Yuan Ching 2024 Prelim P1 and P2 Sol

N’Level Self-Revision Set 05 – Yuan Ching N’Level Prelim 2024 SOLUTIONS -PAPER 1- Question 1a Utilities expense for the year = Amount paid – Amount payable for previous year + Amount used but not paid for this year =2 780 – 260 [1] + 170 [1] = $2 690 [1] Question 1b 2024 Debit $ Credit $ Apr 30 Utilities expense [1] 170 Utilities expense payable [1] 170 Adjustment for $170 of utilities expense used but not paid yet at year end [1] Question 1c The profit for the year would be overstated[1] by $170 [1]. Question 1d (i) 15 May 2024 Aces Trading received a cheque of $4 500 [1] from credit customer David after giving David a discount of $330. [1] Question 1d (ii) 22 May 2024 Aces Trading sold goods to credit customer David for $2 700 on credit. [1] Question 1e 2024 Debit $ Credit $ Jun 11 Allowance for impairment of trade receivables [1] 2 700 Trade receivable, David [1] 2 700

Question 2a The previous accountant has violated the principle of objectivity [1] as he had caused the business to suffer a loss to make a personal gain. [1] (Student is to explain the conflict of interest as defined in the principle of objectivity.) Question 2b Employees, to know the career prospects of continuing to work for the business Credit suppliers, to know if the business has enough assets to repay the amount owing Government, to know if the business is complying with the laws and regulations (any other suitable answer, 1m for naming the stakeholder and 1m for explanation of the interest) Question 2c Effect of transaction on: Assets Liabilities Equity (i) Sims Trading bought $600 of goods for resale on credit. Inventory + $600 Trade payable + $600 (ii) Sims Trading repaid $10 000 of bank loan with the owner’s personal cheque. Bank loan - $10 000 [1] Capital + $10 000 [1] Question 2d To facilitate the preparation of financial statements [1] To check for arithmetic accuracy in recording [1] Question 2e Some errors affect both the debit and credit sides of the affected ledger accounts equally, so the trial balance cannot detect these errors. Question 2f 2024 Debit $ Credit $ May 31 Trade receivable Su Shan [1] 450 Trade receivable Susan [1] 450 May 31 Trade payable, Beng [1] 180 Inventory [1] 180 Question 2g Correcting Error 3 would increase [1] profit by $450 [1]

Question 3a • Capital expenditure refers to spending on buying non-current assets and any cost to get the non-current assets to a ready-to-use condition whereas revenue expenditure refers to spending to operate, repair and maintain non-current assets in working condition. • Capital expenditure are capitalised and recorded as non -current assets in the statement of financial position but revenue expenditure are expensed off and reported in statement of financial performance. • Benefits from capital expenditure last for more than one accounting year whereas benefits from revenue expenditure last for one accounting year or less. (Each comparison, 2m) Question 3b Capital expenditure Revenue expenditure (i) The business paid $20 000 by cheque to rent the shophouse. (ii) The business paid $800 to install ramps at the entrance and in the pets’ shower area. [1] (iii) The business bought $3 500 of grooming equipment on credit. [1] (iv) The business bought $400 of pet shampoo by cheque for use in the business. [1] Question 3c Source document (i) The business bought $3 500 of grooming equipment on credit. Invoice [1] (ii) The business bought $400 of pet shampoo by cheque for use in the business. Payment voucher [1] Question 3d The materiality theory states that an amount is considered material if it affects decision making and is significant in comparison with the business’ sales revenue, profit or total assets. [1] In this case, even though the benefits of the camera are for more than one accounting period, [1], the camera was recorded as an expense because the amount was immaterial [1].

-PAPER 2- Question 1a Home Elves Statement of financial performance for the year ended 30 June 2024 $ $ Service fees revenue (83140 - 3470) 79 670 2 Other income Discount received 704 1 Less: Other expenses Cleaning supplies expense (21 415 - 400) 21 015 2 Salaries and wages 49 500 1 Impairment loss on trade receivables (688 – 310) 378 1 Depreciation of cleaning equipment (25400-2540) X 10% 2 286 1 Depreciation of office equipment (4000 – 300) ÷ 5 740 1 Interest expense 480 (74 399) 1 Profit for the year 5 975

Question 1b Home Elves Statement of financial position as at 30 June 2024 Assets $ $ $ Non-current asset Cost Accumulated depreciation Net book value Cleaning equipment 25 400 4 826 [1] 20 574 Office equipment 4 000 740 [1] 3 260 23 834 1 Current assets Trade receivables 8 600 Less: Allowance for impairment of trade receivables (8% X 8600) (688) 7 912 1 1 Cash at bank 6 807 Prepaid cleaning supplies expense 400 15 119 1 Total assets 38 953 Equity and liabilities Owner's equity Capital (19234 + 5 975 - 4306) 20 903 2 Non-current liability Long-term borrowings 12 000 1 Current liabilities Trade payables 2 580 Service fee revenue received in advance 3 470 6 050 1 Total equity and liabilities 38 953

Question 2a Authorisation [1] Custody of cash [1] Segregation of duties [1] (Any 1) Question 2b Safeguard assets of the business [1] Ensure business transactions are recorded accurately [1] Comply with laws and regulations [1] (Any 1) Question 2c Expired cheque [1] Post dated cheque [1] Insufficient balance in the payer’s bank account [1] Signature on cheque does not match the bank records [1] Inconsistent information between the numerals and words [1] (Any 1) Question 2d Cash at bank Date Particulars Debit Credit Balance 2024 $ $ $ Apr 30 Balance b/d 5 064 Dr Trade receivable, Winston [1] 770 5 834 Dr Trade receivable, Mei [1] 540 5 294 Dr Utilities expense [1] 164 5 130 Dr May 1 Balance b/d [1] 5 130 Dr (No OF for Balance b/d if student includes $155, a past month payment.) Question 2e Bank reconciliation statement as at 30 April 2024 $ Marks Balance as per bank statement 6 254 1 Add: Deposits in transit Trade receivable, Chee 926 1 Less: Cheques not yet presented Trade payable, Ravi (2 050) 1 Balance as per adjusted cash at bank 5 130 1 Question 2f Profit for the month would decrease [1] by $164. [1] (effect of recording the utilities expense) Question 3a

Assets = Equity + Liabilities [1] Question 3b Capital = Total assets – Total liabilities = (21 445 + 7 054 + 11 137 + 4 560) – (12 000 + 9 813) = 44 196 [1] – 21 813 [1] = $22 383 Question 3c Total drawings = 25 + 6 830 = $6 855 [1] Question 3d Capital Date Particulars Debit Credit Balance 2023 $ $ $ Jan 1 Balance b/d 22 383 Cr OF from 3(a) Feb 4 Office equipment [1] 2 500 24 883 Cr Dec 31 Income summary [1] 46 592 71 475 Cr Dec 31 Drawings [1] 6 855 64 620 Cr OF from 3(b) 2024 Jan 1 Balance b/d [1] 64 620 Cr Question 3e Equity is the owner’s claim on the net assets of the business. [1] Question 3f The accounting entity theory states that the business activities and the owner’s actions are separate and only transactions affecting the business should be recorded from the business’ point of view. [1] Hence, any contribution of assets to the business by the owner or withdrawals of business resources by the owner for his personal use must be recorded. [1]

Question 4a Cost of sales = 1300 [1] + 900 = $2 200 [1] Question 4b 2024 Debit $ Credi