QSS 2022 4E Prelim ANSWERS

QUEENSWAY SECONDARY SCHOOL PRELIM EXAMINATION 2022 PRINCIPLES OF ACCOUNTS PAPER 1 and 2 (7087) Sec 4 Express/ 5 Normal Academic Mark Scheme

7087 Sec 4 Express Prelim PAPER 1 Table of Specifications Qn Marks Qn Marks Qn Marks Qn Marks Introduction to Accounting 0 Accounting Information System 0 Elements of financial statements and the accounting equation 0 Double entry recording 0 Trial balance and financial statements 0 Revenue and other income 3a 8 3d 1 9 Cost of sales and other expenses 3b, 3c 5 3d 1 6 Cash 0 Inventories 0 Trade receivables 2b 2 2a 6 8 Non-current assets 0 Trade payables 0 Long-term borrowings 0 Equities 0 Correction of errors 1a 6 1b, 1c 5 11 Financial statement analysis 4b 2 4a 4 6 Total 4 25 7 4 40 7087 Sec 4 Express Prelim PAPER 2 Table of Specifications Qn Marks Qn Marks Qn Marks Qn Marks Introduction to Accounting 0 Accounting Information System 0 Elements of financial statements and the accounting equation 0 Double entry recording 0 Trial balance and financial statements 1a, 1b 20 20 Revenue and other income 0 Cost of sales and other expenses 0 Cash 0 Inventories 0 Trade receivables 0 Non-current assets 4a, 4b, 4c 6 4d 7 13 Trade payables 0 Long-term borrowings 0 Equities 3e 2 3a, 3b 11 3c, 3d 2 15 Correction of errors 0 Financial statement analysis 2c 4 2a 2 2b 6 12 Total 6 19 22 13 60 Total Marks Topic P1 AO1 (15%) P1 AO2 (10%) P1 AO3 (10%) P1 A04 (5%) Total Marks Topic P1 AO1 (10%) P1 AO2 (15%) P1 AO3 (20%) P1 A04 (15%)

PAPER 1 Q1, Total 11 marks (a) Total 6 marks; 1 mark for each correct entry Journal Date Particulars Debit Credit 2022 $ $ 1 Sep-30 Maintenance expense 300 1 Fixtures and fittings 300 1 2 30 Trade payable - Angie ($250 x 2) 500 1 Cash at bank 500 1 3 30 Cash in hand 20 1 Interest income 20 1 (b) Total 3 marks 1 1 1 c) Total 2 marks; accept any 2 stated When a trial balance is balanced, errors can exist when: ▪ A transaction is not recorded at all. ▪The wrong amount is recorded in the correct side of the correct accounts. ▪Transaction is recorded in the wrong account of a different accounting element. ▪Transaction is recorded in the wrong account of a same accounting element. ▪The correct amount is recorded in the wrong sides of the correct accounts involved. No effect Overstated $ Underst ated $ Error 1 300 Error 2  Error 3 20

Paper 1 Q2, Total 8 marks a) Total 6 marks ai) On 1 August, Kimly owed $20 000 to Rashid. 1 aii) 2 aiii) 1 aiv) 2 b) Total 2 marks 2 On 20 August, Rashid received a cheque, $10 000 from Kimly [1] and the outstanding amount owing of $7 000 was written off as uncollectible. [1] An allowance for impairment of trade receivables is an estimate of the amount of debts likely to be uncollectible. [1] This will ensure that the trade receivables balance reflects the amount that is collectible and is not overstated. [1] On 6 August, Rashid received a cheque of $19 500 from Kimly in full settlement of amount owing (on 1 August). [1] A cash discount/ discount allowed of $500 was given. [1] On 10 August, Rashid provided services to Kimly at $12 000 on credit.

PAPER 1 Q3 Total 15 marks (a) Total 8 marks; 1 mark for each correct entry Date Dr Cr 2021 $ $ Jul-01 3 000 1 Consultancy fee revenue 3 000 1 2022 Jun-30 100 000 1 Consultancy fee revenue 100 000 1 Jun-30 5 000 1 Consultancy fee revenue 5 000 1 Jun-30 108 000 1 Income summary 108 000 1 b) Total 3 marks Wages = $8000 [1] - $4 500 [1] + $600 [1] = $4 100 3 (c) Total 2 marks 2 OR (d) Total 2 marks; 1 mark for each correct entry $ Income consultancy fee revenue 108 000 1 Wages expense 4 100 1 Cash at bank Trade receivable/ Consultancy fee receivable Journal Particulars Consultancy fee revenue received in advance Statement of financial performance for the year ended 30 June 2022 Less expenses According to the matching theory [1], wages expense incurred must be matched against income earned in the same accounting period to determine the profit for that period. [1] According to the accrual basis of accounting [1], wages expenses must be recognised in the period the employees has provided their services, regardless of whether they have been paid for or not. [1] Consultancy fee revenue

Paper 1 Q4, Total 6 marks (a) Total 4 marks; 1 mark per suitable comment to a maximum of 4 marks 1 1 1 1 (b) Total 2 marks; accept any 2 stated Sell inventory faster By reducing selling price for slow moving goods By providing trade discounts to encourage customers to buy in bulk By attracting more customers through advertising and marketing 2 The rate of inventory turnover worsened from 9.43 times in 2020 to 8.33 times in 2021 to 7.28 times in 2022. The days sales in inventory have also increased from 20.63 days in 2020 to 25.80 days in 2021 to 32.51 days in 2022. This suggests that Atiqah is taking longer to sell her inventory, which may lead to higher storage costs and inventory obsolescence. This means that Atiqah is becoming less efficient in managing the inventory from 2020 to 2022 Keep sufficient inventory on hand by using technology to implement inventory monitoring systems to replace inventory on a timely basis and predicting customer demand.

Paper 2 Q1 Total 20 marks, 1 mark each unless otherwise stated (a) Total 10 marks; 1 mark for each correct entry as indicated $ $ Design fee revenue ($25 800 - $5 000) 20 800 1 Other income Discount received 800 1 Less: Other Expenses Interest expense 1 200 1 Discount allowed 500 1 Rent expense (12/13 x 15 600) 14 400 1 Salaries expense 17 000 1 Depreciation of equipment (5% x 54 000) 2 700 1 Depreciation of fixtures and fittings [10% x 40 000] 4 000 1 Reversal on Impairment loss on trade receivables [(2000-800) - (4% x 14 200)] (632) 39 168 1 Loss for the year (17 568) 1 (b) Total 10 marks; 1 mark for each correct entry as indicated Statement of Financial Performance for the year ended 31 December 2021 Cozy Pte Ltd

$ $ $ Cost Accumulated depreciation Net book value ASSETS Non-current assets Equipment 60 000 8 700 51 300 1 Fixtures and fittings 40 000 8 000 32 000 1 100 000 16 700 83 300 Current assets Trade receivables (15 000 - 800) 14 200 Less: Allowance for impairment of trade receivables (4% x 14 200) (568) 13 632 1 Cash at bank 32 000 Prepaid rent expense (1/13 x 15 600) 1 200 1 46 832 Total assets 130 132 EQUITY AND LIABILITIES Shareholder's equity Share capital, 20 000 ordinary shares 50 000 1 Retained earnings (28 100 - 17 568 - 1000 ) 9 532 1 59 532 Non-current liabilities Long-term borrowing (50 000 - 8 000) 42 000 1 Current liabilities Trade payables 14 600 Design fee revenue received in advance 5 000 1 Dividends payable (0.05 x 20 000) 1 000 1 Current portion of long-term borrowing 8 000 1 28 600 Total equity and liabilities 130 132 Statement of Financial Position as at 31 December 2021 Cozy Pte Ltd

PAPER 2 Q2 Total 12 marks (a) Total 2 marks (i) Current ratio =(9 800 +2 500 + 4 000 + 11 000 + 2 000 + 25 000)/ (17 000 + 10 000) = 2.01 1 (ii) Quick ratio =(9 800 + 11 000 + 2 000)/ (17 000 + 10 000) = 0.84 1 (b) Total 6 marks; 1 mark per suitable comment to a maximum of 6 marks Current assets are greater than current liabilities for each of the three years. Increasing inventory may mean funds are tied up. The quick ratio has deteriorated over the three years from 1.75 to 1.48 to 0.84. Increasing trade receivables may mean that funds are less readily available. Lim Pte Ltd’s current ratio has worsened from 2.45 in 2020 to 2.23 in 2021 to 2.01 in 2021. Current liabilities have increased to a greater extent than current assets over the period. A portion of long-term borrowings has now become current as the status has changed from being due in over 1 year to falling due within the next 12 months. Inventory holdings have incr