SHSS 2023 Prelims 4E5N POA P1_2 MS

SHSS Principles of Accounts 2023 PRELIMINARY 4E5N 7087 - Mark Scheme Paper 1 Marks Q1 (a) (i) Debit note (ii) Credit note (iii) Payment voucher/bank statement/ remittance advice/receipt 3 (b) Recording using source documents ensures that transactions are recorded based on information that is reliable and verifiable [1] as required by objectivity theory.[1] 2 (d) Any one difference:  Trade discount is given to encourage customers to buy in bulk while cash discount is given to encourage prompt payment by credit customers.  Trade discount are deductions off the list price at the point of sale and cash discount are deducted off the invoice price of goods at the point of payment. 1 (c) Journal Date Particulars Dr $ Cr $ 2022 Aug 19 Trade payable – Caddy Co [(9400-800)x90%+250] [1] 7990 Discount received [1] 90 Cash at bank [1] 7900 3 Total 9 Q2 (a) Journal Date Particulars Dr $ Cr $ (i) 2021 Nov 4 Trade receivable - Kirby [1] 2100 Cash at bank [1] 2100 (ii) 2022 Feb 2 Allowance for impairment on trade receivables [1] 2100 Trade receivable – Kirby [1] 2100 4 (b) Allowance for impairment on trade receivables for year ended 31 December: 5% x 28300 = $1415 [1] 2021 2022 $1820 Less write off: (2100) (280) New: 1415 Adjustment: 1415-(-280) = 1695 Allowance needed to be increased by $1695 [1] 2 (c) Statement of financial performance for year ended 31 December 2022 Less: other expenses $ Impairment loss on trade receivables [1] OF 1695 1 Total 7

Q3 (a) Furniture account represents furniture purchased meant for use by the business. Inventory is used to record furniture purchased for resale to generate revenue for the business. 2 (b) Transaction (ii) 1 (c) Error 1: Dr Furniture [1] Cr Inventory [1] Error 2: Dr Equipment [1] Cr Repairs [1] 4 (d) Adjusted profit = 16500 +590=$17090 [1] 1 Total 8 Q4 (a) (i) Gross profit margin = 200564/691600 x 100 = 29.00% [1] (i) Profit margin = (200564-138320) [1] / 691600 x 100 = 62244 / 691600x100 = 9.00% [1] (ii) Return on equity = 62244/((500000+546000)/2) [1] = 11.90% 5 (b) Return on equity measures how much profit is earned for every dollar of equity invested by the shareholders.[1] It helps shareholders decide whether to buy more or sell their shares in the business.[1] 2 (b) 2021 2022 Gross profit margin 25% 29% Profit margin 12% 9% Return on equity 16% 11.9% Any 6 comments: Kwek Ltd’s gross profit margin improved from 25% for year ended 30 Sep 2021 to 29% for year ended 30 Sep 2022. [1] What This indicates that the business was able to derive more trading profit from its increased sales revenue over the two years. It could be owing to higher selling price or its ability to keep it cost of sales low. [1] So what However, the profit margin worsened from 12% for year ended 30 Sep 2021 to 9% for year ended 30 Sep 2022. [1] This signals that the business was unable to manage its operating expenses and the increased in gross profit is insufficient to cover the increase in operating expenses over the two ye