2018 N Level POA Answers

Paper 1 :

1. Source documents

2. Journal entries

3. Ledger

4. Trial balance

5. Statement of financial performance

6. Statement of financial position

b) All business transactions must be supported by a verifiable unbiased piece of evidence.

		Source document
i)	Bank charges	Bank statement
ii)	Sale of goods for cash	Receipt
iii)	Purchase of goods on credit	Invoice
iv)	Return of goods sold on credit	Credit note

Journal

Particulars	Dr ($)	Cr ($)
Drawings	320
Inventory		320

Rental income

Date	Particulars	Dr ($)+	Cr ($)-	Balance
2017
Aug 1	Rental income received in advance		1 500	1 500 Cr
Nov 1	Cash at bank		3 500	5 000 Dr
2018
May 1	Cash at bank		3 500	8 500 Dr
Jul 31	Rental income received in advance	1 750		6 750 Dr
Jul 31	Income summary	6 750		–

Advertising expense

Date	Particulars	Dr ($)+	Cr ($)-	Balance
2018
Jun 1	Cash at bank	2 100		2 100 Dr
Jul 31	Prepaid advertising expense		1 750	350 Dr
31	Income summary		350	–

c) Expenses are recognised when incurred not paid and income are recognised when earned not received.

ai) Assets are resources of value owned by the business.

ii) Liabilities are amounts owed by a business to external parties.

iii) Owner’s equity is the owner’s interest or claim on the assets of the business.

b) (10 000 + 25 000) – (12 000 + 5 000) = $18 000

		Effect on equity
1	Increase in trade receivables	Increase
2	Increase in accumulated depreciation	Decrease
3	Payment of wages which were owing	Decrease

a) Inventory should be valued at the lower of cost or net realisable value.

b) 75 x (85 + 150 + 95 + 225) = $41 625

c) 165 x 10 = $1 650

Journal

Particulars	Dr ($)	Cr ($)
Impairment loss on inventory(200-165)x10	350
Inventory		350
Being impairment loss on inventory

e) Matching concept

Paper 2 :

Delun

Statement of financial performance for the year ended 30 April 2018

	$	$
Sales revenue		266 425
Less: Sales returns		1 325
Net sales revenue		265 100
Less: Cost of sales		186 730
Gross Profit		78 370

Add: Other income
Discount received		465
		78 835
Less: Expenses
Motor vehicles expenses (9 280- 375)	8 905
General expenses (11 275+210)	11 485
Wages and salaries	48 300
Rental expenses	15 000
Impairment loss on inventory (1 389-937)	452
Depreciation on motor vehicles (20%x(20 000-4 000))	3 200
Depreciation on fixtures and fittings (15% x 15 000)	2 250	89 592

Loss of the year		10 757

Delun

Statement of financial position as at 30 April 2018

	Cost	Accumulated Depreciation	Net Book Value
Assets	$	$	$
Non-current assets
Motor vehicles (4 000+3 200)	20 000	7 200	12 800
Fixtures and fittings (2 250+2 250)	15 000	4 500	10 500
Total non-current assets			23 300
Current assets
Trade receivables	46 300
Less: Allowance for impairment of trade receivables	1 389	44 911
Inventory		19 632
Cash in hand		55
Prepaid motor vehicles expense		375
Total current assets			64 973
Total assets			88 273

Equity and Liabilities
Capital (79 625-10 757-15 160)			53 708

Current liabilities
Bank overdraft		1 680
Trade payables		32 675
General expense payable		210
Total current liabilities			34 565
Total equity and liabilities			88 273

Interest expense account

Date	Particulars	Dr ($)+	Cr ($)-	Balance
2017
Jun 30	Interest expense payable	300		300 Dr
Jun 30	Income summary		300	–
July 1	Interest expense payable			300 Cr
Dec 31	Cash at bank	600		300 Dr
2018
Jun 30	Interest expense payable	240		540 Dr
Jun 30	Income summary		540	–

	Non-current liabilities	Current liabilities
	$	$
as at 30 June 2017	10,000	6%10,0006/12=300
as at 30 June 2018	8,000	6%8,0006/12= 240

a) To prevent overcrowding ledger and to prevent fraud.

Trade receivables control account

Date	Particulars	Dr ($)+	Cr ($)-	Balance
2017
Apr 1	Balance b/d			32 850 Dr
2018
Mar 31	Sales revenue	85 195		118 045 Dr
31	Cash at bank		74 955	43 090 Dr
31	Discount allowed		4 060	39 030 Dr
31	Sales returns		2 590	36 440 Dr
31	Trade payables control		480	35 960 Dr

Apr 1	Balance b/d			35 960 Dr

c) General journal

d) Sales ledger

e) Set off / contra entries. Sometimes, the same person may be trade payable and trade receivable for the business. At the end of the month, the smaller amount in his account from one ledger is transferred to his account in the ledger with a large amount. The entry passed for recording this transfer is known as set off or contra entry.

Journal

Date	Particulars	Dr ($)	Cr ($)
2018
May 1	Fixtures and fittings	1275
	Inventory	3855
	Bank loan		2000
	Capital		3130
	Assets is able to pay its current liabilities.

b) Correction of errors

Trade payable – Lim

Date	Particulars	Dr ($)+	Cr ($)-	Balance
2018
Jun 1	Balance b/d			2 480 Dr
4	Inventory		2 655	5 135 Dr
18	Inventory(returns)	220		4 915 Dr
28	Cash at bank (95%x2 480)	2 356		2 559 Dr
28	Discount received (5%x2 480)	124		2 435 Dr

Jul 1	Balance b/d			2 435 Dr

Cash in hand account

Date	Particulars	Dr ($)+	Cr ($)-	Balance
2018
Jul 1	Balance b/d			75 Dr
3	Sales revenue	905		980 Dr
25	Wages expense		50	930 Dr
29	Cash at bank		820	110 Dr
Aug 1	Balance b/d			110 Dr

Cash at bank account

Date	Particulars	Dr ($)+	Cr ($)-	Balance
2018
Jul 1	Balance b/d			180 Dr
6	Trade receivables – Lionel (dishonoured)		172	8 Dr
10	Trade receivables – Sasha (96% x 550)	528		536 Dr
10	Discount allowed (4% x 550)	22		558 Dr
14	Trade payable – Rayzal (95% x 1 260)		1 197	639 Cr
14	Discount received (5% x 1 260)		63	702 Cr
19	Electricity expenses		350	1 052 Dr
29	Cash in hand	820		232 Cr

Aug 1	Balance b/d			232 Cr