2022 GMSS POA 4E5N PRELIM PAPER 1

GeylangMethodistSchool(Secondary)PreliminaryExamination2022 CandidateName Class IndexNumber PRINCIPLESOFACCOUNTSPaper 1 NoAdditional Materialsarerequired 7087/01Sec4Express/Sec5Normal (Academic) 1hour READTHESEINSTRUCTIONSFIRST Writeyour indexnumber andnameinthespacesat thetopof thispage.Writeindarkblueor blackpen.Donot usestaples, paper clips, glueor correctionfluid/tape.Theuseof anapprovedcalculator isallowed. Answer all questions. Thebusinessesdescribedinthisquestionpaper areentirelyfictitious. Thenumber of marksisgiveninbrackets[ ] at theendof eachquestionor part question. Thetotal marksfor thispaper is40marks. Thisdocument consistsof 8printedpages. 1 Layla operates a supermarket, Best Grocer. When preparing thebusinessfinancial statementsfortheyear ended30June2022, her accountant discoveredthefollowingerrors. 1 Invoiceof $2000receivedfromcredit supplier Alex, hadbeenrecordedinAllen’saccount.

GMS(S)/POA/P1/PRELIM2022/4E5N(A) 2 Chequepayment of $500for utilities, hadbeenrecordedas$5000. 3 Cash of $600 received for goods sold, has been debited to the sales revenue account andcreditedtocashinhandaccount. REQUIRED (a) Stateonepurposeof sourcedocument. [1] (b) Preparethejournal entrytocorrect error 1. Anarrationisnot required. Date Debit$ Credit$ [2] (c) Prepare a statement of adjusted profit for the year ended 30 June 2022. The unadjustedprofit was$5000. [3] (d) Stateoneroleof accountantsinbusiness. 2

GMS(S)/POA/P1/PRELIM2022/4E5N(A) [1] (e) Name one stakeholder and the decision that he/she might make by using the businessfinancial statements. [2] (f) Ineachgivenscenario, identifytheaccountingtheoryapplied: Scenario Accountingtheory (i) Layla paid rent in advance for the month of July2022. She has not recorded this aspart of rentalexpensefor theyear ended30June2022. (ii) Theexcellent shoplocationandskillsofemployeesarenot recorded. [2] [Total: 11] [Turnover2 The following information was extracted fromthe books of Claire Home Supplies as at 31 July2020to2022. 2020 2021 2022$ $ $Motor vehicles 130800 124640 152800Cashat bank 41300 21800 -Tradereceivables 10120 22260 28330Inventory 12300 19800 35200 3

GMS(S)/POA/P1/PRELIM2022/4E5N(A) Prepaidrent 1000 2500 4400Tradepayables 16000 28400 30880Current portionof long-termborrowings 5000 5000 5000Bankoverdraft - - 4400 Current ratio 3.08 1.99 ?Quickratio 2.45 1.32 ? REQUIRED (a) Distinguishbetweenbankloanandbankoverdraft. [2] (b) Explaintheimportanceof beingliquid. [1] (c) Calculatethefollowingratiosasat 31July2022. Showyour answerstotwodecimal places: Current ratio QuickratioWorkings Answer [2] (d) Evaluate the liquidity of Claire HomeSuppliesover theperiodof threeyears. Usethegiveninformationandyour answer to(c). 4

GMS(S)/POA/P1/PRELIM2022/4E5N(A) [5] (e) Recommendonewaytoimproveliquidityof ClaireHomeSupplies. [1] [Total: 11] [Turnover 3 The following trade receivable account was extracted from the books of Alan LandscapeServicesfor June2022. Tradereceivable–EllieGardens 5

GMS(S)/POA/P1/PRELIM2022/4E5N(A) 2022 Dr Cr BalanceJun 1 Balanceb/d 600Dr4 Servicefeerevenue 1600 2200Dr9 Cashat bank 2090 110Dr9 Discount allowed 110 018 Servicefeerevenue 1900 1900Dr21 Cashat bank 2090 3990Dr21 Discount allowed 110 4100Dr28 Cashat bank 2800 1300Dr28 Allowancefor impairment of tradereceivables 1300 0 REQUIRED (a) Interpret theentriesonthefollowingdates: (i) 1June [1] (ii) 4June [1] (iii) 21June [2] (iv) 28June [2] (b) Prepare thejournal entriesinAlanLandscapeServices’ bookstorecordthetransactionon28June. Narrationisnot required. 6

GMS(S)/POA/P1/PRELIM2022/4E5N(A) [3] (c) Distinguishbetweentradediscount andcashdiscount. [2] [Total: 11] [Turnover4 Ianisasoleproprietor. HeownsabookstorecalledIanBooks. On 1 April 2021, the business hadacapital balanceof $40000. Thefollowingtransactionstookplaceduringthefinancial year ended31March2022. 2021 7

GMS(S)/POA/P1/PRELIM2022/4E5N(A) Nov29 Ian issued a personal cheque of $6 000 to pay off part of the business bankloan.Dec10 Ianwithdrew$1000fromthebusinessbankaccount for officeuse.2022Jan8 Ianwithdrew$50worthof booksasagift tohisfriend.Mar 31 Lossamountedto$2500. REQUIRED (a) Preparethecapital account for theyear ended31March2022. Capital account [4] Ian is considering forming a private limited company. He requires some advice on certainaccountingterminologies. REQUIRED (b) Define:(i) Retainedearnings [1] (ii) Dividends [1] (c) Nameoneaccountingtheorywhichisappliedwhenaccountingfor sharecapital. [1] [Total: 7] 8