In the O-Level POA Paper 2, the 20-mark Financial Statement question is the “make or break” section. Most students lose marks not because they don’t know the format, but because they miss one side of an adjustment.
Remember the Golden Rule: Every “Additional Information” item requires at least two entries (Double Entry).
Accrued Expense: Add to the Expense in the Statement of Financial Performance and record as a Current Liability in the Statement of Financial Position.
Prepaid Expense: Subtract from the Expense and record as a Current Asset.
Expert Tip: Watch out for “Year-End” dates. If the insurance covers 15 months but your financial year is 12 months, you must calculate the 3-month prepayment.
Straight-Line Method: (Cost – Scrap Value) / Useful Life.
Reducing Balance Method: Percentage $\times$ Net Book Value (Cost – Accumulated Depreciation).
Expert Tip: Always check if the asset was bought mid-year. If so, you must pro-rate the depreciation by the number of months owned.
Calculate the New Allowance (e.g., 5% of Trade Receivables).
Compare it with the Old Allowance in the Trial Balance.
Increase? Record the difference as an Expense.
Decrease? Record the difference as Other Income.
Inventory must be valued at the lower of its Original Cost or its Net Realizable Value (Selling Price – Selling Costs).
Expert Tip: If the NRV is lower, you must record an “Impairment Loss on Inventory” as an expense.
If the owner takes goods for personal use, you must Subtract from Purchases (not Sales!) and Add to Drawings.
If the owner takes cash, record as a decrease in Cash at Bank and an increase in Drawings.
While knowing these five adjustments is a great start, the New 7087 Syllabus now includes Scenario-Based Questions (SBQ) and Ethical Dilemmas in Accounting.
At TUITION SOLUTION, our tutors provide a comprehensive “Error Log” for every student, helping them identify if their mistakes are Mathematical, Conceptual, or Format-based.