2022 Peirce Sec PRELIM 7087 4E POA P1 ANS.xlsx

Peirce Secondary School Principles of Accounts Secondary 4 (Express) Preliminary Examination Paper (1) 1a)A accountant should have integrity. This means that he or she has to be straightforward and ü honest in all professional relationships. ü Or An accountant must have objectivity. This means that he or she will not let bias, conflict of ü interest or the undue influence of others overide his or her professional judgement. ü Each ü = 1 mark Total: 2 marks 1b)According to the objectivity theory, source documents provides evidence to capture occurrenceü of a transaction. ü Each ü = 1 mark Total: 2 marks 1c)Assets = Equity + Liabilities ü Each ü = 1 mark Total: 1 mark 1d)The purpose of a trial balance is ensure arithmetic accuracy in recording and to facilitate the preparation ofü financial statements. ü Each ü = 1 mark Total: 2 marks 1e)Wear and tear/ usage/ obsolescence/ legal limits üü Each ü = 1 mark Total: 2 marks

2a) In accordance to the acrrual basis of accounting, expenses must be recognised in the period the services have been used, regardless of whether they have been paid or not. Or In accordance to the matching concept, other costs incurred during the operation of a business to generate revenue and other income must be matched against revenue and other income earned in the same accounting period to determine the profit for that period. Each ü = 1 mark 2b) General Journal Date Particulars Dr Cr 2021 ($) ($) Jul 1Utilities 1,080 Prepaid utilities 1,080 2022 Jun 30Utilities 500 Cash at bank 500 Utilities 50 Utilities payable 50 Each ü = 1 mark

ü ü ü ü Total: 2 marks ü ü ü ü ü ü Total: 6 marks

3a)Firstly, a bank reconciliation is used to reconcile differences between the cash at bank account and the√ bank statement. It is also used to identify any errors in recording made by the business or the bank.√ Each ü = 1 mark Total: 2 marks 3b)A cheque may be dishonoured because it has expired/ cheque is post-dated/ information on the cheque√ is not consistent/ information on the cheque is not complete/ payer's account is closed, frozen or does √ not have sufficient money. Each ü = 1 mark Total: 2 marks 3c) Cash at bank account Date Particulars Debit Credit Balance 2022 $ $ $ Apr 30Balance b/d - 7,850- Dr Insurance expense (standing instruction) - 1,500- - 6,350- Dr √ Trade receivables - Sarah - 1,000- - 5,350- Dr √ Trade receivables - Bee 1600 - 6,950- Dr √ Bank charges 200- 6,750- Dr √ May 1Balance b/d - 6,750- Dr √ Each ü = 1 mark Total: 5 marks 3d) Efficient Wheels Leasing Bank reconciliation statement as at 30 April 2022 $ $ Balance as per bank statement - 4,970- √ Add: Deposits in transit Trade receivables - Chris - 4,000- √

Add: Correction of error for cheque 104 - 180- √ Less: Cheques not yet presented Rent - 2,400- √ Adjusted balance as per cash at bank account - 6,750- √ Correct headings for reconciling items = 1 mark Each ü = 1 mark Total: 5 marks

4a) General Journal Date Particulars Dr Cr 2021 ($) ($) Mar 31Impairment loss on trade receivables (0.1*36890)( 3,689) √ Allowance for impairment of trade receivables ( 3,689) √ 2022 Mar 31Allowance for impairment of trade receivables 3689-(0.1*17420)( 1,947) √ Impairment loss on trade receivables ( 1,947) √ Each √ = 1 mark Both account and amount must be correctly debited/ credited to be awarded 1 mark Total: 4 marks 4b)Yes the business should sell to Sparkling Stones. √ Sparkling Stones seems to be a reliable credit customer with a good reputation amongst its suppliers for prompt √ payment. As such, it would most likely pay up on time to the business and the business would have the cash for its daily operations. √ In addition, Sparkling Stones generates a high sales revenue of $500 000 a year. With the generous credit limit of √ $80 000 provided by Bling Bling Rocks, Sparkling Stones would be able to buy more inventory and increase its sales and profits leading to increased sales and profits for the former too. √ Or No the business should not sell to Sparkling Stones. √ In ABC country, the average credit period averages 50 days, which is more than that offered by Bling Bling Rocks of √ 40 days. Therefore, it is likely that Sparkling Stones would not be able to pay up on time if Bling Bling Rocks sells on credit to the former. As a result the business would not have the cash promptly for its daily operations.√ Besides, gemstones is considered a luxury item in ABC country which only the wealthy could afford. This could limit√ growth of new and recurring sales in the long run as it is not considered a form of necessity for the majority of the population. As such, the business might not want to sell to Sparkling Stones due to the unstable nature of its business in the long run. √ Each √ = 1 mark

Accept other plausible answers Total: 5 marks