Cambridge IGCSE Accounting 0452 — 2010 May/June Paper 1 · Variant 1

This document consists of 16 printed pages. IB10 06_0452_11/6RP © UCLES 2010 [Turn over *1211836760* For Examiner's Use 1 2 3 4 5 6 Total UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education ACCOUNTING 0452/11 Paper 1 May/June 2010 1 hour 45 minutes Candidates answer on the Question Paper. No Additional Materials are required. READ THESE INSTRUCTIONS FIRST Write your Centre number, candidate number and name on all the work you hand in. Write in dark blue or black pen. You may use a soft pencil for any diagrams or graphs. Do not use staples, paper clips, highlighters, glue or correction fluid. DO NOT WRITE IN ANY BARCODES. Answer all questions. You may use a calculator. Where layouts are to be completed, you may not need all the lines for your answer. The businesses mentioned in this Question Paper are fictitious. At the end of the examination, fasten all your work securely together. The number of marks is given in brackets [ ] at the end of each question or part question.

2 © UCLES 2010 0452/11/M/J/10 For Examiner's Use There are 10 parts to Question 1. For each of the parts (a) to (j) below there are four possible answers A, B, C and D. Choose the one you consider correct and place a tick (✓) in the box to indicate the correct answer. 1 (a) Why does the owner of a business need to know how much profit he has made? A to calculate interest payable on a bank loan B to calculate cost of sales C to calculate the return on capital D to calculate total expenses [1] (b) Which business document shows all the transactions that have taken place with a customer during a month? A credit note B debit note C invoice D statement [1] (c) A shop makes all its sales for cash. Where does the sales account appear? A cash book B nominal (general) ledger C sales journal D sales ledger [1] (d) Which account could appear in either the debit column or the credit column of a trial balance? A bad debts B bank C drawings D sales [1]

3 © UCLES 2010 0452/11/M/J/10 [Turn over For Examiner's Use (e) The cash book showed a balance in the bank of $1000 Dr. On the same date, the bank statement showed a balance in the bank of $900 Dr. Which could be the reason for this difference? A bank interest received B payments made directly into the trader’s bank account C standing order for property tax paid directly by the bank D unpresented cheque [1] (f) What is an income statement (profit and loss account)? A A list of all the assets and liabilities of a business at a particular date. B A list of all the balances in the ledger accounts of a business at a particular date. C A statement of receipts and payments of a business during a particular period. D A summary of income and expenditure of a business during a particular period. [1] (g) Which entry is made to reduce a provision for doubtful debts? account to be debited account to be credited A income statement (profit and loss account) provision for doubtful debts B provision for doubtful debts income statement (profit and loss account) C provision for doubtful debts trade receivables (debtors) D trade receivables (debtors) provision for doubtful debts [1]

4 © UCLES 2010 0452/11/M/J/10 For Examiner's Use (h) The total of the sales returns journal is posted to the sales returns account. Where will the double entry appear? A bank account B creditors’ accounts C debtors’ accounts D sales account [1] (i) How is working capital calculated? A current assets – current liabilities B current assets + current liabilities C non-current (fixed) assets + current assets – current liabilities D non-current (fixed) assets + current assets + current liabilities [1] (j) A sole trader compares his results with those of a similar business. Which shows how well expenses are being controlled? A bank balance B cost of sales C gross profit D net profit [1] [Total: 10]

5 © UCLES 2010 0452/11/M/J/10 [Turn over For Examiner's Use 2 (a) Give two examples of non-current (fixed) assets. [2] (b) In the table below, place a tick (
) under the correct heading to show how the monthly total in the sales returns journal should be posted in the nominal (general) ledger. Debit entry Credit entry Sales returns account [1] (c) Which accounting principle states that the same accounting treatment should be applied to similar items at all times? [1] (d) In the balance sheet, non-current (fixed) assets are shown at their net book value. Explain how net book value is different from cost. [2] (e) In which final account will carriage inwards be shown? [1] (f) State which accounting principle is being followed when an accrued expense is included in the income statement (profit and loss account). [1]

6 © UCLES 2010 0452/11/M/J/10 For Examiner's Use (g) Tamari’s business had sales for the year ended 31 March of $75 000, and her cost of goods sold was $52 500. She had expenses of $7500. Calculate the following. Show your workings. Give your answer to two decimal places. (i) Tamari’s percentage of gross profit to sales. [4] (ii) Tamari’s percentage of net profit to sales. [4] (h) Hooper Limited has an issued share capital of $5000 divided into shares of $0.50 each. The company declares a dividend of $0.15 per share. What will be the total amount of the dividend paid to the shareholders? [4] [Total: 20]

7 © UCLES 2010 0452/11/M/J/10 [Turn over For Examiner's Use 3 In the month of April Sumaru had the following transactions with his customers. April $ 3 Cheque received from Ahar 1500 9 Cash sales 4000 12 Cheque received from Bannu 2000 18 Credit note issued to Chango 400 22 Credit transfer from Dooly 1650 28 Cheque received from Eduardo 900 REQUIRED (a) Make the necessary entries in the bank and cash columns on the debit side of Sumaru’s cash book for the month of April. Sumaru Cash book April 2010 Date Detail Cash Dr $ Bank Dr $ [10]

8 © UCLES 2010 0452/11/M/J/10 For Examiner's Use (b) In the table below, show how the transaction on 9 April should be posted to the ledger. Name of account Dr $ Cr $ [2] Sumaru prepared his trial balance at 30 April 2010 and transferred the difference on the trial balance to a suspense account. The balance shown in the bank column in Sumaru’s cash book at 1 April 2010 was $620 Dr. He found that this balance was incorrect and should have been $260 Dr. REQUIRED (c) Show (with narrative) the journal entry required to correct this error. Date Dr $ Cr $ [5] (d) Sumaru is concerned that some of his customers to whom he has sold on credit may not be able to pay him. Suggest two ways in which Sumaru might be able to encourage his customers to pay their invoices. 1 2 [4] [Total: 21]

9 © UCLES 2010 0452/11/M/J/10 [Turn over For Examiner's Use 4 Timpani Ltd makes machine parts and their financial year ends on 31 March. After preparing the income statement (trading and profit and loss account) for the year ended 31 March 2010 the trial balance showed the following items. $ Bank 500 Dr Bank loan (repayable 2011) 2 800 Trade payables (creditors) 700 Trade receivables (debtors) 1 000 Plant and equipment 20 000 Provision for depreciation 12 000 Inventory (stock) at cost 3 000 Share capital 5 000 Profit for the year 4 000 Timpani Ltd found that the inventory (stock) could be sold for only $2700. REQUIRED (a) (i) State the basis on which inventory (stock) should be valued at the end of a financial year. [3] (ii) State the value that Timpani Ltd should use for inventory (stock) in the balance sheet at 31 March 2010. [1] (iii) State the effect on the company’s profit for the year of adjusting the value of inventory (stock). [2]

10 © UCLES 2010 0452/11/M/J/10 For Examiner's Use REQUIRED (b) Prepare Timpani Ltd’s balance sheet at 31 March 2010. Timpani Ltd Balance Sheet at 31 March 2010 [11]

11 © UCLES 2010 0452/11/M/J/10 [Turn over For Examiner's Use Timpani Ltd must repay its bank loan by 31 March 2011. The company is not sure if it will be able to repay the loan. Timpani Ltd decides to take some action to enable it to repay the bank loan when it becomes due. REQUIRED (c) For each proposed action place a tick (
) under the correct heading to show if it might be successful. Successful Not successful Reduce dividend paid Reduce depreciation Reduce trade payables (creditors) [6] (d) (i) Name the accounting principle which states that a business is assumed to continue to operate indefinitely. [1] (ii) If a business is not expected to continue, state the value at which its assets should be valued in the balance sheet. [2] [Total: 26]

12 © UCLES 2010 0452/11/M/J/10 For Examiner's Use 5 Griffin has a car hire business. He hires cars to customers for a fixed period of time. He buys cars new and keeps them for three years. At the end of the three years a motor dealer buys the used car in part exchange for a new car. REQUIRED (a) In the table below, place a tick (
) under the correct heading to show whether Griffin’s receipts are capital or revenue. Capital Revenue Hire charges Cash discount received from motor dealer for prompt payment for new car Part exchange value of used car [6] (b) (i) On 1 April 2009 Griffin bought a new car at a cost of $12 000. He charges depreciation on cars using the reducing balance basis at 30% per annum. Calculate the depreciation charged in Griffin’s income statement (profit and loss account) for the year ended 31 March 2010. [3] (ii) State the net book value of the car to be shown in Griffin’s balance sheet at 31 March 2010. [1] (c) On 1 April 2010 the car was involved in an accident and was damaged so badly that it could not be repaired and had to be scrapped. The insurance company paid Griffin $5000 for the scrapped car. Prepare the disposal of motor vehicles account in Griffin’s nominal (general) ledger for April 2010, showing any profit or loss on the disposal. (The disposal of motor vehicles account is on the next page.)

13 © UCLES 2010 0452/11/M/J/10 [Turn over For Examiner's Use Disposal of motor vehicles account [5] (d) Griffin is finding that the part exchange value being paid by the motor dealer is less than the net book value after three years. (i) Comment on the annual rate of depreciation charged by Griffin. [2] (ii) Suggest a different method for charging depreciation on Griffin’s hire cars. Give one reason for your answer. Method Reason [2] [Total: 19]

14 © UCLES 2010 0452/11/M/J/10 For Examiner's Use 6 Wilma has a shop selling clothing. She sells for cash and on credit to her customers. A summary of her cash book for the year ended 31 March 2010 showed the following: $ Opening balance at 1 April 2009 730 Dr Deposits for the year (cash sales and receipts from credit customers) 15 270 Payments for the year (to suppliers, expenses and drawings) 14 750 Closing balance at 31 March 2010 1 250 Additional information: $ Trade receivables (debtors) at 1 April 2009 3140 at 31 March 2010 4080 Cash sales deposited at the bank 2680 Purchases from suppliers 9560 Carriage inwards 280 Inventory (stock) at 1 April 2009 1780 at 31 March 2010 1920 REQUIRED (a) Calculate Wilma’s total credit sales for the year. Show all your workings. [5]

15 © UCLES 2010 0452/11/M/J/10 [Turn over For Examiner's Use (b) Prepare Wilma’s trading account for the year ended 31 March 2010. Wilma Trading Account for the year ended 31 March 2010 [8] (c) Wilma wishes to know how her business is performing. Calculate the following. Show all your workings. (i) Rate of inventory (stock) turnover to two decimal places. [4] (ii) Collection period for trade receivables (debtors) in days, to the nearest whole day. [4]

16 Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the publisher will be pleased to make amends at the earliest possible opportunity. University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge. © UCLES 2010 0452/11/M/J/10 For Examiner's Use (d) Cash received from sales, $3400, had not been banked. This had been used to pay for additional purchases. No entries had been made in the books. In the table below, place a tick (
) under the correct heading to show the effect of this error. Increase Decrease No change Gross profit Percentage of gross profit to sales Rate of inventory (stock) turnover [3] [Total: 24]

UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS International General Certificate of Secondary Education MARK SCHEME for the May/June 2010 question paper for the guidance of teachers 0452 ACCOUNTING 0452/11 Paper 11, maximum raw mark 120 This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of the examination. It shows the basis on which Examiners were instructed to award marks. It does not indicate the details of the discussions that took place at an Examiners’ meeting before marking began, which would have considered the acceptability of alternative answers. Mark schemes must be read in conjunction with the question papers and the report on the examination. • CIE will not enter into discussions or correspondence in connection with these mark schemes. CIE is publishing the mark schemes for the May/June 2010 question papers for most IGCSE, GCE Advanced Level and Advanced Subsidiary Level syllabuses and some Ordinary Level syllabuses.

Page 2 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2010 0452 11 © UCLES 2010 MARKING GUIDELINES • Award marks only in accordance with the mark scheme. • Where a candidate makes an arithmetical error or selects the wrong figure in an account or a calculation, so that totals or the results of the calculation are wrong but are correct on his own figures, he will lose the mark for selecting the original figure but may earn an own figure (OF) mark for the result, total or calculation. • Where particular wording is shown on the mark scheme accept any reasonable spelling and abbreviation as long as the meaning is clear. For example, for “Balance brought down” accept Balance b/down, Balance b/d, Balance, Bal b/down, Bal b/d, Bal, Brought down, b/down, b/d, but not Bbd, bd, or any variation of “Balance carried down”. • Where a ledger account is to be prepared, each mark is usually for the date, narrative and amount together. If the candidate has correctly prepared the account but not shown some or all of the dates he may earn some marks according to the mark scheme. • If a ledger account is completely reversed no marks will be awarded for individual entries but there may be marks available for own figure balances carried and brought down • Where an answer is to be shown as a ratio, it should be shown as xx:1 and not as 1:xx. An answer of just the correct figure xx may be accepted but not if any other description such as %, times, days etc is shown and not if shown as negative when it should be positive. • Where a calculation is to be shown to two decimal places, an answer rounded up or down may be accepted (e.g. 2.85 or 2.86 if the true answer is 2.853) but not an answer shown to only the nearest whole number or one decimal place (e.g. 2.8 or 3). • Where dollars and cents are shown in a question and exact cents are required in a calculated answer (e.g. $35.60) many candidates will show $35.6 as their calculators will suppress the final 0. Although wrong this may be accepted. The $ sign is not required. • Ledger accounts may be accepted in either two sided or the running balance format and the mark scheme will show how marks should be allocated. • Where a final account is requested, a list of items will not normally earn any marks. • If candidates are required to prepare a Balance Sheet, either a two sided or a vertical presentation will be accepted and the mark scheme will show how marks are to be awarded.

Page 3 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2010 0452 11 © UCLES 2010 1 Question Number Key Question Number Key (a) C (f) D (b) D (g) B (c) B (h) C (d) B (i) A (e) C (j) D [Total: 10] 2 (a) Property (Land and buildings)(only one mark) Fixtures and fittings Plant and equipment (machinery)(only one mark) Office equipment Motor vehicles Any two [2] (b) Debit entry Credit entry Sales returns account
(1) [1] (c) Consistency [1] (d) Net book value = Cost (1) less accumulated depreciation (1) [2] (e) Income statement (Trading and profit and loss account) [1] (must include the word “trading”) (f) Accruals (matching), not prudence [1] (g) (i) Percentage of gross profit to sales = (75 000 (1) – 52 500 (1)) / 75 000 (1) × 100% = 30.00% (1)OF [4] (ii) Percentage of net profit to sales = (22 500 (1)OF – 7 500 (1)) / 75 000 (1) × 100% = 20.00% (1)OF [4] (h) Number of shares = $5 000 (1) / $0.50 = 10 000 (1) Total dividend = 10 000 × $0.15 (1) = $1 500 (1)OF [4] (For 5000 (1) × 0.50 × 0.15 (1) = 375, award 2 marks as shown) [Total: 20]

Page 4 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2010 0452 11 © UCLES 2010 3 (a) Sumaru Cash book, April 2010 April Cash Dr $ Bank Dr $ 3 9 12 22 28 Ahar (1)* Cash sales (1)* Bannu (1)* Dooly (1)* Eduardo (1)* 4 000 (1) 1 500 (1) 2 000 (1) 1 650 (1) 900 (1) *Mark is for date and name [10] (b) Name of account Dr $ Cr $ Sales (1) (accept cash sales but not sales ledger) 4000 (1) [2] (c) Date Dr Cr 30 April Suspense (1) 360 (1) Cash book (bank) (1) 360 (1) To correct balance entered at 1 April 2010 (1) (Award marks for amount only if correctly shown as Dr or Cr with account name.) [5] (d) Send statement Offer cash discount (not trade discount) Limit credit (no more credit sales) Charge interest on overdue amounts Use debt collection methods (any two, 2 marks each) [4] [Total: 21]

Page 5 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2010 0452 11 © UCLES 2010 4 (a) (i) Lower (1) of cost (1) and net realisable value (1) [3] (ii) $2 700 (1) [1] (iii) Reduces profit (not overstated or understated) (1) by $300 (1) [2] (b) Timpani Limited Balance Sheet at 31 March 2010 $ $ Non-current (fixed) assets Plant and equipment at cost 20 000 (1) Accumulated depreciation 12 000 (1) Net book value 8 000 (1) Current assets Inventory (stock) 2 700 (1) Trade receivables (debtors) 1 000 (1) Bank 500 (1) 4 200 Current Liabilities Trade payables (creditors) 700 (1) Bank loan (must be shown as current liability) 2 800 (1) 3 500 Net current assets 700 Total assets 8 700 Equity Share capital 5 000 (1) Profit for the year 3 700 (2) 8 700 Note: award marks for acceptable layout, not list of balances. [11] (c) Successful Not Successful Reduce dividend
(2) Reduce depreciation
(2) Reduce trade payables (creditors)
(2) [6] (d) (i) Going concern (1) (ii) Expected sale values (2) [3] (accept net realisable value) [Total: 26]

Page 6 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2010 0452 11 © UCLES 2010 5 (a) Capital Revenue Hire charges
(2) Cash discount received from motor dealer for prompt payment for new car
(2) Part exchange value of used car
(2) [6] (b) (i) Cost $12 000 (1) @ 30% (1) = $3 600 (1)OF [3] (Award only the component marks but not the mark for $3600 if other calculations are shown, e.g. net book value or for other years.) (ii) Net book value = $8 400 (1)OF [1] (Award this mark if correct by reference to answer to (i).) (c) Disposal of motor vehicles 2010 $ 2010 $ April 1 Motor vehicle* 12 000 (1) 12 000 April 1 Depreciation* 3 600 (1) Bank (Insurance) 5 000 (1) Income statement 3 400 (2)OF (Profit & loss account) 12 000 (Mark is for reasonable narrative and amount, not date.) (*Award 2 marks for “Net book value 8400”, but 0 for “Balance b/down 8400”.) [5] (d) (i) The rate may be too low as large loss arose on scrapping car. An increased rate, up to 60%, would reduce loss. [2] (Award marks for similar comments.) (ii) Straight line method (1) over life of car, or using scrap value (1) or Based on estimated mileage over three years (2) or other reasonable suggestion and explanation. [2] [Total: 19]

Page 7 Mark Scheme: Teachers’ version Syllabus Paper IGCSE – May/June 2010 0452 11 © UCLES 2010 6 (a) $ Deposits to bank 15 270 (1) Less: cash sales 2 680 (1) 12 590 Add: receivables at 31/3/10 4 080 (1) 16 670 Less: receivables at 1/4/09 3 140 (1) Credit sales 13 530 (1)OF (Award total figure only if no aliens, e.g. cash book balance b/fwd shown.) [5] (b) Wilma Trading account for the year ended 31 March 2010 $ $ Revenue (sales) – credit 13 530 (1)OF – cash 2 680 (1) 16 210 Inventory (stock) at 1 April 2009 1 780 (1) Purchases 9 560 (1) Carriage inwards 280 (1) 11 620 Inventory (stock) at 31 March 2010 1 920 (1) Cost of goods sold 9 700 (1)OF Gross profit 6 510 (1)OF [8] (c) (i) Rate of inventory (stock) turnover = Cost of goods sold / average inventory (stock) = 9 700 (1)OF / [(1 780 + 1 920)/2 = 1 850 (1)OF] = 5.24 (1)OF times (1) [4] (Note – a calculation mark may be awarded even if the formula is wrong.) (ii) Collection period for trade receivables (debtors) = (Debtors / credit sales) × 365 days = (4 080 (1) / 13 530 (1)OF) × 365 days = 110 (1)OF (accept 111) days (1) [4] (Note – a calculation mark may be awarded even if the formula is wrong.) (d) Increase Decrease No change Gross profit
(1) Percentage of gross profit to sales
(1) Rate of inventory (stock) turnover
(1) [3] [Total: 24]