Haung's income statement showed a draft profit for the year of $15 500. After completion of the income statement the following errors were discovered: 1 Purchases of goods on credit from Takka, $4000, had been omitted from the books. 2 Goods sold on credit to Nolan, $380, had been posted to the account of North. 3 Discount received, $3050, had been debited to the discount received account. 4 A debt of $375, owing by Long, was considered irrecoverable. No entries had been made in the books.

Mark scheme

Marking points from the official mark scheme (May/June 2012). The mark or mark type is shown in brackets.

1. [8] (a) Journal entries: 1. Dr Purchases $4000 (1), Cr Takka $4000 (1). 2. Dr Nolan $380 (1), Cr North $380 (1). 3. Dr Suspense $6100 (1), Cr Discount received $6100 (1). 4. Dr Bad debts $375 (1), Cr Long $375 (1). (Award marks for correct account name, correct amount and dr/cr)
2. [4] (b) Statement of revised profit for the year ended 30 April 2012: Draft profit for year $15500. 1. Purchases: Decrease $4000 (1), Revised profit $11500. 2. Sales: No effect (1), Revised profit $11500. 3. Discount: Increase $6100 (1), Revised profit $17600. 4. Bad debt: Decrease $375 (1), Revised profit $17225. Revised profit for the year $17225.
3. [1] (c)(i) Accounting concept: Accruals / Matching (1)
4. [2] (c)(i) Reason: Depreciation is the cost consumed of a non-current asset and should be charged as an expense to the income statement and matched against the income generated by the asset for the financial year. (2 or 0)
5. [1] (c)(ii) Accounting concept: Money measurement (1)
6. [2] (c)(ii) Reason: Only items with a monetary value are recorded in the financial statements.(1) The skill of the workforce cannot be measured in monetary terms.(1)
7. [1] (c)(iii) Accounting concept: Consistency (1)
8. [2] (c)(iii) Reason: The same method used to charge depreciation should be used from one year to the next. (2 or 0)