EVG 2024 POA Prelim 4G3 5G2 P1 Ans

2024 4G3_5G2 Prelim P1 Ans Question 1 (a) No effect Amount of increase $ Amount of decrease $ $ Profit for the year before correction of errors 990 Error 1 600 Error 2 250 Error 3 √ Error 4 100 Adjusted profit for the year 740 1 mark for each correct answer. [5] (b) Integrity √ and Objectivity √ [2] [Total: 7]

2 Question 2 (a) Invoice. √ [1] (b) Revenue recognition theory √ [1], which states that revenue is earned when goods have been delivered or services have been provided. Or Accrual basis of accounting √ [1], which states that business activities that have occurred, regardless of whether cash is paid or received, should be recorded in the relevant accounting period. (c) $30 000. √ [1] (d) On 30 September 2023, the business adjusted for $3 000 collected for photography services not yet provided. √ This amount is reduced from the photography fee revenue account and recorded as a liability, photography fee revenue received in advance. √ [2] (e) Income Summary Account √ [1] (f) $75 500 √ [1] [Total: 7]

3 Question 3 (a) A business will return inventory if they are defective/damaged/faulty √ and of incorrect specifications √. [2] (b) Inventory account Date Particulars Dr Cr Balance 2024 $ $ $ Jun 1 Balance b/d 2 000 Dr √ 7 Trade payable – XY 4 800 6 800 Dr √ 9 Trade payable – XY 3 000 9 800 Dr √ 18 Trade payable – XY 2 200 12 000 Dr √ 28 Cost of sales 6 800 5 200 Dr √ 29 Trade payable – XY 2 200 3 000 Dr √ Jul 1 Balance b/d 3 000 Dr √ √ For correct dates and format [7] (c) Impairment loss on inventory = $3 000 - $1 800 = $1 200 √ [1] (d) Prudence theory. √ [1] (e) The rate of inventory turnover for KJ of 5.47 times is better than that of GB of 4.32 times. √ This means that KJ sells inventory at a faster rate than GB. √ Or In conclusion, KJ is more efficient in inventory management as compared to GB. √ [2] (f) One consequence of having a low rate of inventory turnover may mean that the business is unable to sell its inventory quickly and there may be too much inventory on hand, which may result in a risk of inventory becoming obsolete. √ Another consequence is that cash is tied up in inventory instead of being used for more profitable investments. √ Or Excessive inventory will lead to high storage costs, including warehouse rent, insurance and handling costs. √ [2] (g) GB can offer trade discounts and special promotions to encourage customers to buy more. The business can also increase marketing campaigns such as advertisements to attract more customers. √ [1] for any 1 reasonable answer. [Total: 16]

4 Question 4 (a) Dividends are a portion of retained earnings that was distributed to shareholders. √ [1] (b) Extract of Statement of Financial Position as at 30 April 2024 $ $ Shareholders’ Equity Share capital, 150 000 ordinary shares Retained earnings [$225 000 – $31 000 – ($0.02 x 150 000)] 200 000 √ 191 000 √ 391 000 √ 1 mark each for correct particulars and correct amount. [2] 1 mark for correct total of $391 000. [1] [3] (c) Dr Cash at bank $50 000 √ Cr Share capital $50 000 √ [2] (d) Dr Dividends $3 000 √ Cr Dividends payable $3 000 √ [2] (e) Dr Retained earnings $31 000 √ Cr Income summary $31 000 √ [2] [Total: 10]