Comparison between straight-line and reducing methods of depreciation

 

Methods Advantages Disadvantages Effect on Net Profit
1. Straight Line

a. Dep = (HC-SV) Useful Life

OR

b. Dep = HC x % Rate

• Simple to apply

• Calculation of dep easy to understand

• For assets like furniture that has a constant rate of use

• Not suitable for assets like machinery where the benefits obtained from using the assets in each period are not of fixed amounts. Constant reduction of a fixed amount
2. Reducing Balance

 

Dep = NBV x % Rate

• More accurately reflect pattern of usage of assets if assets provide most benefits during initial years

More maintenance and repairs costs in later years so total expenses incurred for asset more or less become constant over its life (since more dep charge in early years)

• May never fully depreciate asset

• High depreciation charge in the early years of assets’ life

• Higher reduction in the early years compared to the later years

* HC = Historical cost

* SV = Scrap value

* NBV = Net book value

= Cost – accumulated depreciation

2015 7175 GCE O Level POA Suggested Solutions is out!

 

 

Weekend proved to be an exciting one for all of us at Caleb’s 2015 POA Crash Course at YMCA Room 206.
Challenging as it is to spot questions in the debut exams from the new syllabus, we did our best and covered most of what we thought will come out for this year’s exams. We cheekily call it, ‘Caleb’s Crystal Ball.’ XD
That said, here’s the suggested solutions for today’s paper:
Download your O Level POA Suggested Solutions now <–

And while you are at it, LIKE US on Facebook!

Best,

Caleb Ho
The POA Tutor

P.S: If you have Sec 2 or 3 friends who need POA foundational classes, please let me know. Classes start from 9 Nov 2015.

Difference Between Bookkeeping And Accounting

 

Accounting Bookkeeping
Accounting is the process of recording, summarising, reporting, analysing and interpretation of financial information. Book-keeping is part of the accounting process. It involves the process of recording accounting data according to set rules. 
Role of accounting is to communicate financial information for decision-making purposes.  Role of book-keeping is to ensure a systematic and accurate recording of business events

2014 7092 GCE O Levels POA Suggested Solutions for Paper 2 (Only)

No greater delight is there as a POA tutor to have used super eye-power to spot questions in the last two days for his beloved students!

Unlike before, the crash course this year has been shorten from 18 hours (3 miserable days) last year to a mere 8 hours over 2 days with battle-weary-grouchy-always-hungry-panda-eyes-16-yr-olds.

I have the other subjects to thank for taking time away from my students for POA.

-.-‘’

Ok. Moving on:

Delightful students maketh a delightful tutor.

 

Instead of burning the theory notes and drink studying, these folks chose to take we-fie and spam my phone WHILE I’M TEACHING.

Now I make you famous. Muahahahah. Open-mouthed smile

> 50 students witness the massive bet I took at YMCA and Jurong East on 4th and 5th Nov:

Beside the obvious (Trading, PLA, Current A/C and B/S) and theory, major topics spotting were made plain on the whiteboard the last two days.

Scoreboard:

Topics Spotted Came out
Analysis and Interpretation of final accounts
– Profitability and commentary
YES!
Stock Valuation Partially. Theory
Bank Reconciliation YES!
Capital versus Revenue Expenditure/Receipt Neh.
Incomplete Records (Debtor/Creditor Ctrl) YES!
Capital Structure (WC, CO, CE) YES!
Provision for Doubtful Debts YES!
Correction of Error (Partial emphasis) YES!

 

Also mentioned to not focus on:

P4 Dep + Disposal of Fixed Assets YES!
Amalgamation YES!
Control Accounts No. Sad smile Saved only by revision of incomplete records

 

The Solutions

Of course you didn’t come here to see how delighted my students and I are.

So here’s the draft/suggested/imperfect solutions for Paper 2. I gave up trying to fish for Paper 1. If you have, please what’s app me:

2014 7092 GCE O Levels POA Paper 2 Suggested Solutions

As with previous attempts for solutions, this post gets flamed with questions, doubts and critics even with this caveat and repeated again in the pdf.

I’ll leave you with a quote:

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat. “

So. Bring it on.

To a better tomorrow and the holidays!

Cheers,

Caleb Ho

P.S: Please also like us on Facebook. This foreign thing is still pretty new to us and we are putting up stuff.

I promise to put useful things for you and your friends!

2013 POA Suggested Solutions for Paper 2!

Hi there!

For those who have put in your fair share of labor, I hope today’s paper was easy for you. 🙂 This year, we have a lag with sources for Paper 1. We will put up the suggested solutions for P1 ASAP. If you are looking for it, head straight below, read the FAQ section and download your answers for review.

——-

To my 2013 students, I just want to say thanks for making this year one of the most enjoyable and memorable moments in my teaching career.

You’ve been such a delightful and fun cohort to teach. What a privilege it is to share moments with you in the classrooms and outside of them.

They are memories I’ll have with me for a long time. I’m grateful for the sense of joy and anticipation every time I am in the class and I’m so happy to see so many survive my very bad jokes.

Look forward to see you make good of the learning experience we had together (POA or not) and may you excel tremendously in whichever industry you set your eyes on.

I’ll miss you sorely. 🙂

Your partner in crime,

Caleb

——

Frequently Asked Questions

Q: Can you upload the question paper for Paper 1?

A: No, unfortunately. Question papers cannot be uploaded due to copyright reasons. Authorized publishers will make these available at all major bookstores from Feb 2014 onwards.

Q: My presentation is this like my school teacher says, it differs from your answers – will I be marked wrong by Cambridge?

A: I’m not the examiner/guru/genie. This remains as suggested solutions and serves as a point of reference.They are not absolute answers. We can discuss who’s right and wrong till the cows come home but it’s decided by the all-power examiner. 🙂

Q: I noticed something is wrong with your answer. Did you make a mistake?

A: Well, the mistake could be mine. In fact, assume it’s mine. 🙂

That’s why I put it up here for discussion. Help better it that all of us can benefit. Tell us your thoughts in the comments section below. I’ll update and upload the new version(s) if there is a need. 🙂

——-

When you are ready, right click and choose “Save As” to download:

7092/02 GCE O’ Level Principles of Accounts 2013 Paper 2 Suggested Solutions

Again, we will upload the answers for Paper 1 as soon as we can. 🙂

Update 1:

8 Nov, 9:48a.m -Solution update:

Adrian Chiam pointed out that insurance expenses was for 15 months. (Thanks)

22 Nov, 5:42p.m

Solutions revised! Credit goes to:

Joshua Ng, Jun Hong, poastudent, Tim, Qq, Green, Chloe and the community on PrinciplesofAccounts.com.sg!

Comments are closed at this time. Check back soon!

2013 GCE N Levels Principles of Accounts (POA) Suggested Solutions!

image: Class in accounting at Mary (sic) Morrison Carnegie School, Pittsburgh, PA

Heyo N Levelers!

Congratulations on completing your entire N Level exams!

Every year, I try out the N Level papers for my students and since I’m doing that, I thought it’d be fun to hear your views and responses.

This year’s paper is amazingly easy (which means the bell curve could be punishing). I’ve indicated my views on parts which I think has contestable responses in red. Teachers/tutors/students, let me know what you think!

When you are ready, right click and choose “Save As” to download:

7092/01/ 02 GCE N’ Level Principles of Accounts 2013 Suggested Solutions

Frequently Asked Questions:

Q: Can you upload the question paper for Paper 1

A: Question papers cannot be uploaded due to copyright reasons. I may be arrested and never to be able to upload anything in future

Q: My presentation is this like my school teacher says, it differs from your answers – will I be marked wrong by Cambridge?

A: Well, in the final analysis – I’m not the examiner/guru/genie. This set of suggested solutions serves as a point of reference, not the absolute answers.

Q: I noticed that you made a mistake in the solutions. 

A: That’s why I put it up here for you to make comments. Help me better it that all of us can benefit. I’ll update and upload the new version(s) if there is a need. 🙂

When you are ready, right click and choose “Save As” to download:

7092/01/ 02 GCE N’ Level Principles of Accounts 2013 Suggested Solutions

Oh yes,

If you are doing O Levels this year, we still have space for our annual crash course. Do join us if you need a push for the final paper on 7 Nov. 🙂

Cheers,

Caleb

 

An Overview of Macro-Level Opportunities in Accountancy in Singapore

Financial District Singaproe

 

If you are embarking on a course on accounting, whether it’s Principles of Accounts (POA) or at tertiary level, here’s some good news for you. Singapore aspires to be a leading global accountancy hub for Asia-Pacific which is the fastest-growing region in accountancy services, forecasted to reach US$ 38.3 billion by 2013. Singapore contributed 2.8% to the Asia-Pacific market and its US$ 862.4 million formed 0.47% of its GDP, signalling great potential to grow. 1

In order to be on par with developed countries such as the United Kingdom and Australia, Singapore aims to double the sector’s existing GDP contribution (from 0.4% to about 1%) and its contribution from services export (from 22% to 50%) over the next decade. 1

This is exciting times for those seeking employment opportunities in Singapore.

Moreover, 29 of the biggest 30 international accountancy network firms have established a presence in Singapore. Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers (the “Big-4”) are part of the international accountancy networks and service a large portion (74%) of Singapore’s listed entities. The medium-sized public accountancy entities comprise those that audit 10 or more Public Interest Entities.

Together they account for 24% of the market share for audit services provided to listed companies. 1

Chic Princples of Accounts SingaporeA world-recognised professional accountancy qualification is key to transforming Singapore’s accountancy sector. Singapore will be the regional hub where international professional bodies offer other accountancy qualifications, and where global accountancy entities operate for Asia-Pacific. The corporate entities and government agencies also offer “on-the-job” training opportunities for accountants in commerce and government service. In terms of employment, the sector directly generates about 12,000 jobs. 1

The ACCA and Robert Half Women in Accounting and Finance Survey showed that the three main industries their respondents worked at were Accounting and Audit, Manufacturing, and Banking and Finance respectively.2

 

 

According to the 2008 survey conducted by the Institute of Certified Public Accountants Singapore (ICPAS),3 only 1 out of 10 accountants are working for an accountancy firm while the majority are working for corporations. Long working hours was found to be the main reason deterring them from working in the accountancy firms. A recent survey by top recruitment company Robert Half also revealed that at least 98 percent of finance or accounting employees in Singapore work longer than what was stipulated in their contract.4 In a separate survey on female accounting and financial consultants in Singapore, it was found that the average working week is 46.1 hours.2

Number of Graduates with Degrees in Accountancy (2011/2012)

University

Degree

Number of Graduates

Nanyang Technological University (NTU)

Bachelor of Accountancy

628

(M: 297; F: 331) 5

MBA (Accountancy)

4

(M: 3; F: 1) 6

National University of Singapore (NUS)

BBA (with Accountancy)

139

(M: 53; F: 86) 7

Singapore Management University (SMU) 8

Bachelor of Accountancy

269

Master of Professional Accounting

31

M – Male ; F – Female

Total number of members in Asia Pacific (2011/2012) for ACCA is 43,704 ; Total number of students is 113,623 (no stand-alone figures for Singapore found). 9

The ICPAS currently has about 21,000 members, of which about 15,000 hold the title of “CPA Singapore” .1

Median Monthly Basic and Gross Wages of Accounting-Related Occupations in All Industries, June 201110

Median Basic Wage ($)

Median Gross Wage ($)

Accountant

4,285

(M: 4,266; F: 4,300)

4,347

(M: 4,310; F: 4,350)

Auditor (Accounting)

4,266

(F: 4,095)

4,285

(F: 4,130)

Accounting Associate Professional

2,952

(M: 3,000; F: 2,950)

3,000

(M: 3,000; F: 3,000)

M – Male ; F – Female

References

1. http://www.acra.gov.sg/Publications/CDAS+Final+Report.htm

2. http://www.roberthalf.com.sg/EMEA/Singapore/Channel%20Descriptors/rh-sg/PDFs/RH_ACCA_Women_in_accounting&finance_survey.pdf

3. http://www.icpas.org.sg/doc/ICPAS%20WP_Young%20Accountants%20Career%20Intentions.pdf

4. http://www.roberthalf.com.sg/id/PR-03432/singapore-finance-accounting-employees-work-longer-hours

5. http://www.ntu.edu.sg/AboutNTU/CorporateInfo/FactsFigures/Pages/AY2011-12FirstDegreeGraduateOutputByProgrammeandGender.aspx

6. http://www.ntu.edu.sg/AboutNTU/CorporateInfo/FactsFigures/Pages/AY2011-12HigherDegreeGraduatesByGender.aspx

7. https://share.nus.edu.sg/registrar/info/statistics/ug-grad-20112012.pdf

8. http://www.smu.edu.sg/sites/default/files/smu/downloads/statistical_highlights_20120907.pdf

9. http://www.accaglobal.com/content/dam/acca/global/pdf-agm/ar2011-12.pdf

10. www.mom.gov.sg

2012 GCE O’ Level Principles of Accounts (POA) Suggested Solutions!

After hearing that Miss Loi’s Joss Sticks website crashed even before E MathsPaper 2 solutions were out,

I wondered if we had to do backups to avoid the same fate… except that I’m reminded that POA is taken by only approximately 20% of the cohort. 😉

So I have 1/5 the same risk. 😉

The weekend was abuzz with activity at YMCA, where we had the largest party turnout for the annual crash course over two days.

Predicted topics include doubtful debts, liquidity, profitability, partnership, control accounts, bank recon, amalgamation, control accounts, correction of errors and incomplete records.

75% of the Sample Paper 1 & 2 collectively came out in this year’s paper. Much to our delight. 🙂

And without further ado…. we present,

RE-UPed Version 2 with contributions from commentators.

7092/01 GCE O’ Level Principles of Accounts 2012 Paper 1 Suggested Solutions

7092/02 GCE O’ Level Principles of Accounts 2012 Paper 2 Suggested Solutions

Right Click on Each Link And “SAVE AS.” File size may be quite big, so be patient.

 

 

Caleb’s Comments

THEORY

Paper 1  – 17 marks

Paper 2  – 16marks.

Total        33 marks.

This is fairly consistent with 2011 paper (32-34 marks, depends on which question you chose for Section B for Paper 2).

Student’s ability to make comparison on performance and liquidity of business (consisting 15 marks of 33) should excel in this year’s papers.

ACCOUNTS & APPLICATION

Paper 1

Students complain the paper was too easy.

Working capital was a generous 5 marks. Complacency might have killed those who failed to show workings. The instruction was extremely clear. I hope you caught that and did accordingly.

Paper 2

U NO BALANCE NO?

This year’s Paper 2 had some notably challenging questions. I am happy that challenging questions which require understanding and application came out so that deserving students can get a decent shot of doing well.

P2 Q1 NP figure is $28,250. Balance Sheet $83,320.

Student’s ability to account for Decrease in Doubtful Debts, Bank Charges (Dr Bank Charges and Cr Bank) and setting Surjit’s $150 dr balance as negative in the balance sheet were perceived to be differentiators of those who do well and those who will excel.

P2 Q4 Tests the student’s ability to calculate depreciation using NBV figures of fixed assets.

P2 Q5 Bad Debts Recovery T-account was asked for the first time. Dates and remembering to transfer it to Profit and Loss are the two major landmines to watch out.

P2 Q5 Capital Account – Students must know to put the right details in the Capital account for additional capital contributed and Drawings made.

Discussing Answers Online. 

Constructive comparison to achieve understanding is fine.

However, I’m no genie. This remains as Suggested Solutions.

I’ll be happy to stand corrected and update the document from your contributions. 🙂

Please don’t ask me if this or that mistake will cost me 1 or 2 marks. Your guess is as good as mine.

Errors can be carried forward and will not be marked down twice, provided you showed workings for the remaining figures. It amazes me constantly that students take workings, dates and details for granted.

Concluding Thoughts

Of course I’ll say I wish you guys, especially my students, the very best grades and may getting your As and Bs help you advance in your academic journey towards the next step. Suffice to say, I’ll end by sharing with you a note by Tong Yee, director of The Thought Collective, for his batch of General Paper students.

“My Last Lesson to You: For the Batch of 2012” (FaceBook note)

It deeply resonates with my heartbeat as an accounting educator. My wish is that the accounting knowledge you learn in POA help you understand and appreciate in future the volatile financial landscape we are in and develop skills to cope with challenges and overcome them with good, critical thinking.

With that, all the best for your remaining papers!

Cheers,

Methods & Suitability of Depreciation Calculations

Several depreciation methods have been coming out for the O Level examinations such as the Revaluation and Units of Production method. We will discuss the two main methods commonly used – the Straight Line Method (SLM) and the Reducing Balance Method (RBM). 

 

1. Straight Line Method

Calculation of Depreciation:

Depreciation can be calculated if the following items of information are available:

  • Cost of the asset includes all expenses incurred for freight, carriage, and installation costs.
  • Scrap or residual value of the asset. I call it the garang-guni value – that amount we estimate the trash collection uncle will take when he collects from your place.
  • Useful life (not the physical life) of asset.

2. Reducing (Diminishing) Balance Method

Calculation of Depreciation:

Depreciation = Rate x Net Book Value (NBV)

where

NBV = Cost* – Provision for (Accumulated) Depreciation

In Year 2,

Depreciation expense using RBM = 10% x (10,000 – 1,000)

 

EXAMPLE

Using two different methods, a $10,000 asset with no scrap value at a depreciation rate of 10% will result in a different depreciation expense and net book value of the asset from Year 2 onwards.

· Straight Line = 10% X $10,000 = $1,000 per year

· Reducing Balance = 10% x Net Book Value Asset at the end of the previous period

Often, the depreciation rate used in RBM is usually between two and three times greater than under the SLM. Besides the depreciation charges, there are also the maintenance and repairs costs element and these running costs usually increases with age.

In Reducing Balance Method,

Suitability of Methods

How suitable the depreciation method is on an asset depends on how well it reflects the benefits the business derives from the used of assets.

Straight line method is more suitable for fixed assets that generates a more constant benefits such as Furniture and Fittings. it is fairer and more realistic.

Reducing balance method is used for fixed assets which depreciate more in the early years and in later years due to the efficiency of the fixed asset is higher in the early year. Therefore, reducing balance method used for assets such as motor vehicle and computers.

Revaluation Method (for loose tools and cutlery) – see notes below on Materiality Concept

Other Methods of Providing Depreciation:

Machine Hour Rate Method, Sum of Year’s Digit Method, Production unit method or Depletion method etc.

Why Different Methods?

To adhere to the Matching principle, because the revenue earned must be matched with the expenses incurred (depreciation) from the fixed asset that was used to generate that income within the same accounting period.

Prudence/Conservatism principle is adhered because the fixed asset is valued based on their net book value after accumulated depreciation so that assets and profits will not be overstated.

Materiality Concept is applied when the amount is insignificant. Loose tools which are immaterial in dollar amount may be written off as expense in one period, even though it may have a useful life of more than an accounting period.

 

SUMMARY OF DIFFERENCES

2011 N Level Results Out!

The results of 2011 Singapore-Cambridge General Certificate of Education (GCE) Normal (Academic) and Normal (Technical) Level Examinations are out!

 

Received great news from all my students. U-graders passed and the best went from F9 to B3 (taught him over 5 months). Did some screen shots of the smses. Rewards from tutoring comes in many ways – this being the greatest! Can’t wait to see what comes from the O’ – Levelers!

“Thanks Caleb, Bryan got 1 for POA. Because of your effort, he managed to top the school. Thanks 🙂 “ – Annie, Bryan’s mom. St Patrick’s School

“F9 to B3 is a big jump. I’m happy!” – Rigzin

“Hello teacher, grade1 for POA :)”Sheri

 

IMG_3371

“… and I didn’t expect to pass my POA! Hahah thank you caleb for the time you spent on me, helping me on my POA 🙂 see you next time! “Joseph Kim, my Korean student from Assumption English School.

A little note on Joseph – Joseph struggled to understand accounting concepts in school and even during my lessons as his command of English was not strong. It was over 4.5 months we worked together on his understanding of the subject. Unlike my student from Hangzhou  in 2010 who scored a C5 from Ungraded in 2.5 months, I was not able to teach in his native language (Korean). I’m so proud of Joseph Kim.

 

Congratulations to all my N-Levelers and all you guys who worked hard for this N levels.