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O-LevelAccountingAccounting procedures7707/22 · Oct/Nov 2018 · Q540 Marks

Shobi is a sole trader. The following balances were extracted from the books on 30 September 2018. | Account | $ | | :---------------------------------- | -----: | | 10-year leasehold premises (at cost)| 120000 | | Motor vehicles (at cost) | 40000 | | Fixtures and fittings (at cost) | 19000 | | Provisions for depreciation at 1 October 2017: || | 10-year leasehold premises | 72000 | | Motor vehicles | 10000 | | Fixtures and fittings | 7600 | | Revenue | 265000 | | Purchases | 135000 | | Returns outwards | 8200 | | Carriage inwards | 3100 | | Wages and salaries | 41000 | | Motor vehicle expenses | 6800 | | Rent payable | 15000 | | Rent receivable | 8500 | | Capital | 40000 | | Drawings | 11900 | | 6% Bank loan (repayable 2020) | 50000 | | Bank interest paid | 3000 | | Inventory at 1 October 2017 | 26000 | | Heat, light and power | 5050 | | Advertising | 9000 | | General expenses | 17700 | | Disposal | 1800 Credit | | Bank | 13350 Debit | | Trade payables | 23050 | | Trade receivables | 23250 | | Provision for doubtful debts | 3000 | Additional information at 30 September 2018 1 Inventory was valued at $19500. 2 Shobi had taken $4700 goods for his own use. No entries had been recorded in the books. 3 The rent payable included a payment of $9000 for the six months ended 30 November 2018. 4 General expenses accrued were $2600 and wages and salaries accrued were $1700. 5 Rent receivable of $150 was outstanding. 6 On 26 September 2018 a motor vehicle costing $12000 was purchased by cheque. No entries had been recorded in the books. 7 Depreciation is to be charged on all non-current assets owned at the end of the year as follows: (i) an appropriate amount for the 10-year leasehold premises (ii) motor vehicles at the rate of 25% per annum using the diminishing (reducing) balance method (iii) fixtures and fittings at the rate of 10% per annum on cost. 8 Trade receivables of $750 are irrecoverable. The provision for doubtful debts is to be maintained at 4%.

  1. (a)REQUIRED (a) Prepare the income statement for the year ended 30 September 2018. Shobi Income Statement for the year ended 30 September 2018[20]
  2. (b)Prepare the statement of financial position at 30 September 2018. Shobi Statement of Financial Position at 30 September 2018.[20]

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). The mark or mark type is shown in brackets.

  1. [1] Income Statement: Inventory at 1 October 2017 $26000
  2. [1] Income Statement: Carriage inwards $3100
  3. [1] Income Statement: Returns outwards ($8200)
  4. [1] Income Statement: Drawings of goods ($4700)
  5. [1] Income Statement: Cost of sales ($131700)
  6. [1] Income Statement: Gross profit $133300
  7. [1] Income Statement: Rent receivable $8650 ($8500 + $150)
  8. [1] Income Statement: Profit on disposal $1800
  9. [1] Income Statement: Decrease in provision for doubtful debts $2100
  10. [1] Income Statement: Wages and salaries $42700 ($41000 + $1700)
  11. [1] Income Statement: Motor vehicle expenses $6800
  12. [1] Income Statement: Rent payable $12000 ($15000 - $3000)
  13. [1] Income Statement: Bank interest $3000
  14. [1] Income Statement: Heat, light and power $5050
  15. [1] Income Statement: Advertising $9000
  16. [1] Income Statement: General expenses $20300 ($17700 + $2600)
  17. [1] Income Statement: Bad debt $750
  18. [1] Income Statement: Depreciation Leasehold premises $12000
  19. [1] Income Statement: Depreciation Motor vehicles $10500
  20. [1] Income Statement: Depreciation Fixtures and fittings $1900
  21. [1] Income Statement: Profit for the year $21850
  22. [1] Statement of Financial Position: 10-year leasehold premises book value $36000
  23. [1] Statement of Financial Position: Motor vehicles cost $52000
  24. [1] Statement of Financial Position: Motor vehicles book value $31500
  25. [1] Statement of Financial Position: Office fixtures book value $9500
  26. [1] Statement of Financial Position: Inventory $19500
  27. [1] Statement of Financial Position: Trade receivables $22500 ($23250 - $750)
  28. [1] Statement of Financial Position: Less Provision for doubtful debts ($900)
  29. [1] Statement of Financial Position: Other receivables $3150 ($150 + $3000)
  30. [1] Statement of Financial Position: Bank $1350 ($13350 - $12000)
  31. [1] Statement of Financial Position: Profit for the year $21850
  32. [1] Statement of Financial Position: Drawings ($16600) ($4700 + $11900)
  33. [1] Statement of Financial Position: Non-current liabilities heading
  34. [1] Statement of Financial Position: 6% loan $50000
  35. [1] Statement of Financial Position: Trade payables $23050
  36. [1] Statement of Financial Position: Other payables $4300 ($2600 + $1700)
  37. [1] Statement of Financial Position: Total Assets $122600
  38. [1] Statement of Financial Position: Total Capital and Liabilities $122600

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About this question

Topic
Accounting procedures, O-Level Accounting (syllabus 7707). Structured question, 40 marks.
Source
O-Level Accounting, Oct/Nov 2018 Paper 2 Variant 2, question 5.

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