90022

1
Level 1 Accounting, 2006
90022 Demonstrate an understanding of the
conceptual basis of accounting

Credits: Three

You should answer ALL the questions in this booklet.

For Assessor’s use only

Achievement Criteria

Achievement with
Achievement Achievement with Merit
Excellence

Describe accounting. Describe accounting. Describe accounting.

Recognise or define or apply Recognise and define or apply Recognise, define and apply
financial elements. financial elements. financial elements.

Recognise or define or apply Recognise and define or apply Recognise, define and apply
accounting concepts. accounting concepts. accounting concepts.

Overall Level of Performance (all criteria within a column are met).

© New Zealand Qualifications Authority, 2006

All rights reserved. No part of this publication may be reproduced by any means without the prior permission of the
New Zealand Qualifications Authority.
 You are advised to spend 30 minutes answering the questions in this booklet.

QUESTION ONE: DESCRIBE ACCOUNTING

Hemi is a Year 11 Accounting student. As part of an assignment he has to look at the accounts of his
whanau / family marae, Aronui Marae.

(a) Aronui Marae is an incorporated organisation. This means that the members of the marae have
limited liability for the debts of the marae.

Describe the meaning of limited liability.

(b) Some family members have specialised positions within Aronui Marae.

Complete the table below to identify the position each family member has. Waka’s role has been
completed as an example.

Person Main Role in Job Specialised Position

Waka Keeps the minutes of the

meetings and sends letters Secretary

Checks the accuracy of Aronui

Tia
Marae’s financial records

Records the daily transactions

Maia (and prepares financial
statements)

(c) One of the statements that Tia checks is the Income Statement  /  Statement of Financial
Performance.

State the purpose of the Income Statement / Statement of Financial Performance.

(d) Each year Aronui Marae produces a Balance Sheet / Statement of Financial Position.

What does the Balance Sheet / Statement of Financial Position for Aronui Marae show Hemi about
the marae finances?

(e) Aronui Marae recently purchased some land that was partly financed by a bank loan.
The Bank Manager requested a copy of the financial statements of Aronui Marae.

Explain why the Bank Manager needed to see the financial statements.

L1 Accounting 2006, 90022 – page 2 of 6

QUESTION TWO: FINANCIAL ELEMENTS

(a) The items listed in the table below are included in Aronui Marae’s financial statements.

Complete the table to show how each item is classified. Tick one column for each item.
Land has been done as an example. (Land is classified as an asset.)

Asset Liability Income / Expense

Revenue

Land 4

Equipment

Insurance

Donations Received

Electricity

Debenture

(b) Tick the column in the table below to show whether a transaction is Capital Expenditure or
Revenue Expenditure for the land.

Transaction Capital Expenditure Revenue Expenditure

purchase of additional
land

fencing of the new land

repairs to the fence on

the old land

wages for mowing the

land

L1 Accounting 2006, 90022 – page 3 of 6

(c) The purchase of the land was partly financed by a bank loan.

Fully explain why a loan is a liability for Aronui Marae by completing the grey lined boxes below.

Characteristic of an Explanation
Asset

Past Transaction (i)

Present Obligation (ii)

The loan will be repaid in the future, using money from

(iii) Aronui Marae’s bank account.

(d) Define Accumulated Fund for a community organisation.

(e) Fully explain why interest received is an Income  /  Revenue for Aronui Marae.

(f) The equipment of Aronui Marae is depreciated on a straight-line basis.

Explain why Aronui Marae depreciates the equipment.

L1 Accounting 2006, 90022 – page 4 of 6

QUESTION THREE: ACCOUNTING CONCEPTS

(a) Hemi has made the flashcards below to help with his study of accounting concepts.

Use the flashcards to help identify and define the accounting concepts shown on the table on page 9
(opposite). Fill in the grey lined boxes with the letter of the appropriate flashcard and write a definition
for each concept. Use each letter once only.
An example has been done for you.

FLASHCARD A FLASHCARD B

Balance Sheet / Statement of
Financial Position Extract

$NZ Fixed Assets

Motor Vehicle $30 000 (cost)

FLASHCARD C FLASHCARD D

Balance Sheet / Life of

Statement of Financial Position Aronui Marae
as at 30 June 2006

L1 Accounting 2006, 90022 – page 5 of 6

 Concept Flashcard Definition

Going Concer D Aronui Marae will continue to operate into

the foreseeable future

Period Reporting

Monetary The transactions in the financial

Measurement statements of Aronui Marae are measured
in New Zealand Dollars
Historical Cost

(b) Fully explain how Aronui Marae would apply the accounting entity concept to its financial
reporting.

(c) Fully explain how the reporting of a prepayment for insurance illustrates the accrual basis
concept.

L1 Accounting 2006, 90022 – page 6 of 6