Answers to 2021 GCE N(A) P1 Theory Questions

Question 1

State the meaning of the following value which an accountant must uphold:
Integrity

Answer 1

An accountant who upholds the value of integrity is someone who is straightforward and honest in all professional relationships.

Question 2

State the meaning of the following value which an accountant must uphold:

Objectivity

Answer 2

An accountant who upholds the value of objectivity is someone who will not let bias, conflict of interest or the undue influence of others override his or her professional judgement.

Question 3

State the purposes of a source document.

Answer 3

1. To provide evidence (objectivity theory) to capture occurrence of a transaction.
2. The source document contains and provides the details of a business transaction that are needed for recording.

Question 4

State the type of transaction involved with the source document: receipt.

Answer 4

Cash purchase or cash sale

Question 5

State the type of transaction involved with the source document:

Debit note

Answer 5

Corrects an undercharge, i.e. increases the amount owed by credit customers who were previously undercharged.

Question 6

State the type of transaction involved with the source document:

Invoice

Answer 6

Informs credit customers of the amount owed after the business sold goods or provided services on credit.

Question 7

State the type of transaction involved with the source document:

Credit note

Answer 7

Corrects an overcharge, i.e. reduces the amount owed by credit customers:

• who were previously overcharged; or
• after goods were returned.

Question 8

State the type of transaction involved with the source document:

Payment voucher

Answer 8

• Processes payment to credit suppliers:
• must be approved by authorised personnel; and
• must be supported by original supplier’s invoice.

Question 9

State the purposes of internal controls.

Answer 9

• safeguard assets of the business;
• ensure business transactions are recorded accurately;
• comply with laws and regulations.

Question 10

Define a trade discount.

Answer 10

A trade discount is a reduction to the list / retail / catalogue price.

Note: List price refers to the original price of an item before any discounts.

Question 11

State the double entry to record a cash discount in the books of:

the supplier

Answer 11

Dr Trade Payables

Cr Discount Received

Question 12

State the double entry to record a cash discount in the books of:

Answer 12

Dr Discount Allowed

Cr Trade receivables

Question 13

Calculation of cost of sales applies only to…

Answer 13

Trading Business

Question 14

Calculation of profit for the year applies to:

Answer 14

Both trading business and service business.

Question 15

“May have other income” applies to…

Answer 15

Both trading business and service business.

Question 16

“Always holds inventory” applies only to…

Answer 16

trading business.

Question 17

Journal entry for:

Owner introduced $20 000 personal savings into the business bank account.

Answer 17

Dr Cash at Bank

Cr Capital

Question 18

Journal entry for:

Owner provided office equipment, $500, from her own home for business use.

Answer 18

Dr Office equipment

Cr Capital

Question 19

Journal entry for: Owner took inventory with a cost of $20 for her own personal use.

Answer 19

Dr Drawings

Cr Inventory

Question 20

Name the ledger account to which the sales revenue account is transferred when that account is closed at the end of the year.

Answer 20

Income Summary Account