MJR 4E5N PRE POA P1 2023 ANSWER

Name Register Number Class Calculator Model ANSWER MANJUSRI SECONDARY SCHOOL PRELIMINARY EXAMINATION 2023 Subject: Principles of Accounts Paper: 7087 / 01 Level: Secondary 4 Express / 5 Normal (Academic) Date: 28 August 2023 Duration: 1 hour Setter: Ms Tan Ai Hua Candidates answer on the Question Paper. No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Write your Name, Register Number and Class in the spaces at the top of this page. Write in dark blue or black pen. You may use an HB pencil for any rough working. Do not use staples, paper clips, glue or correction fluid. The use of an approved calculator is allowed. Answer all questions. The businesses described in this question paper are entirely fictitious. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 9 printed pages and 3 blank pages. [Turn over For Examiner’s Use Q1 /10 Q2 /9 Q3 /10 Q4 /11 Total /40

2 4E5NA/7087/01/PRE/2023[Turn over Answer all questions. 1 Scott is a sole trader. After preparing the accounts f or the year ended 3 0 June 2023, he discovered the following errors. 1 A payment received, $280, from Jen, a credit customer, had been credited to the sales revenue account. 2 A cheque payment, $39, for office expenses, had been recorded as $93. 3 A cheque payment of $826 to Kai Xiang, a credit supplier, had been incorrectly debited to the account of Kai Yu. 4 A credit note of $250 issued to Ian, a credit customer, for defective goods returned, had been omitted from the books. REQUIRED (a) Complete the following table to calculate the adjusted profit after correcting errors 1 to 4. If there is no effect, place a tick (√) in the “No effect” column. Do not write on the shaded boxes. No effect Increase Decrease $ Profit for the year before correction of errors 26 970 Error 1 280 [1] Error 2 54 [1] Error 3 √ [1] Error 4 250 [1] Adjusted profit for the year 26 494 [1] [5] (b) Explain two reasons why a trial balance is prepared at the end of every financial year. 1. To check the arithmetical accuracy in recording i.e. whether the total equals to the total credits in the ledger. [1] 2. To facilitate the preparation of financial statements i.e. the statement of financial performance and the statement of financial position. [1] [2]

3 4E5NA/7087/01/PRE/2023[Turn over (c) Explain the limitation of a balanced trial balance. Errors may still exist in a balanced trial balance when a transaction is not recorded at all [1] OR a transaction is recorded in the wrong account of the same or different accounting element. Any other relevant point. [1] (d) State the two principles of professional ethics that accounta nts are required to adopt. nced trial balance when a transaction is not recorded Integrity [1] and objectivity [1] [2] [Total: 10] [Turn over

4 4E5NA/7087/01/PRE/2023[Turn over 2 Jovan Sports Trading is a business that buys and sells sportswear and equipment. Jovan Sports Tradin g wants to borrow money to buy co mputers and upgrade it s accounting computing software. REQUIRED (a) Describe one way in which a bank loan differs from a bank overdraft. A bank loan arises when the business borrows a fixed amount for a fixed period and the amount is transferred to its bank account while a bank overdraft arises when the business withdraws more than what it has deposited in the bank a/c, up to the limit which the business and the bank have agreed upon. Any other reasonable contrasting point [2] On 1 April 2021, Jovan Sports Trading took a bank loan o f $60 000 at 4% interest per annum. The loan is to be paid equa lly over five years . The partial principal sum of th e loan and the interest, is payable every year on 31 March. The first repayment of the loan and interest w as made on 31 March 2022. The financial year of Jovan Sports Trading ends on 31 December. REQUIRED (b) Prepare an extract of the statement of financial performance for the year ended 31 December 2021, showing only the expense section. Statement of financial performance for the year ended 31 December 2021 Less Other expenses $ Interest expense (4%x$60000x9/12) 1 800 [1] (c) Prepare an extract of the statement of financial position as at 31 December 2021, showing only the liabilities section. Statement of financial position as at 31 December 2021 Non-current liabilities $ Long-term borrowings (60000 – 60000/5) 48 000 [1] Current liabilities Current portion of long-term borrowing (60000/5) 12 000 [1] Interest expense payable (4%x60000x9/12) 1 800 [1] [3]

5 4E5NA/7087/01/PRE/2023[Turn over (d) Prepare a statement of financial performance for the year ended 31 Decem ber 2022. Statement of financial performance for the year ended 31 December 2022 Less Other expenses $ Interest expense (4%x$60000x3/12)+(4%x$48000x9/12) 2 040 [1] [1] (e) Name and explain the accounting theo ry underlying the accounting for interest expense incurred but not yet paid. Accrual basis of accounting [1]. When the business has incurred Interest expense, regardless of whether it has been paid or not, the interest expense should be recorded.[1] [2] [Total: 9] [Turn over

6 4E5NA/7087/01/PRE/2023[Turn over 3 The following information relates to Joshua Trading for the year ended 30 June 2023. $ Credit sales revenue 260 000 Credit sales returns 9 500 Cash sales 12 000 The net trade receivables balances were provided. 1 July 2022 30 June 2023 $ $ Net trade receivables 22 000 27 000 REQUIRED (a) Calculate the following for the year ended 30 June 2023. Show your answers to two decimal places. (i) Rate of trade receivables turnover = Net credit sales revenue / Average net trade receivables = 260 000 – 9 500 / (22 000 + 27 000) ÷ 2 = 250 500 / 24 500 = 10.22 times [1] (ii) Trade receivables collection period = Average net trade receivables / Net credit sales revenue X 365 days = [(22 000 + 27 000) ÷ 2 / 260 000 – 9 500] X 365 days = 35.70 days [1]

7 4E5NA/7087/01/PRE/2023[Turn over The following trade receivables efficiency ratios are extracted from the books of Isaac Co., a direct competitor of Joshua Trading. Rate of trade receivables turnover 14.23 times Trade receivables collection period 25.61 days REQUIRED (b) Evaluate Joshua Trading’s efficiency in trade receivables management against its competitor, Isaac Co.. Joshua Trading’s rate of trade receivables turnover of 10.22 times is worse than Isaac Co.’s rate of trade receivables turnover of 14.23 times. [1] This indicates that Joshua Trading is not collecting payments from its credit customers as promptly as compared to Isaac Co..[1] Joshua Trading’s trade receivables collection period of 35.70 days is worse than that of Isaac’s of 25.61 days. [1] This implies that Joshua Trading is taking a longer time to collect payment from its credit customers as compared to Isaac Co..[1] Hence, Joshua Trading is less efficient in managing its trade receivables than Isaac Co..[1] Max 4 marks [4] (c) Suggest one way to improv e Joshua Tradin g’s efficiency in trade receivables management. Improve credit granting processes by ensuring credit is granted to customers who are financially ab