Question 3

(a) Indicate which of the following would be revenue items and which would be capital items in a wholesale bakery. (10 marks)

i) Purchase of new van

ii) Purchase of replacement engine for existing van

iii) Cost of altering interior of new van to increase carrying capacity

iv) Cost of motor tax for new van

v) Cost of motor tax for existing van

vi) Cost of painting businesss name on new van

vii) Repair and maintenance of existing van

viii) Repairs to a fruiterers van

ix) Cost of hiring refrigeration plant in a butchers shop.

x) A motor vehicle bought for re-sale by a motor dealer

(b) Explain the concept of going concern. (5 marks)

(c) Explain the difference between classifying something as capital expenditure

rather than revenue expenditure, and vice versa, so important to the users of

finance statements. (5 marks)

(d) Do you agree with the view that the prudence concept results in accountants

producing financial statements that understate profits and gains and therefore

present a value for capital that is lower than it should be? Justify your answer. (5 marks)

[Total: 25 Marks]

Question 4

Consider the following information:

Motor van:
Acquisition date	1 January 2017
Cost	RM100,000
Residual value	RM4,000
Estimated useful life	6 years
Depreciation method	Straight-line

Required:

For the period of 1 January 2017 to 31 December 2017, prepare the following accounts and balance the accounts at each financial year end:

1. The motor van account and the accumulated provision for depreciation account. (14 marks)

2. The income statement and statement of financial position extracts for each of the years 2017, 2018 and 2019. (9 marks)

3. State any TWO (2) causes of depreciation. (2 marks)