2017 POA N Level Answer

2017 N Level POA Answers

Paper 1 :

a) Book-keeping is only the recording of business transactions while accounting is the process of recording, summarising, reporting, analysing and interpretation of financial information.

b) The going-concern theory states that any business should be assumed to operate indefinitely.

c)

TransactionSource documentJournal
(i)Cash salesReceiptCash book
(ii)Credit salesInvoiceSales Journal
(iii)Purchases of non-current asset on creditInvoiceGeneral Journal
(iv)Returns of credit salesCredit noteSales returns journal
(v)Cheque payments for credit purchasesReceiptPurchases Journal

a) 

Umar

Trial balance as at 30 June 2017

Dr ($)Cr ($)
Capital9 550
Drawings7 225
Fixtures and fittings5 650
Accumulated depreciation of fixtures and fittings1 450
Cash in hand25
Bank overdraft 375
Trade payables3 750
General expenses4 955
Inventory470
Cost of sales11 805
Sales revenue15 600
Sales returns595
30 72530 725

b) 1. To check for arithmetic errors.

      2. To aid in the preparation of financial statements.

a) 

Method of depreciationWorkingsDepreciation charge for the year ended 30 September
2016 ($)2017 ($)
(i)Straight-line(using a useful life of 4 ears and a scrap value of $4 000)(20 000 – 4 000)/4 = 4 000Depreciation charge 2016 = $4 000Depreciation charge 2017 = $4 0004 0004 000
(ii)Reducing-balance(using a rate of 25%)Depreciation charge 2016 = 25% x 20 000 = $5 000Depreciation charge 2017 = 25% x (20 000 – 5 000) = $3 7505 0003 750

b) Straight-line method.

c) 1. Wear and tear

2. Lapse of time

d) The consistency theory states that when an accounting method is applied to an item, it should be the same throughout all accounting periods.

a) 1. To encourage buyers to bulk buy.

      2. To promote brand loyalty.

b) Amount recorded in purchases journal = 3 200 x (100 – 20)% = $2 560

c) Debit 

d) 

OverstatedUnderstatedNo effect
Gross profit
Profit for the year
Trade receivables
Cash at bank

Paper 2 :

Malik

Statement of Financial Performance for the year ended 31 May 2017

$$
Fee income30 245
Less: Expenses
Rent (5 950 – 550)5 400
Insurance2 650
Printing and stationery (295 + 66)361
General expenses (8 860 – 320)8 540
Motor vehicle expense1 675
Depreciation of fixtures and fittings2 450
Depreciation of motor vehicles2 344
Impairment loss on trade receivables (1 000 – 875)12523 545
Profit for the year6 700

Malik 

Statement of Financial Position as at 31 May 2017

CostAccumulated DepreciationNet Book Value
Assets$$$
Non-current assets
Fixtures and fittings (7 350 + 2 450)18 5009 8008 700
Motor vehicles (2 930 + 2 344)14 6505 2749 376
Total non-current assets33 15015 07418 076
Current assets
Trade receivables2 680
Less: Allowance for impairment of trade receivables(1 000)
Net trade receivables1 680
Cash in hand85
Rent paid in advance550
Total current assets2 315
Total assets20 391
Equity and Liabilities
Capital (25 500 + 6 700 – (14 380 + 320))17 500
Current liabilities
Trade payable1 580
Cash at bank (overdraft)1 245
Stationery payable66
Total current liabilities2 891
Total equity and liabilities20 391

a) Every transaction entered in a journal involves a debit entry in one account and a credit entry in another account. Thus, every transaction should be recorded in at least two accounts as a debit or credit. In a double-entry system, the amounts recorded as debits must be equal to the amounts recorded as credits

b)

TransactionDebitCredit
1Cash at bankCapital
2Rent expenseCash at bank
3InventoryTrade payables – Yin
4Fixtures and fittingsCash in hand

c)

Banks, government, competitors, investors

a)

Capital

DateParticularsDr ($)Cr ($)Balance
2016
Jul 1Balance b/d35 500 Cr
Sep 2Office equipment 125
2017
Jun 30Drawings (3 400 + 13 580)16 98018 645 Cr
Income summary (28070-18645)9 42528 070 Cr
Jul 1Balance b/d28 070 Cr

b) Withdrawals of business; resources for the owner’s personal use.

c)

1. Compensating error

2. Error of omission

d)

Journal

DateParticularsDr ($)Cr ($)
2017
Jun 30Discount allowed55
Cost of sales55
30Advertising expense265
    Cash at bank265

a)

Motor vehicles

DateParticularsDr ($)+Cr ($)-Balance
2016
Jan 1Capital8 5008 500 Dr
Sep 1Other payable – Ty Motors16 80025 300 Dr
1Cash at bank15025 450 Dr
2017
Jan 1Balance b/d25 450 Dr

Motor vehicles expense

DateParticularsDr ($)+Cr ($)-Balance
2016
Jan 1Cash at bank825825 Dr
Dec 31Cash in hand2531 078 Dr
Cash at bank1 5892 667 Dr
Prepaid motor vehicle expense (3/15*825)1652502 Dr
Income summary2502

c) To avoid presenting too many insignificant details in financial statements.

a)

Sales revenue

DateParticularsDr ($)+Cr ($)-Balance
2017
Jul 31Trade payable81 41481 414 Cr
31Income summary81 414

b)

Sales returns

DateParticularsDr ($)+Cr ($)-Balance
2017
Jul 31Trade payable13 48013 480 Dr
31Income summary13 480

c)

Cost of sales

DateParticularsDr ($)+Cr ($)-Balance
2017
Jul 31Inventory42 23542 235 Dr
31Inventory (returns)2 57639 659 Dr
31Income summary39 659

d)

(81 414 – 13 480 – (42 235 – 2 576)) = $28 275

e) To prepare the statement of financial position.

f) The business and owner are considered separate entities

Have a great weekend!

Caleb

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