2020 N Level POA Answers 7088

Paper 1 :

a) Rental expense account

Date	Particulars	Dr ($)+	Cr ($)-	Balance
2019
Oct 1	Prepaid rental expense	650		650 Dr
Dec 1	Cash at bank	1 450		2 100 Dr
2020
May 1	Cash at bank	1 450		3 550 Dr
Sep 30	Prepaid rental expense		550	3 000 Dr
Sep 30	Income summary		3 000	–

Commission income account

Date	Particulars	Dr ($)+	Cr ($)-	Balance
2019
Oct 1	Commission income receivable	4 140		4 140 Dr
Nov 1	Cash at bank		3 350	790 Dr
2020
Jul 1	Cash at bank		3 350	2 560 Dr
Sep 30	Commission income received in advance	2 010		550 Cr
Sep 30	Income summary	550		=

c) Rental expenses not incurred yet cannot be included as rental expense even though money has been paid already. Commission income earned has to be recorded even though money is not received yet.

a) A steward refers to a person managing the resources of a business on behalf of the owner. Hence the accountant who is the steward has to set up an accounting information system to collate, record and organise financial information to report the performance of the business and provide financial information for the owner’s decision-making.

b) (i)

Capital expenditure refers to the cost of buying a non-current asset and bringing it to a ready

to use conditions. Benefits of capital expenditure last for more than a year, hence capital expenditure are

reported as non-current assets in the balance sheet.

b) (ii) Revenue expenditure refers to the cost of operating, repairing and maintaining a non-current asset in working condition. Benefits of revenue expenditure last for less than a year, hence revenue expenditure are reported as expenses in the income statement.

	Capital Expenditure	Revenue Expenditure
Purchases cost of a machine for use in the business	✓
Cost of fixing the machine to the factory floor	✓
Freight charges for the machine	✓
Insurance of the machine		✓
Repairs to the machine		✓

a) Working capital refers to net current assets [1] a business has to pay for its current liabilities and operating expenses when they fall due. [1]

3b) Current assets = 24 300 + 150 + 10 500 460 = $35 410 [1]

Current liabilities = 14 200 + 5 160 350 = $19 710 [1]

Working capital = Current assets Current liabilities = 35 410 19 710 = $15 700 [1]

3c) Taking the bank loan would increase the non-current liability by $5000 and decrease the bank overdraft by $5000. [1] Hence the working capital would increase by $5000. [1]

3d) The bank manager would want to know if the business had enough working capital to convert to cash [1] to pay the interest expense [1) and repay the loan amount [1] when they are due.

ei) Objectivity. Not letting bias, conflict of interest or undue influence of others to override professional judgment.

eii) Integrity. To be straightforward and honest in all business and professional dealings.

Paper 2 :

Adele

Statement of financial performance for the year ended 30 July 2021

	$	$
Sales revenue	191,520
Less: sales returns	8,720
Net sales revenue		182,800
Less : cost of sales		120,240
Gross profit		62,560

Add : other income
Commission income		7,810

Less : expenses
General expense	9,575
Rent and rates (10600-560)	10,040
Wages and salaries (2,470 + 420 )	25,180
Motor vehicle expense	7,335
Impairment loss on trade receivables	300
Depreciation on motor vehicle [(19,000 – 650)x 20 %]	2,500
Depreciation on fixtures and fittings (10%x 6,300)	630	55,580


Profit for the year

Adele

Statement of financial performance for the year ended 30 July 2021

Assets	$	$	$
Non-current asset	cost	Acc. dep.	N.B.V
Motor vehicle	19,000	9,000	10,000
Fixtures and fittings	6,300	2,830	3,470
			13,470
Current assets
Prepaid rent expense		560
Cash in hand		120
Trade receivables	24,685
Less: allowance for impairment on TR	(300)
Net trade receivables		24,385

Total current assets			25,065
Total assets			38,535

Equity and liabilities
Owner’s equity
Beginning balance		36,930
Add: profit for the year		14,790
Less : drawings		(21,600)
Total equity			30,120

Current liabilities
Trade payable		18,120
Accrued wages expense		420
Short term borrowing		900
Total current liabilities			19,440
			49,560
Total equity and liabilities

(a)

transaction	Debit	Credit
1	Cash at bank	Bank loan
2	Inventory	Trade payable – Rashid
3	Insurance	Cash at bank
4	Stationary	Cash in hand

(b) The cash book is where all collections and payments of monies are first recorded. It records the cash discount given to credit customers and cash discount obtained from credit suppliers.

(c)

	Debit ($)	Credit ($)
Trade receivables – Hanna	45
Cash at bank		45

(a) A source document captures information about a business transaction. The document provides proof that the transactions have occurred. As all the important information is captured in the source documents, it ensures that the transactions will be accurately recorded later.

(bi) Credit note

(bii) Bank statement

(ci) General Journal

(cii) Credit note

(d) Sales journal

(ei) To encourage prompt payment

(eii) $4,600 * 3% = $138

(eiii) Discount allowed

(eiv) Debit balance

(f) Going concern concept

(a) Shing – Trade payable control account

Date	Particulars	Dr	Cr	Bal
2019		$	$	$
Jun 1	Balance b/d			25,320 Cr
2020
May 31	Cash at bank	32,860
	Inventory		42,750
	Trade receivables control	490
	Inventory (purchase returns )	6,870		27,850 Cr
Jun 1	Balance b/d			27,850 Cr

(b) Shing Trade receivables – Zhu account

Date	Particulars	Dr	Cr	Bal
2020		$	$	$
May 1	Balance b/d			4,600 Dr
May 8	Sales revenue	1,890
May 15	Sales returns		300
May 31	Cash at bank		619	5,571 Dr
Jun 1	Balance b/d			5,571 Dr

(a) Nasim Fixtures and fittings account

Date	Particulars	Dr	Cr	Bal
2019		$	$	$
Sept 1	Balance b/d			3,460 Dr
2020
Jan 11	Cash in hand	30
Apr 9	Other payable – Lee suppliers	350
Jul 5	Capital	75
Sept 1	Balance b/d			3,915 Dr

(b) Nasim
Capital account

Date	Particulars	Dr	Cr	Bal
2019		$	$	$
Sept 1	Balance b/d			45,200 Cr
2020
Jul 5	Fixtures and fitting		75
Aug 31	Drawings ($200 + $10,580)	10,780		34,495 Cr
	Profit and loss (loss)	2,425		32,070 Cr
Sept 1	Balance b/d			32,070 Cr