PSS 2024 POA 4E5N Paper 1 Prelim 4E5N Answer Key

EXP/NA PUNGGOL SECONDARY SCHOOL SECONDARY 4/5 EXPRESS / NORMAL ACADEMIC 2024 PRELIMINARY EXAMINATION ANSWER KEY NAME CLASS INDEX NUMBER Principles of Accounts Paper 1 7087/01 26 August 2024 1 hour READ THESE INSTRUCTIONS FIRST Write your class, register number and name on all the work you hand in. Write in dark blue or black ink on both sides of the paper. You may use a soft pencil for any diagrams, graphs, tables or rough working. Do not use staples, paper clips, glue or correction fluid. Answer ALL questions. Write your answers in the spaces provided. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question. The use of an approved scientific calculator is expected, where appropriate. For Examiner’s use Parent’s Signature - - - - - - Total /40 This paper consists of 8 printed pages and 0 blank page. Setter(s) : Vetter :

2 Answer all questions. 1 The following information was extracted from the books of Jayden Fishery Pte Ltd. Advertising expense account Date Particulars Debit ($) Credit ($) Balance ($) 2023 Aug 1 Advertising expense payable (i) 5 200 5 200 CR Nov 7 Cash at bank (ii) 19 000 13 800 DR 2024 Apr 9 Cash at bank 22 000 35 800 DR Jul 31 Prepaid advertising expense (iii) 2 800 33 000 DR Income summary 29 000 - REQUIRED (a) Define Expense payable. payments that a business owes to a supplier or vendor for goods or services but haven't received an invoice for those costs yet. [1] (b) Explain the following transactions. (i) 1 August 2023 Advertising expense of $5200 was incurred but not yet paid for in the last financial year ended 31 July 2022[1]. As such, it is now reversed and deducted from this year’s advertising expense as it is not this year’s advertising expense. [1] (ii) 7 November 2023 Advertising expense of $20 000 was paid by cheque for the year ended 31 July 2022. [1] (iii) 31 July 2024 Advertising expense amounting to $2 800 was paid but not yet incurred for the year ended 31 July 2024[1]. As such, it is recorded as a current asset and deducted from this year’s advertising expense [1].

3 (c) Explain, using an appropriate accounting theory, the need to adjust for prepaid advertising expense for the year ended 31 July 2022. Accrual basis of accounting states that business activities that have occurred, regardless of whether cash is paid or received, should be recorded in the relevant accounting period[1]. As such, since prepaid advertising expense had not yet been incurred, it is deducted from advertising expense account and recorded as a current asset instead [1]. [Total:8]

4 2 Hala owns a gocery shop. Details from the cash at bank account and bank statement of the business for the month of March 2024 are as follows: Bank Statement Date Particulars Withdrawal Deposit Balance 2024 $ $ $ Mar 1 Balance b/d 6 290 Cr 4 Credit transfer – Bobo 2 850 9 140 Cr 7 Cheque 10210 1 250 7 890 Cr 8 Cheque 10209 790 7 100 Cr 9 Cheque deposit 1 700 8 800 Cr 14 Cheque deposit 2 010 10 810 Cr 15 Cheque returned (deposited on 14 Mar) 2 010 8 800 Cr 18 Cheque 10212 8155 645 Cr 27 Cash 350 995 Cr 31 Interest 85 1 080Cr Cash at Bank Date Particulars Cheque Number Debit Credit Balance 2024 $ $ $ Mar 1 Balance b/d 5 500 Dr 3 Utilities 10210 1 250 4 250 Dr 4 Liching Kitchen 10211 750 3 500 Dr 10 Sales revenue 1 700 5 200 Dr 12 Cocoa Store 2 010 7 210 Dr 15 Insurance 10212 8 355 1 145 Cr 22 Toys Shop 10213 875 2 020 Cr 27 Cash in hand 350 1 670 Cr 31 Commission 1 850 180 Dr Additional information: Hala has recorded the amount for cheque number 10212 incorrectly in his books.

5 REQUIRED (a) Update the cash at bank account on 31 March 2024 and bring down the new balance. Cash at bank account Date Particulars Dr Cr Balance 2024 $ $ $ Mar 31 Balance b/d [1]180 Dr 31 Trade receivable - Bobo [1]2850 3030 Dr 31 Trade receivable CoCoa Store [1]2010 1020 Dr 31 Insurance expense (Correction) [1]200 1220 Dr 31 Interest income [1]85 1305 Dr Apr 1 Balance b/d 1305 Dr [5] (b) Prepare a bank reconciliation statement on 31 March 2024. Bank Reconciliation Statement as at 31 March 2024 $ $ Balance as per bank statement 1 080 [1] Add: Deposits in transit* Commission [1] 1850 Less: Cheques not yet presented* Trade payable Liching Kitchen [1] 750 Trade payable Toyshop [1] 875 1625 Adjusted balance as per cash at bank account 1305 [4] (c) State one possible reason why the cheque was returned on 15 January. Cheque has expired. (1) Cheque is post-dated. (1) Inconsistent information on cheque. (1) Incomplete information on cheque. (1) Hala's bank account does not have sufficient money. (1) bank account is closed or frozen. (1) Any ONE [1]

6 (d) State the effect of the bank reconciliation adjustments on the profit for the period. Profit will increase [0.5] by $2250. [0.5] [Total: 11] 3 Charvi, the owner of a trading business, started his operations on 1 April 2021. The total amount of trade receivables at the end of each financial period is shown below. 31 March 2022 31 March 2023 31 March 2024 Trade receivables $ 120 000 $90 000 $100 000 Additional information 1. Charvi reviews the list of trade receivables at the end of every financial year and estimates that 3% of its trade receivables is deemed to be uncollectible. 2. On 22 October 2022, Steven Trading who owed $4 000 was declared bankrupt. Charvi was able to collect 40 cents for every dollar owed by Steven Trading and wrote off the remaining amount. REQUIRED (a) Explain, with a relevant accounting theory, why an allowance for impairment of trade receivables should be made annually. According to the prudence theory, assets and profits should not be overstated while liabilities and losses should not be understated. [1] The allowance for impairment of trade receivables is a deduction against the book value of trade receivables and will ensure that trade receivables is not overstated. [1] [2] (b) Prepare journal entries to record the following transactions. Narrations are not required. Show all workings clearly. (i) Write-off of balance on 22 October 2023. 2022 Dr ($) Cr ($) Oct 22 Dr Allowance for impairment of trade receivables 2 400 Cr Trade receivable – Steven Trading (60% x 4000) 2 400 [2]

7 (ii) Adjustments of the allowance for impairment of trade receivables on 31 March 2023 and 31 March 2024. 2023 Dr ($) Cr ($) Mar 31 Dr Allowance for impairment of trade receivables 900 Cr Impairment loss on trade receivables (Reversal) [(3% x 120 000)- (3% x 90000)] 900 2024 Mar 31 Dr Impairment loss on trade receivables 300 Cr Allowance for impairment of trade receivables 300 [(3% x 100 000) – (3%x90000)] [4] (c) Explain the effect on owner’s equity if the allowance for impairment of trade receivables was not adjusted on 31 March 2022. Owner’s equity will be overstated by $3600 because profit is ovderstated by $3600. [1] [Total: 10] 4 Kane Limited is a football apparels trading company which prepares its financial statements to 31 December of every year. REQUIRED (a) State the order in which financial transactions are processed through the accounting information system. Source documents, journal, ledger,[1] trial balance, statement of financial Performance and statement of financial position. [1] [2] (c) Name and explain one principle of professional ethics which must be applied by accountants in the preparation and presentation of accounting i