O-LevelAccountingAccounting procedures7707/21 · May/June 2013 · Q122 Marks

Mary started business on 1 January 2012, renting premises at $12000 per annum, paid by instalments on the first day of January, April, July, and October. On 1 August 2012 Mary let part of the premises to another business for $5400 per annum, to be paid by instalments on the first day of August, November, February, and May. Mary paid the rent on 1 January, 1 April, and 1 July 2012. The tenant paid rent to Mary on 1 August and 1 November 2012. REQUIRED

(a)Prepare the rent payable account for the year ended 31 December 2012. Balance the account and bring the balance down on 1 January 2013. Rent Payable account[5]
(b)Explain the meaning of the balance on 1 January 2013.[2]
(c)Prepare the rent received account for the year ended 31 December 2012. Balance the account and bring the balance down on 1 January 2013. Rent Received account[5]
(d)Explain the meaning of the balance on 1 January 2013.[2]
(e)Mary bought a motor vehicle, $15000. State the section of Mary's balance sheet (statement of financial position) where this will be shown.[1]
(f)Explain the difference between capital and revenue expenditure.[4]
(g)Indicate by placing a tick (✔) which transactions are capital expenditure and which are revenue expenditure. Transaction Capital expenditure Revenue expenditure (i) Purchase of fixtures and fittings (ii) Installing and testing an air conditioning system (iii) Insurance of shop premises[3]

Mark scheme

Marking points from the official mark scheme (May/June 2013). The mark or mark type is shown in brackets.

[1] (a) Rent Payable Account - Jan 1 Bank 3000
[1] (a) Rent Payable Account - Apr 1 Bank 3000
[1] (a) Rent Payable Account - Jul 1 Bank 3000
[1] (a) Rent Payable Account - Dec 31 Income statement 12000
[1] (a) Rent Payable Account - Dec 31 Balance c/d 3000
[1] (a) Rent Payable Account - Jan 1 Balance b/d 3000
[2] (b) Mary owes her landlord rent of $3000
[2] (b) Mary has other payables of $3000
[2] (b) Mary has a creditor / accrual for rent of $3000
[1] (c) Rent Received Account - Aug 1 Bank 1350
[1] (c) Rent Received Account - Nov 1 Bank 1350
[1] (c) Rent Received Account - Dec 31 Income stat 2250
[1] (c) Rent Received Account - Dec 31 Balance c/d 450
[1] (c) Rent Received Account - Jan 1 Balance b/d 450
[2] (d) Mary has received one months rent, $450, in advance
[2] (d) Mary has other payables of $450
[2] (d) Paul has prepaid one month's rent of $450
[1] (e) Non-current asset
[2] (f) Capital expenditure: Expenditure incurred on the purchase, alteration or improvement of non-current assets
[2] (f) Revenue expenditure: Expenditure incurred on the day-to-day running expenses of the business
[1] (g)(i) Purchase of fixtures and fittings - Capital expenditure (✔)
[1] (g)(ii) Installing and testing an air conditioning system - Capital expenditure (✔)
[1] (g)(iii) Insurance of shop premises - Revenue expenditure (✔)

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