A-Level Accounting ACCN1 Introduction to Financial Accounting Final Mark scheme June 2017 Version/Stage: v1.0
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 Mark schemes are prepared by the Lead Assessment Writer and considered, together with the relevant questions, by a panel of subject teachers. This mark scheme includes any amendments made at the standardisation events which all associates participate in and is the scheme which was used by them in this examination. The standardisation process ensures that the mark scheme covers the students responses to questions and that every associate understands and applies it in the same correct way. As preparation for standardisation each associate analyses a number of students scripts. Alternative answers not already covered by the mark scheme are discussed and legislated for. If, after the standardisation process, associates encounter unusual answers which have not been raised they are required to refer these to the Lead Assessment Writer. It must be stressed that a mark scheme is a working document, in many cases further developed and expanded on the basis of students reactions to a particular paper. Assumptions about future mark schemes on the basis of one year s document should be avoided; whilst the guiding principles of assessment remain constant, details will change, depending on the content of a particular examination paper. Further copies of this mark scheme are available from aqa.org.uk Copyright 2017 AQA and its licensors. All rights reserved. AQA retains the copyright on all its publications. However, registered schools/colleges for AQA are permitted to copy material from this booklet for their own internal use, with the following important exception: AQA cannot give permission to schools/colleges to photocopy any material that is acknowledged to a third party even for internal use within the centre.
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 1 (a) Record the above transactions in Gregory Gower s cash book. (Note: You do not need to balance the cash book.) [5 marks] Dr Cash book Cr Details Discounts Bank Details Discounts Bank Southgate Ltd 250.00(1) 4750.00(1) Balance b/d 200.05 Bank charges 65.00(1) Bishopston Stores 155.00(1) 2945.00(1) Narratives required for the entries; for bank charges accept charges (not bank ); accept personal account names omitting Ltd and Stores 1 (b) Complete the account of Southgate Ltd in the sales ledger and balance the account at 8 May 2017. [3 marks] Dr Southgate Ltd account Cr Date Details Date Details 1 May Balance b/d 16 000 3 May Bank 4 750(1) 3 May Discounts allowed 250(1)OF 8 May Balance b/d 11 000 (1)*OF 7 May Balance c/d 11 000 16 000 16 000 Narratives: accept discount (but not discount received); accept disc allwd (or similar) but do not accept DA. The OF for discount allowed is awarded for the transfer of figure from cash book (in 1a) Ignore dates. Accept variations of narrative for balances for example: bal c/d, bal b/d, c/d, b/d, c/f, b/f (but not just balance or bal) (b/d and c/d must be correctly applied). Do not reward the balance b/d if there is no record of a balance to carry down. Narrative for 4750 must be bank (do not accept credit transfer). The closing balance of 11 000 (OF) must be a debit balance. Bank charges is an alien item resulting in no mark for the closing balance b/d. 3
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 1 (c) Complete the account of Bishopston Stores in the purchases ledger and balance the account at 8 May 2017. [3 marks] Dr Bishopston Stores account Cr Date Details Date Details 3 May Bank 2945(1) 1 May Balance b/d 6000 3 May Discounts received 155(1)OF 7 May Balance c/d 2900 6000 6000 8 May Balance b/d 2900 (1)*OF Narratives: accept discount (but not discount allowed); accept disc rcvd (or similar) but do not accept DR The OF for discount received is awarded for the transfer of figure from cash book (in 1a) Ignore dates. Accept variations of narrative for balances for examples: bal c/d, bal b/d, c/d, b/d, c/f, b/f (but not just balance or bal)(b/d and c/d must be correctly applied). Do not reward the balance b/d if there is no record of a balance to carry down. Narrative for 2945 must be bank (do not accept direct debit). The closing balance of 2900 (OF) must be a credit balance. Bank charges is an alien item resulting in no mark for the closing balance b/d. 1 (d) State one purpose of cash discounts. [1 mark] Cash discount is given to encourage prompt payment. (1). Do not reward answers which describe cash discounts (e.g. if you pay within a certain number of days you get discount this answer does not cover idea of encouragement). 1 (e) State one purpose of trade discounts. [1 mark] Trade discount is given to encourage bulk purchase/or to encourage repeat custom (1). Do not accept purely descriptive answers (e.g. list price is reduced because a large quantity is purchased). Accept comments which imply loyalty or good relationships. 4
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 1 (f) Explain the difference in the treatment of cash and trade discounts in the year-end financial statements. [3 marks] Discounts allowed are recorded in the Income statement as an expense (1) and reduce profit and discounts received are recorded as income (1) and increase profit. Trade discount is not entered in the end-of-year financial statements as only net figures are of significance (1). Students must clarify to which cash discount they are referring. 5
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 2 (a) Prepare an extract from the income statement for Mandy s Car Servicing for the year ended 30 April 2017 to show profit for the year. [14 marks] Mandy s Car Servicing Extract from the Income statement for the year ended 30 April 2017 Gross profit 367 650 (1) Rent received 37 280 (1) 404 930 Bad debts 11 731 (1) Business Rates 2 790 (2)OF Insurance 10 786 (3)OF General expenses 49 310 (1) Servicing expenses 28 900 Loan interest 2 590 (1) Wages and salaries 60 890 (1) Depreciation 20 220 (2)OF 187 217 Profit for the year 217 713 (1)OF Business rates: award (1) for a correct prepayment of 1600, (0) for any other prepayment, but allow (1)OF for the end result providing an adjustment has been for a prepayment. No workings and incorrect figure no marks. Where a student has provided detailed workings but not transferred the results to the income statement award (0). Each item should have an appropriate label (allow net profit). Treat the provision for depreciation 60 660 as an alien if in the income statement. The OF mark for profit for the year cannot be awarded if there is an alien item. 6
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 2 (b) Prepare a balance sheet for Mandy s Car Servicing at 30 April 2017. [17 marks] [includes 2 marks for quality of presentation] Workings Original figure Adjustment details Original figure Bad debts 456 + 11 275 = 11 731 (1) Business rates - Prepayment 4 390 (2 400)6 x 4) = 1600 (1) Error = 2 790 (1) OF Prepayment Insurance 15 260 3 234 (1) -(7 440/12 x 2) =1 240 (1) = 10 786 (1)OF General expenses Loan interest Wages and salaries Error 44 310 + 5000 = 49 310 (1) Due 2 340 + 250 = 2 590 (1) Error 65 890 5000 = 60 890 (1) Residual value/10 Depreciation 218 200 16 000 = 202 200 /10(1) = 20 220 (1) OF 7
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 Mandy s Car Servicing Balance sheet at 30 April 2017 Assets Non-current assets*** Property 338 220 Equipment 218 200 80 880 (1)OF 137 320 (1)CF 475 540 Current assets*** Closing inventories 9 000 Trade receivables 15 665 (1) Prepayments 2 840 (2)OF Bank 5 968 (2) 33 473 Total assets 509 013 # Capital and liabilities Capital *** Opening balance 305 034 Capital introduced 9400 (1) Profit for the year 217 713 (1)OF Less drawings (77 164) (1) 454 983 Non-current liabilities*** Loan 18 750 (1) # For both Current liabilities*** Loan payable 6 250 (1) Trade payable 28 780 (1) Accruals 250 (1) 35 280 Total capital and liabilities 509 013 # (1)CF *** 2 QoP marks for all five correct sub-headings *** 1 QoP for four correct sub-headings In this layout only the correct balance sheet totals of 509 013 can be awarded (1) 8
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 Workings Equipment depreciation Trade receivables Adjustment details Original figure 60 660 + 20 220 (OF) = 80 880 (1)OF Original figure 26 940 11 275 = 15 665 (1) IS figures Prepayments 1 240 (1)OF + 1 600 (1)OF = 2 840 Capital overdraft Bank 9 400 (1) 3 432 (1) = 5 968 Own use insurance Drawings + 3 234 = 77 164 (1) Prepayments: accept two separate figures within the balance sheet Bank: if details shown separately as a positive balance of 9 00 and an overdraft of 3 432 award (1). Loan: where student records bank loan of 25 000 as a non-current liability award 1 mark. Opening capital could be shown 314 434 (1) Equipment: if only the net book value of 137 320 is shown award 2 marks Allow fixed assets for sub-headings Allow long-term liabilities for sub-headings Quality mark: do not accept abbreviated subheadings 9
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 ALTERNATIVE BALANCE SHEET LAYOUT Mandy s Car Servicing Balance sheet at 30 April 2017 Non-current assets*** Property 338 220 Equipment 218 200 80 880 (1)OF 137 320 (1)CF 475 540 Current assets*** Closing inventories 9 000 Trade receivables 15 665 (1) Prepayments 2 840 (2)OF Bank 5 968 (2) 33 473 Less: current liabilities*** Loan payable 6 250 (1) Trade payable 28 780 (1) Accruals 250 (1) 35 280 Net current assets (1 807) 473 733 Less: non-current liabilities*** Loan 18 750 (1) 454 983 # Capital *** Opening balance 305 034 Capital introduced 9400 (1) Profit for the year 217 713 (1)OF Less drawings (77 164) (1) 454 983 # (1)CF # For both *** 2 QoP marks for all five correct sub-headings *** 1 QoP for four correct sub-headings In this layout only the correct balance sheet totals of 454 983 can be awarded (1) 10
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 Workings Equipment depreciation Trade receivables Adjustment details Original figure 60 660 + 20 220 (OF) = 80 880 (1)OF Original figure 26 940 11 275 = 15 665 (1) IS figures Prepayments 1 240 (1)OF + 1 600 (1)OF = 2 840 Capital overdraft Bank 9 400 (1) 3 432 (1) = 5 968 Own use insurance Drawings + 3 234 = 77 164 (1) Prepayments: accept two separate figures within the balance sheet Bank: if details shown separately as a positive balance of 9 400 and an overdraft of 3 432 award (1). Loan: where student records bank loan of 25 000 as a non-current liability award 1 mark. Opening capital could be shown 314 434 (1) Equipment: if only the net book value of 137 320 is shown award 2 marks Allow fixed assets for sub-headings Allow long-term liabilities for sub-headings Quality mark: do not accept abbreviated subheadings 2 (c) Explain to Mandy why it is important to ensure her business s bad debts are recorded in the business s financial statements for the year ended on 31 May 2017. Discuss the effect on both the income statement and the balance sheet. [8 marks] [includes 2 marks for quality of written communication] Income statement (Max 3) Non-treatment would overstate profit/understate expenses (1) by 11 731 (1)OF. This could lead to poor decisions being made by the owner/manager (1). For example, excessive drawings / overpayment of tax (1). (Max 1 for examples.) Or: bad debts reduces profit (1) by 11 731 (1)OF; gives a correct impression of the business s performance (1) leading to valid decision-making (1). Balance sheet (Max 3) Non-treatment would result in trade receivables / total current assets / net assets figure being overstated (1) by 11 731 (1)OF) and total capital would also be overstated by same amount (1). 11
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 Or: bad debts reduce trade receivables/total current assets/net assets (1) by 11 731 (1)OF; and total capital will be reduced by same amount (1) this ensures the balance sheet shows a true and fair view of the business. 6 Marks Plus 2 QWC 8 marks total Quality of Written Communication 2 marks No more than 3 spelling, punctuation and grammatical errors. 1 mark 4 or more spelling, punctuation and grammatical errors. 0 mark Prose response is difficult to understand. Accept that comments about decision making (and examples) could be made in reference to the balance sheet rather than the income statement. 12
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 3 Prepare the expense accounts for Freddie s fast food shops for the year ended 30 April 2017 showing clearly the amount to be transferred to the income statement. [9 marks] Dr Wages and salaries account Cr 1 May 2016 Balance b/d 22 000(1) 1 May 2016 Balance b/d 19 990(1) 30 April 2017 Bank 630 600(1) 30 April 2017 Income statement 644 610(1)OF 30 April 2017 Balance c/d 12 000 664 600 664 600 1 May 2017 Balance b/d 12 000(1) [5 marks] Dr Rent and business rates account Cr 30 April 2017 Bank 79 300(1) 1 May 2016 Balance b/d 38 050(1) 30 April 2017 Income statement 24 650(1)OF 30 April 2017 Balance c/d 16 600 1 May 2017 Balance b/d 16 600(1) 79 300 79 300 [4 marks] Each entry must be accompanied by a correct narrative (accept profit and loss instead of income statement); accept variations of narrative for balances for example: bal c/d, bal b/d, c/d, b/d, c/f, b/f (but not just balance or bal) (b/d and c/d must be correctly applied). Do not accept prepaid b/d accrued b/d etc. The income statement figures must be credit entries. The closing balances must be correct balances on the correct side. Ignore dates. 13
MARK SCHEME A LEVEL ACCOUNTING ACCN1 JUNE 2017 4 (a) Prepare the entries in the general journal necessary to correct the errors. (Narratives are not required). [11 marks] General Journal Debit 1 Suspense 850 (1) Credit Sales 850 (1) 2 Dougie Aston 490} Doug Austin 490} Suspense 980 (1) 3 Discounts allowed 370 (1) Suspense 370 (1) 4 Suspense 1350 (1) Discounts allowed 675 (1) Discounts received 675 (1) 5 Drawings 7600 (1) Purchases 7600 (1) (1) The details must be the correct name of the account with the corresponding correct amount to be awarded a mark. For error 1, do not accept sales day book. For error 2 and 4 accept two separate journal entries. 4 (b) Complete the following table to show the effect and amount that each correction would have on the draft profit. [5 marks] Increase Decrease Error 1) 356 Error 2) 5600(1) Error 3) Error 4) 642(1) Error 5) 840(1) Error 6) No effect (1) (1) 14