Accounting scheme June 208 ICSA, 208 Page of 9
Section A Accrual basis () Going concern () Other responses may include: Stable monetary unit () Units of constant purchasing power () Total 2 2 False () Total D: 24,900 Total 4 Periodicity () Total 5 Debtors or trade receivables () Total 6 Debit: Return inwards account () Credit: Trade receivables account () Other responses may include: Debit: Sales returns () Credit: Debtors () Customer account () Accounts receivable () Total 2 ICSA, 208 Page 2 of 9
7 Capital is the initial cash contributed by a sole trader to fund the operations of a business before it starts making profit from the business activities. () Capital is a liability to a sole trader because it represents the investment from the business owner. () ing guidance: Allocate one mark for the definition and one mark for a valid explanation. Total 2 8 Award up to three marks for any three of the following: Take the money out of the business to distribute to shareholders. () Retain the profit in the business and reinvest for the future. () Retain and set aside provision for the unknown and known contingent liabilities. () Transfer internally to general reserves until a later date. () Total 9 500,000 () ing guidance: Reward one mark for the correct amount. Total 0 Trade discount () Other valid responses may include: Settlement discount () Total ICSA, 208 Page of 9
Section B Managers: appointed by the owners of the business and responsible for the day-to-day running of the operations and activities. () They need accounting information for decision making, planning and controlling. () Lenders: provide a credit facility to the business. () They need to know their monies are safe, for example, that loans can be repaid on time. () Suppliers: they sell to the business () and need the information to ensure their invoices will be paid on time. () ing guidance: One mark for each user identified and their role, one mark for explaining related interest and/or example. Other valid responses may include: Shareholders: owners of the business (), who expect to receive maximum returns for their investment. () Financial analysts: financial specialists assess whether businesses are worth investing in on behalf of potential profit investors. () Examples are stockbrokers, financial advisers and financial journalists. () Government bodies: needed for taxation, statistics, regulation and compliance purposes. () To ensure a business is paying the right amount of tax. () Customers: those buying from the business (); want brand loyalty to ensure continued supply of goods and services. () They also want to ensure product guaranties/warranties are valid and availability of replacement specialist parts. () Employees: those working for the business (), their interest is job security and wage bargaining. () 2 Invoices from suppliers: a document given to a customer from a supplier, stating goods and services purchased. () Payment will be made against the invoice and must match the details on the purchase order. () Sales order: an internally generated document raised by the supplier acknowledging and detailing goods or services the customer has to order. () Also used to instruct the warehouse to deliver goods and copied to accounts for invoice preparation. () *Study text definition: It is a written document provided by the customer detailing out goods or services they wish to order. Goods received note (GRN): an internal document created by the firm receiving the goods to update stock. () It is also used by accounts departments to prove shipment before paying the relevant invoice. () *Study text definition: This document is sent by the business with goods shipped to the customer and used to book the goods into the warehouse. ICSA, 208 Page 4 of 9
ing guidance: Award one mark for each source document identified with definition, and one mark for further explanation and examples provided. *Award mark for study text definition. Other valid responses may include: Credit note: this note is sent out when a customer returns goods or is received by an organisation for returned purchases. () These are negative sales invoices crediting the buyer. () Purchase order: this is a written order () sent by the business to a supplier to order goods or services. () Invoices sent to customers: the business selling goods and services to a customer sends an invoice to the customer. () Details on the invoice must match details on the sales order. () Year Annual depn. Cost Accumulated depn. Net book value 208 7,500 () 25,000 7,500 7,500 () 209 5,250 () 25,000 2,750 2,250 () 2020,675 () 25,000 6,425 8,575 () ing guidance: Allocate one mark to each correct entry under annual depreciation and net book value. s may be accepted in alternative format if annual amounts are correctly calculated. 4 Physical deterioration due to wear and tear from usage. () For example, a used motor vehicle is less efficient than a brand new one. () Obsolescence of assets no longer useful due to enhanced or improved models. () For example, updated computer hardware and software or mobile phones. () Asset use over time specific to those that lose value due to a decrease of legal life. () For example, lease terms which lose value as the term becomes shorter. Leasehold years of a property. () ing guidance: one mark for definition or explanation and one mark for each example per reason. ICSA, 208 Page 5 of 9
5 Z&Y Limited Bank Reconciliation March 208 Balance as per cash book 28,079 Add: Unpresented cheque () 4,500 Add: Bank transfers: 274+76 (2) 450 Direct debit + standing order Less: Bank deposit () (4,020) Less: Bank charges () (50) (),029 Balance as per bank statement 28,659 ing guidance: Award one mark for each correct entry; if the sub total is not shown, full marks will be awarded for all correct entries and format as above. Award one mark each for direct debit and standing order entry or two marks for computing it as one figure. Award full marks for alternative format of Dr and Cr columns style. ICSA, 208 Page 6 of 9
Section C 6 Balance Sheet of Joe as at 0 November 207 Non-current assets Premises ()55,000 Car ()0,000 Fixtures and fittings ()40,000 ()25,000 Current assets Stock* ()2,954 Debtors ()75,220 Cash ()56,694 ()55,868 less Current liabilities Creditors ()66,750 Net current assets ()289,8 ()64,8 less Long term liabilities Bank loan ()9,8 575,000 Capital ()500,77 plus Retained profit ()74,82 575,000 ing guidance: Award one mark for each correct entry as above. Heading Award one mark for Statement of Financial Position as the heading is also acceptable. s will be capped at 0 marks, where incorrect format (i.e. lack of sub headings) of the Balance Sheet is used with correct postings. Total 5 ICSA, 208 Page 7 of 9
7 Financial ratio Formula Workings: 206 Workings: 207 Inventory holding days Inventory x 65 Cost of goods sold () 7,640 x 65 84,500 = days () 0,4 x 65 99,075 =8 days () Collection of debtors Accounts receivable x 65 Sales () 5,600 x 65 90,546 = days () 7,560 x 65 20,565 = days () Payment of trade payables Trade payables x 65 Purchases () 7,000 x 65 6,860 =69 days () 9,450 x 65 45,000 =77 days () Net profit margin Net profit x 00 Sales () 25,875 x 00 90,546 =.58% or 4% () 4,9 x 00 20,565 =6.59% or 7% () Gross profit margin Gross profit x 00 Sales () 06,046 x 00 90,546 =55.65 or 56% (),490 x 00 20,565 =52.95% or 5% () ing guidance: Award one mark for each correct entry as above or nearest decimal s. Total 5 ICSA, 208 Page 8 of 9
8 Sales ledger Description Dr Cr Balance Opening balance (2) 98,65 98,65 Credit sales () 88,000 86,65 Sales returns () 5,500 7,5 Cash from customers () 46,500 24,65 Discount allowed () 750 2,90 Bad debt written off (),6 92,742 Closing balance () 92,742 2 Purchase ledger Description Dr Cr Balance Opening balance (2) 48,500 48,500 Credit purchases () 44,590 9,090 Purchase returns () 2,050 9,040 Cash paid to suppliers () 47,60 4,40 Discount received () 602 42,828 Closing balance () 42,828 2 ing guidance: Award two marks for each opening balance, and one mark for each correct double entry and closing balance. Total 5 ICSA, 208 Page 9 of 9