2020 POA N Level Answer

2020 N Level POA Answers 7088

Paper 1 :

a) Rental expense account

DateParticularsDr ($)+Cr ($)-Balance
Oct 1Prepaid rental expense650650 Dr
Dec 1Cash at bank1 4502 100 Dr
May 1Cash at bank1 4503 550 Dr
Sep 30Prepaid rental expense5503 000 Dr
Sep 30Income summary3 000


Commission income  account

DateParticularsDr ($)+Cr ($)-Balance
Oct 1Commission income receivable4 1404 140 Dr
Nov 1Cash at bank3 350790 Dr
Jul 1Cash at bank3 3502 560 Dr
Sep 30Commission income received in advance2 010550 Cr
Sep 30Income summary550=

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 ExpenditureRevenue 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 :


Statement of financial performance for the year ended 30 July 2021

Sales revenue191,520
Less: sales returns 8,720
Net sales revenue 182,800
Less : cost of sales 120,240
Gross profit 62,560
Add : other income 
Commission income7,810
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)63055,580
Profit for the year


Statement of financial performance for the year ended 30 July 2021

Non-current asset costAcc. dep.    N.B.V
Motor vehicle 19,0009,00010,000
Fixtures and fittings 6,3002,8303,470
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 assets25,065
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
Total equity and liabilities 


transactionDebit Credit 
1Cash at bank Bank loan
2Inventory Trade payable – Rashid 
3Insurance Cash at bank 
4Stationary 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.


Debit ($)Credit ($)
Trade receivables – Hanna 45
Cash at bank45

 (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  1Balance b/d25,320 Cr
May 31Cash at bank 32,860
Inventory 42,750
Trade receivables control 490
Inventory (purchase returns )6,87027,850 Cr
Jun 1 Balance b/d 27,850 Cr

(b)  Shing Trade receivables – Zhu account 

Date Particulars Dr Cr Bal 
2020 $$$
May 1Balance b/d 4,600 Dr
May 8 Sales revenue 1,890
May 15 Sales returns 300
May 31 Cash at bank 6195,571 Dr
Jun 1 Balance b/d 5,571 Dr 

(c) prudence concept 

 (a)  Nasim Fixtures and fittings account 

Date Particulars Dr Cr Bal 
2019 $$$
Sept 1 Balance b/d3,460 Dr
Jan 11 Cash in hand 30
Apr 9 Other payable – Lee suppliers350
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/d45,200 Cr
Jul 5 Fixtures and fitting 75
Aug 31 Drawings ($200 + $10,580)10,78034,495 Cr
Profit and loss (loss)2,42532,070 Cr
Sept 1 Balance b/d 32,070 Cr

(c) Accounting entity theory 

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