HIHS Prelim 2022 4E5N Paper 1

1 HOLY INNOCENTS’ HIGH SCHOOL Candidate Name Class Index Number PRELIMINARY EXAMINATION 2022 SECONDARY 4 EXPRESS / 5 NORMAL ACADEMIC PRINCIPLES OF ACCOUNTS 7087/01 PAPER 1 Date: 16 August 2022 Duration: 1 Hour Candidates answer on the Question Paper. No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Write your name, class and index number on all the work you hand in. Write in dark blue or black pen. You may use an HB pencil for any diagrams or graphs. Do not use staples, paper clips, glue or correction tape/fluid. Answer all questions. The number of marks is given in brackets [ ] at the end of each question or part question. Set by: Mr Nalpon Walter Edgar Vetted by: Ms Natalie Kwok This document consists of 9 printed pages (including cover page) and 1 blank page. O N A 40

2 Answer all questions. 1 Percilla discovered the following errors after preparing the trial balance for the year ended 31 December 2021. 1 Motor vehicle repairs of $580 had been recorded in the motor vehicles account. 2 Interest income of $130 received by cheque had been recorded in the books as $310. 3 Percilla took $300 worth of cash from the business office for her personal use. This has not been recorded in the books. The statement of financial performance for the year ended 31 December 2021 showed a profit of $7 350 before discovering the errors. REQUIRED (a) Prepare the journal entries to correct the errors above. Narrations are required. Journal [6]

3 (b) Explain two purposes of preparing a trial balance. 1 2 [2] (c) Using an accounting theory, explain why Percilla should record the $300 cash she took from the business office for personal use. [2] (d) Prepare a statement to show the adjusted profit for the year ended 31 December 2021. Percilla’s business Statement to show adjusted profit for the year ended 31 December 2021 [3] [Total: 13]

4 2 Sane owns a business which sells flowers. The following transactions took place during May 2021 with a credit supplier, Vivian. May 1 Sane’s business owed Vivian $2 500. 7 Purchased goods at a list price of $900 from Vivian, with a trade discount of 20%. 10 Returned goods at a list price of $100 to Vivian. These goods were purchased on 7 May. 24 Issued a cheque of $3 000 to Vivian in full settlement of the amount owing on this date. REQUIRED (a) Prepare Vivian’s account in Sane’s books for the month of May 2021. Vivian’s account [4] (b) Name the source document used to record the transactions on 7 and 10 May 2021. 7 May 10 May [2]

5 (c) Explain the difference between a cash transaction and a credit transaction. [2] Upon receiving the bank statement for the month of May 2021, Sane noticed that the cash at bank balance in the bank statement was different from th e cash at bank balance in his business books. REQUIRED (d) Explain one reason why the cash at bank balance in the bank statement could be different from the cash at bank balance in his business books. [1] (e) State two purposes of internal control. 1 2 [2] (f) Name two types of internal controls over cash. 1 2 [2] [Total: 13]

6 3 On 1 May 2020, Omar Pte Ltd provided the following account balance. $ Allowance for impairment of trade receivables 1 000 On 19 November 2020, one of Omar Pte Ltd’s credit customers, Shafiq, who owed $2 000 was declared bankrupt and was only able to pay 40 cents for every dollar owed. On the same day, Shafiq issued a cheque to Omar Pte Ltd. Omar Pte Ltd reviews its list of trade receivables at the end of every financial year and estimates that 5% of its trade receivables is likely to be uncollectible. The trade receivables balance as at financial year ended 30 April 2021 was $11 000. REQUIRED (a) Prepare the journal entries to record the transactions on 19 November 2020 and 30 April 2021. Narrations are not required. Journal [4]

7 (b) State the effect on profit for the year if the allowance for impairment of trade receivables was not adjusted on 30 April 2021. Write either the word ‘overstated’ or ‘understated’. [1] (c) State two advantages of setting up a private limited company compared to setting up a sole proprietorship. 1 2 [2] [Total: 7]

8 4 Indra provided the following balances from her business books for the financial year ended 30 September 2021. $ Office equipment 12 500 Trade receivables 3 300 Trade payables 6 600 Prepaid rent 7 000 Cash at bank 7 100 Commission received in advance 5 000 Cash in hand 480 Inventory 9 900 Mortgage loan 10 000 REQUIRED (a) Calculate the working capital as at 30 September 2021. Show your workings clearly. [1] (b) Calculate the net assets as at 30 September 2021. Show your workings clearly. [1]

9 END OF PAPER Indra also provided the following ratios for the financial years ended 30 September 2020 and 2021. 30 September 2020 30 September 2021 Current ratio 2.12 2.39 Quic