MSHS 2024 POA P1 MS

MARIS STELLA HIGH SCHOOL (SECONDARY) PRELIMINARY EXAMINATIONS 2024 SECONDARY FOUR EXPRESS PRINCIPLES OF ACCOUNTS Paper 1 7087/01 15 August 2024 1 hour MARK SCHEME MAXIMUM MARK: 40

POA P1 Prelim 2024 2 Answer Key Question 1 [Total: 7] (a) Transaction Source document 1 Invoice 2 Debit note 3 Receipt [1 mark each, 3] (b) Any one of the following. [2] Integrity – to be straightforward and honest in all professional and business relationships Objectivity – to be unbiased when making a professional judgement in the accounting process and not be influenced by threats and rewards (c) Ledger [1] (d) Going concern theory [1] Question 2 [Total: 11] (a) Drawings has no effect on the profit for the year. [1] Drawings will decrease the equity. [1] (b) Drawings Debit Credit Balance 2023 $ $ $ Jun 14 Inventory 500 [1] 500 Dr 2024 Feb 16 Cash at bank 2 500 [1] 3 000 Dr 31 Capital 3 000 [1] OF - (c) Capital Debit Credit Balance 2023 $ $ $ Apr 1 Balance b/d 50 000 Cr [1/2] Aug 13 Cash at bank 10 000 [1] 60 000 Cr Dec 25 Motor vehicles 40 000 [1] 100 000 Cr 2024 Mar 31 Income summary 28 000 [1] 128 000 Cr 31 Drawings 3 000 [1] OF 125 000 Cr Apr 1 Balance b/d 125 000 Cr [1/2] (d) Stewardship – Accountant being the agent of the organization is given the responsibility to manage the resources [1/2] of the business and has a moral duty to present accounts that do not misled users of accounting information [1/2].

POA P1 Prelim 2024 3 Answer Key Question 3 [Total: 10] (a) WOW Joy Eatery Current ratio =Current assets ÷ Current liabilities (65000+60000+35000+1000) ÷ (50000+30000) = 161000 ÷ 80000 = 2.01 [1] (53000+10000+36000+2000) ÷ (54000+22000) = 101000 ÷ 76000 = 1.33 Quick ratio [Current assets – (inventory + prepayment)] ÷ Current liabilities (161000 – 60000 - 35000) ÷ 80000) = 66000 ÷ 80000 = 0.83 [1] (101000 – 10000) ÷ 76000 = 91000 ÷ 76000 = 1.20 (b) ● WOW’s current ratio of 2.01 was better than Joy Eatery’s current ratio of 1.33. ● WOW’s current ratio was above the general benchmark of 2 [1/2] while Joy Eatery falls below the general benchmark of 2 [1/2]. ● This means that WOW is more able to pay its current liabilities using current assets than Joy Eatery. ● WOW’s quick ratio of 0.83 was worse than Joy Eatery’s quick ratio of 1.20. ● WOW’s quick ratio of 0.83 was below the general benchmark of 1 [1/2] while Joy Eatery was above the general benchmark of 1 [1/2]. ● This means that WOW is less able to pay its current liabilities using quick assets than Joy Eatery. / This indicate that WOW may face difficulties in paying its immediate debts using its quick assets. ● These could be because WOW has a bank overdraft of $30000, ● and has a high inventory of $60000. A lot of funds are tied up in inventory. These could