EXAMINATIONS COUNCIL OF ESWATINI

Eswatini General Certificate of Secondary Education

ACCOUNTING 6896/02

Paper 2 October/November 2019

Confidential

MARK SCHEME
{6896/02}

MARKS: 100

This document consists of 8 printed pages.

© ECESWA 2019 [Turn over

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Question 1

(a) (i) FIFO method

Date Goods issued Goods sold Balance (E)

April 100 @ E20 each 2000
May 80 400 (1)
June 230 @ E 25 each 6150 (1)
July 180 1750 (1)
[3]
(ii) AVCO

Date Goods bought Goods sold Average cost Number of Total value of
per unit units of stock
inventory E
April 100 @ E20 E20 100 2000
May 80 E20 20 400 (1)
June 230 @ E 25 E24.60 (1) 250 6150 (1)
July 180 E24.60 (1) 70 (1) 1722 (1)
[6]

(b) (i) Cash flow is the movement of money/cash into (1) and out of the business (1). [2]

(ii)
Sourcing of funds/ cash needed to Purchase of goods
buy raw materials (1)

Cash payments received Goods sold (1)

[2]

(iii) Stage inflow/outflow

1 Inflow (1)
3 Inflow (1) [2]
(iv) Lease non-current assets instead of buying
Conduct credit check on customers before selling to them on credit
Send invoice and statements promptly
Encourage customers to use electronic methods of payment
Increasing the selling price
Improving credit control
Buying from cheaper suppliers/ negotiating better terms with suppliers
Delaying payments to suppliers
Reducing expenses
Disposal of excess noncurrent assets for cash
Any three points x 1 [3]

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[Total: 18]
Question 2

(a) (i) Sept 5 A contra entry (1) OR

Money was withdrawn from the bank (1) for office use (1)
10 Monti paid by cheque (1) after being allowed a cash discount (1)
20 Received cheque (1) for a sale of office equipment (1)
23 Bezile withdrew money from the bank (1) for private use (1)
Oct 1 Cash available from the previous month (September) (1) and amount
overdrawn from the bank from the previous month (1)
[10]
(ii) Cash - current assets (1)

Bank - Current liabilities (1) [2]

(b)
Capital receipts Revenue Capital Revenue
receipts expenditure expenditure
Office equipment Sales (1) Fixtures and Rent/ purchases/
disposal (1) fittings / office discount allowed (1)
furniture(1)
[4]

(c) (i) Error 2 - No effect (1)

Error 3 - Decrease by E450 (1)
Error 4 - Increase by E560 (1)
Error 5 - Increase by E3600(1)
Accept + or – [4]

(ii) Bezile
Statement of corrected net assets at 30 September 2019
E
Assets at 30 September 2019 33 000
Effect

1 increase 4000
2 No effect - (1)
3 increase 450 (1)
4 Decrease (560)(1)
5 No effect - (1)
Net assets 36 890(1) [5]

© ECESWA 2019 6896/02/O/N/2019

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[Total: 25]

Question 3

(a) If production is not adequate to meet demand /shortage of raw materials

When it is cheaper to buy the goods than producing them
When the business cannot produce the goods/quality/type required
Any 2 points x 1 mark [2]

(b) Mzee
Income Statement for the year ended 31 July 2019
E E
Revenue 180 000 (1)
Opening inventory of finished goods 38 000
Add: Production cost of completed goods 73 100 (1)
Purchases of finished goods 13 400 (1)
124 500
Less: Closing inventory of finished goods 32 000
Cost of sales 92 500 (1)
Gross profit 87 500 (1) Office rates
15 600
Office insurance 10 000 (1)
Wages of office and sales staff 8 390
Depreciation – Office equipment 4 850 (1) 38 840
Profit for the year 48 660 (1) [8]

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(c)
Mzee
Statement of Financial Position as at 31 July 2019

Non-current assets Cost Acc depr Net Book Value

E E E
Factory machinery 86 000 44 400 (1) 41 600 (1)
Office equipment 56 000 12 350 (1) 43 650 (1)
142 000 56 750 85 250

Current Assets
Inventories:
raw materials 15 700
work in progress 10 110 (1)
finished goods 32 000 57 810
Trade receivables 43 000 (1)
Cash and bank 13 200
114 010
Current liabilities
Trade payables 40 200(1)
Working capital 73 810 (1)
159 060
Financed by:
Capital 110 400 (1)
Profit for the year 48 660 (1)
159 060 [10]

[Total: 20]

© ECESWA 2019 6896/02/O/N/2019

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Question 4
(a)

Nkosi and Sisa

Appropriation Account for the year ended 30 June 2019

E E
Profit for the year 22 000

Add: Interest on drawings Nkosi 500 (1)

Sisa 600 (1) 1 100
23 100
Less: Interest on capital Nkosi 3 000
Sisa 2 000 (1)
Salary Sisa 6 000 (1) 11 000
12 100

Share of profits: Nkosi 7 260 (1)

Sisa 4 840 (1)
12 100
[6]
(b)

Sisa
Current account
2018 E 2019 E
Jul 1 Balance b/d 2 200 June 30 Interest on capital 2 000 (1)
2019 30 Share of profits 4 840 (1)
June 30 Drawings 12 000 30 Salary 6 000
30 Interest on loan 200(1)
Interest on drawings 600 (1) 30 Balance c/d 1 710
14 800 14 800
2019
Jul 1 Balance b/d 1 710(1) [5]

(c) Nkosi – credit balance shows that the business owed Nkosi E9000 on that date (1)/undrawn profits
Sisa – debit balance shows that Sisa owed the business E2200 on that date (1) / overdrawn
[2]

(d)
Account debited Account credited
Bank/cash (1) Loan – Nkosi (1)

[2]

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[Total: 15]

Question 5

(a) (i) Working Capital – the amount available for the day to day running of the business
- No mark for formula [1]

(ii) Current Assets

Inventory 6 500
Trade receivables 24 000
Cash 300
30 800 (1)
Current Liabilities
Trade payables 25 000
Bank overdraft 4 900 29 900 (1)
900 (1)
[3]

(iii) - Sibusile may not be able to purchase goods when they are required/ pay for expenses
- Sibusile may have difficulty in obtaining further supplies on credit.
- Sibusile cannot meet immediate liabilities when they are due.
- Sibusile cannot take advantage cash discounts from suppliers
- Sibusile cannot take advantage of business opportunities when they arise

Any three points x 1 mark [3]

(iv) Introduction of additional capital

Sale of non-current assets
Obtaining long term loans
Reduction in drawings
Delaying purchase of non-current assets
Increasing profits.

Any three points x 1 mark [3]

(b) (i) - an amount owed to a business which trade receivables are not likely to be paid(1).

OR
An estimate of the amount which the business will lose as a result of bad debts. (1) [1]

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(ii) Sibusile
Provision for doubtful debts account
E E
2016 2016
Aug 31 Balance c/d 1600 Aug 31 Income statement 1600 (1)
2017 2016
Aug 31 Balance c/d 2500 Sept 1 Balance b/d 1600 (1)
2017
____ Aug 31 Income statement 900 (1)
2500 2500
2018 2017
Aug 31 Income statement 500(1)Sep 1 Balance b/d 2500 (1)
31 Balance c/d 2000 ____
2500 2500
2018
Sept 1 Balance b/d 2000 (1)
+ 1 for dates [7]

(iii) Trade receivables have increased at the end of the financial year. (1) [1]

(c) Prudence (1)

Prudence means that the assets and profits of a business should not be overstated (1) and
liabilities and losses should not be understated (1).

OR
A business should never anticipate profits (1) but should provide for all possible losses (1).

Matching (1)

Requires that a business should record an expense in its income statement (1) in the
same period as the related revenue (1).
No mark for explanation if concept is wrong [3]

[Total: 22]

© ECESWA 2019 6896/02/O/N/2019