2020 7086 POA N Level Answer

2020 7086 N Level POA Answers

Paper 1 :

a) The role of accounting is recording summarizing, analyzing, interpreting and reporting

bi) Assets are resources which are owned or controlled by business.

bii) Liabilities are obligations owed by business to others. 

c)

TransactionSource Documents
(i)Cash salesReceipt
(ii)Credit salesInvoice
(iii)Purchase of non-current asset on creditInvoice
(iv)Returns of credit salesCredit note
(v)Payments for credit purchasesPayment voucher

d) Expenses should be matched to the revenue to determine profits in the same accounting period.

a)

Lin

Trial balance as at 30 June 2020

Dr ($)Cr ($)
Capital 9 550
Fixtures and fittings5 650
Accumulated depreciation of fixtures and fittings 1 450
Inventory 470
Trade payables 3 750
Cash in hand 25
Cash at bank (overdrawn)375
Drawings 7 225
Cost of sales 11 805
Sales revenue 15 600
Sales returns 595
General expenses 4 955
30 72530 725

b)
1. To prevent arithmetical errors

2. To prepare the statement of financial performance and statement of financial position.

c)

1. Banks

2. Government

Etc. Investors, customers, employees, suppliers

a) To encourage Kai to bulk purchase.

b) Trade discount at July 5 = 15% x 6 280

= $942

c) Cash discount at July 28 = 2 425/97 x 100

= $2 500

d)

Kai account

DateParticularsDr ($)Cr ($)Balance
2020
Jul 1Balance b/d1 567 Dr
5Sales revenue (6 280 – 942)5 3386 905 Dr
14Sales returns1 9504 955 Dr
28Cash at bank2 4252 530 Dr
Discount allowed752 455 Dr
Aug 1Balance b/d2 455 Dr

e) 

1. Incomplete information on the cheque

2. Cheque was post-dated

3. Balance in the payers account is insufficient

a) Asset = Liabilities + Equity

b)

Assets = (3 000+100+600) = 3 700

Liabilities = (1 000+150) = 1 150

Equity = (3 700-1 150) = 2 550

c) When a business buys an asset, equity will increase. By assets = liabilities + equity, when assets increase, equity also increases. So, when Sahil’s business bought the motor vehicle from Riya Motors, the equity will also increase as he owes his trade payable of $5000. 

d) The business and the owner are treated as two separate entities.

Paper 2 :

Alisa

Statement of Financial Performance for the year ended 31 December 2021

$$
Service fee revenue (30 270 – 1 800)28 470
Add: Other income
Commission income850
29 590
Less: Other Expense
Rent expense (5 950 – 550)5 400
Insurance expense2 650
Printing and stationery (295 + 66)361
General expense8 860
Motor vehicle expense1 675
Depreciation on Fixtures and fittings (10% x 18 500)1 850
Depreciation on Motor Vehicles (20% x (14 650 – 2 930))2 344(23 140)
Profit for the year6 180

Alisa

Statement of Financial Position as at 31 December 2021

CostAccumulated DepreciationNet Book Value
Assets$$$
Non-current assets
Fixtures and fittings (10% x 18 500)+(7 400)18 5009 2509 250
Motor vehicles (20% x (14 650 – 2 930))+(2 930)14 6505 2749 376
Total non-current assets33 15014 52418 626
Current assets
Trade receivables2 680
Cash in hand85
Prepaid rent expense550
Total current assets3 315
Total assets21 941
Equity and liabilities
Owner’s equity
Capital (25 450+6 180-14 380)17 250
Current liabilities
Trade payables1 580
Cash at bank1 245
Stationery expense payable66
Service fee income received in advance 1 800
Total Liabilities4 691
Total Equity and liabilities21 941

a)

General Journal

$$
Motor vehicles7 300
    Trade payable – Exe Motors7 300
Bought motor vehicles costing $7300 on credit from Exe Motors. 

bi) Capital expenditure is the cost to buy and bring non-current assets to their intended use. 

bii) Revenue expenditure is the cost to operate, repair and maintain the non-current assets in working condition.

c)

Capital ExpenditureRevenueExpenditure
Diesel for the motor van
Painting business name on the motor van
Motor van service
Motor van insurance

d) Materiality is relevant information should be reported in the financial statements if it is likely to make a difference to the decision-making process.  

a)

Cash at bank account

DateParticularsDr ($)+Cr ($)-Balance
2020
Jul 31Balance b/d993 Dr
Bank charges72921 Dr
Aug 1Balance b/d921 Dr

b)

Bank reconciliation statement at 31 July 2020

$$
Balance as per unadjusted bank statement (credit)988
Add: Deposit in transit
Sheng257
Less: Cheques not yet presented 
Vanya(324)
Updated bank statement balance921

c) To determine the actual cash at bank balance. To deter fraud. To reconcile the differences between the cash at bank account and the bank statement.

d) Objectivity theory states that all business transactions must have a piece of verifiable unbiased evidence to prove that the transaction took place. 

a)

Inventory account

DateParticularsDr ($)+Cr ($)-Balance
2020
Mar 1Balance b/d5 000 Dr
8Cost of sales5 000
12Trade payable – LP Supplies400400 Dr
19Cost of sales400
25Cost of sales400400 Dr
Apr 1Balance b/d400 Dr

b) Cost of sales for March 2020 = 5 000 + 400 – 400

= $5 000

c) Advise Eric which supplier he should choose. Justify your decision with two reasons. 

I would advise Eric to choose from SK Traders. Firstly, it’s because of its list price of $9 which is cheaper by $1 than the LP Supplies. Lower list price allows the business to have extra cash to pay for other expenses and Eric’s business gross profit, gross profit margin and mark-up on cost. Secondly, Eric can also have the additional incentives from SK Traders. SK Traders provides an additional incentive which is samples of new types of shoes provided monthly to their customers. This will allow Eric to change the types of shoes in his shop more often so people would not think that the pattern is very mundane and would attract more customers too. Hence, I would recommend Eric to choose SK Traders.

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