Ramla has calculated her draft profit figure for the year ended 28 February 2023. Adjustments in Ramla's ledger accounts have still to be made for the following items. 1 An amount of $99 owed to Ramla by Mai is to be written off as irrecoverable. 2 Fixtures and fittings, $875, were purchased on credit from Padma. 3 A loan repayment, $500, had been incorrectly recorded as loan interest. 4 Rent paid, $350, had been recorded as $530. 5 Drawings, $120, had been debited to the wages account.

Mark scheme

Marking points from the official mark scheme (May/June 2023). The mark or mark type is shown in brackets.

1. [1] Item 1: Irrecoverable debts Debit $99
2. [1] Item 1: Mai Credit $99
3. [1] Item 2: Fixtures and fittings Debit $875
4. [1] Item 2: Padma Credit $875
5. [1] Item 3: Loan Debit $500
6. [1] Item 3: Loan interest Credit $500
7. [1] Item 4: Bank / cash Debit $180
8. [1] Item 4: Rent Credit $180
9. [1] Item 5: Drawings Debit $120
10. [1] Item 5: Wages Credit $120
11. [6] (b) Table with Draft profit $11650, Item 1 Decrease $99, Item 2 No effect $0, Item 3 Increase $500, Item 4 Increase $180, Item 5 Increase $120, Adjusted profit $12351 (OF)
12. [1] The prudence principle states that profits and assets are not overstated / losses and liabilities are not understated
13. [1] Irrecoverable debts should be written off to ensure that profits / assets are not overstated / not understate loss
14. [1] The business entity principle states that the business is regarded as being completely separate from the owner of the business OR transactions should be recorded from the point of view of the business
15. [1] Drawings should be recorded correctly to ensure that profits are not understated / capital overstated