Marking Scheme

[Pages:11]MATSEC Examinations Board

Marking Scheme

IM Accounting Special September Session 2020

Marking Scheme (Special September Session 2020): IM Accounting

Marking schemes published by the MATSEC Examination Board are not intended to be standalone documents. They are an essential resource for markers who are subsequently monitored through a verification process to ensure consistent and accurate application of the marking scheme. In the case of marking schemes that include model solutions or answers, it should be noted that these are not intended to be exhaustive. Variations and alternatives may also be acceptable. Examiners must consider all answers on their merits, and will have consulted with the MATSEC Examinations Board when in doubt.

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Marking Scheme (Special September Session 2020): IM Accounting

SECTION A Answer all FIVE questions in this section. Each question carries 4 marks.

Marks

1. a. b.

Depreciation is the part of the non-current asset consumed during the financial 2

year.

It is a cost that is estimated annually and included as an expense.

Depletion eg. use; rust, rot and decay.

0.5

Economic eg. outdated; too small for operations.

0.5

Physical eg. rust, rot and decay.

0.5

Time eg. legal life on contract.

0.5

4

2.

AT LEAST TWO FROM THE FOLLOWING:

Possibility to offer shares to the public

2

Number of shareholders

2

Name of company

4

3.

Explain the difference between time rate and piece rate methods of labour

remuneration, indicating the circumstances when each method of remuneration

would be preferable.

TIME RATE ? PER HOUR (1 MARK)

OUTPUT NOT MEASURABLE (1

MARK)

PIECE RATE ? PER UNIT (1 MARK)

MASS PRODUCTION (1 MARK)

4

4. a. b. c. d.

Fixed Cost is a period cost and does not change with the level of production. 1 Candidates are to provide an example. Variable cost is one that changes with the level of production. Candidates are to 1 provide an example. A direct cost is traceable to the unit being produced or to the service being 1 provided. Candidates are to provide an example. An indirect cost cannot be traced to the unit being produced. Candidates are to 1 provide an example.

4

5. a. b.

Contribution is SP ? VC per unit, referring to how much each unit is contributing 1

towards FC.

BE point is the level of output at which no profit or loss is made.

In other words, the level where contribution earned = Fixed costs.

1

TWO limitations of BE analysis:

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Marking Scheme (Special September Session 2020): IM Accounting

It is assumed that the SP per unit is constant at all levels of output.

1

It is assumed that the VC per unit is constant at all levels of output.

1

It is assumed that FC remain constant.

4

SECTION B

Answer question 6. This question carries 30 marks.

6. a.(i)

Statement of Profit and Loss

Sales Ret in

905,000 0.5

(8,200)

In. Cred Net sales

(3,200)

1 893,600

Op. Inv. Purchases Ret. Out Carr in

563,200 (11,400)

5,800

55,000

557,600

Clo. Inv. CoS Gr. Prof.

(21,000) 2

591,600

1 302,000

0.25

Bank OD Interest

630

2

Disp. Loss

900

0.5

Depr

Prem

9,000

0.5

Fix

17,000

1

MV

7,160

0.5

Wages

88,000

Insur.

12,800

0.5

Elect

34,900

0.5

W/H rent

0.5

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Marking Scheme (Special September Session 2020): IM Accounting

17,800

0.5

Bad Debt

9,800

0.25

Disc All

24,600

Disc Rec

(33,700)

0.25

Increase in prov BD

1,140

2

Carr out

12,400

0.25

Loan Int

5,000

0.5

MV exp

3,700

0.25

BD Rec

(1,160)

0.25

Profit

209,970 92,030

15

a.(ii) Statement of Financial Position

Non-Current Assets

38000

Premises

0 (67,000) 313,000

1

1

Fixt

85000 (51,000)

34,000

Mot Veh

45500 (34,760)

10,740

2

51050

0 (152,760) 357,740

Current Assets

Inventories

21,000

1

289

Tr. Rec

00

1

-

282

Prov

0

26,080

0.25

0.25

Prepaid Cash

4,400 530

52,010

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409,750

Marking Scheme (Special September Session 2020): IM Accounting

Capital

200,000

Profit Drawings

92,030

(23,110)

1

Current

268,920 1

Liabilities:

0.25

10000

0.5

Loan

0

0.5

Tr. Pay

17100

0.25

Accr.

6830

Loan int

2500

Bank Capital

14400

140,830 409,750

10

b.

ACCRUAL CONCEPT:

Financial Statements are prepared on an accrual basis that is, taking into

consideration expenses incurred during the period even though not paid. These

shall be shown as liabilities in the balance sheet. Furthermore, the accrual

concept also requires consideration of expenses paid in advance, which shall be

shown as assets in the balance sheet.

5

OR

MATCHING CONCEPT: Adjustments are required for accruals and prepayments so the expenses incurred during the accounting period can be matched with the revenue generated during the same period. In this way, the difference would reflect a better measure of the profit generated from operations during the period.

Workings:

Disposal

MV Cost Acc. Dep NBV

18500 -14400

4100

Mot. Veh

Disp

64000 -18500 45500

Realized Loss

-3200 900

Depr 42000 Disp -14400

Rem 27600

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Marking Scheme (Special September Session 2020): IM Accounting

Deprec. Adjust

Premises Fixtures

Mot. Veh Wages W/H rent

(380000200000)X5% 85000 X 20% (45500-27600) X 40%

85900 19400

Insurance Electricity Bad Debts

15600 30800 9100

Loan int 100000X5%

Dep

IS

FPS

9000 58000 67000 17000 34000 51000

7160 2100 88000 -1600 17800

-2800 12800 4100 34900

700 9800

5000 -2500

27600 34760

Prepai d =

2500 Due

All for bad debts: One half balance Three large customers

Cl Prov

Op Prov

Increase

700

2120 2820 -1680 1140

2800

SECTION C

Answer any ONE question from this Section. Each question carries 25 marks.

7. a.

Sales Ledger Contro A/c

bal b/d

8,450 Bal B/d

530

Cr. Sales

84,000 Bank

62,400

Dis. Chq

1,200 Ret

8,200

BD Rec

840 Bad Debt

1,200

Disc.

2,200

Set off

630

Bal /d

19,330

94,490

94,490

12

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Marking Scheme (Special September Session 2020): IM Accounting

b.

Purchases Ledger Control A/c

Bank

79,000

Bal B/d

18,200

Ret

12,100

Purch

105,000

Disc

14,200

Set-off

630

Bal c/d

17,670

Bal c/d

400

123,600

123,600

10

c.

Alf. Borg A/c (Sales ledger)

Bal B/d

940 Set off

630

Bal c/d

310

940

940

Alf. Borg A/c (Purchases ledger)

Set off

630 Bal b/d

630

8. a.(i) Gross Profit Mark-up Gr. Pr./Cost of sales

Push 141/219X100

a.(ii) Net Profit Margin

Pull 425/525X100 Net Prof./Sales

Push (62+4)/360X100

Pull 105/950X100

a.(iii) ROCE

NPBIT/CRL

Push 66/254X100

Pull 105/325X100

a.(iv) Current ratio

CurrAss/Curr Liab

Push 60:26

Pull 112:87

a.(v) Acid Test (Quick) Ratio

Curr Ass - Inv.: Cur.Liab

Push (60-24):26

Pull (112-55):87

a.(vi) Inventory turnover

cos/Av. Inv Push 219/?(33 +24) Pull 525/?(60 + 55)

3

25

64.4%

1

81.0%

2

18.3%

1

11.1%

2

26.0%

3

32.3%

2

2.3:1

2

1.3:1

2

1.38:1

1

0.66:1

1

7.7 times

2

9.1 times

2

21

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