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2 marksAccounting Standards and Conceptual Framework

CAPE Accounting Unit 1 · 2015 · Paper 2 · Question 1(a)(ii)

B. Ross started operations on 1 June 2014 with a motor car purchased three years ago for 120 000, with latest valuation 75 000. Opened a chequing account with 20 000 (15 000 of which was a loan from M. Brown). After six months, drawings were 17 300 and net loss was 21 500.

State the meaning of the prudence concept.

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Other parts of this question

  1. 1(a)(i)State the meaning of the historical cost concept.[2 marks]
  2. 1(b)What amount should B. Ross record for the motor car in the books of the business?[2 marks]
  3. 1(c)Identify and explain the concept which allows B. Ross to record the motor car invested in the business as a non-current asset.[4 marks]
  4. 1(d)Show the journal entries required to record the formation of B. Ross' business on 1 June 2014.[6 marks]
  5. 1(e)Show the closing entries to record the loss and the drawings for the period.[3 marks]
  6. 1(f)Outline THREE controls that the management can implement to ensure the integrity of its accounting records.[6 marks]
  7. 1(g)Using Table 1 provided as an insert, show the effect of EACH of the transactions (i) to (v) in the Cash Book and Statement of Comprehensive Income of BisNess…[10 marks]

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