheque for P2,800 from a debtor, and paid P1,500 by cheque for rent.
  1. Write up the Bank column, balancing it off at the end of the month. (6 marks)
  2. State the balance brought down at the start of next month. (2 marks)
Model answer
  1. Debit side: Balance b/d 6,200; Debtor 2,800 (Total 9,000). Credit side: Rent 1,500; Balance c/d 7,500 (Total 9,000).
  2. Balance b/d of P7,500 is brought down on the debit side.
3
10 marks
A sole proprietor had opening stock of P6,000 and closing stock of P4,500. During the year: Sales were P70,000, Purchases were P42,000, Rent was P7,000, and Wages were P11,000.
  1. Calculate the Cost of Sales. (3 marks)
  2. Calculate the Gross Profit. (2 marks)
  3. Calculate the Net Profit. (5 marks)
Model answer
  1. Cost of Sales = 6,000 + 42,000 − 4,500 = P43,500.
  2. Gross Profit = 70,000 − 43,500 = P26,500.
  3. Net Profit = 26,500 − (7,000 + 11,000) = P8,500.
4
6 marks
Using the P8,500 net profit from Question 3: the owner's opening capital was P55,000 and drawings during the year were P6,000. Calculate the closing capital, and confirm this matches net assets if the business's net assets total P57,500.
Model answerClosing Capital = 55,000 + 8,500 − 6,000 = P57,500, which correctly matches the given net assets figure of P57,500, confirming the accounting equation holds.
5
8 marks
Goods have a list price of P4,500. The buyer receives a 12% trade discount, and a further 5% cash discount for paying within 7 days.
  1. Calculate the trade discount and the invoice price. (4 marks)
  2. Calculate the amount actually paid if the buyer pays within 7 days. (4 marks)
Model answer
  1. Trade discount = 12% × 4,500 = P540. Invoice price = 4,500 − 540 = P3,960.
  2. Cash discount = 5% × 3,960 = P198. Amount paid = 3,960 − 198 = P3,762.
6
8 marks
A small business estimates monthly income of P10,000. Estimated expenses are: Rent P2,800, Wages P3,900, Stock purchases P2,500, Utilities P600.
  1. Calculate the total estimated expenditure. (3 marks)
  2. State the budget position and its amount. (3 marks)
  3. Explain what the business should do if this position had instead been a deficit. (2 marks)
Model answer
  1. Total expenditure = 2,800 + 3,900 + 2,500 + 600 = P9,800.
  2. Budget position = 10,000 − 9,800 = P200 surplus.
  3. If a deficit, the business would need to either raise more income, cut back on planned expenditure, or arrange short-term finance (e.g. an overdraft) to cover the shortfall.
7
8 marks
A community club received P16,000 in subscriptions during the year. Expenditure included: Hall maintenance P6,000, Refreshments P2,800, and Utilities P3,400.
  1. Calculate the total expenditure. (2 marks)
  2. Calculate the surplus or deficit for the year. (3 marks)
  3. Explain how this figure affects the club's Accumulated Fund. (3 marks)
Model answer
  1. Total expenditure = 6,000 + 2,800 + 3,400 = P12,200.
  2. Surplus = 16,000 − 12,200 = P3,800 surplus.
  3. This surplus increases the club's Accumulated Fund for the next year, exactly as net profit increases a sole trader's capital — a deficit would instead reduce it.
8
6 marks
The corrected cash book balance is P5,100. The bank statement shows a balance of P6,400. There is an unpresented cheque of P1,700 and an uncredited deposit of P400.
  1. Prepare a bank reconciliation statement starting from the bank statement balance. (4 marks)
  2. State what type of difference these two items represent. (2 marks)
Model answer
  1. Balance per bank statement 6,400; Less: Unpresented cheque (1,700); Add: Uncredited deposit 400; Balance per cash book = P5,100.
  2. They are timing differences, not errors — the amounts will appear on the bank statement eventually, once the bank finishes processing them.