O-LevelAccountingAccounting procedures7707/23 · Oct/Nov 2022 · Q320 Marks

The following balances have been taken from the accounts of RB, a trader. 1 April 2021 31 March 2022 $ $ Insurance 2500 prepaid 850 prepaid Commission receivable 700 owing 630 owing The following transactions relate to the year ended 31 March 2022. All receipts and payments were through the bank account. Insurance paid $15300 Insurance refund $600 Commission receivable $7200

(a)Prepare the following ledger accounts for the year ended 31 March 2022. Balance the accounts and bring down the balances on 1 April 2022. RB Insurance account Date Details $ Date Details $ Commission receivable account Date Details $ Date Details $[8]
(b)Prepare the entries for insurance and commission receivable in RB's statement of financial position at 31 March 2022. RB Extract from statement of financial position at 31 March 2022[2]
(c)Explain why the matching principle is important in the preparation of RB's income statement.[3]
(d)(i)Calculate each of the following: the trade discount[1]
(d)(ii)the cash discount[1]
(d)(iii)the amount paid to the supplier JP[1]
(e)Complete the table below indicating with a tick (✔) the effect of each type of discount on gross profit and profit for the year. Discount allowed increase decrease no effect gross profit profit for the year Discount received increase decrease no effect gross profit profit for the year[4]

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2022). The mark or mark type is shown in brackets.

[8] RB Insurance account
Date 2021 Apr 1 Details Balance b/d $ 2500 (1)
Date 2022 Mar 31 Details Bank $ 15300 (1)
Date 2022 Mar 31 Details Bank $ 600 (1)
Date 2022 Mar 31 Details Income statement $ 16350 (1) OF
Date 2022 Mar 31 Details Balance c/d $ 850
Totals 17800
Date 2022 Apr 1 Details Balance b/d $ 850 **
Commission receivable account
Date 2021 Apr 1 Details Balance b/d $ 700 (1)
Date 2022 Mar 31 Details Bank $ 7200 (1)
Date 2022 Mar 31 Details Income statement $ 7130 (1) OF
Date 2022 Mar 31 Details Balance c/d $ 630
Totals 7830
Date 2022 Apr 1 Details Balance b/d $ 630 **(1) For both
[2] RB Extract from Statement of financial position at 31 March 2022
Current assets (1)
Other receivables (850 + 630) $ 1480 (1)
OR
Current assets (1)
Insurance prepaid 850 }(1)
Commission receivable accrued 630 }
[3] Ensures the correct amount of revenue and expenses for the period are entered in the income statement (1)
Ensures that the revenue and expenses are not under or over -stated (1)
Ensures that the profit for the year is correctly calculated/is not over or under-stated (1)
Ensures that profitability ratios can be relied upon/more accurate decision-making (1)
Max (3)
[1] $3000 × 25% = $750 (1)
[1] $2250 × 2% = $45 (1)
[1] ($3000 – $750) = $2250
$2250 – $45 = $2205 (1) OF
[4] Discount allowed
gross profit ✔ (1) no effect
profit for the year ✔ (1) decrease
Discount received
gross profit ✔ (1) no effect
profit for the year ✔ (1) increase

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