2020 N Level POA Answers 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 | – |
b)
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 organize financial information to report the performance of the business and provide financial information for the owner’s decision-making.
bi)
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.
bii)
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.
c)
| 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]
b)
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]
c)
Taking the bank loan would increase the non-current liability by $5000 and decrease the bank overdraft by $5000. Hence the working capital would increase by $5000.
d)
The bank manager would want to know if the business had enough working capital to convert to cash to pay the interest expense and repay the loan amount 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.
