YCKSS 4E5N 2022 PRELIM POA P1 QN

Name: Index Number: Class: YIO CHU KANG SECONDARY SCHOOL O-LEVEL PRELIMINARY EXAMINATION 2022 SECONDARY FOUR EXPRESS SECONDARY FIVE NORMAL (ACADEMIC) PRINCIPLES OF ACCOUNTS 7087/01 Paper 1 1 hour 13 September 2022 (Tuesday) READ THESE INSTRUCTIONS FIRST Write your name, index number and class on all the work you hand in. Write in dark blue or black pen. You may use an HB pencil for any rough working. Do not use staples, paper clips, glue or correction fluid. The use of an approved calculator is allowed. Answer all questions. Where layouts are to be completed, you may not need all the lines for your answers. Where the T account format is used, the account should be balanced. Where applicable, the balance should be brought down to the next financial year. Where the columnar format is used, the running balance column should be updated for the first and last entries. Where applicable, the balance should be brought down to the next financial year. The businesses described in this question paper are fictitious. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. For Examiner’s Use 40 Setter: Mr Jude Ang This document consists of 7 printed pages and 1 blank page.

2 O-LEVEL PRELIM EXAM 2022 7087/01 Answer all questions. 1 Adrian runs a small provision shop and deals mainly with cash transactions. REQUIRED (a) State and explain two internal controls of cash that Adrian should have. …………………………………………………………………………………..…..…… …………………………………………………………………………………………… …………………………………………………………………………………..…..…… ……………………………………………………………………………….……….....[4] (b) State two reasons why cheques are rejected by banks. …………………………………………………………………………………………… …………………………………………………………………………………..…..…… ……………………………………………………………………………….……….....[2] (c) Explain why bank reconciliation is done by businesses. …………………………………………………………………………………………… …………………………………………………………………………………..…..…… ……………………………………………………………………………….……….....[2] Adrian realises that the balance in his cash at bank account is 10 500 Cr. He realises that this is not a healthy balance. (d) Suggest two ways that Adrian can improve the cash at bank balance of his business. …………………………………………………………………………………………… …………………………………………………………………………………..…..…… …………………………………………………………………………………..…..…… ……………………………………………………………………………….……….....[2]

3 O-LEVEL PRELIM EXAM 2022 7087/01 On 31 December 2020, Adrian did a stocktake and found that $2 000 worth of goods were either expired or missing. (e) Prepare the journal entries to record this loss of inventory. Narrations are required. ………………………………………………………………………………………… …………………………………………………………………………………..…….. ………………………………………………………………………………………… …………………………………………………………………………………..…..… ……………………………………………………………………………………....[3] [Total: 13]

4 O-LEVEL PRELIM EXAM 2022 7087/01 2 For the year ended 31 March 2021, a new and inexperienced book-keeper of Blur Ltd made four errors when preparing the accounts of the business: Error 1 Cash contribution by the owner of $500 was not recorded in the books. 2 Purchase of inventory worth $1 250 from Papy Trading was recorded in Tapy Trading’s account instead. 3 Cheque of $2 000 received for rent income was wrongly recorded as $200 in the books. 4 A cheque payment of $1 000 for repairs expense was debited to the Cash at Bank account and credited to the Repairs Expense account. REQUIRED (a) Complete the table below for the errors listed above. An example has been done for you. Error Effect on Profit for the year Assets Equity Liabilities 1 No effect Understated $500 Understated $500 No effect 2 3 4 [7]

5 O-LEVEL PRELIM EXAM 2022 7087/01 (b) State the accounting theory behind the need for verifiable objective evidence before recording any transactions in the books. ……………………………………………………………………………………………. ……………………………………………………………………………….……….....[1] (c) State two examples of verifiable objective evidence and explain their purpose. .……………………………………………………………………………………………. …………………………………………………………………………………………….. ……………………………………………………………………………………………. ……………………………………………………………………………………………. ……………………………………………………………………………….……….....[4] [Total 12]

6 O-LEVEL PRELIM EXAM 2022 7087/01 3 The following assets and liabilities were in Kara’s business on 31 December 2020. $ Motor vehicles 50 000 Trade receivables 17 800 Trade payables 22 500 Inventory 10 000 Cash at bank 13 250 5 Year bank loan 10 000 Cash in hand 7 750 Prepaid rent expense 1 000 REQUIRED (a) Calculate the following: (i) Working capital ………………………………………………………………………………………… ………………………………………………………………………………………… ……………………………………………………………………………….….......[1] (ii) Working capital ratio (current ratio) to two decimal places. ………………………………………………………………………………………… ………………………………………………………………………………………… ……………………………………………………………………………….….......[2] (iii) Quick ratio (acid test ratio) to two decimal places. ………………………………………………………………………………………… ………………………………………………………………………………………… ……………………………………………………………………………….….......[3]

7 O-LEVEL PRELIM EXAM 2022 7087/01 Kara’s working capital ratio (current ratio) on 31 December 2019 was 1.8:1. REQUIRED (b) Give three possible reasons for this change in the working capital ratio (current ratio) between 31 December 2019 and 31 December 2020. 1 ………………………………………………………………………………………….. 2 ………………………………………………………………………………………….. 3 ………………………………………………………………………………………….. [3] (c) Suggest three actions that Kara could take to improve the liquidity of the business. Give reasons to support your answers. …………………………………………………………………………………………..… …………………………………………………………………………………………..… ………………………………………………………………………………………..…… …………………………………………………………………………………………..… …………………………………………………………………………………………….. …………………………………………………………………………………..………… ………………………………………………………………………………………..…… …………………………………………………………………………………………..… …………………………………………………………………………………………….. …………………………………………………………………………………………….. …………………………………………………………………………………………….. ……………………………………………………………………………….…….........[6] [Total: 15] END OF PAPER

8 O-LEVEL PRELIM EXAM 2022 7087/01 BLANK PAGE