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JUNIOR CERTIFICATE 2009 MARKING SCHEME BUSINESS STUDIES PAPER 2 HIGHER LEVEL Page 1 of 17 Junior Certificate Examination 2009 Business Studies Higher Level – Paper 2 Marking Scheme and Support Notes for use with the Marking Scheme In considering this marking scheme the following points should be noted: The support notes presented are not exclusive or definitive and alternative answers may be acceptable if deemed valid; They are support notes and not model or suggested answers; The bookkeeping layout as presented in the support notes may be accepted as best practice.

However, in some bookkeeping questions there can be a number of alternative approaches and formats that can be validly used by candidates; Further relevant points of information presented by candidates are marked and rewarded on their merits; The detail required in any answer is determined by the context and the manner in which the question is asked and by the number of marks assigned to the answer on the examination paper. Requirements and mark allocations may therefore vary from year to year.

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Page 2 of 17 JUNIOR CERTIFICATE EXMINATION 2009 BUSINESS STUDIES – HIGHER PAPER PAPER 2 (160 marks) All questions carry equal marks (40 marks) DRAFT MARKING SCHEME Q1 (A) Books of First Entry, Ledger and Trial Balance Sales Book 4 Purchase Book 2? 6? marks (B) Analysed Cash Book 9 marks (A~C) Ledger Trial Balance 17 marks 4 marks (A~D) Presentation Dates Folios 2 marks 3 ? marks (40 marks) 1? marks Q2 Purchasing, Business Documents and Bookkeeping 10 marks (A) (i&ii) (B) Order Form Completion 11 marks C) Credit Note Completion Sales Returns Book 12 marks 7 marks 19 marks (40 marks) Q3 (A) (B) (C) Marketing Correct selling price Two explanations with examples Information & presentation of Advertisement 16 marks 12 marks 4 marks 8 marks (B) Three methods of promotion (other than advertising) (40 marks) Page 3 of 17 Q4 (A) Final Accounts and Balance Sheet Trading, Profit and Loss Appropriation Account 18 marks Balance Sheet 17 marks 35 marks (B) Two appropriate methods stated 5 marks (40 marks) Q5 (A)

Report Writing, Business Terms and Assessing a Business Three terms explained Report layout 9 marks 11 marks 20 marks (B) (i) (ii) Four correct calculations Four comparisons 16 marks 4 marks 20 marks (40 marks) Q6 (A) Forms of Ownership and Company Formation (i) (ii) Explanation of co-operative 3 marks 5 marks Example of co-operative in financial sector 2 marks (B) Four comparisons 12 marks (C) (i) (ii) (iii) Two documents Seven entries in Memorandum Ledger 4 marks 13 marks 6 marks 23 marks (40 marks) Page 4 of 17 JUNIOR CERTIFICATE 2009 – BUSINESS STUDIES PAPER 2 SUPPORT NOTES

Q 1 Books of First Entry, Ledger and Trial Balance Question (A) SALES BOOK of CLARKE Ltd (page 1) Details Invoice F Net VAT € € TREE Ltd 4 DL 24,000 5,160 BARK Ltd 5 DL 19,000 4,085 43,000 9,245 GL (A) Date 3/3/2009 (B) Date 4/3/2009 8/3/2009 1/4/2009 (B) ANALYSED CASH BOOK Details Ch. F No. 2/3/2009 Insurance 56 GL 5/3/2009 Purchases 57 GL 9/3/2009 WOOD Ltd 58 CL Date 31/3/2009 Balance C/D of CLARKE Ltd (Credit Side ) (page 1) Bank Purchases VAT Insurance Creditors € € € € € 7,500 7,500 40,095 33,000 7,095 12,000 12,000 59,595 33,000 7,095 7,500 12,000 35,380 94,975 ANALYSED CASH BOOK of CLARKE Ltd (Debit Side) (page 1) Details Rec.

No. F Bank Sales VAT € € € Sales GL 78,975 65,000 13,975 BARK Ltd 34 DL 16,000 94,975 65,000 13,975 Balance B/D 35,380 Debtors € 16,000 16,000 PURCHASES BOOK of CLARKE Ltd (page 1) Details Invoice No. F Net VAT € € WOOD Ltd 74 CL 15,000 3,225 GL GL Total € 18,225 GL Date 1/3/2009 2/3/2009 Total € 29,160 23,085 52,245 ALTERNATIVE BANK ACCOUNT of CLARKE Ltd if Separate Cash Books are used Date Details Total Date € Bank A/C (P1) ACB 94,970 31/3/2009 31/3/2009 94,975 35,380 Page 5 of 17 F Details F Total € 59,595 35,380 94,975 31/3/2009 Receipts Payments Balance C/D

ACB 1/4/2009 Balance B/D Q 1 continued LEDGER for (A, B and C) Date 2009 Details F Total € Date 2009 DEBTORS LEDGER 1/3 Sales TREE Ltd A/C (p1) SB 29,160 BARK Ltd A/C (p2) 23,085 8/3 31/3 23,085 7,085 CREDITORS LEDGER 9/3 31/3 Bank Balance C/D ACB WOOD A/C (p1) 12,000 3/3 6,225 18,225 1/4 Purchases PB 18,225 18,225 Balance B/D 6,225 Details F Total € 2/3 Sales SB Bank Balance C/D ACB 16,000 7,085 23,085 1/4 Balance B/D GENERAL LEDGER 31/3 31/3 Total Net Purchases Bank Purchases A/C (p1) PB 15,000 ACB 33,000 48,000 Sales A/C (p2) 31/3 31/3 Total Net Debtors Bank

SB ACB 43,000 65,000 108,000 31/3 31/3 31/3 Credit Purchases Cash Purchases Balance C/D VAT A/C (p3) PB 3,225 31/3 ACB 7,095 31/3 12,900 23,220 1/4 Insurance A/C (p5) Cash Sales Credit Sales ACB SB 13,975 9,245 23,220 Balance B/D 12,900 2/3 Bank ACB 7,500 Page 6 of 17 Q 1 continued (C) Trial Balance of CLARKE Ltd as on 31/March 2009 Dr.

€ TREE Ltd BARK Ltd WOOD Ltd Purchases Sales VAT Insurance Bank 29,160 7,085 6,225 48,000 108,000 12,900 7,500 35,380 127,125 Cr. € 127,125 Page 7 of 17 Q2 (A) Purchasing, Business Documents and Bookkeeping Question (i) ? ? ? ? ? ? ? ii) Any three pieces of information, other than price, trade discount and rate of VAT from : Description of Goods / model numbers/ Quantity; Terms /Methods of Payment/ Delivery Date/Delivery Arrangements/Cash Discount; Date the Quotation is valid for/ Date of Quotation; Quotation Number; Name and Address of Seller (sender) / Name and Address of Buyer; Signature of Sales Manager/person Telephone No / Fax Number / Email Address/ VAT Number. Any two procedures from : Compare with letter of enquiry e. g. accuracy of details; Compare with other quotations; File the quotation; Check date the quotation is valid for.

B & C) see Page 6 over Page 8 of 17 For use with Q 2(B) CASEY FOOTWEAR Ltd 19 Dublin Street, Sligo Telephone: 071 9151322 e-mail: [email protected] com FEETRIGHT Ltd 30 Castlebar Rd Ballina Co. Mayo QUANTITY 60 30 10 DESCRIPTION White trainers assorted sizes Green Wellingtons assorted sizes House shoes assorted sizes PRICE EACH € ORDER No. 45 VAT Reg. No.

IE 4554678 Date: Quotation No. : 19/5/2009 72 50 20 10 Goods to be delivered to the above address within 15 days Position Purchasing Manager Signature Matilda Casey For use with Q 2 (C) (i) FEETRIGHT Ltd 0 Castlebar Rd, Ballina, Co. Mayo Telephone: 09624223 e-mail: [email protected] net CASEY FOOTWEAR Ltd 19 Dublin Street, Sligo QUANTITY DESCRIPTION PRICE EACH € CREDIT NOTE No. 32 VAT Reg.

No. IE 3267891 Date: 4 June 2009 Order No. : 45 TOTAL € 10 Trainers Trainers were yellow instead of white 50 500 Total (Excluding VAT) Trade Discount Subtotal VAT E &OE Total (Including VAT) 500 100 400 86 486 For use with Q 2 (C) (ii) Date 4/6/2009 Sales Returns Book of FEETRIGHT Ltd Details Credit F NET Note No. € CASEY FOOTWEAR Ltd 32 DL 400 VAT € 86 Total € 486 Page 9 of 17

Q 3 Marketing Question (A) €507 Workings Cost price €390 + Markup 30% of €390 = €117 = Selling Price (B) Method Desk Research * Explanation Use Existing Information Example Reports, Internet, Own Files, CSO / Government Publications, Magazines/ Newspapers, Field Studies ** Obtain New Information * Secondary Research, Questionnaires, Surveys, Interviews- Face to face or telephone, Observation, ** Primary Research €507 (C) There are four points of information required in the advertisement. Additional marks are given for Presentation of Advertisement in an eye catching manner.

Piece of Information Name of Company Name of Product Environmental point Example ONYOURBIKE Ltd FUB4U Leave your car behind.

Cycle to work on the bike you can bring on the bus or train. Selling Price Features Assembly and weight Where to purchase Date of launch Availability Competitor €507 Comes in five different colours and three sizes. Takes 20 seconds to assemble and weighs 8 kilos. All good bicycle shops 1 July 2009 Available in shops from 2 July onwards. BREAKDOWNBIKES Ltd only offer one size and one colour and costs €600 Page 10 of 17 (D) Three methods of promoting the new FUB4U, other than by advertising, :

Method Sponsorship Explanation Businesses supporting teams and events and in return having their names and logos displayed.

Seminars Holding information days on being more environmentally friendly or fitter. Competitions News briefing /interviews/PR Open days in shops Hold quizzes to raise interest in the new bicycle. Using the media to promote their bicycle e. g. business section of news programmes/ paper/ internet Inviting customers to visit bicycle shops to see and test cycle the bicycle.

Government backing Ask the Minister for the Environment to launch it Page 11 of 17

Q 4 Final Accounts and Balance Sheet Question (A) Trading, Profit and Loss Appropriation Account of BROWN Ltd for year ended 31 May 2009 € Sales Less Cost of Actual Sales 1/6/08 Opening Stock Purchases Less Purchases returns Carriage Inwards Less Carriage Inwards Prepaid Cost of Goods Available for Sale 31/5/09 Less Closing Stock Gross Profit Add Gains Commission Receivable Add Commission Receivable Due 3,200 1,400 4,600 175,600 Less Expenses Advertising Add Advertising Due Wages Bad Debts Depreciation : Motor Vehicles Equipment Net Profit Less Dividends Declared Reserves 8,000 18,000 26,000 67,200 108,400 33,600 74,800 8,000 1,600 9,600 28,000 3,600 116,000 6,000 2,500 500 2,000 128,000 19,000 109,000 171,000 110,000 16,000 € € 280,000 Alternative Presentation of figures where Expenses are Deducted before Adding Gains Gross Profit Less Expenses 171,000 67,200 103,800 Add Gains €3,200 €1,400 Net Profit 4,600 108,400 Page 12 of 17

Q 4 (A) continued Balance Sheet of BROWN Ltd as on 31May 2009 € Fixed Assets Buildings Motor Vehicles Equipment Total Fixed Assets Current Assets Closing Stock Debtors Cash Commission Receivable Due Carriage Inwards Prepaid Less Current Liabilities Creditors Bank Overdraft Advertising Due Dividends Declared Due Working Capital Total Net Assets Financed By 500,000 €1 ordinary shares Add Reserves Add Long Term Liabilities 20Year loan Capital Employed 30,000 524,800 Authorised 500,000 Issued 420,000 74,800 15,700 6,000 1,600 33,600 56,900 (9,200) 524,800 19,000 19,000 7,800 1,400 500 47,700 Cost 330,000 80,000 150,000 560,000 € Depreciation ——————-8,000 18,000 26,000 € NBV 330,000 72,000 132,000 534,000 (B)

Any two methods of reducing bad debts from : Ask the customer to obtain a Bank Reference or Trade Reference before selling goods on credit; Stop selling goods on credit; Limit the amount of Credit Given to the buyer; Give cash discounts to encourage prompt payment; Charge interest on overdue accounts. Page 13 of 17 Q 5 Report Writing, Business Terms and Assessing a Business Question (A) Report 14 Quay Street Waterford 9 June 2009 Explanation of Business Terms Mr. Martin Kelly, 10 Laoise Street, Carlow Further to your enquiry re explanation of business terms in the daily newspaper please find my answers below. Issued Share Capital This is the amount of finance that a limited company has raised to date from issuing shares to its shareholders (owners). Collateral

This is the security that a business offers to a bank when it looks for a loan. If the business cannot pay back the loan the bank can takeover the item the loan was secured against.

Land and Buildings are examples of security. Overtrading This is where a company has a negative working capital i. e. Current Liabilities are greater than Current Assets. OR The company relies too heavily on Creditors and Bank Overdrafts when it should be obtaining more share capital or long term loans.

Solvency This is the ability of a company to pay all its debts as they fall due for payment. OR A company is solvent if all of its assets (current and fixed) are greater than its liabilities (current and long term).

I am available to answer any further questions re the above that you may have. Brenda Nolan Finance Consultant Note only three of the above business terms have to be explained in the report. (Bi) see page 12 Page 14 of 17 Q 5(Bi) Ratio Rate of Stock Turnover Net Profit Percentage Acid test Ratio Return on Capital Employed Answer times 15 % 3. 1 : 1 6% 5 Q 5 (Bi) Workings Ratio Rate of Stock Turnover Net Profit Percentage Acid test Ratio Return on Capital Employed Formula Cost of Sales Average Stock Net Profit X 100% Net Sales CA minus Closing Stock : CL Net Profit X 100% Capital Employed Workings €150,000 €30,000 €45,000 X 100% €300,000 €340,000: €110,000 €45,000 X 100% €750,000 Answer 5 times 15% 3.

1 : 1 6%

Note : C A = (Current Assets), C L= (Current Liabilities) Note : Average Stock = Opening Stock + Closing Stock 2 = €40,000 + €20,000 2 Q 5(Bii) Comparison between 2009 and 2008 ratios Ratio Comparison Both years had the same rate of Stock Turnover 2009 had a 3% higher Net Profit Percentage than in 2008 2009 had a 0. 4 lower Acid Test Ratio than in 2008 2009 had a 2% higher Return on Capital Employed Rate of Stock Turnover Net Profit Percentage Acid Test Ratio Return on Capital Employed Page 15 of 17 Q 6 Form of Ownership and Company Formation Question (A) (i) A co-operative is a business owned and managed by its members for the members’ benefit.

OR A co-operative is a business where each member has one vote and an equal say in the running of the business regardless of how much they invest in the business. (ii) A Credit Union is an example of a cooperative in the financial sector. (B) Comparison of Sole Traders and Private Limited Companies Comparison Headings Ownership Liability Sole Trader 1 person Private Limited Company Between 1 and 50 shareholders Owner has Unlimited Liability Shareholders have Limited Liability.

Control Owner has complete control Controlled is shared. Those with the most shares make the decisions. Profits Owner keeps all the profits Profits are shared between 1 to 50 shareholders (called dividends). C) (i) Any two documents, from below, to be inserted in space provided on page 14: Articles of Association; Form A1 OR any of the following Declaration of Compliance with Company Act; Statement of Nominal Share Capital; Statement of Consent to become a director. (C) (ii) see Page 14 over Page 16 of 17 For use with Q 6(C) (i) Sample answer 1 Articles of Association 2 Declaration of Compliance with Company Act For use with Q 6(C) (ii) MEMORANDUM OF ASSOCIATION 1.

2. The Name of the Company is WESTHURL Ltd_______________________________ The Objects for which the Company is established are: Manufacture and Sale of Hurleys___________________________________________ 3. The Liability of the members is Limited____________________________________ 4. The Share Capital of the Company is 300,000 €300,000 __________ divided into €1 ordinary shares_______________________________________________

We the several persons whose names. Addresses and descriptions are subscribed wish to be formed into a Company in pursuance of the Memorandum of Association and we agree to take the number of shares in the Capital of the Company set opposite our names.

Name, Address of each Subscriber Nora Clarke, 26 Nutley Park, Galway Number of Shares taken by each subscriber 45,000 Patrick Canning, Portumna, Co. Galway 50,000 Date : 1 June 2009 For use with Q 6 (C) (iii) LEDGER of WESTHURL Ltd Date Details Total Date Details € Ordinary Share Capital A/C (p. 1) 10/6/09 Bank Bank A/C (p. 2) GL 95,000 F F Total € ACB 95,000 10/6/09 Ord. Share Capital Page 17 of 17

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