SPS POA 2026 4E5NA PRELIMS P1

NAMEFORM CLASSACAD CLASSINDEX NO. ST. PATRICK’S SCHOOLPRELIMINARY EXAMINATION 2026SUBJECT:Principles of AccountsDATE:21 August 2026(7087/01)LEVEL:Secondary 4 Express/5NADURATION:1 hourCandidates answer on the Question Paper.READ THESE INSTRUCTIONS FIRSTWrite your Name, Form Class, Acad Class and Index No. in the spaces at the top of the page.Write in dark blue or black pen.Do not use staples, paper clips, glue or correction fluid.Answer all questions.If working is needed for any question it must be shown with the answer.The use of an approved scientific calculator is expected, where appropriate.The businesses described in this question paper are entirely fictitious.The number of marks is given in brackets [ ] at the end of each question or part question.The total marks for this paper is 40.For Examiner’s UseScore/40This question paper consists of 10 printed pages including this cover page.

2 Answer all questions.1First Garments provided the following information for two years. 31 July 202531 July 2026$$Inventory58 59075 670Trade receivables44 70053 400Prepaid expenses 5 030 6 850Cash at bank 9 800-Cash in hand 3 000 900Trade payables63 50071 000Bank overdraft- 18 900REQUIREDa) Calculate the following for the business for the year ended 31 July 2026.Show your answers to two decimal places. [3]31 July 2026i) Working Capitalii) Current ratioiii) Quick ratio

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4 The information available for the year ended 31 July 2025 were as follows:Working Capital: $67 620Current ratio: 2.06Quick ratio: 1.06b) Comment on the liquidity of the business for the two years ended 31 July 2025 and 2026. [7] c) Give one reason why a business needs to have adequate liquidity. [1]d) Suggest one way in which a business can improve its liquidity. [1]

5 [Total: 12]2Muji Store buys and sells designer timepieces. The following information was provided for the year ended 30 April 2026.Inventory as at 1 May 2025 was 90 units at $236 200.Summary of inventory purchases for the year.Purchases2025July 15110 units at $275 000 by cheque.November 1070 units at $135 000 on credit from Watchit Enterprise.2026January 1230 units at $78 000 by cash.April 2450 units at 155 000 on credit from Diamond Timepiece.Muji Store sold 300 units of inventory for the year ended 30 April 2026 for $816 000 on credit. The business uses the FIFO (First-in-First Out) method of inventory valuation. REQUIREDa) Calculate the following for the year ended 30 April 2026. [2] i) Cost of salesii) Rate of inventory turnover, rounding your answer to two decimal places.

6 The rate of inventory turnover for the years ended 30 April 2024 and 2025 was 8.98 times and 4.12 times respectively.b) Comment on the rate of inventory turnover of the business over the three years. [2] c) Suggest one way for the business to improve its inventory turnover. [1]

7 d) Prepare the inventory account for the above transactions, bringing down the balance to the next financial period. [3] It was discovered that on 30 April 2026, after the financial reports were prepared, that 10 pieces of inventory, costing $16 000, were damaged beyond repair.e) Explain with an accounting theory the valuation rule for inventory. [2]f) Explain how profit will be affected if the value of inventory is not adjusted for MujiStore for the year ended 30 April 2026.[1]

8 g) Prepare the journal entry to adjust the inventory for the year ended 30 April 2026.[1]h) State one non-accounting information that a business might use when deciding on choosing a credit supplier. [1] [Total: 13]3A new and inexperienced accountant at Celine Beauty Salon made the following errors on 31 May 2026.ErroriPurchase of a van for business use from Kah Motors for $80 000 has been recorded in the vehicles maintenance account.iiHair service revenue for $8 200 received by cheque has been recorded in the books as $2 800.iiiPayment for salaries $8 000 has been debited to the Cash at bank account and credited to the salaries expense account.ivOwner took goods costing $750 for personal use. This was not recorded.vA receipt issued to a credit customer, Paula, for $500 cash received was

9 omitted. REQUIREDa) Prepare the journal entry to correct error ‘v’. [1] b) Complete the following table to show the effect of correcting errors i, ii and iii onthe profit of the business. If there is no effect, place a tick in the ‘no effect’ column. [3]ErrorIncrease by$Decrease by$No effectiiiiiic) Name the accounting theory applied when recording transaction ‘iv’. [1]d) Explain how an accountant can exercise integrity and be objective. [2]

10 e) Explain the Revenue recognition theory. [1] [Total: 8]4Brooks Production Company provides the following information for the year ended 31 July 2026.Salaries prepaid on 1 August 2025$15 000Salaries paid by cheque for the year$87 000Annual salaries$100 000REQUIREDa) Prepare the journal entry to adjust salaries expense on 31 July 2026.[2]