Greenridge 2024 4N P1 Answers

[Turn over This paper consists of 9 printed pages, including this cover page. GREENRIDGE SECONDARY SCHOOL 2024 PRELIMINARY EXAMINATION SECONDARY 4 NORMAL (ACADEMIC) CANDIDATE NAME ANSWERS CLASS - INDEX NUMBER Principles of Accounts 7086 Paper 1 7 August 2024 Setter: Ms Sabrina 1 hour Candidates answer on the Question Paper. No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Write your name, register number and class on this cover and 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. The businesses described in this question paper are fictitious. The number of marks is given in brackets [ ] at the end of each question or part question. The total of the marks for this paper is 40. For Examiner’s Use Total 40

2 Answer all the questions. 1 LX Trading provided the following balances as at 30 June 2024. $ Trade receivables 12 100 Trade payables 7 800 Bank overdraft 1 600 Inventory 13 300 Non-current assets 24 500 Loan from bank 10 000 REQUIRED (a) Define the following terms: (i) Assets Resources owned and controlled by the business that are expected to generate future benefits.[1] (ii) Liabilities Obligations owed by a business to others that are expected to be settled in the future.[1] (b) Calculate the capital as at 30 June 2024. Capital 30 June 2024 = Total assets – Total Liabilities = (12100 + 13300 + 24500) – (7800+1600+10000) = 49900 [1] – 19400 [1] = $30500 [1] (c) Explain the going concern theory. A business is assumed to have an indefinite economic life [1]unless there is credible evidence that it may close. [1]

3 The following transactions took place during the year ended 30 June 2024. REQUIRED (d) Name the source document used for each transaction. Source document A credit customer was undercharged. Debit note [1] Bought a computer on credit. Invoice [1] Cash purchases. Receipt [1] Bank charges. Bank statement [1] [4] [Total: 11]

4 2 Kelvin runs a trading business with a financial year of 31 December. On 1 April 2023, the business obtained a bank loan of $400 000. The loan is to be paid equally over 10 years. The first payment, together with interest, fell on 31 March 2024. The interest incurred for the year ended 31 December 2023 was $15 000. REQUIRED (a) State one difference between a bank loan and a bank overdraft. Bank loan Bank overdraft 1 The business borrows a fixed amount, and the cash is transferred to its bank account. The business withdraws more than what it has deposited in the bank account, up to the limit agreed upon. 2 The business makes regular cash payments in equal instalments over the period of loan period or a one-time lump sum payment at the end of the loan period. The business deposits cash into the bank account within the year to reduce the overdraft. 3 Presented under non-current liability in the statement of financial position. Presented under current liability in statement of financial position. [any difference 2m] (b) Prepare the bank loan account for the year ended 31 December 2023 and 2024. Bank loan account Date 2023 Particulars Debit $ Credit $ Balance $ Apr 1 Cash at bank [1] 400 000 400 000 Cr 2024 Jan 1 Balance b/d [1] 400 000 Cr Mar 31 Cash at bank [1] 40 000 360 000 Cr 2025 Jan 1 Balance b/d [1] 360 000 Cr [4]

5 (c) Prepare an extract of the statement of financial position as at 31 December 2023 to show the liabilities section. Extract of statement of financial position as at 31 December 2023 Non-current liabilities $ Long-term borrowings [1] 360 000 Current liabilities Current portion of long-term borrowings [1] 40 000 Interest expense payable [1] 15 000 (d) Name and explain the accounting theory applied by a business when accounting for interest expense incurred but not yet paid. Name: Accrual basis of accounting [1] Explanation: Interest expense must be recognised in the financial period once incurred [1] whether or not it has been paid.[1] [Total: 12]

6 3 On 1 October 2022, Danial’s business bought a motor vehicle, costing $50 000, on credit from Speedy Co. The business depreciates its motor vehicles at 1 0% per annum using the reducing balance method. The financial year of the business ends on 31 March. REQUIRED (a) Prepare the journal entry to record the transaction on 1 October 2022. A narration is required. Date 2022 Particulars Debit $ Credit $ Apr 1 Motor vehicles [1] 50 000 Trade payable – Speedy Co [1] 50 000 Bought motor vehicle on credit from Speedy Co. [1] [3] (b) Calculate the depreciation of motor vehicles for the financial year ended: (i) 31 March 2023 10% X 50 000 X 6/12 = $2 500 [1] (ii) 31 March 2024 10% X (50 000 – 2 500 OF) = $4 750 [1] (c) Prepare the journal entry to record the depreciation of motor vehicles for the year ended 31 March 2024. A narration is not required. Date 2024 Particulars Debit $ Credit $ Mar 31 Depreciation of motor vehicles [1] OF 4 750 Accumulated depreciation of motor vehicles [1] 4 750 [2]

7 During the year ended 31 March 2024, Danial’s business also bought a new machine and incurred expenditure relating to the machinery. REQUIRED (d) Classify the expenditure in the following table by placing a tick (√) in the appropriate column. Capital expenditure Revenue expenditure Delivery and installation fees √ [1] Annual servicing and maintenance √ [1] Utilities to run the machinery √ [1] [3] [Total: 10]

8 4 Elysia runs a bookshop with a financial year end of 30 April. She has provided the following information. Drawings account Date 2024 Particulars Debit $ Credit $ Balance $ Jan 18 Cash in hand (a)(i) 400 400 Dr Mar 2 Inventory (a)(ii) 500 900 Dr Apr 30 Capital 900 - Capital account Date 2023 Particulars Debit $ Credit $ Balance $ May 1 Balance b/d 24 800 Cr Aug 1 Cash at bank (a)(iii) 10 000 34 800 Cr 2024 Apr 30 Income summary (b)(i) 7 800 42 600 Cr 30 Drawings (b)(ii) 900 41 700 Cr May 1 Balance b/d 41 700 Cr REQUIRED (a) Interpret the entries on the following dates: (i) 18 January 2024 The owner withdrew $400 cash for personal use. [1] (ii) 2 March 2024 The owner took $500 worth of goods for personal use.[1] (iii)1 August 2023 The owner deposited / contributed $10 000 into the bank account. [1]

9 (b) State the effect of the following transactions on the owner’s equity. (i) Income summary Increase by $7 800 [1] (ii) Drawings Decrease by $900 [1] (c) Explain the accounting entity theory. The owner and business are treated as separate entities. [1] All transactions are recorded from the point of view of the business. [1] [Total: 7] END OF PAPER

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