2024 Cambridge IGCSE Accounting (0452) 模擬試題連答案詳解

To correct the first error, the purchases account must be debited with $120. The corresponding entry is to credit the suspense account with $120.

To correct the second error, the sales returns account must be debited with $45. The corresponding entry is to credit the suspense account with $45.

Therefore, the net entry to the suspense account is a credit of \( \$120 + \$45 = \$165 \).

Award 1 mark for the correct choice. Method: Identify that both omissions require a debit entry in their respective ledger accounts, resulting in a dual credit entry in the suspense account totalling $165.

First, update the cash book balance:
- Starting cash book balance (overdrawn): \( -\$1,250 \)
- Subtract bank charges: \( -\$35 \)
- Add customer's bank transfer: \( +\$180 \)
- Adjusted cash book balance: \( -\$1,105 \) (credit/overdraft)

Next, perform the bank reconciliation calculation to find the bank statement balance \( X \):
\( \text{Adjusted Cash Book Balance} = X + \text{Uncleared Deposits} - \text{Unpresented Cheques} \)
\( -\$1,105 = X + \$420 - \$210 \)
\( -\$1,105 = X + \$210 \)
\( X = -\$1,315 \)

A negative balance on the bank statement indicates an overdraft, which is represented as a debit balance of $1,315.

Award 1 mark for the correct choice. Method: Update the cash book to get an adjusted credit balance of $1,105 and reconcile this to find the bank statement debit balance of $1,315.

1. Depreciation for 2021: \( 20\% \times \$16,000 = \$3,200 \). Net Book Value (NBV) on 1 January 2022: \( \$16,000 - \$3,200 = \$12,800 \).
2. Depreciation for 2022: \( 20\% \times \$12,800 = \$2,560 \). NBV on 1 January 2023: \( \$12,800 - \$2,560 = \$10,240 \).
3. No depreciation is charged in the year of disposal (2023). So, the NBV at disposal remains $10,240.
4. Profit/Loss on disposal = Proceeds - NBV = \( \$9,800 - \$10,240 = -\$440 \) (Loss of $440).

Award 1 mark for the correct choice. Method: Calculate cumulative depreciation for 2021 and 2022 to determine the net book value of $10,240, and compare it to the sale proceeds of $9,800 to find a loss of $440.

1. Calculate Interest on Capital:
- Hassan: \( 5\% \times \$60,000 = \$3,000 \)
- Ibrahim: \( 5\% \times \$40,000 = \$2,000 \)
Total Interest on Capital = $5,000.

2. Deduct Salary:
- Ibrahim: $8,000.

3. Calculate Residual Profit:
Residual Profit = Profit for the year - Interest on Capital - Salary
\( = \$35,000 - \$5,000 - \$8,000 = \$22,000 \).

4. Share of Residual Profit for Hassan:
\( \$22,000 \times \frac{3}{5} = \$13,200 \).

Award 1 mark for the correct choice. Method: Determine the residual profit of $22,000 after accounting for interest on capital and salary, then apply Hassan's profit-sharing ratio (3/5) to find his share of $13,200.

Prime Cost consists of Cost of Raw Materials Consumed plus Direct Wages.

1. Calculate Cost of Raw Materials Consumed:
\( \text{Opening Inventory} + \text{Purchases} + \text{Carriage Inwards} - \text{Closing Inventory} \)
\( = \$9,200 + \$84,500 + \$3,500 - \$10,800 = \$86,400 \).

2. Calculate Prime Cost:
\( \text{Cost of Raw Materials Consumed} + \text{Direct Wages} \)
\( = \$86,400 + \$42,000 = \$128,400 \).

Note: Factory rent and rates and depreciation of factory machinery are factory overheads and are excluded from the prime cost calculation.

Award 1 mark for the correct choice. Method: Add carriage inwards to purchases of raw materials, adjust for opening and closing inventory to calculate materials consumed of $86,400, and add direct wages of $42,000 while excluding overheads.

1. Calculate Gross Profit:
\( 25\% \times \$180,000 = \$45,000 \).

2. Calculate Cost of Sales:
\( \text{Revenue} - \text{Gross Profit} = \$180,000 - \$45,000 = \$135,000 \).

3. Calculate Average Inventory:
\( \frac{\$14,000 + \$16,000}{2} = \$15,000 \).

4. Calculate Rate of Inventory Turnover:
\( \frac{\text{Cost of Sales}}{\text{Average Inventory}} = \frac{\$135,000}{\$15,000} = 9 \text{ times} \).

Award 1 mark for the correct choice. Method: Work back from the gross profit margin to find the cost of sales ($135,000) and divide this by the average inventory ($15,000) to find the turnover of 9 times.

The sales ledger control account only records transactions relating to credit sales and credit customers. Cash sales do not affect this account.

- Debit entries: Opening Balance ($8,400) + Credit Sales ($32,100) = $40,500
- Credit entries: Receipts ($29,600) + Discounts Allowed ($850) + Irrecoverable Debts ($400) + Contra Entry ($650) = $31,500

Closing balance = \( \$40,500 - \$31,500 = \$9,000 \).

Award 1 mark for the correct choice. Method: Sum the debit entries (opening balance and credit sales) and subtract the credit entries (receipts, discounts, written-off debts, and contra entries), ensuring cash sales are correctly excluded.

Transactions involving the credit purchase of non-current assets (such as office equipment) cannot be recorded in the Purchases Journal, which is reserved strictly for credit purchases of goods intended for resale (inventory). They are also not recorded in the Cash Book since no cash has been exchanged. Therefore, they must be recorded in the General Journal.

Award 1 mark for the correct choice. Method: Identify that credit purchases of non-current assets are recorded in the General Journal (Journal) rather than any of the specialized books of prime entry.

To find the corrected profit:
1. Draft profit = \(\$34,500\)
2. Add repair costs mistakenly expensed (reversing error 1): \(+\$2,500\)
3. Less depreciation on the new equipment: \(20\% \times \$2,500 = -\$500\)
4. Add sales undercast: \(+\$400\)

Corrected Profit = \(\$34,500 + \$2,500 - \$500 + \$400 = \$36,900\).

1 mark for the correct option (C). Accept only C.

Only items not yet recorded in the cash book require adjustment to find the updated cash book balance. Unpresented cheques are timing differences and are only adjusted in the bank reconciliation statement.

Original Balance = \(\$1,850\) (Debit)
Less Bank charges = \(-\$45\)
Less Dishonoured cheque = \(-\$210\)
Updated cash book balance = \(\$1,595\) (Debit)

1 mark for the correct option (B). Accept only B.

1. Cost (1 January 2021) = \(\$40,000\)
2. Year 2021 depreciation: \(15\% \times \$40,000 = \$6,000\). Carrying value at 31 December 2021 = \(\$34,000\)
3. Year 2022 depreciation: \(15\% \times \$34,000 = \$5,100\). Carrying value at 31 December 2022 = \(\$28,900\)
4. Year 2023 depreciation: \(\$0\) (none charged in the year of disposal).
5. Carrying value on disposal = \(\$28,900\)
6. Sales proceeds = \(\$26,000\)
7. Loss on disposal = \(\$28,900 - \$26,000 = \$2,900\) loss.

1 mark for the correct option (A). Accept only A.

1. Calculate appropriations:
- Interest on Capital:
X: \(5\% \times \$80,000 = \$4,000\)
Y: \(5\% \times \$50,000 = \$2,500\)
- Salary Y: \(\$12,000\)

2. Calculate residual profit:
Residual Profit = \(\$58,500 - (\$4,000 + \$2,500) - \$12,000 = \$40,000\)

3. Calculate Y's share of residual profit:
Y's share = \(2/5 \times \$40,000 = \$16,000\)

4. Calculate Y's total share:
Y's total share = Interest on Capital (\(\$2,500\)) + Salary (\(\$12,000\)) + Residual share (\(\$16,000\)) = \(\$30,500\).

1 mark for the correct option (C). Accept only C.

1. Prime Cost = Cost of raw materials consumed + Direct factory wages
Prime Cost = \(\$84,000 + \$42,000 = \$126,000\)

2. Factory Overheads = Factory indirect wages + Factory heating and lighting
Factory Overheads = \(\$18,000 + \$12,000 = \$30,000\)

3. Total Factory Cost = Prime Cost + Factory Overheads = \(\$126,000 + \$30,000 = \$156,000\)

4. Cost of Production = Total Factory Cost + Opening WIP - Closing WIP
Cost of Production = \(\$156,000 + \$6,500 - \$8,200 = \$154,300\).

1 mark for the correct option (B). Accept only B.

1. Credit sales = \(80\% \times \$300,000 = \$240,000\)
2. Average trade receivables = \((\$22,000 + \$26,000) / 2 = \$24,000\)
3. Trade receivables turnover (days) = \((\text{Average trade receivables} / \text{Credit sales}) \times 365\)
\((\$24,000 / \$240,000) \times 365 = 36.5\) days.

1 mark for the correct option (C). Accept only C.

The current ratio includes inventory, whereas the liquid (acid test) ratio excludes inventory. Because the current ratio remains unchanged but the liquid ratio has significantly decreased, the gap between current assets and liquid assets has widened. This indicates that a larger proportion of current assets is held in the form of inventory.

1 mark for the correct option (C). Accept only C.

Cash sales do not affect the sales ledger control account because they do not involve credit customers.
Corrected balance = Draft balance + Credit sales (omitted) - Contra entry (omitted)
Corrected balance = \(\$12,400 + \$8,500 - \$450 = \$20,450\).

1 mark for the correct option (A). Accept only A.

To find the corrected profit:
1. Omitted prepaid rent of $450 means the rent expense was overstated. To correct this, we reduce rent expense, which increases profit: \(+\$450\).
2. Office equipment charged to repairs means repairs expense was overstated. To correct this, we reduce repairs expense, which increases profit: \(+\$1,200\).
3. However, we must charge depreciation on this newly recognized non-current asset. Depreciation expense is \(20\% \times \$1,200 = \$240\), which reduces profit: \(-\$240\).

\(\text{Corrected Profit} = \$34,500 + \$450 + \$1,200 - \$240 = \$35,910\).

1 mark for the correct option C. Award 0 marks for incorrect options.

First, update the Cash Book balance:
\(\text{Adjusted Cash Book Balance} = \$1,840 - \$65 \text{ (bank charges)} - \$410 \text{ (dishonoured cheque)} = \$1,365 \text{ (Debit/positive)}\).

Next, perform the bank reconciliation to find the bank statement balance:
\(\text{Adjusted Cash Book Balance} = \text{Bank Statement Balance} + \text{Unpresented Cheques} - \text{Uncredited Deposits}\)

\(\$1,365 = \text{Bank Statement Balance} + \$290 - \$0\)

\(\text{Bank Statement Balance} = \$1,365 - \$290 = \$1,075 \text{ (Credit/positive balance)}\).

1 mark for the correct option A. Award 0 marks for incorrect options.

Calculate the net book value (NBV) of the machine at disposal:
- **Year 1 (31 Dec 2021)**: Depreciation is \(15\% \times \$20,000 = \$3,000\). NBV = \(\$20,000 - \$3,000 = \$17,000\).
- **Year 2 (31 Dec 2022)**: Depreciation is \(15\% \times \$17,000 = \$2,550\). NBV = \(\$17,000 - \$2,550 = \$14,450\).
- **Year 3 (1 Sept 2023)**: No depreciation is charged in the year of disposal.

Thus, the NBV at the date of disposal is \(\$14,450\).
- **Disposal proceeds**: \(\$13,500\).
- **Loss on disposal**: \(\$14,450 - \$13,500 = \$950\) loss.

1 mark for the correct option B. Award 0 marks for incorrect options.

Calculate the residual profit available for sharing:
- **Profit for the year**: \(\$58,000\)
- **Add**: Interest on drawings: \(\$600 \text{ (Alan)} + \$400 \text{ (Bilal)} = \$1,000\)
- **Less**: Interest on capital:
- Alan: \(5\% \times \$80,000 = \$4,000\)
- Bilal: \(5\% \times \$60,000 = \$3,000\)
- Total Interest on capital: \(\$7,000\)
- **Less**: Bilal's salary: \(\$12,000\)
- **Residual profit**: \(\$58,000 + \$1,000 - \$7,000 - \$12,000 = \$40,000\).

Bilal's share of the residual profit is:
\(\frac{2}{5} \times \$40,000 = \$16,000\).

1 mark for the correct option C. Award 0 marks for incorrect options.

Calculate Cost of Production:
1. **Prime Cost** = Cost of raw materials consumed + Direct wages
\(\text{Prime Cost} = \$45,000 + \$32,000 = \$77,000\)

2. **Factory Overheads** = Indirect wages + Factory rent/rates + Depreciation
\(\text{Factory Overheads} = \$14,000 + \$18,000 + \$6,500 = \$38,500\)

3. **Total Manufacturing Cost** = \(\$77,000 + \$38,500 = \$115,500\)

4. **Cost of Production** = Total Manufacturing Cost + Opening WIP - Closing WIP
\(\text{Cost of Production} = \$115,500 + \$4,200 - \$3,800 = \$115,900\).

1 mark for the correct option C. Award 0 marks for incorrect options.

1. Find Gross Profit:
\(\text{Gross Profit} = 25\% \times \$240,000 = \$60,000\)

2. Find Cost of Sales:
\(\text{Cost of Sales} = \text{Revenue} - \text{Gross Profit} = \$240,000 - \$60,000 = \$180,000\)

3. Find Average Inventory:
\(\text{Average Inventory} = \frac{\$16,000 + \$20,000}{2} = \$18,000\)

4. Calculate Rate of Inventory Turnover:
\(\text{Inventory Turnover} = \frac{\text{Cost of Sales}}{\text{Average Inventory}} = \frac{\$180,000}{\$18,000} = 10 \text{ times}\).

1 mark for the correct option C. Award 0 marks for incorrect options.

The formula for the liquid ratio is:
\(\text{Liquid Ratio} = \frac{\text{Current Assets} - \text{Inventory}}{\text{Current Liabilities}}\)

Let's analyze the options:
- **A: Selling inventory on credit**: This increases trade receivables (a liquid asset) and decreases inventory (which is not in the numerator). This would increase the ratio.
- **B: Paying trade payables by cheque**: This decreases cash and trade payables by equal amounts. Since the original ratio is > 1, this transaction increases the ratio.
- **C: Purchasing inventory on credit**: This increases inventory (not a liquid asset) and increases trade payables (a current liability). The denominator increases while the numerator remains unchanged. This decreases the liquid ratio.
- **D: Receiving a long-term bank loan**: This increases cash (a liquid asset) and increases non-current liabilities. This would increase the ratio.

1 mark for the correct option C. Award 0 marks for incorrect options.

To find the closing debit balance of the sales ledger control account, we include only the transactions that affect credit customers (debtors):
- **Opening Balance (Debit)**: \(\$8,500\)
- **Add**: Credit sales: \(+\$42,000\)
- **Less**: Receipts from credit customers: \(-\$38,200\)
- **Less**: Sales returns: \(-\$1,400\)
- **Less**: Discount allowed: \(-\$800\)
- **Less**: Contra entry with purchase ledger: \(-\$500\)
*(Note: Cash sales of $12,500 are not entered in the sales ledger control account because they do not involve credit sales.)*

\(\text{Closing Balance} = \$8,500 + \$42,000 - \$38,200 - \$1,400 - \$800 - \$500 = \$9,600\).

1 mark for the correct option A. Award 0 marks for incorrect options.

Let us analyze the impact of each error on the suspense account:

1. A cheque received from Henry for $150 was correctly debited to the bank account ($150 debit) but incorrectly credited to Henry's account as $510 ($510 credit). This creates an excess credit of $360 ($510 - $150) in the ledger accounts, causing the credit side of the trial balance to be higher by $360. To correct this, Henry's account must be debited with $360 and the suspense account credited with $360. Therefore, the suspense account must have had an opening debit balance of $360 to be cleared by this correcting credit entry.

2. Repairs to machinery debited to the machinery account is an error of principle. The total debits and credits remain equal, so no entry in the suspense account is needed.

3. An omitted transaction of cash purchase of stationery is an error of omission. Both debit and credit aspects are missing, so it does not affect the trial balance agreement and no suspense account is needed.

Thus, the original balance on the suspense account was $360 debit.

1 mark for the correct option (A).

Award 0 marks for any other option.

First, update the cash book balance:
- Draft cash book balance: $1,450 (credit/overdraft), which is \(-\$1,450\).
- Subtract Bank charges: \(-\$85\).
- Subtract Dishonoured cheque: \(-\$340\).
- Updated cash book balance = \(-\$1,450 - \$85 - \$340 = -\$1,875\) (or $1,875 credit).

Second, prepare the bank reconciliation:
- Let \(X\) be the balance as per bank statement.
- \(X + \text{Outstanding lodgements} - \text{Unpresented cheques} = \text{Updated cash book balance}\)
- \(X + \$810 - \$520 = -\$1,875\)
- \(X + \$290 = -\$1,875\)
- \(X = -\$2,165\)

A negative balance in the bank statement is represented as a debit balance (overdrawn). Therefore, the bank statement balance is $2,165 debit.

1 mark for the correct option (C).

Award 0 marks for any other option.

First, calculate the depreciation and carrying value of the motor vehicle over its life:

- Cost (1 Jan 2021): $24,000
- Depreciation for 2021: \(20\% \times \$24,000 = \$4,800\)
- Carrying Value (31 Dec 2021): \(\$24,000 - \$4,800 = \$19,200\)

- Depreciation for 2022: \(20\% \times \$19,200 = \$3,840\)
- Carrying Value (31 Dec 2022): \(\$19,200 - \$3,840 = \$15,360\)

- Depreciation for 2023: $0 (since no depreciation is charged in the year of disposal).
- Carrying Value at disposal (1 August 2023): $15,360

Next, calculate the profit or loss on disposal:
- Disposal Proceeds: $14,500
- Carrying Value: $15,360
- Loss on disposal = \(\$15,360 - \$14,500 = \$860\).

1 mark for the correct option (A).

Award 0 marks for any other option.

To find Yasmin's total share of the profit, we prepare the profit and loss appropriation account:

1. Interest on Capital:
- Xavier: \(5\% \times \$80,000 = \$4,000\)
- Yasmin: \(5\% \times \$50,000 = \$2,500\)
Total Interest on Capital = $6,500

2. Partner's Salary:
- Yasmin: $8,000

3. Residual Profit to share:
- \(\text{Profit for the year} - \text{Total Interest} - \text{Yasmin's Salary} = \$45,000 - \$6,500 - \$8,000 = \$30,500\)

4. Share of Residual Profit:
- Yasmin's share (2/5): \(\frac{2}{5} \times \$30,500 = \$12,200\)

5. Yasmin's Total Share of Profit:
- \(\text{Interest on Capital} + \text{Salary} + \text{Share of Residual Profit} = \$2,500 + \$8,000 + \$12,200 = \$22,700\).

1 mark for the correct option (D).

Award 0 marks for any other option.

To calculate the cost of production:

1. Prime Cost = Cost of raw materials consumed + Direct wages
\(\text{Prime Cost} = \$124,000 + \$68,000 = \$192,000\)

2. Factory Overheads = Indirect factory wages + Factory heating and lighting + Depreciation of factory machinery
\(\text{Factory Overheads} = \$24,000 + \$18,000 + \$12,000 = \$54,000\)

3. Total Factory Cost = \(\text{Prime Cost} + \text{Factory Overheads} = \$192,000 + \$54,000 = \$246,000\)

4. Cost of Production = Total Factory Cost + Opening WIP - Closing WIP
\(\text{Cost of Production} = \$246,000 + \$15,000 - \$18,000 = \$243,000\).

1 mark for the correct option (B).

Award 0 marks for any other option.

First, calculate the average inventory:
\(\text{Average Inventory} = \frac{\text{Opening Inventory} + \text{Closing Inventory}}{2} = \frac{\$18,000 + \$22,000}{2} = \$20,000\)

Next, use the rate of inventory turnover formula:
\(\text{Rate of Inventory Turnover} = \frac{\text{Cost of Sales}}{\text{Average Inventory}} = \frac{\$200,000}{\$20,000} = 10\text{ times}\).

1 mark for the correct option (B).

Award 0 marks for any other option.

The current ratio includes all current assets (including inventory), while the liquid (acid test) ratio excludes inventory from current assets.

A significant difference between these two ratios (2.2 : 1 vs 0.8 : 1) shows that a large part of the current assets is made up of inventory, which may suggest that a large proportion of capital is tied up in slow-moving stock.

1 mark for the correct option (B).

Award 0 marks for any other option.

The sales ledger control account behaves like an asset account representing trade receivables.

- It increases on the debit side with items that increase the customers' debts, such as credit sales, dishonoured cheques (3), and interest charged on overdue accounts (4).
- It decreases on the credit side with items that reduce the customers' debts, such as cash received from credit customers (1) and bad debts written off (2).

Therefore, only 1 and 2 are entered on the credit side.

1 mark for the correct option (A).

Award 0 marks for any other option.

To find the corrected profit for the year, we must adjust the draft profit for each of the discovered errors: 1. Prepaid rent is an asset. Rent expense was overstated, so we must add back the prepaid rent: $600. 2. The purchase of office equipment is capital expenditure. Charging it to office expenses understated non-current assets and overstated expenses, so we must add back: $2,400. 3. A decrease in the provision for doubtful debts is a gain and increases profit, so we add: $150. Corrected profit = \( \$32,400 + \$600 + \$2,400 + \$150 = \$35,550 \).

1 mark for the correct option D.

First, calculate the appropriations: Interest on capital: X: \( \$60,000 \times 5\% = \$3,000 \), Y: \( \$40,000 \times 5\% = \$2,000 \). Salary to Y: $8,000. Residual profit to share = \( \$43,000 - \$3,000 (\text{Interest X}) - \$2,000 (\text{Interest Y}) - \$8,000 (\text{Salary Y}) = \$30,000 \). Y's share of residual profit = \( \frac{2}{5} \times \$30,000 = \$12,000 \). Total credited to Y's current account = Interest on capital ($2,000) + Partner's salary ($8,000) + Share of profit ($12,000) = $22,000. Note that drawings of $5,000 are debited, not credited, to the current account.

1 mark for the correct option C.

Step 1: Update the Cash Book balance. Starting cash book credit balance (overdraft) = \(-\$1,450\). Less: Bank charges = \(-\$75\). Less: Dishonoured cheque = \(-\$920\). Adjusted Cash Book balance = \(-\$1,450 - \$75 - \$920 = -\$2,445\) (overdraft). Step 2: Prepare the Bank Reconciliation. Let \( B \) be the bank statement balance. \( B - \text{Unpresented Cheques} + \text{Uncredited Deposits} = \text{Adjusted Cash Book Balance} \). \( B - \$430 + \$610 = -\$2,445 \). \( B + \$180 = -\$2,445 \). \( B = -\$2,625 \), which represents an overdraft of $2,625.

1 mark for the correct option C.

### (a) Fiona - Updated Cash Book (Bank Columns only) for October 2023

$$
\begin{array}{llr|llr}
\textbf{Date} & \textbf{Details} & \textbf{Amount (\$)} & \textbf{Date} & \textbf{Details} & \textbf{Amount (\$)} \\
\hline
2023 & & & 2023 & & \\
\text{31 Oct} & \text{Balance b/d} & 1,450 & \text{31 Oct} & \text{Bank charges} & 45 \\
\text{31 Oct} & \text{J. Patel (credit transfer)} & 410 & \text{31 Oct} & \text{Insurance (direct debit)} & 120 \\
& & & \text{31 Oct} & \text{L. Vance (dishonoured cheque)} & 150 \\
& & & \text{31 Oct} & \text{Balance c/d} & 1,545 \\
\hline
& & \mathbf{1,860} & & & \mathbf{1,860} \\
\hline
2023 & & & & & \\
\text{1 Nov} & \text{Balance b/d} & \mathbf{1,545} & & & \\
\end{array}
$$

---

### (b) Fiona - Bank Reconciliation Statement at 31 October 2023

*(Method 1: Starting with bank statement balance)*

$$
\begin{array}{lrr}
\textbf{Details} & \textbf{\$} & \textbf{\$} \\
\hline
\text{Balance as per Bank Statement (credit)} & & 1,210 \\
\text{Add: Uncredited deposits} & 975 & \\
\quad\quad\text{Bank error (standing order incorrectly debited)} & 70 & 1,045 \\
\hline
& & 2,255 \\
\text{Less: Unpresented cheques} & & \\
\quad\quad\text{Cheque 104526} & 280 & \\
\quad\quad\text{Cheque 104529} & 430 & (710) \\
\hline
\textbf{Balance as per Updated Cash Book (debit)} & & \mathbf{1,545} \\
\hline
\end{array}
$$

*(Alternative Method 2: Starting with cash book balance)*

$$
\begin{array}{lrr}
\textbf{Details} & \textbf{\$} & \textbf{\$} \\
\hline
\text{Balance as per Updated Cash Book (debit)} & & 1,545 \\
\text{Add: Unpresented cheques} & & \\
\quad\quad\text{Cheque 104526} & 280 & \\
\quad\quad\text{Cheque 104529} & 430 & 710 \\
\hline
& & 2,255 \\
\text{Less: Uncredited deposits} & 975 & \\
\quad\quad\text{Bank error (incorrect standing order debit)} & 70 & (1,045) \\
\hline
\textbf{Balance as per Bank Statement (credit)} & & \mathbf{1,210} \\
\hline
\end{array}
$$

---

### (c) Reasons for difference before updating
1. Timing differences: Some items are recorded in the cash book first but have not yet cleared the banking system (e.g. uncredited deposits, unpresented cheques).
2. Bank entries unknown to the business: Some transactions are processed directly by the bank and are only discovered when the bank statement is received (e.g. bank charges, direct debits, credit transfers, dishonoured cheques).

---

### (d) Benefits of preparing bank reconciliation statement
1. It helps identify errors in both the cash book (by the business) and the bank statement (by the bank).
2. It acts as an internal check to detect fraud or embezzlement of cash.
3. It verifies the accuracy of the cash book balance and ensures that the financial statements reflect the correct bank balance.

---

### (e) Disadvantage of using bank overdraft for non-current assets
- **Short-term vs. Long-term mismatch:** A bank overdraft is a short-term facility repayable on demand. Non-current assets like a delivery vehicle are long-term investments. If the bank recalls the overdraft, the business could face severe liquidity issues and might be forced to sell the vehicle.
- **Cost:** Overdrafts carry high and variable interest rates compared to structured long-term bank loans, making them more expensive over the long term.

### (a) Updated Cash Book [8 marks]
- **Balance b/d ($1,450)**: (1) mark on Debit side.
- **J. Patel ($410)**: (1) mark on Debit side.
- **Bank charges ($45)**: (1) mark on Credit side.
- **Insurance ($120)**: (1) mark on Credit side.
- **L. Vance / Dishonoured cheque ($150)**: (1) mark on Credit side.
- **Balance c/d ($1,545)**: (1) mark on Credit side for balancing.
- **Balance b/d ($1,545)**: (1) mark on Debit side below the line (must match c/d value and be on correct side).
- **Totals ($1,860)**: (1) mark for matching totals on both sides.

### (b) Bank Reconciliation Statement [6 marks]
*Based on Method 1 (Starting with bank statement)*
- **Opening balance ($1,210)**: (1) mark (must state credit/bank statement).
- **Add uncredited deposits ($975)**: (1) mark.
- **Add bank error ($70)**: (1) mark.
- **Less unpresented cheques**: (1) mark for identifying both cheques ($280 & $430) and (1) mark for the total deduction ($710).
- **Reconciliation to updated cash book ($1,545)**: (1) mark (must match updated cash book balance from part (a) on an OF basis).

*Accept alternative layout starting with cash book balance with identical marks for correct directions of items.*

### (c) Reasons for difference [2 marks]
- (1) mark per valid point (max 2 marks).
- *Accept:* Uncredited deposits, unpresented cheques, bank charges, direct debits, standing orders, dishonoured cheques, bank errors.

### (d) Benefits of bank reconciliation [2 marks]
- (1) mark per valid point (max 2 marks).
- *Accept:* Detects errors in cash book, detects bank errors, prevents/detects fraud, establishes true bank balance, identifies stale cheques.

### (e) Disadvantage of bank overdraft for non-current assets [2 marks]
- (1) mark for identifying key feature (e.g. short-term source, payable on demand, high variable interest rates).
- (1) mark for explaining why this is unsuitable/risky for financing long-term assets (matching principle/liquidity risk).

Part (a) Journal Entries:
1. Debit: Drawings $1,200 | Credit: Purchases $1,200
2. Debit: Administrative Expenses $450 | Credit: Accrued Expenses (or Other payables) $450

Part (b) Partnership Profit and Loss Appropriation Account for the year ended 31 December 2023:
Adjusted Profit for the year ($38,500 + $1,200 - $450) = $39,250
Add: Interest on Drawings:
- Farhan (10% * $12,000) = $1,200
- Ghalib (10% * $7,000) = $700
Total Interest on Drawings = $1,900
Total = $41,150

Less: Interest on Capital:
- Farhan (5% * $60,000) = $3,000
- Ghalib (5% * $40,000) = $2,000
Total Interest on Capital = $5,000

Less: Salary to Ghalib = $8,000
Residual Profit = $28,150

Share of Profit:
- Farhan (3/5 * $28,150) = $16,890
- Ghalib (2/5 * $28,150) = $11,260
Total = $28,150

Part (c) Farhan's Current Account:
Debit side:
- Drawings: $12,000 (comprising cash drawings $10,800 and goods drawings $1,200)
- Interest on drawings: $1,200
- Balance c/d: $8,190
Credit side:
- Balance b/d: $1,500
- Interest on Capital: $3,000
- Share of Profit: $16,890
Balance b/d on 1 Jan 2024: $8,190 (Cr)

Part (a) [4 marks]
- Debit Drawings $1,200 (1) and Credit Purchases $1,200 (1)
- Debit Administrative expenses $450 (1) and Credit Accrued expenses/Other payables $450 (1)

Part (b) [11 marks]
- Adjusted Profit: $39,250 (2) [1 mark for adding $1,200, 1 mark for subtracting $450]
- Interest on drawings: Farhan $1,200 (1), Ghalib $700 (1)
- Interest on capital: Farhan $3,000 (1), Ghalib $2,000 (1)
- Salary Ghalib: $8,000 (1)
- Share of profit: Farhan $16,890 (2) [1 method, 1 accuracy], Ghalib $11,260 (1)
- Layout/Subtotals correct (1)

Part (c) [5 marks]
- Opening balance b/d on Credit side: $1,500 (1)
- Drawings on Debit side: $12,000 (1) [Must include the $1,200 goods drawings]
- Interest on Drawings on Debit side: $1,200 (1)
- Interest on Capital and Share of Profit on Credit side: $3,000 and $16,890 (1) [Both must be correct]
- Closing balance b/d on 1 January 2024: $8,190 on Credit side (1) [Of]

(a) Tara - Journal Entries
ErrorAccount DetailsDebit ($)Credit ($)1Motor repairs380Motor vehicles3802Purchases450P. Smith4503Suspense1,200Rent received1,2004Drawings950Cash9505Discount allowed220Suspense220

(b) Statement of Corrected Profit for the year ended 31 December 2023
AdjustmentEffect on Profit ($)Amount ($)Draft profit for the year14,200Error 1: Motor repairs capitalizedDecrease(380)Error 2: Purchases undercastDecrease(450)Error 3: Rent received incorrectly debitedIncrease1,200Error 4: Cash drawings omittedNo effect-Error 5: Discount allowed incorrectly creditedDecrease(220)Corrected profit for the year14,350

Part (a) Journal Entries [10 marks]:
- Error 1: Debit Motor repairs $380 [1], Credit Motor vehicles $380 [1]
- Error 2: Debit Purchases $450 [1], Credit P. Smith $450 [1]
- Error 3: Debit Suspense $1,200 [1], Credit Rent received $1,200 [1]
- Error 4: Debit Drawings $950 [1], Credit Cash $950 [1]
- Error 5: Debit Discount allowed $220 [1], Credit Suspense $220 [1]

Part (b) Statement of Corrected Profit [10 marks]:
- Draft profit: $14,200
- Error 1: Decrease $380 [2] (1 mark for direction, 1 mark for amount)
- Error 2: Decrease $450 [2] (1 mark for direction, 1 mark for amount)
- Error 3: Increase $1,200 [2] (1 mark for direction, 1 mark for amount)
- Error 4: No effect / omitted with mention [1]
- Error 5: Decrease $220 [2] (1 mark for direction, 1 mark for amount)
- Corrected Profit: $14,350 [1] (O/F if arithmetic correct based on previous items)

### Part (a)(i)

**Motor Vehicles Account**

| Date | Details | Amount ($) | Date | Details | Amount ($) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| **2022** | | | **2022** | | |
| Jan 1 | Balance b/d | 60,000 | Dec 31 | Balance c/d | 78,000 |
| Jul 1 | Bank | 18,000 | | | |
| | | **78,000** | | | **78,000** |
| **2023** | | | **2023** | | |
| Jan 1 | Balance b/d | 78,000 | Oct 1 | Disposal (Vehicle A) | 20,000 |
| | | | Dec 31 | Balance c/d | 58,000 |
| | | **78,000** | | | **78,000** |
| **2024** | | | | | |
| Jan 1 | Balance b/d | 58,000 | | | |

---

### Part (a)(ii)

**Provision for Depreciation of Motor Vehicles Account**

| Date | Details | Amount ($) | Date | Details | Amount ($) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| **2022** | | | **2022** | | |
| Dec 31 | Balance c/d | 27,760 | Jan 1 | Balance b/d | 15,200 |
| | | | Dec 31 | Income Statement *(W1)* | 12,560 |
| | | **27,760** | | | **27,760** |
| **2023** | | | **2023** | | |
| Oct 1 | Disposal (Vehicle A) *(W2)* | 9,760 | Jan 1 | Balance b/d | 27,760 |
| Dec 31 | Balance c/d | 26,000 | Dec 31 | Income Statement *(W3)* | 8,000 |
| | | **35,760** | | | **35,760** |
| | | | **2024** | | |
| | | | Jan 1 | Balance b/d | 26,000 |

**Workings:**

* **W1: Depreciation charge for 2022**
* *Vehicle A:* Cost \( \$20,000 \) minus accumulated depreciation \( \$7,200 \) (calculated as 20% of \( \$20,000 \) in 2020 = \( \$4,000 \), plus 20% of \( \$16,000 \) in 2021 = \( \$3,200 \)). NBV = \( \$12,800 \). Charge for 2022 = \( 20\% \times \$12,800 = \$2,560 \).
* *Vehicle B:* Cost \( \$40,000 \) minus accumulated depreciation \( \$8,000 \) (20% of \( \$40,000 \) in 2021). NBV = \( \$32,000 \). Charge for 2022 = \( 20\% \times \$32,000 = \$6,400 \).
* *Vehicle C:* Cost \( \$18,000 \). Full year charged. Charge for 2022 = \( 20\% \times \$18,000 = \$3,600 \).
* *Total 2022 Charge:* \( \$2,560 + \$6,400 + \$3,600 = \$12,560 \).

* **W2: Accumulated depreciation on Vehicle A (Disposal)**
* Year 2020: \( \$4,000 \)
* Year 2021: \( \$3,200 \)
* Year 2022: \( \$2,560 \)
* Total accumulated: \( \$4,000 + \$3,200 + \$2,560 = \$9,760 \).

* **W3: Depreciation charge for 2023**
* Vehicle A is disposed of, so no charge is made for 2023.
* *Vehicle B:* NBV start of 2023 = \( \$40,000 - \$14,400 = \$25,600 \). Charge = \( 20\% \times \$25,600 = \$5,120 \).
* *Vehicle C:* NBV start of 2023 = \( \$18,000 - \$3,600 = \$14,400 \). Charge = \( 20\% \times \$14,400 = \$2,880 \).
* *Total 2023 Charge:* \( \$5,120 + \$2,880 = \$8,000 \).

---

### Part (a)(iii)

**Motor Vehicles Disposal Account**

| Date | Details | Amount ($) | Date | Details | Amount ($) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| **2023** | | | **2023** | | |
| Oct 1 | Motor Vehicles (Cost) | 20,000 | Oct 1 | Provision for Depreciation | 9,760 |
| | | | Oct 1 | Cash (Proceeds) | 7,500 |
| | | | Dec 31 | Income Statement (Loss) | 2,740 |
| | | **20,000** | | | **20,000** |

---

### Part (b)

* **Section:** Non-current assets
* **Presentation:**

| Non-current Assets | Cost ($) | Accumulated Depreciation ($) | Net Book Value ($) |
| :--- | :--- | :--- | :--- |
| Motor Vehicles | 58,000 | 26,000 | 32,000 |

**(a)(i) Motor Vehicles Account (4 marks)**
- Debit balance b/d on 1 Jan 2022 \( \$60,000 \) (1)
- Debit entry Bank/Cash on 1 Jul 2022 \( \$18,000 \) (1)
- Credit entry Disposal on 1 Oct 2023 \( \$20,000 \) (1)
- Balance c/d and subsequent Balance b/d on 1 Jan 2024 \( \$58,000 \) (1)

**(a)(ii) Provision for Depreciation of Motor Vehicles Account (8 marks)**
- Credit balance b/d on 1 Jan 2022 \( \$15,200 \) (1)
- Credit entry Income Statement for year ended 31 Dec 2022 \( \$12,560 \) (2) [1 for working, 1 for correct entry]
- Credit balance b/d on 1 Jan 2023 \( \$27,760 \) (1) [carrying down and bringing down correct total]
- Debit entry Disposal on 1 Oct 2023 \( \$9,760 \) (2) [1 for working, 1 for correct entry]
- Credit entry Income Statement for year ended 31 Dec 2023 \( \$8,000 \) (1)
- Balance c/d and subsequent Balance b/d on 1 Jan 2024 \( \$26,000 \) (1)

**(a)(iii) Motor Vehicles Disposal Account (5 marks)**
- Debit entry Motor Vehicles (cost) \( \$20,000 \) (1)
- Credit entry Provision for Depreciation \( \$9,760 \) (1)
- Credit entry Cash/Bank (proceeds) \( \$7,500 \) (1)
- Credit entry Income Statement (loss on disposal) \( \$2,740 \) (2) [1 for calculation, 1 for transfer to Income Statement]

**(b) SFP Presentation (3 marks)**
- Stating 'Non-current assets' section (1)
- Presenting three columns: Cost \( \$58,000 \), Accum. Depreciation \( \$26,000 \) (1)
- Correct net book value of \( \$32,000 \) (1)

(a) Arun - Manufacturing Account for the year ended 31 December 2023:

Opening inventory of raw materials: \( \$18,400 \)
Add: Purchases of raw materials: \( \$114,800 \)
Add: Carriage on raw materials: \( \$3,200 \)
Less: Closing inventory of raw materials: \( (\$16,900) \)
Cost of raw materials consumed: \( \$119,500 \)
Add: Direct factory wages: \( \$84,500 \)
Prime Cost: \( \$204,000 \)

Factory Overheads:
Indirect factory wages: \( \$28,400 \)
Factory power: \( \$16,200 \)
Depreciation of factory machinery: \( \$15,600 \)
Factory office expenses: \( \$9,800 \)
Factory rent and rates [\( 75\% \times (\$24,000 - \$3,000) \)]: \( \$15,750 \)
Total Overheads: \( \$85,750 \)

Total Factory Cost: \( \$289,750 \)
Add: Opening work in progress: \( \$11,200 \)
Less: Closing work in progress: \( (\$12,600) \)
Cost of Production: \( \$288,350 \)

(b) Differences:
- Direct costs: Costs that are easily and directly traced to a specific unit of production. Example: Raw materials or direct factory wages.
- Indirect costs: Costs that are incurred for the benefit of general factory operations and cannot be traced to a specific unit of production. Example: Indirect wages, factory power, factory office expenses, or factory rent and rates.

(c) Credit Policy Evaluation:
- Advantages: Faster collection of cash, which improves working capital/liquidity; reduced risk of irrecoverable (bad) debts; might encourage higher sales volume.
- Disadvantages: Reduces the cash received from customers by \( 2\% \), directly decreasing profit margins; administrative cost to manage the discount periods.
- Recommendation: Arun should proceed if cash flow is constrained or bad debt levels are currently high, as the liquidity benefit would outweigh the \( 2\% \) cost.

Part (a) [11 marks]:
- Opening inventory of raw materials + Purchases + Carriage (1 mark for format/entries)
- Closing inventory of raw materials subtracted (1 mark)
- Correct Cost of raw materials consumed (\( \$119,500 \)) (1 mark)
- Direct factory wages added (1 mark)
- Correct Prime Cost (\( \$204,000 \)) (1 mark)
- Indirect factory wages, Factory power, Depreciation of factory machinery, Factory office expenses (2 marks for all four; 1 mark if only 2-3 are correctly listed)
- Factory rent and rates calculation: \( (\$24,000 - \$3,000) \times 75\% = \$15,750 \) (2 marks: 1 mark for subtracting prepayment, 1 mark for \( 75\% \) allocation)
- Work in progress adjustment (+ Opening, - Closing) (1 mark)
- Correct Cost of Production (\( \$288,350 \)) (1 mark)

Part (b) [4 marks]:
- 1 mark for definition of direct cost
- 1 mark for valid example of direct cost from Arun's business
- 1 mark for definition of indirect cost
- 1 mark for valid example of indirect cost from Arun's business

Part (c) [5 marks]:
- Max 2 marks for advantages of cash discount (e.g., faster payment, less bad debts)
- Max 2 marks for disadvantages of cash discount (e.g., lower profit margin, admin effort)
- 1 mark for logical recommendation/conclusion