O-LevelAccountingAccounting procedures7707/23 · Oct/Nov 2021 · Q420 Marks

Karishma runs her own business. The balances in her books on 1 October 2020 included the following. $ Insurance account 1700 prepaid Electricity account 1800 owing During the financial year ended 30 September 2021 Karishma made the following payments by cheque. Insurance payments $ 7 February 2021 3400 13 August 2021 3500 Electricity payments $ 14 October 2020 1800 24 January 2021 1800 26 May 2021 1800 A refund of $300 for insurance overpaid was received by bank transfer on 28 February 2021. The insurance paid on 13 August 2021 covered a period of five months to 31 December 2021. At 30 September 2021, an amount of $2000 was owing for electricity. REQUIRED

(a)Prepare the following accounts for the year ended 30 September 2021. Balance the accounts and bring down the balances on 1 October 2021. Karishma Insurance account Date | Details | $ | Date | Details | $ Electricity account Date | Details | $ | Date | Details | $[10]
(b)Advise Karishma whether she should change to the new electricity supplier. Justify your answer with two advantages and two disadvantages of changing supplier.[5]
(c)Prepare the rent receivable account for the year ended 30 September 2021. Balance the account and bring down the balance on 1 October 2021. Karishma Rent receivable account Date | Details | $ | Date | Details | $[4]
(d)Identify the section of the statement of financial position at 30 September 2021 in which the balance on the rent receivable account would appear.[1]

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2021). The mark or mark type is shown in brackets.

[1] Insurance account: Feb 7 Bank 3400 and Aug 13 Bank 3500 (combined)
[1] Insurance account: Feb 28 Bank 300
[1] Insurance account: Income statement 6200 OF
[1] Insurance account: Balance c/d 2100
[1] Insurance account: Balance b/d 2100
[1] Electricity account: Oct 14 Bank 1800, Jan 24 Bank 1800 and May 26 Bank 1800 (combined)
[1] Electricity account: Income statement 5600 OF
[1] Electricity account: Balance c/d 2000
[1] Electricity account: Balance b/d 2000
[1] Dates (for accounts in 4(a))
[1] Fixed monthly payment (Advantage)
[1] Payments would be made automatically (Advantage)
[1] More difficult to fall behind with payments (Advantage)
[1] Cheaper than existing contract (Advantage)
[1] Helps with planning expenditure (Advantage)
[Max 2] Accept other valid points for advantages
[1] Would lose control of her payment schedule/ would not be able to pick and choose when to make the payments (Disadvantage)
[1] Bank charges might increase (Disadvantage)
[1] Tied to two-year contract (Disadvantage)
[1] Need to consider reliability of new supplier (Disadvantage)
[1] Possible price increase after two years (Disadvantage)
[Max 2] Accept other valid points for disadvantages
[1] Recommendation
[1] Rent receivable account: Oct 1 Bank 800, Mar 2 Bank 825, Aug 8 Bank 850 (combined)
[1] Rent receivable account: Income statement 1965 OF
[1] Rent receivable account: Balance c/d 510
[1] Rent receivable account: Balance b/d 510
[1] Current liabilities

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