POA 7087 Theory

POA TYS Theory questions [7087 syllabus] Note: the 7078 syllabus starts from 2021 onwards. 2024 Paper 1 1. State two features of a sole proprietorship [CHAP1: intro to accounting] - Sole-owner has full control over all business operations - Minimal administrative duties to adhere to 2. Suggest one way a business might improve its quick ratio [CHAP16: financial statement analysis]] - Increasing sources of cash (i.e. additional capital to business) 3. State one difference between the financial statements of a trading business and service business [CHAP5: trial balance and financial statement] - Financial statements of trading businesses include sales and cost of sales which are not found in that of a service business ⊹ ˖͙͘͡ ★ Note by the creator! - this document may not cover all potentially tested questions, rmb that this is an updated syllabus!! study ur notes!! - unfortunately, poa theory qns demand word-for-word definitions (i dread it, but oh well study hard i guess TT) - no, this is not taken from the TYS answer booklet, but is made with reference to the POA textbook + TYS answer booklet here and there (but mostly textbook info) so dont worry if it doesnt seem to match up with ur answer booklets!! - know how to identify ur topics! This doc isnt sorted by chapters as some questions interlink more than one chapter, but its beneficial to be able to identify which specific chapter a certain qn comes up in!

2024 Paper 2 1. Define dividends [CHAP14: equities] - The portion of retained earnings that are distributed to the shareholders. 2. Two features of a limited liability partnership [CHAP1: intro to accounting] - Owned by two or more partners that contribute capital to the LLC - Has few regulatory duties to comply with 3. Distinguish between profit margin and profit for the year [CHAP16: financial statement analysis] - Profit margin: deducting cost of sales from sales revenue - Profit for the year: deducting other expenses from gross profit and adding other income 4. Give two examples of costs , other than purchase price , which a business might include in the cost of inventory purchased [CHAP9: inventories] - Import tax for purchase of inventory - Insurance for import of inventory 5. Suggest a way a business could improve the gross profit margin of the business. [CHAP16: financial statement analysis] - Increase sales revenue by selling goods at a higher price . 6. Suggest two further ways a business could improve the profit for the year of the business. [CHAP5: trial balance and financial statements] - Increase other income (e.g. rental income, commission income, etc.) - Reduce operating expenses by negotiating a lower rental rate 2023 Paper 1 1. Explain one reason why businesses keep inventories [CHAP9: inventories] - To keep customers’ needs met and prevent a loss in sales 2. State two ways in which business manages inventory [CHAP9: inventories] - Proper records of inventory to keep track of available goods - Proper storage to keep and maintain inventory 3. Define trade discount [CHAP4: double-entry recording] - A reduction to the list price

4. State two reasons why a business might offer a trade discount to customers [CHAP4: double-entry recording] - To encourage bulk orders - To reward regular customers 5. State two differences between a bank loan and bank overdraft [CHAP13: long-term borrowings] - A bank loan is a fixed amount of money borrowed from a bank - Bank overdraft is a negative balance as a business withdraws more money than what is deposited into their account - Bank loans are repaid in regular cash payments in equal period over the loan period to reduce the principal sum - Bank overdrafts are reduced by depositing cash into the bank account within the year 6. Explain the accounting entity theory 7. [CHAP1: intro to accounting] - Businesses and owners are distinct and separate entities . Transactions are recorded from the POV of the business 8. Define the professional ethics of integrity and objectivity [CHAP1: intro to accounting] - Integrity: Remain straightforward and hones t in all professional relationships - Objectivity: Not let personal bias, conflict of interest, or undue influence of others override his/her professional judgement 2023 Paper 2 1. Explain why a business accounts for an impairment loss on trade receivables with reference to an appropriate accounting theory [CHAP10: trade receivables] - According to prudence theory , assets should not be overstated . Hence, a business should account for an impairment loss on trade receivables to reflect the lower value of debt owed 2. Explain two ways a business could improve its efficiency in managing trade receivables [CHAP16: financial statement analysis] - Grant credit only to customers that make regular payments (the customer’s reliability) - Offer cash discounts to encourage prompt payment

3. State two roles of an accountant [CHAP1: intro to accounting] - To act as stewards and manage resources and accounting information on behalf of the business - To set up Accounting Information Systems (AIS) for stakeholders to make informed decisions 4. Define the following accounting theories: ACCOUNTING PERIOD, HISTORICAL COST [CHAP1: intro to accounting] - Accounting period: Financial statements are prepared for fixed accounting periods to allow meaningful consolidation and analysis in each period - Historical cost: All transactions are to be recorded at its original cost on date of transaction. 2022 Paper 1 1. State the four stages in the accounting cycle [CHAP2: accounting information system] - Identify and record, Adjustment, Report, Close 2. Name and explain the accounting theory which must be applied when accounting for the sale of goods or provision of services [CHAP1: intro to accounting] - Revenue recognition theory. All revenue is recorded once delivery of goods is made or services are provided . 3. State how working capital is calculated [CHAP16: financial statement analysis] - Working capital = Current Assets - Current Liabilities 4. Distinguish between the current ratio and quick ratio [CHAP16: financial statement analysis] - Current ratio: Ability to pay short-term debts using current assets (Current Assets / Current Liabilities) - Quick ratio (aka. Acid test): Ability to pay short-term debts using quick assets , which can be converted to cash more easily (Current Assets - Inventory - Prepayment / Current Liabilities

5. Define depreciation [CHAP11: non-current assets] - Depreciation is the allocation of cost of a non-current asset over its estimated useful life 6. State TWO accounting theories which are applied by a business when charging depreciation expense [CHAP11: non-current assets] - Consistency theory . A business should use the same method and same rate of de