HIHS 2022 4E5N Paper 1 Solutions.xlsx

4 Express / 5 Normal Academic Paper 1 Solutions 1a Journal Date Particulars Debit Credit 2021 $ $ 1 Motor vehicle repairs 580 (1) Motor vehicle 580 (1) Correction of error - Motor vehicle repairs of $580 was recorded into the motor vehicle account. 2 Interest income $(310 - 130) 180 (1) Cash at bank 180 (1) Correction of error - Interest income of $130 received by cheque was recorded as $310 in the books. 3 Drawings 300 (1) Cash in hand 300 (1) Correction of error - Cash of $300 withdrawn by the owner for personal use was omitted from the books. *1 mark deducted from total marks of this part if students never write narrations[6] b > To check for arithematic accuracy in recording (1) > To facilitate the preparation of the financial statements. (1) [2] c According to the accounting entity theory (1) Percilla should record the $300 she took from the business because the business is a separate entity from its owner. (1) [2] d Percilla's business Statement to show adjusted profit for the year ended 31 December 2021 $ Unadjusted profit 7 350 Less: Motor vehicle repairs understated (580) (1) Less: Interest income overstated $(310 - 130) (180) (1) Adjusted profit for the year 6 590(1) [3] [Total: 13]

2a Vivian's account Date Particulars Debit Credit Balance 2021 $ $ $ May 1 Balance b/d 2 500 Cr 7 Inventory $(900 x 80%) 720 (1) 3 220 Cr 10 Inventory $(100 x 80%) 80 (1) 3 140 Cr 24 Cash at bank 3 000 (1) 140 Cr 24 Discount received 140 (1) - [4] b 7 May: Invoice (1) 10 May: Credit note (1) [2] c A cash transaction occurs when payment is made at the same time when the goods is purchased or sold. (1) Whereas a credit transaction occurs when the goods or services are received first and payment is made at a later date. (1) [2] d Accept any one of the following reasons > The business has received a cheque from a customer and updated it into the business cash at bank account but the bank has yet to update the cheque in the bank statement. (1) > The business has issued a cheque to its supplier and has updated the business cash at bank account but the supplier has yet to present the cheque to the bank.(1) > The business could have created standing order instructions with the bank for certain frequent transactions such as rent payments so the bank automatically deducts or receives amounts before they are made known to the business.(1) > There could be errors in recording made by the business or the bank.(1) [1] e Accept any two of the following > Safeguard assets of the business (1) > Ensure business transactions are recorded accurately (1) > Comply with laws and regulations (1) > Prevent fraud (1) [2] f Accept any two of the following answers > Segregation of duties (1) > Custody of cash (1) > Authorisation (1) > Bank reconciliation (1) [2] [Total: 13]

3a Journal Date Particulars Debit Credit 2020 Nov 19Allowance for impairment of trade receivables1 200 (1)Cash at bank $(2 000 x 40%) 800 Trade receivables: Shafiq 2 000 (1) 2021 Apr 30 Impairment loss on trade receivables 750 (1) Allowance for impairment of trade receivables 750 (1) $[(11 000 x 5%) - (1 000 - 1 200)] [4] b Overstated [1] c Accept any two of the following answers > It is easier for a private limited company to raise funds as they can issue shares. whereas for sole proprietorships funds are usually limited to the owner's personal funds.(1) > Private limited companies are more likely to obtain loans from banks as compared to sole proprietors. (1) > For private limited companies, shareholders are not obliged to pay for debts using their personal assets. However, for sole proprietors, the sole owner is obliged to pay them using his or her own personal assets. (1) > A private limited company exists forever untill wound up or struck off. However, a sole proprietorship may exist as long as the owner is alive and desires to continue operation.(1) [2] [Total: 7]

4aWorking capital = Current assets - current liabilities = $(3 300 + 7 000 + 7 100 + 480 + 9 900) - $(6 600 + 5 000) = $16 180 [1] bNet assets = Total assets - Total liabilities = $(12 500 + 3 300 + 7 000 + 7 100 + 480 + 9 900) - $(6 600 + 5 000 + 10 000) = $40 280 - $21 600 = $18 680 [1] cCommenting on the trend> The current ratio is on an improving trend from 2.12 in 2020 to 2.39 in 2021.(1)> The quick ratio is on improving trend from 0.87 in 2020 to 0.94 in 2021.(1) Accept any three of the following analysis points> The current ratio met the acceptable norm of 2.00 in both 2020 and 2021.Both sets of comparing acceptable norm to get 1 mark This means that the business has sufficient current assets to pay off its short-termBoth sets of saying current/quick assets to pay off to get one mark debts. (1)> The quick ratio did not meet the acceptable norm of 1.00 in both 2020 and 2021. This means that the business did not have sufficient quick assets to pay off its short-term debts. (1)> Indra's quick ratio may not have met the acceptable norm of 1.00 because the business might have purchased excess inventory which it has been unable to sell. Only once the inventory has been sold the business can generate cash or trade receivables. (1)> Indra's quick ratio may have also not met the acceptable norm of 1.00 due to a significant amount of prepayments made. Prepayments are not included in the calculation of the quick ratio. (1)> Indra's quick ratio may have not met the acceptable norm of 1.00 also because the business may have been using its cash to repay the mortgage loan each year.(1) [5] [Total: 7]