2024 CCHY 4NA POA Prelim P1 ans

1 Chung Cheng High School (Yishun) Preliminary Examination 2024 Principles of Accounts Paper 1 (7086/01) Secondary 4NA Suggested answers and marking scheme Question 1 (a) Accounting is an information system that provides accounting information for stakeholders to make informed decisions [1] regarding the management of resources and performance of businesses. [1m] (b) Any one professional ethics below Integrity [1] – being straightforward and honest in all professional and business relationships. [1] Objectivity (Is objective) [1] – will not let bias, conflict of interest or undue influence of others override his or her professional judgement. [1] [2m] (c) Any feature below [1] Feature Sole proprietorship Capital structure Ownership Owned by one person who contributes capital to set up. Access to funds Less likely for banks and other lenders to lend money due to lack of personal assets as collaterals. Funds are usually limited to personal funds of the owner. Extent of liability Risk When the business incurs debts and losses, the sole proprietor is obliged to pay them using personal assets. Management of business Level of control The sole proprietor runs the business and has absolute control over it. He may hire professionals to help him. Lifespan The business exists as long as the owner is alive and desires to continue operation. Transferability of ownership The sole proprietor can easily update the particulars of the new owner to notify the corporate regulatory authority of the transfer of ownership. Formalities and procedures The business has minimal administrative duties to adhere to. [1m] (d) [1] [1] [2m]

2 (e) Only business transactions that can be measured in monetary terms are recorded. [1] [1m] (f) Transaction Source document [m] (i) Cash sales of goods Receipt / bank statement 1 (ii) Returns from credit purchase Credit note 1 (iii) Bank charges Bank statement 1 [3m] [Total: 10m] Question 2 (a) Assets = Liabilities + Owner’s Equity [1] [1m] (b) 4 500 + 9 200 + 68 200 [1] = 10 900 + 60 000 [1] + Capital 81 900 = 70 900 + capital Capital = $11 000 [1] [3m] (c) Journal Date 2023 Particulars Debit $ Credit $ [m] Jan 15 Office equipment 3 500 1 Capital 3 500 1 Justin / Owner contributed his personal computer worth $3 500 for office use. 1 [3m] (d) Drawings – owner withdrew assets from the business for his own use. [1] [1m] (e) . Effects on Transaction Assets Liabilities Owner’s Equity E.g. Justin contributed $3 000 cash into the business. Cash at bank + $3 000 No effect Capital + $3 000 (i) The business bought goods worth $1 000 on credit from Chung Cheng Trading. Inventory + $1 000 [1] Chung Cheng Trading, Trade payable + $1 000 [1] No effect [2m]

3 (f) Any 2 reasons - drawings by owner for his own use - additional capital contributed by owner - profit / loss for the year [2m] [Total: 12m] Question 3 (a) Journal Date 2024 Particulars Debit $ Credit $ [m] Feb 28 Cash at bank 30 000 1 Commission income 30 000 1 Feb 28 Commission income receivable 6 000 1 Commission income 6 000 1 Feb 28 Commission income 36 000 1 Income summary 36 000 1 [6m] (b) $36 000 [1] [1m] (c) Current assets [1] [1m] [Total: 8m] Question 4 (a) The method used to depreciate machinery is the straight-line method. [1] (b) Depreciation expense = Rate of depreciation (%) x Cost Rate of depreciation (%) x 60 000 = 6 000 Rate of depreciation = (6 000 / 60 000) x 100 = 10% [1] [1m] (c) According to the matching theory [1], expenses incurred must be matched against the income earned in the same period to determine the profit for the period. As the non-current assets are being used to generate income, depreciation expense should be matched to the income earned in the same period to determine the profit for the period. [1] [2m]

4 (d) Any one difference Capital Expenditure Revenue Expenditure [m] • Costs to buy and bring the non- current asset to working condition (their intended use). • Costs to repair and maintain the non- current asset in working condition. 2 • Costs to enhance the non-current assets. • Costs to operate the non-current assets. 2 • Provides benefits for more than one year. • Provides benefits for less than one year (used within one year). 2 [2m] (e) Capital expenditure Revenue expenditure [m] Cost of new machinery ✓ 1 Delivery fees for the machinery ✓ 1 Repairs and maintenance of machinery ✓ 1 [3m] (f) Profit will be understated. [1] [1m] [Total: 10m]