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 have worsened WOW’s liquidity position. ● In conclusion, WOW is in a worst off liquidity position than Joy Eatery. (Any 5 points + Conclusion, 1 mark each) (c) (Any 2, max 2 marks) ● Cash contribution from owner ● Obtain long-term borrowings ● Sale of excess non-current assets for cash

POA P1 Prelim 2024 4 Answer Key Question 4 [Total: 12] (a) It refers to service fee revenue received last month but earned this month [1/2]. Thus the amount of $6000 that was adjusted last year is reversed [1/2] and added to this year service fee revenue on 1 June 2024. (b) On 20 June, Ethans Vans provided $2000 [1/2] worth of services for Shawn but did not receive any amount from Shawn for the services provided. [1/2]. (c) It refers to services fee revenue of $5000 received this month [1/2] but Ethan Vans had not provide the service yet [1/2]. (d) Service fee revenue and profit would be overstated [1/2] by $5000. [1/2] Current liability (Service fee revenue received in advance) would be understated [1/2] by $5000 [1/2] (e) Any one of the following. [2] Revenue Recognition – Revenue is recognised when goods are sold and delivered or when services have been performed Accrual - Revenue is recognised when it is earned and not on amount of cash received. (f) Revenue is the main sou rce of income for the business, it is the amount earned when a business sells goods or provides services to customers. [1] Other income is the amount earned from other business activities , discount received, commission income [1] (g) Journal Date Particulars Debit ($) Credit ($) 2024 Jun 30 Cleaning expense 1200 Cash at bank 1200 Jun 30 Cleaning expense 200 Cleaning expense payable 200 Jun 30 Income summary 1400 Cleaning expense 1400 [1/2 mark each, 3]