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 | – |
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 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.
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]
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 |
(c) prudence concept
(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 |
(c) Accounting entity theory
