2020 JYSS 3N POA EOY P2 Q2

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

Inventory 

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]

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Assets=Liabilities +Equity

Assets= 85000+6800+105000+12000 = $208 800

Liabilities = 7000+20 000 = $27 000

Equity = Assets – Liabilities

           = 208 800 – 27 000

           =$181 800

Materiality theory

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.

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