2022 Broadrick 4E PRELIM P1 with ANS

Name Class Index Number BROADRICK SECONDARY SCHOOL SECONDARY 4 EXPRESS SECONDARY 5 NORMAL ACADEMIC PRELIMINARY EXAMINATION 2022 PRINCIPLES OF ACCOUNTS Paper 1 Candidates answer on the Question Paper. No Additional Materials are required. 7087/01 September 2022 1 hour READ THESE INSTRUCTIONS FIRST Write your name, index 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 diagrams or graph. Do not use staples, paper clips, glue or correction fluid. You may use a calculator. Answer all questions. The number of marks is given in brackets [ ] at the end of each question or part question. The total mark for this paper is 40. This document consists of 8 printed pages including the cover page. Setter(s) : Mr. Lim Shi Hao [Turn over Parent’s Signature: ________________________ For Examiner’s Use 40 Actual Grade: Target Grade:

2 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 1 Answer all questions. 1 Lucien runs a business trading in books. Its financial year ends on 31 May every year. The business trial balance as at 31 May 2022 is balanced. However , some errors has since been discovered. REQUIRED (a) Explain two purposes of preparing a trial balance. [2] (b) Explain the limitation of a trial balance. [2] (c) State the amount and effect of the following errors on Lucien’s business profit for the year ended 31 May 2022: (i) Purchase of van $900 has been debited to the motor expense account. [2] (ii) Credit note of $670 issued to a customer had been debited to trade receivable account and credited to sales returns account. [2] (d) Name and define one ethical principle. [2] [Total : 10] [Turn over

3 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 1 2 The cash at bank account and bank statement of Corinthian’s business for the month of April 2022 were as follows: Cash at Bank Account Date Particulars Cheque No. Debit Credit Balance 2022 $ $ $ Apr 1 Balance b/d 5 800 Dr Dr 6 Insurance 415 3 400 2 400 Dr Dr 9 Cash in hand 5 200 7 600 Dr Dr 16 Rent 416 3 200 4 400 Dr Dr 18 Eve 3 040 7 440 Dr Dr 23 Jed 1 600 9 040 Dr Dr 26 Utilities 417 1 040 8 000 Dr Dr May 1 Balance b/d 8 000 Dr Dr Bank Statement Date Particulars Payments Receipts Balance 2022 $ $ $ Apr 1 Balance b/d 6 640 Cr Cr 3 Cheque 414 840 5 800 Cr Cr 9 Cash 5 200 11 000 Cr Cr 21 Cheque deposit 3 040 14 040 Cr Cr 22 Cheque 416 3 200 10 840 Cr Cr 24 Rejected cheque 3 040 7 800 Cr Cr 26 Credit transfer: Barbie 1 160 8 960 Cr Cr 29 Cheque 417 1 400 7 560 Cr Cr Additional information It was discovered that the bank had incorrectly recorded the transaction for cheque 417. REQUIRED (a) State two other ways of internal control, besides bank reconciliation, a business may use to safeguard cash balances. [2]

4 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 1 (b) Update the cash at bank account at 30 April 2022 and bring down the balance. [2] (c) Prepare the bank reconciliation statement as at 30 April 2022. [4] [Total : 8] [Turn over

5 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 1 3 Matthew runs an advertising agency. His business has a financial year end of 30 June. The following information has been provided: $ At 1 July 2021 Insurance owing 298 Rent income due 2 210 During the year ended 30 June 2022 Insurance paid by cheque 4 200 Rent received by cheque 27 000 At 30 June 2022 Insurance paid in advance 318 Rent income due 1 730 REQUIRED (a) Name the accounting theory which must be used when it is assumed that a business will continue to operate for the foreseeable future. [1] (b) State the accounting theory that is being applied when calculating the amounts for insurance expense and rent income for the year ended 30 June 2022. [1] [1] (c) Calculate the amount to be included in the statement of financial performance of the business for the year ended 30 June 2022 for rent income. Show all workings. [4]

6 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 1 (d) Prepare the journal entries to account for insurance expense for the year ended 30 June 2022, including the closing entry. Narrations are not required. [4] [Total : 10] [Turn over

7 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 1 4 Walker runs a trading business. The following transactions took place with a credit customer, Rose during July 2022. 2022 July 2 Goods, $1200, were supplied to Rose 8 Rose paid Walker $600 11 Rose returned faulty goods, cost $150 22 Rose paid Walker the outstanding balance on her account by cheque 30 The bank returned Rose’s cheque due to insufficient funds The balance on Rose’s account was still outstanding at the end of Walker’s financial year on 31 August 2022. Walker decided to write off the balance in full. REQUIRED (a) Prepare the journal entry to write off the outstanding balance as at 31 August 2022. A narration is required. [4] (b) Explain why a business may decide to make an allowance for impairment of trade receivables. [2] (c) Name one accounting theory which is applied when making an allowance for impairment of trade receivables. [1]

8 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 1 Gilbert runs a similar business. The rate of inventory turnover for two years are shown for both businesses Walker Gilbert 2020 2021 2020 2021 9.27 times 11.91 times 8.28 times 5.88 times REQUIRED (d) Evaluate the rate of inventory turnover for both businesses for both years. [5] [Total: 12] -End of Paper-

9 Broadrick Secondary School, Preliminary Examination 2022, Sec 4E5N, Principles of Accounts, Paper 1 Suggested Solution Q1 (a) Explain two purposes of preparing a trial balance. [2] 1 facilitate the preparation of financial statements✔ 2 ensure arithmetic accuracy in recording✔ (b) Explain the limitation of a trial balance is balanced. [2] A trial balance is not an absolute proof of accuracy of transactions recorded in ledger accounts (1) Because there may be errors which would not affect the balancing of the trial balance and thus would not be revealed. (1) (c)(i) Profit Understated(1) by $900(1) (ii) Profit Overstated(1) b