Tampines Sec 4E Prelim 2023 Paper 1 (Answers)

Debit $ Credit $ Error 1 Trade receivable – Ling Ling 2 500 [1] Trade receivable – Ming Ming 2 500 [1] Error 2 Cash at bank 600 [1] Commission income 600 [1] 2023 Sec 4E/5NA Prelim Exam Suggested Answers 1(a) 1(b) Shirley Statement to show adjusted profit for the year ended 31 December 2022 $ Unadjusted profit for the year 12 360 Add: Commission income – was understated 600 [1] Less: Utilities expense – was understated 18 [1] Adjusted profit for the year 12 942 [1]

2(a) Transaction Source document (i) Interest expense on bank overdraft. Bank statement [1] (ii) Purchase inventory on credit. Invoice [1] (iii) Correct an undercharge for sales made to a credit customer. Debit note [1] 2(b) A source document provides evidence [1] and this is consistent with the objectivity theory which states that accounting information recorded must be supported by reliable and verifiable evidence. [1] 2(c) Assets = 22 500 + 4 000 + 20 100 + 9 200+ 1 800 = $57 600 [1] Liabilities = 15 600 + 10 000 = $25 600 [1] Equity = A – L = $57 600 – $25 600 = $32 000 [1] 2(d)(i) On 14 July 2021, A debtor, Emily Trading, was unable to pay its debt of $2 400 and Flora Cosmetics wrote off that amount. [1] 2(d)(ii) On 31 March 2022, Flora Cosmetics reviewed its trade receivables balance and increased its allowance for impairment of trade receivables by $760 to $2,760.[1] 2(e) Prudence theory states that the accounting treatment chosen should be the one that least overstates assets and profits and least understates liabilities and losses.[1] Accounting for allowance for impairment of trade receivables as a deduction against trade receivables will ensure that trade receivables balance (asset) is no