2020 JYSS 3N POA EOY P2 Q2
2 Ahmad owns a bakery. The following balances were extracted from his books on 30 June 2020.
$ | |
Fixtures and fittings | 85 000 |
Trade receivables | 6 800 |
Trade payables | 7 000 |
Bank loan, repayable 2030 | 20 000 |
Premises | 105 000 |
12 000 |
REQUIRED
a. State the accounting equation.
[1]
b. Calculate the amount owed by Wendy.
[3]
Ahmad decided that his business should treat the purchase of a stapler costing less than $3 as revenue expenditure
REQUIRED
c. State the accounting theory applied by the business when recording the purchase of a stapler as revenue expenditure.
[1]
d. Explain one difference between revenue expenditure and capital expenditure.
[2]
[TOTAL 7]
Assets= 85000+6800+105000+12000 = $208 800
Liabilities = 7000+20 000 = $27 000
Equity = Assets – Liabilities
= 208 800 – 27 000
=$181 800
Capital expenditure is money spent to purchase non-current asset whereas revenue expenditure is money spent to operate the non-current asset.
…Or Capital expenditure is money spent to increase the capacity/efficiency of the non-current asset whereas revenue expenditure is money spent to restore the non-current asset back to its original working condition.