2021 POA N Level Answer 7086

2021 N Level POA Answers 7086

Paper 1 :

ai) Integrity. Being straightforward and honest in all professional and business relationships

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

(b) To serve as an objective and verifiable evidence of a business transaction.


Source documentType of transaction
(i)ReceiptCash purchase or cash sale
(ii)Debit noteCorrect an undercharge of a credit sale or purchase
(iii)InvoiceCredit purchase or credit sale
(iv)Credit NoteReturn of credit sale or credit purchase
(v)Payment VoucherRecord of payments 


Income Summary.


•  safeguard assets of the business

•  ensure business transactions are recorded objectively and on a timely basis

•  ensure that the business complies with laws and regulation


Trade payable : Ting

DateParticularsDr ($)-Cr ($)+Balance
Jun 1 Balance b/d 4820 Cr
2Inventory (purchases) 2160
6Inventory (returns) 180 
30Cash at bank30003800 Cr
Jul 1 Bal b/d 3800 Cr


Trade discount is given by the seller to the buyer of goods to encourage bulk purchase.

Dr Trade payable 

Cr Discount Received


Dr Discount allowed Cr Trade receivable


Method of depreciationWorkingsDepreciation expense for the year ended
31 August 202031 August 2021
Straight-lineUseful life 5 yearsScrap value $2500($40000-$2500)/5
= $7500
Reducing-balanceof 20% per annumYr 1: $40,000×20%=$8000

Yr 2:
($40,000-$8000)x20% = $6400

b) Reducing balance method



Extract of Statement of Financial Position as at 31 August 2021

 CostAccumulated DepreciationNet Book Value
Non-current Assets$$$
Motor vehicles 40,00014,40025,600


Only trading businessBoth trading business and service business
Calculates cost of sales
Calculates profit for the year
May have other income
Always holds inventory


 General Journal  
2021 Dr ($)Cr ($)
 Cash at bank20000 
 Capital 20000
 Office equipment500 
 Capital 500
 Inventory 20

Paper 2 :


Statement of financial performance for the year ended 31 March 2021 

Sales revenue425 800
Less: Sales returns(28 700)
Net sales revenue397 100
Less: Cost of sales275 600
Gross profit121 500
Other income
Rent income (7 700+700)8 400
Less: Other expenses
Insurance (1 650-400)1 250
Discount allowed225
General expenses16 130
Office expenses (6 900+250)7 150
Wages and salaries62 800
Depreciation of office equipment (10%x10 000) 1 000
Depreciation of motor vehicles [20%x(15 000-5 400)]1 920(90 475)
Profit for the period 39 425


Statement of financial position as at 31 March 2021 

Non-current assetsCostAccumulateddepreciationNet book value
Office equipment10 0003 0007 000
Motor Vehicles15 0007 3207 680
25 00010 32014 680
Current assets
Inventory12 500
Trade receivables18 900
Cash at bank3 020
Cash in hand425 
Rent income receivable 700
Prepaid insurance40035 945
Total Assets50 625
Equity & Liabilities
Owner’s equity
Capital (30 500+39 425-40 200)29 725
Current liabilities
Trade payables20 650
Office expenses payable25020 900
Total equity and liabilities50 625

a) For cash sales, money received from customers will be recorded in the cash in hand or cash at bank account, while for sales on credit, money owed by credit customers will be recorded in the trade receivables account.



Date Particulars Dr Cr 
Jun 3Allowance for impairment of trade receivables800
      Trade receivables – Hollins’ 800



Date Particulars Dr Cr 
Dec 31Impairment loss on trade receivables  [(5%x 47 000) – (2 820-800)]330
    Allowance for impairment of trade receivables330


Statement of Financial Performance for the year ended 31 December 2020 (extract)

Less: Other expenses$$
Impairment loss on trade receivables330


Statement of Financial Position as at 31 December 2020 (extract)

Current assets$$
Trade receivables47 000
Less: Allowance for impairment of trade receivables(2 350)44 650


Reputation of customers

Customer’s history of repayment

Economic outlook 

Choose any two of the following above

a)i) Prepaid expenses are expenses that have been paid by the business, but not yet incurred.

a)ii) Prepaid expense is recognised as an expense only when service has been provided to the business.

b)i) Income received in advance is income that is received, but not yet earned.

b)ii) Income received in advance is recognised as an income only when service has been provided by the business to its customer.

c)i)  $190 + $12 200 – $230 = $12 160

c)ii) $1 200 + $8 300 – $1 650 = $7 850

d)i) Current liabilities

d)ii) Current liabilities

e) Accrual basis of accounting theory

a) $8 200 + $250 + $500 + $195 = $9 145

b) $50 000


  • Reduce selling price for slow-moving goods to sell inventory faster
  • Provide trade discount to encourage customers to buy in bulk and regularly to sell inventory faster
  • Attract more customers through marketing campaigns to sell inventory faster
  • Use technological tools to improve the accuracy of predictions about customer demand in order to know when and how much inventory to buy 

Choose two of the following above

d) Prudence theory


Tegan should choose Bright Light.

Assuming that the business purchases 100 desk lamps, the total cost for Bright Light would be $2520 [100 x $20 + 20% x (20 x 100) + $120], which is cheaper than the total cost for Illuminate of $2955 [100 x $25 + 15% x (25 x 100) + $80]. A lower inventory cost would mean a lower cost of sales and a higher gross profit assuming both selling prices are similar. 

Bright Light is already a successful product and appeals to a wide range of consumers, hence Tegan will be assured of good sales volume from this product.


Tegan should choose Illuminate.

The product from Illuminate is made from wood from a sustainable forest, which would be more environmentally friendly as compared to the product from Bright Light that is made from non-recyclable materials. 

The product from Illuminate allows a dimming feature, which would be much preferred by customers as customers would be able to adjust the lighting of the light bulb according to their preferences, instead of only having a on or off function as provided by the product of Bright Light.

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