NCEA Level 2 Accounting (90220) 2005 — page 1 of 5
Assessment Schedule – 2005
Accounting: Describe the conceptual basis of accounting for a sole proprietor (90220)
Evidence Statement
Codes used:
D = describe (recognise or define)
E = explain (apply or justify)
Notes for Markers:
• Bolded words in the model answer for a definition question are key words expected in a candidate’s
response.
• Bolded words in the model answer for an apply or justify question are key words / ideas expected in a
candidate’s response.
Question
ONE
(a)
Evidence
Award D or E
Award D for identification of relevant information
•
•
•
to see the return on sales made (D)
to see the costs of running the business (D)
to see Net Profit (D).
Award E for explanation that links information identified and purchase decision
•
•
(b) (i)
(ii)
•
•
or
E
D
non-financial.
Award E for explanation that links purchase decision to client base / customers / the
revenue continuing to be received. Must be a clearly stated link
•
•
•
D
to calculate the possible return on her investment in the café
to see if sufficient income / profit will be made compared with the capital invested /
other investment options / the risk and work involved.
Award D for information identified
•
Code
E
to see if the amount being paid for goodwill is fair for the client base available
to see what proportion of revenue is from regular customers
a large established customers / client base will continue to purchase coffee and so
the sales level will be maintained
an established client base means the business has a good reputation for providing
good service / product, so customers will continue to buy coffee after the purchase
gives an indication of the customer base to see if a regular income will occur / be
maintained.
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NCEA Level 2 Accounting (90220) 2005 — page 2 of 5
Question
TWO
(a) (i)
(ii)
Evidence
Code
Award D for the correct concept identified
• monetary measurement / concept.
D
Award D for the correct definition as indicated by bolding
• all transactions / assets are recorded in New Zealand Dollar amounts.
D
Note: – accept definition of historical cost if given as the answer for (a) (i)
– but candidate cannot gain historical cost definition for (iii) as well.
(iii)
Award D for the correct definition as indicated by bolding. Must have “time of
purchase” idea. NOT “is valued at purchase cost”.
•
(b) (i)
(ii)
transactions / assets / the roasting equipment are recorded / stated at the
amount paid / payable at the time of purchase / you bought it / acquisition.
Award D for correct concept identified
• prudence.
Award E for link to predictive value and future economic benefit
• the amount is relevant / timely because it has predictive value in that it
represents the future economic benefit to be gained from the Accounts
receivable, when received.
•
D
the $6 000 figure represents the estimated realisable value which is the
probable future economic benefit to be received.
D
E
NCEA Level 2 Accounting (90220) 2005 — page 3 of 5
Question
TWO
(c) (i)
Evidence
Award D for the correct definition as indicated by bolding
•
(ii)
(d) (i)
D
an item is material if it is of such a size / nature that its disclosure / nondisclosure is likely to influence a decision being made by the users of the
accounts.
Award E for linking value of microwave compared with total assets being so small as
to not influence a decision
•
Code
E
the amount paid for the microwave is not of a big enough amount compared
with the other / total assets of the business to influence decision made.
Award D for the definition of depreciation. All three aspects as bolded below must be
given. Must NOT refer to increase in liabilities
•
depreciation is a consumption of service potential* in the form of the reduction
in asset that results in a decrease in owner’s equity (other than a distribution to
the owners)
•
depreciation is the measure of the consumption (or using up) of the economic
benefits of a fixed asset in each accounting period it is used by the business.
D
Notes:
1.
*“future economic benefits” can be substituted for “service potential”
2.
“loss in value” / “allocation of cost” in an answer by itself is not acceptable
unless linked to “consumption of economic benefit”
For example – the following are NOT sufficient by themselves
• ‘depreciation recognises the loss in value of a fixed asset’
•
(ii)
‘depreciation is the allocation of the cost of a fixed asset over its useful
life’.
Award E for link to pattern of use and depreciation method
•
diminishing value better reflects the pattern of consumption / use of future
economic benefit / service potential of the equipment
•
diminishing value is appropriate because there is a greater consumption of
service potential / use of future economic benefit of the equipment in the
earlier years compared with later years.
Note: NOT “loss in value”.
E
NCEA Level 2 Accounting (90220) 2005 — page 4 of 5
Question
THREE
(a)
Evidence
Code
Award E for explaining in detail the future economic benefit goodwill brings. Must have
applied answer to goodwill being purchased and link explanation to the increase in
the asset account bank / accounts receivable / continued sales
E
•
(b)
Award E for link of the amount recorded on a source document / purchase document
being verifiable. Must have applied answer to goodwill being recorded on purchase
document
•
(c) (i)
goodwill brings future economic benefit in form of the existing customers
continuing to purchase coffee / continued sales of product which (increases
the asset account bank or accounts receivable / revenue received).
the amount of the goodwill is recorded on the purchase documents / legal /
invoice / source documents for the coffee shop, so the amount is verifiable.
Award D or E
Award D for the correct definition as indicated by bolding – all 3 aspects required
Note: must have used ‘OR’; ‘and’ is INCORRECT.
•
E
an expense decreases owner’s equity and decreases an asset / OR
increases liabilities, and is not a distribution to the owner.
D
or
E
Award E for definition applied to wages – all 3 aspects are required
•
(ii)
wages are an expense because they reduce net profit, which reduces owner’s
equity and reduces the asset account / bank account when paid, and is not
owner’s drawings.
Award D or E
Award D for the correct definition as indicated by bolding – all 3 aspects required
•
a liability is the result of a past transaction, requires a future sacrifice of
service potential / economic benefit, and a present obligation to pay.
Award E for definition applied to Accrued Wages – all 3 aspects required
•
accrued wages are a liability because
– workers did work / performed tasks (in a past transaction)
– the asset account bank will decrease when paid (resulting in a future
sacrifice); and
– (there is a present obligation), the business is expected / obligated to pay
the wages on the due date.
D
or
E
NCEA Level 2 Accounting (90220) 2005 — page 5 of 5
Question
FOUR
(a) (i)
Evidence
Award D for the correct definition as indicated by bolding. NOT ‘understand’.
•
(ii)
Code
D
information is understandable if readers are able to comprehend the
information / its meaning.
Award D or E
D
Award D for Statement of Accounting Policies’ purpose
•
statement of Accounting Policies tells the reader of the accounts, the
assumptions and / or valuation methods used in the preparation of the accounts.
or
E
Award E for linking accounting policies information to being better able to
comprehend / understand information or to make better informed decisions
•
(b)
statement of Accounting Policies tells the reader of the accounts the
assumptions and / valuation methods used in the preparation of the accounts,
so the reader of the accounts can better understand the Financial Statements
/ can make better informed decisions on them.
Award D or E
Award D for answers to both but no link
Award E for conflict explained. Must link to the fall in the value of inventory below
historical cost
•
D
or
E
historical cost requires inventory to be valued at the amount paid when
purchased, however if the value of inventory falls below Historical Cost then
prudence requires that inventory is recorded at the lower amount.
Judgement Statement
Achievement
Achievement with Merit
Achievement with Excellence
6 × D or E
Total 11 × D or E
16 × D or E (breadth)
Minimum of 3 × E
or
Total 13 × D or E
Minimum of 6 × E (depth)
Codes
D = describe (recognise or define)
E = explain (apply or justify)